SOCIETATEA FILIALA DE INTRETINERE SI SERVICII ENERGETICE ELECTRICA SERV S.A. FINANCIAL STATEMENTS

Transcription

1 SOCIETATEA FILIALA DE INTRETINERE SI SERVICII ENERGETICE ELECTRICA SERV S.A. FINANCIAL STATEMENTS Prepared in accordance with The Order of the Minister of Public Finance no.1802/2014 with subsequent modifications, on and for the financial exercise ended on DECEMBER 31, 2017

2 Contents Page Financial statements Balance sheet 3-6 Profit and loss account 7-8 Cash Flow Statement 9-10 Statement of changes in equity 11 Notes to the financial statements 12-36

3 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF FINANCIAL POSITION as at (All amounts in RON, unless otherwise specified) A. NON-CURRENT ASSETS I. INTANGIBLE ASSETS Row no. Balance at: Item January 1, 2017 A B lei - December 31, Set-up costs (acc ) Development costs (acc ) Concession rights, patents, licenses, trademarks and other similar 03 rights and other intangible assets(acc ,664 5, ) 4. Goodwill(acc ) Intangible assets of exploration and evaluation of mineral 05 resources ( ) 6. Advances ( acc. 4094) 06 TOTAL (row 01 to 06) 07 76,664 5,067 II. TANGIBLE ASSETS 1. Land and buildings(acc ) ,652, ,120, Technical equipment and machinery(acc ) 09 16,167,684 23,572, Other systems, equipment and furniture (acc ) 1,236, , Real estate investment (acc ) Tangible assets in progress(acc ) 12 1,059, , Real estate investments under construction(acc ) Tangible assets of exploration and evaluation of mineral resources 14 (acc ) Productive biological asstes (acc ) Advances ( acc. 4093) TOTAL (row 08 to 16) ,116, ,820,314 III. FINANCIAL ASSETS 1. Shares held in subsidiaries (acc ) 18-1, Loans to group subsidiaries (acc ) 19 2,702, , Shares held by associated entities and shared entities (acc ) 4. Loans to associated entities and shared entities (acc ) 5. Other investments (acc ) Other loans (acc. 2675* * * * * *) 781, ,538 TOTAL (row 18 to 23) 24 3,483,823 1,272,992 NON-CURRENT ASSETS TOTAL (row ) ,676, ,098,373 B. CURRENT ASSETS I. INVENTORIES 1. Raw materials and consumables (acc / / ,418,265 3,019, ) 2. Production in progress (acc /- 348* ) 3,945,838 34, Finished products and goods (acc /- 348* / / , , din acc. 4428) 4. Advances (acc. 4091) 29 5,323 4,129

4 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF FINANCIAL POSITION as at (All amounts in RON, unless otherwise specified) TOTAL (row 26 la 29) 30 31,446,007 3,589,461 II. CLAIMS (The amounts which are to be collected after a period of more than one year must be shown separately for each item) 1. Trade receivables 1 (acc. 2675* * * * * * ) 11,879,257 18,904, Amounts to be received from affiliated entities (acc. 451** - 495*) 32 92,217,379 72,850, Amounts to be received from the entities associated and controlled 33 entities in common (acc *) 4. Other receivables (acc ** + 437** ** from acc. 4428** + 444** ** + 447** 4,206,839 6,832, ** ) 5. Subscribed and unpaid Equity (acc *) 35 TOTAL (row 31 la 35) ,303,475 98,587,428 III. SHORT TERM INVESTMENTS 1. Shares in affiliated entities (acc ) Other short term investments (acc from acc ) TOTAL (row ) 39 IV. CASH ON HAND AND BANK ACCOUNTS 40 (from acc acc ) 18,622,268 29,887,689 CURRENT ASSETS TOTAL 41 (row ) 158,371, ,064,578 C. PREPAYMENTS (acc. 471) (row 43+44) , ,759 Amounts of resumed within a period of up to one year (from acc , , *) Amounts taken over a period exceeding one year (from acc. 471*) 44 D. LIABILITIES: AMOUNTS TO BE PAID IN A PERIOD OF UP TO ONE YEAR 1. Debenture loans, presenting separately the loands from the issue of convertible bonds (acc ) Amounts owed to credit institutions (acc ) 3. Advances collected for orders (acc. 419) 47 11,374 11,811 4.Commercial debts - suppliers (acc ) 48 60,162,899 36,907, Commercial papers payable (acc ) Amounts due to the entities of the group (acc ***) 18,476,659 21,001, Amounts owed to entities associated with and controlled entities 51 in common (acc ***) 8. Other creditors, including tax debts and debts on social security 52 insurance (acc *** + 437*** *** *** + 444*** + 446*** + 447*** *** + 25,839,069 6,095, *** ) TOTAL (row 45 to 52) ,490,001 64,016,400 E. NON-CURRENT ASSETS/NET CURRENT LIABILITIES 54 (row ) 53,136,064 64,406,419 F. TOTAL ASSETS LESS CURRENT LIABILITIES 55 (row ) 278,812, ,504,792 G. LIABILITIES: THE AMOUNTS TO BE PAID IN A PERIOD OF MORE THAN ONE YEAR 1 The amounts entered in this row and taken from the accounts represent the claims relating to contracts of financial leasing and other similar contracts and other long term receivables due in a period of less than 12 months. 4

