TOPLIFIKACIJA GROUP ANNUAL REPORT

Transcription

1 TOPLIFIKACIJA GROUP ANNUAL REPORT 2015

2 CONTENT REVIEW OF KEY NUMBERS TOPLIFIKACIJA GROUP INFORMATION FOR INVESTORS ORGANIZATION AND ACTIVITIES IN INFORMATION TE-TO AD Skopje FINANCIAL STATEMENTS FOR TOPLIFIKACIJA GROUP CORPORATE GOVERNANCE

3 REVIEW OF 2015 During 2015 Toplifikacija AD Skopje and the companies in the Group continued with its activities and organization established from 2013 year. The activities that were the main and most important in 2015 are structured into the following groups - Collection of portfolio of receivables for heat; - Reducing the credit exposure toward the banks; - Regulation of the loans given to the TE-TO AD Skopje; - Agreement for rent of equipment for production of heat; - Other litigation; - New projects. Toplifikacija Group in 2015 managed to reduce its debt to banks and suppliers for a significant amount and also had significant collection of receivables for heat. The numbers and activities are detailed in the annual report section Organizations and activities in In 2015, court procedures followed on the loans given to TE-TO AD Skopje. Toplifikacija AD Skopje in the role of creditor claims its funds given to the gas plant TE-TO AD Skopje. 1 of 32

4 KEY NUMBERS TOPLIFIKACIJA GROUP Key Ratios (in mkd) Net Income Per Share P/E ratio Operating CF Per Share P/CF ratio n.a Book Value Per Share P/Book ratio Dividend Per Share n.a n.a n.a n.a Dividend Yield n.a n.a n.a 2.83% n.a Statement of comprehensive income (in million mkd) Sales Revenue , ,358.5 EBITDA EBIT EBT Comprehensive income before minority interest Comprehensive income after minority interest Statement of financial position (in million mkd) Total Assets 2, , , , ,947.2 Accounts Receivables ,064.1 Short-term Liabilities , ,872.1 Total Capital 1, , , , ,632.3 Leverage 42.9% 45.1% 46.0% 55.2% 58.2% Cash Flow (in million mkd) Operating cash flow Investment cash flow Key numbers are for Toplifikacija Group. 2 of 32

5 Toplifikacija Group consists of 11 companies in which Toplifikacija AD Skopje is parent company. Name of the company Area of business 2015 Share Toplifikacija AD - Skopje Production of heat Distribucija na toplina DOOEL - Skopje Distribution of heat % Snabduvanje Centar DOOEL - Skopje Heat supply % Snabduvanje Istok Heat supply % Snabduvanje Zapad Heat supply % Proizvodstvo na toplina DOOEL - Skopje Production of heat % Skopje Sever AD - Skopje Production, distribution and supply of heat % Toplifikacija - Inzenering DOOEL - Skopje Designing, engineering, trade, transport and etc % Servisi za greenje DOOEL - Skopje Maintainance of heat instalation % Toplifikacija - Bitola DOO - Skopje Heat supply 98.34% Gas Trade DOOEL - Skopje Trade and distribution of gas and gas fuels % Toplifikacija AD Toplifikacija AD Skopje is the parent company of all other companies in the Toplifikacija Group. In 2013 the company signed lease agreement for the equipment for heat production indefinitely and no longer performs the activity heat production. The activities in 2015 related to collection of receivables for heat, regulation of the investment in TE-TO AD Skopje, regulating relations with the new companies that performs regulated activities and other activities. Key numbers Statement of comprehensive income Total Revenue 203, ,011 EBITDA 115,856 52,485 EBIT 56,150-7,468 EBT 32,821 29,194 Net Profit/Loss 32,006 29,194 Total comprehensive income/loss 32,006 29,194 Number of employees 0 0 Statement of financial position Total Assets 2,979,286 3,072,543 Accounts Receivables 146, ,302 Total Liabilities 1,320,380 1,445,643 Long-term Liabilities 851, ,423 3 of 32

6 Proizvodstvo na toplina DOOEL Skopje Proizvodstvo na toplina DOOEL is limited liability company established in During 2015, the activities of the company were collection of receivables and regulation of open issues with the new licensee for production, distribution and supply of heat. Employees in this company provide services to companies in the Toplifikacija Group for all necessary activities. Key numbers Statement of comprehensive income Total Revenue 9,010 9,262 EBITDA EBIT EBT Net Profit/Loss Total comprehensive income/loss Number of employees Statement of financial position Total Assets 64,053 65,142 Accounts Receivables 58,868 60,261 Total Liabilities 35,716 36,023 Long-term Liabilities / / Distribucija na toplina DOOEL Skopje Distribucija na toplina DOOEL Skopje till year 2012 operated with the business distribution of heat. By 2013 the activities of this company are directed at protecting and regulating the property or assets of the company used in the regulated activity distribution of heat by the new licensee for distribution of heat. Key numbers Statement of comprehensive income Total Revenue 3,273 1,565 EBITDA -1,893-3,865 EBIT -18,974-21,448 EBT -19,489-21,461 Net Profit/Loss -19,489-21,461 Total comprehensive income/loss -19,489-21,461 Number of employees of 32

