CONSOLIDATED
BOARD OF
DIRECTORS’ REPORT
2021
2021 Consolidated Board of Directors’ Report
I.
2021 ROMGAZ GROUP OVERVIEW ..................................................................................................................... 3
1.1. ROMGAZ GROUP IN FIGURES ............................................................................................................................................... 3
1.2 SIGNIFICANT EVENTS ........................................................................................................................................................... 7
II.
PARENT COMPANY AT A GLANCE ..................................................................................................................... 11
2.1. IDENTIFICATION DATA ....................................................................................................................................................... 11
2.2. COMPANY ORGANIZATION ................................................................................................................................................ 11
2.3. MISSION, VISION AND GOAL ............................................................................................................................................. 13
2.4. STRATEGIC OBJECTIVES, STRATEGIC OPTIONS AND SECONDARY OBJECTIVES ................................................................................ 13
III.
REVIEW OF ROMGAZ GROUP BUSINESS ........................................................................................................... 14
3.1. BUSINESS SEGMENTS ....................................................................................................................................................... 14
3.2. BRIEF HISTORY ................................................................................................................................................................ 17
3.3. MERGERS AND REORGANISATIONS, ACQUISITIONS AND DIVESTMENTS OF ASSETS ........................................................................ 17
3.4. GROUP’S BUSINESS PERFORMANCE .................................................................................................................................... 18
IV.
GROUP’S TANGIBLE ASSETS ............................................................................................................................. 32
4.1. MAIN PRODUCTION FACILITIES ........................................................................................................................................... 32
4.2. INVESTMENTS ................................................................................................................................................................. 35
V.
SECURITIES MARKET ........................................................................................................................................ 41
5.1. DIVIDEND POLICY ............................................................................................................................................................ 43
VI.
COMPANY MANAGEMENT ............................................................................................................................... 45
6.1. BOARD OF DIRECTORS ...................................................................................................................................................... 45
6.2. EXECUTIVE MANAGEMENT ................................................................................................................................................. 46
VII.
CONSOLIDATED FINANCIAL-ACCOUNTING INFORMATION ............................................................................... 49
7.1. STATEMENT OF CONSOLIDATED FINANCIAL POSITION ............................................................................................................. 49
7.2. STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME ...................................................................................................... 51
7.3. STATEMENT OF CONSOLIDATED CASH FLOWS ....................................................................................................................... 52
VIII.
CORPORATE GOVERNANCE .............................................................................................................................. 54
IX.
PERFORMANCE OF DIRECTOR AGREEMENTS AND CONTRACTS OF MANDATE ................................................. 69
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2021 Consolidated Board of Directors’ Report
I.
2021 ROMGAZ GROUP OVERVIEW
Romgaz Group1 recorded in 2021 a revenue of RON 5,852.93 million, higher by 43.63% namely RON 1,778.03
million, as compared to the revenue of 2020 (RON 4,074.89 million).
The Net Profit of RON 1,914.99 million was higher by RON 667.08 million than the net profit for 2020 (+53.46%).
Following factors influenced Romgaz Group performances for the year ended December 31, 2021:
Revenue increase as compared to the previous year triggered by following factors:
Quantity of natural gas sold (including gas purchased for resale) is 12.7% higher in 2021 as
compared to 2020. Revenue from natural gas sales for 2021 is RON 5,043.15 million, increasing
by 52.41% as compared to the previous year;
In Q4 2021, revenue from natural gas sales increased by 101.81% as compared to the previous
quarter (+17.15% quantitatively), and by 120.62% as compared to Q4 2020 ( 15.64%
quantitatively);
In 2021 storage activities recorded a decrease by 30.64% of the revenue at group level, following
32.3% lower capacity reservation services (RON -91.18 million) and a decrease by 31.48% (RON
-15.53 million) of injection services. As for Depogaz, revenue from these services decreased by
6.14%;
Revenue from electricity sales increased by 69.9% as compared to last year (RON +132.31
million) against a 31.7% drop in production as compared to last year. This revenue is due to the
high prices on centralised markets where the Group is active;
In 2021, an income of RON 114.7 million was generated by executing the performance guarantee related
to the works contract for development of CTE Iernut by building a new 430 MW power plant with combined
cycle gas turbine concluded between S.N.G.N. Romgaz S.A. and the Consortium consisting of Duro
Felguera S.A. and Romelectro S.A.;
Romgaz won in court a litigation against ANAF (National Agency for Fiscal Administration) for the
annulment of a fiscal inspection report related to an inspection carried out between December 2016 –
April 2017, which led to the recognition of an income of RON 28.02 million from releasing to income the
impairment set up for such receivable;
Petroleum royalty expenses and windfall tax increased significantly due to the following:
o Petroleum royalty expenses (including royalty for storage activities) increased by RON 552.54
million as compared to the previous year, namely by 280.65% (RON 749.4 million in 2021, as
compared to RON 196.9 million in 2020), mainly as a result of the increase of the reference
price considered for calculating royalty. The increase in Q4 2021 as compared to the previous
quarter was by 145.7%;
o Windfall tax increased in 2021 by RON 843.1 million (203.17%) as compared to 2020.
Compared to the previous quarter, windfall tax rose by 491.48% in Q4 2021;
The table below shows the petroleum royalty and windfall tax related to revenues from sales of natural
gas from the Group’s production
Indicator
M.U.
Q3 2021 Q4 2021
2020
2021
Revenue
Petroleum royalty from gas
production
Windfall tax
% from revenue
RON mln
RON mln
796.7
160.6
2,031.5
399.4
3,293.4
185.6
4,712.8
737.9
RON mln
%
151.1
39.1
894.0
63.7
414.9
1,258.0
18.2
42.4
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).
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2021 Consolidated Board of Directors’ Report
The Group performed an impairment test for the gas fields it operates. The increase of sales prices
was mostly offset by the increase of costs, especially of costs with petroleum royalty and windfall tax,
therefore the Group did not release to income the losses from previous impairments;
In 2021, the Group recorded a net gain from impairment of receivables of RON 349.99 million,
following collection of receivables from clients under insolvency;
The amount of RON 94.1 million was cashed in 2021, representing financing from the National
Investment Plan for building the new Iernut power plant;
Net profit per share was RON 4.97.
The achieved margins of the consolidated net profit (32.72%) and consolidated EBIT (35.86%) increased as
compared to 2020 (30.62% and 33.83% respectively) and show a high profitability of the Group. Consolidated
EBITDA (47.58%) decreased as compared to last year (50.33%), but maintains at a high level.
Investments made by Romgaz Group in 2021 amount to RON 459.32 million, lower by RON 177.98 million,
respectively 27.93%, as compared to 2020, the value of commissioned fixed assets was RON 391.2 million.
Natural gas consumption in Romania for 2021 recorded a 2.34% increase, from 127.14 TWh to 130.11 TWh,
according to ANRE reports.
Natural gas production recorded in 2021 5,028.5 million m3, 11.3% higher than the production for 2020, mainly
influenced by increased gas sales.
According to estimates, this production ensured Romgaz a market share of approx. 42.2% of deliveries in the
total consumption of Romania, increasing by 3.55% as compared to 2020.
In 2021, Romgaz electricity production was 640.0 GW, by 31.73% lower as compared to the production of
2020. This evolution strongly related to the energy demand, the evolution of prices on competitive markets, fuel
quantity allocated for electricity generation. According to preliminary data published by Transelectrica, Romgaz
market share was 1.09%.
Operational Results
The table below shows a summary of the main production indicators, royalty and storage services:
Q4 2020 Q3 2021 Q4 2021
1,322
6,119
94
1,187
6,528
84
1,322
5,027
94
Δ Q4
(%)
0.00
-17.8
0.00
Gas production (million m3)
Condensate production (tons)
Petroleum royalty (million m3)
319.6
223.0
213.9
-33.1
Electricity production (GWh)
4,520
5,029
11.26
22,713
24,420
7.52
316
937.5
355
12.34
640.0
-31.73
Main indicators
2020
2021
Δ ‘21/’20
(%)
892.5
25.3
663.3
-25.7
99.6
1,070.8
192.1
3.4
Invoiced UGS withdrawal services
(million m3)
Invoiced UGS injection services (million
m3)
1,816.8
2,109.2
16.1
1,115.1
1,821.9
63.4
Natural gas quantities produced, delivered, injected into and withdrawn from gas storages are shown in the table
below (million m3):
Specifications
2019
2020
2021
Ratios
Item
no.
0
1.
2.
3.
4.
5.
6.
7.
8.
9.
Gross gas production
Technological consumption
1
Net internal gas production (1.-2.)
Internal gas volumes injected into UGS
Internal gas volumes withdrawn from UGS
Difference from conversion to Gross Calorific Value
2
5,276.9
3
4,519.7
4
5,028.5
5=4/3x100
111.3%
78.9
63.7
69.9
5,198.0
4,456.0
4,958.6
526.0
257.7
0.0
225.9
367.8
6.4
487.9
422.2
8.6
Volumes supplied from internal production (3.-4.+5.-6.)
4,929.7
4,591.6
4,884.3
Gas supplied to CTE Iernut and Cojocna from Romgaz gas
173.0
277.2
192.5
Gas supplied from internal production to the market (7.+8.)
4,756.7
4,314.4
4,691.8
10. Gas from partnerships – Amromco (50%)*)
140.5
91.4
35.4
113.9%
111.3%
216.0%
114.8%
134.4%
106.4%
69.4%
108.7%
38.7%
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2021 Consolidated Board of Directors’ Report
11.
12.
Purchased internal gas volumes (including commodity gas and
imbalances)
Sold internal gas volumes (9.+10.+11.)
4.4
0.4
239.5
59.875%
4,901.6
4,406.1
4,966.7
112.7%
13.
Supplied internal gas volumes (8.+12.)
5,074.6
4,683.3
5,159.2
110.2
14.
Supplied import gas volumes
15. 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
16.
*
*
53.0
4.5
0.0
4.7
0.0
8.4
-
178.7%
5,132.1
4,688.1
5,167.6
110.2%
1,271.8
1,816.7
2,109.2
2,620.5
1,115.1
1,821.9
116.1%
163.4%
Note: the information is not consolidated; these include the transactions between Romgaz and Depogaz.
*) The produced gas is reflected in Romgaz revenue, according to the participating interest share in the partnership.
Production level of 2021 was supported by ongoing production rehabilitation projects of main mature fields,
performance of capitalizable repair works and well recompletion works and by streaming into production new
wells.
Evolution of natural gas production between 2000-2021 is shown below:
8.4
8
7.3
7
6.6
6.3
6.2
m
c
b
9
8
7
6
5
4
3
2
1
0
5.9
5.9
5.8
5.8
5.6
5.7
5.7
5.7
5.6
5.2
5.3
5.3
5.0
4.5
4.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
The table below shows the quarterly electricity production for 2021, as compared to 2020:
2020
2021
*MWh*
Variation (%)
1
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year total
2
258,923
36,310
322,633
319,634
937,500
3
4=(3-2)/2x100
202,073
1,010
222,989
213,930
640,001
-21.96
-97.22
-30.88
-33.07
-31.73
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2021 Consolidated Board of Directors’ Report
Romgaz is one of the largest gas suppliers in Romania. The evolution of gas supplies2 between 2008-2021 is
shown below:
343
304
680
1018
606
310
81
33
181
53
0
0
3
7
5572
5563
5513
5200
5156
5304
5529
5055
5623
5422
4223
5079
4683
5159.2
3
m
n
o
i
l
l
i
m
7000
6000
5000
4000
3000
2000
1000
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Gas from internal production
Import gas
Relevant Consolidated Financial Results
Q4
2020
1,156.5
1,129.2
810.7
1.1
319.7
13.7
306.0
307.4
511.4
0.79
26.46
26.58
44.22
6,188
Q3
2021
1,246.5
1,469.7
1,023.0
0.8
447.5
52.7
394.8
435.7
621.7
1.02
31.67
34.95
49.87
5,918
Q4
2021
Δ Q4
(%)
Main indicators
2020
2021
*RON million*
Δ ‘21/’20
(%)
2,356.4
2,428.6
1,620.9
0.1
103.76 Revenue
115.07
99.94
-93.35
Income
Expenses
Share of profit of associates
807.8 152.71 Gross profit
49.2
758.6
787.8
977.3
1.97
32.19
33.43
41.47
5,863
EBITDA
Income tax expense
259.28
147.94 Net profit
156.25 EBIT
91.10
147.94 Earnings per share EPS (RON)
21.66
25.77
-6.22
-5.25
Net profit ratio (% from Revenue)
EBIT Ratio (% from Revenue)
EBITDA Ratio (% from Revenue)
Number of employees at the end
of the period
4,074.9
4,133.9
2,708.7
1.3
1,426.5
178.6
1,247.9
1,378.7
2,050.7
3.24
30.62
33.83
50.33
6,188
5,852.9
6,156.5
3,999.4
0.1
2,157.3
242.3
1,915.0
2,098.9
2,784.6
4.97
32.72
35.86
47.58
5,863
43.63
48.93
47.65
-93.61
51.23
35.64
53.46
52.24
35.79
53.46
6.86
6.00
-5.46
-5.25
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.