5 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF FINANCIAL POSITION as at (All amounts in RON, unless otherwise specified) 1. Debenture loans, privinding separately the loands form, from the 56 issue of convertible bond loans (acc ) 2. Amounts owed to credit institutions (acc ) 3. Advances collected for orders (acc. 419) Trade payables - suppliers (acc ) Commercial papers payable (acc ) Amounts due to the entities of the group (acc ***) 7. Amounts owed to entities associated with and controlled entities 62 in common (acc ***) 8. Other creditors, including tax liabilities and debts on social 63 security insurance (acc *** + 437*** *** *** + 444*** + 446*** + 447*** *** *** ) TOTAL (row 56 la 63) 64 H. PROVISIONS 1. Provisions for employee benefits (acc ) 65 34,745,378 19,287, Provisions for taxation (acc. 1516) , , Other provisions (acc ) 67 13,772,029 2,505,708 TOTAL (row ) 68 49,489,485 22,765,137 I. DEFERRED REVENUE 1. Investments subsidies (acc. 475) (row ): , ,529 Amounts to be resumed within a period of up to one year (from 70 acc. 475*) 831, ,529 Amounts to be resumed in a period of more than one year (from 71 acc. 475*) 2. Deferred revenue (acc. 472) - total (row ), 72 of which: 166,987 3,076,980 Amounts to be resumed within a period of up to one year (from 73 acc. 472*) 166,987 3,076,980 Amounts to be resumed in a period of more than one year (from 74 acc. 472*) 3. Deferred revenue related to transfers from customers (acc. 478) 75 (row ): Amounts to be resumed within a period of up to one year (from 76 acc. 478*) Amounts to be resumed in a period of more than one year (from 77 acc. 478*) Negative goodwill (acc. 2075) 78 TOTAL (row ) ,951 3,839,509 J. EQUITY AND RESERVES I. EQUITY 1. Subscribed paid Equity (acc. 1012) ,089, ,089, Subscribed and unpaid Equity (acc. 1011) Patrimony administration (acc. 1015) Patrimony of national research and development institutions 83 (acc. 1018) 5. Other elements of the Equity and reserves (acc. SOLD C ) TOTAL (row ) ,089, ,089,920 II. SHARE PREMIUM (acc. 104) 86 III. REVALUATION RESERVES (acc. 105) ,794, ,597,292 IV. RESERVES 1. Legal reserves (acc. 1061) 88 1,762,695 2,687,424 5

6 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF FINANCIAL POSITION as at (All amounts in RON, unless otherwise specified) 2. Statutory or contractual reserves (acc. 1063) Other reserves (acc. 1068) 90 3,602,900 3,597,620 TOTAL (row 88 la 90) 91 5,365,595 6,285,044 Own shares (acc. 109) 92 Earnings related equity instruments (acc. 141) 93 Losses related equity instruments (acc. 149) 94 V. REPORTED PROFIT OR LOSS (acc. 117) SOLD C 95 SOLD D ,262, ,802,447 VI. FINANCIAL PROFIT OR LOSS FOR THE SOLD C 97 4,563,059 18,494,574 YEAR (acc. 121) SOLD D 98 Distribution of profit (acc. 129) , ,729 EQUITY - TOTAL 100 (row ) 229,323, ,739,653 Public heritage(acc. 1016) 101 Private heritage (acc. 1017) 102 EQUITY - TOTAL (row ) ,323, ,739,653 TOTAL EQUITIES AND LIABILITIES 384,301, ,360,710 The financial statements beginning with the page 3 until page 37, have been approved by the Board of Directors in date of March 02, 2018 and submitted for approval to General Meeting of Shareholders. Sinan Mustafa Managing Director Daniel Marin Financial Director Signature Signature 6