7 Statement of financial position Total Assets 395, ,856 Accounts Receivables 128, ,949 Total Liabilities 77,644 78,650 Long-term Liabilities / / Snabduvanje Centar DOOEL Snabduvanje Centar DOOEL Skopje is limited liability company which till 2012 preformed the regulated activity heat supply to the consumers. The company operated i.e. supplied heat in municipality Centar, municipality Kisela Voda, Municipality Cair and part of municipality Aerodrom. In 2015 the activities of the company were directed to collection of receivables for heat and repayment of liabilities to suppliers. Key numbers Statement of comprehensive income Total Revenue 11,626 11,604 EBITDA 1, EBIT 1, EBT 9,740 8,836 Net Profit/Loss 8,766 7,952 Total comprehensive income/loss 8,766 7,952 Number of employees 0 0 Statement of financial position Total Assets 89, ,028 Accounts Receivables 88, ,545 Total Liabilities 13,604 55,154 Long-term Liabilities / / Snabduvanje Istok DOOEL Snabduvanje Istok DOOEL Skopje is limited liability company which till 2012 preformed the regulated activity heat supply to the consumers. In 2015 the activities of the company were directed to collection of receivables for heat and repayment of liabilities to suppliers. 5 of 32

8 Key numbers Statement of comprehensive income Total Revenue 707 4,656 EBITDA -2,155-1,814 EBIT -2,155-1,827 EBT -1,787 2,496 Net Profit/Loss -1,787 2,234 Total comprehensive income/loss -1,787 2,234 Number of employees 0 0 Statement of financial position Total Assets 64,078 79,851 Accounts Receivables 62,752 78,419 Total Liabilities 50,986 64,972 Long-term Liabilities 0 0 Snabduvanje Zapad DOOEL Snabduvanje Zapad DOOEL is limited liability company which till 2012 preformed the regulated activity heat supply to the consumers. In 2015 the activities of the company were directed to collection of receivables for heat and repayment of liabilities to suppliers. Key numbers Statement of comprehensive income Total Revenue 3,643 5,468 EBITDA -1,111-3,241 EBIT -1,145-3,317 EBT -1,110 1,076 Net Profit/Loss -1, Total comprehensive income/loss -1, Number of employees 1 1 Statement of financial position Total Assets 37,904 47,381 Accounts Receivables 36,453 46,367 Total Liabilities 43,078 51,445 Long-term Liabilities / / 6 of 32

9 Skopje Sever AD Skopje Sever AD Skopje is shareholder company established in year From year 2001 performs regulated activities production, distribution and supply of heat. The regulated activities are performed in the municipality Butel and part of municipality Cair. In year 2015 the company operated with 21 employees. Key number Statement of comprehensive income Total Revenue 45,644 46,134 EBITDA -5, EBIT -10,276-12,096 EBT -7,033-9,233 Net Profit/Loss -7,033-9,233 Total comprehensive income/loss -7,033-9,233 Number of employees Statement of financial position Total Assets 209, ,272 Accounts Receivables 49,647 55,590 Total Liabilities 40,700 45,349 Long-term Liabilities 0 0 Toplifikacija Inzenering DOOEL Toplifikacija Inzenering DOOEL Skopje is a company for designing and engineering services of distribution network, development and designing of measuring control equipment, reconstruction of substations, as well as engineering services in heating and air conditioning. In 2015 the number of employees was 10. Key numbers Statement of comprehensive income Total Revenue 52,210 45,831 EBITDA 21,718 17,215 EBIT 21,526 16,986 EBT 23,033 19,083 Net Profit/Loss 20,762 17,170 Total comprehensive income/loss 20,762 17,170 Number of employees of 32

10 Statement of financial position Total Assets 102,869 34,821 Accounts Receivables 85,948 21,669 Total Liabilities 55,952 8,666 Long-term Liabilities / / Servisi za greenje DOOEL Servisi za greenje DOOEL is limited liability company founded by Toplifikacija AD Skopje for performing maintenance on heat installations and other activities. In 2015 the number of employees was 6. Key numbers Statement of comprehensive income Total Revenue 3,885 7,269 EBITDA EBIT EBT Net Profit/Loss Total comprehensive income/loss Number of employees 6 6 Statement of financial position Total Assets Accounts Receivables Total Liabilities 6,847 6,972 Long-term Liabilities / / Toplifikacija Bitola DOO Toplifikacija Bitola DOO - Skopje is a company for heat supply in the town Bitola in Republic of Macedonia. In 2015 the company didn t operate, i.e. it didn t supply its customers with heat energy. The company currently works for the collection of debts from its customers. 8 of 32