Romgaz on the stock exchange
Since November 12, 2013, company’s shares have been traded on the regulated market governed by BVB
(Bucharest Stock Exchange) under the symbol “SNG” and the GDRs on the regulated market governed by LSE
(London Stock Exchange) under the symbol “SNGR”.
Performance of Romgaz shares compared to the evolution of BET index (Bucharest Exchange Trading) from
listing to December 31, 2021 is shown below:
2 include gas from internal production, including gas supplied to CTE Iernut and Cojocna and gas purchased from internal production.
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2021 Consolidated Board of Directors’ Report
45
40
35
30
November 12, 2013 - December 30, 2021
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14000
12000
10000
8000
6000
4000
2000
0
Data
Event
January 13, 2021
January 25, 2021
February 12, 2021
11 martie 2021
March 30, 2021
SNGN Romgaz SA Board of Directors revoked by Resolution No.1 Mr. Constantin Adrian
Volintiru from the position of Chief Executive Officer, terminating the contract of mandate
concluded between the company and Mr. Volintiru.
Until the appointment of a new chief executive officer, Mr. Daniel Corneliu Pena – Deputy
legal
Chief Executive Officer, exercised
representation.
the company’s management
including
Following each employee’s voluntary decision to get the vaccine, Romgaz undertook the
responsible role to register employees’ identification data on the official vaccination platform,
as an engagement to facilitate vaccination for company employees by including them in the
2nd phase of the national vaccination program.
The Board of Directors convened on February 12, 2021 took note of Mr. Aristotel Marius
Jude resignation as chairman of the Board, by Resolution No. 10.
During the same meeting, the Board appointed by Resolution No. 11 Mr. Aristotel Marius
Jude as SNGN Romgaz SA Chief Executive Officer as of February 13, 2021 for a temporary
mandate of 2 months.
According to Resolution No.1, further to casting the cumulative vote, the company’s
shareholders appointed the following persons as members of the Board of Directors for a
temporary four-month mandate:
Jude Aristotel Marius
Simescu Nicolae Bogdan
Stan Olteanu Manuela Petronela
Drăgan Dan Dragoş
Niculescu George Sergiu
Balazs Botond
Sorici Gheorghe Silvian.
Following Board members were revoked: Mr. Ciobanu Romeo Cristian, Mr. Jansen Petrus
Antonius Maria and Mr. Marin Marius Dumitru.
The Board of Directors endorsed the binding offer to acquire all shares issued by ExxonMobil
Exploration and Production Romania Limited (representing 100% of the share capital),
company that holds 50% of the rights and obligations under the Concession Agreement for
petroleum exploration, development and production in XIX Neptun Deep Block. OMV Petrom
S.A. holds the other 50% participating interest in XIX Neptun Deep Block.
The binding offer to acquire all shares was submitted to ExxonMobil Exploration and
Production Romania Limited on March 30, 2021, being conditional upon Romgaz
shareholders approval.
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2021 Consolidated Board of Directors’ Report
April 1, 2021
According to Resolution No.28, the Board of Directors expressed its agreement to terminate
the Contract of Works No. 13.384/2016 for Development of CTE Iernut by building a 430
MW power plant with combined cycle gas turbines.
April 7, 2021
April 8, 2021
April 22, 2021
April 23, 2021
May 6, 2021
May 7, 2021
May 20, 2021
June 2, 2021
June 17, 2021
June 18, 2021
June 24, 2021
June 30, 2021
July 9, 2021
The Board of Directors approved by Resolution No.29, the extension of Mr. Aristotel Marius
Jude mandate as Chief Executive Officer for a period of 4 months, effective as of April 13,
2021.
By Resolution No. 30, the Board of Directors appointed Mr. Razvan Popescu as Chief
Financial Officer as of April 14, 2021, for a 4 months term.
At the Contractor’s request, Romgaz suspended for 14 days the termination notice related
to the Contract of Works No. 13.384/2016 for Development of CTE Iernut by building a 430
MW power plant with combined cycle gas turbines.
The notice regarding termination of Contract of Works No. 13.384/2016 for Development of
CTE Iernut by building a 430 MW power plant with combined cycle gas turbines was further
suspended until May 7, 2021.
Romgaz and OMV Petrom issued a joint press release stating: “If ExxonMobil accepts
Romgaz offer, OMV Petrom shall act as operator of Neptun Deep Block”.
Romgaz further suspended until May 20, 2021 the notice regarding termination of Contract
of Works No. 13.384/2016 for Development of CTE Iernut by building a 430 MW power plant
with combined cycle gas turbines.
Company’s shareholders approved by Resolution No.4, the conclusion of lease contracts
between Romgaz and Depogaz Subsidiary, with respect to Romgaz fixed assets necessary
for Depogaz Subsidiary to perform the storage activity, for a nine-month period, as of April
1, 2021 until December 31, 2021.
The notice regarding termination of Contract of Works No. 13.384/2016 for Development of
CTE Iernut by building a 430 MW power plant with combined cycle gas turbines was further
suspended until June 2, 2021.
The notice regarding termination of Contract of Works No. 13.384/2016 for Development of
CTE Iernut by building a 430 MW power plant with combined cycle gas turbines was further
suspended until June 16, 2021.
Romgaz and ExxonMobil Exploration and Production Romania Limited signed an Exclusivity
Agreement by which the seller grants Romgaz an exclusivity right for a period of 4 months
(until October 15, 2021) with respect to the negotiations for the acquisition of all shares
issued by (representing 100% of the share capital of) ExxonMobil Exploration and Production
Romania Limited, company that holds 50% of the rights and obligations under the
Concession Agreement for petroleum exploration, development and production in XIX
Neptun Deep Block.
Romgaz informs its shareholders and investors that starting June 17, 2021 the Contract of
Works No. 13384/2016, for the Development of CTE Iernut by building a new 430 MW power
plant, with combined cycle gas turbine, ceased by termination, motivated by the non-
completion in time, by the Contractor, of construction works and commissioning of the
investment objective.
GD No.669/2021 extends the following: the term for completion and commissioning of
investments financed from the National Investment Plan until June 30, 2022; the
reimbursement term until December 31, 2022, as well as all other related terms.
According to Resolution No. 47, the Board of Directors appointed Mr. Aristotel Marius Jude
as Chief Executive Officer for a temporary mandate of 4 months, as of August 14, 2021.
According to Resolution No.48, the Board of Directors appointed Mr. Razvan Popescu as
Chief Financial Officer for a temporary mandate of 4 months, as of August 15, 2021.
By Resolution No. 5, Romgaz shareholders approved to extend the mandates of SNGN
Romgaz SA Board of Directors members by two months from the date of expiry, pursuant to
the provisions of Art. 641, par. (5) of GEO No.109/2011 on corporate governance of public
enterprises.
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2021 Consolidated Board of Directors’ Report
By Resolution No. 7, Romgaz shareholders appointed the following persons as interim
members of SNGN Romgaz SA Board of Directors, for a period of 4 months starting with
September 13, 2021 until January 13, 2022:
September 9,
2021
Drăgan Dan Dragoş
Niculescu George Sergiu
Jude Aristotel Marius
Simescu Nicolae Bogdan
Stan Olteanu Manuela Petronela
Balazs Botond
Sorici Gheorghe Silvian.
September 22,
2021
September 28,
2021
October 5, 2021
October 6, 2021
October 12, 2021
October 26, 2021
October 27, 2021
November 2, 2021
November 3, 2021
November 4, 2021
GD No.1011 approved Addendum No. 6 to the Concession Agreement concerning 8
exploration, development and production blocks, concluded between Agenţia Naţională
pentru Resurse Minerale (ANRM) (National Agency for Mineral Resources) and SNGN
Romgaz SA, approving the extension of the exploration period for 6 years (October 2021-
October 2027). The extension of the exploration period was requested by Romgaz on the
basis of the prospective potential identified through works previously carried out in these
blocks.
The Board of Directors endorsed Romgaz Strategy for 2021-2030 by Resolution No. 62.
Romgaz and ExxonMobil Exploration and Production Romania Holdings Limited agreed to
extend the exclusivity period from October 15, 2021 until November 15, 2021.
Company’s shareholders appoint by Resolution No. 8 Ernst&Young Assurance Services
SRL as Romgaz financial auditor and set the minimum term of the financial audit contract
for 3 years to provide specific services in years 2021, 2022 and 2023 and to audit the joint
accountability of the partnerships for years 2020-2023.
Romgaz receives the Technical report on the quantitative and qualitative assessment
following the technical and economic inspection of the works performed related to “CTE
Iernut Development by building a new power plant with combined cycle gas turbine”.
Romgaz and ExxonMobil Exploration and Production Romania Holdings Limited finalized
exclusive negotiations and reached an agreement on the terms and conditions of the
acquisition of 100% of ExxonMobil Exploration and Production Romania Limited shares.
By Resolution No. 9, Company’s shareholders approve the procedure for selection of Board
members, in compliance with GEO No.109/2011. The Ministry of Energy on behalf of the
shareholder, the Romanian state, will organize the selection procedure.
The Board of Directors endorsed the acquisition of 100% of ExxonMobil Exploration and
Production Romania Limited shares.
According to Resolution No. 67, the Board of Directors appointed Mr. Aristotel Marius Jude
as Chief Executive Officer for a mandate of 4 months, as of December 15, 2021 until April
15, 2022.
According to Resolution No.68, the Board of Directors appointed Mr. Razvan Popescu as
Chief Financial Officer for a mandate of 4 months, as of December 16, 2021 until April 16,
2022.
GD No. 1153 of October 22, 2021 approved some Addenda to the Concession Agreement
for 12 development-production and production blocks, concluded between the National
Agency for Mineral Resources (ANRM) and Romgaz.
As titleholder of petroleum agreements for these blocks, Romgaz performed petroleum
operations that discovered new hydrocarbon reserves and requested extension of the
production period by 6 years, namely for December 2021- December 2027.
Company’s shareholders approve by Resolution No.10 S.N.G.N. Romgaz S.A. Strategy for
2021-2030.
Company’s shareholders, convened in an extraordinary meeting, approved the following:
By Resolution No.11:
December 10,
2021
a)
the transaction for S.N.G.N. ROMGAZ S.A. to acquire all shares issued by
(representing 100% of the share capital of) ExxonMobil Exploration and Production
Romania Limited, company that holds 50% of the rights and obligations under the
Concession Agreement for petroleum exploration, development and production in
XIX Neptun Deep Block.
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2021 Consolidated Board of Directors’ Report
b) conclusion of the share sale and purchase agreement regarding all shares issued
by (representing 100% of the share capital of) ExxonMobil Exploration and
Production Romania Limited, agreement to be concluded between S.N.G.N.
ROMGAZ S.A., as buyer, and ExxonMobil Exploration and Production Romania
Holdings Limited, ExxonMobil Exploration and Production Romania (Domino)
Limited, ExxonMobil Exploration and Production Romania (Pelican South) Limited,
ExxonMobil Exploration and Production Romania (Califar) Limited and ExxonMobil
Exploration and Production Romania (Nard) Limited, as sellers.
By Resolution No.12:
a) contracting of loans from one or several credit institutions in the total amount of EUR
325 million, in order to cover a part of the purchase transaction price payed by
S.N.G.N. Romgaz S.A. for all the shares issued by (representing 100% of the share
capital of) Exxon Mobile Exploration and Production Romania Limited, in compliance
with the award criteria listed in the Resolution;
the extension by 1 year, changing the granting currency and decreasing the credit
limit for Credit Facility Contract No. 201812070225 concluded with Banca
Comerciala Romana S.A, for issuing bank guarantee letters up to the limit of RON
350 million.
b)
By Resolution No. 11: Approves extension of fixed assets rental contracts concluded
between S.N.G.N. Romgaz S.A. and S.N.G.N. Romgaz S.A. – Filiala de Inmagazinare
Gaze Naturale Depogaz Ploiesti S.R.L., No. 31655/April 1, 2021 and No. 31657/April 1,
2021, for a period of one year, as of January 1, 2022.
On December 29, 2021, the trading price of Romgaz shares on Bucharest Stock Exchange
reached an historic maximum of 39 RON/share. This value represents the highest share
price recorded since listing the company on BVB (November 2013) and maintained the high
rate for two trading days December 29 and 30, 2021.
December 29,
2021
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2021 Consolidated Board of Directors’ Report
II.
PARENT COMPANY AT A GLANCE
Name: Societatea Naţională 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, 2021 the shareholder structure was the following:
Romanian State3
Free float – total, out of
which:
*legal persons
*natural persons
Shares
%
269,823,080
115,599,320
96,615,074
18,984,246
70.0071
29.9929
25.0673
4.9256
Free
float
30%
Total
385,422,400
100.0000
In financial year 2021 the Company neither performed
transactions with own shares nor held own shares on December 31, 2021.
