The Company Electrica Furnizare S.A.

Transcription

1 The Company Electrica Furnizare S.A. FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH ORDER OF THE MINISTER OF PUBLIC FINANCE NO. 1802/2014 AS AMENDED AS AT AND FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2017

2 SUMMARY: Page Financial statements Balance sheet 3-7 Profit and loss account 8-10 Cash Flow Statement 11 Statement of changes in equity Explanatory notes to the financial statements

3 BALANCE SHEET as at 2017 Item description A. NON CURRENT ASSETS Balance as at Balance as at Row Note no. no A B 2 2 I. INTANGIBLES ASSETS 1. Set-up costs (account ) Development costs (account ) Concessions, patents, licenses, trade marks and other similar rights and other intangible assets (account 03 15,277,286 13,420, ) 4. Goodwill (account ) Advances and intangible assets in progress and evaluation of mineral resources (account Advances (account 4094) 06 TOTAL: (row 01 to 06) ,277,286 13,420,110 II. TANGIBLE ASSETS 1. Land and buildings (account ) 08 61,995,679 68,643, Technical equipment and machinery (account ) 09 9,386,213 8,391, Other equipment and furniture (account ) 10 3,883,797 4,237,575 III. 4. Investment property (account ) Non-current assets in progress (account ) , , Investment property in progress Intangible assets in progress and evaluation of mineral resources (account ) Bearer biological assets (account Assets (account 4093) TOTAL: (row 08 to 16) ,129,280 81,623,234 FINANCIAL ASSETS 1. Shares in affiliated entities (account ) Loans granted to affiliated entities (account ) Shares in associates and in jointly controlled entities (account ) Loans granted to associates and to jointly controlled entities (account ) Other long term investments (account ) Other loans (account 2675*+2676*+2678*+2679*- 2966*-2968*) 23 5,772 10,485 TOTAL: (row 18 to 23) ,772 10,485 NON CURRENT ASSETS - TOTAL (row ) ,412,338 95,053,829 B. CURRENT ASSETS I. INVENTORIES Raw materials and consumables (account / / ) 2. Work in progress (account / )

4 BALANCE SHEET as at 2017 II. III. IV. Item description 3. Finished goods and merchandises (account / / / / ) Row no. Note no. Balance as at 2016 Balance as at Advances (account 4091) TOTAL: (row 26 to 29) RECEIVABLES 1. Commercial receivables (account ) ,089, ,168, Amounts receivable from affiliated entities (account ) 32 7,546,910 7,043, Amounts receivable from entities with which the company is linked by virtue of participating interests (account ) 4. Other receivables (account ,091,887 7,180, ) 5. Subscribed and unpaid capital (account ) 35 TOTAL: (row 31 to 35) ,728, ,391,314 SHORT TERM INVESTMENTS 1. Shares in affiliated entities (account ) Other short term investments (account ) ,655 61,793 TOTAL: (row 37 to 38) ,655 61,793 CASH AND BANK ACCOUNTS (account ) ,422, ,243,360 CURRENT ASSETS - TOTAL (row ) 41 1, , ,696,475 C. PREPAYMENTS (account 471) (row 43+44) ,920 16,918,545 Amounts to be resumed in a period of up to one year (account 471) ,920 16,918,545 Amounts to be resumed in a period exceeding one year (account 471) TOTAL ASSETS 1,188,354, ,668,849 D. LIABILITIES: AMOUNTS TO BE PAID IN A PERIOD SHORTER THAN ONE YEAR 1. Debenture loans, presented separately from the convertible debenture loans ) Amounts owed to the credit institutions (account ) Advances collected for orders (account 419) Commercial payables (account ) ,658, ,465, Bills of exchange payables (account ) Amounts owed to the entities of the group (account *) ,304, ,358, Amounts owed to associates and to jointly controlled entities (account *) Other liabilities including tax and social security debts (account ) ,916,052 87,187,680 4

5 BALANCE SHEET as at 2017 Balance as at Balance as at Row Note Item description no. no TOTAL: (row 45 to 52) ,878, ,011,472 E. NET CURRENT ASSETS/NET CURRENT LIABILITIES (row ) F. TOTAL ACTIVE MINUS CURRENT LIABILITIES (row ) G. LIABILITIES: AMOUNTS TO BE PAID IN A PERIOD LONGER THEN ONE YEAR 1.Debenture loans presenting separately the loans from the convertible debenture loans (account ) ,602, ,082, ,015, ,136, Amounts owed to the credit institutions (account ) 3. Advances collected for orders (account 419) Commercial payables-suppliers (account ) Bills of exchange payable (account ) Amounts owed to the entities of the group (account *) Amounts owed to associates and to jointly controlled entities (account *) Other liabilities including tax and social security debts (account ,920,866 40,432, ) TOTAL: (row 56 to 63) ,920,866 40,432,870 H. PROVISIONS 1. Provisions for pensions and similar obligations (account ) ,692,039 20,306, Provisions for taxes (account 1516) ,831,692 4,670, Other provisions (account ) ,827,341 1,573,585 TOTAL PROVISIONS: (row 65 to 67) ,351,072 26,550,501 I. DEFERRED INCOME 1. Investment subsidies (account 475) (row 70+71) 69 5,092 3,792 Amounts to be resumed in a period of up to one year (account 475*) 70 5,092 3,792 Amounts to be resumed in a period longer than one year (account475*) - 2. Deferred income (account 472) - total (row ) out of which: 72 3,455,824 3,517,552 Amounts to be resumed in a period of up to one year (account 472*) 73 3,455,824 3,517,552 Amounts to be resumed in a period of up to one year (account 472*) Deferred income related to assets received by transfer from customers (account 478) (row 76-77) Amounts to be resumed in a period of up to one year (account 478*)