11 Key numbers Statement of comprehensive income Total Revenue 0 0 EBITDA EBIT EBT Net Profit/Loss Total comprehensive income/loss Number of employees 0 0 Statement of financial position Total Assets 28,075 28,268 Accounts Receivables 16,307 16,510 Total Liabilities 50,884 51,036 Long-term Liabilities / / 9 of 32

12 INFORMATION FOR INVESTORS The shares of Toplifikacija Group are registered for trade on Macedonian stock exchange. They are classified on the official market in the segment of Exchange listing ordinary shares under the symbol of TPLF. A total of 450,000 ordinary shares have been issued after the nominal value of euro. Out of them, 1,193 are treasury shares, while the others are available for trade. Stock-market performance Table 1 Trading data (price, value and capitalization are in mkd) month Average price Number of transactions Traded values Traded Quantity Market Capitalization January , ,500,000 February ,806 1, ,000,000 March , ,500,000 April , ,500,000 May , ,000,000 June , ,950,000 July , ,000,000 August , ,750,000 September , ,500,000 October , ,400,000 November ,108 1, ,500,000 December ,460 1, ,900,000 Total ,837,085 9, ,153,000 In 2015 a total of 9,100 ordinary shares of Toplifikacija Group were traded on the Macedonian stock market, which represents 2% of the total number of issued shares. The total traded value amounted to 5,837,085 mkd and it was realized in 185 transactions. In average, about 49 shares per transaction were traded. During the trade in 2015, the highest realized price was in the amount of 850 mkd on the other hand, the lowest realized price was 485 mkd. The average price for 2015 according to the Annual statistical bulletin Macedonian Stock Exchange is mkd. The comparison of the movement of the main stock exchange index MBI 10 of the Macedonian stock market and the price of the share of Toplifikacija Group is shown in the following chart. 10 of 32

13 Graph 1 Comparison of the movement of the MBI 10 and TPLF in 2015 The movement of the price of the share of Toplifikacija Group is shown in the following figure. Graph 2 Movement of the price of TPLF in 2015 in mkd The following chart shows the realized average price and quantity of trade per months in of 32

14 Graph 3 Quantity and average price of trading by months in 2015 (mkd) Key ratios Table 2 Key ratios Ratio Change % EBITDA Per Share (in mkd) % EBIT Per Share (in mkd) Basic Earnings Per Share (in mkd) % Diluted Earnings Per Share (in mkd) % Return on Assets (ROA) 2.30% 1.82% 26.2% 1.72% 2.23% 0.52% Return on equity (ROE) 4.11% 3.35% 22.6% 3.51% 5.17% 1.19% Book Value Per Share (in mkd) % P/E ratio % P/Bоок ration % Dividend Per Share n.a n.a - n.a 60 n.a. Dividend Payout ratio n.a n.a - n.a 70.25% n.a. Dividend Yield n.a n.a - n.a 2.83% n.a. Key numbers for all the years are for Toplifikacija Group. 12 of 32

15 Shareholder structure The shareholders structure of Toplifikacija AD Skopje is diversified to a great extent. The biggest shareholder is BITAR HOLDINGS LIMITED from Cipar with 16.44% (date taken from the Shareholders Book of Toplifikacija AD Skopje on ). All other shareholders participate with less than 2% in the equity. The total number of shareholders with the balance on was 2,649. Their structure is shown in the following chart. Graph 4 Shareholder structure as on % 76% natural legal 13 of 32

16 ORGANISATION AND ACTIVITES IN 2015 During 2015 Toplifikacija AD Skopje and the companies in the Group continued with its activities and organization established from 2013 year. The activities that were the main and most important in 2015 are structured into the following groups - Collection of portfolio of receivables for heat; - Reducing the credit exposure toward the banks; - Regulation of the loans given to the TE-TO AD Skopje; - Agreement for rent of equipment for production of heat; - Other litigation; - New projects. Organization of collection of portfolio of receivables for heat Total collected receivables from selling heat in 2015 are in amount of 80,616,067 mkd. On the receivables from selling heat of Toplifikacija AD Skopje, Snabduvanje Istok DOOEL, Snabduvanje Zapad DOOEL and Snabduvanje Centar DOOEL were in amount of 910,514,613 mkd. Table 1 Receivables on company households other TOTAL Snabduvanje Zapad 36,524,300 17,080,398 53,604,698 Snabduvanje Centar 39,790,758 52,357,701 92,148,459 Snabduvanje Istok 34,183,750 9,323,176 43,506,926 Toplifikacija AD Skopje 399,763, ,491, ,254,530 TOTAL 510,261, ,252, ,514,613 On the receivables from selling heat of Toplifikacija AD Skopje, Snabduvanje Istok DOOEL, Snabduvanje Zapad DOOEL and Snabduvanje Centar DOOEL were in amount of 799,324,781 mkd. Table 1 Receivables on company households other TOTAL Snabduvanje Zapad 31,648,141 23,413,398 55,061,539 Snabduvanje Centar 34,479,241 45,985,131 80,464,372 Snabduvanje Istok 30,009,362 9,175,448 39,184,810 Toplifikacija AD Skopje 367,394, ,219, ,614,062 TOTAL 463,531, ,793, ,324, of 32