The
Romanian
State
70%
Romgaz organization structure is a hierarchy-functional type, with the following hierarchy levels from company’s
shareholders to execution personnel:
General Meeting of Shareholders
Board of Directors
Chief Executive Officer, Deputy Chief Executive Officer (with mandate), Chief Financial Officer (with
mandate)
managers without contract of mandate
heads of functional and operational departments subordinated to managers
execution personnel
3 The Romanian state through the Ministry of Energy
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2021 Consolidated Board of Directors’ Report
The duties of the Board of Directors are detailed both in the Company’s Articles of Incorporation as well as in the
Terms of Reference of the Board of Directors.
The Chief Executive Officer, the Chief Financial Officer, the Deputy Chief Executive Officer as well as managers
without contract of mandate are key people in the structure and operation 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 duties 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 had at the beginning of 2021 seven branches, set up based on the specific of the activities
performed and on the specific of 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 9 sections;
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 5 sections and one laboratory;
Sucursala de Productie Energie Electrica Iernut (SPEE – Iernut Power Generation Branch) having its
office in Iernut, 1 Energeticii Street, postal code 545100, Mures County, organised in 7 sections;
Sucursala Bratislava4 (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.
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
4 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. By Resolution No.51 of August 12, 2021 (art.5), “The Board
of Directors approve the dissolution of Bratislava Branch and order deregistration from the Trade Register (ONRC)”.
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2021 Consolidated Board of Directors’ Report
Mission
Sustainable increase of added value for the company, employees
and shareholders, resilient over the long term.
Vision
Gaining profit by producing and trading hydrocarbons and
electricity, including electricity from renewable sources, under
efficiency and low emission conditions.
Goal
Future ambition to reach NetZeRomGAZ in our business. Romgaz
plans to develop its business and to reach net zero CO2 emissions
by 2050.
Strategic Objectives
Minimum 10% reduction of carbon, methane and other gas emissions (10-10-10). Reduction is set for
the validity term of the strategy (2021-2030) having 2020 as reference year;
Annual natural gas production decline below 2.5%;
EBITDA margin between 25-40%;
ROACE equal to or higher than 12%.
Strategic options and secondary objectives
We continue to develop the portfolio of resources focused on mitigating climate changes effects, centred on
resilient hydrocarbons and on operational safety and reliability:
Maximize the recovery factor of hydrocarbon reserves under safety, reliability and sustainable
development conditions;
Increase of onshore and offshore (Black Sea) hydrocarbon resources and reserves portfolio;
Electricity and energy with low CO2 emissions with large scale use of renewable energy sources, seeking
opportunities on the hydrogen market and developing a portfolio of gas clients to complete such low CO 2
emission energy:
Production of sustainable energy;
Minimum 10% reduction of carbon, methane and other gas emissions (10-10-10);
Digital transformation of the company and supporting innovations to approach new customer interaction
methods, to increase efficiency and to support new development directions;
Company digitalization;
Increase of market share and portfolio diversification;
Create long-term relationships with equal profitability for both the market and social environment:
Training human resources to embrace future trends in the field of sustainable energy;
Citizens in a green society.
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2021 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.
Exploration
Since October 1997, the exploration activity is 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.
Currently, exploration activities are performed under Addendum No. 6 (approved by GD No.1011/22.09.2021 to
the Concession Agreement for petroleum exploration-development-production approved by GD No.23/2000, with
a validity term of 6 years (10.10.2021 – 9.10.2027). The approved minimum work program includes 36 wells with
a total length of 92,000m and 1,000 km2 3D seismic for all eight blocks,
with the total value of the program of USD 195 million.
Main works performed in 2021 are:
exploration drilling:
eight wells are finalised, out of which three are in
conservation, testing gas;
one well is currently being drilled;
building surface facilities for one well;
procurement of drilling works for two wells;
preparatory works for initiating procurement of drilling
works for 18 wells.
two projects for the procurement of 3D seismic data in exploration-development-production blocks RG
07 Muntenia Centru and RG 06 Muntenia Nord-Est, covering an area of approx. 650 km2.
Exploration works are designed and prioritised based on technical-economic principles, in order to increase the
hydrocarbon resources and reserves portfolio and to maximise the prospective potential of the eight exploration-
development-production blocks licensed by Romgaz.
The table below shows the evolution of the reserves replacement ratio between 2013-2021:
100.00
94.40
80.00
70.20
102.00
82.00
60.00
%
40.00
20.00
0.00
63.00
69.50
55.94
42.00
40.75
2013
2014
2015
2016
2017
2018
2019
2020
2021
Reserves replacement ratio is influenced by the improvement of the final recovery factor, by promoting probable
and possible reserves and by investments in the infrastructure necessary for streaming in experimental
production of new exploration discoveries.
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2021 Consolidated Board of Directors’ Report
Production
The 2021 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.
2021-gas production was 5,028.5 million m3, by 508 million m3 higher than last year’s production (+11.3%) and
by 2.9 million m3 higher than planned (+0.05%).
Gas production of 5,028.5 million m3 recorded in 2021 was influenced by:
1. measures implemented to optimise gas field production;
2.
investments to extend the production infrastructure and connection of
new wells to this infrastructure;
3. continuous production rehabilitation of the main mature gas fields:
Filitelnic, Delenii, Laslău, Sădinca, Copsa Mica, Nadeş-Prod-Seleuş,
Roman, Corunca Sud, Târgu Mureş, Grebeniş, Bazna, Cetatea de
Baltă, Mărgineni, Corunca Nord, Iclănzel Vaideiu, Sărmăşel;
4. performing capitalisable repair works and well recompletion operations
for inactive or low production wells.
Underground Gas Storage
Currently, there are six operational UGSs in depleted gas reservoirs in Romania.
Romgaz owns and operates through Depogaz Subsidiary 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 25% in 2021. This level is in the first upper half of
the international values chart of Europe.
In 2021 the ratio between stored gas volumes and working volume of the
UGSs was 95.60%.
The Romanian Government issued Emergency Ordinance No. 106/2020
amending Gas and Electricity Law No. 123/2012 ruling deregulation of
storage activities. Therefore, after the withdrawal cycle 2020-2021, the
storage activity is no longer regulated.
Natural Gas Supply
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 captive customers, and
suppliers on the wholesale market.
In 2021, the Romanian gas market is fully liberalised, meaning that the gas price is set on competitive principles,
based on demand and supply and stimulated by competition between suppliers.
In terms of supply, Romgaz held, between 2014-2021, a national market share ranging between 37%-46%:
National consumption
Romgaz traded volumes
(domestic + import)
M.U.
bcm
bcm
2014
2015
2016
2017
2018
2019
2020
2021
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
12.3
5.2
Romgaz market share
%
46.1
44.0
37.1
46.3
45.5
44.1
39.1
42.4
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÷2021 deliveries
include gas delivered to Iernut and Cojocna for electricity production.
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2021 Consolidated Board of Directors’ Report
Well Workover, Recompletions and Special Operations
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 services were supplied for the wells within the company’s portfolio, yet, well workover
and special well operations were performed also for other companies that have under concession and operate
gas wells in Romania.
As regards well reactivation works for 2021, out of the 173 planned well operations the branch achieved 153
works.
The table below shows recompletion operations and capitalizable repairs performed in 2021:
Mediaș
Branch
68
75
7
Târgu Mureș
Branch
105
78
-27
TOTAL
Romgaz
173
153
-20
Planned
Achieved
Difference
Transportation and Maintenance
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.
Electricity Generation
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 430 MW combined
cycle 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.
In 2021, SPEE Iernut operated with energy group 5 of 200MW, energy group 4 of 100 MW was withdrawn from
operation due to non-compliance with NOx emission limits, provided by effective regulations.
Natural Gas Distribution
The natural gas distribution activity is regulated, 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.
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2021 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:
• 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)
1909
1913
1925
1958
1972
1976
1979
1991
1998
2000
2001
2013
• Unbundling the underground gas storage activity by setting up Filiala de Înmagazinare Gaze Naturale Depogaz
2015
SRL Ploieşti
• As of April 1, 2018 Filiala de Înmagazinare Gaze Naturale Depogaz SRL Ploieşti became operational
2018
Changes to the organisational structure
The organizational structure underwent two changes in 2021:
BoD Resolution No.22 of March 23, 2021 amended the organisational structure, by transferring the economic
and human resource departments to the headquarters;
BoD Resolution No. 44 of June 24, 2021 18, 2020 amended the organisational structure, by setting up the
Exploration-Production Division at the headquarters.
No mergers of the company took place in financial year 2021.
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2021 Consolidated Board of Directors’ Report
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.
Financial Results
Item
no
0
1
2
3
4
5
6
7
Description
2020
2021
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
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
3
6,156,535
6,098,082
58,453
5,852,926
3,999,369
3,982,298
17,071
85
2,157,251
(242,264)
1,914,987
*RON thousand*
Ratio
(2021/2020)
4=3/2x100
48.93%
49.24%
21.98%
43.63%
47.65%
47.90%
6.15%
-93.61%
51.23%
35.64%
53.46%
The total income of 2021 was higher by 48.93% as compared to 2020.
Below are the compared economic-financial indicators for 2020 and 2021 and their detailed structure split by
activity:
Compared economic-financial indicators *RON thousand*
Description
2020
2021
Variance (2021/2020)
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
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
Profit for the year
2
4,074,893
(18,617)
47,845
(6,534)
17,551
(16,151)
(58,282)
(672,063)
(767,251)
(17,000)
(26,509)
1,330
(1,158,143)
25,439
1,426,508
(178,604)
1,247,904
3
5,852,926
(281,589)
58,403
23,388
349,989
74,787
(81,146)
(685,772)
(766,639)
(16,739)
(1,197)
85
(2,539,086)
169,841
2,157,251
(242,264)
1,914,987
4=(3/2-1)x100
43.63%
1,412.54%
22.07%
n/a
1,894.13%
n/a
39.23%
2.04%
-0.08%
-1.54%
-95.48%
-93.61%
119.24%
567.64%
51.23%
35.64%
53.46%
Structure of indicators split by activity-2020
* RON thousand *
Description
TOTAL
2020
including:
1
Revenue
Cost of commodities sold
Investment Income
2
4,074,893
(18,617)
47,845
Gas
production
and
deliveries
3
3,690,235
(7,726)
107
Underground
Gas Storage
Electricity
Other
activities
Settlement
between
segments
4
333,939
(2)
1,018
5
261,112
(10,375)
152
6
376,937
(514)
67,699
7
(587,330)
-
(21,131)
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2021 Consolidated Board of Directors’ Report
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
Exploration Expenses
Share of associates’ result
Other Expenses
Other Income
Profit before tax
Income tax expense
Profit for the year
(6,534)
17,551
(8,641)
18,221
(951)
-
(174)
(638)
3,232
(32)
-
-
(16,151)
(58,282)
(17,757)
(38,212)
-
(19,225)
35
(1,481)
1,571
(9,936)
-
10,572
(672,063)
(547,414)
(5,804)
(21,761)
(25,514)
(71,570)
(767,251)
(17,000)
(26,509)
1,330
(465,561)
(14,862)
(26,509)
-
(70,733)
(1,582)
-
-
(50,866)
-
-
-
(180,091)
(590)
-
1,330
(1,158,143)
25,439
1,426,508
(1,230,603)
24,531
1,375,809
(169,289)
61
67,432
(210,677)
34
(34,639)
(124,900)
1,403
110,595
(178,604)
1,247,904
-
1,375,809
(8,718)
58,714
-
(34,639)
(169,886)
(59,291)
-
34
-
-
577,326
(590)
(92,689)
-
(92,689)
Structure of indicators split by activity-2021
* RON thousand *
Description
1
Revenue
Cost of commodities sold
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
Exploration Expenses
Share of associates’ result
Other Expenses
Other Income
Profit before tax
Income tax expense
Profit for the year
TOTAL
2021
including:
2
5,852,926
(281,589)
58,403
23,388
349,989
Gas
production
and
deliveries
3
5,338,316
(246,933)
133
(3,599)
362,633
Underground
Gas Storage
Electricit
y
Other
activities
Settlement
between
segments
4
313,456
(2)
534
(7,995)
-
5
442,412
(33,901)
7
(95)
(12,593)
6
408,161
(753)
85,823
28,804
(51)
7
(649,419)
-
(28,094)
6,273
-
74,787
(81,146)
73,538
(43,135)
-
(21,606)
25
(60,003)
1,224
(13,705)
-
57,303
(685,772)
(580,293)
(8,506)
(7,102)
(25,877)
(63,994)
(766,639)
(16,739)
(1,197)
85
(453,144)
(14,829)
(1,197)
-
(72,325)
(1,387)
-
-
(47,959)
-
-
-
(193,221)
(553)
-
85
(2,539,086)
169,841
2,157,251
(2,628,583)
41,036
1,843,943
(169,101)
274
33,342
(259,850)
126,909
147,850
(74,209)
2,071
217,799
(242,264)
1,914,987
-
1,843,943
(2,835)
30,507
-
147,850
(239,429)
(21,630)
10
30
-
-
592,657
(449)
(85,683)
-
(85,683)
Revenue
The table below shows the compared revenue and the revenue share on activity segments:
Description
2019
2020
2021
Gas production and delivery
UGS activity
Electricity generation and delivery
Other activities
Settlement between branches
TOTAL Revenue
RON
mln
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
mln
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
RON
mln
5,338.3
313.5
442.4
408.2
-649.4
5,852.9
% R
91.21%
5.36%
7.56%
6.97%
-11.10%
100.00
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2021 Consolidated Board of Directors’ Report
Finanacial Income
The financial income is higher by 21.98 % than recorded in the previous year. Financial income consists mainly
of interests from cash in bank deposits and in state bonds.