6 BALANCE SHEET as at 2017 Item description Row no. Note no. Balance as at 2016 Balance as at 2017 Amounts to be resumed in a period of up to one year (account 478*) Negative Goodwill (account 2075) 78 TOTAL: (row ) ,460,916 3,521,344 J. CAPITAL AND RESERVES I. CAPITAL 1. Paid in capital (account 1012) 80 62,109,560 62,109, Un-paid capital (account 1011) 81 3.State regis patrimony (account 1015) Patrimony of national research and development institutes (account 1018) Other equity items (account 1031) 84 TOTAL: (row 80 to 84) ,109,560 62,109,560 II. SHARE PREMIUM (account 104) 86 III. REVALUATION RESERVE (account 105 ) ,446,326 46,150,237 IV. V. VI. RESERVES 1. Legal reserve (account 1061) 88 12,421,912 12,421, Statutory or contractual capital reserve (account 1063) Other reserve (account 1068) 90 74,717,665 92,297,164 TOTAL: (row 88 la 90) 91 87,139, ,719,076 Own shares (account 109) Gains related to equity instruments (account 141) Losses related to equity instruments (account 149) PROFIT OR LOSS CARRIED FORWARD Balance C (account 117) 95 1,252,618 1,608,646 Balance D (account 117) 96 PROFIT OR LOSS OF THE YEAR Balance C (account 121) ,794,991 1,565,143 Balance D (account 121) Profit distribution (account 129) EQUITY - TOTAL (row ) ,743, ,152,662 Public patrimony (account 1016) Public patrimony (account 1017) TOTAL EQUITY (row ) (row ) ,743, ,152,662 TOTAL PASSIVE 1,188,354, ,668,849 The attached notes constitute an integrant part of this balance sheet. Mircea PATRASCOIU GENERAL MANAGER Cristina PANA CHIEF FINANCIAL OFFICER 6

7 PROFIT AND LOSS ACCOUNT as at 2017 Financial year Financial year Row Note Item description ended as of ended as of no. no A B Net turnover (row ) ,182,569,704 3,882,396,770 Sold production (account ) ,182,567,208 3,882,202,779 Income from sales of goods (account 707) 03 2, ,991 Commercial discounts awarded (account 709) Income from interest recorded by entities removed from the General Register and who have ongoing leasing contracts (account *) Income from operating grants related to net turnover (account 7411) Changes in inventories (account ) - - Balance C Balance D 08 3 Production made by the entity for its own needs and capitalized (account ) Revenues from re-assessment of tangible assets (account 755) 10-78,693 5 Revenues from real estate investment production (account 725) Revenues from subsidies (account ) 7 Other operating income (account ) ,422,088 48,077,887 out of which, revenues from gain on goodwill (account 7415) out of which, income from investment subsidies (account 7584) OPERATING INCOME - TOTAL (row ) 16 4,207,991,792 3,930,553, a) Raw materials and consumables expenses (account ) 17 3,276,251 1,913,242 Other material expenses (account ) 18 2,069,080,764 2,157,394,385 b) Other external expenses (with energy and water) (account 605) 19 2,085,312 1,753,235 c) Merchandise expenses (account 607) 20 2, ,658 Commercial discounts received (account 609) Personnel expenses (row 23+24) ,181,797 79,512,933 a) Salaries and wages (account ) 23 66,259,630 64,226,012 b) Social security costs (account 645) 24 15,922,167 15,286,921 10a) Adjustment of the value of tangible and intangible assets (row 27 26) 25 10,196,916 12,664,483 a.1) Expenses (account ) 26 10,196,916 12,664,483 a.2) Income (account 7813)

