Societatea Nationala de Gaze
Naturale “ROMGAZ” SA
Consolidated Board of
Directors’ Report
2020
2020 Consolidated Board of Directors’ Report
Contents
I. 2020 ROMGAZ GROUP OVERVIEW ............................................................................................3
1.1. Romgaz Group in Figures .............................................................................................................3
1.2. Significant Events .........................................................................................................................7
II. PARENT COMPANY AT A GLANCE ........................................................................................10
2.1. Identification Data .......................................................................................................................10
2.2. Company Organization ...............................................................................................................11
2.3. Mission, Vision and Values ........................................................................................................12
2.4. Strategic Objectives.....................................................................................................................12
III. REVIEW OF ROMGAZ GROUP BUSINESS ...........................................................................14
3.1. Business Segments ......................................................................................................................14
3.2. Brief History ................................................................................................................................18
3.3. Mergers and Reorganizations, Acquisitions and Divestment of Assets ......................................19
3.4. Group’s Business Performance ...................................................................................................19
3.4.1. Overall Performance ............................................................................................................19
3.4.2. Sales .....................................................................................................................................23
3.4.3. Prices and Tariffs .................................................................................................................25
3.4.4. Human Resources .................................................................................................................27
........................................................................................................29
...........................................................................................31
.............................................................................................................................33
................................................33
IV. GROUP’S TANGIBLE ASSETS .................................................................................................35
4.1. Main Production Facilities ..........................................................................................................35
4.2. Investments .................................................................................................................................39
V. SECURITIES MARKET ................................................................................................................46
5.1. Dividend Policy ...........................................................................................................................49
VI. COMPANY MANAGEMENT .....................................................................................................51
6.1. Board of Directors .......................................................................................................................51
6.2. Upper Management .....................................................................................................................53
VII. CONSOLIDATED FINANCIAL-ACCOUNTING INFORMATION ....................................55
7.1. Statement of Consolidated Financial Position.............................................................................55
7.2. Statement of Consolidated Comprehensive Income ...................................................................57
7.3. Statement of Consolidated Cash Flows .......................................................................................59
VIII. CORPORATE GOVERNANCE ...............................................................................................61
IX. PERFORMANCE OF DIRECTORS’ AGREEMENTS/CONTRACTS OF MANDATE ......79
SIGNATURES: ......................................................................................................................................80
Page 2 of 80
2020 Consolidated Board of Directors’ Report
I. 2020 ROMGAZ GROUP OVERVIEW
Romgaz Group1 recorded in 2020 a revenue of RON 4,074.9 million, by 19.79% lower as compared to
the previous year.
The Net Profit of RON 1,247.9 million was higher by RON 158.28 million than the net profit for 2019
(+14.53%).
Following factors influenced Romgaz Group performances for the year ended December 31, 2020:
Decrease by RON 146.0 million (42.59%) of petroleum royalty expenses (RON 195.9 million
in 2020 as compared to RON 342.9 million in 2019) pursuant to the decrease of the reference
price taken into account;
Decrease by RON 302.0 million (42.12%) of the windfall tax further to the deregulation of
prices in the gas sector, the gas sale price decreased on average by 16% and quantities supplied
were lower by 10.1%;
Due to existing market conditions the Group identified impairment indicators for assets used in
the gas production segment. The Group ran an impairment test, which did not result in any
additional impairment. In 2020 the Group only recorded impairment for specific assets, for
abandoned wells as dry holes. Due to this fact, the depreciation, amortisation and impairment
expenses decreased by RON 779.7 million (-53.71%) as compared to previous year;
In 2020 the Group did not encounter any major collection issues regarding current trade
receivables, so that it recorded a net impairment gain on trade receivables of RON 17.6 million
compared to a net loss of RON 81.2 million last year;
In 2020 the Company was subject to an economic-financial inspection on the allocation of
dividends according to art. 43 of Government Emergency Ordinance no. 114/2018. The
inspectors concluded that the Company did not calculate the allocated dividends correctly, but
rather it should have paid additional dividends of RON 34,852 thousand, of which RON 24,284
thousand payable to the main shareholder and penalties of RON 938 thousand. As the Company
did not agree with the conclusions in the report, currently legal proceedings are pending. The
deemed dividends attributable to the main shareholder and related penalties were offset by the
National Agency for Fiscal Administration (“ANAF”) against receivables of the Company from
ANAF, although the Company requested the receivables to be offset against other tax liabilities
when due. Following the offset, the consolidated result includes an expense of RON 24,284
thousand, as there is no shareholders’ decision to allocate additional dividends. As for the
penalties of RON 938 thousand, these were written-off according to Government Emergency
Ordinance No. 69/2020;
Consolidated net profit per share was Ron 3.3.
Consolidated net profit margin (30.62%) and Consolidated EBIT margin (33.83%) have risen strongly
from 2019 levels (21.45%, respectively, 24.35%) and show a high profitability of the Group despite a
drop in revenue. Consolidated EBIDTA margin (50.33%) decreased from last year, but it maintains a
high rate.
Investments made by Romgaz Group in 2020 amount to RON 637.3 million, lower by RON 254.3
million, namely 28.5%, as compared to 2019, and the value of fixed assets brought in production reached
RON 361.0 million.
In 2020, Romania’s natural gas consumption recorded an increase of approximately 5%, from
121.05 TWh to 127.24 TWh according to ANRE and the company’s consumption estimations2.
1 Romgaz Group consists of SNGN Romgaz SA (“Company”/”Romgaz”) as parent company, Filiala de
Inmagazinare Gaze Naturale Depogaz Ploiesti SRL (“Depogaz”), 100% owned by Romgaz, and associates SC
Depomures SA (40% of the share capital) and SC Agri LNG Project Company SRL (25% of the share capital).
2 Until the date of this Report ANRE did not publish the gas market monitoring reports for December 2020, the
data used for national consumption and market shares are estimations.
Page 3 of 80
2020 Consolidated Board of Directors’ Report
2020 gas production was 4,520 million m3, by 14.3% lower than the production recorded in 2019. This
relatively high decline was recorded against a significant decrease of gas production in Q2 and Q3 due
to overlapping of commercial, economic, sanitary and regulatory factors that led on short term to a lower
gas demand.
This production, according to estimations, ensured Romgaz a 48% market share in terms of deliveries
from internal production and approximately 39% market share of deliveries for the total consumption
of Romania.
Romgaz electricity production reached in 2020 937.5 GW, by 58.86% higher as compared to 2019.
This was achieved as a result of shorter intervals when CTE Iernut old units were unavailable. These
unavailability periods occur because of works performed at the new power plant and to adapt the burning
system of unit 5 as to reduce NOx emissions for compliance with emission limits. According to
preliminary data published by Transelectrica, Romgaz market share is 1.69%.
The table below shows a summary of the main production indicators, royalty and storage services:
Q4
2019
Q3
2020
Q4
2020
Δ Q4
(%)
Main indicators
2019
2020
Δ ‘20/’19
(%)
-0.38 Gas production (million m3)
5,277
4,520
-14.35
1,327
4,388
96
952.0
5,349
64
1,322
6,119
94
14.40 Condensate production (tons)
Petroleum royalty (million m3)
-2.11
298.0
322.6
319.6
7.25
Electricity production (GWh)
17,340
22,713
339
316
590.1
937.5
30.99
-6.84
58.86
347.1
0.3
892.5
157.13
346.1
444.5
99.6
-71.22
Invoiced UGS withdrawal services
(million m3)
Invoiced UGS injection services
(million m3)
1,271.8
1,816.8
42.85
2,620.5
1,115.1
-57.45
Natural gas quantities produced, delivered, injected into and withdrawn from gas storages are shown in
the table below (million m3):
Item
no.
0
1.
1.1.
1.2.
2.
3.
4.
5.
Specifications
2018
2019
2020
Ratios
Gross gas production – total, including:
1
*own gas
*Schlumberger (100%)
Technological consumption
2
3
5,333.3 5,276.9 4,519.7
4
5=4/3x100
85.7%
5,177.1 5,276.9 4,519.7
85.7%
156.3
86.4
0.0
78.9
0.0
63.7
-
80.8%
Net internal gas production (1.-1.2.-2.)
5,090.6 5,198.0 4,456.0
85.7%
Internal gas volumes injected into UGS
Internal gas volumes withdrawn from UGS
5.1.
*gas cushion
6.
7.
Difference from conversion to Gross Calorific Value
Volumes supplied from internal production (3.-4.+5.-
6.)
348.1
479.4
6.9
1.4
526.0
257.7
0.0
0.0
225.9
44.9%
367.8
142.7%
0.0
6.3
-
-
5,220.5 4,929.7 4,591.6
93.1%
8.1. Gas sold in UGS
8.1
0.0
0.0
-
8.2. Gas supplied to CTE Iernut and Cojocna from Romgaz’s
326.7
173.0
277.2
160.2%
9.
gas
Gas supplied from internal production to the market
(7.+8.1.-8.2.)
4,901.9 4,756.7 4,314.4
90.7%
10. Gas from partnerships– total, including:
163.6
140.5
91.4
65.1%
*Schlumberger (50%)
*Raffles Energy (37.5%)
78.2
0.0
0.0
0.0
0.0
0.0
-
-
Page 4 of 80
11.
12.
13.
14.
15.
16.
*
*
2020 Consolidated Board of Directors’ Report
*Amromco (50%)
85.4
140.5
91.4
Purchased internal gas volumes (including imbalances)
Sold internal gas volumes (9.+10.+11.)
9.7
0.4
5,075.2 4,901.6 4,406.2
4.4
65.1%
9.1%
89.9%
Supplied internal gas volumes (8.2+12.)
5,401.9 5,074.6 4,683.4
92.3%
Supplied import gas volumes
Gas supplied to CTE Iernut and Cojocna from other
sources (including imbalances)
Total gas supplies (13.+14.+15.)
Invoiced UGS withdrawal services
Invoiced UGS injection services
181.4
19.4
53.0
4.5
0.0
4.7
-
104.4%
5,602.7 5,132.1 4,688.1
91.3%
1,949.9 1,271.8 1,816.7
142.8%
1,731.2 2,620.5 1,115.1
42.6%
Note: the information is not consolidated; these include the transactions between Romgaz and Depogaz.
*) Romgaz-Schlumberger joint venture contract ended on November 30, 2018. With respect to the joint venture
with Amromco, gas produced is reflected in Romgaz revenue, proportionally with its respective participating
interest share in the joint venture.
The production level was maintained by the ongoing production rehabilitation projects of the main
fields, performance of capitalisable repair and well recompletion works in 168 wells, bringing into
production new wells.
Evolution of natural gas production between years 2000-2020 is shown below:
8,4
8
7,3
7
6,6
6,3
6,2
5,9
5,9
5,8
5,8
5,6
5,7
5,7
5,7
5,6
5,2
5,3
5,3
4,5
4,2
9
8
7
6
5
4
3
2
1
0
m
c
n
o
i
l
l
i
b
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
The table below shows the quarterly electricity production for 2020, as compared to 2019:
2019
2020
2
170,894
773
120,443
298,019
590,129
3
258,923
36,310
322,633
319,634
937,500
*MWh*
Variation
(%)
4=(3-2)/2x100
51.51
4,597.17
167.87
7.25
58.86
1
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year total
Romgaz is one of the largest gas suppliers in Romania. The evolution of gas supplies3 during 2008-2020
is shown below:
3 Include gas from internal production, including gas supplied to CTE Iernut and Cojocna, 50% of the gas from
Schlumberger joint venture and gas purchased from internal production of other producers
Page 5 of 80
2020 Consolidated Board of Directors’ Report
7000
6000
5000
4000
3000
2000
1000
0
m
c
n
o
i
l
l
i
m
343
304
680
1018
606
310
81
33
181
53
0
3
7
5572
5563
5513
5200
5156
5304
5529
5055
5623
5422
5079
4683
4223
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Internal gas
Import gas
Q4
2020
1,156.5
1,129.2
810.7
1.1
319.7
13.7
306.0
307.4
543.7
0.79
26.46
Q4
2019*)
1,289.6
1,308.4
1,429.3
0.1
(120.8)
(25.3)
(95.5)
(128.8)
728.4
(0.25)
-7.4
-9.99
56.48
Q3
2020
725.0
771.3
607.7
0.3
163.8
22.7
141.1
150.8
315.5
0.37
19.5
20.8
43.52
26.58
47.02
n/a
-16.75
6,251
6,201
6,188
-1.01
Δ Q4
(%)
Main indicators
2019*)
2020
Δ ‘20/’19
(%)
* RON million *
-10.32 Revenue
-13.70
-43.28
1,000.0
0
n/a
-45.85
n/a
n/a
-25.36
n/a
n/a
Income
Expenses
Share of profit of associates
Gross profit
Income tax expense
Net profit
EBIT
EBITDA
Earnings per share EPS (RON)
Net profit
Revenue)
EBIT Ratio (% from Revenue)
EBITDA Ratio
Revenue)
Number of employees at the end
of the period
from
from
ratio
(%
(%
5,080.5
5,235.4
3,961.7
1.5
4,074.9
4,133.9
2,708.7
1.3
1,275.2
185.6
1,089.6
1,237.1
2,688.8
2.83
21.45
1,426.5
178.6
1,247.9
1,378.7
2,050.7
3.24
30.62
-19.79
-21.04
-31.63
-13.33
11.86
-3.77
14.53
11.45
-23.73
14.53
42.79
24.35
52.92
33.83
50.33
38.95
-4.91
6,251
6,188
-1.01
*) – restated – see the comment to the statement of consolidated comprehensive income
Figures in the above table are rounded; therefore, small differences may result upon reconciliation.
Note 1: Income and Expenses do not include those related to in-house production of non-current assets.
Since November 12, 2013, the company’s shares have been traded on the regulated market governed by
BVB (Bucharest Stock Exchange) under the “SNG” symbol, and the GDRs on the regulated market
governed by LSE (London Stock Exchange) under the “SNGR” symbol.
Performance of Romgaz shares compared to the evolution of BET index (Bucharest Exchange Trading)
from listing to December 31, 2020 is shown below:
Page 6 of 80
2020 Consolidated Board of Directors’ Report
45,00
40,00
35,00
30,00
25,00
20,00
e
r
a
h
s
/
N
O
R
15,00
10,00
5,00
0,00
3
1
0
2
/
2
1
/
1
1
3
1
0
2
/
7
2
/
2
1
.
4
1
0
2
2
0
4
1
.
4
1
0
2
/
1
3
/
3
.
4
1
0
2
5
0
0
2
.
.
4
1
0
2
7
0
4
0
.
4
1
0
2
/
9
1
/
8
.
4
1
0
2
0
1
3
0
.
.
4
1
0
2
1
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7
1
.
.
5
1
0
2
1
0
8
0
.
5
1
0
2
/
8
/
4
5
1
0
2
/
0
2
/
2
5
1
0
2
/
7
2
/
5
5
1
0
2
/
0
1
/
7
5
1
0
2
/
4
2
/
8
5
1
0
2
/
7
/
0
1
5
1
0
2
/
9
1
/
1
1
6
1
0
2
/
2
1
/
1
6
1
0
2
/
4
2
/
2
6
1
0
2
/
7
/
4
6
1
0
2
/
3
2
/
5
6
1
0
2
/
6
/
7
6
1
0
2
/
9
1
/
8
6
1
0
2
/
3
/
0
1
6
1
0
2
/
5
1
/
1
1
7
1
0
2
/
4
/
1
7
1
0
2
/
7
1
/
2
7
1
0
2
/
3
/
4
7
1
0
2
/
8
1
/
5
7
1
0
2
/
5
/
7
7
1
0
2
/
8
1
/
8
7
1
0
2
/
2
/
0
1
7
1
0
2
/
4
1
/
1
1
8
1
0
2
/
4
/
1
8
1
0
2
/
9
1
/
2
8
1
0
2
/
4
/
4
8
1
0
2
/
2
2
/
5
8
1
0
2
/
6
/
7
8
1
0
2
/
1
2
/
8
8
1
0
2
/
3
/
0
1
8
1
0
2
/
5
1
/
1
1
9
1
0
2
/
4
/
1
9
1
0
2
/
9
1
/
2
9
1
0
2
/
3
/
4
9
1
0
2
/
1
2
/
5
9
1
0
2
/
4
/
7
9
1
0
2
/
9
1
/
8
9
1
0
2
/
1
/
0
1
9
1
0
2
/
3
1
/
1
1
SNG
BET
12000,00
10000,00
8000,00
6000,00
4000,00
2000,00
0,00
January 30, 2020
Romgaz announces production from Caragele Deep by well 77 Rosetti with a daily production potential
of 1,500 boe.
March-May 2020
“Together for Romania!”- Romgaz engaged in the fight against COVID-19 by:
supporting Romanian Red Cross with RON 1,250,000 for the coronavirus information and
prevention campaign;
supporting Sibiu County Emergency Clinical Hospital with RON 1,500,000 for extending and
equipping the Anaesthesia and Intensive Care Unit for treating COVID-19 patients whenever
necessary and RON 900,000 for securing materials needed in the fight against COVID-19;
supporting Medias Town Hospital with RON 1,500,000 for equipping the Anaesthesia and
Intensive Care Unit and with specific medical equipment and RON 500,000 for equipping the
ICU with 2 beds and specific equipment within the COVID-19 ward;
supporting Alba County Emergency Hospital with RON 1,500,000 for limiting and preventing
possible COVID-19 illnesses and for efficiently managing COVID-19 suspected/confirmed
cases;
supporting Slatina County Emergency Hospital with RON 1,500,000 for fighting against
COVID-19;
supporting Vaslui County Emergency Clinical Hospital RON 1,500,000 for fighting against
COVID-19;
supporting Mures County Clinical Hospital RON 1,500,000 for fighting against COVID-19.
April 13, 2020
By Resolution No. 5, company’s shareholders approve to extend the mandate of interim directors by
two months from the expiration date, in compliance with the provisions of Art. 641 para (5) of GEO
No.109/20114.
4 Emergency Ordinance No. 109 of December 14, 2011 on corporate governance of public enterprises, as
subsequently amended and supplemented.
Page 7 of 80
2020 Consolidated Board of Directors’ Report
June 10, 2020
Romgaz and SC Liberty Galati SA agreed to conclude a Memorandum of Understanding envisaging a
joint venture for the development of greenfield projects, namely to develop a gas fuelled power
production unit (“CCGT”) and units for the production of electricity from renewable sources using
both wind and photovoltaic technologies. Implementation of these investments will take between 3.5
and 4 years.
June 15, 2020
General Meeting of Shareholders approves by Resolution No. 7 “S.N.G.N. Romgaz S.A.
Development/Investment Strategy 2020-2025”. According to the Strategy, the investment program of
RON 15.69 billion is set for the following main investment directions:
to continue geological research by new drilling works and geological surveys to discover new
natural gas reserves;
to develop the production potential by adding new capacities on the existing structures;
to improve performances of facilities and equipment and to increase production safety;
to identify new development and diversification opportunities.
June 25, 2020
By Resolution No.8, the Company’s shareholders appointed the following persons as members of the
Board:
Stan Olteanu Manuela Petronela
Jude Aristotel Marius
Simescu Nicolae Bogdan
Marin Marius-Dumitru
Balazs Botond
Ciobanu Romeo Cristian
Jansen Petrus Antonius Maria.
Mr. Ciobanu Romeo Cristian and Mr. Jansen Petrus Antonius Maria were reconfirmed as board
members by OGMS Resolution No. 6 of June 26, 2019, they were selected following a selection process
in 2018 and appointed board members for a 4-years mandate by OGMS Resolution No. 8 of July 6,
2018. Therefore, their mandate is ongoing. The other board members, as interim board members, are
appointed for 4-months.
July 1, 2020
The Board of Directors decided to appoint Mrs Stan Olteanu Manuela Petronela as Chairman of the
Board. During the same meeting, the board of directors set the members of its committees.
August 25, 2020
Romgaz concluded a Memorandum of Understanding with GSP Power SRL in order to provide the
framework necessary to start the discussions between the two companies for developing some projects
based on the following principle: GSP Power builds and operates the electric power plants with
capacities between 50 MW and 200 MW, at the indication and locations set by Romgaz; in return
Romgaz will rent the production capacity of these power plants from GSP Power SRL in order to
generate electric power.
August 26, 2020
The Board of Directors appoints by Resolution No. 32/2020 Mr. Pena Daniel Corneliu as Deputy Chief
Executive Officer for 2 months with a temporary mandate, from August 28 to October 26, 2020.
September 18, 2020
The Board of Directors approved by Resolution No.36/2020 to establish Drobeta –Turnu Severin
Branch.
Page 8 of 80
2020 Consolidated Board of Directors’ Report
October 14, 2020
The Board of Directors approved by Resolution No.41/2020 to extend by 120 days the temporary
mandate of Mr. Pena Daniel Corneliu, Deputy Chief Executive Officer, namely until February 24, 2021.
October 23, 2020
Company’s shareholders approve by Resolution No.12 to extend the mandate of interim board members
by 2 months from their expiration date, in compliance with the provisions of Art. 641 para (5) of GEO
No. 109/2011.
November 3, 2020
The Board of Directors appointed Mr. Jude Aristotel Marius as Chairman of the Board. During the same
meeting, the board set the members of its committees.
November 4, 2020
Romgaz informs shareholders and investors that the Ministry of Economy, Energy and Business
Environment transferred RON 115,027,026.77 representing the 2nd instalment of the Financing Contract
No. 4/07.12.2017 for the investment “Combined cycle gas turbines” – Iernut in total amount of RON
320.90 million.
December 9, 2020
The Board of Directors appointed by Resolution No.50/2020 Mr. Popescu Razvan as interim Chief
Financial Officer for a 4-months term, as of December 14, 2020.
December 21, 2020
Company’s shareholders appoint by Resolution No.14 SNGN Romgaz SA interim board members:
Jude Aristotel Marius
Marin Marius-Dumitru
Stan Olteanu Manuela Petronela
Balazs Botond
Simescu Nicolae Bogdan
The interim board members were appointed for 4-months as of December 27, 2020 until April 27, 2021.
December 28, 2020
The Board of Directors decided to appoint Mr. Jude Aristotel Marius as Chairman. During the same
meeting, the board set the members of its committees. The committees’ members can be found on
Romgaz website by accessing https://www.romgaz.ro/en/consiliu-administratie .
Page 9 of 80
2020 Consolidated Board of Directors’ Report
II. PARENT COMPANY AT A GLANCE
Name: Societatea Nationala de Gaze Naturale “ROMGAZ” SA
Main scope of activity: natural gas production
Address: Medias, 4 Constantin I. Motas Square, 551130, Sibiu County
Trade Registry registration number: J32/392/2001
Fiscal registration number: RO14056826
LEI Code: 2549009R7KJ38D9RW354
Legal form of establishment: joint-stock company
Subscribed and paid in share capital: RON 385,422,400
Number of shares: 385,422,400 each having a nominal value of RON 1
Regulated market where the company’s shares are traded: Bucharest Stock Exchange (shares) and
London Stock Exchange (GDRs)
Phone: 0040 374 401020
Fax:
0040 269 846901
Web: www.romgaz.ro
E-mail: secretariat@romgaz.ro
Bank accounts opened at: Banca Comerciala Romana, BRD-Groupe Société Générale, Citibank Europe,
Patria Bank, Raiffeisen Bank, Banca Transilvania, ING Bank, Eximbank, CEC Bank.
Shareholder Structure
On December 31, 2020 the shareholder structure was the following:
The Romanian State5
Free float – total, including:
*legal persons
*natural persons
Total
FREE
FLOAT
30%
Number of shares
269,823,080
115,599,320
%
70.0071
29.9929
95,612,507
19,986,813
24.8072
5.1857
385,422,400
100.0000
The
Romanian
State
70%
In financial year 2020 the Company neither performed transactions with own shares nor held own
shares on December 31, 2020.
5 The Romanian State through the Ministry of Economy, Energy and Business Environment
Page 10 of 80
2020 Consolidated Board of Directors’ Report
Romgaz organization structure is a hierarchy-functional type, with a number of six hierarchy levels,
from company’s shareholders to execution personnel, as follows:
General Meeting of Shareholders
Board of Directors
Director General
Deputy Directors General
Branch Directors
Heads of functional and operational compartments subordinated to the Director General,
Deputy Directors General and Branch Directors
Execution Personnel
The responsibilities of the Board of Directors are detailed in the Company’s Articles of Incorporation
as well as in the Rules of Organization and Operation.
The Director General, the Deputy Directors General, Economic Director, as well as the branch directors
are key people in the structure and function of the company. The heads of compartments
(branches/departments/directions/offices etc.) representing the connection between the upper structure
and the employees of the respective compartment are directly subordinated to the afore-mentioned.
Each compartment has its own attributions well-defined in the company’s Rules of Organization and
Operation and all these elements work as a whole.
The tasks, competencies and responsibilities of the execution personnel are included in the job
descriptions related to each position.
The company has seven branches set up based on the specific of the activities performed and on the
region (natural gas production branches) as follows:
Sucursala Medias (Medias Branch) having its office in Medias, 5 Garii Street, postal code
551025, Sibiu County, territorially organized in 8 sections;
Sucursala Targu Mures (Targu Mures Branch) having its office in Targu Mures, 23 Salcamilor
Street, postal code 540202, Mures County, territorially organized in 8 sections;
Sucursala Ploiesti (Ploiesti Branch) having its office in Ploiesti, 184 G. Cantacuzino Street,
postal code 100492, Prahova County, territorially organized in 2 sections and 2 workshops;
Sucursala de Interventii, Reparatii Capitale si Operatii Speciale la Sonde Medias (SIRCOSS –
Branch for Well Workover, Recompletions and Special Well Operations) having its office in
Medias, 5 Soseaua Sibiului Street, postal code 551009, Sibiu County, territorially organized in
3 sections and 5 workshops;
Sucursala de Transport Tehnologic si Mentenanta Targu Mures (STTM – Technological
Transport and Maintenance Branch) having its office in Targu Mures, 6 Barajului Street, postal
code 540101, Mures County, territorially organized in 3 sections and 3 workshops;
Sucursala de Productie Energie Electrica Iernut (SPEE – Iernut Power Generation Branch)
having its office in Iernut, 1 Energeticii Street, postal code 545100, Mures County;
Sucursala Bratislava6 (Bratislava Branch) having its office in Bratislava, City Business Centre
V.-Karadžičova 16, code 82108, Slovakia;
Sucursala Drobeta-Turnu Severin (Drobeta-Turnu Severin Branch), having its office in
Drobeta-Turnu Severin, 109 Traian Street, ap.2, code 220139, Caras Severin County.
As of April 1, 2018 Sucursala Ploiesti ceased its activity and SNGN Romgaz SA – Filiala de
Înmagazinare Gaze Naturale Depogaz Ploieşti SRL became operational, managing the natural gas
underground storage activity.
6 Company shareholders approved by EGMS Resolution No. 3 of March 25, 2020 SNGN Romgaz SA withdrawal
from Svidnik concession block located in Slovakia, by this decision the company withdrew from Slovakia
Page 11 of 80
2020 Consolidated Board of Directors’ Report
Therefore, subject to EC Directive No. 73/2009 implemented by the Electricity and Natural Gas Law
123/2012 (art. 141), the storage activity is unbundled from SNGN Romgaz SA and performed by a
storage operator, namely a subsidiary, where SNGN Romgaz SA is sole associate.
The subscribed and paid in share capital of the company is RON 66,056,160, divided in 6,605,616
shares, with a nominal value of RON 10/share, solely owned by Romgaz.
The Subsidiary took over the operation of the underground storages licensed by SNGN Romgaz SA, the
operation of assets that contribute to performing the storage activity and the entire personnel performing
storage activities.
Information about the Subsidiary can be found at: https://www.depogazploiesti.ro
Romgaz
is to produce and supply energy, to provide underground gas storage activities under
quality, safety, continuity and flexibility conditions. The company uses all resources in a responsible
and ethical manner in order to obtain long-term profit.
ROMGAZ aims to be an active, profitable and competitive player on the gas and electricity production
market.
Romgaz has to pursue both a strong development on the local market and the development on the
international market in order to become an important player on the regional energy market.
promoted by Romgaz are mainly the following:
Increasing
the
company's
value for its
shareholders
Care for the
environment
Quality
products
and services
Efficiency
ROMGAZ
Safety for
the
employees
Social
responsibility
Transparency
Sustainable
development
In order to meet its main business scope by efficiently using material, financial, informational and
human resources, the company set the following strategic objectives:
increase of the gas resources and reserves portfolio through the discovery of new resources and
the improvement of the recovery rate of already discovered resources;
Page 12 of 80
2020 Consolidated Board of Directors’ Report
identify new growth and diversification opportunities;
increase the company’s performance;
optimize, develop and diversify the UGS activity by reconsidering its importance in terms of
safety, continuity and flexibility of natural gas supply;
increase efficiency of the underground gas storages to improve gas trading capacities;
increase daily production through investments that reduce dependency of the daily production
capacity on the reservoir pressure;
maintain the natural production decline at maximum 1.5% /year;
consolidate the position on the energy supply market;
optimise and increase efficiency of the company’s organisational structure;
elaborate a predictable dividend distribution policy to help potential investors understand the
company’s financial structure;
expand the business regionally by identifying new business opportunities;
implement corporate governance principles and the Ethics and Integrity Code;
develop reporting, control and risk management capacities;
responsible and active involvement in corporate social responsibility actions.
Page 13 of 80
2020 Consolidated Board of Directors’ Report
III. REVIEW OF ROMGAZ GROUP BUSINESS
Romgaz Group undertakes business in the following segments:
natural gas exploration and production;
UGS activity (the Subsidiary);
natural gas supply;
special well operations and services;
maintenance and transportation services;
electricity generation and supply;
natural gas distribution.
In Romania, Romgaz performs, as titleholder or co-titleholder, subject to petroleum agreements:
petroleum operations in 9 exploration-development-production blocks with 100% participating
interest and in 4 blocks as co-titleholder under certain concession agreements;
139 commercial reservoirs and 12 non-commercial reservoirs with experimental production and
11 reservoirs operated together with Amromco;
exploration and production rights in Slovakia.
Exploration
Since October 1997, the exploration activity has been carried out in 8 blocks located in Transylvania,
Muntenia-Oltenia and Moldova, in accordance with the Concession Agreement approved by
Government Decision No. 23/2000.
In 2020, six exploration wells out of ten were tested with gas and temporarily abandoned until the
necessary infrastructure is build to turn these into experimental or final production. The success rate of
60% lies within the average margin of 35%-65% recorded in the international hydrocarbon production
activity.
Well 7 Merii and well 4 Tapu turned 3,000 million m3 from prospective resources to contingent
resources.
The company finalised works for 11 exploration wells that will enter production testing.
Moreover, the company initiated the procurement for 3D seismic data in RG 08 Oltenia Block and RG
06 Muntenia Nord-Est Block.
Romgaz designs and plans all exploration works based on its own concepts by using modern
professional software, prospectivity assessments of geological areas displaying specific features within
the blocks under concession. These are performed by using specific surface exploration methods to
identify the areas with hydrocarbon accumulations (prospects), followed by exploration drilling to prove
the presence of accumulations.
In 2012, the results materialised in the highest reserves replacement ratio of 323%.
The table below shows the evolution of the reserves replacement ratio between 2010-2020:
Page 14 of 80
2020 Consolidated Board of Directors’ Report
323
155
92
%
350
300
250
200
150
100
50
0
94
82
70
102
42
56
63
41
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Reserves replacement ratio is influenced by the updates to the reserves and resources assessment studies
and by finalising investments in the infrastructure necessary for bringing in new production facilities.
Production
The 2020 annual program for petroleum operations considered the gas
demand dynamics, reactivation, recompletion and workover operations,
bringing into production new wells and exploration wells; the program
focused also on maintenance programs of compressor stations and of
dehydration stations.
4,520 million m3 gas production recorded in 2020, by 757 million m3 lower than the production recorded
in the previous year (-14.35%) and by 205 million m3 higher than planned (+5%).
The production of 4,520 million m3 recorded in 2020 was influenced by:
1.
2.
3.
4.
significant decrease of gas sales in Q2 and Q3 as a result of overlapping commercial, economic,
sanitary and regulatory factors that led to a reduced gas demand on short term;
investments made for extension/upgrading of surface facilities to bring new wells in production;
continuous production rehabilitation of the main mature fields: Filitelnic, Delenii, Laslău,
Sădinca, Copsa Mica, Nadeş-Prod-Seleuş, Roman, Corunca Sud, Târgu Mureş, Grebeniş, Piscu
Stejari-Hurezani;
performing capitalisable repair and well recompletion works for inactive or low production
wells.
Currently, there are 6 operational UGSs in depleted gas reservoirs
in Romania. Romgaz owns and operates through Depogaz 5 UGSs
having a total capacity of 3.965 bcm and a working gas volume of
2.770 bcm.
Nationally, the ratio between the working gas volume and the annual consumption was about 24.6% in
2020. This level is in the first upper half of the international values chart of Europe.
In 2020 the ratio between stored gas volumes and working volume of the UGSs was 102%.
Page 15 of 80
2020 Consolidated Board of Directors’ Report
The underground storage activity performed by Depogaz Subsidiary will be regulated by ANRE
(National Authority for Energy Regulation) until April 1, 2021 with respect to UGS operators’ licensing,
the access to the UGSs as well as to setting storage tariffs.
According to Government Emergency Ordinance No. 106/2020 amending Gas and Electricity Law No.
123/2012 storage activities are no longer regulated. Therefore, after the withdrawal cycle 2020-2021,
the storage activity is no longer regulated.
After a thorough restructuring, the Romanian natural gas sector is
currently split into independent activities. The Romanian natural gas
market includes a NTS operator (Transgaz), producers (Romgaz and
Petrom with a 97% market share), UGS operators, companies for the
distribution and supply of gas to non-eligible customers, and suppliers on
the wholesale market.
The natural gas market in Romania consists of the competition segment, which includes gas trading
activities between suppliers and between suppliers and eligible consumers, and the regulated segment,
which includes monopoly-like activities performed in accordance with framework contracts
(transmission, underground storage, distribution and supply at a regulated price).
In terms of supply, Romgaz held, during 2013-2020, a national market share ranging between 37% and
46%:
National consumption
Romgaz
(domestic + import)
Romgaz market share
traded volumes
M. U.
2013
2014
2015
2016
2017
2018
2019
2020
bcm
bcm
12.5
5.7
12.2
5.7
11.6
5.1
11.8
4.4
12.3
5.7
12.3
5.6
11.5
5.1
12.0
4.7
%
44.5
46.1
44.0
37.1
46.3
45.5
44.1
39.1
The above quantities include gas from own internal production, domestic gas purchased from third
parties, 100% gas from Schlumberger joint venture and import gas. As compared to previous years,
2018÷2020 deliveries include gas delivered to Iernut and Cojocna for electricity production, as well as
technological consumption.
SIRCOSS was set up in 2003 in accordance with GSM Resolution No. 5/June 13, 2003. The branch
performs two main types of activities:
well workover, recompletion operations and production tests;
special well operations.
All well workover, recompletion operations and production tests are performed by means of rig
installations.
The second main activity consists of special well operations, namely services supplied by means of
different transportable equipment for downhole or surface operations.
During the past years, most of services were supplied for the wells within the company’s portfolio, yet,
well workover and special well operations were also performed for other companies that have under
concession and operate gas wells in Romania.
As regards well reactivation works, the branch planned 123 works and performed works in 168 wells.
Page 16 of 80
2020 Consolidated Board of Directors’ Report
The table below shows recompletion operations and capitalisable repairs performed in 2020:
Program
Achieved
Difference
Number of wells
Daily flow rate (thousand m3)
Number of wells
Daily flow rate (thousand m3)
Number of wells
Daily flow rate (thousand m3)
Mediaș
Branch
78
562
94
1,043
16
481
Tg. Mureș
Branch
45
258
74
427
29
169
TOTAL
Romgaz
123
820
168
1,470
45
650
Following recompletion operations and capitalisable repair works, production recorded additional 210
million m3 , representing 4.6% of 2020 total production.
STTM was established in October 2003, by taking over the means of transportation from Medias, Targu-
Mures and Ploiesti branches.
The branch’s scope of activity is transportation of goods and people, specific technological
transportation, and maintenance activities for the benefit of the company and of third parties.
CTE Iernut is an important junction point in the National Power Grid, located in the centre of the
country, in Mures County, on the left bank of Mures River, between towns Iernut and Cuci, with easily
accessible gas and industrial water sources and power discharge facilities.
CTE Iernut is operated by Sucursala de Producţie Energie Electrică (SPEE).
CTE Iernut has an installed capacity of 800 MW comprising six energy groups: four 100 MW groups
of Czechoslovakian manufacturing and two 200 MW groups of Soviet manufacturing. The groups were
commissioned between 1963 and 1967. Taking into consideration the investment works at the new
power plant and the need to ensure proper conditions for works at the related cooling system, in
November 2019, the 200 MW group 6 was permanently withdrawn from operation.
Groups 2 and 3 of 100 MW were permanently withdrawn from operation in January 2019, followed by
group 1 (100 MW) in November 2019, all groups were withdrawn for non-compliance with
environmental conditions. Therefore, at the end of 2020, SPEE Iernut held commercial licence for two
groups: one 100 MW group and one 200 MW group.
The evolution of works at the new power plant allowed at the beginning of 2020 operation with both
licenced groups (group 4 and group 5).
Contract no. 13384/31.10.2016 “Development of CTE Iernut by building a thermal power plant with
combined cycle gas turbines” is in progress and has the following characteristics:
installed power: 430 MW;
capacity: 56.42 % at base load and under normal temperature and pressure conditions;
maximum NOx emissions: 50 mg/Ncm and CO: 100mg/Ncm.
The natural gas distribution activity is a regulated activity carried out in Ghercesti and Piscu Stejari
areas. Romgaz has concession agreements with the Ministry of Economy and Trade for Ghercesti area
and with Piscu Stejari Town Hall for Piscu Stejari distribution. The activity is carried out by Targu-
Mures Branch.
Page 17 of 80
2020 Consolidated Board of Directors’ Report
Societatea Nationala de Gaze Naturale “ROMGAZ” SA is Romania’s
most important natural gas producer and supplier. The company’s
experience in the field of gas exploration and production exceeds 100
years. Its history began in 1909 when the first natural gas commercial
reservoir was discovered, in the Transylvanian Basin, upon drilling of
well Sarmasel-2.
The most important historic benchmarks are:
1909
1913
1925
1958
1972
1976
1979
1991
1998
2000
2001
2013
2015
2018
• Natural gas discovery in Sarmasel (Transylvanian Basin)
• First gas production recorded in Romania (113,000 m3)
• Setting up the National Gas Company "SONAMETAN"
•
• First UGS in Romania at Ilimbav, Sibiu County
•
• Use of compressors in the course of production
• Maximum gas production obtained by Romgaz (29,834 million m3)
• Started to import natural gas from the Russian Federation
• Centrala Gazului Metan was reorganized, by Government decision, to Regia Autonoma
"ROMGAZ" RA
• "ROMGAZ" RA becomes Societatea Naţională de Gaze Naturale "ROMGAZ" SA
• SNGN "ROMGAZ" SA was reorganized in five independent companies (SC "Exprogaz" SA
Mediaş, SNDSGN "Depogaz" SA Ploieşti, SNTGN "Transgaz" SA Mediaş, SC "Distrigaz Sud"
SA Bucureşti şi SC "Distrigaz Nord" SA Tîrgu-Mureş
• The current SNGN "ROMGAZ" SA Medias was established
• Company shares are traded on Bucharest Stock Exchange and London stock Exchange (GDR's)
• Unbundling the underground gas storage activity by setting up Filiala de Înmagazinare Gaze
Naturale Depogaz SRL Ploieşti
• As of April 1, 2018 Filiala de Înmagazinare Gaze Naturale Depogaz SRL Ploieşti became
operational
Page 18 of 80
2020 Consolidated Board of Directors’ Report
Changes to the organizational structure
The organizational structure underwent a series of changes in 2020:
BoD Resolution No.32 of August 26, 2020 established a position as Deputy CEO with mandate,
namely having duties delegated by the BoD;
BoD Resolution No. 36 of September 18, 2020 established Sucursala Drobeta-Turnu Severin a new
branch within SNGN Romgaz SA.
No mergers of the company took place in financial year 2020.
3.4.1. Overall Performance
The Group’s revenues are generated mainly from gas production and deliveries (own gas production
and delivery, gas produced by joint ventures, import gas deliveries and gas deliveries from other
domestic producers), from supply of underground gas storage services, from production and supply of
electricity and from other specific services.
* RON thousand *
Item
no
0
1
2
3
4
5
6
7
Description
2019
2020
1
Total Income, out of which:
*operating income
*financial income
Revenue
Total Expenses, out of which:
*operating expenses
*financial expenses
Share of associates’ result
Gross Profit
Income tax
Net Profit
2
5,235,436
5,194,679
40,757
5,080,482
3,961,730
3,929,265
32,465
1,474
1,275,180
185,557
1,089,623
3
4,133,888
4,085,969
47,919
4,074,893
2,708,710
2,692,628
16,082
1,330
1,426,508
(178,604)
1,247,904
Ratio
(2020/2019)
4=3/2x100
-21.04%
-21.34%
17.57%
-19.79%
-31.63%
-31.47%
-50.46%
-9.8%
11.87%
-3.75%
14.53%
The total income of 2020 decreased by 21.04% as compared to 2019.
Below are the compared economic-financial indicators for 2019 and 2020 and their detailed structure
split by activity:
Compared economic-financial indicators
Description
1
Revenue
Cost of commodities sold
Investment Income
Other gains or losses
Net losses from impairment of trade receivables
Changes in inventories
Raw materials and consumables
2019
restated*)
2
5,080,482
* RON thousand *
Variance
(2020/2019)
4=(3/2-1)x100
2020
3
4,074,893
(107,800)
(18,617)
38,124
7,519
(81,221)
80,008
(76,048)
47,845
(6,534)
17,551
(16,151)
(58,282)
-19.79%
-82.73%
25.50%
-186.90%
-121.61%
-120.19%
-23.36%
Page 19 of 80
2020 Consolidated Board of Directors’ Report
Depreciation, amortization and impairment
Employee benefit expense
Finance cost
Exploration Expenses
Share of associates’ result
Other Expenses
Other Income
Profit before tax
Income tax expense
(1,451,766)
(670,408)
(24,740)
(1,636)
1,474
(672,063)
(767,251)
(17,000)
(26,509)
1,330
(1,551,642)
(1,158,143)
32,834
1,275,180
(185,557)
25,439
1,426,508
(178,604)
-53.71%
14.45%
-31.29%
1520.35%
-9.77%
-25.36%
-22.52%
11.87%
-3.75%
Profit for the year
14.53%
*) – restated: Since 2020, the Group presents the release to income of the impairment for non-current assets written-off as a
decrease of the expense generated by the write-off of the respective assets, as “other gains and losses” or as “exploration
expense”. Previously, the release to income was presented as “depreciation, amortization and impairment”. For comparability
purposes, 2019 was restated.
1,247,904
1,089,623
Structure of indicators split by activity-2019
Gas
production
and deliveries
TOTAL
2019*)
Description
including:
1
Revenue
2
5,080,482
Cost of commodities sold
(107,800)
Underground
Gas Storage
Electricity
* RON thousand *
Settlement
Other
between
activities
segments
4
454,370
5
237,759
6
288,883
7
(610,325)
(3)
(22,452)
(1,017)
3
4,709,795
(84,328)
116
(3,657)
38,124
7,519
(81,221)
(81,208)
80,008
78,675
12
37,548
(791)
12,471
(6)
(7)
464
(501)
-
-
(76,048)
(51,100)
(31,215)
(955)
(10,071)
17,293
59
1,274
-
(1,451,766)
(941,770)
(485,078)
(7,160)
(17,758)
(670,408)
(416,635)
(62,412)
(39,187)
(152,174)
Investment Income
Other gains and losses
Net losses from
impairment of trade
receivables
Changes in inventories
Raw materials and
consumables
Depreciation,
amortization and
impairment
Employee benefit
expense
Finance cost
(24,740)
(21,170)
(3,045)
Exploration Expenses
Share of associates’ result
(1,636)
1,474
(1,636)
-
-
-
-
-
-
(541)
-
1,474
Other Expenses
Other Income
Profit before tax
(1,551,642)
(1,703,856)
(198,547)
(154,849)
(88,165)
593,775
32,834
30,887
264
64
2,362
(743)
1,275,180
1,514,113
(325,703)
12,494
74,279
Income tax expense
(185,557)
-
(7,741)
-
(177,816)
Profit for the year
1,089,623
1,514,113
(333,444)
12,494
(103,537)
*) – restated: see the comment made at the consolidated statement of the global result
-
(16)
(3)
-
-
-
16
-
-
(3)
-
(3)
Structure of indicators split by activity-2020
* RON thousand *
Description
1
Revenue
TOTAL
2020,
including:
2
Gas
production
and
deliveries
3
4,074,893
3,690,235
Underground
gas
storage
Electricity
Other
activities
Settlement
between
segments
4
333,939
5
261,112
6
376,937
7
(587,330)
Page 20 of 80
2020 Consolidated Board of Directors’ Report
Cost of commodities sold
Investment income
Other gains and losses
Loses from impairment
of trade receivables
Changes in inventories
Raw materials and
consumables
Depreciation,
amortization and
impairment
Employee benefit
expense
Finance cost
Exploration expense
Share of associates’
result
Other expenses
Other income
Profit before tax
Income tax expense
Profit for the year
(18,617)
47,845
(6,534)
17,551
(16,151)
(58,282)
(7,726)
107
(8,641)
18,221
(17,757)
(38,212)
(2)
(10,375)
(514)
-
1,018
(951)
-
-
152
67,699
(21,131)
(174)
(638)
3,232
(32)
35
1,571
-
-
-
(19,225)
(1,481)
(9,936)
10,572
(672,063)
(547,414)
(5,804)
(21,761)
(25,514)
(71,570)
(767,251)
(465,561)
(70,733)
(50,866)
(180,091)
(17,000)
(26,509)
1,330
(14,862)
(26,509)
-
(1,582)
-
-
-
-
-
(590)
-
1,330
-
34
-
-
(1,158,143)
(1,230,603)
(169,289)
(210,677)
(124,900)
577,326
25,439
24,531
1,426,508
(178,604)
1,375,809
-
1,247,904
1,375,809
61
67,432
(8,718)
58,714
34
1,403
(590)
(34,639)
110,595
(92,689)
-
(169,886)
-
(34,639)
(59,291)
(92,689)
Compared revenue and the revenue weight on activity segments is shown in the table below:
Description
2018
2019
2020
Gas production and delivery
UGS activity
Electricity generation and delivery
Other activities
Settlement between branches
TOTAL Revenue
RON
mil
4,522.6
355.1
388.5
356.5
-618.4
5,004.2
% R
90.37
7.09
7.76
7.12
-12.35
100.00
RON
mil
4,709.8
454.4
237.8
288.9
-610.3
5,080.5
% R
92.70
8.94
4.68
5.69
-12.01
100.00
RON
mil
3,690.2
333.9
261.1
376.9
-587.3
4,074.9
% R
90.56
8.19
6.41
9.25
-14.41
100.00
The financial income is higher by 17.57 % than recorded in the previous year. Financial income consists
mainly of interests from cash in bank deposits and in state bonds.
Description
Year 2019
Year 2020
Ratio
1
Operating expenses
Financial expenses
Total expenses
Financial Expenses
(RON thousand)
2
3,929,265
32,465
3,961,730
(RON thousand)
3
2,692,628
16,082
2,708,710
(2020/2019)
4=3/2x100
-31.47%
-50.46%
-31.63%
Financial expenses incurred in 2020 are lower by 50.46% as compared to the previous year.
Chapter 7 shows more details on the different expenses categories and a comparative assessment thereof.
Page 21 of 80
2020 Consolidated Board of Directors’ Report
Compared economic-financial results are shown in the table below (RON thousand):
Description
2019
2020
1
Operating results
Financial results
Share of associates’ result
Gross result
Income tax
Net Result
2
1,265,414
8,292
1,474
1,275,180
185,557
1,089,623
3
1,393,341
31,837
1,330
1,426,508
178,604
1,247,904
Ratio
(2020/2019)
4=3/2x100
10.11%
283.95%
-9.75%
11.87%
-3.75%
14.53%
Gross result for January – December 2020 in amount of RON 1,426,507 thousand is higher by 11.87%
than the gross result of the similar period of 2019.
is also emphasized by the evolution of indicators presented in the table below:
Indicators
1
Working capital (WC)
Working capital requirements (WCR)
Net cash
Economic Rate of Return (ERR)
Return on Equity
Return on Sales
Return on Assets
EBIT
EBITDA
ROCE
Current liquidity
Asset Solvency
where:
Clt
Af
E
Lnc
Pr
Si
Ast
L
Pp
Crst
Idf
long-term capital;
non-current assets;
equity;
non-current liabilities;
provisions;
investment subsidies;
short term assets;
liquidity position;
Prepayments;
short-term credit;
deferred income
Calculation Formula
M.U.
2019
2
Clt-Af =
E+Lnc+Pr+Si-Af
3
RON mil
4
1,863
(Ast-L+Pp) -
(Lcrt-Crst+Idf)
WC-WCR = L-Crst
Pg/Cltx100
Pn/Ex100
Pg/Rx100
RON mil
RON mil
%
%
%
Pn/Ax100
Pg+Exi-Ir
EBIT+Am
EBIT/Cempx100
Ac/Lc
E/Lx100
%
RON mil
RON mil
%
-
%
1,499
364
16.59
15.19
25.10
13.20
1,237
2,698
16.10
4.28
86.92
2020
5
2,656
2,239
417
16.59
16.02
35.01
13.47
1,379
2.051
16.03
5.01
84.08
Pg
Pn
R
A
Exi
Ir
Am
Cemp
Ac
Lc
L
gross profit;
net profit;
revenue;
total assets;
interest expense;
interest income
amortization and impairment;
capital employed (total assets–current liabilities)
Current assets
Current liabilities
total liabilities
Page 22 of 80
2020 Consolidated Board of Directors’ Report
3.4.2. Sales
The entire gas quantity traded by Romgaz was sold on the internal market. Romgaz traded quantities
delivered on free market both by bilateral negotiation and on centralized markets. Quantities supplied
in 2020 on the competitive market have been traded 46.9% on Romanian centralized markets.
Description
unit
2018
2019
2020
2019/2018 2020/2019
Delivered gas
mil.cm
5,602.7
5,132.1
4,688.1
Sales to third parties
mil.cm
5,276.0
4,959.1
4,406.2
-8.40%
-6.01%
-8.65%
-11.15%
Gas for electricity production in own
power plant
mil.cm
346.1
173.0
281.9
-47.05%
+62.95%
From the total gas quantities supplied to third parties the following available means of trade have been
used:
gas delivered under contracts on the regulated market: 12.83 TWh;
gas delivered under contracts on centralized markets: 21.35 TWh;
gas delivered under bilateral contracts on the competitive market: 11.27 TWh.
Romgaz gas production dropped by 14% as compared to 2019 and volumes supplied in 2020 decreased
by 7.7%. With regard to gas deliveries from own production, these decreased by 6.9% as compared to
2019.
Gas supplied to third parties recorded a decrease of 10%. It is worth mentioning that no import gas
volumes were traded in 2020. At the same time, gas volumes used by CET Iernut increased by 58% as
compared to 2019. Deliveries and sources are shown in the table at pages 4-5.
As regards trading on Romanian centralized markets, Romgaz’s weight was significant, approximately
36% of the total of gas traded on these markets with delivery in 2020 was sold by Romgaz. In terms of
quantity, Romgaz traded over 19.7 TWh with delivery in 2020 on centralized markets, from the total
volume of approx. 55.5 TWh, representing the total transactions performed on these markets with the
same period of delivery.