Expenses
Description
1
Operating expenses
Financial expenses
Total expenses
Year 2020
Year 2021
Ratio
(RON
thousand)
2
2,692,628
16,082
2,708,710
(RON
thousand)
3
3,982,298
17,071
3,999,369
(2021/2020)
4=(3-2)/2x100
47.90%
6.15%
47.65%
Financial expenses
Financial expenses incurred in 2021 are higher by 6.15% as compared to the previous year.
Chapter 7 shows more details on the different expenses categories and a comparative assessment thereof.
Economic-Financial Results
Compared economic-financial results are shown in the table below (RON thousand):
Description
2020
2021
Ratio
(2021/2020)
1
Operating results
Financial results
Share of associates’ result
Gross result
Income tax
Net Result
2
1,393,341
31,837
1,330
1,426,508
(178,604)
1,247,904
3
2,115,784
41,382
85
2,157,251
(242,264)
1,914,987
4=(3-2)/2x100
51.85%
29.98%
-93.61%
51.23%
35.64%
53.46%
Gross result for January – December 2021 in amount of RON 2,157,251 thousand is higher by 51.23% than the
gross result of the similar period of 2020.
Financial Performance is also emphasized by the evolution of indicators presented in the table below:
Indicator
1
Formula
M.U.
2020
2021
2
3
4
5
Working capital (WC)
Clt-Af =
mil.RON
2,656
4,223
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
E+Lnc+Pr+Si-Af
(Ast-L+Pp) -
(Lcrt-Crst+Idf)
mil.RON
WC-WCR = L-Crst
mil.RON
Pg/Cltx100
Pn/Ex100
Pg/Rx100
Pn/Ax100
Pg+Exi-Ir
EBIT+Am
EBIT/Cempx100
Ac/Lc
E/Lx100
%
%
%
%
mil.RON
mil.RON
%
-
%
2,239
639
417
16.59
16.02
35.01
13.47
1.379
2.051
16.03
5.01
84.08
3,584
22.04
21.32
36.86
16.96
2.099
2.785
21.44
3.81
79.53
where:
Clt
Af
E
Lnc
long-term capital;
non-current assets;
equity;
non-current liabilities;
Pg
Pn
R
A
gross profit;
net profit;
revenue;
total assets;
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2021 Consolidated Board of Directors’ Report
Pr
Si
Ast
L
Pp
Crst
Idf
provisions;
investment subsidies;
short term assets;
liquidity position;
Prepayments;
short-term credit;
deferred income
Exi
Ir
Am
Cemp
Ac
Lc
L
interest expense;
interest income
amortization and impairment;
capital employed (total assets–current liabilities)
Current assets
Current liabilities
total liabilities
Sale’s Evolution and Perspectives
Romgaz sold on the domestic market the entire gas quantity traded. Romgaz traded quantities on the free market
both by bilateral negotiation and on the centralized market governed by the Romanian Commodities Exchange
(BRM).
Description
Delivered gas
Sales to third parties
Gas for electricity production in
own power plant
unit
mil. m3
mil. m3
mil. m3
2019
2020
2021
2020/2019 2021/2020
5,132.1
4,901.6
173.0
4,688.1
4,406.2
277.2
5,167.6
4,966.7
192.5
-8.65%
-11.15%
+62.95%
+10.2%
+12.7%
-30.6%
From the total gas quantities supplied to third parties, the following available trading means were used:
gas delivered under contracts on centralized markets: 26.3 TWh (50.5%);
gas delivered under bilateral negotiated contracts: 25.8 TWh (49.5%), out of which:
o 11.8 TWh to Electrocentrale Bucureşti;
o 11.4 TWh to other customers, final customers and suppliers;
o 2.6 TWh represent commodity gas, purchased for resale.
Romgaz gas production increased roughly by 11.3% as compared to 2020 and volumes delivered in 2021 also
increased by 10.2%. As regards gas deliveries from own production, these went up by 6.4% as compared to
2020.
Gas supplied to third parties recorded an increase by 12.7%. It is worth mentioning that no import gas volumes
were traded in 2021. At the same time, gas volumes used by CET Iernut decreased by 30.6% as compared to
2020.
As regards trading on Romanian centralized markets, Romgaz’s share was significant, approximately 46% of the
total of gas traded on these markets (forward and SPOT) with delivery in 2021 was sold by Romgaz. In terms of
quantity, Romgaz traded over 26.08 TWh with delivery in 2021 on centralized markets, from the total volume of
approx. 56.71 TWh that represented the total transactions performed on these markets with the same delivery
period.
Romgaz was also active on the SPOT market – day ahead market, intraday market respectively in order to
optimize sales on one hand and to balance the portfolio, on the other hand, Romgaz sold on these markets
approximately 0.13 TWh.
2022 gas sales perspectives are characterized by:
taking into account the national and international gas market context, the increased gas demand will keep
gas prices at high rates;
the company concluded in 2021 - 958 contracts, of which more than 95% are GRP related contracts (Gas
Release Program) with gas deliveries in 2021and in 2022;
approximately 50% (24.06 TWh) from quantities estimated to be sold in 2022 (49.11 TWh) are based on
contracts concluded in 2021;
according 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 initial price, that can be determined (maximum 95% from the average weighted
price of the traded products) for several products: monthly, quarterly, seasonal, half year and annual
product. The program started on June 1, 2020 and ends on December 31, 2022 as regards the offering
obligation and on December 31, 2023 as regards the delivery obligation of traded products. If in 2020 the
trading price was less favourable from the producer’s point of view, starting with Q2 2021, although prices
start from a pre-set value, these are set based on the real demand and supply, reflecting the reality at
the transaction time.
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2021 Consolidated Board of Directors’ Report
Competition and Market Share of Romgaz Products and Services
In 2021, 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 negative impact of ANRE Order 143/2020, setting an initial price, felt in 2020 and at the beginning of 2021,
faded and even disappeared in 2021 as regards transactions with products that have delivery terms in 2021 and
2022, due to a steep increase of gas demand and of prices implicitly.
On the gas market, competition was not very high since temperatures were low for long periods in Q1 until the
second half of April and large gas quantities were withdrawn from storages, Romgaz withdrew the entire stored
gas quantity. Therefore, once with the beginning of the storage cycle, against a gradual economic recovery after
the COVID pandemic, gas demand increased significantly, exceeding the gas supply.
Although import gas volumes recorded a significant increase, it was complementary, necessary, required by the
market triggered by the demand increase and not for price reasons, such gas did not compete with Romgaz gas.
According to the company’s estimates, national gas consumption rose by approximately 2% as compared to
2020. Romgaz market share in the national consumption increased by 4% as compared to 2020.
National electricity production, according to preliminary data of the system operator, was 58,560,986 MWh. On
the whole-sale electricity market, Romgaz had a 1.07% market share, decreasing by 35.5% as compared to last
year.
Annual evolution of electricity production and market share:
Description
National production
Romgaz production
Romgaz market share
2019
(MWh)
59,454,280
590,129
1.00
2020
(MWh)
55,519,195
937,500
1.69
2021
(MWh)
58,560,986
640,001
1.07
2020/2019
(%)
-6.61
58.86
70.71
2021/2020
(%)
5.48
-31.73
-35.50
As regards electricity generation sources, in 2021, these were as follows5 :
29% hydro;
17% coal;
20% nuclear;
16% gas;
18% renewable sources and other producers
Market Dependence
The Romanian gas market situation allowed the company to have an extended customer portfolio 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.
Cadrul Law No. 123/2012 sets the regulatory framework for natural gas production, transmission, distribution,
supply and storage, for organization and operation of the gas sector, for market access as well as criteria and
procedures for granting authorizations and/or licenses in the natural gas sector.
On December 31, 2021, Romgaz Group operated both on the regulated market, performing distribution activities
and on the free market, performing gas and electricity production and supply activities.
Underground Gas Storage
By GEO NO.106/2020 on amending Electricity and Gas Law 123/2012, the Romanian Government decided that
gas storage activities will no longer be regulated. Therefore, after the withdrawal cycle 2020-2021, storage
activities are not regulated anymore.
Taking into account GEO No. 106/2020 and Law No. 155/2020 on amending and supplementing Law 123/2012,
starting with April 1, 2021 the price and tariffs system for storage activities is no longer set by the National
Regulatory Authority for Energy.
5 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.
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2021 Consolidated Board of Directors’ Report
As a result, storage tariffs for the two compared periods were those approved by ANRE Order No.44 of March
29, 2019 (01.04.2019-31.03.2020), ANRE Order No. 24 of March 23, 2020 (01.04.2020-31.03.2021) and
Depogaz Board Resolution No.3/March 5, 2021 (01.04.2021-31.03.2022).
The table below shows the storage tariffs:
Tariff component
unit
Volumetric component for gas injection
Fixed component for capacity
reservation
Volumetric component for gas
withdrawal
RON/MWh
RON/MWh/stora
ge cycle
RON/MWh
Tariffs
(01.04.2019-
31.03.2020)
1.90
9.98
Tariffs
(01.04.2020-
31.03.2021)
3.67
7.58
1.61
2.03
Tariffs (as of
01.04.2021)
2.29
9.31
1.74
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.
The table below shows the average gas supply prices between 2019-2021:
Description
1
Average supply price for internal gas production6
Average supply price for import gas
unit
2
RON/1000 m3
RON/MWh
RON/1000 m3
RON/MWh
2019
3
882.2
83.7
1,468.8
136.9
2020
4
751.3
73.3
-
-
2021
5
1,019.66
96.66
-
-
Natural Gas Distrubution
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);
Order No. 77/2021 on approving regulated tariffs applicable to distribution services for Societatea
Naţională de Gaze Naturale "ROMGAZ" - S.A. Medias (as of July 1, 2021).
6 Including commodity gas, less storage costs
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2021 Consolidated Board of Directors’ Report
The table below shows tariffs and prices:
Description
01.08.’18-
30.06.’19
01.07.’19-
31.12.’19
01.01.’20-
30.06.’20
01.07.’20-
30.06.’21
01.07.’21-
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
52.75
47.96
47.07
46.26
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
52.87
0.00
50.00
52.87
0.00
50.00
52.52
46.17
41.29
48.19
42.37
37.91
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
139.24
122.71
On December 31, 2021, Romgaz Group had 5,863 employees and SNGN Romgaz SA had 5,363 employees.
The evolution of the number of employees between January 1, 2019 – December 31, 2021, is shown in the table
below:
Description
2019
2020
2021
1
Employees at the beginning of the
year
Newly hired employees
Employees who terminated their
labour relationship with the
company
Employees at the end of the year
Romgaz
Group
Romgaz Romgaz
Group
Romgaz Romgaz
Group
Romgaz
3
6,214
264
227
4
5,688
238
188
3
6,251
198
261
4
5,738
177
242
5
6,188
179
504
6
5,673
157
467
6,251
5,738
6,188
5,673
5,863
5,363
The structure of SNGN Romgaz SA employees at the end of 2021 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
26.48 %
29.85 %
2.35 %
31.90 %
9.42 %
5.07 %
13.00 %
31.34 %
44.14 %
6.45 %
71.53 %
11.34 %
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2021 Consolidated Board of Directors’ Report
health
transportation
electricity production
1.44 %
9.23 %
6.47 %.
Distribution of Romgaz employees by headquarters and by branches is shown in the figure below:
Iernut Branch
7%
STTM
9%
SIRCOSS
11%
Headquarters
12%
Medias Branch
32%
Targu-Mures
Branch
29%
The table below shows the structure of employees at the headquarters and branches:
Entity
Workers
Foremen
Administrative
employees
Total
Headquarters
Mediaş Branch
Targu-Mures Branch
SIRCOSS
STTM
Iernut Branch
Drobeta Turnu Severin Branch
TOTAL
38
1,339
1,247
447
374
227
3,672
83
50
46
16
31
226
622
291
241
115
105
89
2
1,465
660
1,713
1,538
608
495
347
2
5,363
In 2021, professional training courses 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 training
suppliers;
authorization/re-authorization, according to their specialization and position;
skills improvement and vocational training of workers through internal training courses.