8 PROFIT AND LOSS ACCOUNT as at 2017 Item description Row no. Note no. Financial year ended as of 2016 Financial year ended as of 2017 b) Adjustment of the value of current assets 28 (15,468,433) 5,965,921 b.1) Expenses (account ) 29 58,996, ,433,999 b.2) Income (account ) 30 74,464, ,468, Other operating expenses (row 32 la 38) ,855,373,372 1,686,500,059 Expenses regarding external services 11.1 (account ) Expenses with other taxes, duties and assimilated; expenses representing transfers and contributions due under special acts (account 635) Expenses with environmental sustainability (account 652) Expenses from re-assessment of tangible assets (account 655) Expenses related to calamities and other similar events (account 6587) Other expenses (account ) Expenses on refinancing interest carried by the entities of which main business is leasing (account 666*) Adjustments related to provisions for risks and expenses (row 40-41) 32 1,447,751,231 1,298,920, ,935,954 8,926, ,382, ,765, , ,303,919 1,548, ,038,794 (17,800,571) Expenses (account 6812) 40 7,516, ,425 Income (account 7812) 41 4,478,163 18,114,996 OPERATING EXPENSES TOTAL (row 17 to ) OPERATING PROFIT/LOSS: ,009,767,265 3,928,098,345 - Profit (row 16-42) ,224,527 2,455,005 - Loss (row 42-16) Income from controlling interests (account ) out of which income obtained from related entities Interest income (account 766) 47 1,505,308 2,149,085 - out of which income obtained from related entities Income from subsidies for interest due (account 7418) Other financial income (account ) 50 4,080 18,679 - out of which, income from other financial assets (account 7615) FINANCIAL INCOME - TOTAL (row ) 52 1,509,388 2,167,764 8

9 PROFIT AND LOSS ACCOUNT as at Item description Adjustment of the value of financial assets and financial participation held as current assets (row 54-55) Row no. Note no. Financial year ended as of 2016 Financial year ended as of Expenses (account 686) Income (account 786) Expenses on interest (account 666-) out of which, expenses in relation with group companies Other financial expenses (account ) 58 15,898 21,342 FINANCIAL EXPENSES - TOTAL (row ) 59 15,898 21,342 FINANCIAL PROFIT/LOSS: Profit (row 52-59) 60 1,493,490 2,146,422 - Loss (row 59-52) 61 TOTAL INCOME (row 16+52) 62 4,209,501,180 3,932,721,114 TOTAL EXPENSES (row 42+59) 63 4,009,783,163 3,928,119, GROSS PROFIT OR LOSS: Profit (row 62-63) ,718,017 4,601,427 - Loss (row 63-62) PROFIT TAX (account 691) ,923,026 3,036, Other taxes not presented among the above items (account 698) 21 NET RESULT OF FISCAL YEAR: Profit row ( ) ,794,991 1,565,143 - Loss row ( ) 69 The attached notes constitute an integrant part of this profit and loss account. Mircea PATRASCOIU GENERAL MANAGER Cristina PANA CHIEF FINANCIAL OFFICER 9

10 The company Electrica Furnizare S.A. STATEMENT OF CHANGES IN EQUITY Name of cash flow item Fiscal year ended 2016 Fiscal year ended 2017 Cash flows from operating activities Profit before tax 199,718,017 4,601,427 Adjustements for: Depreciation and impairment adjustments on tangible and intangible 10,196,916 12,664,483 assets Adjustments for current assets impairment, net (15,468,433) 5,965,921 Impairments in provisions 3,038,794 (17,800,571) Net financial result (1,493,490) (2,146,422) Loss from revaluation of tangible assets - 260,654 Operating result before working capital changes 195,991,804 3,545,492 Chenges of net working capital : Inventories Trade receivables and other assets 7,240,324 (49,882,722) Suppliers and other debts 71,372,754 (24,479,827) Changes of working capital 78,613,886 (74,362,351) Paid interest (136,119) - Paid income tax (21,480,479) (6,915,177) Net cash flow from / (used in) operating activities 252,989,092 (77,732,036) Cash flow from investing activities Acquisitions of fixed assets (16,535,937) (11,441,691) Interest received 1,529,038 2,210,479 Net cash flow used in investing activities (15,006,899) (9,231,212) Cash flow from financing activity Paid dividends (111,469,008) (158,215,492) Net cash flow used in financing activity (111,469,008) (158,215,492) Increase / decrease in net available cash and assimilated items 126,513,185 (245,178,740) Available cash and equivalents at beginning of the period 337,908, ,422,100 Available cash and equivalents at end of the period 464,422, ,243,360 The attached notes constitute an integrant part of this cash flow statement. Mircea PATRASCOIU GENERAL MANAGER Cristina PANA CHIEF FINANCIAL OFFICER 10

11 The company Electrica Furnizare S.A. STATEMENT OF CHANGES IN EQUITY Statement of changes in equity for the year ended 2017 are presented as follows: Balance on Increases Decreases Balance on Element of equity December Total out Total out of December by transfer by transfer 31, 2016 of which which 31, Subscribed capital 62,109, ,109,560 Revaluation reserves 40,446,326 7,970,128-2,266, ,028 46,150,237 Legal reserves 12,421, ,421,912 Other reserves 74,717,665 17,579,499 17,579, ,297,164 Retained earnings 1,252, , , ,608,646 Result of the year profit 175,794,991 1,565, ,794,991 17,579,499 1,565,143 Total capitals and reserves 366,743,072 27,470,798 17,935, ,061,208 17,935, ,152,662 During the year 2017 the Company distributed and paid dividends in the amount of Lei 158,215,492 and transferred to Other reserves the remaining profit non distributed from the year 2016 in the amount of Lei 17,579,499. Mircea PATRASCOIU GENERAL MANAGER Cristina PANA CHIEF FINANCIAL OFFICER 11