Romgaz was also active on the day ahead market, respectively intraday market in order to optimize sales
on one hand and to balance the portfolio, on the other hand, Romgaz sold on these markets
approximately 0.7 TWh.
2020 gas sales perspectives are characterized by:
concluding in 2019 contracts with delivery in 2020 for approximately 50% of the sales estimates
for this year;
quantities were contracted both based on regulated contracts and on the competitive market.
Through centralized markets, approximately 8 TWh were contracted with delivery in 2020;
price capping for residential consumers and heat producers, as well as the other measures
provided in GEO No. 114/20187 will terminate according to GEO No.1/2020, as of July 1, 2020;
according to current legislation, ANRE Order No.79/2020, amended by ANRE Order No.
143/2020 (Gas Release Program – GRP), gas producers that record an annual production higher
than 3,000,000 MWh have to trade 40% of the production on centralised markets at a required
price, that can be determined (maximum 95% from CEGH for the period the product refers to)
for several products: monthly, quarterly, seasonal, half year and annual product. The program
started on June 1, 2020 and ends on December 31, 2022;
Implementation of projects that will increase gas export capacities from Romania to other
countries (especially to Hungary and Bulgaria), which would lead to a proper interconnection
7 GEO No 114 of December 28, 2018 on setting up measures in the public investment sector and of fiscal-
budgetary measures, amending and supplementing certain legislative acts and extending certain terms.
Page 23 of 80
2020 Consolidated Board of Directors’ Report
of gas transmission networks from Romania and would represent an alternative in terms of gas
trade. This matter must be viewed in line with the regulation framework that will be prepared
by applying GEO No. 114/2018.
In the last year, a series of negative factors influenced the Romanian gas market. On one hand, we have
the current situation, the state of emergency triggered by COVID-19 crisis and on the other hand, the
effective laws, namely, ANRE Order No.79/2020 amended and repealed by ANRE Order No. 143/2020,
the obligation to offer a significant gas quantity on a pre-set schedule and at a low starting price given
by the state of the market adding thereto a 5% discount.
In 2019, the Romanian gas market continued to progress as regards liquidity increase and reselling on
centralized markets, as well as the positive trends regarding trade balancing through transactions on
short-term markets. The impact of GEO No.114/2018 led to a sharp increase of prices on the competitive
market.
On the gas market, when it comes to sources, competition was high between domestic and import
sources. In fact, import volumes recorded a significant increase taking into consideration the decreasing
import gas prices as well as the attractiveness of the Romanian market for such sources.
According to the company’s estimates, the national gas consumption rose by approximately 5% as
compared to 2019. Romgaz market share in the national consumption recorded a decrease of 10.5%
compared to 2019 (internal gas for consumption).
The table below shows average gas delivery prices between 2018-2020:
Description
1
Average price of gas sold from internal
production8
Average import gas delivery price
M.U.
2
RON/1000 m3
RON/MWh
RON/1000 m3
2018
3
783.42
74.94
2019
4
882.2
83.7
1,134.84
1,468.8
RON/MWh
105.65
136.9
2020
5
751.3
73.3
-
-
National electricity production, according to preliminary data of the system operator, was 54,775,402
MWh. Romgaz had a market share of 1.69% increasing by 70.71% as compared to last year.
The yearly evolution of electricity production and market share:
Description
2018
(MWh)
2019
2020
(MWh)
(MWh)
2019/2018
(%)
2020/2019
(%)
Domestic production
63,933,510
59,454,280
55,519,195
Romgaz production
1,165,189
590,129
937,500
Romgaz market share
1.822
1.00
1.69
-7.64
-49.35
-45.12
-6.61
58.86
70.71
As regards electricity generation sources, in 2020, these were as follows9 :
30% hydro;
22 % coal;
18 % nuclear;
15% gas;
15 % renewable sources and other producers
8 including commodity gas and gas from Schlumberger joint venture less storage costs
9 approximate levels - Source ANRE, market reports. Note: on the date of preparing the Report, ANRE did not
publish the annual report containing the energy label.
Page 24 of 80
2020 Consolidated Board of Directors’ Report
The Romanian gas market situation allowed the company to have an extended portfolio of customers
both on centralized markets and as regards contracts by direct negotiation. Moreover, the company has
a balanced portfolio as regards the ratio between the final consumers market (especially power plants)
and the wholesale market where it sells gas to suppliers.
3.4.3. Prices and Tariffs
The regulatory framework for natural gas production, transmission, distribution, supply and storage,
organization and operation of the gas sector, market access as well as criteria and procedures for granting
authorizations and/or licenses in the natural gas sector are set by Law No. 123/2012.
Romgaz Group operates both on regulated market, performing underground gas storage and distribution
activities, and on the free market, performing gas and electricity production and supply activities.
Underground Gas Storage
The revenues from the underground storage business and the storage tariffs are regulated since April 1,
2004, by ANRGN Decision No. 1078/2003, repealed by ANRE Order no. 22 of May 25, 2012 on approval
of the Methodology for approving prices and setting regulated tariffs in the gas sector, published in the
Official Gazette of Romania No. 379 of June 6, 2012.
ANRE Order No. 14 of February 13, 2019 is currently in effect, approving the Methodology to establish
regulated tariffs for natural gas underground storage services.
Storage tariffs applied for the two compared periods are those approved by ANRE Order No. 58 of
March 29, 2018 (between April 1, 2018 and March 31, 2019), ANRE Order No. 44 of March 29, 2019
(between April 1, 2019 and March 31, 2020) and ANRE Order No. 24 of March 23, 2020 (starting with
April 1, 2020) respectively.
Government Emergency Ordinance No. 106/2020 amending Gas and Electricity Law No. 123/2012
cancelled the provision on regulating the storage activities. Therefore, after the withdrawal cycle 2020-
2021, the storage activity is no longer a regulated activity.
The table below shows the storage tariffs:
Tariff component
M. U.
Volumetric component for gas injection
Fixed component for capacity reservation
Volumetric
withdrawal
component
for
gas
RON/MWh
RON/MWh/
storage cycle
RON/MWh
Tariffs
(01.01.2018-
31.03.2019)
1.68
9.90
Tariffs
(01.04.2019-
31.03.2020)
1.90
9.98
1.67
1.61
Tariffs (as of
01.04.2020)
3.67
7.58
2.03
Natural Gas Supply
The final gas price for the customer is the sum of the weighted average price for gas acquisition, the
tariffs for transmission, storage and distribution, and the trading component, according to the following
formula:
Final price = Weighted average gas acquisition price + Transmission tariff + Storage tariff +
Distribution tariff + Trading component
The distribution tariffs depend on the distribution area and on the distribution system operator.
Regulated prices and tariffs are calculated by the “revenue-cap” method for underground storage and
gas transmission and by the “price-cap” method for regulated distribution and supply.
According to the provisions of Article 181, paragraph (5) of Law No. 123/2012, the domestic gas
acquisition price on the regulated market is set by Government Decision, at the proposal of the
competent ministry, and is updated by ANRE and ANRM, in accordance with the provisions of the
Calendar for gradual deregulation of prices for the final customers.
Page 25 of 80
2020 Consolidated Board of Directors’ Report
The table below shows the average gas supply prices between 2018-2020:
Description
1
Average supply price for internal gas
production10
M. U.
2
RON/1000 cm
RON/MWh
2018
3
783.42
74.94
2019
4
882.2
83.7
Average price for import gas
RON/1000 cm
1,134.84
1,468.8
RON/MWh
105.65
136.9
2020
5
751.3
73.3
-
-
Natural Gas Distribution
Distribution tariffs and final regulated prices valid during the analysed period are approved by ANRE
Orders, as follows:
Order No. 146/2018 on setting the unitary income for 2019 and on approving regulated prices
for regulated gas supply activity performed by Societatea Naţională de Gaze Naturale
"ROMGAZ" - S.A. Medias (as of August 1, 2018);
Order No. 146/2019 on setting the unitary income for 2019 and on approving regulated prices
for regulated gas supply activity performed by Societatea Naţională de Gaze Naturale
"ROMGAZ" - S.A. Medias (as of July 1, 2019);
Order No.111/2019 on setting the regulated tariffs for gas distribution services performed by
Societatea Naţională de Gaze Naturale "ROMGAZ" - S.A. Medias (as of July 1, 2019);
Order No. 56/2020 on setting the unitary tariff for regulated supply services between January
1- June 30, 2020 and on approving regulated gas prices for Societatea Naţională de Gaze
Naturale "ROMGAZ" - S.A. Medias (as of January 1, 2020);
Order No. 122/2020 on approving regulated tariffs applicable to distribution services for
Societatea Naţională de Gaze Naturale "ROMGAZ" - S.A. Medias (as of July 1, 2020).
The table below shows tariffs and prices:
Description
01.08.’18-
30.06.2019
01.07.’19-
31.12.2019
01.01.’20-
30.06.2020
01.07.’20-
present
Distribution tariffs (RON/MWh):
*B1 consumption up to 23.25 MWh
*B2 annual consumption between 23.26-116.28 MWh
*B3annual consumption between 116.29-1,116.78 MWh
*B4 annual consumption between 1,116.79-11,627.78 MWh
Distribution tariffs (RON/MWh):
*C1 consumption up to 280 MWh
*C2 annual consumption between 280 and 2,800 MWh
*C3 annual consumption between 2,800 and 28,000 MWh
52.75
47.96
47.07
46.26
Final regulated prices (RON/MWH):
*B1 consumption up to 23.25 MWh
*B2 annual consumption between 23.26-116.28 MWh
152.23
147.44
Final regulated prices (RON/MWh):
*C1 consumption up to 280 MWh
52.87
0.00
50.00
52.87
0.00
50.00
52.52
46.17
41.29
139.24
122.71
10 Including commodity gas and gas from Schlumberger joint venture less storage costs
Page 26 of 80
2020 Consolidated Board of Directors’ Report
3.4.4. Human Resources
On December 31, 2020 Romgaz Group had 6,188 employees and SNGN Romgaz SA had 5,673
employees. As of April 1, 2018 a number of 504 employees terminated their labour contracts concluded
with the company continuing their activity under Depogaz Subsidiary.
The evolution of the number of employees between January 1, 2018 – December 31, 2020, is shown in
the table below:
Description
2018
2019
2020
1
Employees at the beginning of the
year
Newly hired employees
Employees who terminated their
labour relationship with the company
Group
Romgaz
3
6,198
Romgaz Group
Romgaz
3
6,214
4
6,198
Romgaz Group
Romgaz
5
6,251
4
5,688
286
270
241
751
264
227
238
188
198
261
Romgaz
6
5,738
177
242
Employees at the end of the year
6,214
5,688
6,251
5,738
6,188
5,673
The structure of SNGN Romgaz SA employees at the end of 2020 was the following:
a) by level of education
University
Secondary education
Foreman education
Vocational school
Middle school
b) by age
under 30 years
30-40 years
40-50 years
50-60 years
over 60 years
c) by activities
gas production
production tests/well special operations
health
transportation
electricity production
25.54 %
29.04%
2.80 %
32.43 %
10.19 %
4.76 %
13.13 %
31.89 %
40.82 %
9.40 %
70.02 %
12.00 %
1.41 %
9.41 %
7.16 %.
Distribution of Romgaz employees by headquarters and by branches is shown in the figure below:
Page 27 of 80
2020 Consolidated Board of Directors’ Report
Iernut Branch
7%
STTM
10%
SIRCOSS
12%
Headquarters
9%
Medias Branch
33%
Targu-Mures
Branch
29%
The structure of the company’s employees from the headquarters and from branches is shown in the
table below:
Entity
Workers
Foremen
1
Headquarters
Mediaş Branch
Targu-Mures Branch
SIRCOSS
STTM
Iernut Branch
Drobeta Turnu Severin
Branch
2
39
1,433
1,319
495
390
250
3
87
50
47
16
41
Administrative
Employees
4
482
342
299
139
128
115
1
Total
5
521
1,862
1,668
681
534
406
1
TOTAL
3,926
241
1,506
5,673
In 2020, professional trainings were meant to increase competitiveness and to improve professional
performance.
Thus, the following were taken into account:
training of administrative employees in various areas of activity, in cooperation with national
and international training suppliers;
authorization/re-authorization, according to specialization and position;
skills improvement and vocational training of workers through internal training courses.
A number of 1,316 employees were trained during 2020 and the costs of such professional trainings
were RON 1,665,985.
The annual training program was implemented as follows:
505 persons participated in professional training programs on job related subject matters;
588 persons participated in training courses to obtain authorization/re-authorization in
accordance with their position;
223 persons participated in internal training courses;
The 2020 professional training plan, as regards the number of participants, was fulfilled 32.57%, due to
the SARS-COV2 pandemic. There were no professional training courses during the state of emergency.
During the state of alert, because of restrictive measures that had to be taken with respect to
organisational matters and because of the employees’ fear to get the disease, the number of training
course decreased and so did the number of participants.
Page 28 of 80
2020 Consolidated Board of Directors’ Report
For 2020, the professional training activity focused mainly on sustaining the increase of adaptability to
new economy requirements based on knowledge, in order to ensure and update the required
competencies for employees working in the technical, economic, research-development field, etc.
Within Romgaz Group there are three trade unions:
“Sindicatul Liber din cadrul S.N.G.N. Romgaz S.A.”, consisting of 5,850 members;
“Sindicatul Extracţie Gaze şi Servicii”, consisting of 5 members;
“Sindicatul Filiala Inmagazinare DEPOGAZ”, consisting of 299 members.
Thus, the total number of union members within Romgaz is 6,151 as compared to 6,188 representing
the total number of employees. The ration between union members and the total number of employees
is 99.40%.
Relationship between manager and employees: following negotiations, the parties agreed to conclude
a new Collective Labour Agreement. On November 27, 2019, the parties agreed to conclude a new
Collective Labour Agreement for SNGN Romgaz SA, registered at the Territorial Labour Inspectorate
Sibiu under No. 18161/04.12.2019, valid as of December 29, 2019 until December 28, 2021 inclusive.
For Depogaz, a Collective Labour Agreement is in effect, negotiated with “Sindicatul Liber Romgaz”,
to which “Sindicatul Filiala de Inmagazinare Gaze Naturale” adhered, being valid until March 27, 2021.
During 2019, there were two conflicts between the management and the trade union, finalized on
December 31, 2019 (see Litigations: Items 51 and 379, paragraph 3.4.7).
In 2020, the environment protection activity continued to focus on ensuring compliance of Group’s
business with the applicable legal requirements on environment protection. Another aim was meeting
specific objectives related to:
Increasing awareness regarding compliance with legal requirements;
Pursuing the accomplishment of all reports imposed by the environment legislation in force, by
centralizing the information required and reported by Romgaz Branches and submitting it to
competent authorities;
Rendering efficiency to the environment protection activity which supports the management
process.
The environment protection activities during 2020 focused on:
Complying with permitting requirements:
Complying with legal requirements relating to environment permits for all 126 units. In this
respect, the conformity degree is 100%. Thus, for 8 units the company required and obtained
the review of the permits, for 17 units reauthorisation was requested and obtained, for 49
units the annual endorsement was requested and obtained, for 36 units documents for
abandoning gas production wells were submitted;
Complying with legal requirements regarding waste water management permits, for:
67 units, for which the conformity degree is 100% with the mention that for 20
units re-authorization documents were submitted,
36 units related to reservoir water injection systems/wells, out of which 13 are in
process of obtaining re-authorization.
A company-wide application is under development to monitor environment/water/injection
permits, permanently analysing and continuously supervising compliance with
legal
requirements on environment protection;
Page 29 of 80
2020 Consolidated Board of Directors’ Report
Management of waste generated from own activity, according to the legal requirements in force. In
2020, the company managed a quantity of 2,787.86 tons of waste from its own activity, out of which
772.15 tons were recycled and co-incinerated (759.30 tons were recycled and 12.85 tons were co-
incinerated), 67.25 tons of waste were disposed by incineration and 1,948.45 tons of waste were
disposed by storage.
AMOUNT OF WASTE MANAGED IN 2020 (2,787.860 tons)
67
772
1,948
6 000
5 500
5 000
4 500
4 000
Quantity disposed by storage
Quantity recycled and co incinerated
Quantity disposed by incineration
In 2020, the “Program for Prevention and Reduction of Waste Generated by S.N.G.N. Romagaz
S.A.” pursued the accomplishment of the measures thereunder and this can be viewed by accessing
https://www.romgaz.ro/ro/content/program-de-prevenire-si-reducere-
the
following
cantitatilor-de-deseuri.
link
The Program aims at continuously identifying the objectives, targets and action policies the
company is required to comply with in its waste management activity in order to fulfil the
company’s strategic objectives;
Monitoring compliance with legal requirements on environment protection. In 2020 Romgaz did
not exceed the limits permitted by regulations in force, with the effluents discharged into surface
water bodies or sewage networks;
In 2020, 2 external environment complaints were recorded, as follows:
Environmental discomfort at the property limit of the residential area generated by gas
compression machines at gas compression station Cristuru Secuiesc. An approved laboratory
pertaining to NCDO-INOE 2000 Institute, ICIA Cluj-Napoca Subsidiary carried out
measurements to determine the sound level at Cristur compression station;
Environmental discomfort at the property limit of industrial premises generated by gas
compression machines at gas compression station Cristuru Secuiesc. Services were purchased
from SC Enviro Consult to carry out a sound level study. For the purposes of reducing noise
pollution at Cristuru Secuiesc working point an acquisition of design and execution services for
sound insulation is in progress;
In 2020, Romgaz continued to monitor compliance with permanent or multiannual measures of
implementation provided in the Remedial Report (maintenance of the perchlorethylene consumption
under 1 tonne/year, for each location, so as to comply with the provisions of GD No. 699/2003 on
establishing certain measures for decreasing emissions of volatile organic compounds resulting from
the use of organic solvents in certain activities and installations, locating industrial units at safe
distances from protected receivers;
Reducing fugitive emissions in the areas with calibration tanks, metallic tanks and concrete
reservoirs for temporary storage of reservoir waters – by equipping the tanks with ecologic
dispersion systems;
Periodic payment of the contribution towards the “Closing Fund”, until reaching the value of
mandatory provision, for the Ogra specific waste facility, supervising the annual monitoring
frequency for Dumbravioara drilling waste facility, closed in 2003 etc.;
Page 30 of 80
2020 Consolidated Board of Directors’ Report
Planning and organizing the internal environmental inspection activity in order to verify compliance
with the legal requirements applicable to inspected activities.
In 2020, 45 internal environmental inspections were planned while 35 were actually conducted by
Romgaz headquarters environmental inspectors due to national and company-level circumstances,
at the authorized units of branches, following which 1 non-conformity report was prepared, being
closed within the deadline. Thus, Romgaz activity complies with the applicable legal environmental
requirements, the conformity degree identified following the implementation of a procedural
assessment method for 2020 being 99%, representing a very good value indicating potential for
reaching 100%;
Assessing the conformity level regarding environmental protection requirements and contractual
requirements of contractors and subcontractors of drilling works contracted by Romgaz, during
2020;
Accomplishing the actions/measures programs for prevention and/or limitation of the impact on the
environment for 2020, by modernizing the reservoir water storages, mounting waste water systems,
transforming abandoned wells in reservoir water injection wells etc.
In 2020, the Environmental Guard and the Water Basins Administrations carried out 22 inspections at
Romgaz locations. Following such inspections, the company had no sanctions.
CO2 Certificates - SPEE Iernut
By GD No. 1096/2013 on approving the mechanism for the free of charge transitory allocation of
greenhouse gas emissions certificates to electric power producers for 2013-2020, including the National
Investment Plan (NIP), the Romanian Government intends to finance replacement of old thermoelectric
installations from a fund supplied from sales of greenhouse gas emissions certificates, investments
receiving a non-reimbursable funding of 25% of the value of eligible expenses based on financing
contracts, within available funds, according to the order of financing request and approval.
By means of Annexes:
Annex No. 1: provides the eligible installations for free of charge transitory allocation and the
number of annually allocated certificates for 2013-2020;
Annex No. 3: National Investment Plan beneficiaries,
Romgaz is included in the above mentioned annexes and, in 2017, launched the investment from the
National Investment Plan.
Therefore, pursuant to Annex No.1 of the Order, free of charge transitory allocation of certificates is
made for the period between 2016-June 30, 2019, while in 2020 free of charge transitory certificates are
no longer allocated.
In order to comply with the legal requirements of GD No. 780/2006, updated (article 8, letter e) the
requirement to reimburse, by April 30 of the year following the year for which greenhouse gas emissions
were monitored, a number of greenhouse gas emission certificates equal to the total number of emissions
from such installations. For 2020, CO2 emissions equal 531,072 tons which is equivalent to 531,072
certificates. In order to comply with the legal requirements, SPEE Iernut must acquire a number of
525,067 certificates (531,072 – 6,005 = 525,067), where 6,005 represents the number of certificates
remaining in the Registry from the previous year. The acquisition must be finalized before April 14,
2021.
At the beginning of 2020 acquisition procedure concerning flu vaccines was finalized by awarding the
contract to Farmexim Bucharest. Farmexim did not deliver the flu vaccines so that the situation is now
under review and a decision will be made whether to terminate the contract or the contracted flu vaccines
to be eventually delivered. The company also takes into account filing an action to appropriate
competent courts in order to settle this matter.
Page 31 of 80
2020 Consolidated Board of Directors’ Report
According to the Collective Labour Agreement, additional voluntary health insurances were acquired
for all employees, a framework agreement being signed for three years with the insurance-reinsurance
association Societatea de Asigurare-Reasigurare ASITO Kapital SA and SC Medical Ocupational SRL.
During this period, the company finalised acquisition procedures regarding personal protective
equipment necessary for the working personnel and 53 types of personal protective equipment were
purchased.
During 2020 RT-PCR testing medical services were acquired in order to diagnose employees infected
with SARS-COV2 virus.
SARS-COV2 illnesses within S.N.G.N. Romgaz S.A. Medias
Since the beginning of the pandemic and up to December 31, 2020, 279 employees were infected with
SARS-COV2 and six of them died.
The two charts below show the evolution of COVID-19 cases within Romgaz during March-December
2020, broken down on branches and headquarters and in total, respectively.
Evolution of COVID-19 cases within Romgaz
45
40
35
30
25
20
15
10
5
0
s
e
s
a
c
f
o
r
e
b
m
u
N
0
0
2
0
0
0
0
0
1
2
1
0
0
0
0
0
0
0
0
0
0
0
0
1
1
2
1
0
1
1
1
1
0
0
4
0
1
3
1
3
2
4
8
6
16
12
6
6
42
25
20
20
10
11
9
22
15
10
3
5
March
April
May
June
Headquarter
July
Medias Branch
August
September October November December
Tg. Mures Branch
Evolution of COVID-19 cases within Romgaz
95
97
54
2
4
0
1
6
6
14
100
50
0
s
e
s
a
c
f
o
r
e
b
m
u
N
Our company paid and is still paying particular attention to fight against the SARS-COV2 virus, by
drafting and implementing the necessary measures and procedures to minimize the impact on the
company as well as by permanently carrying out inspections to verify their implementation.
Page 32 of 80
2020 Consolidated Board of Directors’ Report
The summarized breakdown of litigations in which Romgaz is involved as of December 31, 2020 is the
following:
A total number of 380 litigations are recorded in company’s records, out of which:
183 cases where Romgaz is plaintiff;
188 cases where Romgaz is defendant;
6 cases where Romgaz is civil party/injured party;
The total value of litigations amounts RON 3,375,391,260.62;
The (approximate) total value of the files where Romgaz is plaintiff amounts RON 2,908,120,587.43
The (approximate) total value of the files where Romgaz is defendant amounts RON
468,405,920.4711;
The (approximate) total value of the files where Romgaz is civil party amounts RON
286,344,946.55.
The detailed list of litigations can be viewed on Romgaz website www.romgaz.ro Investor Relations
Annual Reports 2020.
Pursuant to article 52 paragraph (6) of GEO no. 109/2011 “The legal acts concluded under paragraph
(1) and (3) shall be specified in the half-yearly and annual reports of the Board of Directors … in a
special chapter …”.
Paragraph (3) letter b) provides as follows:
(3) the Board of Directors … informs the shareholders, during the first general meeting of
shareholders following conclusion of the legal act, on any transaction concluded by the public
enterprise with:
……………………………………………………………………………………………
b) another public enterprise or with the public supervisory authority, if the transaction
has, individually or in a series of transactions, a value of at least the RON equivalent
of EUR 100,000”.
Article 82 paragraph (1) of Law No. 24/201712 provides that “The administrators of issuers of whose
securities are admitted for transactions on a regulated market have the obligation to promptly report
any legal act concluded by the issuer with the administrators, employees, shareholders that control, as
well as with the persons with whom these act together, the cumulative value of which represents at least
the RON equivalent of EUR 50,000”.
Therefore, Romgaz prepares current reports any time it concludes a legal act as mentioned above, which
are sent to Bucharest Stock Exchange and published on its website.
Half-yearly, Romgaz financial auditor prepares a “Limited Insurance Independent Report on the
information included in the current reports issued by SNGN Romgaz SA in accordance with the
requirements of Law No. 24/2017 (article 82) and Regulation No. 5/2018 of the Financial Supervisory
Authority”. The report is sent to Bucharest Stock Exchange and published on its website.
Current reports prepared by the company in accordance with article 82 of Law no. 24/2017 also include
legal acts concluded in accordance with the provisions of article 52 of GEO No. 109/2011.
Taking into consideration that current reports as mentioned above are public documents, posted on
Bucharest Stock Exchange website, as well as that the current half-yearly reports with the legal acts
concluded in each half-year, reports audited by the company’s financial audit, are published on
11 defendant: RON 468,402,340.99 in 188 cases + EUR 73,350; RON 357,581.25 in 3 cases.
12 Law No. 24 of March 21, 2017 on issuers of financial instruments and market operations
Page 33 of 80
2020 Consolidated Board of Directors’ Report
company’s website, for more details on concluded legal acts please access company’s website at
www.romgaz.ro, under Investor Relations – News and Events – Current Reports-Contracts (“Auditor
Report”).
Page 34 of 80
2020 Consolidated Board of Directors’ Report
IV. GROUP’S TANGIBLE ASSETS
The occurrence and thereafter the development and gradual diversification of what was truly going to
be the Romanian natural gas infrastructure has an important benchmark, year 1909, when the first gas
reservoir was discovered by drilling well 2 Sarmasel (Mures County).
During the immediately following years, a gas infrastructure unique in Europe for those times started to
outline at a small scale, consisting of the following assets:
gas transmission pipeline, the first of this kind in Europe, built in 1914, connecting towns Sarmasel
and Turda (Cluj County), and
gas compressor station from Sarmasel; built in 1927- the first one in Europe.
It is notable that the country’s large gas structures were discovered after 1960 and in parallel, a complex
infrastructure started to be developed, at national scale, dedicated exclusively to the gas extraction
process and later to the injection and underground storage process. These large gas structures located in
the Transylvanian basin supply considerable gas quantities even today.
The infrastructure related to exploitation of natural gas reservoirs is a particularly complex system today
that needs to ensure continuous collection, circulation, conditioning and metering of gas produced by
wells ensuring the quality parameters provided in applicable regulations.
As a whole, the infrastructure of the company developed continuously upon discovery and exploitation
of new reservoirs. The maximum intensity of the rate of development of production capacities was
reached between 1970-1980, when the annual production was extremely high both due to the
consumption demand in those times and to the great volumes of resources and reserves in most of the
newly discovered gas fields.
Production capacities of company’s infrastructure are summarized as follows:
1. natural gas producing wells and wells for reservoir water injection;
2. gathering pipelines connecting wells and well clusters;
3. collecting pipelines connecting well clusters and the NTS;
4. Gas heaters (radiators);
5. Underground and surface gas separators;
6. Flow metering panels (for technological and fiscal metering located at the interface with the NTS);
7. Gas dehydration (conditioning) stations;
8. Gas compression units:
low capacity portable compressors installed at the well head or at the well cluster;
booster compressors for one or more gas fields;
gas compressor stations, usually consisting of two or more high capacity compression units,
which can be intermediate or final compressor stations (outlet to the NTS);
9. Industrial or reservoir water pumping stations;
10. Other facilities (buildings, workshops, storehouses, electric lines, well access roads etc.).
Utilisation of production capacities depends on gas sales volume, generally being close to 100%. During
2020, due to an overlap of commercial, economic, sanitary as well as regulatory factors resulting in a
reduction in gas sales in Q2 and Q3, utilisation of production capacities was lower (approximately 85%).
In order to keep these production capacities in operation, under safety and efficiency conditions, Romgaz
carries out extensive and continuous efforts focused on workover and special operations in wells,
maintenance and rehabilitation of pipes, maintenance and modernisation of gas compression stations
and dehydration stations as well as of commercial (fiscal) gas delivery panels.
Page 35 of 80
2020 Consolidated Board of Directors’ Report
In 2020, Romgaz, as sole titleholder, carried out petroleum operations in 140 gas fields out of which
128 are well defined blocks and the rest of 12 are blocks with experimental production.
Production from these fields is obtained through more than 3,050 wells and through almost the same
number of technological surface facilities consisting mainly of gathering pipelines, gas heaters (where
applicable), liquid separators and gas flow technological metering panels.
Pressure and flow limits of production wells are maintained by 18 compression stations (in which 86
compressor units are installed), 17 booster compressors and 9 well cluster compressors.
One technical demand required by applicable laws is the quality of gas, which is 100% fulfilled by
means of 67 gas dehydration stations.
Depogaz holds Licence No. 1942/2014 for the operation of 5 underground gas storages, developed in
depleted gas fields, their aggregate capacity representing about 90.5 % of the total storage capacity of
Romania.
The capacity of the underground gas storages operated by Depogaz, by storages, is shown in the table
below:
Storage
Active capacity
Withdrawal capacity
Injection capacity
Balaceanca
Bilciuresti
Ghercesti
Sarmasel
Urziceni
Total
[Mil.St
m3/cycle]
50
1,310
150
900
360
2,770
[GWh/cycle]
545.0
14.2
1.6
9.5
3.9
29.8
[Mil.St
m3/cycle]
1.2
14.0
2.0
7.5
4,5
29.2
[GWh/day]
[Mil.St m3/cycle]
[GWh/day]
13.1
151.9
21.4
79.4
49.4
315.1
1.0
10.0
2.0
6.5
3.0
22.5
10.9
108.5
21.4
68.8
32.9
242.5
1. Balaceanca Storage
Balaceanca Storage facility is located at approximately 4 km from Bucharest.
The fixed assets contributing to the storage process are as follows:
24 wells of which 21 injection/withdrawal wells and 3 piezometric wells;
surface infrastructure includes:
Balaceanca gas compressor station;
8.4 km collecting pipelines;
4 separators;
4 technological gas metering facilities;
1 gas dehydration station;
15 gas heaters;
communication system and fibre-optic data acquisition system;
1 bi-directional fiscal metering system.
2. Bilciuresti Storage
Bilciuresti Storage facility is located in Dambovita County, approximately 40 km W-NW of Bucharest.
The fixed assets contributing to the storage process are as follows:
61 wells of which 57 injection/withdrawal wells, 3 piezometric wells, 1 waste water injection well;
surface infrastructure includes:
Butimanu gas compressor station;
6 gas dehydration stations;
26.5 km collecting pipelines for 57 injection/withdrawal wells;
Page 36 of 80
2020 Consolidated Board of Directors’ Report
50 gas heaters;
24 separators;
14 technological gas metering facilities;
37.5 km collecting pipelines;
bi-directional fiscal metering system;
waste water injection station.
3. Ghercesti Storage
Ghercesti Storage facility is located in Dolj County, near Craiova.
The fixed assets contributing to the storage process are as follows:
85 wells;
surface infrastructure includes:
135.7 km collecting pipelines for 79 injection/withdrawal wells;
22.6 km collecting pipelines;
13 separators;
12 technological gas metering facilities;
1 gas dehydration station;
communication system and fibre-optic data acquisition system;
bi-directional fiscal metering system.
4. Sarmasel Storage
Sarmasel Storage facility is located near Sarmasel, approximately 35 km NW of Tirgu-Mures, 35 km
north of Ludus and 48 km east of Cluj-Napoca.
The fixed assets contributing to the storage process are as follows:
63 wells;
surface infrastructure includes:
Sarmasel gas compressor station;
26.7 km collecting pipeline for 63 wells;
13.8 km collecting pipelines;
59 separators;
3 dehydration stations;
bi-directional fiscal metering system.
5. Urziceni Storage
Urziceni Storage facility is located in Ialomita County approximately 50 km NE of Bucharest.
The fixed assets contributing to the storage process are as follows:
32 wells of which 31 injection/withdrawal wells and 1 piezometric well;
surface infrastructure includes:
Urziceni gas compressor station;
19.5 km of collecting pipelines for 32 wells;
3.3 km of collecting pipelines;
6 technological gas metering facilities;
31 gas heaters;
1 gas dehydration station;
optic fibre data acquisition system;
bi-directional fiscal metering system.
Page 37 of 80
2020 Consolidated Board of Directors’ Report
Well workover, recompletions and well production tests represent all the services performed with
workover rigs, as well as equipment for specific support operations such as: cement plug drilling
installations, mud tank equipped with agitator, sand control-sand blender, DST- cased hole testing of
productive layers, shale shaker, mud pumps.
Special Well Operations are performed with the following equipment: cementing unit, slickline,
wireline, coiled tubing unit, liquid nitrogen converter, liquid nitrogen tank truck, cement container, filter
unit, equipment for discharge and measurement with two-phase separation, equipment for discharge and
measurement with three-phase separation, equipment for tubing investigation, echometer, tubing
cutting, packer assembling device, hydraulic packer recovery tool, well fire-fighting equipment.
Future well workover and special well operations are required in order to stop production decline, taking
into consideration the continuous need for such works and the large number of works performed in the
past.
On December 31, 2020, the car fleet of STTM consists of 721 motor vehicles as follows:
Passenger carriers: cars 92, minibuses 16, buses 2 and large buses 2;
passengers and goods utility cars - 226 are < than 3.5 t and 29 are > than 3.5 t;
vehicles for goods transportation: dumpers 22, cesspit emptier 42, platform trucks 28, tank trucks
3;
vehicles for heavy transportation: truck-tractors 3 and semitrailer trucks 17;
lifting and handling machinery: auto cranes 25 and hook and ladder trucks 5;
other special vehicles: mobile laboratory for equipment testing and checking 1;
heavy machinery: bulldozers 8, caterpillar shovels 2, wheel loaders 15, motor grader 3, compactor
3, front end loaders 12;
other machinery: tractor trucks 70, fork lift trucks 11, motorized cleaning vehicles 3;
other vehicles: trailers for heavy transportations, trailers and semitrailers for tractors 81.
Considering the dynamics of gas exploration – production activity performed by Romgaz, in order to
achieve the activities on medium term (approx. 5 years) the perspective to develop STTM must be
achieved by permanently determining methods and measures resulting from the provision of quality
services and in terms of economic efficiency.
Out of the 721 vehicles existing in STTM fleet on December 31, 2020:
58 motor vehicles were approved for decommissioning;
22 motor vehicles are proposed for decommissioning.
CTE Iernut is an important junction point of the NPG (the National Power Grid), located in the centre
of the country, in Mures County, on the left bank of Mures River, between towns Iernut and Cuci, with
gas and industrial water sources and power discharge facilities.
CTE Iernut is operated by Romgaz through Sucursala de Productie Energie Electrica (SPEE).
CTE Iernut has an installed power of 800 MW and comprises 6 power units: 4 100 MW units of
Czechoslovakian manufacturing and 2 200 MW units of Soviet manufacturing. These units were
commissioned between 1963 and 1967. Taking in consideration the start of investment works at the 430
MW CCGT Power Plant and the necessity to ensure appropriate conditions for the execution of works
at the related cooling circuit, unit 6 of 200 MW was decommissioned in November 2019.
Page 38 of 80
2020 Consolidated Board of Directors’ Report
In January 2019, units 2 and 3 of 100 MW were decommissioned followed by unit 1 (of 100 MW) in
November 2019; all units were decommissioned on the grounds of non-compliance with the
environmental conditions. Thus, at the end of 2020, SPEE Iernut has license to commercially operate 2
power units: 1 100 MW unit and 1 200 MW unit.
The development of investment works carried out in the new part of CTE Iernut allowed both
commercially licensed units to function (Unit 4 of 100 MW and Unit 5 of 200 MW) in the first part of
2020.
The “Development of CTE Iernut though the construction of a new combined cycle gas turbine power
plant “ project is currently under development, with the following characteristics:
Installed power: 430 MW;
efficiency: 56.42 % at nominal load and under normal temperature and pressure conditions;
Maximum NOx emissions: 50 mg/Ncm and CO: 100mg/Ncm.
Cojocna Project is an outcome of the pressing need of finding ways to experimentally produce from a
series of wells resulted from exploratory drilling, in order to determine, as detailed as possible, the
production potential of such area. The wells are located far from each other and from the National
Transmission System (NTS).
Therefore, gas from wells Palatca 1, Vaida 2 is used as fuel gas for 2 x 1.5 MW electric power generation
units.
Investments play an important part in maintaining the production decline, which is achieved by
discovering new reserves, by improving the current recovery rate, and by rehabilitation, development
and modernization of existing facilities.
In 2020, Romgaz Group invested RON 637.3 million, that is 28.5% (RON 254.3 million) lower than
2019 investments, representing approx. 71% of the scheduled investments.
The Company invested during 2016-2020 RON 3.89 billion, as follows:
Year
2016
2017
2018
2019
2020
Total
Value (thousand
RON)
497,716
781,768
1,150,349
866,218
601,800
3,897,851
For 2020, Romgaz forecasted the achievement of an investment program with a total budget of RON
853.00 million, based mostly on objectives aiming to compensate the natural decline and electricity
generation, such as:
Continue geological research works by performing new exploration drillings for the discovery of
new gas reserves;
development of production potential by adding new facilities on existing structures (drilling of
production wells, surface facilities, dehydration stations, compressor stations, compression in gas
fields), improving the performance of facilities and equipment to increase operational safety,
reducing energy consumption and optimise gas field production;
modernization and upgrading of constructions, installations and equipment, as well as acquisition
of new equipment and performing facilities specific to the core activity;
procurement of specific machinery to ensure the technological transportation and maintenance of
core activities and maintaining road infrastructure in gas fields in optimal conditions.
In absolute figures, the investment costs for 2020 reached RON 601,800 thousand, representing:
69.5% as compared to the achievements in 2019;
Page 39 of 80
2020 Consolidated Board of Directors’ Report
70.6% of the scheduled level.
The investments were financed as follows:
-
-
from own sources and sources obtained from the National Investment Plan (approx. 22% from
eligible expenses) for “The Development of CTE Iernut Power Plant by Building a New Combined
Cycle Gas Turbine Power Plant”; and
exclusively from own sources for the other approved investment objectives.
As regards physical achievements for the analysed period, the objectives initiated in the previous year
were achieved, and preparatory works were carried out (design, obtaining lands, approvals, agreements,
authorizations/permits, acquisitions). The Company started the works for part of the new objectives and
performed modernisation works and repairs that can be capitalized at the producing wells.
The value of fixed assets commissioned during the reporting period was RON 333.74 million.
The table below shows the investments made in 2020, as compared to those scheduled and accomplished
in 2019, the table is similar to Annex 4 to the Income and Expenditure Budget:
Item
no.
Investment Chapter
2019
2020
*RON thousand*
%
0
1.
1
Investments in progress – total, out of which:
1.1 Natural gas exploration, production works
1.2 Maintaining UGS capacity
1.3 Environmental protection works
2.
New investments – total, out of which:
2.1 Natural gas exploration, production works
2.2 Maintaining UGS capacity
2.3 Environmental protection works
Investment in existing tangible assets
Equipment (other acquisitions of tangible
assets)
Other
investments
software, financial assets etc.)
(studies,
licenses,
3.
4.
5.
*
Program
3
Achieved
4
2
547,104
545,917
0
1,187
88,797
88,444
0
353
188,138
39,903
309,797
308,942
0
855
139,171
132,840
0
6,331
249,548
124,930
’20/’19
5=4/2x100
44.02
240,843
203,990
37.37
0
0.0
853
71.86
105,196
118.47
105,000
0
118.72
0.00
196
55.52
206,677
109.85
77,270
193.64
2,276
29,554
7,814
343.32
TOTAL
866,218
853,000
601,800
69.47
The table below shows the achieved investments according to Romgaz Investment Program for 2020:
*RON thousand*
Investment Chapter
Program
2020
1
I. Geological exploration works to discover new gas reserves
2
198,220
%
Achieved on
December 31,
2020
3
159,479
4=3/2x100
80.46%
II. Exploitation drilling works, putting into production of
wells, infrastructure and utilities and electricity generation
IV. Environmental protection works
V. Retrofitting and revamping of installation and equipment
VI. Independent equipment and installations
VII. Expenses related to studies and projects
TOTAL
243,562
149,511
61.39%
7,186
249,548
124,930
29,554
853,000
1,049
206,677
77,270
7,814
601,800
14.60%
82.82%
61.85%
26.44%
70.55%
Page 40 of 80
2020 Consolidated Board of Directors’ Report
The chart below shows the structure of investments for 2020:
34,57%
0,18%
24,34%
12,93%
1,31%
I. Geological exploration for the discovery of new
natural gas reserves
II. Gas field production, infrastructure and utilities,
electricity generation
IV. Environmental protection
V. Retrofitting and revamping of installations and
equipment
VI. Independent equipment and installations
VII. Consultancy, studies and projects, software and
licenses
26,68%
A summary of outcomes show that, to a large extent, investments were completed:
Main Physical Objectives
Planned
Results
Item
No.
1.
Drilling, exploration
16 wells
2.
Drilling design
19 wells
3.
4.
Development drilling
Construction of surface
facilities – at shut-in wells
5.
Well recompletion operations,
reactivation and capitalizable
repairs
6.
Electricity generation
7.
Partnerships/Associations
4 wells
4 surface facilities under
construction – for
putting into production 6
wells;
13 new surface facilities
– for bringing into
production shut-in wells;
Budget to prepare 48
surface facilities –for
putting into production
of wells;
Works at approx. 160
wells, correlated with the
annual program agreed
by ANRM
Continuing works at
CTE Iernut
Raffles Energy SRL:
- land preparation and
obtaining authorisations
for well 1 Voitinel;
- acquisition of generator
for well 1 Voitinel;
- surface facilities;
9 wells: completed;
4 wells: in progress;
4 wells drilling works procurement in
progress;
18 wells with completed technical design,
in the process of obtaining approvals,
lands and organization of drilling
procurement procedure
12 wells design or design acquisition in
progress
1 completed well
8 surface facilities completed for putting
into production 10 wells;
6 surface facilities under construction for
putting into production 5 wells;
15 surface facilities for connecting 19
wells, pending land/permits, agreements,
authorisations;
Technical design is currently prepared for
surface facilities to connect 15 wells
In EIII-1 Brodina block – Bilca
In 2020 works were performed for 168
wells (94 wells at Medias Branch and 74
wells at Tg. Mureş Branch), works
performed in-house by S.I.R.C.O.S.S.
Continuing the performance of the
execution contract
-
gas area
Through Bilca E III-1 Group processing
facilities only the gas processing activity
was carried out, processed gas almost
entirely coming from Suceava block.
-
for well 1 Lilieci;
Generator operating mode at Lilieci was
established at 12h/day, out of which 5
In Bacau Block– power generator
Page 41 of 80
2020 Consolidated Board of Directors’ Report
Item
No.
Main Physical Objectives
Planned
Results
In EIII-1 Brodina Block- Non-
hours between 7:00-12:00 and 7 hours
between 15:00 – 22:00. Time intervals
correspond to the maximum prices for
electricity capitalization through sale on
PZU platform. In 2020 the generator
functioned according to the forecasted
program with small interruptions due to
maintenance.
-
Bilca Area - Well 1 Voitinel
Preparation of a solution study regarding
connection to the medium voltage system
was launched and the Certificate of
Urbanism was obtained. The contract for
technical surface installation design was
signed.
In the last quarter of 2019 drilling of well
Trinity 1-X was completed in 30 EX
Trident Block, while in the first quarter of
2020 the results of drilling continued to be
analysed based on production tests and
well investigations in order to make a
decision on future operations in said block.
Titleholders of Petroleum Agreement
(Lukoil and Romgaz) requested ANRM to
suspend the agreement for 8 months.
ANRM ‘s reply provides that suspension is
not possible but a possible extension of
this agreement was analysed. Thus, the
OCM representative of the association
confirmed that no new drilling campaign
was carried out in 2020.
The Building Permit was obtained for well
122 Balta Albă ;
- for well 117 Frasin-Brazi – well
workover performed in February 2020
(up-hole recompletion to Da II c1, interval
: 1585-1586.5=1.5 m, with a positive
result, well in experimental production
since February 19, 2020);
- For well 210 Bibești – well workover
carried out in January 2020 (up-hole
recompletion to Me VII b1b2c East-
complex VII b1(L#28), drilled interval:
1212-1213= 1 m, with a positive result;
well in production since January 25, 2020)
- considering the opposition of institutions
and population to drilling wells in the area
of interest analysis were performed in
order to withdraw from this association.
Page 42 of 80
Lukoil:
- continuing drilling of
Trinity 1X exploration
well in 30EX Trident
Block
Amromco:
- drilling wells;
- surface facilities;
- well recompletion
operations;
- well abandonment
expenses
Slovakia:
- By means of
Resolution No. 2 / March
25, 2020 of the Ordinary
General Meeting of
Shareholder Romgaz
withdrawal from
Slovakia Association
was approved (Svidnik
block); the budget was
approved only for
January-April 2020.
2020 Consolidated Board of Directors’ Report
Development of CTE Iernut
One of Romgaz main strategic directions, provided in “The Development Strategy for 2015-2025”, is
consolidation of the company’s position on the energy supply markets. In this case, in the field of
electricity generation, Romgaz proposed to have “a more efficient activity by making investments to
increase the efficiency of the Thermoelectric Plant (CTE) Iernut to a minimum of 55%, complying with
the environmental requirements (NOx, CO2) and increasing the exploitation safety”.
Therefore, a very important objective is the “The Development of CTE Iernut by building a new
combined cycle gas turbine power plant”, with a deadline for completion the end of 2020.
In 2020 performance of works continued (sewage and fire-fighting water networks; gas compressor
casings and a series of equipment was delivered (automation system, software and instrumentation;
cabinets for the new 6 kV station equipment; manual valves for all circuits; roof panels; front panels;
connecting pipes from gas compressors to cooling system; telephone and telecommunication systems
etc.).
For this year the followings are planned: delivery of equipment for commissioning and endurance tests
(Diesel units; rainwater pumps; isolating valves for drained water circuit rainwater and wastewater
pumping; medium and low voltage transformers, gas compressor electric station etc.), completion of
remaining works, performing technological tests and commissioning.
Works performance deadline was 36 months but it was successively changed, as follows:
Addendum No.10/13384/January 23, 2020 extended the dead-line to 40 months, with
commissioning on May 26, 2020;
Addendum No.15/May 26, 2020 extended the deadline to 47 months, with commissioning on
December 26, 2020.
On December 3rd and 17th, 2020 negotiations took place between Romgaz and the Consortium
representatives regarding extension of deadline and costs relating to completion of the Plant.
On December 22, 2020, the Consortium sent a letter requesting an extension of the dead-line and
significant additional costs.
Under these circumstances, Romgaz Board of Directors consistent with Romgaz executive management,
by Resolution No. 56 of December 23, 2020: ,,does not agree to amend the Works Contract concluded
between SNGN ROMGAZ SA and the general contractor DURO FULGUERA SA and ROMELECTRO
SA Consortium, for the development of CTE Iernut, as regards amendment of the dead-line and
adjustment of the contract price, as well as amendment of any other provision that would result in the
amendment of the two previously mentioned contractual elements”.
Asa a result, on December 30, 2020, Romgaz informs the Consortium on the decision regarding the non-
extension of the dead-line and non-acceptance of additional costs, “delay penalties will be charged
pursuant to the Contract starting with December 27, 2020 and until effective fulfilment of obligations
…”.
The main reasons causing delays in meeting the objectives included in the 2020 investment program,
with a direct impact on the achievements were the following:
-
-
drilling works were not completed on time due to difficulties encountered during drilling of
scheduled wells;
the occurrence of CORONAVIRUS (COVID-19) pandemic which generated delays of 3-4 months
in the achievement of investment objectives, delays in performance of the activity of branches in
relation to various institutions granting approvals as well as decrease in gas sales and implicitly of
proceeds;
- Failure to perform a new drilling campaign within the partnership with Lukoil as a result of
suspending the petroleum agreement for a period of 8 months;
- Delays in delivery of fixed assets by contractors (suppliers) generated by the SARS COV 2
pandemic;
- Extended periods of carrying out acquisition procedures;
Page 43 of 80
2020 Consolidated Board of Directors’ Report
- Extended periods for carrying out redesign activities, especially for the acquisition of drilling works;
- Obtaining the approvals and agreements issued by competent authorities (mainly from the
Environment and Romanain Waters Authorities ) after extremely long periods exceeding the legal
terms;
- Restarting certain acquisition procedures because of non-compliant or inacceptable tenders
exceeding the estimated values or the absence of tenders;
-
Impossibility to conclude land renting/purchase contracts due to numerous legislative amendments
as well as due to the absence of ownership deeds;
- Limited competition between domestic suppliers;
- Lack of Romanian producers on the market;
- Difficulties in obtaining lands (lack of ownership deeds and/or refusal of the owners to rent or sell
lands) in order to carry out modernization, recompletion and reactivation works at planned wells.
Investment objectives that were not achieved or that were delayed during 2020 will continue to be
fulfilled in 2021.
In 2020, Depogaz Subsidiary had an approved investment program of RON 42,168 thousand and
achieved investments of RON 35,447.33 thousand, representing 84% as follows:
Description
Program
Results
Gas fields and UGSs exploitation, infrastructure and utilities in fields
and underground storages
Underground gas storage activities
2.
3. Modernisation and upgrading of installations and equipment, surface
facilities, utilities
Independent equipment and machines
Costs with consultancy, studies and projects, software, licences and
patents etc.
TOTAL
4.
5.
*
300
1,100
163.4
256.9
31,730
29,921.0
3,131
5,907
1,973.4
3,762.7
42,168
35,447.4
Item
No.
1.
The investments were financed entirely from own sources.
For the reporting period, fixed assets were commissioned in amount of RON 27,263.3 thousand.
The main objectives recording achievements in 2020 were:
Modernisation of wells: RON 24,031,703.70. Works were required due to the low performance of
wells in the injection/withdrawal process affecting the daily injection capacity and especially the
daily withdrawal capacity. Moreover, operating safety will be improved by installing safety valves.
These works are required both for improving storage performances and by the provisions of safety
reports drawn up in accordance with Law No. 59/2016;
Oil separator discharge automation: RON 470,478.08. the work is necessary to provide safety
conditions for the operating personnel while discharging oil separators and to prevent oil from
leaking to the reservoir;
Feasibility study for Sărmășel underground storage: RON 2,818,334.08. The study aims at
developing the underground storage in Sarmasel from 900 million cm/cycle to approximately 1,550
million cm/cycle (an increase by 650 million cm/cycle), increasing the injection capacity by 4
million cm/day, to a total of 10 million cm/day, increasing the withdrawal capacity by 4 million
cm/day, to a total of 12 million cm/day;
Modernisation of electric engines control system: RON 400.27 thousand. Works to optimize the
control system of electric engines driving compressors (MCC1 and MCC2 UCM Resita –Butimanu
Compressor Station;
Triethylene glycol dehydration station, Group 145 Bilciuresti: RON 1,770 thousand. Works began
at this dehydration station which will provide conditions to increase the daily gas delivery capacity
Page 44 of 80
2020 Consolidated Board of Directors’ Report
of the underground storage to 20 million cm/day. Works were fully contracted and will be completed
in 2021.