A number of 1,800 employees were trained in 2021 and the costs of such professional trainings were RON
1,218,161.
The annual training program was implemented as follows:
480 persons participated in professional training programs on job related subject matters;
1,127 persons participated in training courses to obtain authorization/re-authorization in accordance with
their position;
193 persons participated in internal training courses;
The 2021 professional training plan, as regards the number of participants, was fulfilled 44.43%. This was caused
as in the previous year, but to a lesser extend, by the SARS-CoV2 pandemic. As the state of alert was still in
force in 2021, the restrictive measures imposed in the country regarding organisation of courses and the fear of
employees of a potential infection have led to non-fulfilment of the objectives set for this activity.
During 2021, the professional training activity focused mainly on supporting the increase of the capacity to adapt
to new requirements of the knowledge-based economy, to ensure and update the necessary skills for employees
holding positions in the technical, economic, research and development field, etc.
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2021 Consolidated Board of Directors’ Report
Romgaz Group has two trade unions:
“Sindicatul Liber din cadrul S.N.G.N. Romgaz S.A.”, consisting of 5,499 members;
“Sindicatul Filiala Inmagazinare DEPOGAZ”, consisting of 323 members.
Thus, the total number of union members within Romgaz is 5,822 out of the 5,863 employees, resulting a ratio of
99.30% union members.
Relationship between manager and employees: The parties agreed to conclude a new Collective Labour
Agreement on November 27, 2019, 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.
According to the provisions of art. 20 of Law No.55/May 15, 2020 on certain measures to prevent and combat
effects of COVID-19 pandemic, “Validity of collective labour contracts and of collective labour agreements
extends during the state of alert as well as for a period of 90 days after termination of the state of alert.”
Consequently, the collective labour contract extended its validity term, beyond December 28, 2021.
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, and according to
art. 20 of Law No.55/May 15, 2020, the collective labour contract extended its validity beyond such date.
During 2021, there were no conflicts between the management and the trade union.
In 2021, the environmental protection activity continued to focus on ensuring compliance with the Group’s
obligations in this respect. Another aim was meeting specific objectives related to:
monitor drafting of all reports required by the effective environmental legislation, by centralizing the
increasing awareness on compliance with legal requirements;
information required and reported by Romgaz Branches and submitting it to competent authorities;
efficiency of environmental protection activities which support the management process.
In 2021 environmental protection activities focused on:
Compliance with permitting requirements:
Complying with legal requirements relating to environmental permits for all 124 units. In this respect, the
compliance degree is 100%. Thus, the company took the following steps: required and obtained review of
permits for 9 units; re-authorisation was requested and obtained for 8 units; the annual endorsement was
requested and obtained for 78 units; submitted documents for abandoning gas production wells for 47 units;
submitted required documents for temporary ceasing activities at 4 units; requested and received a point of
view on the necessity to obtain the Environment Authorisation (negative – it wasn’t necessary to obtain the
regulatory act) from county Environment Protection Agencies;
Complying with legal requirements regarding waste water management permits, for:
69 units, for which the conformity degree is 100% mentioning that for 22 units re-
authorization documents were submitted,
36 units related to reservoir water injection systems/wells, out of which 4 are in process of
obtaining re-authorization and for 2 units the company submitted requests for abandonment.
A company-wide application is under development to monitor environmental/water/injection permits, permanently
analysing and continuously supervising compliance with legal requirements on environment protection;
Management of waste generated from own activities, according to the legal requirements in force. In 2021,
the company managed a quantity of 2,336.736 tons of waste from its own activity, out of which 464.26 tons
were recycled and co-incinerated (437.937 tons were recycled and 26.323 tons were co-incinerated), 0.09246
tons of waste were disposed by incineration and 1,872.383 tons of waste were disposed by storage.
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2021 Consolidated Board of Directors’ Report
AMOUNT OF WASTE MANAGED IN 2021 (2,336.736 tons)
6 000
5 500
5 000
4 500
0,092
464
1.872
4 000
Quantity disposed by storage
Quantity recicled and co-incinerated
Quantity disposed by incineration
In 2021, the “Program for Preventing and Reducing Waste Generated by S.N.G.N. Romagaz S.A.” pursued
the accomplishment of the measures thereunder; it can be viewed by accessing the following link
https://www.romgaz.ro/ro/content/program-de-prevenire-si-reducere-cantitatilor-de-deseuri.
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 2021 Romgaz did not exceed
the limits permitted by regulations in force, with the effluents discharged into surface water bodies or sewage
networks;
In 2021, 1 external environment complaint were recorded, as follows:
The National Environment Guard Mures (GNM CJ Mures) and Public Health District Authority Mures (DSP
Mures) were notified regarding noise exceedance at Corunca compressor station in Corunca, Mures County.
Following the inspection (Findings report No.189) dated March 26, 2021, DSP Mures ruled as measure
installation of noise-absorbing panels around Corunca compressor station in order to reduce the noise
produced by the compressor station activity, deadline October 1, 2021. In this respect, the procurement
procedure was initiated to contract the investment works (design and execution noise-absorbing panels).
After all procurement phases and after providing clarifications on the tender specifications, the only tenderer
withdrew the offer. Under these circumstances, the procedure was cancelled and the documentation was
send to the internal procurement department for re-evaluation in order to initiate the procurement procedure
again. DSP Mures was notified on October 1, 2021 on restarting the procurement procedure.
In 2021, 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.;
Planning and organizing the internal environmental inspection activity in order to verify compliance with the
legal requirements applicable to inspected activities.
Romgaz headquarters environmental inspectors planned in 2021 36 internal environmental inspections, while
32 were actually conducted due to national pandemic circumstances and company-level circumstances, at
the authorized units of branches. Thus, Romgaz activity complies with the applicable legal environmental
requirements, the conformity degree identified following the implementation of a procedural assessment
method for 2021 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 in 2021;
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 2021, the Environmental Guard and the Water Basins Administrations carried out 39 inspections at
Romgaz locations.
27/ 70
2021 Consolidated Board of Directors’ Report
Following the inspection carried out at well 23 Jugureanu (located on the shore of lake Vultureni, in Vultureni,
Ciresu commune, Braila county) by Environmental Guard commissioners found that the lake shore, where
the well is located, was consolidated against corrosion with concrete blocks and this caused degradation of
the lake bank soil. Targu Mures Branch was fined for non-compliance with effective environmental legislation
according to art 68 of GEO No.195/2005 on environmental protection, with the amount of RON 15,000. The
well was drilled in 1965, consolidation works were performed around that date when the well was brought in
production (January1969). The fine was paid as there were no legal grounds to challenge it.
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 2021, CO2 emissions equal 378,841 tons which is equivalent to 378,841 certificates.
In order to comply with the legal requirements, SPEE Iernut has to purchase these certificates. The
acquisition has to be finalized before April 14, 2022.
In 2021 the company concluded the subsequent contract no.2 to the framework agreement for purchasing
additional voluntary health insurances for all employees.
Moreover, the company concluded subsequent contracts to the framework agreements for personal protective
equipment (PPE), necessary for the working personnel, namely 53 types of protective equipment.
The inspectors performed internal controls at the headquarters and the branches, checking employees training
in the field of occupational safety and health, the manner of complying measures to reduce the COVID infection
risk; the inspectors also distributed PPE and reviewed the necessary PPE stocks.
SARS-CoV2 infections at S.N.G.N. Romgaz S.A.
Between January 1, 2021-December 31, 12, 2021 there were 371 infections with the virus and 5 deaths.
The two charts below show the evolution of COVID-19 cases at Romgaz in 2021 split on branches and
headquarters and total Romgaz cases, respectively.
28/ 70
2021 Consolidated Board of Directors’ Report
s
e
s
a
c
f
o
r
e
b
m
u
N
50
40
30
20
10
0
s
e
s
a
c
f
o
r
e
b
m
u
N
Evolution of COVID-19 CASES at Romgaz,
during January 2021 - December 2021, split on branches/headquarters
45
37
22
20
13
13
7
6
6
12
7
8
5
1
1
2
1
0
0
0
0
1
0
0
0
0
0
0
0
0
2
0
1
0
0
0
2
1
5
4
3
2
1
1
1
0
0
19
11
10
11
7
7
3
2
1
2
4
3
1
9
6
4
3
1
2
12
8
7
6
1
1
January
Headquarters
February
March
April
Medias Branch
May
June
July
Targu Mures Branch
August
SIRCOSS
September October
STTM
November December
Iernut Branch
140
120
100
80
60
40
20
0
Evolution of COVID-19 cases at Romgaz,
during January 2021 - December 2021
130
35
25
46
28
12
35
51
1
0
3
5
The company paid and is still paying particular attention to measures for fighting against SARS-COV2, by drafting
and implementing the necessary measures and procedures to minimize its impact on the company as well as by
permanently carrying out inspections to verify their implementation.
In this respect, following measures were taken:
Drawing up lists with Romgaz employees who expressed their consent to vaccination, lists which were
centralized and uploaded to the national programming platform for vaccination against COVID-19;
Purchase of disinfectant gel for hands;
Purchase of digital infrared thermometers (no touch) to find employees with fever at the entrance in the
headquarters;
Romgaz employees were allowed to work from home between October 25, 2021-February 1, 2022;
Daily monitoring and updating the status/condition of Romgaz employees who are isolated/in quarantine due
to suspicion of or infection with SARS-CoV-2 virus.
The summarized breakdown of litigations in which Romgaz is involved as of December 31, 2021 is the following:
A total number of 231 litigations are recorded in company’s records, out of which:
121 cases where Romgaz is plaintiff;
104 cases where Romgaz is defendant;
6 cases where Romgaz is civil party/injured party;
The total value of litigations is RON 1,754,358,712.28;
The (approximate) total value of the files where Romgaz is plaintiff (including injured party and third party
garnishee) is RON 1,336,601,257.02
The (approximate) total value of the files where Romgaz is defendant is RON 131,412,508.71;
29/ 70
2021 Consolidated Board of Directors’ Report
The (approximate) total value of the files where Romgaz is civil party is RON 286,344,946.55.
The detailed list of litigations can be viewed on Romgaz website www.romgaz.ro Investor Relations Annual
Reports 2021.