12 The company Electrica Furnizare S.A. STATEMENT OF CHANGES IN EQUITY Statement of changes in equity for the year ended 2016 are presented as follows: Element of equity Balance on Increases Decreases Balance on December 31, 2015 Total out of which by transfer Total out of which prin transfer December 31, Subscribed capital 62,109, ,109,560 Revaluation reserves 40,587, , ,404 40,446,326 Legal reserves 12,421, ,421,912 Other reserves 55,046,664 19,671,001 19,671, ,717,665 Retained earnings 1,111, , , ,252,618 Result of the year profit 131,140, ,794, ,140,009 19,671, ,794,991 Total capitals and reserve 302,417, ,607,396 19,812, ,281,413 19,812, ,743,072 During the year 2016 the Company distributed and paid dividends in the amount of Lei 111,469,008 and transferred to Other reserves the remaining profit non distributed from the year 2015 in the amount of Lei 19,671,

13 1 Information about the Company The Company Electrica Furnizare SA ( the Company ) was set up on July 22 nd 2011 (G.D. no. 930/ ) by merger of the three branches of Electrica SA: Electrica Furnizare Muntenia Nord, Electrica Furnizare Transilvania Nord and Electrica Furnizare Transilvania Sud. The registered office is in Bucharest , Sos. Stefan cel Mare, nr. 1A, sector 1, office@electricafurnizare.ro, The identification data are: Fiscal Identification Code: RO , registration number to the Trade Registry J40/8974/ The company has as its main object of activity the trading of electricity and as secondary objects other specific service redendering. The company is a subsidiary of Electrica SA, a listed company. The Romanian State is a major shareholder of Electrica SA. On 2017, the share capital of the Company is owned by % by Societatea Energetica Electrica SA corresponding to a share capital of Lei 61,109,460 and in proportion of % by the Societatea Filiala de Intretinere si Servicii Energetice Electrica Serv SA with a share capital of Lei 100. The company operates in 18 Romanian counties according to the Electric Power Supply License no. 1028/ August 18, It is entitled to supply electric power to whole Romania by three electric power branches that each have six agencies: Muntenia Nord Electric Power Supply Branch Ploiesti, with office located in B-dul Republicii nr. 1 A, Ploiesti, judetul Prahova, having the next Electric Power Supply Agencies: a) Ploiesti Electric Power Supply Agency b) Focsani Electric Power Supply Agency c) Buzau Electric Power Supply Agency d) Braila Electric Power Supply Agency e) Galati Electric Power Supply Agency f) Targoviste Electric Power Supply Agency. Transilvania Nord Electric Power Supply Branch Cluj-Napoca, with office located in Cluj-Napoca Str. Memorandumului nr.27. județul Cluj, having the next Electric Power Supply Agencies: a) Cluj Napoca Electric Power Supply Agency b) Satu Mare Electric Power Supply Agency c) Baia Mare Electric Power Supply Agency d) Oradea Electric Power Supply Agency e) Bistrita Electric Power Supply Agency f) Zalau Electric Power Supply Agency Transilvania Sud Electric Power Supply Branch Brasov, with office located in Brasov, Str. Pictor Ștefan Luchian nr. 25. bl. 30, județul Brasov, having the next Electric Power Supply Agencies: a) Brasov Electric Power Supply Agency b) Sibiu Electric Power Supply Agency c) Alba Electric Power Supply Agency d) Mures Electric Power Supply Agency e) Covasna Electric Power Supply Agency f) Harghita Electric Power Supply Agency Regulation environment The electric power market is divided into regulated market and competition market. On both markets, electric power can be balance / purchased wholesale or retail. Regulated market 13