Page 45 of 80
2020 Consolidated Board of Directors’ Report
V. SECURITIES MARKET
Government Decision No. 831/201013 approved “the sale by secondary initial public offering of shares
representing 15% of S.N.G.N. Romgaz S.A. share capital by the Ministry of Economy, Trade and
Business Environment, through the Office Ownership and Privatization in Industry”.
On November 12, 2013, the company was listed on Bucharest Stock Exchange (BVB) and on London
Stock Exchange (LSE). As of this date, the shares of the company have been traded on the regulated
market governed by BVB under the symbol “SNG”, and on the regulated market governed by LSE as
GDRs issued by the Bank of New York Mellon (1 GDR = 1 share) under the symbol “SNGR”.
Item
No.
1.
Description
2013
2014
2015
2016
2017
2018
2019
2020
Number
(x1000)
of
shares
385,422.4
385,422.4
385,422.4
385,422.4
385,422.4
385,422.4
385,422.4
385,422.4
2. Market capitalization14
*million RON
*million EUR
3. Maximum price (RON)
4. Minimum price (RON)
Year-end price (RON)
Net profit per
(RON)
share
2.58
13,178
2,952
14,018
3,127
10,483
2,315
35.60
33.80
34.19
36.37
32.41
35.36
3.66
36.55
26.30
27.20
3.10
9,636
2,122
27.55
21.60
25.00
2.66
12,064
2,589
10,714
2,297
14,299
2,992
10,830
2,224
33.95
25.10
31.30
4.81
38.20
27.80
27.80
3.53
38.40
27.35
37.10
2.83
37.70
25.75
28.10
3.24
Gross dividend per share
(RON)
Dividend yield
(7./5.x100)
Exchange rate
(RON/EUR)
2.57
3.15
2.70
5.761)
6.852)
4.172)
1.614)
1.795)
7.5%
8.9%
9.9%
23.04%
21.88%
15.00%
4.34%
5.85%
4.4639
4.4834
4.5285
4.5411
4.6597
4.6639
4.7785
4.8694
5.
6.
7.
8.
9.
1) The gross dividend per share of RON 5.76 is composed of the gross dividend per share for financial year 2016
in amount of RON 2.40 per share, the additional gross dividend of RON 1.42 per share resulted from the
distribution of retained earnings and the additional dividend of RON 1.94 per share assigned under the provisions
of Article II and III of Government Emergency Ordinance No.29/2017, distributed from the company’s reserves,
representing own financing sources.
2) The gross dividend per share of RON 6.85 is composed of the gross dividend per share for financial year 2017
in amount of RON 4.34 per share, the additional gross dividend of RON 0.65 per share resulted from the
distribution of retained earnings and the additional dividend of RON 1.86 per share assigned under the provisions
of Article II and III of Government Emergency Ordinance No. 29/2017, distributed from the company’s reserves
representing own financing sources.
3) The gross dividend per share of 4.17 RON is composed of the gross dividend per share for financial year 2018
in amount of RON 3.15 per share, the additional gross dividend of RON 0.08 per share resulted from the
distribution of retained earnings and the additional dividend of RON 0.94 per share assigned under the provisions
of Article 43 of Government Emergency Ordinance No 114/2018.
4) Proposed dividend of RON 1.61 is composed of the gross dividend per share for financial year 2019, in amount
of 1.39 RON per share and the additional gross dividend of 0.22 RON per share resulted from the distribution of
retained earnings representing the impairment value of fixed assets and the value of fixed assets and abandoned
investment projects in the reporting year that were financed from “the share of expenses necessary for the
development and modernisation of gas production” according to GD No. 168/1998 as subsequently amended and
supplemented.
5) The proposed gross dividend of RON 1.74 is composed of the gross dividend per share for the financial year
2020 in amount of RON 1.63 per share and the additional gross dividend of RON 0.16 per share resulted from the
13 GD No. 831 of August 4, 2010 on the approval of the privatisation strategy by public offering of Societatea
Naţionala de Gaze Naturale “Romgaz” – S.A. Medias and of the mandate of the public institution involved in the
development of such process.
14 Calculated based on the closing price on the last trading day of the year, namely based on the exchange rate
communicated by the National Bank of Romania and valid in the last trading day of the year.
Page 46 of 80
2020 Consolidated Board of Directors’ Report
distribution of retained earnings representing the impairment value of fixed assets and the value of fixed assets
and abandoned investment projects in the reporting year that were financed from “the share of expenses necessary
for the development and modernisation of gas production” according to GD No. 168/1998 as subsequently
amended and supplemented.
In 2020, trading prices of shares and GDRs were negatively influenced partly by the evolution of
COVID-19 pandemic and the decrease in oil price (trend noticeable mostly at the end of Q1 2020) and
partly by the declining financial results recorded in HI and Q3 2020 compared to previous periods.
Thus, in the first two months of 2020, the trading price of Romgaz shares followed a slightly oscillating
trend, increasing in January, up to a maximum of RON 37.70 per share reached on January 17, 2020
(which was also the year peak). Starting with March 2020, pursuant to WHO’s declaration of COVID-
19 pandemic worldwide as well as the decrease in oil price, Romgaz share recorded significant decreases
down to a minimum of RON 25.80 per share on March 23, 2020.
In Q2 2020, share prices progressed positively reaching a maximum of RON 32.40 per share on June
17, 2020 following GMS’ approval of S.N.G.N. ROMGAZ S.A Development/Investment Strategy for
2020-2025.
In H2 2020, shares recorded a decrease in price mainly on 2019 dividend registration date and following
publication of Reports on key operational results for HI 2020 and Q3 2020 which showed a decrease in
gas production and in gas delivered to third parties. Hence the shares reached a minimum threshold of
the year on October 30, 2020.
Romgaz shares on Bucharest Stock Exchange had an annual average price of RON 30.08 and at the end
of 2020 a price of RON 28.10, 23.75% lower than the price at the beginning of the year.
GDRs trading price recorded a similar trend on London Stock Exchange during the analysed period,
recording an annual average price of USD 6.99/GDR. Starting with the first trading day of the year
when GDR was quoted at USD 8.80 (which is also the maximum of the analysed period), its price
dropped significantly especially in the last month of Q1 down to a minimum of USD 5.70/GDR, also
recorded on March 23, 2020 similar to Romgaz share (which is also the minimum of the year).
Moreover, similar to shares, in Q2 2020 and HII 2020, GDRs price followed an oscillating-increasing
trend, reaching USD 7.30/GDR on June 17, 2020 and decreasing thereafter on the above mentioned
dates.
For GDRs, 2020 closed at USD 6.85, 22.16% lower than the maximum price recorded in the first day
of the year.
Since the listing day up to present, Romgaz has been considered an attractive company for investors and
holds a significant position in the top of local issuers, being included in BVB indices by the end of 2020,
as follows:
- Third place by market capitalization, in the top of Premium BVB issuers. With a market
capitalization amounting to RON 10,830.36 million, respectively EUR 2,224.16 million on
December 31 2020, Romgaz is the third largest listed company in Romania, being preceded by
Banca Transilvania with a capitalization of RON 12,909.82 million, respectively EUR 2,651.21
million and OMV Petrom with a capitalization of RON 20,590.13 million, respectively EUR
4,228.47 million;
- Fourth place as regards the total amount of transactions in 2020 in the top of local issuers in the
main segment of BVB (RON 976.98 million), ranked after Banca Transilvania, Fondul
Proprietatea and OMV Petrom;
- Weight of 8.73% and 8.55% in BET index (top 15 issuers) and namely BET-XT index (top 25
issuers), 25.73% in BET-NG index (energy and utilities) and 8.73% in BET-TR index (BET
Total Return).
Performance of Romgaz shares between listing and December 31, 2019, respectively in 2020 compared
to the BET index, is shown below:
Page 47 of 80
2020 Consolidated Board of Directors’ Report
45
40
35
30
April 12, 2013 - September 30, 2020
.
4
1
0
2
0
1
3
2
.
.
4
1
0
2
2
1
0
1
.
5
1
0
2
/
3
/
2
5
1
0
2
/
0
2
/
3
5
1
0
2
/
3
1
/
5
5
1
0
2
/
1
/
7
5
1
0
2
/
7
1
/
8
5
1
0
2
/
2
/
0
1
5
1
0
2
/
8
1
/
1
1
6
1
0
2
/
3
1
/
1
6
1
0
2
/
9
2
/
2
6
1
0
2
/
4
1
/
4
6
1
0
2
/
1
/
6
6
1
0
2
/
9
1
/
7
6
1
0
2
/
5
/
9
6
1
0
2
/
0
2
/
0
1
6
1
0
2
/
8
/
2
1
7
1
0
2
/
0
3
/
1
7
1
0
2
/
6
1
/
3
7
1
0
2
/
4
/
5
7
1
0
2
/
3
2
/
6
7
1
0
2
/
9
/
8
7
1
0
2
/
6
2
/
9
SNG
7
1
0
2
/
0
1
/
1
1
8
1
0
2
/
4
/
1
8
1
0
2
/
1
2
/
2
8
1
0
2
/
2
1
/
4
8
1
0
2
/
1
3
/
5
8
1
0
2
/
8
1
/
7
8
1
0
2
/
4
/
9
8
1
0
2
/
9
1
/
0
1
8
1
0
2
/
6
/
2
1
9
1
0
2
/
9
2
/
1
9
1
0
2
/
5
1
/
3
9
1
0
2
/
6
/
5
9
1
0
2
/
1
2
/
6
9
1
0
2
/
7
/
8
9
1
0
2
/
4
2
/
9
9
1
0
2
/
8
/
1
1
BET
January 3, 2020 - December 30, 2020
e
r
a
h
s
/
N
O
R
25
20
15
.
4
1
0
2
9
0
5
0
.
.
4
1
0
2
7
0
8
1
.
.
4
1
0
2
6
0
2
0
.
4
1
0
2
/
8
/
4
.
4
1
0
2
2
0
0
2
.
.
4
1
0
2
1
0
6
0
.
10
5
0
3
1
0
2
/
2
1
/
1
1
e
r
a
h
s
/
N
O
R
40
35
30
25
20
15
10
5
0
12000
10000
8000
6000
4000
2000
0
9
1
0
2
/
0
3
/
2
1
0
2
0
2
/
9
1
/
2
0
2
0
2
/
6
/
4
0
2
0
2
/
6
2
/
5
0
2
0
2
/
4
1
/
7
0
2
0
2
/
8
2
/
8
0
2
0
2
/
2
/
2
1
0
2
0
2
/
4
1
/
0
1
12000
10000
8000
6000
4000
2000
0
Performance of GDRs traded on London Stock Exchange and RON/USD exchange rate movements are
shown below:
SNG
BET
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00
R
D
G
/
D
S
U
3
1
0
2
/
2
1
/
1
1
.
4
1
0
2
1
0
9
0
.
.
4
1
0
2
2
0
8
2
.
4
1
0
2
/
3
2
/
4
.
4
1
0
2
6
0
9
1
.
4
1
0
2
/
8
/
8
.
4
1
0
2
0
1
2
0
.
.
4
1
0
2
1
1
1
2
.
5,00
4,50
4,00
3,50
3,00
2,50
2,00
1,50
1,00
0,50
0,00
D
S
U
/
N
O
R
5
1
0
2
/
1
2
/
1
5
1
0
2
/
2
1
/
3
5
1
0
2
/
7
/
5
5
1
0
2
/
0
3
/
6
5
1
0
2
/
9
1
/
8
5
1
0
2
/
9
/
0
1
5
1
0
2
/
2
/
2
1
6
1
0
2
/
8
2
/
1
6
1
0
2
/
8
1
/
3
6
1
0
2
/
1
1
/
5
6
1
0
2
/
4
/
7
6
1
0
2
/
4
2
/
8
6
1
0
2
/
4
1
/
0
1
6
1
0
2
/
7
/
2
1
7
1
0
2
/
3
/
2
7
1
0
2
/
7
2
/
3
7
1
0
2
/
2
2
/
5
7
1
0
2
/
4
1
/
7
7
1
0
2
/
5
/
9
7
1
0
2
/
5
2
/
0
1
7
1
0
2
/
8
1
/
2
1
8
1
0
2
/
3
1
/
2
8
1
0
2
/
0
1
/
4
8
1
0
2
/
1
1
/
6
8
1
0
2
/
1
3
/
7
8
1
0
2
/
1
2
/
9
8
1
0
2
/
2
1
/
1
1
9
1
0
2
/
8
/
1
9
1
0
2
/
8
2
/
2
9
1
0
2
/
3
2
/
4
9
1
0
2
/
0
2
/
6
9
1
0
2
/
9
/
8
9
1
0
2
/
2
/
0
1
9
1
0
2
/
1
2
/
1
1
0
2
0
2
/
7
1
/
1
0
2
0
2
/
0
1
/
3
0
2
0
2
/
4
/
5
0
2
0
2
/
5
2
/
6
0
2
0
2
/
4
1
/
8
0
2
0
2
/
5
/
0
1
0
2
0
2
/
4
2
/
1
1
USD/GDR
RON/USD
Page 48 of 80
2020 Consolidated Board of Directors’ Report
The General Meeting of Shareholders determines the value of dividends to be distributed to shareholders
considering the specific legal provisions.
Therefore, Government Ordinance No. 64/200115 approved by Law No. nr.769/2001 as amended and
supplemented, provides at Article 1, par. (1), let. f) that the profit after the deduction of profit tax is
distributed in proportion of minimum 50% as dividends.
By way of derogation from provisions of Law No. 31/1990 providing that the dividends must be paid
no later than six months after the approval of the annual financial statements, the state-owned companies
are required, according to the provisions of Government Ordinance nr.64/2001, to pay the due dividends
to the shareholders within 60 days from the legal deadline for the submission of the annual financial
statements to the competent fiscal authorities.
According to Government Emergency Ordinance No. 29/201716:
“The amounts distributed in the previous years to other reserves under the provisions of Art. 1
par. (1) let. (g) of Government Ordinance No.64/2001 [...], existing at the date of entry into
force of this Emergency Ordinance, can be redistributed as dividends [...]” - Art.II;
“After the approval of the financial statements of 2016, the entities provided in Art. 1, par. (1)
of the Government Ordinance No.64/2001, [...], the retained earnings existing in the balance
account on December 31, can be distributed as dividends” - Art.III par. (1).
The table below shows the status of dividends for years 2018-2020:
Description
2018
2019
Dividends
Gross dividends per share (RON/share)
Dividend distribution rate (%)
Number of shares
1,607,211,408
4.17*)
117.64
620,530,064
1.61**)
56.95
385,422,400
385,422,400
385,422,400
*) The gross dividend per share of RON 4.17 is composed of the gross dividend per share for financial year 2018
in amount of RON 3.15 per share, the additional gross dividend of RON 0.08 per share resulted from the
distribution of retained earnings and the additional dividend of RON 0.94 per share assigned under the provisions
of Article 43 of Government Emergency Ordinance No.114/2018.
**) The gross dividend per share of RON 1.61 is composed of the gross dividend per share for financial year 2019
in amount of RON 1.39 per share and the additional gross dividend of RON 0.22 per share resulted from the
distribution of retained earnings representing the impairment value of fixed assets and the value of fixed assets
and abandoned investment projects in the reporting year that were financed from “the share of expenses necessary
for the development and modernization of gas production” according to GD No.168/1998, as subsequently
amended and supplemented.
***) The proposed gross dividend of RON 1.74 is composed of the gross dividend per share for the financial year
2020 in amount of RON 1.63 per share and the additional gross dividend of RON 0.16 per share resulted from the
distribution of retained earnings representing the impairment value of fixed assets and the value of fixed assets
and abandoned investment projects in the reporting year that were financed from “the share of expenses necessary
for the development and modernisation of gas production” according to GD No. 168/1998 as subsequently
amended and supplemented.
15 Government Ordinance No. 64/August 30, 2001 on distribution of profit in majority state-owned companies as
well as in autonomous regies
16 Government Emergency Ordinance No.29 of March 30, 2017 to amend Art. 1 par. (1) let. g) of Government
Ordinance No. 64/2001 on the distribution of profit in national companies, and trading companies with full or
majority state capital, as well as in autonomous regies, and to amend Art. 1 par. (2) and (3) of Government
Emergency Ordinance no.109/2001 on corporate governance of public enterprises.
Page 49 of 80
2020
Proposal
689,906,096
1.79***)
55.29
2020 Consolidated Board of Directors’ Report
The internal regulation “Dividend Policy” was approved by the company’s Board of Directors in March
2017 and is currently published on the company’s webpage www.romgaz.ro, at “Investor Relations –
Corporate Governance – Reference Documents”.
Page 50 of 80
2020 Consolidated Board of Directors’ Report
VI. COMPANY MANAGEMENT
The selection and appointment of members in the Board of Directors was accomplished in compliance
with the provisions of GEO No.109/2001 on corporate governance of public enterprises, as subsequently
amended and supplemented, approved by Law No.111/2016 and by Enforcement Guidelines (GD No.
722/2016).
The members of the Board of Directors on January 1st, 2020 were as follows:
Item
No
1
Name
Stan-Olteanu Manuela-
Petronela
Position in
the Board
chairperson
2
Jude Aristotel Marius
member
3
Harabor Tudorel
member
4 Marin Marius-Dumitru
member
5
Balazs Botond
member
6
7
Ciobanu Romeo Cristian
member
Jansen Petrus Antonius
Maria
member
Status*)
non-executive
non-
independent
non-executive
non-
independent
non-executive
independent
non-executive
independent
non-executive
non-
independent
non-executive
independent
non-executive
independent
Professional
Qualification
legal adviser General Secretariat of
Institution of
Employment
the Government
MBA legal
adviser
SNGN Romgaz SA
economist
-
PhD engineer MDM Consultancy
Deva
legal adviser SNGN Romgaz SA
PhD engineer Universitatea Tehnica
Iasi
London School of
Business and Finance
economist
*) - members of the Board of Directors submitted the independent statements in compliance with the provisions of
Romgaz Corporate Governance Code.
In 2020, the Board of Directors underwent several changes. Thus, on June 25, 2020, by OGMS
Resolution No. 8/2020, the company shareholders appointed the following persons as interim members
of the Board:
Stan Olteanu Manuela-Petronela
Jude Aristotel Marius
Simescu Nicolae Bogdan
Marin Marius-Dumitru
Botond Balazs.
Thus, beginning with June 26, 2020 the Board of Directors had the following composition:
Item
No.
1
Name
Stan-Olteanu Manuela-
Petronela
Position in
the Board
chairperson
2
Jude Aristotel Marius
member
3
Simescu Nicolae Bogdan
member
4 Marin Marius-Dumitru
member
5
Balazs Botond
member
Status*)
non-executive
non-
independent
non-executive
non-
independent
non-executive
non-
independent
non-executive
independent
non-executive
non-
independent
Professional
Qualification
legal adviser General Secretariat of
Institution of
Employment
the Government
MBA legal
adviser
SNGN Romgaz SA
engineer
SNGN Romgaz SA
PhD engineer MDM Consultancy
Deva
legal adviser SNGN Romgaz SA
Page 51 of 80
2020 Consolidated Board of Directors’ Report
6
7
Ciobanu Romeo Cristian
member
Jansen Petrus Antonius
Maria
member
non-executive
independent
non-executive
independent
PhD engineer Universitatea Tehnica
Iasi
London School of
Business and Finance
economist
*) - members of the Board of Directors submitted the independent statements in compliance with the provisions of
Romgaz Corporate Governance Code.
Company’s shareholders approve by Resolution No. 12 of October 23, 2020, to extend the mandates of
interim board members by two months from the date of their expiration, in compliance with article 641
par. (5) of GEO No. 109/2011.
The Board of Directors gathered on November 3 and acknowledged expiration of the chairperson
mandate of Ms. Stan-Olteanu Manuela-Petronela and appointed Mr. Jude Aristotel Marius as
Chairperson of the Board of Directors.
On December 21, 2020, by OGMS Resolution No. 14/2020, company’s shareholders appointed, for a
4 months mandate, the following persons as interim members of the Board:
Jude Aristotel Marius
Marin Marius-Dumitru
Stan Olteanu Manuela Petronela
Balazs Botond
Simescu Nicolae Bogdan.
Thus, the Board of Directors has the following composition:
Item
no.
1
Name
Jude Aristotel Marius
Position in
the Board
chairman
2 Marin Marius-Dumitru
member
3
Stan-Olteanu Manuela-
Petronela
member
4
Balazs Botond
member
5
6
7
Simescu Nicolae Bogdan
member
Ciobanu Romeo Cristian
member
Jansen Petrus Antonius
Maria
member
Status*)
non-executive
non-
independent
non-executive
independent
non-executive
non-
independent
non-executive
non-
independent
non-executive
non-
independent
non-executive
independent
non-executive
independent
Professional
Qualification
MBA legal
adviser
Institution of
Employment
SNGN Romgaz SA
PhD engineer MDM Consultancy
Deva
legal adviser General Sectretariat of
the Government
legal adviser SNGN Romgaz SA
engineer
SNGN Romgaz SA
PhD engineer Universitatea Tehnica
Iasi
London School of
Business and Finance
economist
*) - members of the Board of Directors submitted the independent statements in compliance with the provisions of
Romgaz Corporate Governance Code.
The Curricula Vitae of the current Board members are to be found on the company’s webpage
www.romgaz.ro, at “Investor Relations – Corporate Governance – Board of Directors”.
According to the information supplied by each director, there is no agreement, understanding or family
relationship between them and another person that contributed to their appointment as directors.
As of December 31, 2020, among the members of the Board Mr. Simescu Nicolae Bogdan – holds 30
shares in the company, representing 0.00000778% of the share capital and Mr. Balazs Botond – holds
11 shares in the company, representing 0.00000285% of the share capital.
Page 52 of 80
2020 Consolidated Board of Directors’ Report
Chief Executive Officer (CEO)
The Board of Directors appointed Mr. Volintiru Adrian Constantin as Chief Executive Officer of the
Company for 4 years by Resolution No. 45 of October 1, 2018.
Deputy Director General
The Board of Directors appointed Mr. Pena Daniel Corneliu as Deputy Director General of the
Company for 2 months (interim mandate) by Resolution No. 32 of August 26, 2020, his appointment
being effective as of August 28, 2020.
By Resolution No. 41 of October 14, 2020 the Board of Directors approved the 120 days extension of
the interim mandate of Mr. Pena Daniel Corneliu as Deputy Director General (by mandate), namely
until February 24, 2021.
Chief Financial Officer (CFO)
The Board of Directors appointed Mr. Bobar Andrei as Chief Financial Officer by Resolution No. 39 of
August 28, 2018, for a limited period, from August 28, 2018 until November 2nd, 2021.
Mr. Bobar Andrei unilaterally terminated the Contract of Mandate by giving Notification no. 28593 on
22 August 2019.
The Board of Directors appointed Mr. Popescu Razvan as interim Chief Financial Officer for 4 months
starting with December 14, 2020, by Resolution No.50 of December 9, 2020.
Other persons discharging managerial responsibilities:
Name
ROMGAZ - headquarters
Tataru Argentina
Chircă Robert Stelian
Grecu Marius Rareş
Paraschiv Nelu
Veza Marius Leonte
Bobar Andrei
Dediu Mihaela Carmen
Boiarciuc Adrian
Lupa Leonard Ionuţ
Chertes Viorel Claudiu
Ciolpan Vasile
Ioo Endre
Toader Mihaela Virginia
-
Mediaş Branch
Totan Constantin Ioan
Achimeţ Teodora Magdalena
Radu Gheorghe Cristian
Man Ioan Mihai
Târgu Mureş Branch
Baciu Marius Tiberiu
Dîmbean Cătălin
Graţian Rusu
Ştefan Ioan
Iernut Branch
Balazs Bela
Haţegan Olimpiu Sorin
Oprea Maria Aurica
Bircea Angela
Position
Deputy Director General
Deputy Director General
Human Resources Director
Director of Drilling Department
Accounting Director
Finance Director
Exploration-Appraisal Director
Information Technology Director
Acquisitions Director
Director of Regulations Department
Energy Trade Director
Legal Department Director
Strategy, International Relations, European Funds Director
HQSE Director
Branch Director
Economic Director
Production Director
Technical Director
Branch Director
Economic Director
Production Director
Technical Director
Branch Director
Economic Director
Trading Director
Technical Director
Page 53 of 80
2020 Consolidated Board of Directors’ Report
Name
SIRCOSS
Rotar Dumitru Gheorghe
Bordeu Viorica
Gheorghiu Sorin
STTM
Alexa Ovidiu
Obreja Dan Nicolae
-
Branch Director
Economic Director
Technical Director
Branch Director
Economic Director
Technical Director
Position
The members of the upper management, except the chief executive officer, deputy chief executive
officer (with interim mandate) and the chief financial officer are employees of the company, having an
individual labour contract for an indefinite period.
The management and operating personnel are employed, promoted and dismissed by the chief executive
officer based on the powers delegated to him by the Board of Directors.
The Board of Directors and the upper management of Depogaz Subsidiary is provided on the website:
https://www.depogazploiesti.ro/ro/despre-noi/conducere.
According to our information, there is no agreement, understanding or family relationship between
the members of the above mentioned upper management and another person that contributed to their
appointment as members of the upper management.
The table below shows the number of Company shares held by the members of the upper management
as of December 31, 2020:
Item
No.
0
1
2
3
4
5
Name
1
Stefan Ioan
Obrejan Dan Nicolae
Dinca Ispasian Ioan
Andrea Nicolae
Balasz Bela Atila
Number of shares held
Weight in the share capital (%)
2
2,945
1,400
1,165
200
38
3
0.00076410
0.00036324
0.00030227
0.00005189
0.00000986
Therewith, from Depogaz upper management the following members hold shares in the Company: Mr.
Carstea Vasile – 412 shares, representing a weight of 0.00010690% in the share capital and Mr.
Vecerdea Dan-Adrian – 45 shares, representing a weight of 0.00001168% in the share capital.
To the best of our knowledge, the persons mentioned at 6.1 and 6.2 above, have not been involved in
litigations or administrative proceedings related to their activity in Romgaz in the last 5 years, nor in
proceedings related to their capacity of fulfilling the duties, except for the litigations arising out of the
application of Decision No.26/2016 of the Court of Accounts – Sibiu Chamber of Accounts, having as
scope the recovery of the amounts paid as regular overtime pay to the managing personnel and litigations
on Labour Law No. 235/102/2020 and 2751/85/2019(*) (see “Litigations” posted on Romgaz website at
www.romgaz.ro - Investor Relations - Annual Reports – 2020).
Page 54 of 80
2020 Consolidated Board of Directors’ Report
VII. CONSOLIDATED FINANCIAL-ACCOUNTING INFORMATION
The consolidated financial statements of the Group have been prepared in accordance with the
provisions of the International Financial Reporting Standards (IFRS) as adopted by the European Union
and the provisions of the Ministry of Finance Order No. 2844/2016. For the purposes of preparing these
consolidated financial statements, the functional currency of the Company is deemed to be the Romanian
Leu (RON). IFRS, as adopted by the EU, differs in certain respects from IFRS as issued by the IASB.
However, the differences have no significant impact on the Group’s consolidated financial statements
for the years presented.
The consolidated financial statements have been prepared on a going concern basis in accordance with
the historical cost convention.
The table below presents a summary of the statement of consolidated financial position as of December
31, 2020:
Indicator
0
31.12.2018
(thousand
RON)
1
31.12.2019
(thousand
RON)
2
31.12.2020
(thousand
RON)
3
Variance
(2020/2021)
4=(3-2)/2*100
ASSETS
Non-current assets
Property, plant and equipment
6,279,748
5,543,177
5,613,122
Other intangible assets
Investments in associates
Deferred tax assets
Other financial assets
Right of use asset
Total non-current assets
Current asset
Inventories
Trade and other receivables
Contract costs
Other financial assets
Other assets
Cash and cash equivalent
Total current assets
TOTAL ASSEST
EQUITY AND LIABILITIES
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Non -current liabilities
Retirement benefit obligation
Provisions
Deferred income
Lease liability
Total non-current liabilities
Current liabilities
4,970
23,298
127,491
9,812
-
9,164
24,772
14,774
26,102
230,947
275,328
5,388
8,590
5,378
7,915
6,445,319
5,822,038
5,942,619
245,992
311,013
244,563
826,046
638,158
592,875
583
312
651
881,245
1,075,224
1,995,523
168,878
566,836
2,689,580
42,485
363,943
2,431,135
68,023
416,913
3,318,548
9,134,899
8,253,173
9,261,167
385,422
385,422
385,422
1,824,999
1,587,409
2,251,909
5,458,196
5,201,222
5,149,919
7,668,617
7,174,053
7,787,250
139,254
510,114
21,128
-
114,876
366,393
21,244
8,285
670,496
510,798
128,690
538,931
136,308
7,845
811,774
1.26%
61.22%
5.37%
19.22%
-0.19%
-7.86%
2.07%
-21.37%
-7.10%
108.65%
85.59%
60.11%
14.55%
36.50%
12.21%
0.00%
41.86%
-0.99%
8.55%
12.03%
47.09%
541.63%
-5.31%
58.92%
Trade payables and other liabilities
186,702
109,910
89,132
-18.90%
Page 55 of 80
2020 Consolidated Board of Directors’ Report
Indicator
0
Contract liabilities
Current tax liabilities
Deferred income
Provisions
Lease liability
Other liabilities
Total current liabilities
TOTAL LIABILITIES
31.12.2018
(thousand
RON)
1
46,381
31.12.2019
(thousand
RON)
2
42,705
31.12.2020
(thousand
RON)
3
81,318
68,001
8,442
93,645
-
392,615
795,786
64,342
3,729
82,701
694
264,241
568,322
1,466,282
1,079,120
59,831
10,899
156,415
767
263,781
662,143
1,473,917
9,261,167
Variance
(2020/2021)
4=(3-2)/2*100
90.42%
-7.01%
192.28%
89.13%
10.52%
-0.17%
16.51%
36.59%
12.21%
TOTAL EQUITY AND LIABILITIES
9,134,899
8,253,173
NON CURRENT ASSETS
The total of non-current assets increased by 2.07% by the end of 2020, compared to the end of 2019,
meaning by RON 120.58 million, from RON 5,822.04 million on December 31, 2019 to RON 5,942.61
million, on December 31, 2020.
In 2020 the Group invested a total of RON 637.25 million, representing 71.19% of the investment
budget.
Of the net increase of RON 69.95 million recorded in non-current assets during 2020 RON 136.04
million relates to the increase of the decommissioning provision. As mentioned above, the increase in
this provision is caused by the decrease of 10-year government bonds yield, this rate being used as a
discount factor.
Investments in associates are accounted for in the consolidated financial statements by the equity method
which implies that the investment is initially recognized as cost and adjusted afterwards, depending on
the post-acquisition modifications, in the apportioned share of the Group in the associate’s net assets in
which the investment had been made. The Group’s profit or loss includes its share of the associate’s
profit or loss.
Deferred tax asset
Deferred tax asset is based on the temporary differences between the accounting value and the tax value
of balance sheet items. These temporary differences may be taxable, meaning they will result in taxable
values when determining the taxable result of future periods, or deductible, meaning they will result in
values that are deductible when determining the taxable result of future periods.
The increase in the deferred tax asset is mainly caused by the increase in the decommissioning provision
(which generated an increase in the deferred tax asset of RON 28.28 million) and the bankruptcy of one
of the Group’s clients (which generated an increase in the deferred tax asset of RON 36.2 million).
CURRENT ASSETS
Current assets increased by RON 887.4 million on December 31 2020, due to the increase of cash, cash
equivalents and other financial assets by RON 973.3 million; this increase is due to a lower level of
investments, cost reductions and lower dividends distributed to shareholders.
Inventories
Inventories decreased at the end of 2020, as compared to December 31, 2019 by 21.37% as a result of
the decrease of gas stock in storages (367.8 million m3 were extracted, while only 225.9 million m3 were
injected in storages).
Trade and other receivables
Page 56 of 80
2020 Consolidated Board of Directors’ Report
Trade receivables decreased in 2020 as compared to December 31, 2019 by 7.10% as a result of lower
prices charged for gas deliveries in 2020 compared to 2019.
NON-CURRENT LIABILITIES
At the end of 2020, non-current liabilities increased by 58.92% as compared to December 31, 2019,
mainly due to the increase of the decommissioning provision for wells with 45.99% (RON 176.7 million,
of which RON 4.2 million related to the short-term portion) and from RON 115 million received from
the National Investment Plan (“NIP”) for Iernut Power Plant construction – the NIP amounts received
are a government grant and will be recorded as income as the plant depreciates.
CURRENT LIABILITIES
Current liabilities increased with RON 93.82 million from RON 568.32 million recorded on December
31, 2019 to RON 662.14 million at the end of 2020.
Trade payables and other liabilities
Trade payables decreased compared to December 31, 2019 by 18.90% due to lower payables to non-
current assets suppliers (-RON 25.6 million) because of the lower level of investments in 2020.
Contract liabilities
These liabilities represent advances received from customers on December 31, 2020 for 2021 deliveries.
Other liabilities
Other liabilities recorded a small decrease of 0.17% as compared to December 31, 2019. Most of these
liabilities are liabilities to state budget that are due in January 2021, according to regulations, and
liabilities to employees.
Provisions
On December 31, 2020, current provisions recorded an increase of 89.13% as compared to December
31, 2019. This increase is due, mainly, to the provision for greenhouse gas emission certificates (RON
81.2 million at December 31, 2020, the equivalent of 525,067 certificates compared to RON 23.4 million
at December 31, 2019, the equivalent of 181,277 certificates).
The Group did not issue bonds or other debt instruments in financial year 2020.
The Group profit and loss account summary for the period January 1 – December 31, 2020, as
compared to the similar period of the years 2018 and 2019, is shown below:
Indicator
0
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Impairment losses on trade
Changes in inventories
Raw materials and consumables used
Depreciation, amortization and impairment
expenses
Year 2018
(thousand
RON)
1
5,004,197
(245,020)
53,279
(102,989)
(19,941)
(32,180)
(75,460)
(708,142)
Year 2019*)
(thousand
RON)
2
5,080,482
(107,800)
38,124
7,519
(81,221)
Year 2020
(thousand
RON)
3
4,074,893
(18,617)
47,845
(6,534)
17,551
80,008
(76,048)
(1,451,766)
(16,151)
(58,282)
(672,063)
Variance
(2020/2019)
4=(3-2)/2*100
-19.79%
-82.73%
25.50%
-186.90%
-121.61%
-120.19%
-23.36%
-53.71%
Page 57 of 80
2020 Consolidated Board of Directors’ Report
Employee benefit expense
Finance cost
Exploration expense
Share of associates’ result
Other expenses
Other income
Profit before tax
Income tax expense
Profit for the period
(621,330)
(29,724)
(247,123)
622
(1,409,447)
18,442
1,585,184
(219,016)
(670,408)
(24,740)
(1,636)
1,474
(1,551,642)
32,834
1,275,180
(185,557)
1,366,168
1,089,623
(767,251)
(17,000)
(26,509)
1,330
(1,158,143)
25,439
1,426,508
(178,604)
1,247,904
14.45%
-31.29%
1,520.35%
-9.77%
-25.36%
-22.52%
11.87%
-3.75%
14.53%
*) – restated: Since 2020, the Group presents the release to income of the impairment for non-current assets written-off as a
decrease of the expense generated by the write-off of the respective assets, as “other gains and losses” or as “exploration
expense”. Previously, the release to income was presented as “depreciation, amortization and impairment”. For comparability
purposes, 2019 was restated.
Revenue
In 2020, Romgaz records consolidated revenues of RON 4.1 billion as compared to RON 5.1 billion
achieved in 2019.
The decrease resides in a 24.48% fall of revenue from sales of gas produced by Romgaz and of gas
purchased for resale, as well as gas from joint ventures. On the other hand, consolidated revenue from
storage services increased by 13.32% and revenue from electricity sales increased by 29.90%.
Please note that consolidated storage revenues include revenue from services invoiced by Romgaz; non-
consolidated storage revenue are down 3.87% compared to 2019.
Cost of Commodities Sold
In 2020, cost of commodities sold decreased by 82.73% as compared to the previous year, mainly due
to the fact that no gas was imported in 2020.
Investment Income
Investment income represent income from placing Group’s liquidities in bank deposits or in state bonds.
Other Gains and Losses
The largest items recorded in Other Gains and Losses are losses from write-offs of non-current assets
(RON 65.7 million) mainly representing abandoned gas wells as dry holes.
Net Impairment losses on trade receivables
The Group records impairments for trade receivables depending on non-collection risks. In 2020, the
Group recorded a net gain from impairment of trade receivables of RON 17.6 million. Non-collection
risk estimated in 2019 was reduced for one of the clients undergoing an insolvency procedure due to
timely collection of receivables, which led to a decrease of the impairment recorded for this client.
Changes in Inventory
During 2020 the gas quantity withdrawn from storages was higher than the quantity injected in storages,
thus generating negative changes in inventory (loss), unlike the year 2019 when the injected quantity
was higher than the withdrawn quantity generating a favourable change in inventories (income). The
quantity of gas injected in storage by the Company in 2020 as compared to 2019 decreased by 57.1%
while the withdrawn quantity increased by 42.7%.
Raw materials and consumables used
The decrease of raw materials and consumables is due to a volume of technological consumption 19.3%
lower (- 40.1% in terms of value) and 31.5% lower fuel expenses during 2020 as compared to 2019.
Depreciation, amortization and impairment
The depreciation, amortization and impairment of non-current assets expenses dropped by 53.71% due
to a reduction by 13.9% of depreciation expenses and a 75.97% decrease in fixed assets impairment.
Page 58 of 80
2020 Consolidated Board of Directors’ Report
Due to existing market conditions the Group identified impairment indicators for assets used in the gas
segment. The Group ran an impairment test which did not result in any additional impairment. In 2020,
the Group only recorded impairments for specific assets, for abandoned wells as dry holes.
Exploration expenses
Exploration expenses recorded in 2020 of RON 26.51 million increased by 1,520.45% compared to the
previous year.
The increase is due to higher exploration expenses (seismic works) by RON 24.2 million.
Exploration expenses also include the costs of wells written off. In 2020 the cost of these
decommissioned investments was of RON 836 thousand, compared to RON 23.1 million in 2019.
Other expenses
In 2020 other expenses decreased by 25.36% as compared to 2019. The decrease of RON 393.49 million
is mainly due to lower windfall tax and lower royalties.
In 2020, other expenses include net expenses with provisions of RON 90.7 million compared to 2019
when there was a net income from provisions of RON 57.2 million. The most significant provision
expenses are:
- CO2 certificates used in 2020 that will be acquired in 2021 (the net expense of RON 57.8 million
is influenced by the use in 2020 of the provision recorded for this purpose in 2019);
-
increase in the decommissioning provision (net expense of RON 24.3 million), following a
lower discount rate used in the computation (4.41% in 2019; 2.97% in 2020); this rate considers
the yield of 10-year government bonds.
Other income
Other income decreased by 22.52% in the year ended December 31, 2020 as compared to the same
period of 2019, due to the decrease of income from penalties for uncollected amounts according to
contract terms or incompliance by suppliers with execution terms.
Statements of cash flows recorded in the period 2018 – 2020 are shown in the table below:
INDICATOR
2018
*thousand RON*
2020
2019
restated*)
Cash flow from operating activities
Net profit for the year
Adjustments for:
Income tax expense
Share from associates’ result
Interest expense
Unwinding of decommissioning provision
Interest revenue
Net loss on disposal of non- current assets
Change in decommissioning provision recognized in profit or
loss, other than unwinding
Change in other provisions
Net impairment of exploration assets
Exploration projects written-off
Net impairment of non-current assets
Depreciation and amortization
Amortization of contract costs
Impairment of investments in associates
Net impairment of other financial assets
(Gains)/(Losses)on financial investments evaluated at fair value
through profit or loss
Losses from disposal of other financial investments
1,366,168
1,089,623
1,247,904
219,016
(622)
-
29,724
(53,279)
62,961
(34,390)
30,152
(118,809)
149,620
235,661
591,290
1,291
-
-
40,782
-
185,557
(1,474)
543
24,197
(38,124)
(2,542)
(51,760)
(5,402)
231,278
123
699,531
520,957
651
-
-
4,424
-
178,604
(1,330)
593
16,407
(47,845)
7
24,273
66,467
97,695
836
125,997
448,371
795
-
-
10
-
Page 59 of 80
2020 Consolidated Board of Directors’ Report
INDICATOR
Losses from trade receivables and other receivables
Other gains and losses
Net impairment of inventories
Income from liabilities written off
Income from subsidies
Cash generated from operations before movement in working
capital
Movements of working capital
(Increase)/Decrease in inventories
(Increase)/Decrease in trade and other receivables
(Increase)/Decrease in trade and other liabilities
Cash generated from operational activities
Interest paid
Income tax paid
Net cash generated by operating activities
Cash flows from investing activities
Bank deposits set up and acquisition of state bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Acquisition of non-current assets
Acquisition of exploration assets
Proceeds from disposal of associates
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Subsidies received
Repayment of lease liability
Subsidies reimbursed
Net cash used in financing activities
Net Increase/(Decrease) in net cash and cash equivalents
Net Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2018
2019
restated*)
20,048
-
(2,052)
(58)
(269)
67,297
(52)
5,125
(89)
(81)
2020
(19,700)
-
8,427
(368)
(7)
2,537,234
2,729,782
2,147,136
143,114
(8,156)
(194,681)
2,477,511
-
(334,324)
2,143,187
-
1,917,569
49,338
961
(948,588)
(205,371)
-
813,909
(38,428)
116,143
(78,115)
2,729,382
-
(297,059)
2,432,323
58,516
38,311
17,600
2,261,563
(3)
(224,796)
2,036,764
(2,591,658)
2,387,686
43,470
1,305
(694,349)
(173,563)
-
(1,027,109)
(2,964,757)
2,060,925
38,601
1,733
(547,215)
(66,516)
-
(1,477,229)
(2,638,535)
(1,607,246)
(620,346)
21,108
-
-
(2,617,427)
339,669
227,167
566,836
-
(861)
-
(1,608,107)
(202,893)
566,836
363,943
115,027
(1,196)
(50)
(506,565)
52,970
363,943
416,913
*) see the comment in the statement of consolidated comprehensive income.
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2020 Consolidated Board of Directors’ Report
VIII. CORPORATE GOVERNANCE
Corporate governance accommodates continuously to the requirements of a modern economy, to
increasing globalization of social life and to investors and interested parties need for information on
companies business.
As a national company Romgaz has to comply with GEO No. 109 of November 30, 2011 on public
companies corporate governance, as amended and supplemented (the “Ordinance”), approved by Law
111/2016 and Government Decision no. 722 of September 28, 2016 on Methodological Norms for
establishing the financial and nonfinancial performance criteria and variable component of remuneration
of Board members, or if applicable, of the supervisory board members, and of managers and members
of the directorate.
The Ordinance sets up a number of principles and provisions to ensure their application.
Ordinance provisions are observed by the company, and are included in the Company’s Articles of
Incorporation, as amended and approved by the company’s shareholders in the following resolutions no.
19 of October 18, 2013; no. 5 of July 30, 2014, no. 8 of October 29, 2015, no.9 of October 28, 2016 and
no.4 of August 9, 2017 (latest update of the Articles of Incorporation).
The updated Company’s Articles of Incorporation is posted on the webpage www.romgaz.ro, at
“Investor Relations – Corporate Governance - Reference Documents”.
Since November 12, 2013, Romgaz shares have been traded on the regulated market governed by BVB,
at category I, under the symbol “SNG”, as well as on London Stock Exchange (where GDRs are traded)
under the symbol “SNGR”.
On January 5, 2015, after the Financial Supervisory Authority approved the proposals to amend BVB’s
regulations, Romgaz was admitted into the PREMIUM category of BVB regulated market.
As issuer of securities traded on the regulated market, Romgaz has to fully comply with the corporate
governance standards provided by applicable national regulations, namely the Corporate Governance
Code of BVB, posted on the internet webpage www.bvb.ro, at “Investor Relations – Regulations - BVB
Regulations”.
The Corporate Governance system was and will be continuously improved according to rules and
recommendations applicable to Companies listed on Bucharest Stock Exchange and on London Stock
Exchange.
Some of the already implemented measures include:
drafting a new Corporate Governance Code, in accordance with the new Corporate Governance
Code of BVB applicable since January 4, 2016 – the document was approved by Romgaz Board of
Directors by Resolution no.2/January 28, 2016. The Corporate Governance Code was updated and
shall be submitted for approval of the Board of Directors.
The Company’s Articles of Incorporation is posted on the webpage www.romgaz.ro, at “Investor
Relations – Corporate Governance – Reference Documents”.
Board of Directors approval and update of the Internal Rules for the advisory committees during the
meetings held on March 24, 2016 (for all committees) and March 23, 2017 (update of the Internal
Rules of the Strategy Committee) and May 14, 2018 (update of the Internal Rules of the Audit
Committee). The Internal Rules of the Nomination and Remuneration Committee was updated to
include all legal amendments on corporate governance (Law No. 111/2016 and GD No. 722/2016)
and approved by the Board of Directors on August 28, 2018;
Update of the Terms of Reference of the Board of Directors to include the latest legal changes on
corporate governance. The Terms of Reference were approved by the Board of Directors on March
23, 2017 and updated subsequently in January 2018 and in February 2019;
Approval of Romgaz Policy related to remuneration and the Policy related to the assessment of
Board members on March 12, 2019; as a consequence, the Romgaz remuneration policy will be
reviewed and summited for the approval of the Ordinary General Meeting of Shareholders;
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2020 Consolidated Board of Directors’ Report
Approval of Romgaz Policy related to transactions with affiliates and the draft statement of Board
members’ commitment to develop and implement the internal management control system and the
risk management policy on March 20, 2019;
Draft/update a series of internal regulations/policies in compliance with BVB Corporate Governance
Code;
Include in the Board of Directors’ Report a chapter dedicated to corporate governance referring,
among others, to : the applicable Corporate Governance Code, the duties of the executive
management and of the three advisory committees of the Board of Directors (Nomination and
Remuneration Committee and Audit Committee and the Strategy Committee), aspects related to
remuneration of members of the Board and of managers, measures to improve the corporate
governance, aspects related to internal control and risk management system and aspects related to
social responsibility;
Include in the Board of Directors’ Report a section referring to compliance with the provisions of
BVB Corporate Governance Code (Annex 1);
Diversify communication ways with shareholders and investors by posting on the website press
releases addressed to market players, half year and quarterly financial statements, annual reports,
procedures to follow for access and participation to GMS, and by setting up of an “Infoline” for
shareholders/investors to respond to their requirements and/or questions;
Establish a specialized department dedicated to investor and shareholder relations;
Starting the procedures necessary for adopting and implementing the National Anticorruption
Strategy. Therefore, a Commission has been established, responsible with the implementation of the
strategy provisions; the Chief Executive Officer adopted the Statement of Adherence to the National
Anticorruption Strategy and Integrity Plan for 2017, 2018 and 2019, documents published on the
internet website at “Investor Relations – Corporate Governance – Transparency”.
Among the measures to be implemented, we mention:
the review of the remuneration policy for the members of the Board and the executive
management following the legislative changes on issuers of financial instruments and
market operations and submission for the approval of the Board of Directors;
Conclusion of professional liability insurance for members of the board and directors and
appointment of a person to monitor these contracts.
The shareholders structure is presented within Chapter II “Parent Company at a Glance”
Romgaz respects and protects the rights and legitimate interests of the shareholders. The company
undertakes all necessary efforts to facilitate the exercitation of shareholders’ rights in relation with the
company under the law and in compliance with the Articles of Incorporation.
A separate document on the rules and procedures of the GMS setting the framework for the way GMS
is organized and carried out was drafted and is about to be submitted for the approval of the Board of
Directors in the following period.
The General Meeting of Shareholders is convened by the Board of Directors, whenever necessary, in
accordance with the legal provisions. The convening notices and afterwards, the GMS resolutions, are
sent to Bucharest Stock Exchange, London Stock Exchange and to the Financial Supervisory Authority
in compliance with the regulations of the capital market and are published on the company’s website at
“Investor Relations – General Meeting of Shareholders”.
The Ordinary General Meeting of Shareholders has the following main competencies:
a)
to approve the company’s strategic objectives;
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2020 Consolidated Board of Directors’ Report
b) to discuss, approve or amend, as the case may be, the annual financial statements of the company
based on the reports submitted by the Board of Directors and the financial auditor, and to set
the dividend;
to discuss, approve or request, as the case may be, the addition or review of the company’s
management plan, under legal provisions;
c)
d) to set the income and expenditure budget for the following financial year;
e)
to appoint and revoke Board members and to set their remuneration;
f)
to make an opinion on the governance of the Board of Directors;
g) to appoint and to dismiss the financial auditor and to set the minimum term of the financial audit
contract;
h) to approve contracting bank loans, whose value exceeds, individually or cumulated with other
i)
bank loans in progress over a financial year, EUR 100 million, equivalent in RON;
to approve the documents for establishing guarantees, other than guarantees for the company’s
non-current assets, with individual or cumulated value with other established guarantees other
than guarantees in progress for the company’s non-current assets over a financial year of EUR
50 million, equivalent in RON.
The Extraordinary General Meeting of Shareholders has the following main competencies:
to change company’s legal form;
a)
b) to move the headquarters;
c)
d) to establish companies, as well as conclude or amend incorporation documents of the companies
to change the Company’s scope of activity;
where Romgaz is partner;
to conclude or amend joint venture contracts where the company is contracting party;
to increase the share capital;
e)
f)
g) to reduce the share capital or to restore it by issuing new shares;
h) to merge with other companies or to spin-off the company;
i)
j)
k) to convert one category of bonds into another one or in shares;
l)
m) to conclude the documents related to the acquisition of non-current assets whose value exceeds,
separately or cumulatively, during a financial year, 20% of the total non-current assets of the
company, except for receivables;
the anticipated winding up of the company;
to convert shares from a category into the other;
to issue bonds;
n) to conclude the documents related to disposal, exchange and set up of guaranties referring to
non-current assets whose value exceeds, separately or cumulatively, during a financial year,
20% of the total non-current assets, except for receivables;
o) to conclude the documents related to rental of tangible assets to the same contractors or to
persons involved or acting together, for a period longer than 1 (one) year, whose value exceeds,
separately or cumulatively, 20% of the total non - current assets, except for receivables at the
document conclusion date;
p) any other change in the articles of incorporation or any other resolution that requires the
approval of the extraordinary general meeting of shareholders.
Romgaz is a joint-stock company governed under an one-tier system.
The Board of Directors consists of 7 (seven) members elected by the general meeting of shareholders,
in compliance with legal applicable provisions and the provisions of the Articles of Incorporation, one
of its members is appointed Chairman of the Board.
Board of Directors composition complies with the legal criteria/conditions on the share of non-executive
and independent members, the studies and competencies, experience and gender diversity (criteria
detailed in the Board of Directors Terms of Reference).
Board of Directors componence on December 31, 2020 is presented in Chapter VI “Company
management”. According to the independency declarations sent to the company, three board members
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2020 Consolidated Board of Directors’ Report
declared to be independent and four as non-independent. The independence of Board members is
determined based on the criteria detailed in Romgaz Corporate Governance Code (art.6).
Aspects on board members’ rights, obligations and competencies, as well as aspects related to Board
Meetings are detailed in the Articles of Incorporation and in the Board of Directors Terms of Reference.
Until December 31, 2020, the Board of Directors did not make a self- assessment for 2020.
In its activity, the Board of Directors is supported by three advisory committees, namely: the nomination
and remuneration committee, the audit committee and the strategy committee.