17 The collection of receivables by months for 2015 is given in the following tables. Table 3 Collection of receivables from selling heat by months 2014 by companies month Snabduvanje Istok Snabduvanje Zapad Snabduvanje Centar Toplifikacija Total January 461, ,070, , ,967, ,303, February 572, ,564, ,739, ,380, ,257, March 392, , ,157, ,616, ,971, April 413, , ,505, ,947, ,535, May 386, ,139, , ,138, ,414, June 394, , , ,899, ,112, July 578, , , ,425, ,369, August 336, , , ,784, ,096, September 496, , ,228, ,601, ,776, October 658, , ,902, ,470, ,503, November 286, , ,143, ,423, ,330, December 2,407, , ,785, ,196, ,945, Total 7,385, ,015, ,361, ,853, ,616, Table 4 Collection of receivables from selling heat by tariff categories month households other total January 4,254, ,049, ,303, February 5,318, ,939, ,257, March 4,576, ,394, ,971, April 4,233, ,301, ,535, May 4,026, ,388, ,414, June 3,717, ,395, ,112, July 4,497, , ,369, August 4,320, , ,096, September 5,950, ,825, ,776, October 4,669, ,833, ,503, November 5,393, ,937, ,330, December 4,295, ,650, ,945, Total 55,254, ,361, ,616, During 2015 and currently, full inventory on the receivables from selling heat energy was made. Organization involves using call center in order to remind users to pay, prosecution of claims for households and other users, activating executors and lawyers in collection of receivables, providing information for users in order efficient collection and other activities. Reducing the credit exposure toward the banks By the end of 2012 Toplifikacija AD Skopje had taken loans from several banks with purpose covering the costs of the ongoing operations and for investment in the gas power plant TE-TO AD Skopje 15 of 32

18 During 2015, Toplifikacija AD Skopje, had reduced its exposure toward the banks in amount of 47,456 thousand mkd. The liabilities toward the banks on were 1,145,325 thousand mkd. On the liabilities toward the banks were 1,097,869 thousand mkd. Regulation of the loans given to the TE-TO AD Skopje By the end of 2012 Toplifikacija AD Skopje has given loans to E-TO AD Skopje in amount of 1,339,407 thousand mkd. By the end of 2015 all loans are due for payment. Loans granted to TE-TO AD Skopje are the basis for solving most of the credit exposure of Toplifikacija AD Skopje. All loans given to TE-TO AD Skopje are for construction of the gas plant for combined production of electricity and heat. Investors in the gas power plant TE-TO AD are: BITAR HOLDING - shareholder who has given investment in the form of loans; TOPLIFIKACIJA AD Skopje - shareholder who has given investment in the form of loans; Landens Bank Berlin (LBB) lender; Komercijalna Banka AD Skopje - lender. The shareholders and the lenders had signed intercreditor agreement in which is stipulated the subordination of the shareholder loans to the loans given from LBB and Komercijalna banka AD Skopje. That means that the loans given from Toplifikacija AD Skopje are subordinated in respect of the payment only on the basis of due obligations toward LBB and Komercijalna Banka. In this kind of investment by the shareholders and the banks intercreditor agreement is inevitable because the shareholders and the banks have the same role as creditors and with this agreement is stipulated that the banks have advantage in settlement their due claims. The agreement stats that Toplifikacija AD Skopje can claim its receivables from TE-TO AD and settle them every time when TE-TO AD hasn t due obligation towards LBB and Komercijalna banka. With the maturity of the loans given to TE-TO AD Skopje, Toplifikacija AD Skopje conducted litigation for recovery of their claims. The process is ongoing. Agreement for rent of equipment for heat production The agreement for rent of equipment for heat production is valid from and is signed with the company Proizvodstvo na toplina Balkan Enerdzi DOOEL carrier of the license for heat production. Production of heat Proizvodstvo na toplina BE DOOEL Skopje received a license to produce heat based on an agreement for the lease of fixed assets for production of heat with Toplifikacija AD Skopje. With the lease agreement Toplifikacija AD Skopje leased the property and equipment for the production of heat for an amount equal to the approved return on equity of fixed assets approved by the Energy Regulatory Commission in the decision for price of producing heat. Under the lease agreement beside the lease, the new licensee is obliged to invest in the fixed assets of Toplifikacija AD Skopje amount equal to the depreciation of the leased fixed assets. During 2015 Toplifikacija AD Skopje delivered monthly invoices to the new licensee for lease of fixed assets. This income for 2015 is in amount of 39,188,134 mkd. The income from the depreciation for 2014 on the leased equipment that Toplifikacija had in 2015 is 48,944,510 mkd. According to the lease agreement the new invested equipment from the depreciation for 2014 is 48,364,637 mkd. 16 of 32