14 Currently, Electrica Furnizare is Last resort supplier '' (LRS) for 3.5 million customers. According to the Law of Energy, supplier of last resort is a supplier designated by the regulatory authority for providing the global Electric Power Supply service in specifically regulated conditions. The tariffs applied by the LRS to the end customers are calculated to cover the cost of electric power (including transport expenses, grid services, distribution expenses and a regulated profit margin). The pricing methodology applied by last resort suppliers (ANRE Order no. 92/2015 with subsequent modifications and completions) provides a percentage value of the profit for the supply activity of 1.5% of the total cost (including acquisition, transportation, distribution, system services, market operation, supply) and an operating cost of operation recognized by ANRE to the value of 4.7 Lei / client / month in Electrica Furnizare records supply costs including contract termination, billing and invoicing costs, and database management costs, IT infrastructure and telecommunications. According to the methodology, ANRE can increase the supply activity cost by a share of the random costs registered by Electrica Furnizare as consequence of some special situations (such as re-contracting based on ANRE Order no. 88/ 2015, modifying IT systems for including new regulations, receivables loss, etc.). In 2017, the household customers were invoiced based on a schedule of eliminating regulated tariffs with tariff made up of mixture of regulated tariff component (20% for the 1st semester and 10% for the 2nd semester) and a competition market component (CPC: 80% for the 1st semester si 90% for the 2nd semester). The non-household customers benefitting of global service were invoiced at CPC tariffs for 100% from the realized consumption, non-household customers who have not used eligibility and do not meet the conditions or did not apply for the global service, including customers who have been excluded from eligibility and who were left without a supplier for reasons beyond their control, were invoiced at last resort tariffs for 100% of consumption. Tariffs for electric power supplied to household and non-household customers benefitting of the global service (GS) in 2017 are those set out by ANRE Order no. 115/2016 and no. 50/2017 and ANRE endorsements no. 46/2016, no. 9/2017 and no. 24/2017. Electric power supplied at regulated tariffs is purchased by regulated contracts, with quantities and prices set out by ANRE decision. The purchase of electricity provided at CPC rates is done through bilateral contracts concluded on PCSU and through bilateral contracts concluded on the PC (ANRE Order No. 92/2015 with subsequent modifications and completions). The differences between the realized consumption and the amount of electricity in the bilateral contracts concluded by PCSU and PC can be traded, as the case may be, on DAM, IM and / or at balancing prices. The purchase of electricity provided to LR tariffs is done through bilateral contracts concluded on PC, DAM, IM and / or at imbalance price. Any difference between the revenues made and the expenses plus related profit substantiated by the activity of supplying electric power in exchange of regulated tariffs / CPC tariffs / LR tariffs, during the previous periods of eliminating regulated tariffs, is rectified in the next phase of substantiating tariffs applied to customers in the regulated market. The expense categories of the last resort suppliers are registered in the tariffs applied to end customers but up to a level that ANRE deems to be justified. Competition market Trading on competition wholesale market is transparent, public, centralized and non-discrimination. Prices can be freely negotiated by the parties on the retail competition market. Participants in the wholesale market can engage in trading on the electric power market based on bilateral contracts concluded on the dedicated centralized market. Since July 19, 2012, the Law of Energy has been forbidding the conclusion of salepurchase contracts on wholesale electric power outside centralized markets unless energy import / export contracts were concerned. Green Certificates 14

15 The Law no. 220/2008, republished, with subsequent amendments, establishes the mechanism to promote electricity produced from renewable energy resources by applying the mandatory annual quota for purchase of green certificates: Establishment of the estimated quota of 2017: a) for the period from to : in December, ANRE establishes by order a mandatory annual quota for the acquisition of green certificates estimated for the following year, the number of green certificates to be issued on the basis of the estimated electricity to be produced from renewable energy sources for the following year and final electricity consumption estimated for the following year. b) for the period between and : until , ANRE establishes by order the mandatory annual quota for the acquisition of green certificates, applicable from the date of its entry into force, taking into account the static quantity of green certificates and the final consumption of electricity estimated for 2017, without exceeding an average impact in the end consumer bill of 11.1 euro / MWh. Within the annual obligation for purchase of green certificates, electricity suppliers are required to purchase a quarterly number of green certificates equal to the product of the annual mandatory quota for purchase of green certificates established for that year and the amount of electricity expressed in MWh, quarterly invoiced to end consumers. Electricity suppliers are required to submit quarterly and annual to ANRE, in the format and by the deadlines specified by ANRE, the electricity quantities for which they are required to purchase green certificates. In the electricity invoice sent to final consumers, the value of green certificates is invoiced separately from the rates/prices for electricity, stating the legal basis. This value is the product of the annual mandatory quota for purchase of green certificates (GC/MWh) estimated by ANRE, the quantity of electricity invoiced (MWh) and the price of green certificates, calculated as a weighted average price of transactions in the centralized market for green certificates in the previous month or the last monthly weighted average available. On the 8th working day of the 2nd month following the analysed quarter, ANRE establishes for the previous quarter and for each economic operator who is obliged to acquire green certificates, based on the number of purchased green certificates and electricity invoiced to final customers, the degree of fulfillment of the mandatory annual quota for the acquisition of green certificates for the previous quarter. ANRE establishes by order, by 1 March 2018, the mandatory annual quota for the acquisition of green certificates for the year 2017 as follows: a) for the period from to the value of the mandatory annual quota for the acquisition of green certificates is established on the basis of the quantities of electricity produced from renewable sources and the final consumption of electricity from the period between and , under the conditions of art. 4 par. (9) of the Law no. 220/2008 establishing the system for the promotion of energy production from renewable energy sources, with subsequent modifications and completions; b) for the period between and , the value of the mandatory annual quota for the acquisition of green certificates shall be established on the basis of the static quantity of green certificates established according to the provisions of par. (1) and the final consumption of electric power from the period to , but without exceeding the average consumer impact of 11.1 EURO / MWh established considering the weighted average market price of the centralized anonymous spot market for green certices, as the case may be, from the same period. The amount in Lei is calculated at the average exchange rate established by the National Bank of Romania for the period and Principles, Policies and Accounting Methods 2.1 Basis of Preparation of the Financial Statements These are the financial statements of the Company for the year ended December 31 st, 2017 prepared in accordance with: The Accounting Law no. 82/1991 (republished in 2008), with subsequent amendments; 15