7 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF PROFIT OR LOSS as at (All amounts in RON, unless otherwise specified) Row Statement of Profit and Loss no. Financial exercise A B 1 2 1, Net turnover 01 (row ) 366,534, ,507,449 Sold production (acc, ) ,299, ,951,619 Income from sale of goods (acc, 707) 03 22,235,279 35,555,830 Trade discounts granted (acc, 709) 04 Income from interests recorded by entities removed from the General 05 Registry that still have ongoing leasing contracts (acc, 766*) Income from subsidies related to net turnover (acc, 7411) 06 2, Income related to the cost of production in progress (acc, ) Balance C - Balance D ,021 3,948,274 3, Income from the production of tangible and intangible assets (acc, ) 4,509 8,970 4, Income from revaluation of tangible assets (acc, 755) 10-1,349,657 5, Income from real estate investment production (acc, 725) 11 6, Income from subsidies (acc, ) 7, Other operating income (acc, ) 13 11,411,915 22,237,838 - of which, income from negative goodwill (acc, 7815) 14 - of which, income from investment subsidies (acc, 7584) 15 OPERATING INCOME TOTAL 16 (row ) 377,704, ,155,640 8, a) Raw material and consumables expenses 17 (acc, ) 84,920,399 75,356,129 Other material expenses (acc, ) 18 2,074,228 1,041,826 b) Other expenses (energy and water) (acc, 605 ) 19 5,121,292 4,613,027 c) Expenses on goods (acc, 607) 20 22,219,261 35,570,220 Received trade discounts (acc, 609) 21 43,795 19,622 9, Personnel expenses (row ), of which: ,296, ,185,050 a) Wages and salaries (acc, ) ,638, ,922,359 b) Expenses on social security and welfare (acc, 645) 24 32,657,472 24,262,691 10, a) Value adjustments on tangible and intangible assets (row 26-27) 25 13,179,460 9,906,306 a,1) Expenses (acc, ) 26 13,179,460 9,906,306 a,2) Income (acc, 7813) 27 b) Value adjustments on current assets (row 29-30) 28 (319,182) 1,356,952 b,1) Expenses (acc, ) 29 5,940,162 10,189,601 b,2) Income (acc, ) 30 6,259,344 8,832,649 11, Other operating expenses (row 32 la 38) 31 94,257, ,299,007 11,1, Expenses on external supply (acc, ) 86,192, ,892,480 11,2, Expenses on other taxes, duties or similar expenses; expenses 33 representing transfers and contributions due under special regulations (acc, *) 4,570,918 12,866,754 11,3, Expenses on environmental protection (acc, 652) 34 10,161 8,796 11,4 Expenses from revaluation of tangible assets (acc, 655) 35-4,702,825 11,5, Expenses regarding calamities and other similar events 36 (acc, 6587) 11,6, Other expenses (acc, ) 37 3,484,483 11,828,152 - lei -

8 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF PROFIT OR LOSS as at (All amounts in RON, unless otherwise specified) Expenses with refinancing interests recorded of Companies removed 38 from the Gwneral Register and that still have ongoing contracts (acc, 666*) Adjustments on provisions (row 40-41) 39 (20,912,067) (26,724,336) - Expenses (acc, 6812) ,272,802 - Income (acc, 7812) 41 29,640,559 28,997,138 OPERATING EXPENSES TOTAL ,793,474 (row 17 la ) 363,584,559 OPERATING PROFIT OR LOSS: - Profit (row 16-42) 43 4,911,237 18,571,081 - Loss (row 42-16) 44 12, Income from participation interests (acc, ) 45 - out of which, income from associated companies 46 13, Income from interests (acc, 766*) 47 8,075 12,225 - of which, income obtained from affiliated entities 48 14, Income from subsidies for due interest (acc, 7418) 49 15, Other financial income (acc, ) , ,359 - of which, income from other financial assets (acc, 7615) 51 FINANCIAL INCOME TOTAL , ,584 16, Value adjustments on financial assets and financial investments held 53 as current assets (row 54-55) - Expenses (acc, 686) 54 - Income (acc, 786) 55 17, Interest charges (acc, 666*) , ,366 - of which, expenses in relation with affiliated entities 57 Other financial expenses (acc, ) 58 65,583 14,725 Financial expenses - TOTAL (row ) , ,091 FINANCIAL PROFIT OR LOSS - Profit (row 52-59) 60 - Loss (row 59-52) ,178 76,507 TOTAL INCOME (row ) ,864, ,345,224 TOTAL EXPENSES (row ) ,301, ,850,650 18, GROSS PROFIT OR LOSS - Profit (row 62-63) 64 4,563,059 18,494,574 - Loss (row 63-62) 65 19, Income Tax Expense (acc, 691) 66 20, Other taxes not shown in the above items (acc, 698) 67 21, NET PROFIT OR LOSS FOR THE FINANCIAL YEAR: - Profit (row ) 68 4,563,059 18,494,574 - Loss (row ); (row ) 69 Sinan Mustafa Managing Director Daniel Marin Financial Director Signature Signature 8

9 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF CHANGES IN EQUITY as at (All amounts in RON, unless otherwise specified) Item Balance on December 31, 2016 Increase Decrease Balance on Total, By Total, by December 31, of which: transfer of which: transfer 2017 Equity subscribed 394,089, ,089,920 Revaluation reserves 199,794,788 44,885,404-24,082,900 5,139, ,597,292 Legal reserves 1,762, , ,729 2,687,484 Other reserves 3,602,900 5,280-3,597,620 Retained earnings (374,262,088) 9,702,903 9,702, , ,153 (364,802,447) Financial year profit or loss 4,563,059 18,494,574-4,563,059 4,563,059 18,494,574 Profit distribution (228,153) 228, , , ,729 (924,729) Total own equity 229,323,121 74,235,762 10,855,785 29,819,230 10,855, ,739,654 Sinan Mustafa Managing Director Daniel Marin Financial Director Signature Signature