19 The problems with the new licensee which were identified in 2013 are now in court procedure: - Unauthorized use of tools and other fixed assets by the holder of the license owned by the Toplifikacija AD Skopje - Lack of recognition of certain expenses by the licensee. For these issues the holder of the license and the Energy Regulatory Commission has been notified. For some of them, judicial proceedings were started. Other litigation During 2015 lawsuits were activated and continued that are from great importance for Toplifikacija AD Skopje. Litigations with TE-TO AD Skopje for collection of given loans. The court procedures are ongoing. Toplifikacija received The Primary Court decisions regarding the two lawsuits, as follows: the lawsuit with a subject value of MKD 383,623,254; and the lawsuit with a subject value of MKD 15,395,204, where The Primary Court adopted our claims. According to these decisions, TE-TO is obliged to pay the required amount to Toplifikacija on the grounds of loan. TE-TO appealed these decisions and as a result The Court of Appeal in Skopje is now required to decide upon the appeals. Litigation with Energy Regulatory Commission for damages to Toplifikacija AD Skopje, in amount of 968,861,000 mkd, through decisions for price of heat approved by Energy Regulatory Commission. The damage that requires Toplifikacija AD Skopje is the difference between actual costs of the regulated businesses and the one recognized by the Energy Regulatory Commission. This damage refers to the period from 2006 to The dispute is ongoing. Other litigations are in relation to the payment of obligations to creditors, disputes regarding payment of claims from heat consumers and other disputes. New projects In 2015, the activities of development opportunities for the realization of new projects, continued. New projects that that Toplifikacija worked on in 2015 are related to the distribution and use of natural gas, with the liberalization of the electricity market, the management of energy consumption and the realization of distributed systems for energy production and supply. During 2015 were developed specific projects at the level of feasibility studies in defined areas of the energy sector. The concept of realization of the projects is based on a partner with experience in the field in the energy sector and partner for the realization of the project financing. In the area of distribution and use of natural gas, the concession for the region Skopje, should have been awarded at the beginning of Because of the overall situation this concession is deferred although the two companies competed in the auction completed all phases envisaged in the tender procedure. The bidding for the amount of the concession which was planned for the month of February 2015, was deferred. 17 of 32

20 In the area of management of heat consumption, the activities continued with about seventy buildings in the three district heating systems in the City Skopje. Distributed production and energy supply will be upgrading this activity. In the field of liberalization of the electricity market, the existing policy is expected to change and significantly speed up the process. In the area of distributed production and supply of electricity,in 2016 is expected to be implemented the first projects,for which are provided partners in specific areas and financiers of projects. 18 of 32

21 INFORMATION TE-TO AD Skopje (investment in gas combined plant for electricity and heat) Regarding the work of TE- TO AD Skopje, economic and financial situation of the company and the circumstances of the operation remain the same as set out in the annual report for This annual report briefly presents data on the financial situation of the company in 2015 from the Central Register of RM. According to the income statement of the company for 2015, total revenues of the company in 2015 amounted to 872,261,150 mkd, while total expenditures of the company amounted to 1,294,837,521 mkd with the loss in operations for 2015 amounted to 422,576,371 mkd. The loss of the company in 2014 amounted to 463,907,463 mkd. Regarding the balance sheet of the company for 2015, the total assets of the company is 10,934,308,553 mkd and includes non-current assets in the amount of 10,663,443,342 MKD and current assets in the amount of 271,683,596 mkd. Total liabilities of the company in 2015 amounted to 13,999,421,039 mkd out of which long term liabilities in the amount of 13,104,402,713 MKD and short-term liabilities in the amount of 895,018,326 mkd. The total equity of the company is negative and amounted to -3,065,112,486 mkd. And the Company has no retained earnings, but has transferred loss in the amount of MKD 2,644,03,015 and net loss for the current year in the amount of 422,576,371 mkd. In addition to this report is a summary of the results of the company for 2015 and 2014 obtained from the Central Registry of RM ( Extract from the Report of the CRM- Information on the economic - financial position of the entity TE- TO AD Skopje) 19 of 32