16 The provisions of the Order of the Minister of Public Finance no. 1802/2014 for he approval of the Accounting Regulations on individual and consolidated annual financial statements as subsequently amended (ʺOMPF 1802/2014ʺ). The accounting policies adopted for preparing and presenting financial statements are in accordance with the accounting principles stipulated by OMPF 1802/2014. These financial statements include: - Balance sheet - Profit and loss account - Cash flow statement - Statement of changes in equity - Explanatory notes to the financial statements. The financial statements refer only to Electrica Furnizare S.A. The Company has no subsidiaries that require consolidtion. The accounting records on which these financial statements have been prepared, are made in Lei (ʺRONʺ). These financial statements are not intended to present the financial position, the results of operations, the cash flows and a complete set of notes to the financial statements in accordance with the accounting principles and practices generally accepted in countries and jurisdictions other than Romania. Therefore, the financial statements are not designed for those who do not know the accounting and legal regulations in Romania, including the OMPF 1802/ Significant Accounting Principles The items presented in the financial statements as at December 31 st, 2016 have been prepared in accordance with the following accounting principles: Going concern principle The Company shall continue to operate normally in the foreseeable future without going into liquidation or significant reduction in activity. Consistency principle The accounting policies and valuation methods were applied consistently from one financial year to another. Prudence principle In the annual financial statements, recognition and measurement was done on a prudent basis and, in particular: a) in the profit-and-loss account it was included only the profit obtained as at the balance sheet date; b) liabilities incurred during the current financial year or a previous financial year were recognized even if they become apparent only between the balance sheet date and the preparation date; c) impairments were recognized, irrespective of the result of the financial year being a loss or profit. Accrual accounting principle The effects of transactions and other events have been recognized when the transactions and events occurred (and not as cash or its equivalent has been received or paid) and were accounted for and reported in the financial statements of the related periods. There were taken into account all income and expenditure of the financial year, without taking into account the date of receipt or payment. 16

17 Revenues and expenses resulting directly and simultaneously from the same transaction were simultaneously recognized in accounting through direct association between expenses and associated revenues, with distinct highlighting of these revenues and expenses. Intangibility principle The opening balance sheet of the financial year corresponds to the closing balance sheet of the previous financial year. Principle of separate valuation of components of asset and liability items In order to establish a balance sheet corresponding position value, it was determined separately the value of each component of the assets and liabilities. Principle of non-compensation The values of the items representing assets were not compensated by the values of the items representing liabilities, namely the revenues and expenses. Accounting and presentation of items in the financial statements considering the economic substance of the concerned transaction or undertaking The accounting recording and the presentation in the financial statements of the economic and financial operations reflect their economic state of facts, highlighting the rights and obligations, and the risks associated with these operations. Principle of valuation at acquisition cost or production cost The items presented in the financial statements were assessed on the basis of the acquisition cost or the production cost, less land and buildings which are assessed on the basis of the revaluation method. Principle of significance threshold The entity may deviate from the requirements contained in the applicable accounting regulations concerning disclosures and publishing when their effects are insignificant. 2.3 Reporting Currency The accounts are kept in Romanian and in national currency (ʺRONʺ). Accounting for transactions in foreign currency must be kept both in national currency and in foreign currency. Items included in these statements are presented in Romanian Lei. 2.4 Use of Accounting Estimates The preparation of the financial statements in accordance with the OMF 1802/2014, as subsequently amended, involves the management making some estimates and assumptions that affect the reported values of assets and liabilities and the presentation of contingent assets and liabilities at the date of the financial statements, and the values of revenues and expenses in the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the profit-and-loss account in the period when they become known. 2.5 Going Concern These financial statements have been prepared on a going concern basis, which assumes that the Company will continue business in the foreseeable future. In order to evaluate the applicability of this presumption, the management analyzes projections of future cash inflows. Based on these analyses, the management believes that the Company will be able to continue their activity in the foreseeable future and therefore the application of the going concern principle in preparing the financial statements is legitimate. 17

18 2.6 Currency Conversions Transactions made in foreign currencies are initially recorded at the exchange rate published by the National Bank of Romania at the transaction date. On the balance sheet date, the monetary items expressed in foreign currency and the receivables and liabilities denominated in Lei whose settlement is based on a foreign currency are evaluated and presented in the annual financial statements at the exchange rate published by the National Bank of Romania for the date closing the financial year. Gains and losses from exchange rate differences, realized and unrealized, between the exchange rate of the currency market communicated by the National Bank of Romania from the date of registration of receivables or liabilities in foreign currency and those expressed in Lei and whose settlement is based on a foreign currency, or the rate at which they are accounted for and the exchange rate of the closing date of the financial year are recorded in the profit-and-loss account of that financial year. Non-monetary items purchased with payment in foreign currency and recorded at historical cost (fixed assets, inventories) are presented in the annual financial statements using the exchange rate at the transaction date. Non-monetary items purchased with payment in foreign currency and recorded at fair value (e.g., revalued tangible assets) are presented in the annual financial statements at this level. Monetary assets and liabilities denominated in foreign currencies are revalued in Lei at the exchange rate at the end of each month and foreign exchange differences are recorded in the profit-and-loss account. The exchange rate at 2016 and 2017 was RON for one EURO, respectively RON for one EURO. 2.7 Significant Accounting Policies a) Intangible assets Intangible assets acquired by the Company are stated at cost less accumulated depreciation and impairment losses (see accounting policy f). Depreciation is recognized in the profit-and-loss account based on a straight line basis during the estimated useful life of the intangible asset. Most intangible assets recorded by the Company are represented by dedicated software. These are depreciated linearly over a period of 3-5 years. b) Tangible assets i) Recognition and measurement Tangible assets are initially recognized at cost. The cost of tangible assets includes the purchase price and other direct costs related to the acquisition and operation of tangible assets. After initial recognition, tangible assets are recorded at cost less accumulated depreciation and impairment losses (see accounting policy f), and the buildings and land are periodically measured at fair value. The items within a group of tangible assets are simultaneously re-measured to avoid selective revaluation and reporting in the annual financial statements of values that are a combination of costs and values as at different dates. If a tangible asset is revalued, all the other assets of the group to which it belongs shall be reassessed. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using the fair value at the balance sheet date. If revaluation of a tangible asset, the accumulated depreciation at the date of the revaluation was eliminated from the gross carrying amount of the asset and the net value determined after correcting the value adjustments is recalculated at the re-measured value of the asset. ii) Subsequent expenditure 18