10 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF CHANGES IN EQUITY as at (All amounts in RON, unless otherwise specified) Item Balance on Increase Decrease Balance on December 31, 2015 Total, of which: By transfer Total, of which: by transfer December 31, 2016 Equity subscribed 394,089, ,089,920 Revaluation reserves 200,781, , , ,794,788 Legal reserves 1,534, , ,153 1,762,695 Other reserves 3,602,900 3,602,900 Retained earnings (350,999,261) 7,999,808 2,852,808 31,262,363 - (374,262,088) Financial year profit or loss 1,936,200 4,563,059-1,936,200 1,936,200 4,563,059 Profit distribution (96,810) (228,153) (228,153) (96,810) (96,810) (228,153) Total own equity 250,848,697 12,562,867 2,825,808 34,088,444 2,825, ,323,121 In 2016, the Company recorded through retained earnings the correction of previous year accounting errors, as follows: Correction of 2015 error in amount of RON 29,989,000 representing provisions for restructuring according to the Reorganization Plan endorsed by the Board of Directors through decision no,35 from December 7th 2015, The provision met the recognition criteria as of December 31st 2015 and is related to the compensatory package for 500 employees, Correction of 2015 error in amount of RON 4,174,000 representing reversal of employee benefits provision related to the employees included in the Reorganization plan mentioned above, Correction of 2005 accounting error in amount of RON 1,806,672 representing social insurance taxes, The Company paid the mentioned amounts in 2005, but were recorded as receivable from Electrica SA, not as an expense, This amounts were not recognized by Electrica SA, Correction of 2008 error in amount of RON 466,964, representing exepenses in transactions with Electrica S,A,,related to fiscal obligations established following an fiscal inspection at Electrica SA in period, which resulted in connection with the years activity of the former Directia de Intretinere si Servicii Energetice a Electrica SA, In 2005, following Electrica spin off, the Company was established, which took over the assets and liabiltiies of Directia de Intretinere si Servicii Energetice according to the transfer protocol, In accordance with the mentioned protocol, in 2008 Electrica SA started the recovery from the company of the fiscal obligations mentioned above, The 2015 net profit, in amount of RON 1,936,200 (without the impact of above mentioned corrections), was distributed as follows: Legal reserves in amount of RON 96,810 and Cover of reported loss in amount of RON 1,839,290, Sinan Mustafa Managing Director Daniel Marin Financial Director Signature Signature 10

11 Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. STATEMENT OF CASH FLOW as at (All amounts in RON, unless otherwise specified) Financial exercise Statement of cash flow A 1 2 Cash flows from operating activities: Profit before tax 4,563,059 18,494,574 Adjustments for: Amortisation and depreciation adjustments of intangible and tangible assets 13,179,460 13,872,041 Loss / (gain) from the sale or disposal of tangible and intangible assets (117,607) (1,634,118) Impairment of current assets, net (319,183) 1,381,312 Changes in provisions, net (44,727,067) (26,724,336) Net financial income 348,178 76,507 Operating profit before changes in working capital (27,073,160) 5,465,980 Decrease / (increase) of inventories (162,515) 27,832,186 (Increase) / decrease of trade receivables and other type 37,262,496 10,792,216 Increase in trade payables and other type 2,180,940 (37,653,426) Changes in working capital 39,280, ,970 Interests paid (442,270) (251,336) Income tax paid Net cash from operating activities 11,765,491 6,185,584 Cash flows from investment activities Payments for purchase of tangible and intangible assets (884,934) (340,530) Proceeds from sale of tangible assets 199,875 5,412,292 Interest received 8,111 8,075 Net cash from investment activities (676,948) 5,079,837 Cash flows from financing activities Collections from loans Loans reimbursement (9,900,000) - Payment of finance lease liabilities Net cash from financing activities (9,900,000) - Net increase in net cash and cash equivalents 1,188,543 11,265,421 Cash and cash equivalents at the beginning of financial year 17,433,725 18,622,268 Cash and cash equivalents at the end of financial year (*) 18,622,268 29,887,689 Sinan Mustafa Managing Director Daniel Marin Financial Director Signature Signature

12 NOTE 1: Information about the Company Filiala de Intretinere si Servicii Energetice Electrica Serv S.A. (the Company or FISE Electrica Serv SA ) is a jointstock company founded in 2005, with its registered office in Sos. Stefan cel Mare, nr. 1A, sector 1, Bucharest, Romania. The Company is registered with the Trade Register under number J40/4454/ and has the unique registration number The sole shareholder of the Company is Societatea Energetica Electrica SA, a company listed at the Stock Exchange. The Company is part of the Electrica group. These annual financial statements are public and may be acquired from the website of the parent Company. The main object of activity of the Company is the execution of maintenance and repair works for electricity distribution and transmission installations, other service activities, as well as the execution of investment works in the energy sector. The company provides maintenance and repair of electrical networks and design, construction and assembly of electrical networks, mainly to the distribution network operators within the Electrica Group (the electricity distribution companies Muntenia Nord, Transilvania Nord and Transilvania Sud). The Company shares are not listed on the Stock Exchange. On December 31, 2017 and 2016, the regional maintenance and energy services subsidiaries of the Company are as follows: a) Maintenance and Energy Services Subsidiary Muntenia Nord; b) Maintenance and Energy Services Subsidiary Transilvania Nord; c) Maintenance and Energy Services Subsidiary Transilvania Sud. NOTE 2: ACCOUNTING PRINCIPLES, POLITICS AND METHODS 2.1 Basics in making the financial statements These are the financial statements of the Company for the financial exercises concluded on December , made according to: Accounting Law no. 82/1991 (republished 2008), with the subsequent modifications Provisions of the Order of the Minister of Public Finances no. 1802/2014 on approval of the Accounting Regulations regarding the annual individual financial statements and the consolidated annual financial statements, with the subsequent modifications ( OMFP 1802/2014 ). The accounting policies adopted for the making and presentation of the financial statements comply with the accounting principles provided by OMFP no. 1802/2014. These financial statements include: - Balance-sheet - Loss and profit statement - Cash flow status - Equity changes status - Explanatory notes to the financial statements. The financial statements only refer to SDEE Muntenia Nord SA. The Company has no branches that would require consolidation. Accounting records based on which the financial statements were based were made in RON (RON). These financial statements are not intended to present the financial status, results of operations, cash flows and a full set of notes to the financial statements in compliance with the accounting regulations and principles accepted by countries and jurisdictions other than Romania. Therefore, the financial statements were not prepared for the use of persons who are not familiar with the accounting and legal regulations in Romania, including OMFP no. 1802/2014.