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24 FINANCIAL STATEMENTS FOR TOPLIFIKACIJA GROUP Consolidated statement of comprehensive income (000) MKD (000) MKD Revenues 39,689 41,496 Cost of sales 26,883 28,682 GROSS PROFIT (LOSS) 12,806 12,814 Other operating income 195, ,706 Employees expenses 31,290 30,242 Depreciation 82,313 83,001 Impairment losses on bad receivables 6,414 6,191 Other operating expenses 41,557 89,363 OPERATING PROFIT (LOSS) 46,260-31,277 Financing income 79, ,172 Income from investments - 31,000 Financing expenses 90, ,504 PROFIT (LOSS) BEFORE TAXATION 35,209 28,391 Income tax 4,074 3,166 NET PROFIT (LOSS) FOR THE YEAR 31,135 25,225 Other comprehensive income: Gains on revaluation on fixed assets 0 0 Total other comprehensive income 0 0 TOTAL COMPREHENSIVE INCOME 31,135 25,225 Attributable to: Owners of the parent 31,136 25,252 Non-controlling interests in subsidiaries ,135 25,225 Basic earnings (loss) per share (In MKD) of 32

25 Consolidated statement of financial position - assets ASSETS (000) MKD (000) MKD Non-current assets Property, plant and equipment 1,007,928 1,040,509 Goodwill Long-term loans - - Bank deposits 26,872 26,282 Investments in associates Investments available-for-sale 5,319 5,319 Total non-current assets 1,040,589 1,072,427 Current assets Inventories 66,082 67,612 Trade receivables 232, ,243 Receivables for advances Other current assets 5,463 7,728 Short-term loans 1,624,516 1,578,673 Cash and cash equivalents 7,230 6,961 Total current assets 0 0 TOTAL ASSETS 2,976,591 3,039, of 32

26 Consolidated statement of financial position - equity and liabilities EQUITY AND LIABILITIES Equity (000) MKD (000) MKD Shareholders capital 1,394,100 1,394,100 Treasury shares (-) -1,641-1,641 Reserves 146, ,220 Revaluation reserves 22,136 22,136 Accumulated profit (loss) 139, ,183 Non-controlling interests Total equity 1,700,283 1,669,767 Long -term borrowings 773, ,590 Current liabilities Trade payables 99, ,075 Payables for advances 12,001 11,856 Short term borrowings 221, ,121 Current portion of long-term borrowings 102,553 81,614 Other short term liabilities and accrued expenses 66,722 64,295 Total current liabilities 502, ,961 Total liabilities 1,276,308 1,369,551 TOTAL EQUITY AND LIABILITIES 2,976,591 3,039, of 32

27 Consolidated cash flow statement - operating activities 2015 (000) MKD Cash flows from operating activities Profit (loss) before taxation 35,209 Adjustments for: Depreciation of property, plant and equipment 82,313 Impairment expenses for bad and doubtful trade receivables 6,414 Interest expenses (income), net 45,963 Income from dividends from subsidiaries - Adjustments -766 Positive exchange rate differences from long term loans -2,061 Caring amount of disposal of fixed assets 5 Profit (loss) before adjustments in working capital 167,077 Trade receivables 66,153 Receivables for advances 639 Other short term assets and accrued expenses 135 Inventories 1,530 Trade payables -48,359 Payables for advances 145 Other short term liabilities and prepaid expenses 1,581 0 Net cash used in ordinary business 188,901 Paid interest -85,270 Collected (paid) income tax -5,930 0 Net cash flows from operating activities 97, of 32

28 Consolidated cash flow statement - investment and financing activities and net cash flow Cash flows from investing activities Bank deposits collected (given) 3 Sold property and equipment - Property, plant and equipment additions -49,743 0 Net cash flows from investing activities -49,740 Cash flows from financing activities Proceeds (repayment) from short term borrowings, net -37,435 Proceeds (repayment) of long-term borrowings, net -10,021 Treasury shares additions - Paid dividends and taxes Net cash flows from financing activities -47,692 Net increase (decrease) of cash and cash equivalents 269 Cash and cash equivalents at the beginning of the year 6,961 Cash and cash equivalents at the end of the year 7, of 32