19 Expenditure on repair or maintenance of fixed assets made to restore or maintain the value of these assets are recognized in the profit-and-loss account on the date of they being incurred, while the costs incurred in order to improve the technical performances are capitalized and depreciated over the remaining period of amortization of that fixed asset. iii) Depreciation Depreciation is calculated to reduce the gross value less the residual value using the straight line method of depreciation over the life of the tangible assets and their components which are accounted for separately. The Company calculates the accounting depreciation based on the remaining economic life duration set by the assessor in the assessment report. Fiscal depreciation is calculated based on tax durations in the Catalogue on classification of fixed assets according to the Government Decision no. 2139/2004. Depreciation economic and fiscal durations (in years) used for tangible assets used by the Company are as follows: Categories Economic periods Fiscal periods Administrative and industrial buildings Office supplies Others 5 3 Land and fixed assets in progress are not depreciated. Investments in progress are not depreciated until commissioning. c) Trade receivables and other receivables Customer accounts and similar accounts include invoices issued until December 31st for the sale of electricity and estimated receivables related to the electricity delivered by the end of the year but invoiced during the period subsequent to the end of the year. The Company recorded in trade receivables mainly electricity supply receivables and in other receivables recorded mainly penalties for late payment of electricity invoices and electricity receivables sued and for which the Company obtained wrigts of execution. Other items included in trade receivables also include other sundry debtors. Measurement of the recoverable amount of receivables at the reporting date is done at their probable collection value. The negative differences between the recoverable amount and the carrying amount of receivables are recorded in accounting based on adjustments for depreciation of current assets. Uncollectible accounts receivable are recorded as expenses at the end of the bankruptcy proceedings of that customer. The impairment loss related to a receivable is reversed if the subsequent increase in the recoverable amount can be related to an event occurring after the impairment loss was recognized. For significant individual customers, an individual impairment analysis is carried out, based on their specific circumstances. d) Cash and cash equivalents Liquid assets consist of cash, bank accounts, term deposits for a period of three months if they are held in order to meet the need for short-term cash, checks and papers deposited with banks. For the cash flow statement, cash and cash equivalents include cash in hand, current bank accounts, shortterm financial investments, net of overdrafts. e) Prepayments 19

20 Expenses paid / payable in the current financial year but relating to a subsequent financial year are recorded as prepayments. Prepayments comprise records of green certificates purchased in advance and scheduled to be invoiced to customers. f) Adjustment for Impairment The carrying value of the Company s assets, other than inventories, is reviewed at each balance sheet date to determine the possible value decreases. If such a decline is likely, it is estimated the recoverable amount of the asset in question. If necessary, an adjustment for depreciation is recognized in the profitand-loss account or in equity when the carrying amount of the asset is superior to its recoverable amount. The adjustment of impairment can be reversed if there has been a change in existing conditions when determining the recoverable amount. Reversing an adjustment for impairment can only be done so that the net value of the asset does not exceed its historical net book value, taking into account depreciation. g) Share capital The Company recognizes changes in the share capital only after their approval in the Shareholders General Assembly and registration with the Trade Registry Office. h) Dividends Dividends are recognized as a liability in the period in which their distribution is approved. i) Revaluation reserve Revaluations are carried out with sufficient regularity at the balance sheet date, so that the carrying amount does not differ materially from that which would be determined using the fair value. The difference between the value resulting from revaluation and the net book value is presented in the revaluation reserve as a distinct sub-item in ʺCapital and Reservesʺ. If the result of revaluation is an increase over the net book value then it is treated as follows: - as an increase in the revaluation reserve presented in the item ʺCapital and Reservesʺ if there was a decrease previously recognized as an expense related to that asset; or - as an income to offset the expense with the previously recognized decrease in that asset. If the result of revaluation is an decrease over the net book value then it is treated as follows: - as an expense with the full value of depreciation when in the revaluation reserve is not recorded an amount related to that asset (revaluation surplus); or - as a decrease in the revaluation reserve by the minimum between the value of such reserve and the decreasing value, and the remaining difference possibly remaining uncovered is recorded as an expense. The revaluation surplus included in the revaluation reserve is capitalized through direct transfer to retained earnings (account 1175 ʺRetained earnings representing surplus from revaluation reserveʺ) when this surplus represents a realized gain. Earnings are deemed realized when the asset is derecognised. According to the tax laws in force, previously deducted tax revaluation reserve is taxed when the change of its destination occurs. Since May 1 st, 2009, as a result of changes in tax laws, revaluation reserves recorded after January 1 st, 2004 are taxable as that fixed asset is depreciated. j) Legal reserves Legal reserves constitute a rate of 5% of the gross profit from the end of the year until overall legal reserves reach 20% of the paid up share capital, in accordance with the legal provisions, and are not distributable. These reserves are deductible when calculating the income tax. 20