13 2.2 Significant accounting principles The financial statements for the financial exercise concluded on December were made in compliance with the following accounting principles: Uninterrupted activity principles The Company will continue to function normally, without entering liquidation or significantly reducing activity. The principle of permanent methods The Company consistently applies the accounting politics and the evaluation methods from a financial exercise to another. Prudence principle In making the annual financial statement, the recognition and evaluation was made on a prudent basis and, especially: a) the profit and loss statement only include the profit achieved at the balance sheet date; b) the debts that appeared during the current financial exercise or the previous one, were recognized, even if they only become obvious between the balance sheet date and the date of its drafting; c) depreciations were recognized, regardless whether the result of the financial exercise was loss or profit. The accounting accrual principle The effects of the transactions and other events have been recognized when the transactions and events actually occurred (and not as the cash or its equivalent has been received or paid) and have been accounted for and reported in the financial statements of the corresponding periods. All revenues and expenses of the respective exercise have been taken into account, regardless of the date when the payment was made or received. Revenues and expenses that resulted directly and simultaneously from the same transaction were recognized simultaneously in accounting, by the direct association between expenses and related revenues, with a distinct indication of such revenues and expenses. The intangibility principle The opening balance sheet of the financial exercise corresponds to the balance sheet closing the previous financial exercise. The principle of separate evaluation of active and passive elements In order to establish the corresponding value for a position in the balance sheet it was separately determined the value of each component of the active elements and debts. The principle of non-compensation The values of the elements representing assets were not compensated for with the values of the elements representing debts, revenues and expenses, respectively. Accounting and presentation of the elements of the financial statements considering the economic nature of the transaction or engagement in question Bookkeeping and presentation of the financial-economic operations reflect their economic reality, by highlighting the rights and obligations, as well as the risks associated with these operations. The principle of evaluation based on acquisition of production cost The elements presented in the financial statements were assessed based on the principle of acquisition or production costs less tangible asset, which are evaluated based on the revaluation method. The principle of materiality threshold

14 The Company may deviate from the requirements included in the applicable accounting regulations referring to the presentations of information and publication, when the effects of their observance are insignificant. 2.3 Reporting currency The accounting records are kept in Romania language and in the national currency ( RON ). The accounting records of the operations carried out in foreign currency are kept both in national currency and in foreign currency. The elements included in these statements are presented in Romanian RON. 2.4 Using of the accounting estimates The preparation of the financial statements according to the OMFP no. 1802/2014, with the subsequent modifications, requires the management to make estimates and assumptions that influence the reported values of assets and liabilities and the presentation of contingent assets and liabilities, at the date of the financial statements, as well as the values of the revenues and expenses during the reporting period. The actual results may differ from the estimated ones. These estimates are periodically revised and, if adjustments are required, they will be recorded in the profit and loss statement, when they become available. 2.5 Business continuity The financial statements herein have been made based on the principle of continuity of activity, which implies that the Company will continue its activity in the foreseeable future. In order to assess the applicability of this assumption, the Company management analyzes the cash inflows forecasts. Based on this analysis, the management believes that the Company will be able to continue its business in the foreseeable future, and therefore the application of the continuity principle in the preparation of the financial statements is justified. As part of the reorganization process initiated in 2017, the core activity of Electrica Serv (electricity distribution network services) was transferred to its main clients the electricity distribution subsidiaries of Electrica SA. As a result of this transfer, the level of activity of the Company has been significantly reduced and is currently limited to the provision of specialized transmission services. These financial statements have been prepared on the basis of the going concern principle, which implies that the Company will continue its activity in the foreseeable future. To assess the applicability of this assumption, the management examines the projections of future cash inflows. The management also has the following main reorganization directions for the future: reducing operational and administrative costs, as well as increasing productivity by reducing the number of TESA (technical, economic, social and administrative) staff and indirectly productive staff, streamlining the real estate portfolio by efficiently using the available spaces and capitalizing on unused spaces and developing new products for the energy services market. Based on these analyses and plans, the management believes that the Company will be able to continue its business in the foreseeable future and therefore the application of the going concern principle in the preparation of the financial statements is justified. 2.6 Foreign exchanges Transactions in foreign currency are initially recorded at the exchange rate communicated by the National Bank of Romania as of the transaction date. At the balance sheet date, the monetary items denominated in foreign currency and the debts, and also the debts denominated in RON, which are settled depending on a certain exchange rate, are being evaluated and presented in the annual financial statements at the exchange rate communicated by the National Bank of Romania, valid at the date of the closing of the financial exercise. The gains and losses caused by the foreign exchange differences, realized and non-realized, between the exchange rate of the foreign exchange market communicated by the National Bank of Romania as of the date when the debts in either foreign or national currency are recorded, the settlement of which depends on a certain exchange rate, or between the exchange rate from the date when they are recorded in the accounting records and the exchange rate at the end of the financial exercises, shall be recorded in the profit and loss statement for the respective financial exercise.