The Audit Committee has legal competencies provided in Article 65 of Law No. 162/210717 consisting
mainly in monitoring the financial reporting process, the internal control systems, the internal audit and
risk management systems within the company, as well as in controlling the statutory audit activity
related to annual financial statements and managing the relationship with the external auditor.
The Nomination and Remuneration committee has, basically, the competence to set the procedures for
selecting the candidates for the board member and manager positions, and to make proposals for the
position as board member and to get involved in the selection and recruitment procedure of managers,
and to make proposals for their remunerations. During the financial year, the committee has also the
obligation to elaborate an annual report on the remuneration and other benefits awarded to directors
and managers.
The main scope of the strategy committee is to coordinate drafting/updating and monitoring of the
company’s development strategies, correlated with the national and European energy strategy, to analyse
the implementation of such strategies and the measures needed to reach the objectives set, and to monitor
the business diversification projects by carrying out some investment objectives.
The detailed presentation of duties and responsibilities of each advisory committee can be found in their
respective Internal Rules published on the company’s webpage www.romgaz.ro at “Investor Relations
– Corporate Governance – Reference Documents”.
On December 31, 2020, the advisory committees’ structure was the following:
I) Nomination and Remuneration Committee:
Ciobanu Romeo Cristian (chairman)
Balazs Botond
Jansen Petrus Antonius Maria
Jude Aristotel Marius
Marin Marius Dumitru
II) Audit Committee
Marin Marius Dumitru (chairman)
Balazs Botond
Ciobanu Romeo Cristian
Jansen Petrus Antonius Maria
Jude Aristotel Marius
III) Strategy Committee
Jansen Petrus Antonius Maria (chairman)
Balazs Botond
17 Law No. 162 of July 15, 2017 on the statutory audit of annual financial statements and of annual consolidated
financial statements and of amending pieces of legislation
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2020 Consolidated Board of Directors’ Report
Jude Aristotel Marius
Ciobanu Romeo Cristian
Simescu Nicolae Bogdan
Information regarding the Board of Directors’ meetings and the Advisory Committees meetings held in
2020
The Board of Directors held in 2020 a number of 37 meetings, in compliance with the legal and statutory
provisions, out of which:
26 meetings with physical attendance of board members;
3 conference-call meetings; and
8 electronic vote meetings.
The attendance at the Board of Directors’ meetings:
First and last name
Number of meetings
during the mandate
P
PA
NP
No. %
No. %
No. %
Stan Manuela Petronela
Marin Marius
Ciobanu Romeo Cristian
Jansen Petrus Antonius Maria
Jude Aristotel Marius
Balazs Botond
Simescu Bogdan
Hărăbor Tudorel
37
37
37
37
37
37
20
15
37
14
36
34
37
37
37
14
100.0
93.33
97.29
91.98
100.0
100.0
100.0
93.33
1
3
2.71
8.11
1
6.67
where:
P = participate
PA = power of attorney
NP = did not participate
Board members’ attendance at Advisory Committees’ meetings:
Nomination and Remuneration Committee: 9 meetings
First name and last name
Balazs Botond
Stan-Olteanu Manuela-Petronela
Ciobanu Romeo Cristian
Jansen Petrus Antonius Maria
Simescu Bogdan
Hărăbor Tudorel
physical attendance
9
9
8
8
8
2
Audit committee: 21 meetings
First name and last name
Jansen Petrus Antonius Maria
Marin Marius Dumitru
Jude Aristotel Marius
Ciobanu Romeo Cristian
Balazs Botond
Hărăbor Tudorel
physical attendance
21
21
21
16
16
9
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2020 Consolidated Board of Directors’ Report
Strategy Committee: 6 meetings
First name and last name
physical attendance
Jude Aristotel Marius
Balazs Botond
Harabor Tudorel
Marin Marius
Stan Olteanu Manuela Petronela
6
6
4
3
3
In compliance with the company’s Articles of Incorporation “the Board of Directors shall assign, totally
or part of, the management competences of the Company to one or more managers, appointing one of
them as Chief Executive Officer” Article 24, paragraph (1), “manager” meaning “the person to whom
the Board of Directors delegated authority to manage the company” Article 24, paragraph (12).
The Board of Directors decided by Resolution No. 45 of October 1, 2018 to appoint Mr. Volintiru Adrian
Constantin as Chief Executive Officer for a four years mandate.
By Resolution no. 49 from October 9, 2018, the Board of Directors established the duties delegated to
the Chief Executive Officer as follows:
A. Duties related to internal management:
a) Carries out the Company’s main activity and development directions established by the Board of
Directors;
b) Carries out the Company’s’ development strategies and/or policies approved by the Board of
Directors;
c) Monitors the way the accounting and financial control policies are carried out and approves the
financial statements and financial planning reports;
d) Concludes legal acts on behalf, in the interest and on the account of the Company, according to Law
No. 31/1990. For contracts with an equivalent value between 1,000,000 Euro and 10,000,000 Euro
it is required to inform the Board of Directors within 30 days. Contracts with a value higher or equal
with the equivalent of 10,000,000 Euro are approved by the Board of Directors;
e) Organizes the Company’s’ personnel selection, hires, awards, sanctions and fires, as the case may
be, the Company’s’ personnel in compliance with the provisions of labour legislation and the
provisions of the labour contract;
f) appoints, suspends and/or revokes the units’ managers and executive directors hired by the company
and negotiates their base salaries.
g) Submits for approval of the Board of Directors the Organisation and Operation Rules of the
Company and the organizational chart;
h) Approves the Company’s’ organizational and functional chart as well as the other internal
documents which regulate the Company’s’ activity at employees level;
i) Negotiates the Collective Labour Agreement (CLA) and the individual labour agreements in
compliance with the provisions of the CLA – salary and social expenses and fund limits provided
in the income and expenditures budget approved by the Company’s General Meeting of
Shareholders;
j) Establishes the personnel’s competencies, attributions, duties and responsibilities on departments,
except for executive board members and managers that signed a contract of mandate;
k) Analyses business opportunities with internal and external partners in compliance with the
Company’s interest;
l) Ensures efficiency of the internal control system and the management system in compliance with
the legislation in force;
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2020 Consolidated Board of Directors’ Report
m) Organizes and manages the Company’s activities, coordinates and controls them in order to ensure
the lawful usage of financial, material and human resources, in accordance with the accounting
system approved by the Company’s Board of Directors and the applicable legal provisions and the
provisions of the Contract of Mandate;
n) Represents the Company with full and discretionary rights in general meetings and boards of
directors of third companies where the Company is partner/shareholder, excepting naming and
revoking the members of their boards of directors which is possible through special mandate from
the Board of Directors.
o) May delegate the power to represent the company for specific documents by its decisions with the
prior approval of the Board of Directors;
p) Ensures and promotes the Company’s image;
q) Fulfils any other duties provided in the applicable legal frame in compliance with the law.
B. Responsibilities and duties related to representation of the company:
represents the company when concluding/issuing legal documents;
represents the company in pre-contractual, administrative and/legal procedures;
fulfils any accessory duties, namely any acts and special operations necessary and useful for
achieving the above mentioned duties.
By Resolution No. 32/ August 26, 2020, The Board of Directors appointed Mr. Pena Daniel Corneliu as
Deputy Chief Executive Officer with an interim mandate of two months, from August 26 until October
26, 2020. By Resolution no. 41, October 14, 2020, the Board of Directors approved the extension by
120 days of the interim mandate, until February 24, 2021, respectively.
By Resolution No. 32/ August 26, 2020, the Board of Directors delegated to the deputy chief executive
officer the following duties:
a) Endorses legal acts on behalf, in the interest and on the account of the Company, in compliance with
the Articles of Incorporation, Board of Directors’ Resolutions, General Meeting of Shareholders’
Resolutions, company’s scope of activity and objectives;
b) Monitors the way the accounting and financial control policies are carried out and approves the
financial statements and financial planning reports;
c) Endorses the Company’s’ organizational and functional chart and any amendments to it as well as
the other internal documents which regulate the Company’s’ activity at employees level;
d) Negotiates together with the Chief Executive Officer the Collective Labour Agreement
e) Endorses the personnel’s competencies, attributions, duties and responsibilities on departments,
except for executive board members and managers that signed a contract of mandate;
f) Endorses the documents required and useful for the personnel selection, hiring, awarding,
sanctioning and dismissal, as the case may be, in order to ensure an optimal performance of the
activity, in compliance with the provisions of labour legislation and labour contract;
g) Endorses the appointment, suspension and/or dismissal of the units’ managers and executive
directors hired by the company;
h) Endorses the Organisation and Operating Regulation, the organizational structure
i) prospects, together with the Chief Executive Officer, the business opportunities with partners inside
and outside the country for the Company’s interest;
j) Ensures efficiency of the internal control system and the management system in compliance with
legal provisions and corporate regulation in force;
k) ensures and promote the company’s image;
l) any other duties delegated by the Board of Directors, except those which may not be delegated by
the Board of Directors, in accordance with the law and the Articles of Incorporation;
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2020 Consolidated Board of Directors’ Report
The Chief Executive Officer and the Deputy Chief Executive Officer have both the obligation to inform
periodically the Board of Directors on the manner of achieving the assigned duties, as well as the right
to request and to obtain instructions on the manner of exercising the assigned duties.
Internal audit activity is organised and conducted in compliance with:
Law 672/2002 on the internal public audit, as subsequently amended and supplemented;
Own methodological norms, issued under GD No. 1086/2013 on approving the General Norms
on exercising the internal public audit;
Order of the Minister of Public Finance No. 252/2004, Code of ethics of the internal auditor, as
subsequently amended and supplemented;
SNGN Romgaz SA Internal Audit Charter.
Therefore, in compliance with Law 672/2002 the internal public audit aims at improving management
by the following:
-
-
assurance activities, that represent fair examinations of evidence, carried out in order to make
an independent assessment of risk management, control and governance processes, and
advisory activities for adding value and improving governance processes without undertaking
management responsibilities;
With respect to the internal public audit, the audit types are those:
-
-
that represent a detailed assessment of management and internal control systems in order to
establish if these are economically, effective and efficiently operational to identify deficiencies
and to make recommendations for corrective actions – system audit;
that examine if the criteria set for implementing the objectives and duties of the company are
correct in order to evaluate the results and assesses if the results are consistent with the
objectives – performance audit.
In order to achieve its objectives, the Internal Public Audit Department has among its main duties to
draft the Annual Internal Public Audit Plan.
The annual plan is prepared based on the risk assessment associated to different activities,
programs/projects or operations, as well as by taking into account the suggestions of the Chief Executive
Officer, Board of Directors and the recommendations of the Romanian Court of Accounts.
Moreover, it performs internal public audit activities to assess if the financial and control management
systems are transparent and consistent with the criteria of lawfulness, regularity, economy, efficiency
and effectiveness.
Romgaz sets and maintains permanently and operational the internal audit function which is carried out
independently from other functions and activities.
According to the effective laws, the Internal Audit Department is directly subordinated to the Chief
Executive Officer but reports also to the Board of Directors through the Audit Committee.
Internal auditing mission, attributions and responsibilities are defined in the Internal Audit Charter
approved by the Chief Executive Officer.
The charter sets at least:
the position of the internal audit within the company;
the manner for accessing company’s documents in order to fulfil audit missions and defines their
scope of activity.
The internal audit activity is independent and objective ensuring the company on the control level of
operations; it is carried out in compliance with the drafted and approved procedures.
In order to observe and to meet the above mentioned conditions and subject to the Activity Plan of the
Internal Public Audit Department 2020 No. 40819/November 26, 2019, endorsed by the Audit
Committee and approved by the Chief Executive Officer in 2020, the audit mission consisted of 7
assurance audit missions for confirming regularity/conformity of procedures and operations with the
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2020 Consolidated Board of Directors’ Report
regulatory framework, by comparing reality with the established reference system in order to provide
identify the obstacles that hinder the normal course of processes, to establish causes, determine the
consequences and to provide solutions for eliminating such obstacles.
In 2020, the material interim changes were transposed in the annual plan by including ad-hoc missions
requested and disposed; these missions were approved by the upper management.
Therefore, in 2020, 14 audit missions have been performed, as follows:
5 missions planned in accordance with 2020 annual plan
1 advisory missions
7 ad-hoc missions
1 audit mission planned for 2019, started on December 2019 and completed on February 2020.
The missions have been performed in the following fields:
information technology;
public procurement;
human resources;
specific functions;
management internal control system
The level of fulfilment of the internal audit plan for 2020 was of 75% due to accomplishment of seven
ad-hoc audit missions, both by the upper management and Board of Directors and due to requirement to
comply with health measures generated by the COVID -19 pandemic.
The missions analysed the actions with financial effects on the budget evaluating observance of
applicable principles, procedures and methodological rules. The missions evaluated the degree of
effectiveness and fulfilment of policies, programs and actions by functional units, aiming at their
continuous improvement.
The table below shows the assurance level for each audit mission carried out in 2020, as follows:
Item
No.
Audited activity
Global
Assessment
Result
1. Verify the manner of managing spare parts that damaged during
the warranty.
2.
3.
4.
Analyse the situation related to ANRE fines in 2018 and 2019,
namely the measures undertaken by the executive management
Assess the activity related to acquisition of lands to ensure
building and operability of objectives
Substantiate the procurement of “Ford” auto vehicles started in
2017 and analyse the status of spare parts stock related to the fleet
car replaced through this procurement
5. Analyze the causes leading to the necessity of concluding a
contract with third parties to perform the general overhaul/
maintenance at dehydration stations operated by Târgu Mures
Branch
6.
7.
Assess the status regarding the steps undertaken to supervise and
ensure the integrity of gathering pipe 10 ¾” N-V Târgu Mureș
related to wells cluster 26 and 162.
Verify the compliance with the fulfilment of tasks in relation to
drafting SNGN Romgaz SA Board of Directors’ Report and
Report of Managers with a mandate from SNGN Romgaz SA
Mission
Type
Ad-hoc
Ad-hoc
Planned
Ad-hoc
Ad-hoc
Ad-hoc
Ad-hoc
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2020 Consolidated Board of Directors’ Report
Item
No.
8.
9.
10
11
12
Audited activity
Global
Assessment
Result
Assess the activity related to carrying out direct procurements
Analyse the addendums to contract related to the “The Development of
CTE Iernut Power Plant by building a new combined cycle CCTG
power plant” concluded in 2020.
Manner of organizing
management
the activity of human resources
Assess the procurement contracts in the IT sector
Assess the activity related to well overhaul and repair
13 Verify the settlement of drilling works carried out due to the
occurrence of some events or accidents 2019-2020.
14
Verify the activity related to the organization and management of
decisions record – advisory mission
Mission
Type
Planned
Ad-hoc
Planned
Planned
Planned
Planned
Planned
High assurance level
Medium assurance level
Low assurance level
Internal auditing is conducted permanently in order to provide an independent evaluation of operations,
control and its management processes, it evaluates the potential risk exposure of various business
segments (asset security, compliance with laws and contracts, integrity of operational and financial
information etc.) makes recommendation for improving the systems, controls and procedures to ensure
efficiency of operations and observes the proposed corrective actions and the results.
As a general note, we state that during the reported period, Romgaz focused on compliance of internal
integrity rules and on a continuous self-assessment of the implementation level of internal anti-
corruption measures, as described in the National Anti-Corruption Strategy 2016 – 2020 and other
secondary laws (Order No.600/2018 on approving the Internal Management Control Code of public
companies).
Company’s Policies and Objectives related to Risk Management
In accordance with the Corporate Governance Code, an important role played by the company’s
management is to ensure that an efficient risk management system is in place.
One major concern of the management is to raise the awareness on the objectives of the risk management
process and on the necessity to be directly involved in the risk management process, as well as on the
alignment to the latest practices in the field by complying with the applicable law, standards and norms
related to such process.
The Board of Directors approved in March 2019 the draft Statement of BoD commitment for developing
and implementing the internal management control system and the risk management policy.
The company’s risk management system is implemented in accordance with:
Government Ordinance no.119/1999 (Article 4) on the internal control and the preventive
financial control;
Law no. 234 of December 7, 2010 amending and supplementing Government Ordinance No.
119/1999;
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2020 Consolidated Board of Directors’ Report
International Standard ISO 31010:2011: “Risk management – risk assessment techniques”;
International Standard ISO 31000:2018: “Risk management: Guidelines”;
Romanian Standard SR Guidelines 73:2010: “Risk management-Vocabulary”.
General Secretariat of Government No.600 of April 20, 2018 for approval of Public Entities
Internal Management Control Code.
Consequently, in compliance with the risk management process, the company systematically analyses,
at least once a year, the risks related to its objectives and activities and prepares adequate remedy plans
in order to mitigate the possible consequences of such risks, and appoints employees responsible for
implementing those plans.
Moreover, the company’s risk management system is an integral part of the decision making process by
setting the requirement to use a risk management analysis when drafting any document (technical
projects, execution projects).
The main benefits of the risk management process are the improvement of the company’s performance
by identifying, analysing, assessing and managing all risks within the company, in order to minimize
the negative risk consequences or to increase the positive risk consequences, as the case may be.
A risk management department has been established for an efficient assessment of the company’s risks.
One major task of this department is drafting the company’s documents in terms of risk management:
Risk Register, Risk Report, Measure Implementation Plan and the Company’s Risk Profile.
Three role levels are set up in the risk management system:
base level, represented by those who identify risks and by the risk managers (head of each
organizational unit) who are responsible for preparing risk management documents related to
the level of the unit they manage;
middle level, represented by the company’s middle management forming together with the heads
of the organizational units the Risk Management Commission that facilitates and coordinates
the management process within the respective direction/department/division;
high level, represented by the executive upper management through the Monitoring
Commission that approves the company’s risk appetite and risk profile in accordance with its
objectives.
General scope of the risk management activity:
1. setting the general uniform framework for risks identification, analysis and management;
2. providing the appropriate tool for a controlled and efficient risk management;
3. describing the manner in which control measures are set and implemented in order to prevent
the occurrence of negative risks.
Some of the analysed risk categories are: financial risks, market risks, occupational health and safety
risks, personnel risks, risks related to IT systems, legal and regulatory risks. All risks are analysed from
following perspectives:
the specificity of the risk;
causes of risk occurrence;
consequences further to risk materialization;
occurrence probabilities;
risk materialization impact;
risk exposure;
risk response strategy;
recommended control (remedy) measures;
residual risks remaining after remedy of initial risks.
Risk exposure
Page 71 of 80
2020 Consolidated Board of Directors’ Report
The Company is exposed to a variety of financial risks: market risk (which includes foreign currency
risk, inflation risk, interest rate risk), credit risk, liquidity risk. The Company’s risk management
program is focused on the financial markets’ unpredictability and seeks to minimize, within some limits,
the potential negative consequences on the Company’s financial performance. However, this approach
does not prevent the losses that occur outside these limits in case of significant variations on the market.
The Company does not use derivatives to cover the exposure to certain risks.
The Company faces foreign exchange risks following the exposure to different foreign currencies. The
foreign exchange risk occurs from future transactions and from recorded receivables and payables.
The financial assets exposing the Group to a potential credit risk comprise mainly trade receivables. The
Group’s policies provide for gas sales to clients with low credit risk. Moreover, sales have to be secured
either by advanced payments or by letters of bank guarantee. The net value of the receivables following
the impairment of doubtful debts, represents the maximum value exposed to credit risk. The Group has
a credit risk concentration related to its four largest clients representing together 85.41% from the net
receivables balance on December 31, 2020 (the largest four clients: 85.10% on December 31, 2019).
Despite the above mentioned policies, the Group is compelled by court order to supply gas to insolvent
clients considered “captive” according to insolvency laws. In respect of these clients, the Group makes
estimates of the lifetime expected credit losses and records appropriate impairment losses.
Even though the collection of receivables might be affected by economic factors, the management
believes that there is no significant risk of loss for the Group, besides the impairment of doubtful debts,
already established.
The responsibility for the liquidity risk resides to the company’s management establishing a suitable
framework for liquidity risk management for the Company’s short, medium and long-term financing
and for complying with the provisions for liquidity risk management. The Company manages liquidity
risk by maintaining an adequate level of the reserves by continuous monitoring of the forecasts and
present cash flow and by connecting the profile of financial assets maturity with those of the financial
debts.
The risk management system evaluates continuously the commercial risks faced by the Company. A
new vision is about to be implemented in this respect so that the market risks impact, quantitative as
well as price risks, to which the Company is naturally exposed in its trading activity, will be
systematically and continuously evaluated and quantified, evaluated and minimized/remedied, as the
case may be.
The main risks identified are quantitative (volatility of demand/offer ratio on the market) with
consequences in underselling and overselling, as well as price risks, inherent on a volatile market,
emerging under the aspect of liquidity but also influenced by a multitude of internal factors
(regulating/political) and also external factors related to import sources and weather conditions.
The risks related to the evolution of macroeconomic environment (macroeconomic indicators) providing
indications on natural gas industrial consumption become important taking into account the current
situation generated by COVID 19.
Among the opportunities offered, due to their lack of adjustment to market condition, sale tactic and
strategy represent a risk which must be regularly assessed and mitigated by specific marketing actions
to optimize the sales result.
Currently, one of the main risk factors with direct consequences on the company’s commercial outcome
is the political and regulations risk. The Company uses all available instruments in order to
minimize/remedy this risk by means of dialogue with the competent authorities, in the phase of drafting
the regulating documents as well as afterwards in the phase of enforcement. The regulation framework
suffered in the previous years major changes of the regulatory framework in order to adopt a European
market model regarding the Network Code. However, the Group is exposed to unfavourable changes of
the primary and/or secondary laws. For example, the successive modifications of Law 123/2012, of the
Energy and Gas Law, especially the obligation to sell gas at a capped price (GEO No.114/2018 and
GEO No. 19/2019), as well as cancelling such provisions by GEO No.1/2020. Other amendments to
Law 123/2012 regulate trading on the competitive market, especially provisions related to trading
obligations. The amendments that were made or are going to be made to the primary laws, as well as
Page 72 of 80
2020 Consolidated Board of Directors’ Report
secondary rules of ANRE may lead to major changes to the company’s commercial activities and may
influence the financial exposure caused by legislative volatility.
Taking into account the latest commercial aspects, quantitative risks were generated by weather
conditions, recording unusual high temperatures that led to lower demands. These risks may spread over
longer periods causing a decrease of the market demand considering that large quantities of stored gas
cannot be sold.
External risk factors (the context of the regional and even of the global energy market) may provide
supply alternatives for the Romanian market, generating a quantitative commercial risk.
The current interconnection technical conditions demand to take into consideration the regional sources
(status of neighbouring storages), new LNG projects (Krk-Croaia, Alexandroupolis-Greece), so as to
avoid to become a competition for the company’s production.
In order to reduce the risk, the company assesses commercial risks, monitors and remedies, as the case
may be, by using specific commercial means (sale alternatives, management of quantities, storage
management, sale strategies).
Internal control
In Romgaz, the internal control system operates in a continuously changing control environment that
requires the adjustment of control at the level of every activity, differentially and integrative, established
in relation to the company’s interests.
Internal control is a process carried out by personnel at all levels, Board of Directors, upper management,
entire personnel.
Romgaz management internal control system is developed and implemented in order to reach the
following objectives:
-
compliance with legal regulation, with internal rules, with contracts and administrative and
jurisdictional decisions applicable to the company’s activity;
fulfilling Romgaz objectives under effectiveness, economy and efficiency conditions;
protect Romgaz patrimony against losses due to errors, waste of money, fraud or abuse;
-
-
- development and maintenance of collection, storage, processing, updating and distribution of
financial and management data and information, as well as of proper systems/procedures to
inform the public.
The internal/management control system is drafted, implemented, developed and assessed in compliance
with the provisions set in Government Ordinance No. 119/1999 and with the standards provided by
SGG18 Order No. 600/2018.
2020 internal management control system development/enhancement actions:
to raise awareness on employees, the company made available a Guideline on internal rules related
to each internal control standard and the actions necessary to be undertaken by every head of
organization unit in order to implement the standards;
in order to raise awareness on the regulations with respect to internal management control system,
the Internal management control Office initiated between January 1st, 2020 and March 06, 2020 an
action for implementing the internal management control system and the anticorruption strategy19;
Involvement in the implementation of SR ISO 37001standard - Anti bribery management system at
the level of Romgaz, an action coordinated by the ethic counsellor.
Participation in the working groups meetings on “IMCS enhancement project”
Reanalysing the internal processes and drafting the proposal to update them in “IMCS enhancement
project”
18 General Secretariat of Government
19 National Anticorruption Strategy
Page 73 of 80
2020 Consolidated Board of Directors’ Report
Analysing and identifying the sensitive job positions at every organisational unit in compliance with
Procedure PS–16 Inventory of sensitive job positions Ed3/revised/05.12.2018. The risks identified
following the analysis were centralized and submitted to the monitoring committee, which,
following the debates and the final vote, drafted the Inventory of sensitive job positions and the List
of persons in these positions;
Drafting and updating Romgaz Risk Register.
According to the self-assessment results for the implementation of Internal/Management Control
System, in 2020 (in relation to the 16 internal/management control standards provided in Order no.
600/2018), the Internal/Management Control System is compliant.
Non-achievements:
the action of methodological guidance initiated every year by the Management Internal Control
Office was made online. The Company tried to comply with all the measures to prevent the spread
of COVID-19.
Lack of professional training courses organized by external lecturers for all employees belonging to
the executive management which would have raised the awareness of the importance of
management internal control, but which could not be carried out due to health situation (COVID-
19).
In order to improve the activity, starting with July 1st, 2020 the upper management appointed an ethic
counsellor.
Romgaz’s Code of Conduct which was first prepared in 2013 suffered many amendments, the latest was
on November 2020, resulting the Ethics and Integrity Code of SNGN Romgaz SA- November 2020,
approved by the Board of Directors Resolution No. 48/ November 20, 2020.
By this Ethics and Integrity Code, the company comply with the provisions of Standard 1 of Internal
Management Control mentioning the importance of knowledge and support of ethical values and
integrity.
The Ethics and Integrity Code protects the company’s integrity and brings the ethical values both to the
fore of professional and people to people relations within the company and the external relations with
the clients, suppliers, investors, partners, public authorities and with the community as well.
The code regulates the following important aspects: safety and health at the work place, fight against
corruption, avoidance of conflict of interest and incompatibility, protection of the company’s image,
the
efficient use of resources, confidentiality of
authorities/business partners/community, transparency etc.
information, harassment, relations with
The Ethics and Integrity Code was brought to the attention of Romgaz personnel by training sessions
and, in order to assess the implementation of employee’s professional conduct rules, actions will be
carried out annually.
In order to monitor the compliance with the conduct rules by Romgaz’s personnel, the ethic counsellor
prepares analyses and quarterly reports on aspects indicated by the Chief Executive Officer. The reports
and analyses shall be sent for information to the monitoring and coordinating committee on
implementation and development of internal management control system and Audit Committee.
The Ethics and Integrity Code can be accessed by any interested person at www.romgaz.ro “Investor
Relations – Corporate Governance – Reference Documents”
Romgaz activities in the field of social responsibility are performed voluntarily, beyond the legal
responsibilities, the company being aware of its role in society.
Page 74 of 80
2020 Consolidated Board of Directors’ Report
Social responsibility means for Romgaz a business culture including business ethics, customer rights,
economic and social equity, environmental friendly technologies, fair treatment of workforce,
transparent relationship with the public authorities, moral integrity and investment in the community.
Moreover, Romgaz supports a sustainable development of the society and community, through financial
support/ total or partial sponsorship for some actions and initiatives in the following main fields:
education, social, sport, health and environment.
Granting financial support/partial or total sponsorship for actions and initiatives, within the budgeted
limits, Romgaz has shown a pro-active attitude of social responsibility and increased the awareness of
the parties involved as regards to the importance and benefits of social responsibility actions.
In 2020, Romgaz supported, totally or partially, actions and initiatives stipulated in Government
Emergency Ordinance (“GEO”) No.2/2015, complying with the budget, as follows:
Expenses/activities
Achieved (RON)
Total of sponsorship expenses, out of which:
Expenses with sponsorships in medical and health fields – Article XIV letter a)
Expenses with sponsorships in education and sport fields – Article XIV letter b)
– total, out of which:
o For Sports Clubs
Sponsorships for other actions and activities – Article XIV letter c)
23,499,999
12,700,000
9,400,000
5,425,000
1.399,999
The detailed description of the projects as regards the sponsorship provided in GEO No.2/2015 is
included in the Annual Report on Social Responsibility and Patronage for 2020 published on
www.romgaz.ro at “Investor Relations - Corporate Governance - Social Responsibility”.
The projects carried out in 2020 had besides the positive impact on the environment and community, an
important benefit for the company by inspiring the organisational culture and the goodwill being a
responsible employer, and also an involved social partner, promotor of a transparent and open
relationship. This is positively reflected in Romgaz image, domestically and internationally, both for
investors, government and local authorities and for other interested parties.
When supporting/performing projects, actions, social responsibility initiatives, Romgaz took into
consideration the provisions of Sponsorship Policy and Sponsorship Guide applicable in 2020,
published on the company’s website at Social Responsibility.
(https://www.romgaz.ro/en/content/social-responsibility-0 )
Legal Framework
The remuneration policy and criteria of the executive and non-executive members of the Board of
Directors are based on the following norms:
Law no. 31/1990 on trading companies, as subsequently amended and supplemented;
GEO no. 109/2011 on corporate governance of public entities, as subsequently amended and
supplemented, approved by Law no.111/2016;
The company’s Articles of Incorporation, approved by the Extraordinary General Meeting of
Shareholders no. 9/October 28, 2016 and no.4/ August 9, 2017 (latest update of the Articles of
Incorporation);
SNGN Romgaz SA remuneration policy, approved by the Board of Directors by Resolution No.13
of March 12, 2019;
Page 75 of 80
2020 Consolidated Board of Directors’ Report
Resolution No. 9/ December 20, 2017 of the Ordinary General Meeting of Shareholders approving
the director agreements for interim members of the Board of Directors;
Resolution No. 8/ July 8, 2018 of the Ordinary General Meeting of Shareholders approving the
contract signed with the board members elected for a 4 years mandate;
Resolution No.6/ June 26, 2019 of the Ordinary General Meeting of Shareholders approving the
contract of mandate signed with the elected interim board members;
Resolution No.8/ October 28, 2019 of the Ordinary General Meeting of Shareholders approving for
interim board members the mandate extension by two months starting with the expiration date;
Resolution No.11/ December 23, 2019 of the Ordinary General Meeting of Shareholders approving
the contract of mandate signed with the board members elected for a four months mandate;
Resolution No. 14/ August 26, 2013 of the Ordinary Meeting of Shareholders establishing the
general limits for the remuneration of the chief executive officer, active member of the BoD;
Resolutions No. 7/ February 22, 2018 and No. 29/ June 14, 2018 approving the contracts of mandate
of the interim chief executive officers;
Resolution No. 45/ October 2018 appointing the chief executive officer for 4 years and approving
the contract of mandate;
Resolution No. 35/ December 14, 2017 approving the contract of mandate of the Chief Financial
Officer;
Resolution No. 39/ August 28, 2018 approving the contract of mandate concluded with the Chief
Financial Officer for a limited period starting from August 28, 2018 until November 02, 2021.
Resolution No. 39/November 4, 2019 of the Board of Directors appointing the interim Chief
Financial Officer until December 28, 2019;
Resolution No. 5/April 13, 2020 of the Ordinary General Meeting of Shareholders approving the
extension of the Board’s members mandate by two months starting with the expiration date;
Resolution No. 8/June 25, 2020 of the Ordinary General Meeting of Shareholders approving the
form and content of the Directors’ Agreement to be concluded with the interim members;
Resolution No. 32/August 26, 2020 of the Board of Directors appointing the interim deputy chief
executive officer for a two months mandate starting from August 28, 2020 until October 20, 2020;
Resolution No. 39, September 30, 2020 of the Board of Directors approving the contract of mandate
for the interim deputy chief executive officer;
Resolution No. 41/October 14, 2020 of the Board of Directors extending the mandate of the interim
deputy chief executive officer by 120 days, namely until February 24, 2021;
Resolution No. 12/October 23, 2020 of the Ordinary General Meeting of Shareholders approving
the extension of the interim directors’ mandate by 2 months starting with the expiration date;
Resolution No. 50/December 9, 2020 of the Board of Directors appointing the interim Chief
Financial Officer for a 4 months mandate starting from December 14, 2020;
Resolution No. 53/December 14, 2020 of the Board of Directors approving the contract of mandate
of the interim Chief Financial Officer;
Resolution No. 14/December 21, 2020 of the Ordinary General Meeting of Shareholders approving
the form and content of the contract of mandate to be concluded with the interim directors for a 4
months mandate.
For compliance with the Requirements of BVB Corporate Governance Code and GEO no. 109/2011
and Law no. 158/2020 amending and supplementing Law no. 24/2017 on issuers of financial instruments
and market operations, the Policy on remuneration shall be reviewed and submitted for approval of the
Ordinary General Meeting of Shareholders.
Page 76 of 80
2020 Consolidated Board of Directors’ Report
The structure of the remuneration granted to non-executive board members
The fixed monthly remuneration as well as the variable one were established according to applicable
legal provisions (detailed in the 2020 Annual Report on remunerations and other benefits granted to
SNGN Romgaz SA board members and managers) and provided in the Director Agreement of each
board member, as approved by the applicable GMS resolution.
The fixed monthly remuneration for 2020 was established at a monthly gross allowance equal two times
the average over the last 12 months of the monthly gross average salary for the activity carried out
according to the company’s activity field as communicated by the National Institute of Statistics
previously to the appointment.
The variable remuneration provided in the director’s agreement will be established and granted
depending on fulfilment of objectives included in the governing plan and of financial and non-financial
performance indicators approved by the General Meeting of Shareholders. The variable element, as well
as the performance objectives and indicators revision conditions will be included in an addendum to the
directors’ agreement.
The structure of the remuneration granted to managers
The monthly fixed remuneration, as well as the variable remuneration were granted under the legal
applicable provisions (detailed in the Annual Report 2019 on remunerations and other benefits granted
to SNGN Romgaz SA board members and managers), being provided in the contract of mandate of each
manager, and approved by Board resolutions.
The monthly fixed remuneration for 2020 was set at a monthly gross allowance up to six times the
average over the last 12 months from the monthly gross average salary for the work carried out in
accordance with the company’s core business as communicated by the National Institute of Statistics,
prior to appointment. The fixed allowance is updated at the beginning of each year based on the data
provided by the National Institute of Statistics. Thus, for the Chief Executive Officer the monthly fixed
allowance was six times the average, for the interim Chief Financial Officer the monthly fixed allowance
was four times the average and for the interim Deputy Chief Executive Officer it has been modified
during his mandate from 4 times the average to 5.2 times the average.
The variable remuneration established depending on the fulfilment of financial and non-financial
performance indicators and objectives, will be included in an addendum to the contract of mandate. In
2020 the Chief Executive Officer, the Deputy Chief Executive Officer and the Chief Financial Officer
did not benefit of variable remuneration.
Page 77 of 80
2020 Consolidated Board of Directors’ Report
NON-FINANCIAL STATEMENT
Romgaz prepares a separate report for financial year 2020, that will be public on the company’s website
by the end of June 2021, according to the Finance Minister Order no. 2844/201620 (chapter 7, item 42,
para (1)).
20 Order of the Ministry of Public Finances no.2844 of December 12, 2016 on approving Accounting Regulations
compliant with the International Financial Reporting Standards
Page 78 of 80
2020 Consolidated Board of Directors’ Report
IX. PERFORMANCE OF DIRECTORS’ AGREEMENTS/CONTRACTS OF
MANDATE
Directors Agreements
Board members appointed by the General Meeting of Shareholders in 2018 for a 4 year mandate had
effective directors agreements in 2019, as well as directors agreements of interim board members that
were appointed in 2019 and 2020, respectively. The directors agreements approved by the General
Meeting of Shareholders do not include performance criteria and indicators.
By Resolution No.8/July 6, 2018 the Ordinary General Meeting of Shareholders appointed following
the cumulative vote, the members of the Board of Directors for a four-year mandate.
Following drafting and approval of the Governing Plan, the General Meeting of Shareholders was called
to negotiate and approve the financial and non-financial performance indicators to be included in the
directors’ agreements by an addendum thereto. By Resolution No.4 /May 15, 2019, the General Meeting
of Shareholders “did not approve the key financial and non-financial performance indicators, resulting
from SNGN Romgaz SA Governing Plan prepared for 2018-2022”.
Company’s shareholders appointed by Resolution No.11/December 23, 2019 the interim board
members, set the fixed monthly gross allowance and approved their contract of mandate.
The General Meeting of Shareholders appointed following the cumulative vote, by Resolution
No.8/June 25, 2020 the members of the Board of Directors, set the fixed monthly gross allowance and
approved the contract of mandate for interim board members.
By Resolution no. 14/December 21, 2020, the Company’s shareholders appointed the interim members
of the Board of Directors, set the fixed monthly gross allowance and approved the contract of mandate
for interim board members.
The director agreement does not include key financial and non-financial performance indicators,
therefore the board members do not benefit from the variable component.
Contract of Mandate
Chief Executive Officer
The Board of Directors appointed on June 14, 2018 under Resolution No. 29, Mr. Volintiru Adrian
Constantin as Chief Executive Officer for four months, and the Board of Directors appointed under
Resolution No. 45 of October 1, 2018 Mr. Volintiru Adrian Constantin as Chief Executive Officer for a
four-year mandate.
Deputy Chief Executive Officer
By Resolution no. 32/August 26, 2020, the Board of Directors appointed Mr. Pena Gabriel Corneliu as
Deputy Chief Executive Officer of SNGN Romgaz SA for an interim mandate of two months, from
August 28 until October 26, 2020 and by Resolution No. 41/October 14, 2020, the Board of Directors
extended the interim mandate by 120 days, until February 24, 2021, respectively.
Chief Financial Officer
By Resolution No. 39/ August 28, 2018, the Board of Directors appointed Mr. Bobar Andrei as Chief
Financial Officer for a limited period, from August 28, 2018 until November 2nd, 2021.
Mr. Bobar Andrei unilaterally terminated the Contract of Mandate by giving Notification no. 28593 on
August 22, 2019.
By Resolution No. 50/December 9, 2020, the Board of Directors appointed Mr. Popescu Razvan as
interim Chief Financial Officer for a four months period starting with December 14, 2020.
Page 79 of 80
2020 Consolidated Board of Directors’ Report
The contracts of mandate concluded between the Board of Directors and the Chief Executive Officer,
the Deputy Chief Executive Officer and the Chief Financial Officer, respectively, do not provide for
performance indicators and criteria. These will be negotiated and included in the contracts of mandate,
by an addendum after completion and approval of the Governing Plan.
SIGNATURES:
Chairman of the Board of Directors,
DRĂGAN DAN DRAGOȘ
Chief Executive Officer,
JUDE ARISTOTEL MARIUS
Chief Financial Officer,
POPESCU RAZVAN
……………………………………
……………………………………
……………………………………
Page 80 of 80
Board of Directors’ Report 2020
Annex1
Table on compliance with BVB Code of Corporate Governance
BVB CGC Provisions
Compliance
2
x
x
x
x
x
x
x
A.1
A.2
A.3
A.4
A.5
A.6
A.7
A.8
1
All companies should have in place Regulations of
the Board of Directors that include the terms of
reference / the responsibilities of the Board and the
company’s key management positions, and that
apply, among others, the General Principles in
section A.
The BoD Regulations should include provisions for
the management of conflict of interest. The
members of the Board should notify the Board on
any conflicts of interest which have arisen or may
arise and should refrain from taking part in the
discussion (including by absence, except where
such absence prevents quorum to be attained) and
from voting on the adoption of a resolution on the
issue which gives rise to such a conflict of interest.
The BoD should comprise at least five members.
The majority of the members of the BoD should be
non-executive; not less than two non-executive
members of the BoD should be independent.
Each independent member of the BoD shall submit
a statement at the time of his/her nomination for
election or re-election, as well as whenever a
change in his/her status occurs, indicating the
elements on which it is deemed independent in
terms of its character and his judgment.
A Board member’s other relatively permanent
professional commitments and engagements,
including executive and non-executive Board
positions
non-profit
organizations, should be disclosed to shareholders
and
to his/her
nomination and during his/her mandate.
investors prior
to potential
companies
and
in
Any member of the BoD should submit to the
Board information on any relationship with a
shareholder who holds, directly or indirectly,
shares representing more than 5% of all voting
rights. This also applies to any relationship which
may affect the member's position on matters
decided by the Board.
The company should appoint a Board secretary
responsible for supporting the work of the BoD
The corporate governance statement should inform
on whether an evaluation of the Board has taken
place under the leadership of the chairman or the
nomination committee and, if so, summarize key
action points and changes resulting from it.
The company should have a policy/ guidelines
regarding the evaluation of the BoD containing the
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
x partially
The section on Corporate
Governance Statement in
the Annual Report of the
Board
Directors
includes specifications on
the BoD evaluation.
of
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
1
2
purpose, criteria and frequency of the evaluation
process.
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
Board
A
Evaluation
Policy was prepared by
Romgaz
it was
and
approved by BoD on
2019.
12,
March
Following approval, the
Policy was published on
the company’s website.
the
2020,
no BoD
In
evaluation was performed
because in 2020 there were
three Boards of Directors,
appointed
and
were
members
provisional.
The
composition of one of the
BoDs included provisional
members, with modified
composition
(the NRC
composition was modified
as
two
committees).
well,
in
x
x
x
x
A.9
A.10
A.11
The Corporate Governance Statement should
contain information on the number of meetings of
the Board and the committees during the past year,
attendance by directors (personally and in their
absence) and a report of the Board and committees
on their activities.
The Corporate Governance Statement should
contain information on the precise number of the
independent members of the Board of Directors.
The BoD should set up a nomination committee
comprised of non-executives, which will lead the
nomination process for new Board members and
make recommendations to the Board.
The majority of the members of the nomination
committee should be independent
B.1
The Board should set up an Audit Committee and
at least one member should be an independent non-
executive.
The Audit Committee should be comprised of at
least three members and the majority should be
independent.
The majority of members, including the chairman,
should have proven an adequate qualification
relevant to the functions and responsibilities of the
Committee. At least one member of the Audit
Committee should have a proven and appropriate
auditing and/or accounting experience.
B.2
The Chairperson of the Audit Committee should be
an independent non-executive member.
x
Page 2 of 7
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
2
x
x
1
B.3
Among its responsibilities, the Audit Committee
should perform an annual assessment of the
internal control system.
B.4
B.5
the Board,
The assessment mentioned in section B.3 should
consider the effectiveness and scope of the internal
audit function, the adequacy of risk management
and internal control reports to the Audit Committee
of
the management’s
and
responsiveness and effectiveness in dealing with
the failures and weak points identified during the
internal control, and submit relevant reports to the
Board.
The Audit Committee should review conflicts of
interests in transactions of the company and its
subsidiaries with affiliated parties.
Noncompliance
/
Partial
compliance
3
x partially
B.6
The Audit Committee should evaluate
the
effectiveness of the internal control system and the
risk management system
x
Reason for
noncompliance/
Explanation on
compliance
4
responsibility
of
for
The
the
monitoring
the
effectiveness
company’s
internal
control, internal audit and
risk management systems
is specified in the Audit
Committee Rules
of
Procedure.
The Audit Committee
assessed
internal
the
control system for 2020.
See explanation in section
B.3
This provision is already
mentioned in Article 8,
par. 2 of Romgaz CCG.
The Audit Committee
the
Rules approved by
BoD in the meeting of
May 14, 2018 includes
provisions
such
obligation.
on
Moreover, a Policy on
related party transactions
was
by
developed
Romgaz, and it obtained
BoD approval on March
20, 2019.
Following approval it was
published
the
company’s website.
on
of
responsibility
for
The
the
monitoring
the
effectiveness
company’s
internal
control, internal audit and
risk management systems
is specified in the Audit
Committee Rules.
The Audit Committee
assessed the effectiveness
of the internal control and
risk management system
for 2020.
Page 3 of 7
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
2
x
x
x
x
x
x
x
B.7
B.8
B.9
B.10
B.11
B.12
C.1
1
The Audit Committee should monitor
the
application of statutory and generally accepted
standards of
internal auditing. The Audit
Committee should receive and evaluate the reports
of the internal audit team.
The Audit Committee should report periodically (at
least annually) or adhoc to BoD with regard to the
reports or analyses undertaken by the committee.
No shareholder may be given undue preference
over other shareholders with regard to transactions
and agreements made by the company with
shareholders and their related parties.
The BoD should adopt a policy ensuring that any
transaction of the company with any of the
companies in close relationship, with a value equal
to or higher than 5% of the company’s net assets
(as stated in the latest financial report), is approved
by the Board based on a mandatory opinion of the
Audit Committee and fairly disclosed to the
shareholders and potential investors, to the extent
such transactions are events requiring disclosure.
The internal audits should be carried out by a
audit
separate
department) within the company or by hiring an
independent third-party entity.
structural division
(internal
The Internal Audit Department should functionally
report to the BoD via the Audit Committee. For
administration purposes and as part of
the
management obligations to monitor and mitigate
risks, the Internal Audit Department should report
directly to the Director General.
formulated so as
The company should publish the Remuneration
Policy on its website. The Remuneration Policy
should be
the
shareholders to understand the principles and
arguments underlying the remuneration of the
members of the Board and of the General Director.
Any
the
Remuneration Policy should be posted in due time
on the company's website.
change occurred
significant
to allow
in
The company should include in its Annual Report
a statement on
the
Remuneration Policy during the annual period
under review.
implementation of
the
The Report on Remuneration should present the
implementation of the Remuneration Policy for
persons identified in this Policy during the annual
period under review.
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
The provision is already
mentioned in Article 9 of
ROMGAZ CCG and it
will be implemented by
the Policy on related party
transactions, as approved
by the BoD on March 20,
2019.
Following approval, the
policy was published on
the company’s website.
The provision is already
mentioned in Article 11,
par. 5 of ROMGAZ CCG.
The section on Corporate
Governance Statement in
the Annual Report of the
Directors
Board
of
the
includes details on
implementation of
the
Remuneration Policy as
well as the remuneration
of the BoD members and
the directors.
A separate document on
Remuneration Policy was
drafted and obtained BoD
approval on March 12,
2019, and then published
on the company’s website.
Page 4 of 7
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
1
D.1
The company should establish an Investors
Relation Department - indicating to the public the
responsible person/persons or the organizational
unit.
Besides the information required by the legal
provisions, the company should also include on its
website a dedicated Investor Relations section,
both in Romanian and English, with all the relevant
information of interest for investors, including:
D.1.1 Main corporate
the articles of
regulations:
incorporation, general meeting of shareholders
procedure;
D.1.2 Professional CVs of the members of the company’s
governing bodies, other professional commitments
of Board member’s, including executive and non-
executive Board positions in companies and non-
profit organizations.
D.1.3 Current reports and periodic reports (quarterly,
semi-annual and annual reports) – at least those
specified at item D.8 - including current reports
with detailed
to non-
compliance with the Bucharest Stock Exchange
Code of Corporate Governance;
information
related
D.1.4
D.1.5
Information related to GMS: the agenda and
supporting materials; the Board of Directors
election procedure; the arguments in support of the
proposal of candidates to the Board of Directors
together with their professional CVs; shareholders’
questions related to the agenda and the company’s
answers, including decisions taken;
and
other
dividends
Information on corporate events (such as payment
of
to
shareholders, or other events leading to the
acquisition or limitation of rights of a shareholder)
including the deadlines and principles applicable to
such operations.
distributions
Such information will be published within due
course of time so as to allow investors to take
investment decisions;
D.1.6 The names and contact data of the persons who
to provide knowledgeable
should be able
information on request;
2
x
x
x
x
x
x
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
The Annual Report on
Remuneration is presented
together with the Annual
Board
of Directors’
Report. It presents details
of the principles applied
for the determination of
the remuneration of the
Board Members
and
directors.
x partially
on
Items
the GMS
organization are presented
to shareholders at each
meeting.
Page 5 of 7
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
1
D.1.7 Corporate presentations (for example presentations
for investors, presentations on quarterly results,
etc.), financial statements (quarterly, semi-annual,
annual), audit reports and annual reports.
D.2
D.3
D.4
D.5
D.6
D.7
D.8
D.9
The company should have a policy for the annual
distribution of dividends or other benefits to
shareholders, proposed by the Director General and
adopted by the BoD as the company’s Guideline on
net profit distribution.
The principles of the policy on annual distribution
of dividends to shareholders shall be published on
the company’s website.
The company shall adopt a policy with respect to
forecasts, whether or not made public. The Policy
on forecasts should determine the frequency,
period and content of the forecasts and should be
published on the company’s website.
GSM rules should not restrict the participation of
shareholders in general meetings and should not
limit the exercise of their rights. The modification
of rules will become effective no sooner than the
following shareholders’ meeting.
The external auditors
those
shareholders’ meetings where their reports are
presented.
should attend
The BoD should submit to the GMS a brief
assessment of the internal control and significant
risk management systems, as well as opinions on
matters to be submitted to the GMS for decision.
Any professional, consultant, expert or financial
analyst, may participate in the shareholders’
meeting upon prior invitation from the BoD.
Accredited journalists may also attend the GMS,
unless
the Board decides
otherwise.
the Chairman of
The quarterly and semi-annual financial reports, in
the Romanian and English languages, should
include information on the key drivers influencing
the change in sales, operating profit, net profit and
other relevant financial indicators, on a quarter-on-
quarter and year-on-year basis.
least
The company should organize at
two
meetings/conference calls with analysts and
investors each year. The information presented on
these occasions should be published on the
company’s website in the IR section at the date of
the meetings/teleconferences.
2
x
x
x
x
x
x
x
x
x
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
are
auditors
External
invited
those
to attend
GMS meetings where their
reports are presented.
Page 6 of 7
Board of Directors’ Report 2020
BVB CGC Provisions
Compliance
D.10
1
sport
cultural
expression,
If the company supports various forms of artistic
activities,
and
educational or scientific activities, and considers
that their resulting impact on the innovativeness
and competitiveness of the company is part of its
business mission and development strategy, the
company should publish the policy guiding its
activity in such field.
2
x
Noncompliance
/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
Legend:
= General Meeting of Shareholders
GMS
BVB = Bucharest Stock Exchange
BoD
CCG
ROMGAZ CCG = Code of Corporate Governance of S.N.G.N. ROMGAZ S.A., as approved on January 28, 2016
CV
ToR
= Board of Directors
= Code of Corporate Governance
= Curriculum Vitae
= Terms of Reference
Page 7 of 7
S.N.G.N. ROMGAZ S.A. GROUP
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2020
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN
UNION AND THE ORDER OF THE MINISTRY OF PUBLIC FINANCE 2844/2016
CONTENTS:
PAGE:
Independent auditor’s report
Statement of consolidated comprehensive income for the year ended December 31, 2020
Statement of consolidated financial position as of December 31, 2020
Statement of consolidated changes in equity for the year ended December 31, 2020
Statement of consolidated cash flow for the year ended December 31, 2020
Notes to the consolidated financial statements for the year ended December 31, 2020
1. Background and general business
2. Significant accounting policies
3. Revenue and other income
4. Investment income
5. Cost of commodities sold, raw materials and consumables
6. Other gains and losses
7. Depreciation, amortization and impairment expenses
8. Employee benefit expense
9. Finance costs
10. Other expenses
11. Income tax
12. Property, plant and equipment
13. Exploration and appraisal for natural gas resources
14. Other intangible assets. Right of use assets
15. Inventories
16. Accounts receivable
17. Share capital
18. Reserves
19. Provisions
20. Deferred revenue
21. Trade and other current liabilities
22. Financial instruments
23. Related party transactions and balances
24. Information regarding the members of the administrative, management and
supervisory bodies
25. Investment in associates
26. Other financial investments
27. Segment information
28. Cash and cash equivalents
29. Other financial assets
30. Commitments undertaken
31. Commitments received
32. Contingencies
33. Joint arrangements
34. Auditor’s fees
35. Events after the balance sheet date
36. Approval of financial statements
1
2
4
5
7
7
7
18
19
19
19
20
20
20
21
21
23
25
26
27
27
29
30
30
32
33
33
35
36
37
39
40
43
43
43
44
44
45
45
45
45
Ernst & Young Assurance Services SRL
Bucharest Tower Center Building, 22nd Floor
15-17 Ion Mihalache Blvd., Sector 1
011171 Bucharest, Romania
Tel: +40 21 402 4000
Fax: +40 21 310 7193
office@ro.ey.com
ey.com
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of SNGN ROMGAZ S.A.