The table below shows the contracts concluded under art.52, para (1) and (3) of GEO No.109/2011:
Estimated value
Penalties
Contracting
party
Number and date of the
legal act
Scope of
contract
Mutual
receivabl
es
Warranties
set up for
contract
Cumulated
contract value
(VAT inclusive)
Electrocentrale
București SA
Electrocentrale
Constanţa SA
Depogaz
Ploiești SRL
Addendum
no.14/01.10.2021 to
Contract no.8/2016
Addendum
no.1/30.09.2021 to
Contract no.32/2020
Contract
no.VG70/26.10.2021
CET Govora
SA
Contract
no.VG32/31.08.2021
U.M. 0929
București
(contracting
authority)
Framework agreement
no.62/31.08.2021 and
Addendum
no.1/28.12.2021
Termoficare
Oradea SA
Contract no.VG
71/29.10.2021
Termo Calor
Confort SA
Pitești
SC Modern
Calor SA
Contract no.VG
31/31.08.2021
Contract
no.VG30/31.08.2021
Depogaz
Ploiești SRL
Contract no.773/
01.04.2021
Depogaz
Ploiești SRL
Depogaz
Ploiești SRL
Depogaz
Ploiești SRL
Depogaz
Ploiești SRL
SNTGN
Transgaz SA
Addendum
no.1/01.09.2021 to
Contract no.773/2021
Addendum
no.2/01.10.2021 to
Contract no.773/2021
Addendum
no.3/01.11.2021 to
Contract no.773/2021
Addendum
no.4/01.12.2021 la
Contract no.773/2021
Addendum no.02-30/2021
la Contract no.90/2020
SNTGN
Transgaz SA
Addendum no.01-23/2021
to Contract no.125T/2020
SNTGN
Transgaz SA
Contract
no.439L/20.01.2021
SNTGN
Transgaz SA
SNTGN
Transgaz SA
Contract
no.441L/20.01.2021 -
Addendum no.01-25/2021
Contract
no.520L/17.02.2021
SNTGN
Transgaz SA
Contract
no.521L/17.02.2021
SNTGN
Transgaz SA
Contract
no.153T/09.02.2021
SNTGN
Transgaz SA
Contract
no.605L/17.03.2021 -
Addendum no.01-23/2021
Gas sales
(01.10.2021-
30.09.2022)
Gas sales
(01.10.2021-
30.09.2022)
Gas sales
(01.01.2022-
31.12.2022)
Gas sales
(01.10.2021-
30.09.2022)
Subsequent
gas sales
(01.09.2021-
31.08.2022)
Gas sales
(01.11.2021 –
01.10.2022)
Gas sales
(01.10.2021 –
01.10.2022)
Gas sales
(01.10.2021-
30.09.2022)
***)
***)
***)
***)
***)
PSTTI
(01.01.2021 -
01.04.2021)
PSTLI
(01.02.2021 -
01.03.2021)
PSTLE
(01.02.2021 -
01.03.2021)
PSTLI
(01.03.2021 -
01.04.2021)
PSTLE
(01.03.2021 -
01.04.2021)
PSTTE
(01.04.2021 -
01.07.2021)
PSTLE
(01.04.2021 -
01.05.2021)
(RON)
2,102,633,488.70
258,915,102.52
37,074,549.96
46,948,694.84
12,044,198.01
408,023,481.25
73,916,718.62
44,462,323.38
63,498,400.00
5,556,110.00
-
-
Deadline
and
payment
methods
90 days
from invoice
issue date
**)
Due date 30
days from
invoice
issue date
**)
Monthly
invoices
due at 15
days from
issue date
**)
**)
**)
15 days
from invoice
issue date
- I I -
- I I -
- I I -
15 days
from invoice
issue date
- I I -
13,493,410.00
- I I -
857,157.00
- I I -
289,004.35
- I I -
175,965.30
- I I -
60,794.72
- I I -
1,331,967.00
- I I -
534,728.88
- I I -
PSTAE
14,132,205.61
11,504,146.50
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,574,558.93
3,834,715.50
857,157.00
289,004.35
175,965.30
60,794.72
443,989.00
534,728.88
*)
*)
4,798,774,330.73
334,773,045.89
0.10%/day
37,074,549,96
0.10%/day
46,948,694.84
0.10%/day
12,044,198.01
0.10%/day
408,023,481.25
0.10%/day
73,916,718.62
0.10%/day
44,462,323.38
-
-
-
-
-
*)
*)
*)
*)
*)
*)
*)
*)
63,498,400.00
69,054,520.71
82,547,930.71
82,547,930.71
82,547,920.00
31,118,862.47
19,146,297.58
857,157.00
165,495.69
175,728.79
39,198.20
383,346.60
313,838.11
30/ 70
2021 Consolidated Board of Directors’ Report
Contracting
party
Number and date of the
legal act
Scope of
contract
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
Contract
no.616L/21.04.2021 -
Addendum no.01-02/2021
Contract
no.695L/19.05.2021
Contract
no.174T/12.05.2021 -
Addendum no.01-32/2021
Contract
no.781L/21.07.2021
Contract
no.836L/18.08.2021 -
Addendum no.01-02/2021
Contract
no.84/20.08.2021 -
Addendum no.01-11/2021
Contract
no.18/20.08.2021
Contract
no.43T/20.08.2021
SNTGN
Transgaz SA
Contract
no.44T/20.08.2021
SNTGN
Transgaz SA
SNTGN
Transgaz SA
Contract
no.49L/22.09.2021 -
Addendum no.01-18/2021
Contract
no.132L/20.10.2021
Addendum no.01-04/2021
SNTGN
Transgaz SA
Contract
no.130L/20.10.2021
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
SNTGN
Transgaz SA
Contract
no.204L/17.11.2021 -
Addendum no.01-04/2021
Contract
no.203L/17.11.2021
Contract
No.46/20.08.2021
Contract No.48-
RBP/30.12.2021
Estimated value
(RON)
1,697,460.15
Deadline
and
payment
methods
- I I -
1,640,107.98
- I I -
6,030,158.40
- I I -
109,164.89
- I I -
212,647.05
- I I -
5,722,980.55
- I I -
PSTLE
(01.05.2021 -
01.06.2021)
PSTLE
(01.06.2021 -
01.07.2021)
PSTTE
(01.07.2021 -
01.10.2021)
PSTLE
(01.08.2021 -
01.09.2021)
PSTLE
(01.09.2021 -
01.10.2021)
STAE
PSTAI
33,230,033.05
- I I -
PSTTI
(01.10.2021 -
01.01.2022)
PSTTE
(01.10.2021 -
01.01.2022)
PSTLE
(01.10.2021 -
01.11.2021)
PSTLE
(01.11.2021 -
01.12.2021)
PSTLI
(01.11.2021 -
01.12.2021)
PSTLE
(01.12.2021 -
01.01.2022)
PSTLI
(01.12.2021 -
01.01.2022)
SE
PSTPI
2,305,648.80
- I I -
670,805.86
- I I -
260,669.90
- I I -
759,644.33
- I I -
723,496.20
- I I -
1,464,174.43
2,548,730.10
15 days
from invoice
issue date
- I I -
-
-
- I I -
- I I -
Mutual
receivabl
es
Warranties
set up for
contract
Penalties
Cumulated
contract value
(VAT inclusive)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,697,460.15
1,640,107.98
2,010,052.80
109,164.89
212,647.05
1,892,108.60
10,986,378.68
768,549.60
223,601.95
260,699.90
459,644.33
723,496.20
1,464,174.43
2,548,730.10
1,000.00
-
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
*)
541,215.81
471,011.52
1,723,878.03
50,996.74
103,890.71
11,321,409.18
45,601,607.52
2,306,693.03
537,097.75
297,073.54
752,420.61
723,496.20
1,201,616.49
2,548,730.10
-
-
*) – at the level of late payment penalties due for failure to pay budgetary obligations on due date.
**) - Advance. Settlement invoice at 30 days from issue date.
***) – Provision of underground gas storage services.
Provision of quarterly gas transmission services in NTS entry points;
Provision of annual gas transmission services in NTS entry points;
Where:
PSTAI
PSTAE Provision of annual gas transmission services in NTS exit points;
PSTTI
PSTTE Provision of quarterly gas transmission services in NTS exit points;
PSTLI
PSTLE Provision of monthly gas transmission services in NTS exit points;
SE
PSTPI Provision of gas transmission services (in interconnection points).
balancing differences between gas entry/exit into/from NTS;
Provision of monthly gas transmission services in NTS entry points ;
31/ 70
2021 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.
Exploitation of Natural Gas Reservoirs
The infrastructure related to exploitation of natural gas reservoirs is a particularly complex system today that
needs to ensure continuous gathering, transmission, conditioning and metering of gas produced by wells ensuring
continuously 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 production 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 compressor 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 compressor units, which
can be intermediate or final compressor stations (entry in the NTS);
Industrial or reservoir water pumping stations;
9.
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%.
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 compressor stations and dehydration stations as
well as of commercial (fiscal) gas delivery panels.
In 2021, Romgaz carried out petroleum operations in 136 gas fields out of which 124 are well defined blocks and
the rest of 12 are gas fields with experimental production.
Production from these fields is obtained through more than 3,000 wells and through almost the same number of
surface facilities consisting mainly of gathering pipelines, gas heaters (where applicable), liquid separators and
gas flow technological metering panels.
Pressure and flow rate limits of production wells are maintained by 16 compressor stations (in which 83
compressor units are installed), 17 booster compressors and 9 well cluster compressors.
32/ 70
2021 Consolidated Board of Directors’ Report
One technical demand required by applicable laws is the quality of gas, which is 100% fulfilled by means of 66
gas dehydration stations.
Underground Gas Storage
Depogaz holds Licence No. 1942/2014 for the operation of five 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:
UGS
Active capacity
Withdrawal capacity
Injection capacity
[mil.Scm/cycle]
[TWh/cycle]
[mil.Scm/cycle]
[GWh/day]
[mil.Scm/cycle]
[GWh/day]
Bălăceanca
Bilciurești
Ghercești
Sărmășel
Urziceni
Total
50
1,310
150
900
360
2,770
0.545
14.214
1.602
9.522
3.953
29.836
1.2
14.0
2.0
7.5
4.5
29.2
13.080
151.900
21.360
79.350
49.410
315.100
1.0
10.0
2.0
6.5
3.0
22.5
10.900
108.500
21.360
68.770
32.940
242.470
1. Balaceanca UGS
Balaceanca UGS 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;
8.73 km collecting pipelines;
1.07 km gathering pipelines;
4 separators;
4 technological gas metering panels;
15 gas heaters;
communication system and fibre-optic data acquisition system;
1 bi-directional fiscal metering system.
2. Bilciuresti UGS
Bilciuresti UGS 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;
26.6 km gathering pipelines for 57 injection/withdrawal wells;
31.7 km gathering pipelines and fittings;
50 gas heaters;
20 impurities separators;
14 technological gas metering panels;
37.5 km gathering pipelines;
bi-directional fiscal metering system;
waste-water injection station.
3. Ghercesti UGS
Ghercesti UGS is located in Dolj County, near Craiova.
The fixed assets contributing to the storage process are as follows:
85 wells, out of which 79 active wells and 6 piezometric wells;
33/ 70
2021 Consolidated Board of Directors’ Report
surface infrastructure includes:
1 gas dehydration station;
135.7 km gathering pipelines for 79 injection/withdrawal wells;
22.7 km gathering pipelines;
13 separators;
12 technological gas metering facilities;
communication system and fibre-optic data acquisition system;
bi-directional fiscal metering system.
4. Sarmasel UGS
Sarmasel UGS 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, out of which 63 active wells;
surface infrastructure includes:
Sarmasel gas compressor station;
3 dehydration stations;
26.9 km gathering pipelines for 63 wells;
15.8 km gathering pipelines;
59 impurities separators;
bi-directional fiscal metering system.
5. Urziceni UGS
Urziceni UGS 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 30 injection/withdrawal wells and 2 piezometric wells;
surface infrastructure includes:
Urziceni gas compressor station;
20.7 km of collecting pipelines for 30 injection/withdrawal wells;
3.3 km of collecting pipelines;
6 technological gas metering facilities;
30 gas heaters;
1 gas dehydration station;
optic fibre data acquisition system;
bi-directional fiscal metering system.
Workover and Special Operations
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.
Transportation and Maintenance
On December 31, 2021, the car fleet of STTM consists of 716 motor vehicles as follows:
passenger carriers: cars 92, minibuses 15, buses 2 and large buses 2;
passengers and goods utility cars - 211 are < than 3.5 t and 13 are > than 3.5 t;
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2021 Consolidated Board of Directors’ Report
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, tyre shovels 2, wheel loaders 15, motor grader 3,
compactor 3, front end loaders 12;
other machinery: tractor trucks 95, 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 716 vehicles existing in STTM fleet on December 31, 2021:
22 motor vehicles were approved to be put out of service;
34 motor vehicles are proposed to be put out of service.
Electricity Generation
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.
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 had the license to commercially operate 2 power units: one 100 MW unit and
one 200 MW unit. In 2021, SPEE Iernut operated with energy group 5 of 200MW, energy group 4 of 100 MW was
withdrawn from operation due to non-compliance with NOx emission limits, provided by effective regulations.
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 1 and 2 is used as fuel gas for 2 x 1.5 MW electric power generation
units.
Investments play an important part in maintaining production decline which is achieved both by discovering new
reserves and by improving the current recovery rate through rehabilitation, development and modernization of
existing facilities.
In 2021, Romgaz Group invested RON 459.32 million, 27.93% (RON 177.98 million) lower than 2020
investments representing approximately 34% of the scheduled investments.
The Company invested RON 3.82 billion during 2017-2021, as follows:
Year
2017
2018
2019
2020
2021
Total
Value
thousand)
(RON
781,768
1,150,349
866,218
601,800
417,658
3,817,793
For 2021 Romgaz forecasted the achievement of an investment program with a total budget of RON 1,292.5
million, based mostly on objectives aiming to compensate natural decline and to generate electricity, such as:
Continuation of geological research works by performing new exploration drillings for the discovery of new
gas reserves;
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2021 Consolidated Board of Directors’ Report
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
optimising gas field production;
modernization and upgrading of constructions, installations and equipment, as well as acquisition of new
equipment and high-performance 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 2021 reached RON 417,658 thousand, representing:
69.5% as compared to the achievements in 2020;
32.3% 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 350.09 million.
Table below shows the investments made in 2021, as compared to those scheduled and accomplished in 2020
and is similar to Annex 4 to the Income and Expenditure Budget:
Item
No.
Investment Chapter
2020
2021
Program
Achieved
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
204,843
203,990
3
187,839
180,528
0
0
853
105,196
105,000
0
7,311
143,702
135,847
0
2.3 Environmental protection works
196
7,855
4
78,688
76,854
0
1,834
65,462
64,767
0
695
Investment in existing tangible assets
206,677
319,170
222,957
3.
4.
5.