15 Non-monetary items acquired in foreign currency and recorded at historical cost (fixed assets, stocks) are presented in the annual financial statements using the exchange rate from the date of the transaction. Non-monetary items acquired in foreign currency and recorded at fair value (for example, revalued tangible assets) are presented in the annual financial statements at that value. Monetary assets and liabilities denominated in foreign currency are revalued in RON at the end of each month and the exchange rate differences are recorded in the loss and profit statement. The exchange rate on 31 December 2017 and 31 December 2016 was of RON 4,6597 for 1 EURO, respectively RON 4,5411 for 1 EURO. 2.7 Significant accounting policies a) Intangible assets The intangible assets acquired by the Company are stated at cost, less the accrued amortization and impairments (see accounting policy g)). Amortization is recognized in the loss and profit statement based on the straight line method for the estimated intangible asset lifetime. Most intangible assets registered by the Company are represented by special software programs. These are straight line amortizations for a period of 3-5 years. b) Property, plant and equipment Cost/Evaluation Tangible assets are initially recognized as cost, and periodically measured at fair value. The cost of property, plant and equipment includes the acquisition price and other direct expenses related to the acquisition and commissioning of the property, plant and equipment. Significant spare parts (meters) and the security equipment are considered to be tangible assets when they are expected to be used over a period of time longer than one year. After initial recognition, property, plant and equipment are recorded as cost, less the accrued amortization and impairments (see accounting policy g) and are periodically revalued. Revaluations are performed regularly enough, so that their accounting value shall not differ materially from that which would have been determined by using the fair value at the balance sheet date. Upon the revaluation of a tangible asset, the accrued amortization at the revaluation date is being removed from the gross accounting value of the asset, and the net value determined as a result of the value adjustments is recalculated to the revalued value of the asset. Subsequent expenditure Later expenditures incurred in connection with a tangible asset are expenses belonging to the period in which they were made or increases in the value of the respective tangible asset, depending on the economic benefits of such expenses, according to the general recognition criteria. In the case of replacement of a component of a long-term asset, the Company recognizes the cost of partial replacement, with the accounting value of the replaced part being removed from the records, plus the related amortization, provided that the required information is available and the recognition criteria for the tangible assets are met. Fixed assets held under a leasing agreement Financial leasing agreements, which transfer to the Company most of the risks and benefits of the ownership over the assets, are capitalized upon at the date of commencement of the lease at the acquisition cost of the leased tangible fixed assets. Assets capitalized upon under a financial leasing agreement are depreciated on a consistent basis with the normal depreciation policy for similar assets.

16 Amortization The amortization of fixed assets with limited economic life is the systematic allocation of the amortizable amount of an asset over the entire economic life. The amortizable amount is the cost or other value that replaces the cost (for example, the revalued amount). The amortization of tangible fixed assets is calculated from the month following commissioning to the full recovery of their input value. In determining the depreciation of tangible fixed assets, their economic life and conditions of use are taken into account. Amortization is calculated using the straight-line amortization method over the life of the assets. The Company calculates the accounting depreciation based on the remaining lifetime set by the valuer in the valuation report or by the Company s technical specialists. Tax depreciation is calculated on the basis of the tax periods in the Fixed Asset Classification Catalog according to GD 2139/2004. The lifetime for the main categories of tangible fixed assets are presented in the table below. Type Use life Tax periods Administrative and industrial buildings (average of 78 years) 40 Vehicles 4-10 (average of 7 years) 4 Measurement and control equipment 4-10 (average of 7 years) 4 Office supplies Other 5 3 Land and ongoing fixed assets are not depreciated. Ongoing investments are depreciated starting from the date of commissioning. The review of the depreciation period may be justified by a significant change in the conditions of use, as well as in the case of capital investments or repairs other than those determined by current maintenance or the aging of a tangible fixed asset. Also, if the tangible fixed assets are put into conservation, their use being interrupted for a long period of time, the review of the depreciation period may be justified. When the elements underlying the initial determination of the economic life have changed, the Company establishes a new depreciation period. Changing the duration of economic life is a change in accounting estimate. Transfer and decommissioning A tangible fixed asset is deregistered upon its transfer or decommissioning when no future economic benefit is expected from its future use. In the case of the deregistration of a tangible fixed asset, the sales income, the non-depreciated cost of the asset and other expenses related to its transfer are shown separately. For the purpose of presentation in the profit and loss statement, any gains or losses arising from the decommissioning or transfer of a tangible fixed asset are determined as the difference between the income generated by its deregistration and its non-depreciated cost, including the expenses incurred by it and presented as net value, as income or expenses, as appropriate, in the profit and loss statement, under the item Other operating income, or Other operating expenses, as the case may be. c) Stocks The main categories of stocks are raw materials, ongoing production, goods, spare parts, consumables and packaging. These stocks are mainly consumables and other materials specific to the maintenance and repair activities in the automotive and energy equipment repair field. These are registered as stocks at the time of purchase and are transferred under expenses when consumed in the works executed or when sold.