29 Notes to the consolidated financial statement CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Realized financial result The profit before taxation for 2015 is in amount of 35,209 thousand mkd, income tax is in amount of 4,074 thousand mkd and net profit is in the amount of 31,135 thousand mkd, i.e. total comprehensive income is in amount of 31,135 thousand mkd. Revenues from sale Revenues from sale for 2015 are in amount of 39,689 thousand mkd. This income is related to revenues from sale of heat energy towards the end consumers according to the approved tariffs from Energy Regulatory Commission divided in two categories households and other users. These are revenues from the daughter company Skopje Sever AD which produces, distributes and supplies heat energy in part of the city Skopje. Other operating income Other operating income in 2015 is in amount of 195,028 thousand mkd. It consists of income from rent (lease of fixed assets for production of heat and depreciation of fixed assets) in amount of 89,318 thousand mkd, income from projects in amount of 50,579 thousand mkd,, income from written off value receivables in amount of 45,974 thousand mkd, income from other services in amount of 4,487 thousand mkd and other revenues. The revenues from rent are based on the agreement for lease of fixed assets for heat production. Cost of service sold Cost of service sold in 2015 amounts of 26,883 thousand mkd. These include the cost of fuel (natural gas), costs for electricity and cost for consumed water. In 2015 total cost for fuel is in amount of 23,763 thousand mkd. These are costs of the daughter company Skopje Sever AD which produces, distributes and supplies heat energy in part of the city Skopje. Employees costs Employees costs are in amount of 31,290 thousand mkd. In 2015 the gross salaries of employees were paid in amount of 29,889 thousand mkd and the rest of the costs are referring to other costs associated with employees in the Toplifikacija Group. The number of employees in Toplifikacija Group on 31 st of December 2015 is 60. Depreciation Depreciation of Toplifikacija Group for 2015 is 82,313 thousand mkd. It is calculated by straight line method for long-term assets adopted by the Group. Impairment losses on bad receivables In 2015 impairment losses on bad receivables is in amount of 6,414 thousand mkd. Other operating expenses The other operating expenses in 2015 are in amount of 41,557 thousand mkd. These includes provisions for payment and bank services, costs for other services, costs of sold goods and services, telephone and internet costs, costs for projects,taxes, costs for court fees, various types of services, contributions, dues and other expenses. 27 of 32

30 In the following chart is shown the participation of each group of expenses out of total amount of costs for Graph 1 Participation by each group of costs for 2015 Financial income Financial income in 2015 is in amount of 79,297 thousand mkd. It consists of income from interests by end consumers, income of loans given to the unrelated companies, income from gain from associated companies income from positive exchange rates and income from bank interests. Financial expenses Financial expenses in 2015 are in amount to 90,348 thousand mkd. The biggest cost in this category includes interest from banks on taken loans for realization of investment in the gas plant for combined production of electricity and heat energy TE-TO AD Skopje and interests from bank loans taken for current operations before 2013 for the need of financing the production of heat. CONSOLIDATED STATEMENT OF FINANCIAL POSITION Total assets Total assets in 2015 are in amount of 2,976,591 thousand mkd. They are composed of current and non-current assets. Total non-current assets are in amount of 1,040,589 thousand mkd. Material assets Material assets are in amount of 1,007,928 thousand mkd, and this category is composed of total movable and immovable properties owned by the Toplifikacija Group. Bank deposits The amount of deposit in Komercijalna banka AD Skopje as guarantee of loan given to TE-TO AD Skopje is in amount of 26,872 thousand mkd. Total current assets are in the amount of 1,936,002 thousand mkd. They are composed of cash 28 of 32

31 equivalents, trade receivables, receivables from loans, receivables for advances, other current assets, paid expenses for future periods and inventories. Trade receivables Trades receivables of Toplifikacija Group are in amount of 232,676 thousand mkd and,it consists of receivables from sale of heat energy towards the end customers, receivables from lease of equipment, receivables from given services and other receivables. Receivables from loans These are receivables from loans given as investment in building a gas plant for combined production of electricity and heat energy TE-TO AD Skopje. These are in amount of 1,624,516 thousand mkd with calculated interest on due loans. Equity Equity of Toplifikacija Group is in amount of 1,700,929 thousand mkd. It is composed of shareholders capital in amount of 1,394,100 thousand mkd, reserves in amount of 146,412 thousand mkd, revaluation reserves in amount of 22,136 thousand mkd and accumulated profit in the amount of 139,922 thousand mkd, deducted for treasury shares and non-controlling interests. Liabilities Liabilities in 2015 are in amount of 1,276,308 thousand mkd. They are composed of current and noncurrent liabilities. Long-term borrowings Long-term borrowings are in amount of 773,630 thousand mkd. Total current liabilities are in amount of 502,678 thousand mkd. They are composed from liabilities of trade payables, payables for advanced, short term borrowing, current portion of long-term borrowing, and other short term liabilities and accurate expenses. Trade payables Trade payables are in amount of 99,716 thousand mkd. Most of these categories are liabilities towards suppliers for materials and fixed assets. Short term borrowings Short term borrowings in 2015 are in amount of 221,686 thousand mkd.. CONSOLIDATED CASH FLOW STATEMENT Cash flow from operating activities Cash flow from operating activities for 2015 is positive and it is in amount of 97,701 thousand mkd. In order to calculate the cash flow from operating activities, the income before tax is adjusted for depreciation, impairment receivables and write-off of liabilities income, interest expenses and interest income and positive exchange rate differences. Profit before adjustments in current assets is 167,077 thousand mkd. In the cash flow from operating activities major positive category are trade receivables arising from more receivables paid in the year of receivables made for the same period. The paid amount of interest as a negative category is 85,270 thousand mkd. 29 of 32