21 k) Debt related to leases Leases in which the Company takes substantially risks and rewards of ownership are classified as financial leases. The other agreements are classified as operating leases. Debt to the leasing company is included in the balance sheet as a liability on the lease. Financing costs are recorded in the profit-and-loss account over the period of the lease at a constant rate of interest. Payments made under operating leases are recorded in the profit-and-loss account on a straight line basis during the lease. Received discounts in lease premiums are recognized in the profit-and-loss account as a reduction of expenses. l) Payables and other liabilities Accounts payables are stated at cost and include invoices for deliveries of contracted works and services. m) Provisions A provision is recognized when: - an entity has a present obligation generated by a previous event; - it is probable that an outflow of resources will be required to settle the obligation; and - a reliable estimate of the value of the obligation can be made. Provisions are reviewed at the end of each year and adjusted to reflect the most appropriate current estimate. Provisions for pensions and other benefits According to the Government Decision no. 1041/2003 and bo. 1461/2003, the Company provides benefits in kind in the form of free energy to retired employees of the Company. Moreover, the Company also provides cash benefits based on the length of service and on retirement for employees. The Company records provisions for employees pensions and benefits based on actuarial calculations. n) Revenue recognition Revenues from electricity supply to consumers are recognized when electricity is delivered to customers based on meter readings and estimates based on the delivered electricity and for which there were not performed readings yet. Electricity consumption invoicing is done monthly. Monthly electricity invoices are based on meter readings or estimated consumption based on historical data of each consumer. Electricity supplied to consumers that was not yet invoiced by the reporting date is estimated using the average of recent consumption or based on subsequent readings. Differences between estimated and actual amounts are recorded in subsequent periods. o) Financial income and expenses Financial income includes revenues from favourable foreign exchange differences, interest income and other financial income. The financial expenses include: unfavourable foreign exchange differences, interest expense and other financial charges. The principle of the financial years separation is observed for the recognition of these types of expenses and income. p) Salary expenses Workers rights in the short term include salaries and social security contributions. Short-term employee rights are recognized as expenses at the same time with the service provision by them. q) Corporate income tax Corporate income tax is calculated based on the annual fiscal result using the tax rate in effect at the 21

22 balance sheet date, adjusted by corrections to prior years. r) Related Parties In accordance with the Order of the Ministry of Public Finance no. 1802/2014 with subsequent amendments, affiliate (or related) parties are defined as follows: (a) A company is related to an entity which reports if 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 subsidiary member is related 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 also 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 the employees of the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, employers who finance the plan are also related to the reporting entity; vi) the entity is controlled or jointly controlled by a person defined in para. (b); vii) the person identified in para. (b) let. i) has a significant influence over the entity or is part of the key management personnel of the entity (or the management of an entity s parent company). (b) A person or a close family member of the person is related to an entity which reports if the person: i) has control or joint control over the reporting entity; ii) has significant influence over the reporting entity; or iii) is part of the key management personnel of the reporting entity or the management of a reporting entity s parent company. A reporting entity is exempt from reporting requirements according to the Order of the Minister of Public Finance no. 1802/2014 with subsequent amendments on the related party transactions and open balances including commitments to: a) the Government that has control or joint control or has a significant influence over the reporting entity; b) Another entity that is a related party for which the same government has joint control or significant influence over both the reporting entity and the other entity. A reporting entity should submit the following issues related to transactions and corresponding outstanding balances with entities referred to in the previous paragraph as follows: - the nature and the value of each significant transaction, individually; and - for other transactions that are significant collectively but not individually, a qualitative or quantitative indication of their importance. s) Contingencies A contingent liability is: a) a potential liability incurred as a result of past events prior to the balance sheet date and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events that may not be entirely under the control of the entity; or b) a current obligation arisen from past events prior to the balance sheet date but that is not recognized because: - it is not sure that outflow of resources will be required to settle the liability; or - the liability value can not be evaluated with sufficient reliability. Contingent liabilities are not recognized in the balance sheet, they are only submitted in the notes to the financial statements. Contingent liabilities are continually evaluated to determine if it became probable the outflow of resources embodying economic benefits. If it is deemed necessary the outflow of resources generated out of an item previously considered contingent liability, it will be recognized as appropriate a liability or a provision in the 22