17 The cost of stocks includes all acquisition and processing costs, as well as other costs incurred to bring stocks in the form and to the location where they are. The commercial discounts granted by the supplier and written on the purchase invoice help adjust in the sense of reducing the cost of acquisition of the goods. The cost of ongoing production includes direct costs related to production, namely: direct materials, direct labor, cost of services provided by third parties or subcontractors and other direct expenses, as well as the share of indirect costs. On their exit from inventory, stocks are valued on a weighted average cost basis. On the balance sheet date, stocks are valued at the lower of cost and net realizable value. The net realizable value is the estimated selling price to be obtained during the normal course of business, less the estimated costs for the completion of the good, where appropriate, and the estimated selling costs. If necessary, value adjustments are made for outdated stocks with slow or no movement. d) Receivables Client accounts and similar accounts include mainly invoices for the goods delivered, works executed and services provided. Client accounts and similar accounts are recorded at nominal value, less the recoverable amount estimated by recording an adjustment for impairment. In general, value adjustments are recorded for old or uncertain receivables. e) Cash and cash equivalent Cash holdings consist of cash, bank accounts, term deposits of up to three months, if they are held in order to cover for the need for cash on short-term, cheques and commercial effects deposited with the banks. Overdrafts are included in the balance sheet as amounts owed to credit institutions to be paid within one year. In what the cash flow is concerned, cash and cash equivalents include cash in hand, current accounts with the banks, short term financial investments for less than three months, overdraft net. f) Impairments The accounting value of the Company's assets, other than stocks, is being analyzed at each balance sheet date, in order to determine possible impairments. If such a decrease is probable, the recoverable amount of the asset in question is estimated. Depending on the case, an adjustment for impairment is recognized in the profit and loss account or in equity, when the accounting value of the asset is higher than its recoverable value. The adjustment for impairment may be resumed if there has been a change in the conditions existing at the time the recoverable value is determined. The resumption of an impairment adjustment may be made only in such a way that the net asset value does not exceed its historical net book value, taking into account the amortization. g) Loans Short and long-term loans are recorded under the amount received. Bank fees and commissions paid in order to obtain longterm loans are acknowledged on the basis of prepaid expenses. Prepaid expenditure is acknowledged under current brokendown expenditure during the repayment period of those loans. The short-term portion of long-term loans is classified under Debts: Amounts due within up to one year and included together with interest due at the balance sheet date in Amounts owed to credit institutions or Amounts owed to affiliated entities within current debts, as appropriate. h) Debts Commercial liabilities are recorded at cost, which represents the amount of the liability that will be paid in the future for the goods and services received, whether or not they have been invoiced to the Company. i) Leasing agreements

18 Leases in which the Company substantially assumes the risks and rewards of ownership are classified as financial leases. Other agreements are classified as operating leases. Debt to the Leasing Company is included in the balance sheet as a lease liability. Financing costs are recorded in the loss and profit statement for the lease period at a constant interest rate. Payments made under the operating leases are recorded in the profit and loss statement for the period of the lease. The reductions in the lease premiums are recognized in the loss and profit statement as a reduction in expenses. j) Provisions Provisions are acknowledged when the Company has a current (legal or constructive) liability generated by a previous event, it is probable that an outflow of resources will be required to honor the liability, and the liability can be estimated reliably. Provisions are reviewed at each balance sheet date and adjusted to reflect the best current estimate. If an outflow of resources is no longer probable for the settlement of a liability, the provision is canceled by transfer back under income. The amount acknowledged as provision is the best estimate at the balance sheet date of the costs required to settle the current liability. The best estimate of the costs required to settle the current debt is the amount that the Company would reasonably pay to settle the liability at the balance sheet date or to transfer it to a third party at that time. Restructuring provisions The Company acknowledges a restructuring provision to the extent that the following conditions are cumulatively met: a) the Company has a detailed official restructuring plan stipulating the activity or part of the activity to which it refers, the main locations affected by the restructuring plan, the approximate number of employees who will receive compensation for the termination of their activity, distribution and positions, the expenses involved, and the date from which the restructuring plan will be implemented; b) the Company caused the affected parties to wait for the restructuring to start by implementing the plan or by announcing its main characteristics to those affected by it. A restructuring provision includes only the direct costs generated by the restructuring, i.e. those that are necessarily generated by the restructuring process and are not related to the business continuity of the entity. Expenditure on future business management is not provisioned. Provisions for pensions and similar liabilities In accordance with GD no. 1041/2003 and no. 1461/2003, the Company provides benefits in kind in the form of free energy to employees who have retired from the Company. The Company also provides cash benefits based on length of service and on retirement for employees. The Company records provisions for employee benefits based on actuarial calculations made by professional actuaries. Other provisions Provisions are also acknowledged for litigations, fines and penalties, indemnities, damages and other uncertain debts, taxes. k) Share capital The Company recognizes the modifications operated in its share capital only after their approval by the General Shareholders Assembly and registration with the Trade Register. l) Revaluation reserves The difference between the value resulting from the revaluation and the net book value is presented in the reserve from the revaluation as a separate sub-item in "Capital and reserves". If the result of a revaluation is an increase from the net book value, then it is treated as follows: - as an increase in the revaluation reserve presented under the item "Capital and reserves", unless there has been a prior decrease recognized as an expense related to that asset, or