*
Equipment (other acquisitions of tangible
assets)
Other
investments
software, financial assets etc.)
licenses,
(studies,
77,270
128,727
46,415
7,814
513,062
4,136
52.93
TOTAL
601,800
1,292,500
417,658
69.40
*RON thousand*
%
2021/2020
5=4/2x100
38.41
37.68
0.0
215.01
62.23
61.68
0.00
354.59
107.88
60.07
Table below shows the achieved investments according to Romgaz Investment Program for 2021:
Investment Chapter
1
I. Geological exploration works to discover new gas
reserves
*RON thousand*
Program
2021
2
149,057
Achieved on
December 31,
2021
%
3
99,360
4=3/2x100
66.66%
36/ 70
2021 Consolidated Board of Directors’ Report
Investment Chapter
II. Exploitation drilling works, putting into production of
wells,
infrastructure and utilities and electricity
generation
IV. Environmental protection works
*RON thousand*
Program
2021
Achieved on
December 31,
2021
%
167,318
42,261
25.26%
15,166
V. Retrofitting and revamping of
equipment
installation and
319,170
VI. Independent equipment and machinery
VII. Expenses related to studies and projects
TOTAL
128,727
513,062
1,292,500
The following chart shows the structure of investments achieved in 2021:
2,529
222,957
46,415
4,136
417,658
16.68%
69.86%
36.06%
0.81%
32.31%
53.38%
0.61%
10.12%
11.11%
0.99%
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 constructions,
installations and equipment
VI. Independent equipment and machinery
23.79%
VII. Consultancy, studies and projects, software
and licenses
A summary of outcomes shows that, to a large extent, investments were completed.
Item
No
1.
Main phisycal objectives
Performance of exploration drilling
Planned
20 wells
2.
3.
4.
Drilling design
Performance of production drilling
34 wells
3 wells
Construction of surface facilities –
successfully tested gas wells to be
tied-in
Construction of 30 surface
facilities to bring into
production 36 successfully
tested gas wells to be tied-in
Results
5 sonde completed
3 sonde drilling in progress
2 sonde drilling works procurement in
in progress
5 sonde drilling works procurements
in preparation
24 sonde design/redesign in progress
1 well completed
1 well drilling works in progress
1 well drilling works procurement in
progress
- 9 surface facilities completed;
- 3 surface facilities in progress;
- 6 surface facilities procurement of
construction works in progress to
bring into production 9 wells;
- 11 surface facilities obtaining
approvals and land in progress to
bring into production 15 wells;
- 10 surface facilities preparation of
feasibility studies or technical projects
in progress to bring into production 10
wells;
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2021 Consolidated Board of Directors’ Report
Item
No
Main phisycal objectives
Planned
Results
5.
Well recompletion operations,
reactivation and capitalizable repairs
6.
Acquisition of high-performance
equipment and installations specific
to the core activity
approx. 160 wells, correlated
with the annual program
agreed by ANRM
Nitrogen tank truck; 700 bar
three-phase gas discharge,
metering and separation
system; ACF 700 cementing
units ; Well parameters
automatic measurement
equipment ; 1 ½ x 3500 m
coiled tubing unit; 7 9/16 x 700
bar and 7 9/16 x 350 bar etc.
blow out preventers.
Continuing works at CTE
Iernut
Workovers in 162 wells, works
performed in-house by SIRCOSS
Acceptance:
Multifunctional wheeled excavator
Well parameters automatic
measurement equipment
Nitrogen tank truck
1 ½ x 3500 m Coiled tubing unit
Connection tariff to the electricity grid
was paid.
Works execution contract was
terminated. Solutions are being
sought to finalize the investment.
7.
Electricity generation
8. Partnerships
Planned
Raffles Energy SRL:
- land preparation and obtaining
authorizations for well 1 Voitinel;
- acquisition of generator for well 1
Voitinel;
- surface facilities;
the
and
restoration
Lukoil:
-
expert
examination of the economic model
of the Project in order to prepare for
making
investment decision
regarding continuation of works
within the block
Amromco:
- drilling wells;
- surface facilities;
- well recompletion operations;
- well abandonment expenses
Slovakia:
- Romgaz Board of Directors
approved dissolution of Bratislava
Branch
- EIII-1 Brodina Block – Bilca Gas Area
Achieved
Through Bilca E III-1 Group processing facilities only the gas processing activity was
carried out, gas entirely coming from Suceava block, titleholder Raffles.
- EIII-1 Brodina Block – Non Bilca Gas Area
Completion of putting into production well 1 Voitinel in progress in accordance with
the legislative changes made by the European Commission and transposed in the
Romanian legislation by means of ANRE Order No. 208/2018 and No. 5/2019,
namely the conditions that the motor-generator group needs to meet for the Gas to
Power facility.
- Bacau Block
The operating mode of the electricity generator well 1 Lilieci was established. The
time intervals correspond to maximum prices for selling electricity on PZU platform.
In 2021, the generator operated in accordance with the projected schedule with short
interruptions due to maintenance.
- By means of Confirmation no. 13215/September 29, 2021 ANRM approved the
evaluation-confirmation of gas resources of LIRA structure for a period of 5 years
- Well 122 Balta Albă was drilled with negative results; well is proposed for
abandonment;
- Well 120 Frasin-Brazi – recompletion works were carried out;
- Well 206 Bibești - recompletion works were carried out;
- wells were abandoned and the surface facility was demolished in fields for which
the concession was relinquished
- the branch was closed on December 31, 2021.
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2021 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
planned to have “a more efficient activity by making investments to increase the efficiency of Iernut Thermoelectric
Plant to a minimum of 55%, complying with the environmental requirements (NOx, CO2) and increasing the
operational safety”.
Therefore, a very important objective is “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 2021, pursuant to the notice of termination no. 10872/April 02, 2021, Romgaz decided to terminate the Contract
of Works no.13384/October 31, 2016 between Romgaz and DURO FELGUERA S.A. and ROMELECTRO S.A
Consortium, considering the continuous breach of contractual obligations undertaken by the Consortium which
failed to finalise works within the deadline established under Addendum No. 15/May 26, 2020, namely December
26, 2020.
Romgaz further undertook all necessary steps to identify optimum solutions to finalise remaining works:
Protocol no.11418/April 08, 2021 and addenda no. 1-4 thereto successively suspending the effects of the
notice of termination until June 16, 2021;
Actual termination of the Contract of Works following the failed negotiations between the parties as of June
17, 2021;
Decision no. 833/August 08, 2021 appointing a Project Management Team (PMT) to finalise this complex
project establishing the specific tasks of the PMT as well as other necessary and useful tasks for the
Completion of Combined Cycle Gas Turbine Power Plant SNGN ROMGAZ – SPEE Iernut project (managing
all necessary activities, partial acceptance of works performed under Contract No. 133843/October 31, 2016,
drawing up the Tender Book and the tender documents for awarding the Consultancy, Project Management
and Supervision Services Contract, identification of procurement procedures, drafting all documents and
documentations necessary to finalize remaining works).
The main reasons causing delays in meeting the objectives included in the 2021 Investment Program, with a
direct impact on the achievements were the following:
- Failure to pay the advance payment for Neptun Deep Partnership – Acquisition of Exxon Mobile Exploration
and Production Romania Limited shares;
- Tenders submitted in some procurement procedures exceeded the estimated/budgeted value of the
investment objectives, requiring resumption of the procurement procedures;
Late delivery of certain fixed assets (independent machinery and specific equipment);
- Completion of certain procurement procedures was lagged/delayed;
-
- Capitalizable repair works performed with delay (delay penalties are charged);
-
- Delays in finalizing the contract due to the COVID-19 pandemic for the “MAIS, BI, Hyperion configuration,
Lukoil Partnership – it was decided not the enter phase two which included drilling of two wells;
programming services” objective;
- Delays in carrying out activities in relation to institutions that grant approvals and in supplying import materials
(tubing) – as a result of Covid 19 pandemic;
- Failure to conclude or conclusion with additional deadlines compared to the planned ones of contracts for
renting/purchasing lands due to legislative changes and lack of property deeds (delayed deadlines for
decisions concerning land removal from agricultural use – Ministry of Agriculture);
- Conduct of redesigning activities on a prolonged period (for certain production units) and delays in the
acquisition of drilling works – due to challenges submitted by bidders;
- Difficulties in obtaining construction permits for certain objectives (e.g. well 9 Urziceni, well 2 Linia Dealului,
-
well 3 Ştefăneşti, Merii gathering pipeline - Ialomiţa County);
Interruption of works carried out for „The Development of CTE Iernut by Building a New Combined Cycle
Gas Turbine Power Plant” project generated by the differences between contractual partners which led to
contract termination;
- Decision of the executive management to reconsider the portfolio of exploration wells under different
preparatory stages following internal researches coordinated by the Exploration-Appraisal Department,
reconsideration of geological assumptions and rethinking of the exploration strategy by taking into
consideration the contingency of exploration wells as regards key wells from the point of view of viability of
geological concepts.
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2021 Consolidated Board of Directors’ Report
Investment objectives that were not achieved or that were delayed during 2021 will continue to be carried out in
2022.
In 2021, Depogaz Subsidiary had an approved investment program of RON 50,000 thousand and achieved
investments of RON 41,665.26 thousand, representing 83.31%, as follows:
Description
Program
Results
Item
no.
1.
2.
3.
4.
5.
6.
7.
*
TOTAL
Research activities for the discovery of new gas reserves
Gas fields and UGSs exploitation, infrastructure and utilities in fields and
underground storages
Underground gas storage activities
Environmental protection and improvement
Modernisation and upgrading of installations and equipment, surface
facilities, utilities
Independent equipment and machinery
Costs with consultancy, studies and projects, software, licences and
patents etc.
0
0
1,531
690.00
500
0
260.00
0
43,823
38,554.38
1,069
3,077
734.44
1,416.44
50,000
41,665.26
The investments were financed entirely from own sources.
For the reporting period, fixed assets were commissioned in amount of RON 41,106 thousand.
The main objectives recording achievements in 2021 were:
Well drilling design, Bilciureşti – RON 640 thousand;
Modernisation of gas metering system, Bilciureşti UGS – RON 1,565 thousand;
Feasibility study, Gherceşti UGS – RON 521 thousand;
Triethylene glycol dehydration station, 145 Gherceşti Group – RON 34,969 thousand;
Oil separator discharge automation, Butimanu Compressor Station – RON 600 thousand;
Compressor suction control loop in the withdrawal cycle, Sărmăşel Compressor Station– RON 505 thousand.
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2021 Consolidated Board of Directors’ Report
V.
SECURITIES MARKET
Romgaz – company listed on Bucharest Stock Exchange and London Stock Exchange
Government Decision No. 831/20107 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 State Ownership and Privatization in Industry Office”.
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”.
Table below shows a series of specific indicators, the number of shares being the same from listing to present,
namely 385,422,400:
Description
Item
no.
1. Market capitalization8
*million RON
*million EUR
2. Maximum price (RONi)
3. Minimum price (RON)
Year-end price (RON)
4.
Net profit per share
5.
(RON)
Gross dividend per
share (RON)
Dividend yield
(6./4.x100)
Exchange rate
(RON/EUR)
6.
8.
7.
2013
2014
2015
2016
2017
2018
2019
2020
2021
13,178
2,952
35.60
33.80
34.19
2.58
14,018
3,127
36.37
32.41
35.36
3.66
10,483
2,315
36.55
26.30
27.20
3.10
9,636
2,122
27.55
21.60
25.00
2.66
12,064
2,589
33.95
25.10
31.30
4.81
10,714
2,297
38.20
27.80
27.80
3.53
14,299
2,992
38.40
27.35
37.10
2.83
10,830
2,224
37.70
25.75
28.10
3.24
15,031
3,038
39.00
28.35
39.00
4.97
2.57
3.15
2.70
5.761)
6.852)
4.172)
1.614)
1.795)
3.806)
7.5%
8.9%
9.9%
23.0%
21.9%
15.0%
4.3%
6.4%
9.7%
4.4639 4.4834 4.5285 4.5411 4.6597 4.6639 4.7785 4.8694 4.9481
1) The gross dividend per share of RON 5.76 is composed of the gross dividend per share for financial year 2016 (RON 2.40 per share), the
additional gross dividend (RON 1.42 per share) resulted from the distribution of retained earnings and the additional dividend (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 (RON 4.34 per share), the
additional gross dividend (RON 0.65 per share) resulted from the distribution of retained earnings and the additional dividend (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 RON 4.17 is composed of the gross dividend per share for financial year 2018 (RON 3.15 per share), the
additional gross dividend (RON 0.08 per share) resulted from the distribution of retained earnings and the additional dividend (RON 0.94 per
share) assigned under the provisions of Article 43 of Government Emergency Ordinance No 114/2018.
4) The gross dividend per share of RON 1.61 is composed of the gross dividend per share for financial year 2019 (RON 1.39 per share) and
the additional gross dividend (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 modernisation of gas production” according to GD No. 168/1998 as subsequently amended
and supplemented.
5) The gross dividend per share of RON 1.79 is composed of the gross dividend per share for the financial year 2020 (RON 1.63 per share)
and the additional gross dividend ( 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.
6) The proposed gross dividend of RON 3.80 is composed of the gross dividend per share for the financial year 2021 in amount of RON 3.62
per share and the additional gross dividend of RON 0.18 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.
In 2021, the trading prices of shares had an oscillating evolution, generally increasing, from January when the
minimum value of the period was recorded namely RON 28.35 per share (on January 05, 2021) to the end of
December when the maximum value was reached in the last trading days of the year, namely December 29,
2021 and December 30, 2021 (RON 39 per share). Noteworthy is the fact that the share price of RON 39
7 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 conduct of such process.