Report on the Audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of SNGN ROMGAZ S.A. (the Company)
and its subsidiary (together “the Group”) with official head office in Mediaş, Piaţa Constantin
I. Motaş. nr. 4, cod 551130, Sibiu county, Romania, identified by sole fiscal registration
number RO 14056826, which comprise the consolidated statement of financial position as at
December 31, 2020, and the consolidated statements of comprehensive income, of changes
in shareholders’ equity and of cash flows for the year then ended, and a summary of
significant accounting policies and other explanatory information.
In our opinion, the consolidated financial statements give a true and fair view of the financial
position of the Group as at December 31, 2020 and of its financial performance and its cash
flows for the year then ended in accordance with the Order of the Minister of Public Finance
no. 2844/2016, approving the accounting regulations compliant with the International
Financial Reporting Standards, with all subsequent modifications and clarifications.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs),
Regulation (EU) No. 537/2014 of the European Parliament and of the Council of
16 April 2014 (“Regulation (EU) No. 537/2014“) and Law 162/2017 („Law 162/2017”). Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities
for the Audit of the Consolidated financial statements” section of our report. We are
independent of the Group in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) as issued by the International
Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements
that are relevant to the audit of the consolidated financial statements in Romania, including
Regulation (EU) No. 537/2014 and Law 162/2017 and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
2
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the consolidated financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
For each matter below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit
of the consolidated financial statements” section of our report, including in relation to these
matters. Accordingly, our audit included the performance of procedures designed to respond
to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to
address the matters below, provide the basis for our audit opinion on the accompanying
consolidated financial statements.
Description of each key audit matter and our procedures performed to address the matter
Key audit matter
How our audit addressed the key audit
matter
Estimation of gas reserves used in impairment testing and the calculation of
depreciation and amortisation
The Group’s disclosures about estimation of gas reserves are included in Note 2 (Use of
Estimates) to the financial statements.
Estimation of the gas reserves is a focus area
in our audit because it has a significant
impact on the financial statements, as the
reserves are the basis for production
estimates used in the Group’s cash flow
forecasts for impairment testing and they
are also the basis for unit of production
depreciation and amortization for the core
assets in the Upstream segment.
We assessed the management’s estimation
process in the determination of gas
reserves. Specifically, our work included,
but was not limited to, the following
procedures:
- We performed a detailed understanding
of the Group’s internal process and
related documentation flow and key
controls associated with the gas
reserves estimation process;
The estimation of gas reserves requires the
Group’s management and engineers to make
significant judgement and assumptions and
therefore it was considered to be a key audit
matter
3
- We analysed the certification process
for technical and commercial
specialists who are responsible for gas
reserves estimation; we also assessed
the competence, capabilities and
objectivity of management specialists;
- We tested whether significant
increases or reductions in gas reserves
were made in the period in which the
new information became available and
in compliance with the standards of the
National Agency for Mineral Resources
(“ANRM”);
- We compared the gas reserves with the
assumptions used in the cash flows for
the impairment testing of production
assets and in the accounting for
depreciation and amortization for the
core assets in the Upstream segment
We further assessed the adequacy of the
Group’s disclosures about impairment
testing and calculation of depreciation and
amortization.
Impairment testing of production assets in the Upstream Gas segment
The Group’s disclosures about its impairment testing are included in Note 2 (Use of
estimates) and in Note 12 (Property, Plant and Equipment) to the financial statements
The impairment test is significant to our audit
because the assessment process is complex,
requires significant management judgment
and is based on assumptions that are
affected by expected future market
conditions. Furthermore, as at 31 December
2020 the carrying value of the production
assets and the common infrastructure and
corporate assets allocated to each cash
generating unit (CGU) from the Upstream
segment’s property, plant and equipment in
amount of RON 2,225 million as at 31
December 2020, is significant.
In respect of impairment testing, our work
included, but was not limited to, the
following procedures:
- We analysed and evaluated the
management’s assessment of the
existence of impairment indicators
(triggering events);
- We reviewed the allocation of the
carrying value of common
infrastructure and corporate assets to
each CGU (field)
- We evaluated the management’s
assessment of the recoverability of the
carrying value of property, plant and
equipment of the cash generating unit
for which triggering events were
identified;
International Financial Reporting
Standards require an entity to assess,at least
at each reporting date, whether indicators of
impairment or reversal of impairment
previously recorded exist. Management
considered that the recent changes brought
by new legislation in 2020, as well as recent
changes in market conditions due to Covid-
19 pandemic effects, constitute impairment
indicators and, consequently, has carried out
an impairment test for the production assets
in the Upstream Gas segment which resulted
in no additional impairment being
recognised.
Considering the above, we determined that
Impairment testing of production assets in
the Upstream Gas segment is a key audit
matter.
4
- We tested the reasonability of future
yearly production volumes per field
based on actual ANRM reports and
appendixes (future production plan per
field is made based on ANRM approved
plan for each field);
- On a sample basis, we compared the
remaining reserves per field from
impairment test as of 31 December
2020 with the latest ANRM approved
reserve reports;
- We compared the main assumptions
used in the impairment test (gas prices,
operating costs, production volumes,
gas reserves and discount rate) with
the current forecasts approved as part
of the Group’s mid-term planning
process;
- We assessed the historical accuracy of
management’s budgets and forecasts
by comparing them to actual
performance in prior years;
- We analysed the assumptions used in
the cash flow projection considering
the recent changes brought by new
legislation in 2020, as well as changes
in market conditions due to Covid-19
pandemic;
- We involved our internal valuation
specialists to assist us in evaluating the
key assumptions and methodologies
used by the Group for the impairment
testing of upstream productions assets
(e.g. checked the mathematical
accuracy of the model, its conformity
with the requirements of the
International Financial Reporting
Standards, the discount rates used,
future natural gas sales prices, etc)
- We evaluated the management’s
sensitivity analysis over key
assumptions in the future cash flow
model in order to assess the potential
impact of possible changes
We also assessed the adequacy of the
Group’s disclosures in the financial
statements.
5
Estimation of decommissioning provisions
The Group’s disclosures about decommissioning obligations are included in Note 2 (Use of
estimates) and Note 19 (Provisions) to the financial statements.
The Group’s core activities regularly lead to
obligations related to dismantling and
removal of equipment and installations, asset
retirement and soil remediation activities.
The decommissioning provision is significant
to our audit because of its magnitude
(carrying value of RON 538.9 million at 31
December 2020) and because management
makes estimates and judgments in
determining the respective provisions.
The key estimates and assumptions relate to
the envisaged future dismantling costs,
forecasted inflation rates and discount rates
to determine the present value of the
obligations.
Our work in respect of management’s
estimation of decommissioning and
restoration provisions included, but was not
limited to, the following procedures:
- We performed a detailed understanding
of the Group’s estimation process and
the related documentation flow and
assessed the design and
implementation of the controls within
the process;
- We compared the current estimates of
decommissioning, costs with the actual
costs incurred in previous periods;
- We reviewed the timing of works to be
performed for surface and subsurface
decommissioning for wells;
- We inspected supporting evidence for
any material revisions in cost estimates
during the year;
- We involved our valuation specialists to
assist us in performing industry bench
marking and analysis over discount
rates and inflation rates;
- We tested the mathematical accuracy
of management’s decommissioning
provision calculations;
- We assessed the competence,
capabilities and objectivity of
management specialists
We also assessed the adequacy of the
Group’s disclosures in the financial
statements relating to decommissioning
obligations.
6
Other information
The other information comprises the Annual Report (which includes the Directors'
Consolidated Report, the Report on Payments to Governments for mining activities and the
Corporate Governance Statement), and Corporate responsibility and sustainability report but
does not include the consolidated financial statements and our auditors’ report thereon. We
obtained the Annual Report prior to the date of our auditor’s report, and we expect to obtain
the Corporate responsibility and sustainability report, as part of a separate report, after the
date of our auditor’s report. Management is responsible for the other information.
Our audit opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed on the other information obtained prior to the date of our auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with the Order of the Minister of Public Finance no.
2844/2016 approving the accounting regulations compliant with the International Financial
Reporting Standards, with all subsequent modifications and clarifications, and for such
internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing
the Group's ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless management either
intends to liquidate the Group or to cease operations, or has no realistic alternative but to do
so.
Those charged with governance are responsible for overseeing the Group's financial reporting
process.
7
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditors’ report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
8
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate to them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the consolidated financial statements of
the current period and are therefore the key audit matters.
Report on Other Legal and Regulatory Requirements
Reporting on Information Other than the consolidated financial statements and Our
Auditors’ Report Thereon
In addition to our reporting responsibilities according to ISAs described in section “Other
information”, with respect to the Directors’ Consolidated Report, we have read the Report
and report that:
a)
b)
in the Directors’ Consolidated Report we have not identified information which is not
consistent, in all material respects, with the information presented in the Group
consolidated financial statements as at December 31, 2020;
the Directors’ Consolidated Report identified above includes, in all material respects, the
required information according to the provisions of the Ministry of Public Finance Order
no. 2844/2016 approving the accounting regulations compliant with the International
Financial Reporting Standards, with all subsequent modifications and clarifications,
Annex 1 points 15 – 19 and 26-28;
c) based on our knowledge and understanding concerning the entity and its environment
gained during our audit of the consolidated financial statements as at December 31,
2020, we have not identified information included in the Directors’ Consolidated Report
that contains a material misstatement of fact.
Other requirements on content of auditor’s report in compliance with Regulation (EU) No.
537/2014 of the European Parliament and of the Council
Appointment and Approval of Auditor
We were appointed as auditors of the Group by the General Meeting of Shareholders on 06
December 2018 to audit the consolidated financial statements for the financial year ended
December 31, 2020. Total uninterrupted engagement period, for the statutory auditor, has
lasted for three years, covering the years ended December 31, 2018, 2019 and 2020.
9
Consistency with Additional Report to the Audit Committee
Our audit opinion on the consolidated financial statements expressed herein is consistent
with the additional report to the Audit Committee of the Group, which we issued on 23 March
2021.
Provision of Non-audit Services
No prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014
of the European Parliament and of the Council were provided by us to the Group and we
remain independent from the Group in conducting the audit.
In addition to statutory audit services and other audit related services, as disclosed in the
financial statements, no other services were provided by us to the Group and its controlled
undertakings.
On behalf of
Ernst & Young Assurance Services SRL
15-17, Ion Mihalache Blvd., floor 21, Bucharest, Romania
Registered in the electronic Public Register under No. FA77
Name of the Auditor/ Partner: Alexandru Lupea
Registered in the electronic Public Register under No. AF273
Bucharest, Romania
23 March 2021
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31,
2020
Note
3
5
4
6
16
5
7
8
9
13
25
10
3
11
Year ended
December 31,
2020
'000 RON
4,074,893
(18,617)
47,845
(6,534)
Year ended
December 31,
2019
'000 RON
restated *
5,080,482
(107,800)
38,124
7,519
17,551
(81,221)
(16,151)
(58,282)
(672,063)
(767,251)
(17,000)
(26,509)
1,330
(1,158,143)
25,439
80,008
(76,048)
(1,451,766)
(670,408)
(24,740)
(1,636)
1,474
(1,551,642)
32,834
1,426,508
1,275,180
(178,604)
(185,557)
1,247,904
1,089,623
19 c)
(16,877)
27,411
11
2,700
(4,387)
(14,177)
23,024
(14,177)
23,024
1,233,727
1,112,647
0.0032
0.0028
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Impairment losses on trade
receivables
Changes in inventory of
finished goods and work
in progress
Raw materials and
consumables used
Depreciation, amortization
and impairment
expenses
Employee benefit expense
Finance cost
Exploration expense
Share of profit of associates
Other expenses
Other income
Profit before tax
Income tax expense
Profit for the year
Other comprehensive
income
Items that will not be
reclassified subsequently
to profit or loss
Actuarial gains/(losses) on
post-employment benefits
Income tax relating to items
that will not be
reclassified subsequently
to profit or loss
Total items that will not be
reclassified
subsequently to profit
or loss
Other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
Basic and diluted earnings
per share
Year ended
December 31,
2019
'000 RON
restatements *
-
-
-
70,588
Year ended
December 31,
2019
'000 RON
as reported
5,080,482
(107,800)
38,124
(63,069)
-
-
-
(93,516)
-
-
22,928
-
-
-
-
-
-
-
-
-
-
-
-
(81,221)
80,008
(76,048)
(1,358,250)
(670,408)
(24,740)
(24,564)
1,474
(1,551,642)
32,834
1,275,180
(185,557)
1,089,623
27,411
(4,387)
23,024
23,024
1,112,647
0.0028
*) Starting 2020, the Group presents the release to income of the impairment for non-current assets written-off as a decrease of the
expense generated by the write-off of the respective assets, as “other gains and losses” or as “exploration expense”. Previously, the
release to income was presented as “depreciation, amortization and impairment”. For comparability purposes, 2019 was restated.
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
1
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 2020
ASSETS
Non-current assets
Property, plant and equipment
Other intangible assets
Investments in associates
Deferred tax asset
Right of use asset
Other financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Contract costs
Other financial assets
Other assets
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
Retained earnings
Total equity
Non-current liabilities
Retirement benefit obligation
Deferred revenue
Lease liability
Provisions
Total non-current liabilities
Note
12
14
25
11
14
26
15
16 a)
29
16 b)
28
17
18
19
20
19
December 31, 2020
'000 RON
December 31, 2019
'000 RON
5,613,122
14,774
26,102
275,328
7,915
5,378
5,942,619
244,563
592,875
651
1,995,523
68,023
416,913
3,318,548
9,261,167
385,422
2,251,909
5,149,919
7,787,250
128,690
136,308
7,845
538,931
811,774
5,543,177
9,164
24,772
230,947
8,590
5,388
5,822,038
311,013
638,158
312
1,075,224
42,485
363,943
2,431,135
8,253,173
385,422
1,587,409
5,201,222
7,174,053
114,876
21,244
8,285
366,393
510,798
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
2
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 2020
Note
December 31, 2020
'000 RON
December 31, 2019
'000 RON
Current liabilities
Trade payables
Contract liabilities
Current tax liabilities
Deferred revenue
Provisions
Lease liability
Other liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
21
20
19
21
89,132
81,318
59,831
10,899
156,415
767
263,781
662,143
1,473,917
9,261,167
109,910
42,705
64,342
3,729
82,701
694
264,241
568,322
1,079,120
8,253,173
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
3
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020
Balance as of January 1, 2020
Profit for the year
Allocation to dividends *)
Increase in legal reserves
Allocation to other reserves
Increase in reinvested profit reserves
Other comprehensive income for the year
Balance as of December 31, 2020
Balance as of January 1, 2019
Profit for the year
Allocation to dividends *)
Increase in legal reserves
Allocation to other reserves
Increase in reinvested profit reserves
Other comprehensive income for the year
Balance as of December 31, 2019
Share
capital
'000 RON
Legal
reserve
'000 RON
Other
reserves (note 18)
'000 RON
Retained
earnings **)
'000 RON
385,422
-
-
-
-
-
-
385,422
385,422
-
-
-
-
-
-
385,422
79,921
-
-
3,616
-
-
-
83,537
77,487
-
-
2,434
-
-
-
79,921
1,507,488
-
-
-
598,840
62,044
-
2,168,372
1,747,512
-
(362,297)
-
106,265
16,008
-
1,507,488
5,201,222
1,247,904
(620,530)
(3,616)
(598,840)
(62,044)
(14,177)
5,149,919
5,458,196
1,089,623
(1,244,914)
(2,434)
(106,265)
(16,008)
23,024
5,201,222
Total
'000 RON
7,174,053
1,247,904
(620,530)
-
-
-
(14,177)
7,787,250
7,668,617
1,089,623
(1,607,211)
-
-
-
23,024
7,174,053
*) In 2020 the Group’s shareholders approved the allocation of dividends of RON 620,530 thousand (2019: RON 1,607,211 thousand), dividend per share being RON 1.61 (2019: RON 4.17).
**) Retained earnings include the geological quota reserve set up in accordance with the provisions of Government Decision no. 168/1998 on the establishment of the expense quota for the development
and modernization of oil and natural gas production, refining, transportation and oil distribution. Following the Group’s transition to IFRS, the reserve existing as of December 31, 2012 was transferred to
retained earnings. This result is allocated based on the depreciation, respectively write-off of the assets financed using this source, based on decision of General Meeting of Shareholders. As of
December 31, 2020 the geological quota reserve is of RON 927,499 thousand (December 31, 2019: RON 1,081,148 thousand).
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
4
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from operating activities
Net profit
Adjustments for:
Income tax expense (note 11)
Share of associates’ result (note 25)
Interest expense (note 9)
Unwinding of decommissioning provision (note 9,
note 19)
Interest revenue (note 4)
Net loss on disposal of non-current assets (note 6)
Change in decommissioning provision recognized
in profit or loss, other than unwinding (note 19)
Change in other provisions (note 19)
Net impairment of exploration assets (note 7, note
12, note 13)
Exploration projects written off (note 13)
Net impairment of property, plant and equipment
and intangibles (note 7, note 12)
Depreciation and amortization (note 7)
Amortization of contract costs
Change in investments at fair value through profit
and loss (note 6)
Net receivable write-offs and movement in
allowances for trade receivables and other
assets
Other gains and losses
Net movement in write-down allowances for
inventory (note 6, note 15)
Liabilities written off
Subsidies income (note 20)
Movements in working capital:
(Increase)/Decrease in inventory
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other liabilities
Cash generated from operations
Interest paid
Income taxes paid
Net cash generated by operating activities
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
restated *
1,247,904
1,089,623
178,604
(1,330)
593
16,407
(47,845)
7
24,273
66,467
97,695
836
125,997
448,371
795
10
(19,700)
-
8,427
(368)
(7)
2,147,136
58,516
38,311
17,600
2,261,562
(3)
(224,796)
2,036,763
185,557
(1,474)
543
24,197
(38,124)
(2,542)
(51,760)
(5,402)
231,278
123
699,531
520,957
651
4,424
67,297
(52)
5,125
(89)
(81)
2,729,782
(38,428)
116,143
(78,115)
2,729,382
-
(297,059)
2,432,323
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
5
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from investing activities
Bank deposits set up and acquisition of state bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Acquisition of non-current assets
Acquisition of exploration assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Repayment of lease liability
Subsidies reimbursed
Subsidies received (note 20)
Net cash used in financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the year
Cash and cash equivalents at the end of the
year
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
restated *
(2,964,757)
2,060,925
38,601
1,733
(547,215)
(66,516)
(1,477,229)
(620,346)
(1,196)
(50)
115,027
(506,565)
52,969
363,943
416,912
(2,591,658)
2,387,686
43,470
1,305
(694,349)
(173,563)
(1,027,109)
(1,607,246)
(861)
-
-
(1,608,107)
(202,893)
566,836
363,943
*) Please see the comment in the statement of consolidated comprehensive income.
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
6
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
1.
BACKGROUND AND GENERAL BUSINESS
Information regarding S.N.G.N. Romgaz S.A. Group (the “Group”)
The Group is formed of S.N.G.N. Romgaz S.A. (”the Company”/"Romgaz"), as parent company, its fully owned
subsidiary S.N.G.N. ROMGAZ S.A. - Filiala de Înmagazinare Gaze Naturale DEPOGAZ Ploiești S.R.L. (“Depogaz”)
and its associates – S.C. Depomures S.A. (40% of the share capital) and S.C. Agri LNG Project Company S.R.L.
(25% of the share capital).
Romgaz is a joint stock company, incorporated in accordance with the Romanian legislation.
The Company’s headquarter is in Mediaş, 4 Constantin I. Motaş Square, 551130, Sibiu County.
The Romanian State, through the Ministry of Economy, Energy and Business Environment, is the majority
shareholder of S.N.G.N. Romgaz S.A. together with other legal and physical persons (note 17).
The Group has as main activity:
1.
2.
3.
4.
5.
geological research for the discovery of natural gas, crude oil and condensed reserves;
operation, production and usage, including trading, of mineral resources;
natural gas production for:
ensuring the storage flow continuity;
technological consumption;
delivery in the transmission system.
underground storage of natural gas provided by Depogaz and Depomures;
commissioning, interventions, capital repairs for wells equipping the deposits, as well as the natural gas
resources extraction wells, for its own activity and for third parties;
6.
electricity production and distribution.
2.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The consolidated financial statements (“financial statements”) of the Group have been prepared in accordance with
the provisions of the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
Ministry of Finance Order 2844/2016 to approve accounting regulations in accordance with IFRS (MOF 2844/2016).
For the purposes of the preparation of these financial statements, the functional currency of the Group is deemed to
be the Romanian Leu (RON). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the
International Accounting Standards Board (IASB), however, the differences have no material impact on the Group’s
financial statements for the periods presented.
Basis of preparation
The financial statements have been prepared on a going concern basis. The principal accounting policies are set out
below.
Accounting is kept in Romanian and in the national currency. Items included in these financial statements are
denominated in Romanian lei. Unless otherwise stated, the amounts are presented in thousand lei (thousand RON).
These financial statements are prepared for general purposes, for users familiar with the IFRS as adopted by EU;
these are not special purpose financial statements. Consequently, these financial statements must not be used as
sole source of information by a potential investor or other users interested in a specific transaction.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in
these financial statements is determined on such a basis, except for measurements that have some similarities to fair
value but are not fair value, such as net realizable value in IAS 2 “Inventory” or value in use in IAS 36 “Impairment of
assets”.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
7
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance to the Group of
the inputs to the fair value measurement, which are described as follows:
level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can
access at the measurement date;
level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
level 3 inputs are unobservable inputs for the asset or liability.
Basis for consolidation
Subsidiaries
The Company controls an entity when it is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when it loses
control of that subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
in line with those used by the Group. All intra-group assets and liabilities, income and expenses relating to
transactions between members of the Group are eliminated in full on consolidation
Associated entities
An associate is a company over which the Company exercises significant influence through participation in decision
making on financial and operational policies of the entity invested in. Investments in associates are recorded using
the equity method of accounting. By this method, the investment is initially recognized at cost and adjusted thereafter
for the post-acquisition change in the Group’s share of the investee’s net assets. The Group’s profit or loss includes
its share of the investee’s profit or loss and the Group’s other comprehensive income includes its share of the
investee’s other comprehensive income.
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control.
A joint arrangement is either a joint operation or a joint venture.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the arrangement. Those parties are called joint ventures.
Joint operations
The Group recognizes in relation to its interest in a joint operation:
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
As joint operator, the Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint
operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
If the Group participates in, but does not have joint control of, a joint operation it accounts for its interest in the
arrangement in accordance with the paragraphs above if it has rights to the assets, and obligations for the liabilities,
relating to the joint operation.
If the Group participates in, but does not have joint control of, a joint operation, does not have rights to the assets,
and obligations for the liabilities, relating to that joint operation, it accounts for its interest in the joint operation in
accordance with the IFRSs applicable to that interest.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
8
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Joint ventures
As a partner in a joint venture, in its financial statements, the Group recognizes its interest in a joint venture using the
equity method of accounting.
Standards and interpretations valid for the current period
The following standards and amendments or improvements to existing standards issued by the IASB and adopted by
the EU have entered into force for the current period:
Amendments to IFRS 3 Business Combinations (effective for annual periods beginning on or after January 1,
2020);
Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods
beginning on or after January 1, 2020);
Amendments to IAS 1 and IAS 8: Definition of materiality (effective for annual periods beginning on or after
January 1, 2020);
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (effective for annual periods
beginning on or after January 1, 2020);
Amendments to IFRS 16 Covid-19-Related Rent Concessions (effective for annual periods beginning on or
after June 1, 2021).
The adoption of these amendments, interpretations or improvements to existing standards has not led to changes in
the Group's accounting policies.
Standards and interpretations issued by IASB not yet adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from IFRS adopted by the IASB except from
the following standards, amendments or improvements to the existing standards and interpretations, which were not
endorsed for use in EU as at date of publication of financial statements:
IFRS 17 Insurance Contracts including Amendments to IFRS 17 (effective for annual periods beginning on or
after January 1, 2023);
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-
current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date (effective for
annual periods beginning on or after January 1, 2023);
Amendments to IFRS 3 Business Combinations (effective for annual periods beginning on or after January 1,
2022);
Amendments to IAS 16 Property, Plant and Equipment (effective for annual periods beginning on or after
January 1, 2022);
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (effective for annual periods
beginning on or after January 1, 2022);
Annual Improvements 2018-2020 (effective for annual periods beginning on or after January 1, 2022);
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
(effective for annual periods beginning on or after January 1, 2021).
The Group is currently evaluating the effect that the adoption of these standards, amendments or improvements to
the existing standards and interpretations will have on the financial statements of the Group in the period of initial
application.
Standards and interpretations issued by IASB and adopted by the EU, but not yet effective
At the date of issue of the financial statements, the following standards were adopted by the EU, but not yet
effective:
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (effective for annual periods beginning on or
after January 1, 2021).
The Group did not adopt these standards and amendments before their effective dates. The Group does not expect
these amendments to have a material impact on the financial statements.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
9
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Segment information
The information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance focuses on the upstream segment, gas storage, electricity production and
distribution, and other activities, including headquarter activities. The Directors of the Group have chosen to organize
the Group around differences in activities performed.
Specifically, the Group is organized in the following segments:
upstream, which includes exploration activities, natural gas production and trade of gas extracted by Romgaz
or acquired from domestic production or import, for resale; these activities are performed by Medias, Mures
and Bratislava branches;
storage activities, performed by Depogaz and Depomures;
electricity production and distribution activities, performed by Iernut branch;
other activities, such as technological transport, operations on wells and corporate activities.
Transactions between the companies within the Group are at current market prices. Unrealized profits are
eliminated in the financial statements.
Transactions between Groups segments within the same company are at cost.
Revenue recognition
a)
Revenue from contracts with customers
The Group recognizes customer contracts when all of the following criteria are met:
the parties to the contract have approved the contract and are committed to perform their respective obligations;
the Group can identify each party’s rights regarding the goods or services to be transferred;
the Group can identify the payment terms;
the contract has commercial substance;
it is probable that the Group will collect the consideration to which it will be entitled in exchange for the goods
delivered or the services provided.
Revenue from contracts with customers is recognized when, or as the Group transfers the goods or services to the
customer, respectively, the client obtains control over them.
Depending on the nature of the goods or services, revenues are recognized over time or at a point in time.
Revenue is recognized over time if:
the customer receives and consumes simultaneously the benefits provided by obtaining the goods and services
as the Group performs the obligation;
the Group creates or enhances an asset that the customer controls as the asset is created or enhanced;
the Group`s performance does not create an asset with an alternative use to the Group.
All other revenues that do not meet the above criteria are recognized at a point in time.
For revenue to be recognized over time, the Group assesses progress towards meeting the execution obligation,
using output methods or input methods, depending on the nature of the good or service transferred to the client.
Revenues are recognized only if the Group can reasonably assess the result of the execution obligation or, if it
cannot be estimated, only at the level of the costs it is expected to recover from the customer.
Revenue from contracts with customers mainly relates to gas sales, electricity supply and related services, storage
services. Revenue from these contracts are recognized at a point in time on the basis of the actual quantities at the
prices fixed in the contracts concluded or at the rates set by the regulatory authority, as the case may be.
Contracts concluded by the Group do not contain significant financing components.
b)
Other revenue
Rental revenue for operating lease contracts where the Group operates as lessor is recognized on an accrual basis
in accordance with the substance of the relevant agreements.
Interest income is recognized periodically and proportionally as the respective income is generated, on accrual basis.
Dividends are recognized as income when the legal right to receive them is established.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
10
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Exploration expenses
The costs of seismic exploration, geological, geophysical and other similar exploration activities are recognized as
exploration expenses in the statement of comprehensive income in the period in which they arise.
Exploration expenses also include the cost of exploration assets that have not identified gas resources and have
been written-off.
Foreign currencies
The functional currency is the currency of the primary economic environment in which the Group operates and is the
currency in which the Group primarily generates and expends cash. The Group operates in Romania and it has the
Romanian Leu (RON) as its functional currency.
In preparing the financial statements of the Group, transactions in currencies other than the functional currency
(foreign currencies) are recorded at the exchange rates prevailing at the dates of the transactions. At each reporting
date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date.
Exchange differences are recognized in the statement of comprehensive income in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Employee benefits
Benefits granted upon retirement
In the normal course of business, the Group makes payments to the Romanian State on behalf of its employees at legal
rates. All employees of the Group are members of the Romanian State pension plan. These costs are recognized in the
statement of comprehensive income together with the related salary costs.
Based on the Collective Labor Agreement, the Group is liable to pay to its employees at retirement a number of gross
salaries, according to the years worked in the gas industry/electrical industry, work conditions etc. To this purpose,
the Group recorded a provision for benefits upon retirement. This provision is updated annually and computed
according to actuary methods based on estimates of the average salary, the average number of salaries payable
upon retirement, on the estimate of the period when they shall be paid and it is brought to present value using a
discount factor based on interest related to a maximum degree of security investments (government securities). As
the benefits are payed, the provision is reduced together with the reversal of the provision against income.
Gains or actuarial losses, are recognized in other comprehensive income. These are changes in the present value of
the defined benefit obligation as a result of statistical adjustments and changes in actuarial assumptions. Any other
changes in the provision are recognized in the result of the year.
The Group does not operate any other pension scheme or post-retirement benefit plan and, consequently, has no
obligation in respect of pensions.
Employee participation to profit
The Group records in its financial statements a provision related to the fund for employee participation to profit in
compliance with legislation in force.
Liabilities related to the fund for employee participation to profit are settled in less than a year and are measured at
the amounts estimated to be paid at the time of settlement.
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events,
when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can be made.
Greenhouse gas provisions
The Group recognizes a provision for the deficit between actual CO2 emissions and certificates held, measured at
the best estimate of expenditure required to settle the obligation.
Provisions for decommissioning of wells
Liabilities for decommissioning costs are recognized due to the Group’s obligation to plug and abandon a well,
dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable
estimate of that liability can be made.
The Group recorded a provision for decommissioning wells.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
11
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
This provision was computed based on the estimated future expenditure determined in accordance with local
conditions and requirements and it was brought to present value using the interest rate on long term treasury bonds.
The rate is updated annually.
A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognized.
The item of property, plant and equipment is subsequently depreciated as part of the asset.
The Group applies IFRIC 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities” related to
changes in existing decommissioning, restoration and similar liabilities.
The change in the decommissioning provision for wells is recorded as follows:
a.
b.
c.
subject to b., changes in the liability are added to, or deducted from, the cost of the related asset in the current
period;
the amount deducted from the cost of the asset does not exceed its carrying amount. If a decrease in the
liability exceeds the carrying amount of the asset, the excess is recognized immediately in the statement of
comprehensive income;
if the adjustment results in an addition to the cost of an asset, the Group considers whether this is an
indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the
Group tests the asset for impairment by estimating its recoverable amount, and accounts for any impairment
loss.
Once the related asset has reached the end of its useful life, all subsequent changes of debt are recognized in the income
statement in the period when they occur.
The periodical unwinding of the discount is recognized periodically in the comprehensive income as a finance cost, as it
occurs.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in
other periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on the differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method.
Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are
generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in associates
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary
differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
12
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current tax for the period is recognized as an expense in the statement of comprehensive income. Deferred tax for
the period is recognized as an expense or income in the statement of comprehensive income, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or
where it arises from the initial accounting for a business combination. In the case of a business combination, the tax
effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair
value of the acquirer’s identifiable assets, liabilities and contingent liabilities over cost.
Property, plant and equipment
(1)
Cost
(i)
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing
the asset into the location and condition necessary for it to be capable of operating in the manner intended by
management and the initial estimate of any decommissioning obligation. The purchase price or construction cost is
the aggregate amount paid and the fair value of any other consideration given to acquire the asset.
(ii)
Gas cushion
This is a quantity of natural gas constituted as a reserve at the level of gas storages, physically recoverable, which
ensures the optimum conditions necessary to maintain their technical-productive flow characteristics. The gas
cushion is recorded as an item of property, plant and equipment in the Storage segment.
(iii) Development expenditure
Expenditure on the construction, installation and completion of infrastructure facilities such as platforms, pipelines
and the drilling of development wells, including the commissioning of wells, is capitalized within property, plant and
equipment and is depreciated from the commencement of production as described below in the property, plant and
equipment accounting policies.
(iv) Maintenance and repairs
The Group does not recognize within the assets’ costs the current expenses and the accidental expenses for that asset.
These costs are expensed in the period in which they are incurred.
The cost for current maintenance are mainly labor costs and consumables and also small inventory items. The purpose of
these expenses is usually described as “repairs and maintenance” for property, plant and equipment.
The expenses with major activities, inspections and repairs comprise the replacement of the assets or other asset’s
parts, the inspection cost and major overhauls. These expenses are capitalized if an asset or part of an asset, which
was separately depreciated, is replaced and is probable that they will bring future economic benefits for the Group. If
part of a replaced asset was not considered as a separate component and, as a result, was not separately
depreciated, the replacement value will be used to estimate the net book value of the asset which is replaced and is
immediately written-off. The inspection costs associated with major overhauls are capitalized and depreciated over
the period until next inspection.
The cost for major overhauls for wells are also capitalized and depreciated using the unit of production depreciation
method.
All other costs with the current repairs and usual maintenance are recognized directly in expenses.
(2)
Depreciation
The depreciable amount of a tangible asset is the cost less the residual value of the asset. The residual value is the
estimated value that the Group would currently obtain from the disposal of an asset, after deducting the estimated
costs associated with the disposal if the asset would already have the age and condition expected at the end of its
useful life.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
13
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
For directly productive tangible assets (natural gas resources extraction wells), the Group applies the depreciation
method based on the unit of production in order to reflect in the statement of comprehensive income, an expense
proportionate with the production obtained from the total natural gas reserve certified at the beginning of the period.
According to this method, the value of each production well is depreciated according to the ratio of the natural gas
quantity extracted during the period compared to the proved developed reserves at the beginning of the period.
Assets representing gas cushion are not depreciated, as the residual value exceeds their cost.
For indirectly productive tangible assets and storage assets, depreciation is computed using the straight–line method
over the estimated useful life of assets, as follows:
Asset
Specific buildings and constructions
Technical installations and machines
Other plant, tools and furniture
Years
10 - 50
3 - 20
3 – 30
Land is not depreciated as it is considered to have an indefinite useful life.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet
determined, are carried at historical cost, less any recognized impairment loss. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
Items of tangible fixed assets that are disposed of are eliminated from the statement of financial position along with
the corresponding accumulated depreciation and impairment. Any gain or loss resulting from such retirement or
disposal is included in the result of the period.
For items of tangible fixed assets that are retired from use, but not yet written off by the reporting date, an impairment
adjustment is recorded for the carrying value at the time of retirement.
(3)
Impairment
Non-current assets must be recognized at the lower of the carrying amount and recoverable amount. If and only if the
recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset should be reduced
to be equal to its recoverable amount. Such a reduction represents an impairment loss that is recognized in the result
of the period.
Thus at the end of each reporting period, the Group assesses whether there is any indication of impairment of assets.
If such indication is identified, the Group tests the assets to determine whether they are impaired.
The Group’s assets are allocated to cash-generating units. The cash-generating unit is the smallest identifiable asset
group that generates independent cash inflows to a large extent from cash inflows generated by other assets or asset
groups. The Group considers each commercial field as a separate cash-generating unit.
All gas storages held by the Group are considered as part of a single cash-generating unit, as the regulatory authority
sets regulated tariffs by analyzing the storage activity as a whole, not every single storage.
In 2020, the Group conducted an impairment test in the Upstream segment, as the conditions existing when the
previous test was conducted changed; the results of the impairment test are presented in note 12.
In 2020, no indications of impairment were observed for storage assets..
Recoverable amount is the largest of the fair value of an asset or a cash-generating unit less costs associated with
disposal and its value in use. Considering the nature of the Group's assets, it was not possible to determine the fair
value of the cash-generating units, being determined only the value in use of the assets.
Exploration and appraisal assets
(1)
Cost
Natural gas exploration (other than seismic, geological, geophysical and other similar activities), appraisal and
development expenditure is accounted for using the principles of the successful efforts method of accounting.
Costs directly associated with an exploration well are initially capitalized as an asset until the drilling of the well is
complete and the results have been evaluated. These costs include employee remuneration, materials and fuel used,
drilling costs and payments made to contractors. If potentially commercial quantities of hydrocarbons are not found,
the exploration well is eliminated from the statement of financial position, by recording an impairment, until National
Agency for Mineral Resources (Agentia Nationala pentru Resurse Minerale – ANRM) approvals are obtained in order
to be written off. If hydrocarbons are found and, subject to further appraisal activity, are likely to be capable of
commercial development, the costs continue to be carried as an asset. Costs directly associated with appraisal
activity, undertaken to determine the size, characteristics and commercial potential of a reservoir following the initial
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
14
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
discovery of hydrocarbons, including the costs of appraisal wells where hydrocarbons were not found, are initially
capitalized as an asset. All such carried costs are subject to technical, commercial and management review at least
once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no
longer the case, an impairment is recorded for the assets, until the completion of the legal steps necessary for them
to be written off. When proved reserves of natural gas are determined and development is approved by management,
the relevant expenditure is transferred to property, plant and equipment other than exploration assets.
(2)
Impairment
At each reporting date, the Group's management reviews its exploration assets and establishes the necessity for
recording in the financial statements an impairment loss in these situations:
the period for which the Group has the right to explore in the specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
substantive expenditure on further exploration for and evaluation of gas resources in the specific area is
neither budgeted nor planned;
exploration for and evaluation of gas resources in the specific area have not led to the discovery of
commercially viable quantities of gas resources and the Group has decided to discontinue such activities in
the specific area;
sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
Other intangible assets
(1)
Cost
Licenses for software, patents and other intangible assets are recognized at acquisition cost.
Intangible assets are not revalued.
(2)
Amortization
Patents and other intangible assets are amortized using the straight-line method over their useful life, but not
exceeding 20 years. Licenses related to the right of use of computer software are amortized over a period of 3 years.
Inventories
Inventories are recorded initially at cost of production, or acquisition cost, depending on the case. The cost of finished
goods and production in progress includes materials, labour, expense incurred for bringing the finished goods at the
location and in the existent form and the related indirect production costs. Write down adjustments are booked
against slow moving, damaged and obsolete inventory, when necessary.
At each reporting date, inventories are measured at the lower of cost and net realizable value. The net realizable
value is estimated based on the selling price less any completion and selling expenses. The cost of inventories is
assigned by using the weighted average cost formula.
Financial assets and liabilities
The Group’s financial assets include cash and cash equivalents, trade receivables, other receivables, loans, bank
deposits and bonds with a maturity from acquisition date of over three months and other investments in equity
instruments. Financial liabilities include interest-bearing bank borrowings and overdrafts and trade and other
payables. For each item, the accounting policies on recognition and measurement are disclosed in this note.
Management believes that the estimated fair values of these instruments approximate their carrying amounts.
Cash and cash equivalents include petty cash, cash in current bank accounts and short-term deposits with a maturity
of less than three months from the date of acquisition.
The Group recognizes a financial asset or financial liability in the statement of financial position when and only when
it becomes a party to the contractual provisions of the instrument. Upon initial recognition, financial assets are
classified at amortized cost or measured at fair value through profit or loss. The classification depends on the Group's
business model for managing the financial assets and their contractual cash flows.
The Group does not have financial assets measured at fair value through other comprehensive income.
On initial recognition, financial assets and financial liabilities are measured at fair value plus or minus, in the case of
assets measured at amortized cost, transaction costs that are directly attributable to the acquisition or issue of the
financial asset or financial liability.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
15
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Receivables resulting from contracts with customers represent the unconditional right of the Group to a consideration.
The right to a consideration is unconditional if only the passage of time is required before payment of the
consideration is due. These are measured at initial recognition at the transaction price.
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial
liability is measured at initial recognition minus principal repayments plus or minus cumulative depreciation using the
effective interest method for each difference between the initial amount and the amount at maturity and, for financial
assets, adjusted for any impairment.
Any difference between the entry amount and the reimbursement amount is recognized in the income statement for
the period of the borrowings using the effective interest method.
Financial instruments are classified as liabilities or equity in accordance with the nature of the contractual
arrangement. Interest, dividends, gains and losses on a financial instrument classified as a liability are reported as
expense or income. Distributions to holders of financial instruments classified as equity are recorded directly in
equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle
either on a net basis or to realize the asset and discharge the obligation simultaneously.
Impairment of financial assets
Financial assets, other than those at fair value through profit and loss, are assessed for indicators of impairment at
each reporting period.
Except for trade receivables, the Group measures the loss allowance for a financial instrument at an amount equal to
the lifetime expected credit losses if the credit risk associated with the financial instrument, has increased significantly
since initial recognition. If, at the reporting date, the credit risk for a financial instrument has not increased
significantly since the initial recognition, the Group measures the loss allowance for that financial instrument at a
value equal to 12-month expected credit losses.
The loss allowance on trade receivables resulting from transactions that are subject to IFRS 15 is measured at an
amount equal to lifetime expected credit losses. The Group considers the risk or probability of a default occurring,
reflecting the possibility of a default to occur or not to occur, even if the possibility of a credit loss is very low.
The Group measures the expected credit losses of a financial instrument in a manner that reflects reasonable and
supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
The carrying amount of the financial asset, other than those at fair value through profit or loss, is reduced through the
use of an allowance account.
De-recognition of financial assets and liabilities
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or they expire.
Reserves
Reserves include (note 18):
legal reserves, which are used annually to transfer to reserves up to 5% of the statutory profit, but not more
than 20% of the statutory share capital of the companies within the Group;
other reserves, which represent allocations from profit in accordance with Government Ordinance no. 64/2001,
paragraph (g) for the Company’s development fund;
reserves from reinvested profit, set up based on the Fiscal Code. The amount of profit that benefited from tax
exemption under the fiscal legislation less the legal reserve, is distributed at the end of the year by setting up
the reserve;
development quota reserve, non-distributable, set up until 2004. Development quota reserve set up after 2004
is distributable and presented in retained earnings. Development quota set up after 2004 is allocated together
with the profit allocation, as approved by the General Meeting of Shareholders, based on depreciation,
respectively write-off of the assets financed using the development quota;
other non-distributable reserves, set up from retained earnings representing translation differences recorded at
transition to IFRS. These reserves are set up in accordance with MOF 2844/2016.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
16
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Subsidies
Subsidies are non-reimbursable financial resources granted to the Group with the condition of meeting certain
criteria. In the category of subsidies are included grants related to assets and grants related to income.
Grants related to assets are government grants for whose primary condition is that the Group should purchase,
construct, or otherwise acquire long-term assets.
Grants related to income are government grants other than those related to assets.
Subsidies are not recognized until there is reasonable assurance that:
(a)
(b)
the Group will comply with the conditions attaching to it; and
subsidies will be received.
Grants related to assets are presented in the statement of financial position as “Deferred revenue”, which is then
recognized in profit or loss on a systematic basis over the useful life of the asset.
Grants related to income are recognized in the statement of profit or loss under "Other income", as the related
expenses are recorded. Until the time the expense occurs, the grant received is recognized as “Deferred revenue”.
Use of estimates
The preparation of the financial information requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the end of reporting
date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from
these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgments that the management has made in the process of applying the Group’s
accounting policies, and that have the most significant effect on the amounts recognized in the financial statements.
Estimates related to impairment losses on trade receivables
At each period end, the Group evaluates the risks attached to current and overdue receivables and the probability of
such risks to materialize. The Group’s receivables are generally due in maximum 30 days from the date of issue.
However, the Group may be forced by court decisions to sell gas to insolvent clients deemed “captive” according to
insolvency legislation. Invoices issued to these clients for gas delivered are due in 90 days from the date of issue.
Based on the information available at period end related to such clients and previous experience, the Group
estimates the lifetime expected credit loss of receivables, both current and overdue, and records appropriate
impairment losses (note 16).
Estimates related to the exploration expenditure on undeveloped fields
If field works prove that the geological structures are not exploitable from an economic point of view or that they do
not have hydrocarbon resources available, an impairment is recorded. The impairment assessment is performed
based on geological experts’ technical expertise (note 7).
Estimates related to the developed proved reserves
The Group applies the depreciation method based on the unit of production in order to reflect in the income statement
an expense proportionate with the production obtained from the total natural gas reserve at the beginning of the
period. According to this method, the value of each production well is depreciated according to the ratio of the natural
gas quantity extracted during the period compared to the gas reserve at the beginning of the period. The gas
reserves are updated annually according to internal assessments that are based on certifications of ANRM (note 7).
Estimates related to the decommissioning provision
Liabilities for decommissioning costs are recognized for the Group’s obligation to plug and abandon a well, dismantle
and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of
that liability can be made.
This provision is computed based on the estimated future expenditure determined in accordance with local conditions
and requirements and it is brought to present value using the interest rate on long term treasury bonds. The rate is
updated annually (note 19).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
17
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Estimates related to the retirement benefit obligation
Under the Collective Labor Agreement, the Group is obliged to pay to its employees when they retire a multiplicator
of the gross salary, depending on the seniority within the gas industry/electricity industry, working conditions etc. This
provision is updated annually and calculated based on actuarial methods to estimate the average wage, the average
number of employees to pay at retirement, the estimate of the period when they will be paid and brought to present
value using a discount factor based on interest on investments with the highest degree of safety (government bonds)
(note 19).
The Group does not operate any other pension plan or retirement benefits, and therefore has no other obligations
relating to pensions.
Contingencies
By their nature, contingencies end only when one or more uncertain future events occur or not. In order to determine
the existence and the potential value of a contingent element, is required to exercise the professional judgment and
the use of estimates regarding the outcome of future events (note 32).
Comparative information
For each item of the statement of financial position, the statement of comprehensive income and, where is the case,
for the statement of changes in equity and for the statement of cash flows, for comparative information purposes is
presented the value of the corresponding item for the previous period ended, unless the changes are insignificant. In
addition, the Group presents an additional statement of financial position at the beginning of the earliest period
presented when there is a retrospective application of an accounting policy, a retrospective restatement, or a
reclassification of items in the financial statements, which has a material impact on the Group.
3.
REVENUE AND OTHER INCOME
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Revenue from gas sold - domestic production
Revenue from gas sold – other arrangements
Revenue from gas acquired for resale – import gas
Revenue from gas acquired for resale – domestic
gas
Revenue from storage services-capacity
reservation
Revenue from storage services-extraction
Revenue from storage services-injection
Revenue from electricity
Revenue from services
Revenue from sale of goods
Other revenues from contracts
Total revenue from contracts with customers
Other revenues
Total revenue
Other operating income *)
Total revenue and other income
3,226,448
66,915
-
15,545
282,363
43,151
49,343
189,289
175,877
18,192
367
4,067,490
7,403
4,074,893
25,439
4,100,332
4,151,626
128,737
77,867
23,368
265,962
22,410
42,418
145,714
184,564
30,243
402
5,073,311
7,171
5,080,482
32,834
5,113,316
*) Other operating income relates mainly to penalties charged to clients for late payment.
Revenue from contracts with customers is recognized as or when the Group satisfies a performance obligation by
transferring a promised good or service to a customer. A good or service is transferred when the customer obtains
control of that good or service. The transfer of control of goods sold by the Group usually coincides with title passing
to the customer and the customer taking physical possession.
Revenues from gas and electricity are recognized when the delivery has been made at the prices fixed in the
contracts with customers.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
18
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Revenues from storage services are recognized when they are provided at the rates set by the regulatory authority.
Usually, injection services are provided in the period April – October, and those for extraction in October – April. The
capacity reservation services are being provided each month of the storage cycle, which begins on April 1 and ends
on March 31 of the next year.
In measuring the revenue from gas, electricity and storage services, the Group uses output methods. According to
these methods, revenues are recognized based on direct measurements of the value to the customer of the goods or
services transferred to date relative to the remaining goods or services promised under the contract. The Group
recognizes the revenue in the amount it has the right to charge.
The Group does not disclose information about the remaining performance obligations, applying the practical
expedient in IFRS 15, as the contracts with the customers are generally signed for periods of less than one year and
the revenues are recognized at the amount which the Group has the right to charge.
4.
INVESTMENT INCOME
Interest income
Total
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
47,845
47,845
38,124
38,124
Interest income is derived from the Group’s investments in bank deposits and government bonds.
5.
COST OF COMMODITIES SOLD, RAW MATERIALS AND CONSUMABLES
Consumables used
Technological consumption
Cost of gas acquired for resale, sold – import
Cost of gas acquired for resale, sold – domestic
Cost of electricity imbalance
Cost of other goods sold
Other consumables
Total
6.
OTHER GAINS AND LOSSES
Forex gain
Forex loss
Net loss on disposal of non-current assets
Net allowances for other receivables (note 16 c)
Net write down allowances for inventory (note 15)
Net gain/(loss) on financial assets at fair value
through profit or loss (note 26)
Other gains and losses from lease contracts
Losses from other debtors
Total
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
35,005
19,257
-
7,650
10,375
592
4,020
76,899
40,338
32,143
74,410
9,863
22,414
1,114
3,566
183.848
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
52
(291)
(7)
2,151
(8,427)
(10)
-
(2)
(6,534)
2,579
(2,029)
2,542
13,926
(5,125)
(4,424)
52
(2)
7,519
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
19
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
7.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT EXPENSES
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Depreciation and amortization *)
out of which:
- depreciation of property, plant and equipment
- amortization of intangible assets
- amortization of write-of use assets
Net impairment of non-current assets (note 12) **)
Total depreciation, amortization and impairment
448,371
445,327
2,130
914
223,692
672,063
520,957
517,833
2,376
748
930,809
1,451,766
*) The decrease in the depreciation expense for property, plant and equipment is due to a reduction in natural gas
production, as they are depreciated using the unit of production method, as mentioned in note 2.
**) Net impairment of non-current assets have decreased as compared to the previous year as in 2020 the Group did
not record any impairment losses from impairment tests unlike 2019. More information on the impairment test
performed in 2020 is presented in note 12.
8.
EMPLOYEE BENEFIT EXPENSE
Wages and salaries
Social security charges
Meal tickets
Other benefits according to collective labor contract
Private pension payments
Private health insurance
Total employee benefit costs
Less, capitalized employee benefit costs
Total employee benefit expense
9.
FINANCE COSTS
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
798,382
28,044
23,231
20,613
11,763
5,980
888,013
(120,762)
767,251
717,927
20,589
19,044
29,865
10,783
-
798,208
(127,800)
670,408
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Interest expense
Unwinding of the decommissioning provision (note
19)
Total
593
16,407
17,000
543
24,197
24,740
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
20
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
10. OTHER EXPENSES
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Energy and water expenses
Expenses for capacity booking and gas
transmission services
Expenses with other taxes and duties *)
(Net gain)/Net loss from provisions movement (note
19)
Other operating expenses **)
Total
40,945
167,937
633,160
90,740
225,361
1,158,143
61,428
164,142
1,070,181
(57,162)
313,053
1,551,642
*) In the year ended December 31, 2020, the major taxes and duties included in the amount of RON 633,160
thousand (year ended December 31, 2019: RON 1,070,181 thousand) are:
RON 414,943 thousand represent windfall tax resulting from the deregulation of prices in the natural gas
sector according to Government Ordinance no. 7/2013 with the subsequent amendments for the
implementation of the windfall tax following the deregulation of prices in the natural gas sector (year ended
December 31, 2019: RON 716,908 thousand);
RON 196,875 thousand represent royalty on gas production and storage activity (year ended December 31,
2019: RON 342,992 thousand).