32 Cash flows from investing activities Cash flows from investing activities are negative in amount of 49,743 thousand mkd. In 2015 Toplifikacija AD Skopje invested in fixed assets amount of 48,365 thousand mkd in accordance with the agreement for lease of equipment for heat production. Cash flows from financing activities Net cash flows from financial activities in 2015 are in amount of 47,692 thousand mkd (negative). During 2015 the Group has net returned more borrowings in the amount of 47,456 thousand mkd. Cash and cash equivalents at the end of the year amounted to 7,230 thousand mkd. 30 of 32

33 CORPORATE GOVERNANCE Managing structure The management is organized on the basis of a two-level system. The highest managerial body is the Shareholders Assembly. The shareholders with their votes elect the members of the Supervisory Board through the Shareholders Assembly. In compliance with the legal regulations during the year one regular Assembly is hold on which the results achieved in the past year are discussed. If deemed necessary, as well as following the initiative of the shareholders, special Assemblies may be hold. In 2015 one regular Shareholders Assembly was held where the Financial statements, the Annual Report of the company for the year 2014, the Report for the work of the Management and Supervisory Board of Toplifikacija AD Skopje were reviewed and adopted, decision for distribution of consolidate net profit was adopted, and decision for auditor for the financial year The Supervisory Board in 2015 consists of the following 5 members: Ivica Stojanovski, President of the Supervisory Board - mandate until June 2017 Dimitar Sulev, member of the Supervisory Board - mandate until June 2017 Grozdan Delidinkov, member of the Supervisory Board - mandate until June 2017 Miodrag Milosevic, member of the Supervisory Board - mandate until June 2017 Bostian Kuhar, independent member of the Supervisory Board - mandate until June 2017 During 2015 the Supervisory board held 5 meetings. The Management Board in 2015 consists of the following 6 members: Dr.Ec.Sci. Dimitar Hadimisev, President of the Management Board mandate until June 2017 Georgi Velevski, member of the Management Board mandate until June 2017 Zoran Kolev, member of the Management Board mandate until June 2017 Jovan Lazaroski, member of the Management Board mandate until June 2017 Dine Iliev, member of the Management Board mandate until June 2017 Zoran Kovacevski, member of the Management Board mandate until June 2017 During 2015 the Management Board held 25 meetings. Fees for Supervisory and Management board Members of the Supervisory and Management Board of Toplifikacija Group did not receive funds based on fee for membership in the Supervisory Board and Management Board for Total gross income on all grounds of Supervisory Board members in 2015 from Toplifikacija Group amounted to mkd and total gross income of the Management Board members for 2015 amounted to 3,192,014 mkd. Ivica Stojanovski, president of the Supervisory Board, an employee of Toplifikacija Group, total gross income of Toplifikacija Group for 2015 mkd of 32

34 Miodrag Milosevic member of Supervisory Board, an employee of DPTU Kopia Miodrag DOOEL, company for services related to information technology and computers, total gross income of Toplifikacija Group for 2015 in the amount of 100,001 MKD and the gross income from the company employer in the amount of mkd. The other members of the Supervisory Board, Grozdan Delidinkov, Bostjan Kuhar and Dimitar Sulev did not receive income from Toplifikacija Group for Dimitar Hadzi- Mishev, Chairman of Management Board, an employee of Toplifikacija Group, total gross income from Toplifikacija Group for 2015 in amount of 1,040,692 mkd. Georgi Velevski, Management Board Member, total gross income from Toplifikacija Group for 2015 in amount of mkd. Jovan Lazaroski, Management Board member, an employee of Toplifikacija Group, total gross income frm Toplifikacija Group for 2015 amounting to mkd. Zoran Kolev, Management Board member, employee of TTK Banka AD Skopje, total gross income from Toplifikacija Group for 2015 in amount of mkd and the gross income from the company employer in the amount of 1,351,658 mkd. Dine Iliev, Management Board member, employee of Toplifikacija Group, total gross income from Toplifikacija Group for 2015 amounting to mkd. Zoran Kovacevski, Management Board member, an employee of Toplifikacija Group, total gross income from Toplifikacija Group for 2015 amounting to mkd. Code on corporate governance Toplifikacija AD Skopje organizes its operation and management in compliance with the Code on corporate management of joint stock companies listed on the Macedonian stock market of securities. 32 of 32