19 - as an income to offset the expense with the previously recognized impairment for that asset. If the result of a revaluation is a decrease in net book value, it is treated as follows: - as an expense with the full value of the impairment, when no value related to the respective asset is recorded in the revaluation reserve; or - as a decrease in the revaluation reserve with the minimum of the value of that reserve and the value of the decrease, and any remaining uncovered difference is recorded as an expense. The revaluation surplus included in the revaluation reserve is capitalized by direct transfer to the retained earnings (account 1175 "Reversed earnings for revaluation surplus"), when that surplus represents a gain. The gain is to be considered as achieved, as the asset is used by the entity; the amount of the transferred reserve is the difference between the amortization calculated on the basis of the revalued carrying amount and the amortization value calculated based on the initial cost of the asset. Under the tax legislation in force, the revaluation reserve is taxed at the time of its change of destination. Starting on May , as a result of changes in the tax legislation, the revaluation reserves recorded after January become taxable as amortization of tangible fixed assets. m) Legal reserves Legal reserves represent 5% of the gross profit at the end of the year, until the total legal reserves reach 20% of the paid up share capital, according with the legal provisions. n) Dividends Dividends are recognized as debt in the period during which their distribution is being approved. Dividends are distributed after the financial statements are approved. o) Retained earnings The accounting profit remaining after the distribution of the legal reserve realized shall be taken up within the result carried forward at the beginning of the financial year following that for which the annual financial statements are prepared, from where it will be distributed to the other legal destinations. The accounting records of the accounting profit destinations are made in the following year after the general meeting of the shareholders approving the distribution of the profit, by registering the amounts representing dividends due to shareholders, reserves and other destinations, according to the law. p) Income The Company income comes from the provision of maintenance, repair, construction and assembly works and automotive services, as well as the sale of spare parts for electricity distribution networks. Income is acknowledged at the fair value of the services rendered or the goods delivered, net of VAT, excise duties and other taxes related to the sale. Income from services Income from services is acknowledged in the period in which they were provided and in accordance with the execution stage. Service provision includes the execution of works and any other operations that cannot be considered as deliveries of goods. The execution stage of the work is determined on the basis of the work statements that accompany the invoices, acceptance reports or other documents attesting the stage of execution and acceptance of the services rendered. In the case of construction and assembly works, income is acknowledged on the basis of the acceptance document signed by the beneficiary, certifying that the contractor has fulfilled its obligations in accordance with the provisions of the agreement and the execution documentation. The value of works not accepted by the beneficiary until the end of the period is written down under costs, at 332 Ongoing services, based on account 712 Income related to ongoing service costs.

20 Income from sale of goods Income from sale of goods is recorded when the goods are handed over to the buyers, delivered on the basis of the invoice or other conditions stipulated in the agreement, attesting the transfer of ownership over the respective goods to the clients. Income from the sale of goods is acknowledged when the following conditions are met: a) the Company transferred to the buyer the significant risks and benefits of the ownership over the goods; b) the Company no longer manages the goods sold at the level they would normally do it, in the case of their ownership, and does not have any effective control over them; c) the size of income may be assessed credibly; d) it is probable for the economic benefits related to the transaction to be generated to the entity; and e) the transaction costs may be assessed credibly. Income from royalties, leases Income from royalties and leases is acknowledged based on accrual accounting, under the agreement. q) Corporate income tax The corporate income tax is calculated based on the annual tax result, by using the tax quota in force at the balance sheet date, adjusted with the corrections of the previous years. r) Financial income and expenditure Financial income includes interest income and foreign exchange income. Financial expenditure includes loanrelated interest expenses and foreign exchange difference expenses. Financial income and expenditure are recovered on the basis of accrual accounting. s) Employee costs Short-term employee rights include salaries and social contributions. The rights of short-term employees are acknowledged as expenses when services are rendered by them. t) Affiliates and connected parties According to the Order of the Ministry of Public Finances no. 1802/2014, with the subsequent modifications, the affiliated party is a person or an entity that is in relation with the entity that is drafting financial statements, hereinafter referred to as a reporting entity. A company is linked to an entity that reports whether it meets one of the following conditions: i) the entity and the reporting entity are part of the same group (which means that each parent-company, subsidiary or member subsidiary is linked to the other entities); ii) the entity is an associate or joint venture of an entity member of a group to which the other entity belongs; iii) both entities are joint ventures of the same third party; (iv) the entity is a joint venture of a third party and the other entity is an associate of the third party; v) the entity is a post-employment benefit plan for the benefit of employees of the reporting entity or an entity related to the reporting entity. If the reporting entity itself is such a plan, employers who finance the plan are also linked to reporting entities; vi) the entity is jointly controlled or controlled by a person as defined in paragraph (b); vii) the person identified in par. (b) letter i) has a significant influence on the entity or is part of the key personnel of the entity's management (or of the management of a parent company of the entity). (viii) the entity or any member of a group to which they belong provide to the reporting entity or the parent of the reporting entity Services related to the key management staff of that entity. 20