**) At the start of 2020, the monetary contribution from license holders in the electric power and natural gas sectors
of 2% from revenues obtained from the activities under the scope of licenses granted by the Romanian Regulatory
Authority for Energy (“ANRE”), as introduced by Government Emergency Ordinance no. 114/2018, was repealed.
The 2019 operating expenses of RON 313,053 thousand included this contribution of RON 86,975 thousand. In 2020
the contribution paid to ANRE was of RON 12,883 thousand.
In 2020 other operating expenses of RON 225,361 thousand include an expense of RON 24,284 thousand
representing dividends deemed by ANAF as payable to the Romanian state according to the provisions of
Government Emergency Ordinance no. 114/2018. The Company did not agree with the conclusions of the report and
started legal actions against it. The deemed dividends attributable to the main shareholder and related penalties were
offset by ANAF against receivables of the Company from ANAF, although the Company requested the receivables to
be offset against other tax liabilities when due. As there is no shareholders’ decision to allocate additional dividends,
the amount offset by ANAF was expensed.
11.
INCOME TAX
Current tax expense *)
Deferred income tax (income)/expense
Income tax expense
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
220,285
(41,681)
178,604
293,400
(107,843)
185,557
*) The 2020 current tax expense of RON 220,285 thousand includes additional income tax of RON 6,923 thousand,
as determined by ANAF following a tax audit for the period 2014-2018; the Company filed a complaint against the
report. The tax audit report included penalties of RON 37,941 thousand, which were written-off due to facilities
introduced by Government Emergency Ordinance no. 69/2020.
The tax rate used for the reconciliations below for the year ended December 31, 2020, respectively year ended
December 31, 2019 is 16% payable by corporate entities in Romania on taxable profits.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
21
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
The total charge for the period can be reconciled to the accounting profit as follows:
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Accounting profit before tax
(Profit)/loss of activities not subject to income tax
Accounting profit subject to income tax
Income tax expense calculated at 16%
Effect of income exempt of taxation
Effect of expenses that are not deductible in
determining taxable profit
Effect of current income tax reduction, due to tax
facilities
Effect of tax incentive for reinvested profit
Effect of legal reserves
Effect of the benefit from tax credits, used to reduce
current tax expense
Effect of deferred tax relating to the origination and
reversal of temporary differences
Effect of the benefit from tax credits, used to reduce
deferred tax expense
Effect of the previous years’ tax expense
Income tax expense
Components of deferred tax (asset)/liability:
1,426,508
6,298
1,432,806
229,249
(39,800)
68,978
(11,023)
(9,950)
(579)
27,362
(57,632)
(34,924)
6,923
178,604
1,275,180
1,821
1,277,001
204,320
(44,977)
171,689
(15,054)
(2,746)
(390)
28,791
(145,040)
(11,036)
-
185,557
December 31, 2020
December 31, 2019
Cumulative
temporary
differences
'000 RON
Deferred tax
(asset)/ liability
'000 RON
Cumulative
temporary
differences
'000 RON
Deferred
tax (asset)/
liability
'000 RON
Provisions
Property, plant and equipment
Exploration assets *)
Financial investments
Inventory
Trade receivables and other receivables
Right of use asset
Deferred revenue
Lease liability
Other intangible assets
(736,102)
274,492
(828,989)
(977)
(29,817)
(395,488)
474
9
(507)
(3,900)
(117,776)
43,919
(132,638)
(156)
(4,771)
(63,278)
76
1
(81)
(624)
(540,560)
236,238
(928,679)
(977)
(17,940)
(191,509)
554
17
(567)
(86,490)
37,798
(148,589)
(156)
(2,870)
(30,641)
89
3
(91)
Total
(1,720,805)
(275,328)
(1,443,423)
(230,947)
Change, out of which:
-
-
in current year’s result
in other comprehensive
income
44,381
41,681
2,700
103,456
107,843
(4,387)
*) According to the Fiscal Code applicable in Romania, expenses related to location, exploration, development or any
preparatory activity for the exploitation of natural resources, which, according to the applicable accounting
regulations, are recorded directly in the result, are recovered in equal rates for a period of 5 years, starting with the
month in which the expenses are incurred. Also, for fixed assets specific to the exploration and production of gas
resources, the carrying tax value of fixed assets written-off is deducted using the tax depreciation method used
before their write-off for the remaining period. All of these costs are treated as assets only from a tax point of view
and generate a deferred tax asset.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
22
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
12.
PROPERTY, PLANT AND EQUIPMENT
Land and
land
improvements
'000 RON
Buildings
'000 RON
Gas
properties
'000 RON
Plant,
machinery
and
equipment
'000 RON
Fixtures,
fittings and
office
equipment
'000 RON
Storage
assets
'000 RON
Tangible
exploration
assets
'000 RON
Capital
work in
progress
'000 RON
Total
'000 RON
Cost
As of January 1, 2020
109,368
909,979
6,730,173
1,017,465
104,110
1,693,062
402,445
1,794,654
12,761,256
Additions
Transfers
Disposals
8,049
254
-
1
7,477
(1,342)
130,268
259,441
(16,051)
9
82,079
(8,928)
-
10,876
(286)
9,819
20,109
(506)
66,516
(4,690)
554,384
(375,546)
769,046
-
(130,665)
(58,493)
(216,271)
As of December 31, 2020
117,671
916,115
7,103,831
1,090,625
114,700
1,722,484
333,606
1,914,999
13,314,031
Accumulated depreciation
As of January 1, 2020
Charge *)
Disposals
As of December 31, 2020
Impairment
-
-
-
-
As of January 1, 2020
8,255
Charge
Transfers
Release
-
-
-
30,872
(839)
(3,014)
358,880
4,325,133
40,306
1,664
-
(382)
493,729
85,085
25,804
(50,993)
328,847
4,022,145
646,360
77,281
648,959
306,002
66,428
(8,882)
703,906
7,141
(286)
84,136
56,536
(69)
705,426
-
-
-
-
-
-
-
-
5,723,592
466,979
(13,090)
6,177,481
80,567
1,148
378,332
245,532
246,618
1,494,487
557
2,374
(400)
76
-
(19)
(11,341)
100,189
-
-
(656)
(132,323)
106,849
(28,178)
(69,365)
283,079
-
(254,138)
As of December 31, 2020
8,255
41,588
553,625
83,098
1,205
366,335
213,398
255,924
1,523,428
Carrying value
As of January 1, 2020
101,113
540,826
2,214,299
290,538
25,681
665,771
156,913
1,548,036
5,543,177
As of December 31, 2020
109,416
515,647
2,225,073
303,621
29,359
650,723
120,208
1,659,075
5,613,122
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 21,649 thousand.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
23
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Land and
land
improvements
'000 RON
Buildings
'000 RON
108,954
374
40
-
892,035
18
18,209
(283)
Gas
properties
'000 RON
6,454,087
16,346
466,419
(206,679)
Plant,
machinery
and
equipment
'000 RON
984,695
25
41,290
(8,545)
Fixtures,
fittings and
office
equipment
'000 RON
102,099
21
4,124
(2,134)
Storage
assets
'000 RON
1,718,601
-
9,035
(34,574)
Tangible
exploration
assets
'000 RON
332,457
210,521
(117,482)
(23,051)
Capital
work in
progress
'000 RON
1,565,368
673,880
(421,635)
(22,959)
Total
'000 RON
12,158,296
901,185
-
(298,225)
Cost
As of January 1, 2019
Additions
Transfers
Disposals
As of December 31, 2019
109,368
909,979
6,730,173
1,017,465
104,110
1,693,062
402,445
1,794,654
12,761,256
Accumulated depreciation
As of January 1, 2019
Charge *)
Transfers
Disposals
As of December 31, 2019
Impairment
As of January 1, 2019
Charge
Transfers
Release
297,747
3,671,297
590,345
72,921
589,044
-
-
-
-
-
31,348
-
(248)
370,794
5,906
(25,852)
64,108
-
(8,093)
328,847
4,022,145
646,360
3,180
5,075
-
-
31,523
11,893
931
(4,041)
390,424
179,095
24,890
(100,680)
71,226
4,526
6,808
(1,993)
80,567
6,463
-
(2,103)
77,281
909
288
279
(328)
68,617
(5,906)
(2,796)
648,959
3,521
375,073
-
(262)
-
-
-
-
-
-
-
-
-
-
37,266
231,409
(84)
(23,059)
119,145
192,449
(32,824)
(32,152)
5,221,354
541,330
-
(39,092)
5,723,592
657,194
999,808
-
(162,515)
1,148
378,332
245,532
246,618
1,494,487
As of December 31, 2019
8,255
40,306
493,729
Carrying value
As of January 1, 2019
105,774
562,765
2,392,366
323,124
28,269
1,126,036
295,191
1,446,223
6,279,748
As of December 31, 2019
101,113
540,826
2,214,299
290,538
25,681
665,771
156,913
1,548,036
5,543,177
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 23,498 thousand.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
24
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
Impairment of property, plant and equipment
Note 2 contains information on the conditions under which impairment losses for individual assets are recognized.
Impairment of assets in the Upstream segment
Based on the current market conditions (the effects of the COVID-19 pandemic on Romanian economy, 2020 gas
production 14% lower compared to previous year, lower gas prices), the Group identified impairment indicators for its
upstream assets.
Based on its assessment, the Group considered each commercial field a separate cash-generating unit. The
infrastructure common to several gas fields (e.g., compression stations, drying stations) was allocated to each field
according to the quantities processed for each field served. The corporate assets were allocated to each field
according to the estimated revenue to be earned by each field in the total revenue over the period considered in the
impairment test.
The impairment test took into account the economic life of the fields, according to the latest studies approved by the
National Agency of Mineral Resources, but no later than 2043, this being the limit year of the concession agreements,
according to the legislation in force.
Following the impairment test, there was no additional impairment identified.
In the impairment test the following assumptions were used:
Weighted average cost of capital: 10%;
The inflation rate for the years 2021-2023 was the one reported by the National Prognosis Commission in the
2021 winter forecast. For the period 2024-2043 a constant inflation rate of 2.4% was used;
Average estimated price for the period was 87.51 lei/MWh.
13.
EXPLORATION AND APPRAISAL FOR NATURAL GAS RESOURCES
The following financial information represents the amounts included within the Group’s totals relating to activity
associated with the exploration for and appraisal of natural gas resources. All such activities are recorded within the
Upstream segment.
Exploration assets written off (note 12)
Seismic, geological, geophysical studies
Total exploration expense
Net movement in exploration assets’ impairment
(note 12) (net income)/net loss
Net cash used in exploration investing activities
Exploration assets (note 12)
Liabilities
Net assets
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
(836)
(25,673)
(26,509)
97,695
(66,516)
(123)
(1,513)
(1,636)
231,278
(173,563)
December 31, 2020
'000 RON
December 31, 2019
'000 RON
120,208
(5,285)
114,923
156,913
(49,270)
107,643
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
25
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2020
14. OTHER INTANGIBLE ASSETS. RIGHT OF USE ASSETS
a) Other intangible assets
2020
'000 RON
2019
'000 RON
Cost
As of January 1
Additions
Disposals
As of December 31
Accumulated amortization
As of January 1
Charge
Disposals
As of December 31
Carrying value
As of January 1
As of December 31
b) Right of use assets
Cost
As of January 1
Implementation of IFRS 16 “Leases”
Additions
Effects of rent index updates
Disposals
As of December 31
Accumulated amortization
As of January 1
Charge
Disposals
As of December 31
Carrying value
As of January 1
As of December 31
186,136
7,990
(7,227)
186,899
176,972
2,130
(6,977)
172,125
9,164
14,774
179,658
6,593
(115)
186,136
174,688
2,376
(92)
176,972
4,970
9,164
2020
'000 RON
2019
'000 RON
9,275
-
-
239
-
9,514
685
914
-
1,599
8,590
7,915
-
4,959
5,036
-
(720)
9,275
-
748
(63)
685
-
8,590
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
26
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
15.
INVENTORIES
Spare parts and materials
Finished goods (gas)
Other inventories
Write-down allowance for spare parts and materials
Write-down allowance for other inventories
Total
16. ACCOUNTS RECEIVABLE
a)
Trade and other receivables
Trade receivables
Allowances for expected credit losses (note 16 c)
Accrued receivables
Allowances for expected credit losses on accrued
receivables (note 16 c)
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
171,990
123,638
686
(51,747)
(4)
244,563
170,030
183,842
465
(43,323)
(1)
311,013
December 31, 2020
'000 RON
December 31, 2019
'000 RON
1,561,742
(1,279,164)
312,991
(2,694)
592,875
1,554,652
(1,252,267)
382,915
(47,142)
638,158
Trade receivables from gas deliveries are generally due within 30 days of invoice issue. These must be guaranteed
by customers through bank letters of guarantee. If customers do not provide such a guarantee, they must ensure that
natural gas is paid in advance.
The Group is forced by court orders to sell gas to insolvent clients considered “captive” by the insolvency law. These
clients provide no guarantees, do not pay for deliveries in advance and have a payment term of 90 days from invoice
issue date.
Trade receivables from the sale of electricity are generally due within 7 days of the date of invoice transmission.
These must be guaranteed by customers through bank letters of guarantee. If customers do not provide such a
guarantee, they must ensure that electricity is paid in advance.
Trade receivables from storage services are due within 15 days of invoice issue. Customers must provide a 5%
guarantee for the services value.
b)
Other assets
Advances paid to suppliers
Joint operation receivables
Other receivables *)
Allowance for expected credit losses other
receivables (note 16 c) *)
Other debtors
Allowance for expected credit losses for other
debtors (note 16 c)
Prepayments
VAT not yet due
Other taxes receivable
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
18,374
2,384
64,471
(28,981)
50,079
(49,016)
5,808
4,898
6
68,023
386
2,125
62,343
(33,703)
47,529
(46,445)
3,911
6,339
-
42,485
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
27
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
*) During May 13, 2014 – September 30, 2014 the National Agency for Tax Administration (Agentia Nationala de
Administrare Fiscala - ANAF) ran a tax investigation at Romgaz regarding the tax statements and/or operations
relevant for the investigation as well as the organization and management of tax and accounting evidence. The
period under control was 2008 – 2013 for income tax and 2009 – 2013 for VAT.
Following the tax inspection, an additional liability was established for Romgaz of RON 22,440 thousand,
representing income tax, VAT, penalties and related interest. Of the total amount, Romgaz paid RON 2,389
thousand.
For the remaining amount of RON 20,051 thousand, Romgaz performed a legal assessment which concluded that
the additional tax, penalties and interest are not correct. Romgaz filed an appeal to the Ministry of Public Finance.
The appeal was partially rejected for the amount of RON 15,872 thousand.
For RON 4,179 thousand a new fiscal control was ordered, which resulted in a tax burden of RON 2,981 thousand.
The appeal filed to ANAF was rejected.
In 2015, Romgaz sued the Ministry of Finance to cancel the above mentioned administrative acts, including the
partial cancelation of the decision issued for the appeal.
The payment made in 2016 generated additional penalties of RON 13,697 thousand, also paid. Considering the
disagreement regarding the conclusions of the tax control, the Company recorded a receivable and an allowance.
In 2019, the Company won some of the points claimed in the case filed against ANAF and the allowance of RON
18,499 thousand was reversed against income. The Company took action to recover the amount paid, but the
amounts were not received by December 31, 2020.
During the period December 2016 - April 2017 ANAF resumed the tax inspection on VAT for the period December
2010 – June 2011 and on income tax for the period January 2010 – December 2011, regarding the discounts granted
by Romgaz to interruptible clients for deliveries during 2010 - 2011. This status was attributed to companies by
Transgaz, the Romanian natural gas transmission operator. Following the tax inspection, additional tax obligations of
RON 15,284 thousand were determined, and also penalties and late payment charges in amount of RON 3,129
thousand. The tax decision and the tax inspection report were appealed to ANAF. Romgaz paid the additional tax
obligation and the late payment charges and based on the appeal, the Company recorded a receivable for which it
recorded an allowance.
The total receivable impaired in connection with this control is RON 28,981 thousand.
c)
Changes in the allowance for expected credit losses for trade and other receivables and other assets
At January 1
Charge in the allowance for other receivables (note
6)
Charge in the allowance for trade receivables
Release in the allowance for other receivables (note
6)
Release in the allowance for trade receivables
At December 31
2020
'000 RON
1,379,557
2,792
61,595
(4,943)
(79,146)
1,359,855
2019
'000 RON
1,312,262
4,641
84,783
(18,567)
(3,562)
1,379,557
As of December 31, 2020, the Group recorded allowances for expected credit losses, of which Interagro RON
271,621 thousand (December 31, 2019: RON 275,137 thousand), GHCL Upsom of RON 68,103 thousand
(December 31, 2019: RON 60,183 thousand), CET Iasi of RON 46,271 thousand (December 31, 2019: RON 46,271
thousand), Electrocentrale Galati with RON 226,338 thousand (December 31, 2019: RON 222,075 thousand),
Electrocentrale Bucuresti with RON 576,080 thousand (December 31, 2019: RON 616,330 thousand), G-ON
EUROGAZ of RON 14,848 thousand (December 31, 2019: RON 14,848 thousand) and Electrocentrale Constanta of
RON 58,227 thousand (December 31, 2019: RON 39,113 thousand) due to existing financial conditions of these
clients as well as ongoing litigating cases related to these receivables or exceeding payment terms.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
28
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
d)
Credit risk exposure for trade receivables
December 31, 2020
Current receivables, including accrued
receivables
less than 30 days overdue
30 to 90 days overdue
90 to 360 days overdue
over 360 days overdue
Total trade receivables
December 31, 2019
Current receivables, including accrued
receivables
less than 30 days overdue
30 to 90 days overdue
90 to 360 days overdue
over 360 days overdue
Total trade receivables
17.
SHARE CAPITAL
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
584,068
13,874
4,861
23,890
1,248,040
1,874,733
0.89
3.91
86.85
99.81
100.00
5,210
542
4,222
23,844
1,248,040
1,281,858
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
673,695
14,820
1,460
25,203
1,222,389
1,937,567
7.01
22.24
95.62
99.71
100.00
47,198
3,296
1,396
25,130
1,222,389
1,299,409
December 31, 2020
‘000 RON
December 31, 2019
‘000 RON
385,422,400 fully paid ordinary shares
Total
385,422
385,422
385,422
385,422
The shareholding structure as at December 31, 2020 is as follows:
No. of shares
Value
‘000 RON
Percentage
(%)
The Romanian State through the
Ministry of Economy, Energy and
Business Environment
Legal persons
Physical persons
Total
269,823,080
95,612,507
19,986,813
385,422,400
269,823
95,612
19,987
385,422
70.01
24.81
5.18
100
All shares are ordinary and were subscribed and fully paid as at December 31, 2020. All shares carry equal voting
rights and have a nominal value of RON 1/share (December 31, 2019: RON 1/share).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
29
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
18.
RESERVES
Legal reserves
Other reserves, of which:
- Company’s development fund
- Reinvested profit
- Geological quota set up until 2004
- Other reserves
Total
19.
PROVISIONS
Decommissioning provision (note 19 a)
Retirement benefit obligation (note 19 c)
Total long term provisions
Decommissioning provision (note 19 a)
Litigation provision (note 19 b)
Other provisions *) (note 19 b)
Total short term provisions
Total provisions
December 31, 2020
'000 RON
December 31, 2019
'000 RON
83,537
2,168,372
1,371,257
291,002
486,388
19,725
2,251,909
79,921
1,507,488
772,417
228,958
486,388
19,725
1,587,409
December 31, 2020
'000 RON
December 31, 2019
'000 RON
538,931
128,690
667,621
22,027
1,380
133,008
156,415
824,036
366,393
114,876
481,269
17,843
1,337
63,521
82,701
563,970
*) On December 31, 2020, other provisions of RON 133,008 thousand include the provision for employee’s
participation to profit of RON 36,938 thousand (December 31, 2019: RON 34,412 thousand), the provision for taxes
of RON 6,716 thousand and the provision for CO2 certificates of RON 81,217 thousand (December 31, 2019: RON
23,410). Regarding the CO2 provision, starting 2020 the mechanism for free of charge transitory allocation of
greenhouse gas emissions certificates is no longer available.
a)
Decommissioning provision
Decommissioning provision movement
At January 1
Additional provision recorded against non-current
assets
Unwinding effect (note 9)
Recorded in profit or loss
Decrease recorded against non-current assets
At December 31
2020
'000 RON
384,236
139,913
16,407
24,273
(3,871)
560,958
2019
'000 RON
530,466
16,342
24,197
(51,760)
(135,009)
384,236
The Group makes full provision for the future costs of decommissioning natural gas wells on a discounted basis upon
installation. The provision for the costs of decommissioning these wells at the end of their economic lives has been
estimated using existing technology, at current prices or future assumptions, depending on the expected timing of the
activity, and discounted using a rate of 2.97% (year ended December 31, 2019: 4.41%). While the provision is based
on the best estimate of future costs and the economic lives of the wells, there is uncertainty regarding both the
amount and timing of these costs
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
30
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
The increase with 1 percentage point of the discount rate would decrease the decommissioning provision with RON
105,546 thousand. The decrease with 1 percentage point of the discount rate would increase the decommissioning
provision with RON 139,304 thousand.
b)
Other provisions
At January 1, 2020
Additional provision in period
Provisions used in the period
Unused amounts during the period, reversed
At December 31, 2020
At January 1, 2019
Additional provision in the period
Provisions used in the period
Unused amounts during the period, reversed
At December 31, 2019
c)
Retirement benefit obligation
Movement of the retirement benefit obligation
At 1 January
Interest cost
Cost of current service
Payments during the year
Actuarial (gain)/loss for the period
At December 31
Litigation provision
‘000 RON
Other provisions
‘000 RON
1,337
730
(684)
(3)
1,380
63,521
146,673
(75,759)
(1,427)
133,008
Litigation provision
‘000 RON
Other provisions
‘000 RON
229
2,184
(1,076)
-
1,337
73,064
70,091
(75,589)
(4,045)
63,521
2020
'000 RON
114,876
2,642
5,904
(11,609)
16,877
128,690
Total
‘000 RON
64,858
147,403
(76,443)
(1,430)
134,388
Total
‘000 RON
73,293
72,275
(76,665)
(4,045)
64,858
2019
'000 RON
139,254
3,994
6,686
(7,647)
(27,411)
114,876
With the exception of actuarial gains/losses, all other movements in the retirement benefit obligation are recognized
in the result of the period.
In determining the retirement benefit obligation, the following significant assumptions were used:
No layoffs or restructurings are planned;
Average discount rate: 3.21%;
Average inflation rate: 2.00%.
Sensitivity analysis
The discount rate has a significant effect on the obligation. Isolated change in assumptions with 1 percentage point
would have the following effect on the obligation:
Increase of 1% in assumptions
'000 RON
Decrease of 1% in assumptions
'000 RON
Average discount rate
Average inflation rate
(12,283)
13,860
14,356
(12,099)
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
31
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
Maturity analysis of payment cash flows
Up to 1 year
1-2 years
2-5 years
5-10 years
Over 10 years
20.
DEFERRED REVENUE
Amounts collected from NIP *)
Other deferred revenue
Other amounts received as subsidies
Total long term deferred revenue
Other amounts received as subsidies
Other deferred revenue
Total short term deferred revenue
Total deferred revenue
Benefit payments
'000 RON
7,827
5,224
14,248
53,549
47,842
December 31, 2020
'000 RON
December 31, 2019
'000 RON
136,021
167
120
136,308
8
10,891
10,899
147,207
20,994
123
127
21,244
58
3,671
3,729
24,973
*) In Government Decision no. 1096/2013 approving the mechanism for free allocation of greenhouse gas emission
allowances to electricity producers for the period 2013-2020, Annex no. 3 "National Investment Plan", S.N.G.N.
ROMGAZ S.A. is included with the investment "Combined Gas Turbine Cycle".
For this investment, Romgaz signed in 2017 a financing agreement with the Ministry of Energy, whereby the Ministry
of Energy undertakes to grant a non-reimbursable financing of RON 320,912 thousand, representing a maximum of
25% of the total value of eligible expenditure of the investment. By December 31, 2020 the Group collected RON
136,021 thousand. Amounts received under this contract will be transferred to income based on the depreciation rate
of the investment.
By Government Decision no. 1070/2020 the deadline until the investments financed from the National Investment
Plan must be put into operation has been extended until June 30, 2021.
By December 31, 2020, the Group submitted two other reimbursement requests amounting to RON 140,498
thousand.
As the term of the contract for the realization of the investment was not extended, the Group is in the process of
identifying solutions for completing the works.
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
At January 1, 2020
Received
Other decreases (reimbursements)
Amounts in revenue
At December 31, 2020
20,994
115,027
-
-
136,021
185
-
(50)
(7)
128
Total
'000 RON
21,179
115,027
(50)
(7)
136,149
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
32
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
January 1, 2019
Received
Other increases
Amounts in revenue
December 31, 2019
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
20,994
-
-
-
20,994
257
-
9
(81)
185
Total
'000 RON
21,251
-
9
(81)
21,179
21.
TRADE AND OTHER CURRENT LIABILITIES
December 31, 2020
'000 RON
December 31, 2019
'000 RON
Accruals
Trade payables
Payables to fixed assets suppliers
Total trade payables
Payables related to employees
Royalties
Social security taxes
Other current liabilities
VAT
Dividends payable
Windfall tax
Other taxes
Total other liabilities
Total trade and other liabilities
22.
FINANCIAL INSTRUMENTS
Financial risk factors
30,861
20,491
37,780
89,132
67,922
63,222
26,489
6,000
64,921
2,047
31,842
1,338
263,781
352,913
32,553
13,953
63,404
109,910
48,055
67,865
22,145
5,489
57,990
2,231
59,095
1,371
264,241
374,151
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, inflation risk,
interest rate risk), credit risk, liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial
performance within certain limits. However, the use of this approach does not prevent losses outside of these limits in
the event of more significant market movements. The Group does not use derivative financial instruments to hedge
certain risk exposures.
(a) Market risk
(i)
Foreign exchange risk
The Group is exposed to currency risk as a result of exposure to various currencies. Foreign exchange risk arises
from future commercial transactions and recognized assets and liabilities.
As at December 31, 2020, the official exchange rates were RON 3.9660 to USD 1 and RON 4.8694 to EUR 1 and
(December 31, 2019: RON 4.2608 to USD 1 and RON 4.7793 to EUR 1).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
33
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2020
The Group is mainly exposed to currency risk generated by EUR and USD against RON. The currency risk is not
significant, as the Group has limited foreign exchange transactions.
(ii)
Inflation risk
The official inflation rate in Romania, during the year ended December 31, 2020 was under 10% as provided by the National
Commission for Statistics of Romania. The cumulative inflation rate for the last 3 years was under 100%. This factor, among
others, led to the conclusion that Romania is not a hyperinflationary economy.
(iii)
Interest rate risk
The Group is exposed to interest rate risk, due to retirement benefit obligations and the decommissioning provision. The
Group’s sensitivity to changes in the discount rate is detailed in note 19.
Bank deposits and treasury bills bear a fixed interest rate.
(b) Credit risk
Financial assets, which potentially subject the Group to credit risk, consist principally of trade receivables. The Group has
policies in place to ensure that sales are made to customers with low credit risk. Also, sales have to be secured, either through
advance payments, either through bank letters of guarantee. The carrying amount of accounts receivable, net of bad debt
allowances, represents the maximum amount exposed to credit risk. The Group has a concentration of credit risk in respect of
its top 4 clients, which together amount to 85.41% of net trade receivable balance at December 31, 2020 (top 4 clients: 85.10%
as of December 31, 2019).
In spite of the policies described above, the Group is forced by court orders to deliver gas to insolvent clients deemed “captive”
by insolvency legislation. In respect of these clients, the Group makes estimates of the lifetime expected credit losses and
records appropriate impairment losses.
Although collection of receivables could be influenced by economic factors, management believes that there is no significant
risk of loss to the Group beyond the bad debt allowance already recorded.
(c)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to minimize the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the dividend policy, issue new shares or sell
assets to reduce debt.
The Group’s policy is to only resort to borrowing if investment needs cannot be financed internally.
(d)
Fair value estimation
Carrying amount of financial assets and liabilities is assumed to approximate their fair values.
Financial instruments in the balance sheet include trade receivables and other receivables, cash and cash equivalents,
other financial assets, short-term loans and borrowings and trade and other payables. The estimated fair values of these
instruments approximate their carrying amounts. The carrying amounts represent the Group’s maximum exposure to
credit risk for existing receivables.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
34
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2020
e)
Maturity analysis for financial assets and financial liabilities at amortized cost
December
31, 2020
Trade
receivables
Bank deposits
Treasury bonds
Due in
less than
a month
‘000 RON
158,907
137,000
-
Due in
1-3 months
‘000 RON
123,643
376,259
270,000
Due in
3 months
to 1 year
‘000 RON
28
412,157
797,505
Total
295,907
769,902
1,209,690
Trade payables
(52,811)
Lease liabilities
(58)
(52,869)
(5,458)
(145)
(5,603)
(2)
(564)
(566)
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
Total
‘000 RON
282,578
925,416
1,067,505
2,275,499
(58,271)
(8,612)
(66,883)
-
-
-
-
-
(4,480)
(4,480)
-
-
-
-
-
(3,365)
(3,365)
(3,365)
Total
Net
Total
Net
243,038
764,299
1,209,124
(4,480)
2,208,616
December
31, 2019
Trade
receivables
Bank deposits
Treasury bonds
Due in
less than
a month
‘000 RON
126,906
265,000
-
Due in
1-3 months
‘000 RON
175,446
566,254
-
Due in
3 months
to 1 year
‘000 RON
33
91,000
149,560
Total
391,906
741,700
240,593
Trade payables
(73,180)
Lease liabilities
(52)
(73,232)
(4,172)
(254)
(4,426)
(5)
(510)
(515)
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
-
-
-
-
-
-
-
-
-
-
(2,998)
(2,998)
(5,165)
(5,165)
Total
‘000 RON
302,385
922,254
149,560
1,374,199
(77,357)
(8,979)
(86,336)
318,674
737,274
240,078
(2,998)
(5,165)
1,287,863
f)
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Group’s management, which has established an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term
funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, by
continuously monitoring forecast and current cash flows and by matching the maturity profiles of financial assets and
liabilities.
23.
RELATED PARTY TRANSACTIONS AND BALANCES
(i)
Sales of goods and services
Romgaz’s associates
Total
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
10,551
10,551
14,024
14,024
Transactions with other companies controlled by the Romanian State are not considered transactions with related
parties, for financial statements purposes.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
35
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2020
24.
INFORMATION REGARDING THE MEMBERS OF THE ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY
BODIES
The remuneration of executives and directors
The Group has no contractual obligations on pensions to former executives and directors of the Group.
During the years ended December 31, 2020 and December 31, 2019, no loans and advances were granted to
executives and directors of the Group, except for work related travel advances, and they do not owe any amounts to the
Group from such advances.
Salaries paid to executives (gross)
of which, bonuses and variable component
(gross)
Remuneration paid to directors (gross)
of which, variable component (gross)
Salaries payable to executives
Salaries payable to directors
Year ended
Dec 31, 2020
'000 RON
17,754
1,327
2,831
491
Year ended
Dec 31, 2019
'000 RON
18,241
786
2,079
-
December 31, 2020
'000 RON
December 31, 2019
'000 RON
552
117
385
96
In addition to the above, on December 31, 2020 the Group recorded a provision for bonuses for executives and directors
of RON 1,299 thousand (December 31, 2019: RON 870 thousand).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
36
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
25.
INVESTMENT IN ASSOCIATES
The Company’s investments in associates are accounted using the equity method. The shares are not quoted on the stock exchange. No dividends were received in the years
ended December 31, 2020, respectively, December 31, 2019.
The Company’s investment in Agri LNG Project Company is not material. The investment is fully impaired.
Name of associate
Main activity
Place of incorporation and
operation
SC Depomures SA Tg.Mures
SC Agri LNG Project Company
SRL
Storage of natural gas
Feasibility projects
Romania
Romania
Proportion of ownership interest and voting power held (%)
December 31, 2020
December 31, 2019
40
25
40
25
Name of associate
SC Depomures SA
Tg.Mures
SC Agri LNG
Project Company
SRL
Total
Cost as of
December 31, 2020
’000 RON
Impairment as of
December 31, 2020
’000 RON
Carrying value as of
December 31, 2020
’000 RON
Cost as of
December 31, 2019
’000 RON
Impairment as of
December 31, 2019
’000 RON
Carrying value as of
December 31, 2019
’000 RON
26,102
977
27,079
-
(977)
(977)
26,102
-
26,102
24,772
977
25,749
-
(977)
(977)
24,772
-
24,772
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
37
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
Summarized financial information for significant investments in associates (Depomureş)
December 31, 2020
'000 RON
December 31, 2019
'000 RON
Non-current assets
Current assets, out of which:
- Cash and cash equivalents
Non-current liabilities, out of which:
- Long term financial liabilities
Current liabilities, out of which:
- Short term financial liabilities
Revenue
Interest income
Amortization and depreciation
Interest expense
Income tax expense
Net profit from continued operations
72,868
11,928
7,113
12,461
12,461
4,011
3,435
77,325
8,108
5,179
15,892
15,892
4,832
3,436
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
28,994
20
(3,959)
(723)
(133)
3,325
40,348
17
(3,941)
(859)
(830)
3,684
2019
'000 RON
23,298
1,474
24,772
Reconciliation of net book value for the significant investments in associates
January 1
Interest in the total comprehensive income of
significant investments in associates
December 31
2020
'000 RON
24,772
1,330
26,102
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
38
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
26. OTHER FINANCIAL INVESTMENTS
Other financial investments are measured at fair value through profit or loss.
Except for the investment in Patria Bank, which is a level 1 financial investment, all other investments are included in
level 3 category, according to IFRS 13.
Company
Principal activity
Place of
incorporation and
operation
Proportion of ownership interest and voting
power held (%)
December 31, 2020
December 31, 2019
Electricity and
thermal power
producer
Other activities –
financial
intermediations
Services related to oil
and natural gas
extraction,
excluding
prospections
Manufacture of other
chemical,
anorganic base
products
Petroleum
exploration
operations
Romania
Romania
Romania
Romania
Romania
Electrocentrale
București S.A.
Patria Bank S.A.
Mi Petrogas Services
S.A.
GHCL Upsom
Lukoil association
Company
Electrocentrale București S.A.*)
Patria Bank S.A.**)
Mi Petrogas Services S.A.
GHCL Upsom
Lukoil association
Total
2.49
0.03
10
4.21
12.2
2.49
0.03
10
4.21
12.2
Fair value as of
December 31, 2020
’000 RON
Fair value as of
December 31, 2019
’000 RON
-
91
60
-
5,227
5,378
-
101
60
-
5,227
5,388
*) The fair value of the investment in Electrocentrale Bucuresti at December 31, 2020 was reduced to zero, due to the
difficulties encountered in implementing the restructuring plan in the insolvency procedure. The investment in
Electrocentrale Bucuresti is not quoted.
**) Patria Bank's shares being quoted, the fair value at the end of the period is determined by taking into account the
closing quotation of the share. The variation between the amount at December 31, 2020 and the amount at
December 31, 2019 was recorded in the result of the period.
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
39
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
27.
SEGMENT INFORMATION
a)
Segment assets and liabilities
December 31,
2020
Property, plant and
equipment
Other intangible
assets
Investments in
associates
Other financial
investments
Deferred tax asset
Other financial
assets
Inventories
Other assets
Trade and other
receivables
Contract costs
Cash and cash
equivalents
Right of use asset
Net investments in
leasing
Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Consolidation
adjustments
'000 RON
Total
'000 RON
3,113,584
797,012
1,182,021
592,102
(71,597)
5,613,122
2,680
743
-
-
-
-
212,453
14,893
556,565
651
33,177
-
-
-
-
2,616
20,016
14,619
11,998
41,867
-
24,056
474
-
-
-
-
-
-
2,193
2,329
6,994
-
371
-
-
11,350
26,102
5,378
272,712
1,975,507
15,298
38,803
10,714
-
359,309
7,442
495
1
-
-
-
-
-
-
(23,265)
-
-
(1)
(495)
14,774
26,102
5,378
275,328
1,995,523
244,563
68,023
592,875
651
416,913
7,915
-
Total assets
3,934,003
913,401
1,193,908
3,315,212
(95,357)
9,261,167
Retirement benefit
obligation
Contract liabilities
Provisions
Trade payables
Current tax
liabilities
Deferred revenue
Lease liability
-
81,314
531,234
49,045
-
294
-
9,257
-
54,604
21,336
1,941
-
507
Other liabilities
147,207
11,631
-
-
83,740
8,670
-
136,021
-
6,104
119,433
4
25,768
33,346
57,890
10,892
8,600
98,839
-
-
-
(23,265)
-
-
(495)
-
128,690
81,318
695,346
89,132
59,831
147,207
8,612
263,781
Total liabilities
809,094
99,276
234,535
354,772
(23,760)
1,473,917
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
40
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
December 31, 2019 Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Consolidation
adjustments
Property, plant and
equipment
Other intangible
assets
Investments in
associates
Other financial
investments
Deferred tax asset
Other financial
assets
Inventories
Other assets
Trade and other
receivables
Contract costs
Right of use asset
Cash and cash
equivalents
3,153,636
974,927
1,086,221
328,393
2,447
1,034
-
-
-
-
279,069
6,594
-
-
1,110
5,933
14,871
1,679
604,394
56,052
312
-
-
554
-
-
-
-
-
2,339
2,423
2,688
-
-
5,683
24,772
5,388
229,837
1,069,291
14,734
31,789
713
-
8,039
46,592
40,837
2,958
273,556
-
-
-
-
-
-
-
-
(25,689)
-
(3)
-
Total
'000 RON
5,543,177
9,164
24,772
5,388
230,947
1,075,224
311,013
42,485
638,158
312
8,590
363,943
Total assets
4,093,044
1,096,997
1,096,629
1,992,195
(25,692)
8,253,173
Retirement benefit
obligation
Contract liabilities
Provisions
Trade payables
Current tax liabilities
Deferred revenue
Lease liability
-
8,718
42,703
364,514
91,144
-
257
-
-
42,682
25,272
4,907
-
567
Other liabilities
164,308
13,432
-
-
25,634
3,669
-
20,994
-
4,268
106,158
2
16,264
15,514
59,435
3,722
8,958
82,233
-
-
-
(25,689)
-
-
(546)
-
114,876
42,705
449,094
109,910
64,342
24,973
8,979
264,241
Total liabilities
662,926
95,578
54,565
292,286
(26,235)
1,079,120
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
41
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
b)
Segment revenues, results and other segment information
Year ended
December 31, 2020 Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Adjustment
and
eliminations
'000 RON
Total
'000 RON
3,690,235
333,939
261,112
376,937
(587,330)
4,074,893
Third party revenue
3,614,241
266,182
(75,994)
(67,757)
107
(3)
-
1,018
-
-
(72,203)
188,909
152
-
-
(371,376)
587,330
5,561
46,602
-
1,330
-
(34)
-
-
-
4,074,893
47,845
(3)
1,330
(340,435)
(5,804)
(4,468)
(26,095)
(71,569)
(448,371)
(265,458)
58,480
-
-
(17,482)
(139)
189
718
-
-
(283,079)
59,387
1,375,809
67,432
(34,639)
110,595
(92,689)
1,426,508
*) The amount of RON 71,569 thousand representing adjustments of the depreciation and amortization expense
stands for depreciation of assets used in the storage segment. This depreciation expense is not recorded in the
accounting records of any of the Group’s companies, being a consolidation adjustment.
Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Adjustment
and
eliminations
'000 RON
Total
'000 RON
4,709,795
454,370
237,759
288,883
(610,325)
5,080,482
(65,048)
(171,865)
(92,281)
(281,131)
610,325
Third party revenue
4,644,747
282,505
145,478
116
464
12
7,752
37,548
-
(16)
-
5,080,482
38,124
-
-
-
1,474
-
1,474
(405,163)
(96,016)
(2,375)
(17,403)
(604,257)
(389,069)
(6,289)
(813)
67,650
7
1,504
458
-
-
-
(520,957)
(1,000,428)
69,619
1,514,113
(325,703)
12,494
74,279
(3)
1,275,180
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
42
Revenue
Less: revenue
between
segments
Interest income
Interest expense
Share of profit of
associates
Depreciation and
amortization *)
Impairment losses
recognized
during the
period in profit
or loss
Impairment losses
reversed during
the period in
profit or loss
Segment result
before tax
profit/(loss)
Year ended
December 31,
2019
Revenue
Less: revenue
between
segments
Interest income
Share of profit of
associates
Depreciation and
amortization
Impairment losses
recognized
during the
period in profit
or loss
Impairment losses
reversed during
the period in
profit or loss
Segment result
before tax
profit/(loss)
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
In the year ended December 31, 2020, the Group's three largest clients each individually represents more than 10%
of revenue, sales to these clients being of RON 808,818 thousand, RON 863,538 thousand, RON 694,827 thousand,
(in the year ended December 31, 2019 the Group's four largest customers represented individually, over 10% of
revenue, sales to these clients being of RON 1,107,526 thousand, RON 1,050,066 thousand, RON 561,811
thousand, respectively RON 531,026 thousand), together totaling 58.09% of total revenue (year ended December 31,
2019: 63.9%). Of the total revenue generated by those three clients, 6.08% are shown in the "Storage" segment and
93.92% in the "Upstream" segment (year ended December 31, 2019: 5.37% in the "Storage" segment, 94.63% in the
"Upstream" segment).
28.
CASH AND CASH EQUIVALENTS
Current bank accounts in RON *)
Current bank accounts in foreign currency
Petty cash
Term deposits in RON
Restricted cash **)
Amounts under settlement
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
95,066
174
56
319,203
2,412
2
416,913
95,454
602
19
180,000
87,867
1
363,943
*) Current bank accounts include overnight deposits.
**) At December 31, 2019 restricted cash included bank accounts used strictly for VAT transactions, as Romgaz
opted in to the application of the split-VAT system. In 2020, the split-VAT system was terminated. At December 31,
2020 restricted cash refers to bank accounts used only for dividend payments to shareholders, according to stock
market regulations (December 31, 2020: RON 2,412 thousand; December 31, 2019: RON 2,652 thousand).
29. OTHER FINANCIAL ASSETS
Other financial assets represent mainly treasury bonds and deposits with a maturity of over 3 months, from
acquisition date.
Treasury bonds in RON
Bank deposits in RON
Accrued interest receivable on bank deposits
Accrued interest on bonds
Total other financial assets
30.
COMMITMENTS UNDERTAKEN
Endorsements and collaterals granted
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
1,045,593
925,416
2,602
21,912
1,995,523
144,923
922,254
3,410
4,637
1,075,224
December 31, 2020
'000 RON
December 31, 2019
'000 RON
224,063
224,063
52,729
52,729
In 2020, Romgaz signed an addendum to the credit agreement with BCR SA representing a facility for issuing letters
of guarantee, and opening letters of credit for a maximum amount of USD 100,000 thousand. On December 31, 2020
are still available for use USD 44,204 thousand.
As of December 31, 2020, the Group’s contractual commitments for the acquisition of non-current assets are of RON
419,104 thousand (December 31, 2019: RON 433,200 thousand).
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
43
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
31.
COMMITMENTS RECEIVED
Endorsements and collaterals received
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
1,524,480
1,524,480
1,498,056
1,498,056
Endorsements and collateral received represent letters of guarantee and other performance guarantees received
from the Group’s clients.
32.
CONTINGENCIES
(a)
Litigations
The Company is subject to several legal actions arisen in the normal course of business. The management of the
Company considers that they will have no material adverse effect on the results and the financial position of the
Company.
On December 28, 2011, 27 former and current employees were notified by DIICOT regarding an investigation related
to sale contracts signed with one of the Company’s clients for allegedly unauthorized discounts granted to this client
during the period 2005-2010. DIICOT mentioned that this may have resulted in a loss of USD 92,000 thousand for
the Company. On that sum, an additional burden to the state budget consists of income tax in amount of USD 15,000
thousand and VAT in amount of USD 19,000 thousand. The internal analysis carried out by the Company’s
specialized departments concluded that the agreement was in compliance with the legal provisions and all discounts
were granted based on Orders issued by the Ministry of Economy and Finance and decisions of the General
Shareholders’ Board and Board of Directors. The management of the Company believes the investigation will not
have a negative impact on the financial statements, to justify the registration of an adjustment. The Company is fully
cooperating with DIICOT in providing all information necessary. On March 18 2014, Romgaz received an address
from DIICOT, by which the investigators ordered an accounting expertise, indicating the objectives of the expertise.
Romgaz was notified that, as injured party, it may submit comments relating to objectives of the expertise
(additions/changes), and may appoint an additional expert to participate in the expertise.
Thus, Romgaz proceeded to identify and appoint an expert with accounting and financial expertise that can
participate to the expertise. After the report was completed, the parties could submit objections by November 2, 2015.
On March 16, 2016, DIICOT – Central Structure informed the persons involved in the cause about the start of legal
actions against them. At the request of investigators, the Company announced that in case of a prejudice being
established during the investigation, the Company will join the case as civil party.
In November 2016, DIICOT informed the Company the prejudice established in amount of RON 282,630 thousand.
Following this request, Romgaz announced that will join the case as a civil party for the amount of RON 282,630
thousand to recover this amount from the respective client and any other person that may be found guilty for causing
the prejudice.
In June 2017, DIICOT issued a press release announcing the referral to court of several persons involved in the
case. In January 2018, the High Court of Cassation and Justice ruled that the indictment prepared by DIICOT was
not legal; the ruling is not final.
At the date of endorsement of these financial statements the case in which Romgaz is a civil party a ruled by the High
Court of Cassation and Justice. By the date the financial statements were endorsed for issue, no court decision was
issued.
(b)
Taxation
The Romanian taxation system is undergoing a process of consolidation and harmonization with the European Union
legislation. However, there are still different interpretations of the fiscal legislation. In various circumstances, the tax
authorities may have different approaches to certain issues, and assess additional tax liabilities, together with late
payment interest and penalties. In Romania, tax periods remain open for fiscal verification for 5 years. The Group’s
management considers that the tax liabilities included in these financial statements are fairly stated.
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
44
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
2020
(c)
Environmental contingencies
Environmental regulations are developing in Romania and the Group has not recorded any liability at December 31,
2020 for any anticipated costs, including legal and consulting fees, impact studies, the design and implementation of
remediation plans related to environmental matters, except the amount of RON 560.958 thousand (December 31,
2019: RON 384,236 thousand), representing the decommissioning liability.
(d)
Controls by The Romanian Court of Accounts
In 2016, the Company came under scrutiny from the Romanian Court of Accounts.
One of the Romanian Court of Accounts’ conclusions was that during 2013-2015 Romgaz delivered gas on the
regulated market over the quantities it was legally allowed to, according to the existing legislation. The price on the
regulated market being lower than the one on the free market, The Romanian Court of Accounts issued Decision
number 26/01.06.2016 and ordered Romgaz to determine and to recover the prejudice as a price difference on gas
quantities delivered on the regulated market over its legal obligation, having January 2017 as due date for
implementation. The alleged prejudice estimated by the Court of Accounts is over RON 160 million. Romgaz
appealed the decision, but the Court of Accounts dismissed the appeal. Subsequently, the Company started legal
proceedings against the Court of Accounts’ decision no. 26/01.06.2016 and, also, contracted legal services for the
annulment of the Court of Accounts’ decision and to carry out the measures ordered by the Court of Accounts’
decision. The legal case against the Court of Accounts was resolved by the Court of Appeal Alba Iulia, maintaining
the findings and measures of Decision no. 26/2016 issued by the Court of Accounts, except for one measure.
The Company’s management respects the decision taken by the Court of Appeal Alba Iulia and started legal actions
to implement the measures established by the Court of Accounts. The deadline for implementing these measures
was extended to June 30, 2021.
33.
JOINT ARRANGEMENTS
In January 2002, Romgaz signed a petroleum agreement with Amromco for rehabilitation operations in order to
achieve additional production in 11 blocks, namely: Bibeşti, Strâmba, Finta, Fierbinți-Târg, Frasin-Brazi, Zătreni,
Boldu, Roșioru, Gura-Șuții, Balta-Albă and Vlădeni. For the base production, Romgaz holds a share of 100% and for
the additional production, Romgaz owns a share of 50% and Amromco Energy SRL - 50%. As the agreement was
signed to execute rehabilitation operations to obtain additional production, the mandatory work program is in
accordance with the studies approved by ANRM. Accordingly, the annual work program, which includes both works
provided in the studies and other works necessary and proposed by the partners, is approved annually by the Board
of the joint arrangement before the start of each year. The duration of the joint arrangement is in line with the time
frame of each individual concession agreement of the 11 perimeters stated above, which differs for each block.
34. AUDITOR’S FEES
The fee charged by the Group’s statutory auditor, S.C. Ernst & Young Assurance Services S.R.L. for the statutory
audit of the 2020 annual financial statements is RON 370 thousand.
The fees charged for other assurance services in 2020 are RON 170 thousand.
35.
EVENTS AFTER THE BALANCE SHEET DATE
No events after the balance sheet date were identified.
36. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements
This is a free translation of the original Romanian version.
45
Societatea Naţională de Gaze Naturale Romgaz S.A. – Mediaş - România
STATEMENT
in accordance with the provisions of art. 63 (2) c) of Law No. 24/2017
regarding issuers of financial instruments and market operations
_______________________________________________________________________________
Entity: Societatea Nationala de Gaze Naturale ROMGAZ S.A.
County: 32--SIBIU
Address: MEDIAŞ, 4 C.I. Motaş Square, tel. +40374401020
Registration Number in the Trade Register: J32/392/2001
Form of Property: 26- Companies with both state and private capital foreign and domestic (State
capital >=50%)
Main activity (CAEN code and denomination): 0620—Natural Gas Production
Tax Identification Number: 14056826
The undersigned,
ARISTOTEL MARIUS JUDE as Chief Executive Officer and
RAZVAN POPESCU as Chief Financial Officer,
hereby confirm that according to our knowledge, the annual consolidated financial statements for
the year ended December 31, 2020, prepared in accordance with the International Financial
Reporting Standards, as adopted by the European Union, and Order of Ministry of Public Finance
no. 2844/2016 for the approval of Accounting regulations in accordance with International Financial
Reporting Standards, offer a true and fair view of the assets, liabilities, financial position, statement
of profit and loss of the Group and that the Board of Directors’ report comprises a fair analysis of
the development and performance of the Group, as well as a description of the main risks and
incertitudes specific to its activity. The Group is a going concern.
Chief Executive Officer,
ARISTOTEL MARIUS JUDE
Chief Financial Officer,
RAZVAN POPESCU
Capital social: 385.422.400 lei
CIF: RO 14056826
Nr. Ord.reg.com/an : J32/392/2001
RO08 RNCB 0231 0195 2533 0001 - BCR Mediaş
RO12 BRDE 330S V024 6190 3300 - BRD Mediaş
S.N.G.N. Romgaz S.A.
551130, Piața C.I. Motaş, nr.4
Mediaş, jud. Sibiu - România
Telefon: 004-0374 - 401020
Fax: 004-0269-846901
E-mail: secretariat@romgaz.ro
www.romgaz.ro
S.N.G.N. ROMGAZ S.A.
INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
AS ADOPTED BY THE EUROPEAN UNION
AND
MINISTRY OF FINANCE ORDER 2844/2016
CONTENTS:
PAGE:
Independent auditor’s report
Statement of individual comprehensive income for the year ended December 31, 2020
Statement of individual financial position as of December 31, 2020
Statement of individual changes in equity for the year ended December 31, 2020
Statement of individual cash flow for the year ended December 31, 2020
Notes to the individual financial statements for the year ended December 31, 2020
1. Background and general business
2. Significant accounting policies
3. Revenue and other income
4. Investment income
5. Cost of commodities sold, raw materials and consumables
6. Other gains and losses
7. Depreciation, amortization and impairment expenses
8. Employee benefit expense
9. Finance costs
10. Other expenses
11. Income tax
12. Property, plant and equipment.
13. Exploration and appraisal for natural gas resources
14. Other intangible assets. Right of use assets
15. Inventories
16. Accounts receivable
17. Share capital
18. Reserves
19. Provisions
20. Deferred revenue
21. Trade and other current liabilities
22. Financial instruments
23. Related party transactions and balances
24. Information regarding the members of the administrative, management and
supervisory bodies
25. Investment in subsidiaries and associates
26. Other financial investments
27. Cash and cash equivalents
28. Other financial assets
29. Assets held for disposal and related liabilities
30. Commitments undertaken
31. Commitments received
32. Contingencies
33. Joint arrangements
34. Auditor’s fees
35. Events after the balance sheet date
36. Approval of financial statements
1
2
4
5
7
7
7
19
19
20
20
20
21
21
21
22
24
26
27
28
28
30
31
31
33
34
35
37
37
38
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41
41
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42
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42
Ernst & Young Assurance Services SRL
Bucharest Tower Center Building, 22nd Floor
15-17 Ion Mihalache Blvd., Sector 1
011171 Bucharest, Romania
Tel: +40 21 402 4000
Fax: +40 21 310 7193
office@ro.ey.com
ey.com
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of SNGN ROMGAZ S.A.
Report on the Audit of the standalone financial statements
Opinion
We have audited the standalone financial statements of SNGN ROMGAZ S.A (the Company)
with official head office in Mediaş, Piaţa Constantin I. Motaş. nr. 4, cod 551130, Sibiu county,
Romania, identified by sole fiscal registration number RO 14056826, which comprise the
statement of financial position as at December 31, 2020 and the statement of comprehensive
income, of changes in shareholders’ equity and of cash flows for the year then ended, and a
summary of significant accounting policies and other explanatory information.
In our opinion, the financial statements give a true and fair view of the financial position of
the Company as at December 31, 2020 and of its financial performance and its cash flows for
the year then ended, in accordance with the Order of the Minister of Public Finance no.
2844/2016, approving the accounting regulations compliant with the International Financial
Reporting Standards, with all subsequent modifications and clarifications.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs),
Regulation (EU) No. 537/2014 of the European Parliament and of the Council of
16 April 2014 (“Regulation (EU) No. 537/2014“) and Law 162/2017 („Law 162/2017”). Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities
for the Audit of the financial statements” section of our report. We are independent of the
Company in accordance with the International Code of Ethics for Professional Accountants
(including International Independence Standards) as issued by the International Ethics
Standards Board for Accountants (IESBA Code) together with the ethical requirements that
are relevant to the audit of the financial statements in Romania, including Regulation (EU)
No. 537/2014 and Law 162/2017 and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
2
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
For each matter below, our description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit
of the financial statements” section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of
our audit procedures, including the procedures performed to address the matters below,
provide the basis for our audit opinion on the accompanying financial statements.
Description of each key audit matter and our procedures performed to address the matter
Key audit matter
How our audit addressed the key audit
matter
Estimation of gas reserves used in impairment testing and the calculation of
depreciation and amortisation
The Company’s disclosures about estimation of gas reserves are included in Note 2 (“Use
of estimates”) to the financial statements.
Estimation of the gas reserves is a focus area
in our audit because it has a significant
impact on the financial statements, as the
reserves are the basis for production
estimates used in the Company’s cash flow
forecasts for impairment testing and they
are also the basis for unit of production
depreciation and amortization for the core
assets in the Upstream segment.
The estimation of gas reserves requires the
Company’s management and engineers to
make significant judgement and assumptions
and therefore it was considered to be a key
audit matter
We assessed the management’s estimation
process in the determination of gas
reserves. Specifically, our work included,
but was not limited to, the following
procedures:
- We performed a detailed understanding
of the Company’s internal process and
related documentation flow and key
controls associated with the gas
reserves estimation process;
- We analysed the certification process
for technical and commercial
specialists who are responsible for gas
reserves estimation; we also assessed
the competence, capabilities and
objectivity of management specialists;
3
- We tested whether significant
increases or reductions in gas reserves
were made in the period in which the
new information became available and
if the adjustments were made in
compliance with the standards of the
National Agency for Mineral Resources
(“ANRM”);
- We compared the gas reserves with the
assumptions used in the cash flows for
the impairment testing of production
assets and in the accounting for
depreciation and amortization for the
core assets in the Upstream segment;
We also assessed the adequacy of the
Company’s disclosures about impairment
testing and calculation of depreciation, and
amortization.
Impairment testing of production assets in the Upstream Gas segment
The Company’s disclosures about its impairment testing are included in Note 2 (Use of
estimates) and in Note 12 (Property, Plant and Equipment) to the financial statements
The impairment test is significant to our audit
because the assessment process is complex,
requires significant management judgment
and is based on assumptions that are
affected by expected future market
conditions. Furthermore, as at 31 December
2020 the carrying value of the production
assets and the common infrastructure and
corporate assets allocated to each cash
generating unit (CGU) from the Upstream
property, plant and equipment, in amount of
RON 2,225 million, is significant.
International Financial Reporting
Standards require an entity to assess, at least
at each reporting date, whether indicators of
impairment or reversal of impairment
previously recorded, exist. Management
considered that the recent changes brought
by new legislation in 2020, as well as recent
changes in market conditions due to Covid-
19 pandemic effects, constitute impairment
indicators and, consequently, has carried out
In respect of impairment testing, our work
included, but was not limited to, the
following procedures:
- We analysed and evaluated the
management’s assessment of the
existence of impairment indicators
(triggering events);
- We assessed the allocation of the
carrying value of common
infrastructure and corporate assets to
each CGU (field);
- We evaluated the management’s
assessment of the recoverability of the
carrying value of property, plant and
equipment of the cash generating unit
for which triggering events were
identified;
- We tested the reasonability of future
yearly production volumes per field
based on actual ANRM reports and
appendixes (future production plan per
an impairment test for the production assets
in the Upstream Gas segment, which resulted
in no additional impairment being
recognised..
Considering the above, we determined that
Impairment testing of production assets in
the Upstream Gas segment is a key audit
matter.
4
field is made based on ANRM approved
plan for each field);
- On a sample basis, we compared the
remaining reserves per field in the
impairment test as of 31 December
2020 with the latest ANRM approved
reserve reports;
- We compared the main assumptions
used in the impairment test (gas prices,
operating costs, production volumes,
gas reserves and discount rate) with
the current forecasts approved as part
of the Company’s mid-term planning
process;
- We assessed the historical accuracy of
management’s budgets and forecasts
by comparing them to actual
performance in prior years;
- We analysed the assumptions used in
the cash flow projection considering
the recent changes brought by new
legislation in 2020, as well as changes
in market conditions due to Covid-19
pandemic;
- We involved our internal valuation
specialists to assist us in evaluating the
key assumptions and methodologies
used by the Company for the
impairment testing of upstream
productions assets (checked the
mathematical accuracy of model, its
conformity with the requirements of
the International Financial Reporting
Standards, the discount rates used,
future natural gas selling prices etc)
- We evaluated the management’s
sensitivity analysis over key
assumptions in the future cash flow
model in order to assess the potential
impact of possible changes
We also assessed the adequacy of the
Company’s disclosures in the financial
statements.
5
Estimation of decommissioning provisions
The Company’s disclosures about decommissioning obligations are included in Note 2 (”Use
of estimates”) and Note 19 (“Provisions”) to the financial statements.
The Company’s core activities regularly lead
to obligations related to dismantling and
removal of equipment and installations, asset
retirement and soil remediation activities.
The decommissioning provision is significant
to our audit because of its magnitude
(carrying value of RON 538.9 million at 31
December 2020) and because management
makes estimates and judgments in
determining the respective provision.
The key estimates and assumptions relate to
the envisaged future dismantling costs,
forecasted inflation rates and discount rates
to determine the present value of the
obligations.
Our work in respect of management’s
estimation of decommissioning provisions
included, but was not limited to, the
following procedures:
- We performed a detailed understanding
of the Company’s estimation process
and the related documentation flow
and assessed the design and
implementation of the controls within
the process;
- We compared the current estimates of
decommissioning costs with the actual
costs incurred in previous periods;
- We reviewed the timing of works to be
performed for surface and subsurface
decommissioning for wells;
- We inspected supporting evidence for
any material revisions in cost estimates
during the year;
- We involved our valuation specialists to
assist us in performing industry bench
marking and analysis of discount rates
and inflation rates;
- We tested the mathematical accuracy
of management’s decommissioning
provision calculations;
- We assessed the competence,
capabilities and objectivity of
management specialists
We also assessed the adequacy of the
Company’s disclosures in the financial
statements relating to decommissioning
obligations.
6
Other information
The other information comprises the Annual Report (which includes the Consolidated
Directors' Report, the Report on Payments to Governments for mining activities and the
Corporate Governance Statement) and Corporate responsibility and sustainability report, but
does not include the financial statements and our auditors’ report thereon. We obtained the
Annual Report prior to the date of our auditor’s report, and we expect to obtain the Corporate
responsibility and sustainability report, as part of a separate report, after the date of our
auditor’s report. Management is responsible for the other information.
Our audit opinion on the financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed on the other
information obtained prior to the date of our auditor’s report we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the financial
statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with the Order of the Minister of Public Finance no. 2844/2016
approving the accounting regulations compliant with the International Financial Reporting
Standards, with all subsequent modifications and clarifications, and for such internal control
as management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error. In preparing the
financial statements, management is responsible for assessing the Company's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial
reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
7
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company's
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditors’ report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate to them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters.
8
Report on Other Legal and Regulatory Requirements
Reporting on Information Other than the financial statements and Our Auditors’ Report
Thereon
In addition to our reporting responsibilities according to ISAs described in section “Other
information”, with respect to the Consolidated Directors’ Report, we have read the Directors’
Report and report that:
a)
b)
in the Consolidated Directors’ Report we have not identified information which is not
consistent, in all material respects, with the information presented in the accompanying
financial statements as at December 31, 2020;
the Consolidated Directors’ Report identified above includes, in all material respects, the
required information according to the provisions of the Ministry of Public Finance Order
no. 2844/2016 approving the accounting regulations compliant with the International
Financial Reporting Standards, with all subsequent modifications and clarifications,
Annex 1 points 15 – 19 and 26-28;
c) based on our knowledge and understanding concerning the entity and its environment
gained during our audit of the financial statements as at December 31, 2020, we have
not identified information included in the Consolidated Directors’ Report that contains a
material misstatement of fact.
Other requirements on content of auditor’s report in compliance with Regulation (EU) No.
537/2014 of the European Parliament and of the Council
Appointment and Approval of Auditor
We were appointed as auditors of the Company by the General Meeting of Shareholders on 06
December 2018 to audit the financial statements for the financial year end December 31,
2020. Total uninterrupted engagement period, for the statutory auditor, has lasted for three
years, covering the years ended December 31, 2018 and 2019 and 2020.
Consistency with Additional Report to the Audit Committee
Our audit opinion on the financial statements expressed herein is consistent
with the additional report to the Audit Committee of the Company, which we issued on
23 March 2021.
9
Provision of Non-audit Services
No prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014
of the European Parliament and of the Council were provided by us to the Company and we
remain independent from the Company in conducting the audit.
In addition to statutory audit services and other audit related services as disclosed in the
financial statements, no other services were provided by us to the Company and its controlled
undertakings.
On behalf of
Ernst & Young Assurance Services SRL
15-17, Ion Mihalache Blvd., floor 21, Bucharest, Romania
Registered in the electronic Public Register under No. FA77
Name of the Auditor/ Partner: Alexandru Lupea
Registered in the electronic Public Register under No. AF273
Bucharest, Romania
23 March 2021
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2020
Note
Year ended
December 31,
2020
'000 RON
Year ended
December 31,
2019
'000 RON
restated *
Year ended
December 31,
2019
'000 RON
restatements *
Year ended
December 31,
2019
'000 RON
as reported
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Impairment losses on trade
receivables
Changes in inventory of
finished goods and work
in progress
Raw materials and
consumables used
Depreciation, amortization
and impairment
expenses
Employee benefit expense
Finance cost
Exploration expense
Other expenses
Other income
Profit before tax
Income tax expense
Profit for the year
Other comprehensive
income
Items that will not be
reclassified
subsequently to profit
or loss
Actuarial gains/(losses) on
post-employment
benefits
Income tax relating to items
that will not be
reclassified subsequently
to profit or loss
Total items that will not be
reclassified
subsequently to profit
or loss
Other comprehensive
income for the year net
of income tax
Total comprehensive
income for the year
3
5
4
6
16
5
7
8
9
13
10
3
11
3,926,034
(18,615)
67,957
(5,583)
4,924,880
(107,798)
37,676
8,024
17,551
(81,221)
(16,151)
(49,629)
(594,689)
(696,518)
(16,999)
(26,509)
(1,163,456)
25,378
80,007
(62,126)
(1,448,827)
(607,996)
(24,738)
(1,636)
(1,524,607)
32,585
1,448,771
1,224,223
(169,886)
(177,816)
1,278,885
1,046,407
19 c)
(16,172)
27,792
11
2,588
(4,446)
(13,584)
23,346
(13,584)
23,346
1,265,301
1,069,753
-
-
-
70,588
-
-
-
(93,516)
-
-
22,928
-
-
-
-
-
-
-
-
-
-
4,924,880
(107,798)
37,676
(62,564)
(81,221)
80,007
(62,126)
(1,355,311)
(607,996)
(24,738)
(24,564)
(1,524,607)
32,585
1,224,223
(177,816)
1,046,407
27,792
(4,446)
23,346
23,346
1,069,753
*) Starting 2020, the Company presents the release to income of the impairment for non-current assets written-off as a decrease of
the expense generated by the write-off of the respective assets, as “other gains and losses” or as “exploration expense”. Previously,
the release to income was presented as “depreciation, amortization and impairment”. For comparability purposes, 2019 was
restated.
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
1
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL FINANCIAL POSITION AS OF DECEMBER 31, 2020
ASSETS
Non-current assets
Property, plant and
equipment
Other intangible assets
Investments in subsidiaries
Investments in associates
Deferred tax asset
Net lease investment
Right of use asset
Other financial investments
Total non-current assets
Current assets
Inventories
Note
12
14
25 a)
25 b)
11
14
26
15
Trade and other receivables
16 a)
Contract costs
Other financial assets
Other assets
Net lease investment
28
16 b)
Cash and cash equivalents
27
December 31,
2020
'000 RON
December 31,
2019
'000 RON
restated *)
December 31,
2019
'000 RON
restatements *
December 31,
2019
'000 RON
as reported
4,888,163
4,782,576
14,030
66,056
120
294,268
424
7,442
5,378
8,130
66,056
120
251,695
481
8,039
5,388
-
-
-
-
220,046
-
-
-
4,782,576
8,130
66,056
120
31,649
481
8,039
5,388
5,275,881
5,122,485
220,046
4,902,439
229,945
574,273
651
296,141
618,319
312
1,975,507
1,069,291
56,025
71
392,857
40,806
65
323,107
-
-
-
-
-
-
-
-
296,141
618,319
312
1,069,291
40,806
65
323,107
2,348,041
Total current assets
3,229,329
2,348,041
Assets held for disposal
29
710,944
701,113
(198,189)
899,302
Total assets
9,216,154
8,171,639
21,857
8,149,782
EQUITY AND LIABILITIES
Equity
Share capital
Reserves
Retained earnings
Total equity
Non-current liabilities
Retirement benefit obligation
Deferred revenue
Lease liability
Provisions
Total non-current liabilities
17
18
19
20
19
385,422
2,219,941
5,140,902
385,422
1,579,902
5,136,170
7,746,265
7,101,494
119,432
136,308
7,844
493,176
756,760
106,158
21,244
8,273
331,812
467,487
-
-
-
-
-
-
-
-
-
385,422
1,579,902
5,136,170
7,101,494
106,158
21,244
8,273
331,812
467,487
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
2
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL FINANCIAL POSITION AS OF DECEMBER 31, 2020
Note
December 31,
2020
'000 RON
December 31,
2019
'000 RON
restated *)
December 31,
2019
'000 RON
restatements *
December 31,
2019
'000 RON
as reported
Current liabilities
Trade payables
Contract liabilities
Current tax liabilities
Deferred revenue
Provisions
Lease liability
Other liabilities
Total current liabilities
Liabilities directly
associated with the assets
held for disposal
21
20
19
21
91,060
81,318
57,890
10,899
147,566
757
252,150
641,640
110,327
42,705
59,436
3,729
74,600
685
250,807
542,289
29
71,489
60,369
Total liabilities
1,469,889
1,070,145
Total equity and liabilities
9,216,154
8,171,639
-
-
-
-
-
-
-
-
21,857
21,857
21,857
110,327
42,705
59,436
3,729
74,600
685
250,807
542,289
38,512
1,048,288
8,149,782
*) The 2019 financial statements contained an error in the allocation of the deferred income tax related to assets held for disposal.
The error was corrected by restating the December 31, 2019 balances. The elements restated are the deferred tax asset, assets
held for disposal and related liabilities.
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
3
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020
Balance as of January 1, 2020
Result for the year
Allocation to dividends *)
Allocation to other reserves
Increase in reinvested profit reserves
Other comprehensive income for the year
Balance as of December 31, 2020
Balance as of January 1, 2019
Result for the year
Allocation to dividends *)
Allocation to other reserves
Increase in reinvested profit reserves
Other comprehensive income for the year
Balance as of December 31, 2019
Share
capital
'000 RON
Legal
reserve
'000 RON
385,422
-
-
-
-
-
385,422
385,422
-
-
-
-
-
385,422
77,084
-
-
-
-
-
77,084
77,084
-
-
-
-
-
77,084
Other
reserves
(note 18)
'000 RON
1,502,818
-
-
580,630
59,409
-
2,142,857
1,746,603
-
(362,297)
106,265
12,247
-
1,502,818
Retained
earnings **)
'000 RON
5,136,170
1,278,885
(620,530)
(580,630)
(59,409)
(13,584)
5,140,902
5,429,843
1,046,407
(1,244,914)
(106,265)
(12,247)
23,346
5,136,170
Total
'000 RON
7,101,494
1,278,885
(620,530)
-
-
(13,584)
7,746,265
7,638,952
1,046,407
(1,607,211)
-
-
23,346
7,101,494
*) In 2020 the Company’s shareholders approved the allocation of dividends of RON 620,530 thousand (2019: RON 1,607,211 thousand), dividend per share being RON 1.61 (2019: RON 4.17).
**) Retained earnings include the geological quota reserve set up in accordance with the provisions of Government Decision no. 168/1998 on the establishment of the expense quota for the development
and modernization of oil and natural gas production, refining, transportation and oil distribution. Following the Company’s transition to IFRS, the reserve existing as of December 31, 2012 was transferred
to retained earnings. This result is allocated based on the depreciation, respectively write-off of the assets financed using this source, based on decision of General Meeting of Shareholders. As of
December 31, 2020 the geological quota reserve is of RON 927,499 thousand (December 31, 2019: RON 1,081,148 thousand).
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
4
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from operating activities
Net profit
Adjustments for:
Income tax expense (note 11)
Interest expense (note 9)
Income from dividends (note 4)
Unwinding of decommissioning provision (note 9,
note 19)
Interest revenue (note 4)
Net loss on disposal of non-current assets (note
6)
Change in decommissioning provision recognized
in profit or loss, other than unwinding (note
19)
Change in other provisions (note 19)
Net impairment of exploration assets (note 7, note
12, note 13)
Exploration projects written off (note 13)
Net impairment of property, plant and equipment
and intangibles (note 7, note 12)
Depreciation and amortization (note 7)
Amortization of contract costs
Change in investments at fair value through profit
and loss (note 6)
Net receivable write-offs and movement in
allowances for trade receivables and other
assets
Other gains and losses
Net movement in write-down allowances for
inventory (note 6, note 15)
Liabilities written off
Subsidies income (note 20)
Movements in working capital:
(Increase)/Decrease in inventory
(Increase)/Decrease in trade and other
receivables
Increase/(Decrease) in trade and other liabilities
Cash generated from operations
Interest paid
Income taxes paid
Net cash generated by operating activities
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
restated *
1,278,885
1,046,407
169,886
592
(21,097)
16,407
(46,860)
7
24,248
66,134
97,695
836
125,997
370,997
795
10
(19,700)
-
7,488
(368)
(7)
177,816
541
-
24,197
(37,676)
(2,564)
(51,760)
(8,814)
231,278
123
699,531
518,018
651
4,424
67,297
(55)
4,652
(89)
(81)
2,071,945
2,673,896
59,201
47,383
20,914
2,199,443
(3)
(211,720)
1,987,720
(39,163)
119,433
(84,085)
2,670,081
-
(292,392)
2,377,689
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
5
S.N.G.N. ROMGAZ S.A.
STATEMENT OF INDIVIDUAL CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2020
Cash flows from investing activities
Bank deposits set up and acquisition of state
(2,877,758)
(2,553,777)
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
restated *
bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Dividends received
Acquisition of non-current assets
Acquisition of exploration assets
Collection of lease payments
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Repayment of lease liability
Subsidies reimbursed
Subsidies received (note 20)
Net cash used in financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the year
Cash and cash equivalents at the end of the
year
1,988,026
37,565
1,733
21,097
(515,667)
(66,516)
103
(1,411,417)
(620,346)
(1,184)
(50)
115,027
(506,553)
69,750
323,107
392,857
*) Please see the comment in the statement of individual comprehensive income.
These financial statements were endorsed by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
2,355,685
43,039
1,780
-
(669,459)
(173,563)
41
(996,254)
(1,607,246)
(850)
-
(1,608,096)
(226,661)
549,768
323,107
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
6
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
1.
BACKGROUND AND GENERAL BUSINESS
Information regarding S.N.G.N. Romgaz S.A. (the “Company”/“Romgaz”)
S.N.G.N. Romgaz S.A. is a joint stock company, incorporated in accordance with the Romanian legislation.
The Company’s headquarter is in Mediaş, 4 Constantin I. Motaş Square, 551130, Sibiu County.
The Romanian State, through the Ministry of Economy, Energy and Business Environment is the majority
shareholder of S.N.G.N. Romgaz S.A. together with other legal and physical persons (note 17).
Romgaz has as main activity:
1.
2.
3.
4.
geological research for the discovery of natural gas, crude oil and condensed reserves;
operation, production and usage, including trading, of mineral resources;
natural gas production for:
ensuring the storage flow continuity;
technological consumption;
delivery in the transmission system.
commissioning, interventions, capital repairs for wells equipping the deposits, as well as the natural gas
resources extraction wells, for its own activity and for third parties;
5.
electricity production and distribution.
2.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The individual financial statements (“financial statements”) of the Company have been prepared in accordance with
the provisions of the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
Ministry of Finance Order no. 2844/2016 to approve accounting regulations in accordance with IFRS (MOF
2844/2016). For the purposes of the preparation of these financial statements, the functional currency of the
Company is deemed to be the Romanian Leu (RON). IFRS as adopted by the EU differ in certain respects from IFRS
as issued by the International Accounting Standards Board (IASB), however, the differences have no material impact
on the Company’s financial statements for the periods presented.
Basis of preparation
The financial statements have been prepared on a going concern basis. The principal accounting policies are set out
below.
Accounting is kept in Romanian and in the national currency. Items included in these financial statements are
denominated in Romanian lei. Unless otherwise stated, the amounts are presented in thousand lei (thousand RON).
These financial statements are prepared for general purposes, for users familiar with the IFRS as adopted by EU;
these are not special purpose financial statements. Consequently, these financial statements must not be used as
sole source of information by a potential investor or other users interested in a specific transaction.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these financial statements is determined on such a basis, except for measurements that have some
similarities to fair value but are not fair value, such as net realizable value in IAS 2 “Inventory” or value in use in IAS
36 “Impairment of assets”.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance to the Company of
the inputs to the fair value measurement, which are described as follows:
level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
Company can access at the measurement date;
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
7
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
level 3 inputs are unobservable inputs for the asset or liability.
Subsidiaries
A subsidiary is an entity controlled by the Company. In establishing the existence of control, the Company analyses
the following:
if it has authority over the invested entity;
if it is exposed to, or has rights to variable returns from its involvement in the invested entity;
if it has the ability to use its authority over the invested entity to affect these returns.
The investment in a subsidiary is recognized at cost less accumulated impairment.
Associated entities
An associate is a company over which the Company exercises significant influence through participation in decision
making on financial and operational policies of the entity invested in. Investments are recorded at cost less
accumulated impairment.
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control.
A joint arrangement is either a joint operation or a joint venture.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the arrangement. Those parties are called joint ventures.
Joint operations
The Company recognizes in relation to its interest in a joint operation:
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
As joint operator, the Company accounts for the assets, liabilities, revenues and expenses relating to its interest in a
joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
If the Company participates in, but does not have joint control of, a joint operation it accounts for its interest in the
arrangement in accordance with the paragraphs above if it has rights to the assets, and obligations for the liabilities,
relating to the joint operation.
If the Company participates in, but does not have joint control of, a joint operation, does not have rights to the assets,
and obligations for the liabilities, relating to that joint operation, it accounts for its interest in the joint operation in
accordance with the IFRSs applicable to that interest.
Joint ventures
As a partner in a joint venture, in its financial statements, the Company recognizes its interest in a joint venture as
investment, at cost, if it has joint control.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
8
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Standards and interpretations valid for the current period
The following standards and amendments or improvements to existing standards issued by the IASB and adopted by
the EU have entered into force for the current period:
Amendments to IFRS 3 Business Combinations (effective for annual periods beginning on or after January 1,
2020);
Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods
beginning on or after January 1, 2020);
Amendments to IAS 1 and IAS 8: Definition of materiality (effective for annual periods beginning on or after
January 1, 2020);
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (effective for annual periods
beginning on or after January 1, 2020);
Amendments to IFRS 16 Covid-19-Related Rent Concessions (effective for annual periods beginning on or
after June 1, 2021).
The adoption of these amendments, interpretations or improvements to existing standards has not led to changes in
the Company's accounting policies.
Standards and interpretations issued by IASB not yet adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from IFRS adopted by the IASB except from
the following standards, amendments or improvements to the existing standards and interpretations, which were not
endorsed for use in EU as at date of publication of financial statements:
IFRS 17 Insurance Contracts including Amendments to IFRS 17 (effective for annual periods beginning on or
after January 1, 2023);
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-
current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date (effective for
annual periods beginning on or after January 1, 2023);
Amendments to IFRS 3 Business Combinations (effective for annual periods beginning on or after January 1,
2022);
Amendments to IAS 16 Property, Plant and Equipment (effective for annual periods beginning on or after
January 1, 2022);
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (effective for annual periods
beginning on or after January 1, 2022);
Annual Improvements 2018-2020 (effective for annual periods beginning on or after January 1, 2022);
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
(effective for annual periods beginning on or after January 1, 2021).
The Company is currently evaluating the effect that the adoption of these standards, amendments or improvements
to the existing standards and interpretations will have on the financial statements of the Company in the period of
initial application.
Standards and interpretations issued by IASB and adopted by the EU, but not yet effective
At the date of issue of the financial statements, the following standards were issued, but not yet effective:
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (effective for annual periods beginning on or
after January 1, 2021).
The Company did not adopt these standards and amendments before their effective dates. The Company does not
expect these amendments to have a material impact on the financial statements.
Segment information
The information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance focuses on the upstream segment, electricity production and distribution, and
other activities, including headquarter activities. The Directors of the Company have chosen to organize the
Company around differences in activities performed.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
9
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Specifically, the Company is organized in the following segments:
upstream, which includes exploration activities, natural gas production and trade of gas extracted by Romgaz
or acquired from domestic production or import, for resale; these activities are performed by Medias, Mures
and Bratislava branches;
electricity production and distribution activities, performed by Iernut branch;
other activities, such as technological transport, operations on wells and corporate activities.
Transactions between Company segments occur at cost.
Considering the insertion of individual and consolidated financial statements in a single annual financial report, the
Company does not disclose segment information in the individual financial statements.
Revenue recognition
a)
Revenue from contracts with customers
The Company recognizes customer contracts when all of the following criteria are met:
•
•
•
•
•
the parties to the contract have approved the contract and are committed to perform their respective
obligations;
the Company can identify each party’s rights regarding the goods or services to be transferred;
the Company can identify the payment terms;
the contract has commercial substance;
it is probable that the Company will collect the consideration to which it will be entitled in exchange for the
goods delivered or the services provided.
Revenue from contracts with customers is recognized when, or as the Company transfers the goods or services to
the customer, respectively, the client obtains control over them.
Depending on the nature of the goods or services, revenues are recognized over time or at a point in time.
Revenue is recognized over time if:
the customer receives and consumes simultaneously the benefits provided by obtaining the goods and
services as the Company performs the obligation;
the Company creates or enhances an asset that the customer controls as the asset is created or enhanced;
the Company`s performance does not create an asset with an alternative use to the Company.
All other revenues that do not meet the above criteria are recognized at a point in time.
For revenue to be recognized over time, the Company assesses progress towards meeting the execution obligation,
using output methods or input methods, depending on the nature of the good or service transferred to the client.
Revenues are recognized only if the Company can reasonably assess the result of the execution obligation or, if it
cannot be estimated, only at the level of the costs it is expected to recover from the customer.
Revenue from contracts with customers mainly relates to gas sales, electricity supply and related services. Revenue
from these contracts are recognized at a point time on the basis of the actual quantities at the prices fixed in the
contracts concluded or at the rates set by the regulatory authority, as the case may be.
Contracts concluded by the Company do not contain significant financing components.
b) Other revenue
Rental revenue for operating lease contracts where the Company operates as lessor is recognized on an accrual
basis in accordance with the substance of the relevant agreements.
Interest income is recognized periodically and proportionally as the respective income is generated, on accrual basis.
Dividends are recognized as income when the legal right to receive them is established.
Exploration expenses
The costs of seismic exploration, geological, geophysical and other similar exploration activities are recognized as
exploration expenses in the statement of comprehensive income in the period in which they arise.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
10
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Exploration expenses also include the cost of exploration assets that have not identified gas resources and have
been written-off.
Foreign currencies
The functional currency is the currency of the primary economic environment in which the Company operates and is
the currency in which the Company primarily generates and expends cash. The Company operates in Romania and it
has the Romanian Leu (RON) as its functional currency.
In preparing the financial statements of the Company, transactions in currencies other than the functional currency
(foreign currencies) are recorded at the exchange rates prevailing at the dates of the transactions. At each reporting
date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date.
Exchange differences are recognized in the statement of comprehensive income in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Employee benefits
Benefits granted upon retirement
In the normal course of business, the Company makes payments to the Romanian State on behalf of its employees at legal
rates. All employees of the Company are members of the Romanian State pension plan. These costs are recognized in the
statement of comprehensive income together with the related salary costs.
Based on the Collective Labor Agreement, the Company is liable to pay to its employees at retirement a number of
gross salaries, according to the years worked in the gas industry/electrical industry, work conditions etc. To this
purpose, the Company recorded a provision for benefits upon retirement. This provision is updated annually and
computed according to actuary methods based on estimates of the average salary, the average number of salaries
payable upon retirement, on the estimate of the period when they shall be paid and it is brought to present value
using a discount factor based on interest related to a maximum degree of security investments (government
securities).
As the benefits are payed, the provision is reduced together with the reversal of the provision against income.
Gains or actuarial losses, are recognized in other comprehensive income. These are changes in the present value of
the defined benefit obligation as a result of statistical adjustments and changes in actuarial assumptions. Any other
changes in the provision are recognized in the result of the year.
The Company does not operate any other pension scheme or post-retirement benefit plan and, consequently, has no
obligation in respect of pensions.
Employee participation to profit
The Company records in its financial statements a provision related to the fund for employee participation to profit in
compliance with legislation in force.
Liabilities related to the fund for employee participation to profit are settled in less than a year and are measured at
the amounts estimated to be paid at the time of settlement.
Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past
events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be made.
Greenhouse gas provisions
The Company recognizes a provision for the deficit between actual CO2 emissions and certificates held, measured at
the best estimate of expenditure required to settle the obligation.
Provisions for decommissioning of wells
Liabilities for decommissioning costs are recognized due to the Company’s obligation to plug and abandon a well,
dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable
estimate of that liability can be made.
The Company recorded a provision for decommissioning wells.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
11
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
This provision was computed based on the estimated future expenditure determined in accordance with local
conditions and requirements and it was brought to present value using the interest rate on long term treasury bonds.
The rate is updated annually.
A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognized.
The item of property, plant and equipment is subsequently depreciated as part of the asset.
The Company applies IFRIC 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities” related to
changes in existing decommissioning, restoration and similar liabilities.
The change in the decommissioning provision for wells is recorded as follows:
a.
b.
c.
subject to b., changes in the liability are added to, or deducted from, the cost of the related asset in the current
period;
the amount deducted from the cost of the asset does not exceed its carrying amount. If a decrease in the
liability exceeds the carrying amount of the asset, the excess is recognized immediately in the statement of
comprehensive income;
if the adjustment results in an addition to the cost of an asset, the Company considers whether this is an
indication that the new carrying amount of the asset may not be fully recoverable.
If it is such an indication, the Company tests the asset for impairment by estimating its recoverable amount, and
accounts for any impairment loss.
Once the related asset has reached the end of its useful life, all subsequent changes of debt are recognized in the income
statement in the period when they occur.
The periodical unwinding of the discount is recognized periodically in the comprehensive income as a finance cost, as it
occurs.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in
other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax
is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on the differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method.
Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are
generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in associates
and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such investments and interests are only recognized to the
extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
12
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current tax for the period is recognized as an expense in the statement of comprehensive income. Deferred tax for
the period is recognized as an expense or income in the statement of comprehensive income, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or
where it arises from the initial accounting for a business combination. In the case of a business combination, the tax
effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair
value of the acquirer’s identifiable assets, liabilities and contingent liabilities over cost.
Property, plant and equipment
(1)
Cost
(i)
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing
the asset into the location and condition necessary for it to be capable of operating in the manner intended by
management and the initial estimate of any decommissioning obligation. The purchase price or construction cost is
the aggregate amount paid and the fair value of any other consideration given to acquire the asset.
(ii)
Gas cushion
This is a quantity of natural gas constituted as a reserve at the level of gas storages, physically recoverable, which
ensures the optimum conditions necessary to maintain their technical-productive flow characteristics.
(iii) Development expenditure
Expenditure on the construction, installation and completion of infrastructure facilities such as platforms, pipelines
and the drilling of development wells, including the commissioning of wells, is capitalized within property, plant and
equipment and is depreciated from the commencement of production as described below in the property, plant and
equipment accounting policies.
(iv) Maintenance and repairs
The Company does not recognize within the assets’ costs the current expenses and the accidental expenses for that asset.
These costs are expensed in the period in which they are incurred.
The cost for current maintenance are mainly labor costs and consumables and also small inventory items. The purpose of
these expenses is usually described as “repairs and maintenance” for property, plant and equipment.
The expenses with major activities, inspections and repairs comprise the replacement of the assets or other asset’s
parts, the inspection cost and major overhauls. These expenses are capitalized if an asset or part of an asset, which
was separately depreciated, is replaced and is probable that they will bring future economic benefits for the
Company. If part of a replaced asset was not considered as a separate component and, as a result, was not
separately depreciated, the replacement value will be used to estimate the net book value of the asset which is
replaced and is immediately written-off. The inspection costs associated with major overhauls are capitalized and
depreciated over the period until next inspection.
The cost for major overhauls for wells are also capitalized and depreciated using the unit of production depreciation
method.
All other costs with the current repairs and usual maintenance are recognized directly in expenses.
(2)
Depreciation
The depreciable amount of a tangible asset is the cost less the residual value of the asset. The residual value is the
estimated value that the Company would currently obtain from the disposal of an asset, after deducting the estimated
costs associated with the disposal if the asset would already have the age and condition expected at the end of its
useful life.
For directly productive tangible assets (natural gas resources extraction wells), the Company applies the depreciation
method based on the unit of production in order to reflect in the statement of comprehensive income, an expense
proportionate with the production obtained from the total natural gas reserve certified at the beginning of the period.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
13
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
According to this method, the value of each production well is depreciated according to the ratio of the natural gas
quantity extracted during the period compared to the proved developed reserves at the beginning of the period.
Assets representing the gas cushion are not depreciated, as the residual value exceeds their cost.
For indirect production tangible assets and other assets, depreciation is calculated at cost using the straight-line
method over the estimated useful life of the asset as follows:
Asset
Specific buildings and constructions
Technical installations and machines
Other plant, tools and furniture
Years
10 - 50
3 - 20
3 – 30
Land is not depreciated as it is considered to have an indefinite useful life.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet
determined, are carried at historical cost, less any recognized impairment loss. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
Items of tangible fixed assets that are disposed of are eliminated from the statement of financial position along with
the corresponding accumulated depreciation and impairment. Any gain or loss resulting from such retirement or
disposal is included in the result of the period.
For items of tangible fixed assets that are retired from use, and have not been written off at the data of financial
statements, an impairment adjustment is recorded for the carrying value at the time of retirement.
(3)
Impairment
Non-current assets must be recognized at the lower of the carrying amount and recoverable amount. If and only if the
recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset should be reduced
to be equal to its recoverable amount. Such a reduction represents an impairment loss that is recognized in the result
of the period.
Thus at the end of each reporting period, the Company assesses whether there is any indication of impairment of
assets. If such indication is identified, the Company tests the assets to determine whether they are impaired.
Company’s assets are allocated to cash-generating units. The cash-generating unit is the smallest identifiable asset
group that generates independent cash inflows to a large extent from cash inflows generated by other assets or asset
groups. The company considers each commercial field as a separate cash-generating unit.
All gas storages held by the Company leased to Depogaz are considered as part of a single cash-generating unit, as
the regulatory authority sets regulated tariffs by analyzing the storage activity as a whole, not every single storage.
In 2020, the Company conducted an impairment test in the Upstream segment, as the conditions existing when the
previous test was conducted changed; the results of the impairment test are presented in note 12.
In 2020, no indications of impairment of storage assets were identified.
Recoverable amount is the largest of the fair value of an asset or a cash-generating unit less costs associated with
disposal and its value in use. Considering the nature of the Company's assets, it was not possible to determine the
fair value of the cash-generating units, being determined only the value in use of the assets.
Assets held for disposal
Non-current assets classified as held for disposal are non-current assets whose carrying amount will be recovered
through a disposal rather than through continuing use. They are measured at the lower of its carrying amount and fair
value less costs to dispose.
Immediately before the initial classification of the assets as held for disposal, the carrying amounts of the assets are
measured in accordance with applicable IFRSs.
Non-current assets classified as held for disposal are no longer depreciated.
In the 2020 financial statements, assets held for disposal are the assets used in the storage activity which will be
transferred to increase the subsidiary’s share capital.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
14
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Exploration and appraisal assets
(1)
Cost
Natural gas exploration (other than seismic, geological, geophysical and other similar activities), appraisal and
development expenditure is accounted for using the principles of the successful efforts method of accounting.
Costs directly associated with an exploration well are initially capitalized as an asset until the drilling of the well is
complete and the results have been evaluated. These costs include employee remuneration, materials and fuel used,
drilling costs and payments made to contractors. If potentially commercial quantities of hydrocarbons are not found,
the exploration well is eliminated from the statement of financial position, by recording an impairment, until National
Agency for Mineral Resources (Agentia Nationala pentru Resurse Minerale – ANRM) approvals are obtained in order
to be written off. If hydrocarbons are found and, subject to further appraisal activity, are likely to be capable of
commercial development, the costs continue to be carried as an asset. Costs directly associated with appraisal
activity, undertaken to determine the size, characteristics and commercial potential of a reservoir following the initial
discovery of hydrocarbons, including the costs of appraisal wells where hydrocarbons were not found, are initially
capitalized as an asset. All such carried costs are subject to technical, commercial and management review at least
once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no
longer the case, an impairment is recorded for the assets, until the completion of the legal steps necessary for them
to be written off. When proved reserves of natural gas are determined and development is approved by management,
the relevant expenditure is transferred to property, plant and equipment other than exploration assets.
(2)
Impairment
At each reporting date, the Company's management reviews its exploration assets and establishes the necessity for
recording in the financial statements an impairment loss in these situations:
the period for which the Company has the right to explore in the specific area has expired during the period or
will expire in the near future, and is not expected to be renewed;
substantive expenditure on further exploration for and evaluation of gas resources in the specific area is
neither budgeted nor planned;
exploration for and evaluation of gas resources in the specific area have not led to the discovery of
commercially viable quantities of gas resources and the Company has decided to discontinue such activities in
the specific area;
sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
Other intangible assets
(1)
Cost
Licenses for software, patents and other intangible assets are recognized at acquisition cost.
Intangible assets are not revalued.
(2)
Amortization
Patents and other intangible assets are amortized using the straight-line method over their useful life, but not
exceeding 20 years. Licenses related to the right of use of computer software are amortized over a period of 3 years.
Inventories
Inventories are recorded initially at cost of production, or acquisition cost, depending on the case. The cost of finished
goods and production in progress includes materials, labour, expense incurred for bringing the finished goods at the
location and in the existent form and the related indirect production costs. Write down adjustments are booked
against slow moving, damaged and obsolete inventory, when necessary.
At each reporting date, inventories are measured at the lower of cost and net realizable value. The net realizable
value is estimated based on the selling price less any completion and selling expenses. The cost of inventories is
assigned by using the weighted average cost formula.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
15
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Financial assets and liabilities
The Company’s financial assets include cash and cash equivalents, trade receivables, other receivables, loans, bank
deposits and bonds with a maturity from acquisition date of over three months and other investments in equity
instruments. Financial liabilities include interest-bearing bank borrowings and overdrafts and trade and other
payables. For each item, the accounting policies on recognition and measurement are disclosed in this note.
Management believes that the estimated fair values of these instruments approximate their carrying amounts.
Cash and cash equivalents include petty cash, cash in current bank accounts and short-term deposits with a maturity
of less than three months from the date of acquisition.
The Company recognizes a financial asset or financial liability in the statement of financial position when and only
when it becomes a party to the contractual provisions of the instrument. Upon initial recognition, financial assets are
classified at amortized cost or measured at fair value through profit or loss. The classification depends on the
Company's business model for managing the financial assets and their contractual cash flows.
The Company does not have financial assets measured at fair value through other comprehensive income.
On initial recognition, financial assets and financial liabilities are measured at fair value plus or minus, in the case of
assets measured at amortized cost, transaction costs that are directly attributable to the acquisition or issue of the
financial asset or financial liability.
Receivables resulting from contracts with customers represent the unconditional right of the Company to a
consideration. The right to a consideration is unconditional if only the passage of time is required before payment of
the consideration is due. These are measured at initial recognition at the transaction price.
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial
liability is measured at initial recognition minus principal repayments plus or minus cumulative depreciation using the
effective interest method for each difference between the initial amount and the amount at maturity and, for financial
assets, adjusted for any impairment.
Any difference between the entry amount and the reimbursement amount is recognized in the income statement for
the period of the borrowings using the effective interest method.
Financial instruments are classified as liabilities or equity in accordance with the nature of the contractual
arrangement. Interest, dividends, gains and losses on a financial instrument classified as a liability are reported as
expense or income. Distributions to holders of financial instruments classified as equity are recorded directly in equity.
Financial instruments are offset when the Company has a legally enforceable right to set off and intends to settle
either on a net basis or to realize the asset and discharge the obligation simultaneously.
Impairment of financial assets
Financial assets, other than those at fair value through profit and loss, are assessed for indicators of impairment at
each reporting period.
Except for trade receivables, the Company measures the loss allowance for a financial instrument at an amount
equal to the lifetime expected credit losses if the credit risk associated with the financial instrument, has increased
significantly since initial recognition. If, at the reporting date, the credit risk for a financial instrument has not
increased significantly since the initial recognition, the Company measures the loss allowance for that financial
instrument at a value equal to 12 month expected credit losses.
The loss allowance on trade receivables resulting from transactions that are subject to IFRS 15 is measured at an
amount equal to lifetime expected credit losses. The Company considers the risk or probability of a default occurring,
reflecting the possibility of a default to occur or not to occur, even if the possibility of a credit loss is very low.
The Company measures the expected credit losses of a financial instrument in a manner that reflects reasonable and
supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
The carrying amount of the financial asset, other than those at fair value through profit or loss, is reduced through the
use of an allowance account.
De-recognition of financial assets and liabilities
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity.
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged,
cancelled or they expire.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
16
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Reserves
Reserves include (note 18):
legal reserves, which are used annually to transfer to reserves up to 5% of the statutory profit, but not more
than 20% of the statutory share capital of the Company;
other reserves, which represent allocations from profit in accordance with Government Ordinance no. 64/2001,
paragraph (g) for the Company’s development fund;
reserves from reinvested profit, set up based on the Fiscal Code. The amount of profit that benefited from tax
exemption under the fiscal legislation less the legal reserve, is distributed at the end of the year by setting up
the reserve;
development quota reserve, non-distributable, set up until 2004. Development quota reserve set up after 2004
is distributable and presented in retained earnings. Development quota set up after 2004 is allocated together
with the profit allocation, as approved by the General Meeting of Shareholders, based on depreciation,
respectively write-off of the assets financed using the development quota;
other non-distributable reserves, set up from retained earnings representing translation differences recorded at
transition to IFRS. These reserves are set up in accordance with MOF 2844/2016.
Subsidies
Subsidies are non-reimbursable financial resources granted to the Company with the condition of meeting certain
criteria. In the category of subsidies are included grants related to assets and grants related to income.
Grants related to assets are government grants for whose primary condition is that the Company should purchase,
construct, or otherwise acquire long-term assets.
Grants related to income are government grants other than those related to assets.
Subsidies are not recognized until there is reasonable assurance that:
(a)
the Company will comply with the conditions attaching to it; and
(b) subsidies will be received.
Grants related to assets are presented in the statement of financial position as “Deferred revenue”, which is then
recognized in profit or loss on a systematic basis over the useful life of the asset.
Grants related to income are recognized in the statement of profit or loss under "Other income", as the related
expenses are recorded. Until the time the expense occurs, the grant received is recognized as “Deferred revenue”.
Use of estimates
The preparation of the financial information requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the end of reporting
date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from
these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgments that the management has made in the process of applying the Company’s
accounting policies, and that have the most significant effect on the amounts recognized in the financial statements.
Estimates related to impairment losses on trade receivables
At each period end, the Company evaluates the risks attached to current and overdue receivables and the probability
of such risks to materialize. The Company’s receivables are generally due in maximum 30 days from the date the
invoice is issued. However, the Company may be forced by court decisions to sell gas to insolvent clients deemed
“captive” according to insolvency legislation. Invoices issued to these clients for gas delivered are due in 90 days
from the date of issue. Based on the information available at period end related to such clients and previous
experience, the Company estimates the lifetime expected credit loss of receivables, both current and overdue, and
records appropriate impairment losses.
Estimates related to the exploration expenditure on undeveloped fields
If field works prove that the geological structures are not exploitable from an economic point of view or that they do
not have hydrocarbon resources available, an impairment is recorded. The impairment assessment is performed
based on geological experts’ technical expertise.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
17
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Estimates related to the developed proved reserves
The Company applies the depreciation method based on the unit of production in order to reflect in the income
statement an expense proportionate with the production obtained from the total natural gas reserve at the beginning
of the period. According to this method, the value of each production well is depreciated according to the ratio of the
natural gas quantity extracted during the period compared to the gas reserve at the beginning of the period. The gas
reserves are updated annually according to internal assessments that are based on certifications of ANRM.
Estimates related to the decommissioning provision
Liabilities for decommissioning costs are recognized for the Company’s obligation to plug and abandon a well,
dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable
estimate of that liability can be made.
This provision is computed based on the estimated future expenditure determined in accordance with local conditions
and requirements and it is brought to present value using the interest rate on long term treasury bonds. The rate is
updated annually.
Estimates related to the retirement benefit obligation
Under the Collective Labor Agreement, the Company is obliged to pay to its employees when they retire a
multiplicator of the gross salary, depending on the seniority within the gas industry/electricity industry, working
conditions etc. This provision is updated annually and calculated based on actuarial methods to estimate the average
wage, the average number of employees to pay at retirement, the estimate of the period when they will be paid and
brought to present value using a discount factor based on interest on investments with the highest degree of safety
(government bonds).
The Company does not operate any other pension plan or retirement benefits, and therefore has no other obligations
relating to pensions.
Contingencies
By their nature, contingencies end only when one or more uncertain future events occur or not. In order to determine
the existence and the potential value of a contingent element, is required to exercise the professional judgment and
the use of estimates regarding the outcome of future events (note 32).
Comparative information
For each item of the statement of financial position, the statement of comprehensive income and, where is the case,
for the statement of changes in equity and for the statement of cash flows, for comparative information purposes is
presented the value of the corresponding item for the previous period ended, unless the changes are insignificant. In
addition, the Company presents an additional statement of financial position at the beginning of the earliest period
presented when there is a retrospective application of an accounting policy, a retrospective restatement, or a
reclassification of items in the financial statements, which has a material impact on the Company.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
18
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
3.
REVENUE AND OTHER INCOME
Revenue from gas sold - domestic production
Revenue from gas sold – other arrangements
Revenue from gas acquired for resale – import
gas
Revenue from gas acquired for resale – domestic
gas
Revenue from electricity
Revenue from services
Revenue from sale of goods
Other revenues from contracts
Total revenue from contracts with customers
Revenues from rental activities (see below)
Total revenue
Other operating income *)
Total revenue and other income
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
3,235,949
66,915
-
15,545
189,294
288,328
18,189
366
3,814,586
111,448
3,926,034
25,378
3,951,412
4,166,522
128,737
77,867
23,368
145,715
237,869
30,239
400
4,810,717
114,163
4,924,880
32,585
4,957,465
*) Other operating income relates mainly to penalties charged to clients for late payment.
Revenue from contracts with customers is recognized as or when the Company satisfies a performance obligation by
transferring a promised good or service to a customer. A good or service is transferred when the customer obtains
control of that good or service. The transfer of control of goods sold by the Company usually coincides with title
passing to the customer and the customer taking physical possession.
Revenues from gas and electricity are recognized when the delivery has been made at the prices fixed in the
contracts with customers.
In measuring the revenue from gas and electricity, the Company uses output methods. According to these methods,
revenues are recognized based on direct measurements of the value to the customer of the goods or services
transferred to date relative to the remaining goods or services promised under the contract. The Company recognizes
the revenue in the amount it has the right to charge.
The Company does not disclose information about the remaining performance obligations, applying the practical
expedient in IFRS 15, as the contracts with the customers are generally signed for periods of less than one year and
the revenues are recognized at the amount which the Company has the right to charge.
Revenues from rental activities mainly includes the revenue from renting the fixed assets used in the storage activity
by Depogaz and Depomureș.
4.
INVESTMENT INCOME
Income from dividends
Interest income
Total
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
21,097
46,860
67,957
-
37,676
37,676
Interest income is derived from the Company's investments in bank deposits and government bonds.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
19
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
5.
