AMERICAN SAMOA POWER AUTHORITY (A Component Unit of American Samoa Government) _________________________________________________ FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION AND INDEPENDENT AUDITORS’ REPORT _____________________________________________________ YEARS ENDED SEPTEMBER 30, 2011 AND 2010 AMERICAN SAMOA POWER AUTHORITY (A Component Unit of American Samoa Government) Table of Contents Years Ended September 30, 2011 and 2010 Page No. I. Independent Auditors' Report 1 II. Management’s Discussion and Analysis 3 III. Financial Statements and Additional Information: Statements of Net Assets 18 Statements of Revenues, Expenses, and Changes in Net Assets 19 Statements of Cash Flows 20 Notes to Financial Statements 22 Combining Statement of Net Assets 38 Combining Statement of Revenues, Expenses and Changes in Net Assets 40 Combining Statement of Cash Flows 41 Statement of Revenues, Expenses and Changes in Net Assets - Electric 43 Statement of Revenues, Expenses and Changes in Net Assets - Water 44 Statement of Revenues, Expenses and Changes in Net Assets - Wastewater 45 Statement of Revenues, Expenses and Changes in Net Assets - Solidwaste 46 Statement of Revenues, Expenses and Changes in Net Assets - Fuels Marketing 47 Deloitte & Touche LLP 361 South Marine Corps Drive Tamuning, GU 96913-3911 USA Tel: (671)646-3884 Fax: (671)649-4932 www.deloitte.com INDEPENDENT AUDITOR'S REPORT The Board of Directors American Samoa Power Authority Pago Pago, American Samoa We have audited the accompanying statements of net assets of the American Samoa Power Authority (ASPA), a component unit of American Samoa Government, as of September 30, 2011 and 2010, and the related statements of revenues, expenses, and changes in net assets and of cash flows for the years then ended. These financial statements are the responsibility of the ASPA's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of ASPA's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the American Samoa Power Authority as of September 30, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated August 10, 2012, on our consideration of the ASPA’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management's Discussion and Analysis on pages 3 through 17 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. This supplementary information is the responsibility of the ASPA’s management. We have applied certain limited procedures to such information, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 1 Member of Deloitte Touche Tohmatsu Limited Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the ASPA taken as a whole. The additional information on pages 38 through 47 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the ASPA’s management. Such additional information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. August 10, 2012 2 AMERICAN SAMOA POWER AUTHORITY (A Component Unit of American Samoa Government) Management’s Discussion and Analysis September 30, 2011 and 2010 On behalf of the American Samoa Power Authority (“ASPA”) organization, the senior management offers the readers its financial statements, narrative overview and analysis of the financial activities of the ASPA for the fiscal year ended September 30, 2011. The information contained herein is based on current known facts, decisions and other conditions that have materially affected the ASPA during this reporting period. It is designed to provide the reader with a summary of the past two years of activities as well as our anticipated projects. We encourage the readers to consider the financial statements presented here in conjunction with the accompanying notes that follow this report. FINANCIAL HIGHLIGHTS Total assets increased by $22.9 million, with the most significant increase reflected in current assets of $9 million and utility plant of $14.2 million while restricted assets decreased by $220 thousand. In FY 2011, ASPA received additional $3.9 million of ARRA funds that are restricted for renewable energy projects. These projects were listed on ASPA FY2009 Consolidated and Organizational Operational future goals. In FY2010, FEMA approved funding for temporary and permanent repair projects for ASPA caused by the Earthquake and Tsunami disaster that affected American Samoa on September 29, 2009. In FY2011, ASPA purchased and installed a Temporary Power Generation System (TPGS) to replace Aggreko rental generators temporarily installed right after the Tsunami disaster. The net result was a significant addition of $14 million to the utility plant assets. In September 2011, ASPA overall total net change in net assets was a surplus of $19 million. Of this total, the Fuel division operating income was about $3.4 million while the other operating divisions made up the remaining balance of $15.6 million mostly of FEMA funded TPGS Project. The Fuels Marketing inventory asset value at the end of FY2011 was approximately $5.9 million. Depreciation expense in FY 2011 decreased by $154,380. ASPA Satala Power Plant and its Operations Center Building on the Eastern Side of Tutuila Island were totally destroyed by the Earthquake and Tsunami disaster and written off in FY2009. The loss of these assets has a direct impact on depreciation expense for utility plant. Only the temporary generators were installed as of September 30, 2011 while the Power plant and Operation Center are still in review process. Total local operating revenues, excluding fuel sales, increased by $9.4 million over the previous year due to an increase in fuel price. In addition, ASPA raised its second incremental rates for Water, Wastewater and Solid Waste in April 2011, which generated additional revenue to cover operational expenses. ASPA factors the variable fuel surcharge into its monthly billings to recover the variable cost of fuel oil, and therefore the cost of fuel has a direct impact on operating revenues. In FY 2011, fuel price peaked at an average of $3.34 per gallon. ASPA’s local operating and maintenance expenses in FY2011 decreased by $1.2 million over FY 2010. Fuel expenses for Electric division increased by $3.3 million. Operating grants revenues increased by $1.4 million in FY2011. Operating grants revenues are those revenues received from FEMA, DOI-OMIP and other federal agencies. In FY2010, FEMA approved several projects related to Earthquake and Tsunami including the Aggreko contract. FEMA is funding 90% and ASPA pays 10% of the total cost. On September 30, 2011, about $9.3 million was booked as FEMA revenue from the Aggreko Contract and other FEMA approved operating projects. 3 AMERICAN SAMOA POWER AUTHORITY (A Component Unit of American Samoa Government) Management’s Discussion and Analysis September 30, 2011 and 2010 Total operating expenses federally funded increased by $3.4 million in FY2011 mainly from Aggreko rental units. In November 2010, ASPA purchased sets of container generators or TPGS to replace Aggreko Company rental units. In June 2011,