COST OF COMMODITIES SOLD, RAW MATERIALS AND CONSUMABLES
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Consumables used
Technological consumption
Cost of gas acquired for resale, sold – import
Cost of gas acquired for resale, sold – domestic
Cost of electricity imbalance
Cost of other goods sold
Other consumables
Total
6.
OTHER GAINS AND LOSSES
31,390
14,541
-
7,650
10,375
590
3,698
68,244
35,110
24,156
74,410
9,863
22,414
1,111
2,860
169,924
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Forex gain
Forex loss
Net loss on disposal of non-current assets
Net allowances for other receivables (note 16 c)
Net write down allowances for inventory (note 15)
Net gain/(loss) on financial assets at fair value
through profit or loss (note 26)
Other gains and losses
Losses from other debtors
Total
52
(279)
(7)
2,151
(7,488)
(10)
-
(2)
(5,583)
2,581
(2,024)
2,564
13,926
(4,652)
(4,424)
55
(2)
8,024
7.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT EXPENSES
Year ended
December 31, 2020
Year ended
December 31, 2019
Depreciation and amortization
out of which:
- depreciation of property, plant and equipment*)
- amortization of intangible assets
- amortization of write-of use assets
Net impairment of non-current assets (note 12) **)
Total depreciation, amortization and
impairment
'000 RON
370,997
368,193
1,977
827
223,692
594,689
'000 RON
518,018
515,073
2,238
707
930,809
1,448,827
*) The decrease in the depreciation expense for property, plant and equipment is due to a reduction in natural gas
production, as they are depreciated using the unit of production method, as mentioned in note 2.
**) Net impairment of non-current assets have decreased as compared to the previous year as in 2020 the Company
did not record any impairment losses from impairment tests unlike 2019. More information on the impairment test
performed in 2020 is presented in note 12.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
20
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
8.
EMPLOYEE BENEFIT EXPENSE
Wages and salaries
Social security charges
Meal tickets
Other benefits according to collective labor
contract
Private pension payments
Private health insurance
Total employee benefit costs
Less, capitalized employee benefit costs
Total employee benefit expense
9.
FINANCE COSTS
Interest expense
Unwinding of the decommissioning provision (note
19)
Total
10. OTHER EXPENSES
Energy and water expenses
Expenses for capacity booking and gas
transmission services
Expenses with other taxes and duties *)
(Net gain)/Net loss from provisions movement
(note 19)
Gas storage services
Other operating expenses **)
Total
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
733,979
26,132
21,260
19,138
10,791
5,980
817,280
(120,762)
696,518
661,456
19,297
17,452
27,700
9,891
-
735,796
(127,800)
607,996
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
592
16,407
16,999
541
24,197
24,738
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
16,322
167,937
623,012
90,382
67,757
198,046
1,163,456
17,101
164,142
1,058,976
(60,574)
64,874
280,088
1,524,607
*) In the year ended December 31, 2020, the major taxes and duties included in the amount of RON 623,012
thousand (year ended December 31, 2019: RON 1,058,976 thousand) are:
414,943 RON thousand represent windfall tax resulting from the deregulation of prices in the natural gas
sector according to Government Ordinance no. 7/2013 with the subsequent amendments for the
implementation of the windfall tax following the deregulation of prices in the natural gas sector (year ended
December 31, 2019: RON 716,908 thousand);
186,857 RON thousand represent royalty on gas production (year ended December 31, 2019: RON 332,501
thousand).
**) At the start of 2020, the monetary contribution from license holders in the electric power and natural gas sectors
of 2% from revenues obtained from the activities under the scope of licenses granted by the Romanian Regulatory
Authority for Energy, as introduced by Government Emergency Ordinance no. 114/2018, was repealed. The 2019
operating expenses of RON 280,088 thousand included this contribution of RON 79,860 thousand. In 2020 the
contribution paid to ANRE was of RON 11,439 thousand.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
21
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
In 2020 other operating expenses of RON 198,046 thousand include an expense of RON 24,284 thousand
representing dividends deemed by ANAF as payable to the Romanian state according to the provisions of
Government Emergency Ordinance no. 114/2018. The Company did not agree with the conclusions of the report and
started legal actions against it. The deemed dividends attributable to the main shareholder and related penalties were
offset by ANAF against receivables of the Company from ANAF, although the Company requested the receivables to
be offset against other tax liabilities when due. As there is no shareholders’ decision to allocate additional dividends,
the amount offset by ANAF was expensed.
11.
INCOME TAX
Current tax expense *)
Deferred income tax (income)/expense
Income tax expense
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
210,174
(40,288)
169,886
286,025
(108,209)
177,816
*) The 2020 current tax expense of RON 210,174 thousand includes additional income tax of RON 6,923 thousand,
as determined by ANAF following a tax audit for the period 2014-2018; the Company filed a complaint against the
report. The tax audit report included penalties of RON 37,941 thousand, which were written-off due to facilities
introduced by Government Emergency Ordinance no. 69/2020.
The tax rate used for the reconciliations below for the year ended December 31, 2020, respectively year ended
December 31, 2019 is 16% payable by corporate entities in Romania on taxable profits.
The total charge for the period can be reconciled to the accounting profit as follows:
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
Accounting profit before tax
(Profit)/loss activities not subject to income tax
Accounting profit subject to income tax
Income tax expense calculated at 16%
Effect of income exempt of taxation
Effect of expenses that are not deductible in
determining taxable profit
Effect of current income tax reduction, due to tax
facilities
Effect of tax incentive for reinvested profit
Effect of the benefit from tax credits, used to
reduce current tax expense
Effect of deferred tax relating to the origination and
reversal of temporary differences
Effect of the benefit from tax credits, used to
reduce deferred tax expense
Effect of the previous year tax expenses
Income tax expense
1,448,771
6,298
1,455,069
232,811
(71,772)
85,643
(10,424)
(9,506)
27,374
(56,239)
(34,924)
6,923
169,886
1,224,223
1,821
1,226,044
196,167
(44,598)
170,899
(15,054)
(1,960)
28,805
(145,407)
(11,036)
-
177,816
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
22
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Components of deferred tax (asset)/liability:
December 31, 2020
December 31, 2019
Cumulative
temporary
differences
'000 RON
(671,907)
88,006
(828,989)
(977)
(29,817)
(395,488)
(1,839,172)
184,986
Deferred tax
(asset)/ liability
'000 RON
(107,505)
14,081
(132,638)
(156)
(4,771)
(63,279)
(294,268)
29,598
Cumulative
temporary
differences
'000 RON
(489,160)
55,175
(928,679)
(977)
(17,940)
(191,509)
(1,573,090)
175,115
Deferred
tax (asset)/
liability
'000 RON
(78,266)
8,827
(148,589)
(156)
(2,870)
(30,641)
(251,695)
28,019
(50,269)
(8,044)
(38,512)
(6,162)
134,717
(1,704,455)
136,603
(1,436,487)
21,554
(272,714)
42,876
40,288
2,588
21,857
(229,838)
103,763
108,209
(4,446)
Provisions
Property, plant and equipment
Exploration assets *)
Financial investments
Inventory
Receivables and other assets
Total
Assets held for disposal
Liabilities directly associated with Assets
held for disposal
Total for assets held for disposal and
associated liabilities
Total General
Change, out of which:
-
-
In current year’s result
in other comprehensive
income
*) According to the Fiscal Code applicable in Romania, expenses related to location, exploration, development or any
preparatory activity for the exploitation of natural resources, which, according to the applicable accounting
regulations, are recorded directly in the result, are recovered in equal rates for a period of 5 years, starting with the
month in which the expenses are incurred. Also, for fixed assets specific to the exploration and production of gas
resources, the carrying tax value of fixed assets written off is deducted using the tax depreciation method used
before their write-off for the remaining period. All of these costs are treated as assets only from a tax point of view
and generate a deferred tax asset.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
23
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
12.
PROPERTY, PLANT AND EQUIPMENT
Land and
land
improvements
'000 RON
88,688
8,049
-
-
-
96,737
Buildings
'000 RON
686,882
1
3,510
-
(1,342)
Gas
properties
'000 RON
6,730,173
130,268
259,441
-
(16,051)
689,051
7,103,831
-
-
-
-
266,495
4,022,145
22,928
(839)
306,002
(3,014)
288,584
4,325,133
Cost
As of January 1, 2020
Additions
Transfers
Assets held for disposal
Disposals
As of December 31, 2020
Accumulated depreciation
As of January 1, 2020
Depreciation *)
Disposals
As of December 31, 2020
Impairment
Plant,
machinery
and
equipment
'000 RON
Fixtures,
fittings and
office
equipment
Storage
assets
Tangible
exploration
assets
'000 RON
'000 RON
'000 RON
Capital
work in
progress
'000 RON
1,794,140
522,699
(348,369)
-
(58,493)
Total
'000 RON
10,841,649
727,540
-
7,338
(216,186)
206,470
-
-
7,338
(421)
402,445
66,516
(4,690)
-
(130,665)
213,387
333,606
1,909,977
11,360,341
7,565
4,200
(4,000)
7,765
-
-
-
-
-
-
-
-
4,953,319
389,844
(17,021)
5,326,142
841,835
7
81,377
-
(8,928)
914,291
585,471
51,014
(8,882)
627,603
91,016
-
8,731
-
(286)
99,461
71,643
5,700
(286)
77,057
As of January 1, 2020
3,180
32,353
493,729
80,464
1,121
2,757
245,532
246,618
1,105,754
Charge
Transfers
Assets held for disposal
Release
-
-
-
-
1,664
-
-
(382)
As of December 31, 2020
3,180
33,635
85,085
25,804
-
(50,993)
553,625
557
2,374
-
(400)
82,995
76
-
-
(19)
(11,341)
-
11,341
(656)
100,189
-
-
(132,323)
106,850
(28,178)
-
(69,366)
283,080
-
11,341
(254,139)
1,178
2,101
213,398
255,924
1,146,036
Carrying value
As of January 1, 2020
85,508
388,034
2,214,299
175,900
As of December 31, 2020
93,557
366,832
2,225,073
203,693
18,252
21,226
196,148
156,913
1,547,522
4,782,576
203,521
120,208
1,654,053
4,888,163
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 21,649 thousand.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
24
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Land and
land
improvements
'000 RON
108,849
374
7
-
Buildings
'000 RON
890,706
18
11,224
(283)
Gas
properties
'000 RON
6,454,088
16,345
466,419
(206,679)
Plant,
machinery
and
equipment
'000 RON
983,784
25
39,901
(8,545)
Fixtures,
fittings and
office
equipment
'000 RON
98,608
21
2,933
(2,134)
Storage
assets
'000 RON
1,698,008
-
(16,738)
(34,574)
Tangible
exploration
assets
'000 RON
332,457
210,521
(117,482)
(23,051)
Capital
work in
progress
'000 RON
1,553,904
649,459
(386,264)
(22,959)
Total
'000 RON
12,120,404
876,763
-
(298,225)
(20,542)
(214,783)
-
(173,330)
(8,412)
(1,440,226)
-
-
(1,857,293)
Cost
As of January 1, 2019
Additions
Transfers
Disposals
Transfer to assets held for disposal
(note 29)
As of December 31, 2019
88,688
686,882
6,730,173
841,835
91,016
206,470
402,445
1,794,140
10,841,649
Accumulated depreciation
As of January 1, 2019
Depreciation *)
Transfers
Disposals
Transfer to assets held for disposal
(note 29)
As of December 31, 2019
Impairment
As of January 1, 2019
Charge
Transfers
Release
Transfer to assets held for disposal
(note 29)
As of December 31, 2019
Carrying value
-
-
-
-
-
-
3,180
5,075
-
-
(5,075)
3,180
297,740
3,671,297
590,318
31,231
-
(248)
(62,228)
266,495
370,794
5,906
(25,852)
-
4,022,145
31,523
390,424
11,893
931
(4,041)
(7,953)
32,353
179,095
24,890
(100,680)
-
63,933
-
(8,093)
(60,687)
585,471
71,226
4,526
6,808
(1,993)
(103)
493,729
80,464
72,906
5,929
-
(2,103)
(5,089)
71,643
909
288
279
(328)
(27)
1,121
589,043
66,682
(5,906)
(2,796)
(639,458)
7,565
-
-
-
-
-
-
-
-
-
-
-
-
5,221,304
538,569
-
(39,092)
(767,462)
4,953,319
3,521
37,266
119,145
657,194
375,073
-
(262)
(375,575)
231,409
(84)
(23,059)
192,449
(32,824)
(32,152)
999,808
-
(162,515)
-
-
(388,733)
2,757
245,532
246,618
1,105,754
As of January 1, 2019
105,669
561,443
2,392,367
322,240
24,793
1,105,444
295,191
1,434,759
6,241,906
As of December 31, 2019
85,508
388,034
2,214,299
175,900
18,252
196,148
156,913
1,547,522
4,782,576
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 23,498 thousand.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
25
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019
Impairment of property, plant and equipment
Note 2 contains information on the conditions under which impairment losses for individual assets are recognized.
Impairment of assets in the Upstream segment
Based on the current market conditions (the effects of the COVID-19 pandemic on Romanian economy, 2020 gas
production 14% lower compared to previous year, lower gas prices), the Group identified impairment indicators for its
upstream assets.
Based on its assessment, the Company considered each commercial field as a separate cash-generating unit. The
infrastructure common to several gas fields (e.g. compression stations, drying stations) was allocated to each field
according to the quantities processed for each field served. The corporate assets were allocated to each field
according to the estimated revenue to be earned by each field in the total revenue over the period considered in the
impairment test.
The impairment test took into account the economic life of the fields, according to the latest studies approved by the
National Agency of Mineral Resources, but no later than 2043, this being the limit year of the concession agreements,
according to the legislation in force.
Following the impairment test, there was no additional impairment identified.
In the impairment test the following assumptions were used:
Weighted average cost of capital: 10%;
The inflation rate for the years 2021-2023 was the one reported by the National Prognosis Commission in the
autumn forecast for 2021. For the period 2024-2043 a constant inflation rate of 2.4% was used;
Average estimated price for the period was 87.51 lei/MWh.
13.
EXPLORATION AND APPRAISAL FOR NATURAL GAS RESOURCES
The following financial information represents the amounts included within the Company’s totals relating to activity
associated with the exploration for and appraisal of natural gas resources.
Exploration assets written off (note 12)
Seismic, geological, geochemical studies
Exploration expenses
Net movement in exploration assets’ impairment
(note 12) (net income)/net loss
Net cash used in exploration investing activities
Exploration assets (note 12)
Liabilities
Net assets
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
(836)
(25,673)
(26,509)
97,695
(66,516)
(123)
(1,513)
(1,636)
231,278
(173,563)
December 31, 2020
'000 RON
December 31, 2019
'000 RON
120,208
(5,285)
114,923
156,913
(49,270)
107,643
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
26
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019
14. OTHER INTANGIBLE ASSETS. RIGHT OF USE ASSETS
a) Other intangible assets
2020
'000 RON
2019
'000 RON
Cost
As of January 1
Additions
Disposals
Transfer to assets held for disposal (note 29)
As of December 31
Accumulated amortization
As of January 1
Charge
Disposals
Transfer to assets held for disposal (note 29)
As of December 31
Carrying value
As of January 1
As of December 31
b) Right of use assets
Cost
As of January 1
Implementation of IFRS16 leases
Additions
Effects of rent index updates
Disposals
As of December 31
Accumulated amortization
As of January 1
Charge
Disposals
As of December 31
Carrying value
As of January 1
As of December 31
184,797
7,877
(7,840)
-
184,834
176,667
1,977
(7,840)
-
170,804
8,130
14,030
179,409
6,124
(695)
(41)
184,797
174,674
2,238
(219)
(26)
176,667
4,735
8,130
2020
'000 RON
2019
'000 RON
8,657
-
-
230
-
8,887
618
827
-
1,445
8,039
7,442
-
4,929
5,036
-
(1,308)
8,657
-
707
(89)
618
-
8,039
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
27
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
15.
INVENTORIES
Spare parts and materials
Finished goods (gas)
Other inventories
Write-down allowance for spare parts and
materials
Write-down allowance for other inventories
Total
16. ACCOUNTS RECEIVABLE
a)
Trade and other receivables
December 31, 2020
'000 RON
December 31, 2019
'000 RON
155,965
123,638
681
(50,335)
(4)
229,945
154,691
183,842
459
(42,850)
(1)
296,141
December 31, 2020
'000 RON
December 31, 2019
'000 RON
Trade receivables
Allowances for expected credit losses (note 16 c)
Accrued receivables
Allowances for expected credit losses on accrued
receivables (note 16 c)
Total
1,553,276
(1,279,164)
302,855
(2,694)
574,273
1,547,917
(1,252,267)
369,811
(47,142)
618,319
Trade receivables from gas deliveries are generally due within 30 days of invoice issue. These must be guaranteed
by customers through bank letters of guarantee. If customers do not provide such a guarantee, they must ensure that
natural gas is paid in advance.
The Company is forced by court orders to sell gas to insolvent clients considered “captive” by the insolvency law.
These clients provide no guarantees, do not pay for deliveries in advance and have a payment term of 90 days from
invoice issue date.
Trade receivables from the sale of electricity are generally due within 7 days of the date of invoice transmission.
These must be guaranteed by customers through bank letters of guarantee. If customers do not provide such a
guarantee, they must ensure that electricity is paid in advance.
b)
Other assets
Advances paid to suppliers
Joint operation receivables
Other receivables *)
Allowance for expected credit losses other
receivables (note 16 c) *)
Other debtors
Allowances for expected credit losses for other
debtors (note 16 c)
Prepayments
VAT not yet due
Other taxes receivable
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
7,934
2,384
63,638
(28,981)
50,072
(49,016)
5,719
4,269
6
56,025
386
2,125
61,177
(33,703)
47,528
(46,445)
3,784
5,954
-
40,806
*) During May 13, 2014 – September 30, 2014 the National Agency for Tax Administration (Agentia Nationala de
Administrare Fiscala - ANAF) ran a tax investigation at Romgaz regarding the tax statements and/or operations
relevant for the investigation as well as the organization and management of tax and accounting evidence. The
period under control was 2008 – 2013 for income tax and 2009 – 2013 for VAT.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
28
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Following the tax inspection, an additional liability was established for Romgaz of RON 22,440 thousand,
representing income tax, VAT, penalties and related interest. Of the total amount, Romgaz paid RON 2,389
thousand.
For the remaining amount of RON 20,051 thousand, Romgaz performed a legal assessment which concluded that
the additional tax, penalties and interest are not correct. Romgaz filed an appeal to the Ministry of Public Finance.
The appeal was partially rejected for the amount of RON 15,872 thousand.
For RON 4,179 thousand a new fiscal control was ordered, which resulted in a tax burden of RON 2,981 thousand.
The appeal filed to ANAF was rejected.
In 2015, Romgaz sued the Ministry of Finance to cancel the above mentioned administrative acts, including the
partial cancelation of the decision issued for the appeal.
The payment made in 2016 generated additional penalties of RON 13,697 thousand, also paid. Considering the
disagreement regarding the conclusions of the tax control, the Company recorded a receivable and an allowance.
In 2019, the Company won some of the points claimed in the case filed against ANAF and the allowance of RON
18,499 thousand was reversed against income. The Company took action to recover the amount paid, but the
amounts were not received by December 31, 2020.
During the period December 2016 - April 2017 ANAF resumed the tax inspection on VAT for the period December
2010 – June 2011 and on income tax for the period January 2010 – December 2011, regarding the discounts granted
by Romgaz to interruptible clients for deliveries during 2010 - 2011. This status was attributed to companies by
Transgaz, the Romanian natural gas transmission operator. Following the tax inspection, additional tax obligations of
RON 15,284 thousand were determined, and also penalties and late payment charges in amount of RON 3,129
thousand. The tax decision and the tax inspection report were appealed to ANAF. Romgaz paid the additional tax
obligation and the late payment charges and based on the appeal, the Company recorded a receivable for which it
recorded an allowance.
The total receivable impaired in connection with these controls is RON 28,981 thousand.
c)
Changes in the allowance for expected credit losses for trade and other receivables and other assets
At January 1
Charge in the allowance for other receivables
(note 6)
Charge in the allowance for trade receivables
Release in the allowance for other receivables
(note 6)
Release in the allowance for trade receivables
At December 31
2020
'000 RON
1,379,557
2,792
61,595
(4,943)
(79,146)
1,359,855
2019
'000 RON
1,312,262
4,641
84,783
(18,567)
(3,562)
1,379,557
As of December 31, 2020, the Company recorded allowances for doubtful debts, of which Interagro RON 271,621
thousand (December 31, 2019: RON 275,137 thousand), GHCL Upsom of RON 68,103 thousand (December 31,
2019: RON 68,103 thousand), CET Iasi of RON 46,271 thousand (December 31, 2019: RON 46,271 thousand),
Electrocentrale Galati with RON 226,338 thousand (December 31, 2019: RON 222,075 thousand), Electrocentrale
Bucuresti with RON 576,080 thousand (December 31, 2019: RON 616,330 thousand), G-ON EUROGAZ of RON
14,848 thousand (December 31, 2019: RON 14,848 thousand) and Electrocentrale Constanta of RON 58,227
thousand (December 31, 2019: RON 39,113 thousand), due to existing financial conditions of these clients as well as
ongoing litigating cases related to these receivables or exceeding payment terms.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
29
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
d)
Credit risk exposure for trade receivables
December 31, 2020
Current receivables, including accrued
receivables
less than 30 days overdue
30 to 90 days overdue
90 to 360 days overdue
over 360 days overdue
Total trade receivables
December 31, 2019
Current receivables, including accrued
receivables
less than 30 days overdue
30 to 90 days overdue
90 to 360 days overdue
over 360 days overdue
Total trade receivables
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
573,446
5,878
4,877
23,890
1,248,040
1,856,131
0.91
9.22
86.57
99.81
100.00
5,210
542
4,222
23,844
1,248,040
1,281,858
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
664,761
3,924
1,451
25,203
1,222,389
1,917,728
7.10
84.00
96.21
99.71
100.00
47,198
3,296
1,396
25,130
1,222,389
1,299,409
17.
SHARE CAPITAL
December 31, 2020
‘000 RON
December 31, 2019
‘000 RON
385,422,400 fully paid ordinary shares
Total
385,422
385,422
The shareholding structure as at December 31, 2020 is as follows:
The Romanian State through the
Ministry of Economy, Energy and
Business Environment
Legal persons
Physical persons
Total
No. of shares
269,823,080
95,612,507
19,986,813
385,422,400
Value
‘000 RON
269,823
95,612
19,987
385,422
385,422
385,422
Percentage (%)
70.01
24.81
5.18
100
All shares are ordinary and were subscribed and fully paid as at December 31, 2020. All shares carry equal voting
rights and have a nominal value of RON 1/share (December 31, 2019: RON 1/share).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
30
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
18.
RESERVES
Legal reserves
Other reserves, of which:
- Company’s development fund
- Reinvested profit
- Geological quota set up until 2004
- Other reserves
Total
19.
PROVISIONS
Decommissioning provision (note 19 a)
Retirement benefit obligation (note 19 c)
Total long term provisions
Decommissioning provision (note 19 a)
Litigation provision (note 19 b)
Other provisions *) (note 19 b)
Total short term provisions
Total provisions
December 31, 2020
'000 RON
December 31, 2019
'000 RON
77,084
2,142,857
1,353,047
283,697
486,388
19,725
2,219,941
77,084
1,502,818
772,417
224,288
486,388
19,725
1,579,902
December 31, 2020
'000 RON
December 31, 2019
'000 RON
493,176
119,432
612,608
17,846
1,380
128,340
147,566
760,174
331,812
106,158
437,970
13,912
1,337
59,351
74,600
512,570
*) On December 31, 2020, other provisions of RON 128,340 thousand include the provision for employee’s
participation to profit of RON 33,848 thousand (December 31, 2019: RON 31,525 thousand), the provision for taxes
of RON 6,716 thousand and the provision for CO2 certificates of RON 81,217 thousand (December 31, 2019: RON
23,410 thousand). Regarding the CO2 provision, starting 2020 the mechanism for free of charge transitory allocation
of greenhouse gas emissions certificates is no longer available.
a)
Decommissioning provision
(i) Decommissioning provision movement
At January 1
Additional provision recorded against non-current
assets
Unwinding effect (note 9)
Recorded in profit or loss
Change recorded against non-current assets
Provision directly associated with the assets held
for disposal (note 29)
At December 31
2020
'000 RON
345,724
130,094
14,860
24,130
(3,786)
-
511,022
2019
'000 RON
530,466
16,342
24,197
(51,760)
(135,009)
(38,512)
345,724
The Company makes full provision for the future cost of decommissioning natural gas wells on a discounted basis
upon installation. The provision for the costs of decommissioning these wells at the end of their economic lives has
been estimated using existing technology, at current prices or future assumptions, depending on the expected timing
of the activity, and discounted using a rate of 2.97% (year ended December 31, 2019: 4.41%). While the provision is
based on the best estimate of future costs and the economic lives of the wells, there is uncertainty regarding both the
amount and timing of these costs.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
31
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
The increase with 1 percentage point of the discount rate would decrease the decommissioning provision with RON
99,099 thousand. The decrease with 1 percentage point of the discount rate would increase the decommissioning
provision with RON 131,707 thousand.
(ii) Decommissioning provision movement for assets held for disposal
At January 1
Additional provision recorded against assets held
for disposal
Unwinding effect (note 9)
Recorded in profit or loss
Change recorded against assets held for disposal
Transfer to liabilities directly associated with assets
held for disposal (nota 29)
At December 31
b)
Other provisions
2020
'000 RON
38,512
9,843
1,547
118
(85)
-
49,935
At January 1, 2020
Additional provision recorded in the result
of the period
Provisions used in the period
Unused amounts during the period,
reversed
At December 31, 2020
At January 1, 2019
Additional provision recorded in the result
of the period
Provisions used in the period
Unused amounts during the period,
reversed
At December 31, 2019
c)
Retirement benefit obligation
Movement for retirement benefit obligation
At January 1
Interest cost
Current service cost
Payments during the year
Actuarial (gain)/loss of the period
At December 31
Litigation provision
‘000 RON
Other provisions
‘000 RON
1,337
730
(684)
(3)
1,380
59,351
142,034
(71,618)
(1,427)
128,340
Litigation provision
‘000 RON
Other provisions
‘000 RON
229
2,184
(1,076)
-
1,337
72,103
65,942
(75,303)
(3,391)
59,351
2020
'000 RON
106,158
2,441
5,438
(10,777)
16,172
119,432
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
32
2019
'000 RON
-
-
-
-
-
38,512
38,512
Total
‘000 RON
60,688
142,764
(72,302)
(1,430)
129,720
Total
‘000 RON
72,332
68,126
(76,379)
(3,391)
60,688
2019
'000 RON
131,120
3,718
6,157
(7,045)
(27,792)
106,158
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
With the exception of actuarial gains/losses, all other movements in the retirement benefit obligation are recognized
in the result of the period.
In determining the retirement benefit obligation, the following significant assumptions were used:
No layoffs or restructurings are planned;
Average discount rate: 3.21%;
Average inflation rate: 2.00%.
Sensitivity analysis
The discount rate has a significant effect on the obligation. Isolated change in assumptions with 1 percentage point
would have the following effect on the obligation:
Average discount rate
Average inflation rate
Maturity analysis of payment cash flows
Increase of 1% in assumptions
'000 RON
Decrease of 1% in assumptions
'000 RON
(11,498)
13,400
13,449
(11,669)
Up to 1 year
1-2 years
2-5 years
5-10 years
Over 10 years
20.
DEFERRED REVENUE
Amounts collected from NIP *)
Other deferred revenue
Other amounts received as subsidies
Total long term deferred revenue
Other amounts received as subsidies
Other deferred revenue
Total short term deferred revenue
Total deferred revenue
Benefit payments
'000 RON
6,693
4,645
12,795
50,728
44,571
December 31, 2020
'000 RON
December 31, 2019
'000 RON
136,021
167
120
136,308
8
10,891
10,899
147,207
20,994
123
127
21,244
58
3,671
3,729
24,973
*) In Government Decision no. 1096/2013 approving the mechanism for the free allocation of greenhouse gas
emission allowances to electricity producers for the period 2013-2020, Annex no. 3 "National Investment Plan" (NIP)
at Item 22, S.N.G.N. ROMGAZ S.A. is included with the investment "Combined Gas Turbine Cycle".
For this investment, Romgaz signed a financing agreement with the Ministry of Energy in 2017, whereby the Ministry
of Energy undertakes to grant a non-reimbursable financing of RON 320,912 thousand, representing a maximum of
25% of the total value of the eligible expenditure of the investment. By December 31, 2020 the Group collected RON
136,021 thousand. Amounts received under this contract will be transferred to income based on the depreciation rate
of the investment.
By Government Decision no. 1070/2020 the deadline until the investments financed from the National Investment
Plan must be put into operation has been extended until June 30, 2021.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
33
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Until December 31, 2020, the Company has submitted two reimbursement requests amounting to RON 140,498
thousand.
As the term of the contract for the realization of the investment was not extended, the Company is in the process of
identifying solutions for completing the works.
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
At January 1, 2020
Received
Other decreases (reimbursements)
Amounts in revenue
At December 31, 2020
20,994
115,027
-
-
136,021
185
-
(50)
(7)
128
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
At January 1, 2019
Received
Other increases
Amounts in revenue
20,994
-
-
-
At December 31, 2019
20,994
21.
TRADE AND OTHER CURRENT LIABILITIES
257
-
9
(81)
185
Total
'000 RON
21,179
115,027
(50)
(7)
136,149
Total
'000 RON
21,251
-
9
(81)
21,179
Accruals
Trade payables
Payables to fixed assets suppliers
Total trade payables
Payables related to employees
Royalties
Social security taxes
Other current liabilities
VAT
Dividends payable
Windfall tax
Other taxes
Total other liabilities
Total trade and other liabilities
December 31, 2020
'000 RON
December 31, 2019
'000 RON
28,268
27,315
35,477
91,060
30,535
18,242
61,550
110,327
December 31, 2020
'000 RON
December 31, 2019
'000 RON
63,452
60,714
24,341
5,711
62,740
2,047
31,842
1,303
252,150
343,210
44,268
64,760
20,226
4,700
54,189
2,231
59,095
1,338
250,807
361,134
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
34
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
22.
FINANCIAL INSTRUMENTS
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, inflation risk,
interest rate risk), credit risk, liquidity risk. The Company’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial
performance within certain limits. However, the use of this approach does not prevent losses outside of these limits in
the event of more significant market movements. The Company does not use derivative financial instruments to
hedge certain risk exposures.
(a) Market risk
(i)
Foreign exchange risk
The Company is exposed to currency risk as a result of exposure to various currencies. Foreign exchange risk arises
from future commercial transactions and recognized assets and liabilities.
As at December 31, 2020, the official exchange rates were RON 3.9660 to USD 1 and RON 4.8694 to EUR 1 and
(December 31, 2019: RON 4.2608 to USD 1 and RON 4.7793 to EUR 1).
The Company is mainly exposed to currency risk generated by EUR and USD against RON. The currency risk is not
significant, as the Company has limited foreign exchange transactions.
(ii)
Inflation risk
The official inflation rate in Romania, during the year ended December 31, 2020 was under 10% as provided by the
National Commission for Statistics of Romania. The cumulative inflation rate for the last 3 years was under 100%. This
factor, among others, led to the conclusion that Romania is not a hyperinflationary economy.
(iii)
Interest rate risk
The Company is exposed to interest rate risk, due to retirement benefit obligations and the decommissioning provision. The
Company’s sensitivity to changes in the discount rate is detailed in note 19.
Bank deposits and treasury bills bear a fixed interest rate.
(b)
Credit risk
Financial assets, which potentially subject the Company to credit risk, consist principally of trade receivables. The Company
has policies in place to ensure that sales are made to customers with low credit risk. Also, sales have to be secured, either
through advance payments, either through bank letters of guarantee. The carrying amount of accounts receivable, net of
bad debt allowances, represents the maximum amount exposed to credit risk. The Company has a concentration of credit
risk in respect of its top 4 clients, which together amount to 85.14% of net trade receivable balance at December 31, 2020
(top 4 clients: 85.19% as of December 31, 2019).
In spite of the policies described above, the Company is forced by court orders to deliver gas to insolvent clients deemed
“captive” by insolvency legislation. In respect of these clients, the Company makes estimates of the lifetime expected credit
losses and records appropriate impairment losses.
Although collection of receivables could be influenced by economic factors, management believes that there is no
significant risk of loss to the Company beyond the bad debt allowance already recorded.
(c)
Capital risk management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to minimize the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the dividend policy, issue new shares or
sell assets to reduce debt.
The Company’s policy is to only resort to borrowing if investment needs cannot be financed internally.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
35
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
(d)
Fair value estimation
Carrying amount of financial assets and liabilities is assumed to approximate their fair values.
Financial instruments in the balance sheet include trade receivables and other receivables, cash and cash
equivalents, other financial assets, short-term loans and borrowings and trade and other payables. The estimated fair
values of these instruments approximate their carrying amounts. The carrying amounts represent the Company’s
maximum exposure to credit risk for existing receivables.
e)
Maturity analysis for financial assets and financial liabilities at amortized cost
Due in
less than
a month
‘000 RON
Due in
1-3 months
‘000 RON
December
31, 2020
Trade
receivables
Bank deposits
Treasury
bonds
Total
Trade
payables
Lease
liabilities
Total
Net
December
31, 2019
Trade
receivables
Bank deposits
Treasury bonds
138,091
137,000
-
275,091
(60,271)
(57)
(60,328)
214,763
Due in
less than
a month
‘000 RON
106,087
265,000
-
Due in
3 months
to 1 year
‘000 RON
28
397,157
797,505
1,194,690
(2)
(556)
(558)
Due in
3 months
to 1 year
‘000 RON
33
91,000
149,560
240,593
(5)
(503)
(508)
135,993
371,259
270,000
777,252
(2,519)
(144)
(2,663)
Due in
1-3 months
‘000 RON
189,530
560,354
-
(3,964)
(252)
(4,216)
774,589
1,194,132
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
-
-
-
-
-
-
-
-
-
-
(3,364)
(3,364)
(3,364)
(4,480)
(4,480)
(4,480)
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
-
-
-
-
-
(2,986)
(2,986)
(2,986)
-
-
-
-
-
(5,165)
(5,165)
(5,165)
Total
‘000 RON
274,112
905,416
1,067,505
2,247,033
(62,792)
(8,601)
(71,393)
2,175,640
Total
‘000 RON
295,650
916,354
149,560
1,361,564
(79,792)
(8,958)
(88,750)
1,272,814
Total
371,087
749,884
Trade payables
Lease liabilities
Total
Net
(75,823)
(52)
(75,875)
295,212
f)
Liquidity risk management
745,668
240,085
Ultimate responsibility for liquidity risk management rests with the Company’s management, which has established
an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-
term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate
reserves, by continuously monitoring forecast and current cash flows and by matching the maturity profiles of
financial assets and liabilities.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
36
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
23.
RELATED PARTY TRANSACTIONS AND BALANCES
i.
Sales of goods and services
Subsidiaries
Associates
Total
Year ended
Dec 31, 2020
'000 RON
117,322
17,584
134,906
Year ended
Dec 31, 2019
'000 RON
126,917
23,374
150,291
Transactions with other companies controlled by the Romanian State are not considered transactions with related
parties, for financial statements purposes.
ii.
Purchase of goods and services
Subsidiaries
Total
iii.
Trade receivables
Subsidiaries
Total
iv.
Trade payables
Subsidiaries
Total
Year ended
Dec 31, 2020
'000 RON
67,757
67,757
Year ended
Dec 31, 2019
'000 RON
64,874
64,874
December 31, 2020
'000 RON
December 31, 2019
'000 RON
15,371
15,371
19,111
19,111
December 31, 2020
'000 RON
December 31, 2019
'000 RON
8,389
8,389
(7,125)
(7,125)
24.
INFORMATION REGARDING THE MEMBERS OF THE ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY
BODIES
The remuneration of executives and directors
The Company has no contractual obligations on pensions to former executives and directors of the Company.
During the years ended December 31, 2020 and December 31, 2019, no loans and advances were granted to
executives and directors of the Company, except for work related travel advances, and they do not owe any amounts
to the Company from such advances.
Salaries paid to executives (gross)
of which, bonuses (gross)
Remuneration paid to directors (gross)
of which, variable component (gross)
Year ended
December 31, 2020
'000 RON
Year ended
December 31, 2019
'000 RON
15,509
775
1,629
-
15,757
613
1,404
-
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
37
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
Salaries payable to executives
Salaries payable to directors
December 31, 2020
'000 RON
December 31, 2019
'000 RON
520
81
352
70
25.
INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
a)
Investment in subsidiaries
Subsidiaries’ name
Main activity
Country of
residence and
operations
Percentage of interest held (%)
December 31, 2020
December 31, 2019
SNGN ROMGAZ SA –
Filiala de
Înmagazinare Gaze
Naturale DEPOGAZ
Ploiesti SRL
Natural gas storage
Romania
100
100
SNGN ROMGAZ SA – Filiala de Înmagazinare
Gaze Naturale DEPOGAZ Ploiesti SRL
Total
b)
Investment in associates
Cost at
December 31, 2020
’000 RON
Cost at
December 31, 2019
’000 RON
66,056
66,056
66,056
66,056
Name of associate
Main activity
Place of
incorporation
and operation
SC Depomures SA
Storage of natural
Tg.Mures
SC Agri LNG Project
Company SRL
gas
Romania
Feasibility projects
Romania
Proportion of interest held (%)
December 31, 2020
December 31, 2019
40
25
40
25
Name of
associate
SC
Depomures
SA Tg.Mures
SC Agri LNG
Project
Company
SRL
Total
Cost
as of
December
31, 2020
Impairment
as of
December
31, 2020
Carrying
value as of
December
31, 2020
Cost
as of
December
31, 2019
Impairment
as of
December
31, 2019
Carrying
value as of
December
31, 2019
’000 RON
’000 RON
’000 RON
’000 RON
’000 RON
’000 RON
120
-
120
120
-
120
977
1,097
(977)
(977)
-
120
977
1,097
(977)
(977)
-
120
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
38
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
26.
OTHER FINANCIAL INVESTMENTS
Other financial investments are measured at fair value through profit or loss.
Except for the investment in Patria Bank, which is a level 1 financial investment, all other investments are included in
level 3 category, according to IFRS 13.
Company
Principal activity
Electricity and thermal
power producer
Other activities –
financial
intermediations
Services related to oil
and natural gas
extraction, excluding
prospections
Manufacture of other
chemical, anorganic
base products
Petroleum exploration
operations
Electrocentrale
București S.A.
Patria Bank S.A.
Mi Petrogas
Services S.A.
GHCL Upsom
Lukoil
association
Company
Electrocentrale București S.A. *)
Patria Bank S.A.**)
Mi Petrogas Services S.A.
GHCL Upsom
Lukoil association
Total
Place of
incorporation and
operation
Proportion of ownership interest and voting
power held (%)
December 31, 2020
December 31, 2019
Romania
Romania
Romania
Romania
Romania
2.49
0.03
10
4.21
12.2
2.49
0.03
10
4.21
12.2
Fair value as of
December 31, 2020
’000 RON
Fair value as of
December 31, 2019
’000 RON
-
91
60
-
5,227
5,378
-
101
60
-
5,227
5,388
*) The fair value of the investment in Electrocentrale Bucuresti at December 31, 2020 was reduced to zero, due to the
difficulties encountered in implementing the restructuring plan in the insolvency procedure. The investment in
Electrocentrale Bucuresti is not quoted.
**) Patria Bank's shares being quoted, the fair value at the end of the period is determined by taking into account the
closing quotation of the share. The variation between the amount at December 31, 2020 and the amount at
December 31, 2019 was recorded in the result of the period.
27.
CASH AND CASH EQUIVALENTS
Current bank accounts in RON *)
Current bank accounts in foreign currency
Petty cash
Term deposits in RON
Restricted cash **)
Amounts under settlement
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
101,014
174
53
289,203
2,412
1
392,857
64,621
602
16
170,000
87,867
1
323,107
*) Current bank accounts include overnight deposits.
**) At December 31, 2019 restricted cash included bank accounts used strictly for VAT transactions, as the Company
opted in to the application of the split-VAT system; in 2020 the split-VAT system was terminated. At December 31,
2020 restricted cash refers to bank accounts used only for dividend payments to shareholders, according to stock
market regulations (December 31, 2020: RON 2,412 thousand; December 31, 2019: RON 2,652 thousand).
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
39
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
28. OTHER FINANCIAL ASSETS
Other financial assets represent mainly treasury bonds and deposits with a maturity of over 3 months, from
acquisition date.
Treasury bonds in RON
Bank deposits in RON
Accrued interest receivable on bank deposits
Accrued interest on bonds
Total other financial assets
December 31, 2020
'000 RON
December 31, 2019
'000 RON
1,045,593
905,416
2,586
21,912
1,975,507
144,923
916,354
3,377
4,637
1,069,291
29.
ASSETS HELD FOR DISPOSAL AND RELATED LIABILITIES
As of April 1 2018, natural gas storage was transferred from Romgaz to SNGN ROMGAZ SA – Filiala de
Înmagazinare Gaze Naturale DEPOGAZ Ploiesti SRL.
The transfer of activity occurred as a result of the Company's legal obligation to achieve separation of natural gas
storage activity from natural gas production and supply in accordance with Directive 2009/73 / EC of the European
Parliament and of the Council of July 13, 2009 and the provisions of art. 141 align (1) of Law 123/2012.
The transfer involved the transfer of the license to the storage subsidiary, transfer of employees and the transfer of
the unfinished acquisitions until 31 March 2018. The transfer did not involve a sale. As a result of the transfer of
activity, the fixed assets were not transferred and they were leased to Depogaz.
At the end of 2018, the shareholders of the Company approved, in principle, to increase the share capital of Depogaz
with the assets used in the storage activity. Based on this decision, in 2019 the Company’s assets were measured in
order to determine the value of the share capital increase. In December 2019, the Company’s majority shareholder
called for a meeting to take a final decision on the increase; the final decision was taken in January 2020. Based on
the call of the majority shareholder in December 2019, the assets to be transferred, according to the Company’s
Board of Directors’ decision in February 2020, together with other related assets and liabilities were classified as held
for disposal as of December 31, 2020. The transfer of assets has not been completed until the date of approval of the
financial statements, as all legal formalities have not been completed.
The major classes of assets and liabilities classified as held for disposal as of December 31, 2020 are:
December 31, 2020
'000 RON
December 31, 2019
'000 RON
Property, plant and equipment
Other intangible assets
Assets held for disposal
Provisions
Deferred tax liabilities
Liabilities directly associated with the assets
held for disposal
Net assets directly associated with the
disposal group
710,929
15
710,944
49,935
21,554
71,489
639,455
701,098
15
701,113
38,512
21,857
60,369
640,744
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
40
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
30.
COMMITMENTS UNDERTAKEN
Endorsements and collaterals granted
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
224,063
224,063
52,729
52,729
In 2020, Romgaz signed an addendum to the credit agreement with BCR SA representing a facility for issuing letters
of guarantee, and opening letters of credit for a maximum amount of USD 100,000 thousand. On December 31, 2020
are still available for use USD 44,204 thousand.
As of December 31, 2020, the Company’s contractual commitments for the acquisition of non-current assets are of
RON 379,808 thousand (December 31, 2019: RON 431,382 thousand).
31.
COMMITMENTS RECEIVED
Endorsements and collaterals received
Total
December 31, 2020
'000 RON
December 31, 2019
'000 RON
1,508,192
1,508,192
1,496,152
1,496,152
Endorsements and collateral received represent letters of guarantee and other performance guarantees received
from the Company’s clients.
32. CONTINGENCIES
(a)
Litigations
The Company is subject to several legal actions arisen in the normal course of business. The management of the
Company considers that they will have no material adverse effect on the results and the financial position of the
Company.
On December 28, 2011, 27 former and current employees were notified by DIICOT regarding an investigation related
to sale contracts signed with one of the Company’s clients for allegedly unauthorized discounts granted to this client
during the period 2005-2010. DIICOT mentioned that this may have resulted in a loss of USD 92,000 thousand for the
Company. On that sum, an additional burden to the state budget consists of income tax in amount of USD 15,000
thousand and VAT in amount of USD 19,000 thousand. The internal analysis carried out by the Company’s
specialized departments concluded that the agreement was in compliance with the legal provisions and all discounts
were granted based on Orders issued by the Ministry of Economy and Finance and decisions of the General
Shareholders’ Board and Board of Directors. The management of the Company believes the investigation will not
have a negative impact on the financial statements, to justify the registration of an adjustment. The Company is fully
cooperating with DIICOT in providing all information necessary. On March 18 2014, Romgaz received an address
from DIICOT, by which the investigators ordered an accounting expertise, indicating the objectives of the expertise.
Romgaz was notified that, as injured party, it may submit comments relating to objectives of the expertise
(additions/changes), and may appoint an additional expert to participate in the expertise.
Thus, Romgaz proceeded to identify and appoint an expert with accounting and financial expertise that can
participate to the expertise. After the report was completed, the parties could submit objections by November 2, 2015.
On March 16, 2016, DIICOT – Central Structure informed the persons involved in the cause about the start of legal
actions against them. At the request of investigators, the Company announced that in case of a prejudice being
established during the investigation, the Company will join the case as civil party.
In November 2016, DIICOT informed the Company the prejudice established in amount of RON 282,630 thousand.
Following this request, Romgaz announced that will join the case as a civil party for the amount of RON 282,630
thousand to recover this amount from the respective client and any other person that may be found guilty for causing
the prejudice.
In June 2017, DIICOT issued a press release announcing the referral to court of several persons involved in the case.
In January 2018, the High Court of Cassation and Justice ruled that the indictment prepared by DIICOT was not legal;
the ruling is not definitive.
At the date of endorsement of these financial statements the case in which Romgaz is a civil party a ruled by the High
Court of Cassation and Justice. By the date the financial statements were endorsed for issue, no court decision was
issued.
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
41
S.N.G.N. ROMGAZ S.A.
NOTES TO THE INDIVIDUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020
(b)
Taxation
The Romanian taxation system is undergoing a process of consolidation and harmonization with the European Union
legislation. However, there are still different interpretations of the fiscal legislation. In various circumstances, the tax
authorities may have different approaches to certain issues, and assess additional tax liabilities, together with late
payment interest and penalties. In Romania, tax periods remain open for fiscal verification for 5 years. The
Company’s management considers that the tax liabilities included in these financial statements are fairly stated.
(c)
Environmental contingencies
Environmental regulations are developing in Romania and the Company has not recorded any liability at December
31, 2020 for any anticipated costs, including legal and consulting fees, impact studies, the design and implementation
of remediation plans related to environmental matters, except the amount of RON 560,958 thousand (December 31,
2019: RON 384,236 thousand), representing the decommissioning liability.
(d)
Controls by The Romanian Court of Accounts
In 2016, the Company came under scrutiny from the Romanian Court of Accounts.
One of the Romanian Court of Accounts’ conclusions was that during 2013-2015 Romgaz delivered gas on the
regulated market over the quantities it was legally allowed to, according to the existing legislation. The price on the
regulated market being lower than the one on the free market, The Romanian Court of Accounts issued Decision
number 26/01.06.2016 and ordered Romgaz to determine and to recover the prejudice as a price difference on gas
quantities delivered on the regulated market over its legal obligation, having January 2017 as due date for
implementation. The alleged prejudice estimated by the Court of Accounts is over RON 160 million. Romgaz
appealed the decision, but the Court of Accounts dismissed the appeal. Subsequently, the Company started legal
proceedings against the Court of Accounts’ decision no. 26/01.06.2016 and, also, contracted legal services for the
annulment of the Court of Accounts’ decision and to carry out the measures ordered by the Court of Accounts’
decision.
The Court of Accounts litigation was resolved by the Court of Appeal Alba Iulia, maintaining the findings and
measures of Decision no. 26/2016 issued by the Court of Accounts, except for one measure.
The Company’s management respects the decision taken by the Court of Appeal Alba Iulia and started legal actions
to implement the measures established by the Court of Accounts. The deadline for implementing these measures
was extended to June 30, 2021.
33.
JOINT ARRANGEMENTS
In January 2002, Romgaz signed a petroleum agreement with Amromco for rehabilitation operations in order to
achieve additional production in 11 blocks, namely: Bibeşti, Strâmba, Finta, Fierbinți-Târg, Frasin-Brazi, Zătreni,
Boldu, Roșioru, Gura-Șuții, Balta-Albă and Vlădeni. For the base production, Romgaz holds a share of 100% and for
the additional production, Romgaz owns a share of 50% and Amromco Energy SRL - 50%. As the agreement was
signed to execute rehabilitation operations to obtain additional production, the mandatory work program is in
accordance with the studies approved by ANRM. Accordingly, the annual work program, which includes both works
provided in the studies and other works necessary and proposed by the partners, is approved annually by the Board
of the joint arrangement before the start of each year. The duration of the joint arrangement is in line with the time
frame of each individual concession agreements of the 11 perimeters stated above, which differs for each block.
34.
AUDITOR’S FEES
The fee charged by the Company’s statutory auditor, S.C. Ernst & Young Assurance Services S.R.L. for the statutory
audit of the 2020 annual financial statements is RON 305 thousand.
The fees charged for other assurance services in 2020 are RON 150 thousand.
35.
EVENTS AFTER THE BALANCE SHEET DATE
No events after the balance sheet date were identified.
36.
APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved by the Board of Directors on March 23, 2021.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
The accompanying notes form an integrant part of these financial statements.
This is a free translation of the original Romanian version.
42
Societatea Naţională de Gaze Naturale Romgaz S.A. – Mediaş - România
STATEMENT
in accordance with the provisions of art. 63 (2) c) of Law No. 24/2017
regarding issuers of financial instruments and market operations
_______________________________________________________________________________
Entity: Societatea Nationala de Gaze Naturale ROMGAZ S.A.
County: 32--SIBIU
Address: MEDIAŞ, 4 C.I. Motaş Square, tel. +40374401020
Registration Number in the Trade Register: J32/392/2001
Form of Property: 26- Companies with both state and private capital foreign and domestic (State
capital >=50%)
Main activity (CAEN code and denomination): 0620—Natural Gas Production
Tax Identification Number: 14056826
The undersigned,
ARISTOTEL MARIUS JUDE as Chief Executive Officer and
RAZVAN POPESCU as Chief Financial Officer,
hereby confirm that according to our knowledge, the annual financial statements for the year
ended December 31, 2020, prepared in accordance with the International Financial Reporting
Standards, as adopted by the European Union, and Order of Ministry of Public Finance no.
2844/2016 for the approval of Accounting regulations in accordance with International Financial
Reporting Standards, offer a true and fair view of the assets, liabilities, financial position, statement
of profit and loss of the Company and that the Board of Directors’ report comprises a fair analysis
of the development and performance of the Company, as well as a description of the main risks
and incertitudes specific to its activity. The Company is a going concern.
Chief Executive Officer,
ARISTOTEL MARIUS JUDE
Chief Financial Officer,
RAZVAN POPESCU
Capital social: 385.422.400 lei
CIF: RO 14056826
Nr. Ord.reg.com/an : J32/392/2001
RO08 RNCB 0231 0195 2533 0001 - BCR Mediaş
RO12 BRDE 330S V024 6190 3300 - BRD Mediaş
S.N.G.N. Romgaz S.A.
551130, Piața C.I. Motaş, nr.4
Mediaş, jud. Sibiu - România
Telefon: 004-0374 - 401020
Fax: 004-0269-846901
E-mail: secretariat@romgaz.ro
www.romgaz.ro