8 Calculated based on the closing price of 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.
41/ 70
2021 Consolidated Board of Directors’ Report
represents the maximum value of Romgaz share on Bucharest Stock Exchange during the trading period
(November 2013 – December 2021).
The average price in 2021 was RON 33.03 per share the highest quarterly average being recorded during
October-December, namely RON 36.12 per share. On December 30, 2021, share price was 37.08% higher than
the price recorded in the first trading day of the year.
The increasing trend of the share price was mainly determined by the positive results of the activity carried out
by the company in 2021, highlighted in the regular reports during the year (Q1, H1 and Q3), by the information
on Romgaz’ acquisition of ExxonMobil Exploration and Production Romania Limited9 shares, and by the “strong
buy” recommendation made by the Swiss Capital on December 6, 2021. Decreases in the share price were
recorded in June 2021 (after ex-date for 2020 dividends) and November 2021, when European stock exchanges
(including BVB) were affected by the discovery of a new, extremely contagiously, version of SARS-CoV-2 in
South Africa.
Global Depositary Receipts (GDRs), traded on London Stock Exchange, recorded a similar trend, especially if
we also take into consideration the evolution of USD-RON exchange rate which increased in 2021 by 10.35%.
GDRs annual average price was USD 7.70 per GDR, RON 32.07 per GDR respectively, with the minimum and
the maximum values of the period (in relation to USD) recorded in Q4 2021, namely USD 6.20 (RON 27.07) on
December 16 (following a transaction made at the end of the daily session) and USD 8.80 (RON 38.39) on
November 2.
As a result of the increase of USD-RON exchange rate in 2021, on December 31 the trading price of GDRs was
USD 8.20, RON 35.84 equivalent, increasing by 17.14%, in USD and by 29.26% in RON, since the beginning 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 trading indices by the end of 2021, as
follows:
Third place by market capitalization in the top of Premium BVB issuers. With a market capitalization
amounting to RON 15,031.47 million, EUR 3,037.82 million respectively, on December 31, 2021, Romgaz
is the third largest listed company in Romania, being preceded by OMV Petrom with a capitalization of
RON 28,265.41 million (EUR 5,712.37 million) and by Banca Transilvania with a capitalization of RON
16,283.59 million (EUR 3,290.87 million);
Fourth place as regards the total amount of transactions in 2021 in the top of Premium BVB issuers (RON
596.70 million), after Banca Transilvania, OMV Petrom and Fondul Proprietatea;
Weight of 8.13 % and 7.98% in BET index (top 15 issuers) and BET-XT (top 25 issuers) respectively,
28% in BET-NG index (energy and utilities) and 8.13% in BET-TR index (BET Total Return).
Performance of Romgaz shares compared to BET index between listing and December 31, 2021, is shown below:
45
40
35
30
25
20
15
10
5
0
e
r
a
h
s
/
N
O
R
3
1
0
2
/
2
1
/
1
1
November 12, 2013 - December 30, 2021
.
4
1
0
2
1
0
8
0
.
.
4
1
0
2
2
0
6
2
.
4
1
0
2
/
6
1
/
4
.
4
1
0
2
6
0
3
1
.
.
4
1
0
2
8
0
1
0
.
.
4
1
0
2
9
0
4
2
.
.
4
1
0
2
1
1
2
1
.
.
5
1
0
2
1
0
9
0
.
5
1
0
2
/
7
2
/
2
5
1
0
2
/
2
2
/
4
5
1
0
2
/
6
1
/
6
5
1
0
2
/
4
/
8
5
1
0
2
/
3
2
/
9
5
1
0
2
/
1
1
/
1
1
6
1
0
2
/
8
/
1
6
1
0
2
/
6
2
/
2
6
1
0
2
/
5
1
/
4
6
1
0
2
/
6
/
6
6
1
0
2
/
6
2
/
7
6
1
0
2
/
4
1
/
9
6
1
0
2
/
2
/
1
1
6
1
0
2
/
3
2
/
2
1
7
1
0
2
/
6
/
4
7
1
0
2
/
6
1
/
2
SNG
7
1
0
2
/
9
2
/
5
7
1
0
2
/
0
2
/
7
7
1
0
2
/
8
/
9
7
1
0
2
/
7
2
/
0
1
7
1
0
2
/
9
1
/
2
1
8
1
0
2
/
4
/
4
8
1
0
2
/
3
1
/
2
8
1
0
2
/
9
2
/
5
8
1
0
2
/
8
1
/
7
8
1
0
2
/
6
/
9
8
1
0
2
/
5
2
/
0
1
8
1
0
2
/
4
1
/
2
1
9
1
0
2
/
8
/
2
9
1
0
2
/
9
2
/
3
9
1
0
2
/
2
2
/
5
9
1
0
2
/
1
1
/
7
9
1
0
2
/
0
3
/
8
9
1
0
2
/
8
1
/
0
1
0
2
0
2
/
4
/
2
9
1
0
2
/
6
/
2
1
0
2
0
2
/
4
2
/
3
0
2
0
2
/
5
1
/
5
0
2
0
2
/
7
/
7
0
2
0
2
/
5
2
/
8
0
2
0
2
/
3
1
/
0
1
0
2
0
2
/
3
/
2
1
1
2
0
2
/
8
2
/
1
1
2
0
2
/
8
1
/
3
1
2
0
2
/
0
1
/
5
1
2
0
2
/
0
3
/
6
1
2
0
2
/
8
1
/
8
1
2
0
2
/
6
/
0
1
1
2
0
2
/
4
2
/
1
1
BET
14000
12000
10000
8000
6000
4000
2000
0
9 Publication of the information on the transmission of the binding acquisition offer to Exxon, on March 31, 2021 and approval
of the acquisition transaction by Romgaz Extraordinary General Meeting of Shareholders, on December 9, 2021.
42/ 70
2021 Consolidated Board of Directors’ Report
January 3, - December 30, 2021
40
35
30
25
20
15
10
5
e
r
a
h
s
/
N
O
R
0
1/5/2021
2/5/2021
3/5/2021
4/5/2021
5/5/2021
6/5/2021
7/5/2021
8/5/2021
9/5/2021
10/5/2021
11/5/2021
12/5/2021
SNG
BET
14000
12000
10000
8000
6000
4000
2000
0
The General Meeting of Shareholders determines the value of dividends to be distributed to shareholders
considering the specific legal provisions.
Therefore, Government Ordinance No. 64/200110 approved by Law No. nr.769/2001 as subsequently amended
and supplemented, provides at Article 1, paragraph (1), letter f) that the accounting profit after deduction of profit
tax is distributed in proportion of minimum 50% as dividends.
Consequently, the percentage taken into consideration in the distribution of 2021 profit as dividends was 76.48%.
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. 29/201711:
“The amounts distributed in the previous years to other reserves under the provisions of Article 1
paragraph (1) letter (g) of Government Ordinance No.64/2001 [...], existing at the date of entry into
force of this Emergency Ordinance, can be redistributed as dividends [...]” – Article II;
“ After the approval of the financial statements of 2016, the entities provided in Article 1, paragraph (1)
of the Government Ordinance No.64/2001, [...], the retained earnings existing in the balance account
on December 31 of each year, can be distributed as dividends” – Article III paragraph (1).
Table below shows the status of dividends for years 2019-2021:
Description
2019
2020
2021 Proposal
Dividends
Gross dividend per share (RON/share)
Dividend distribution rate (%)
Number of shares
620,530,064
1.61*)
56.95
385,422,400
689,906,096
1.79**)
55.29
385,422,400
1,464,605,120
3.80***)
76.48
385,422,400
*) 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 gross dividend per share of RON 1.79 is composed of the gross dividend per share for 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
10 Government Ordinance No. 64/August 30, 2001 on distribution of profit in majority state-owned companies as well as in
autonomous regies.
11 Government Emergency Ordinance No.29 of March 30, 2017 to amend Article 1 paragraph (1) letter 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 Article 1 paragraph (2) and (3) of Government Emergency Ordinance
no.109/2001 on corporate governance of public enterprises.
43/ 70
2021 Consolidated Board of Directors’ Report
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 3.80 is composed of the gross dividend per share for the financial year 2021 in amount of RON 3.62
per share and the additional gross dividend of RON 0.18 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.
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 “Investors – Corporate Governance –
Reference Documents”.
44/ 70
2021 Consolidated Board of Directors’ Report
VI.
COMPANY MANAGEMENT
The selection and nomination 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 with Enforcement Guidelines (GD No. 722/2016)).
Members of the Board of Directors on January 1st, 2021:
Item
no.
1
2
3
Last name and first name
Jude Aristotel Marius
Marin Marius-Dumitru
Stan-Olteanu Manuela-
Petronela
4
Balazs Botond
Position
in the
Board
president
member
member
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
Institute of Employment
SNGN Romgaz SA
PhD Engineer MDM Consultancy Deva
Legal Adviser General Secretariat of t he
Government
Legal Adviser
SNGN Romgaz SA
Engineer
SNGN Romgaz SA
PhD Engineer
Iaşi Technical University
Economist
London School of Business
and Finance
*) - members of the Board of Directors submitted the independent statements in compliance with the provisions of Romgaz
Code of Corporate Governance.
By Resolution No. 10 of February 12, 2021, the Board of Directors acknowledges Mr. Aristotel Marius Jude’s
resignation as Chairman of the Board and appoints Mr. Bogdan Nicolae Simescu to temporarily exercise the
powers of the Chairman of the Board of Directors.
In 2021, the Board of Directors underwent several changes. Thus, on March 11, 2021, by OGMS Resolution No.
1/2021, the company shareholders appointed the following persons as interim members of the Board:
Jude Aristotel Marius
Simescu Nicolae Bogdan
Stan Olteanu Manuela-Petronela
Drăgan Dan Dragoş
Niculescu George Sergiu
Botond Balazs
Sorici Gheorghe Silvian
By Resolution No. 19 of March 17, 2021, the Board of Directors appoints Mr. Drăgan Dan Dragoș as Chairman
of the Board.
On December 31, 2021 the Board of Directors had the following composition:
Item
no.
1
Last name and first name
Drăgan Dan Dragos
Position in
the Board
chairman
2
Jude Aristotel Marius
member
Status*)
Non-executive
non-
independent
Executive
non-
independent
Professional
Qualification
economist
Institution of
Employment
Ministerul Energiei
jurist, MBA
SNGN Romgaz SA
45/ 70
2021 Consolidated Board of Directors’ Report
Item
no.
3
Last name and first name
Simescu Nicolae Bogdan
Position in
the Board
member
4
Stan-Olteanu Manuela-Petronela member
5
Balazs Botond
membru
6
Niculescu Sergiu George
member
7
Sorici Gheorghe Silvian
member
Status*)
Non-executive
non-
independent
Non-executive
non-
independent
Non-executive
non-
independent
Non-executive
non-
independent
Non-executive
independent
Professional
Qualification
Engineer
Institution of
Employment
SNGN Romgaz SA
Legal Adviser Hidroelectrica SA
Legal Adviser SNGN Romgaz SA
Legal Adviser Ministry of Energy
Economist
SC Sobis Solution SRL
*) - members of the Board of Directors submitted the independent statements in compliance with the provisions of Romgaz
Code of Corporate Governance.
The Curricula Vitae of the current Board members are to be found on the company’s webpage www.romgaz.ro
at “Investors – 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.
On December 31, 2021, the following directors hold shares in the company:
Item
no.
0
1
2
3
4
Last name and first
name
1
Drăgan Dan Dragoş
Niculescu George Sergiu
Simescu Nicolae Bogdan
Balasz Botond
Number of
shares held
2
18,757
1,500
30
11
Weight in the share
capital (%)
3
0.00486661
0.00038918
0.00000778
0.00000285
temporary exercised
Chief Executive Officer (CEO)
SNGN Romgaz SA Board of Directors revoked by Resolution No.1/January 13, 2021 Mr. Constantin Adrian
Volintiru from the position as Chief Executive Officer, terminating his contract of mandate concluded with the
company. Until the appointment of a new chief executive officer, Mr. Daniel Corneliu Pena – Deputy Chief
Executive Officer (with mandate),
legal
representation.
By Resolution No. 11 of February 12, 2021, the Board of Directors gathered on February 12, 2021, appointed
Mr. Aristotel Marius Jude as SNGN Romgaz SA CEO for a 2 months interim mandate starting with February
13, 2021.
By Resolution No. 29 of April 7, 2021, the Board of Directors approved the extension of Mr. Aristotel Marius
Jude’s CEO mandate, for a 4 months period starting with April 13, 2021.
By Resolution No. 47 of June 30, 2021, the Board of Directors appointed Mr. Aristotel Marius Jude as CEO of
Romgaz for an interim mandate of 4 months starting with August 14, 2021.
By Resolution No. 67 of November 2, 2021, the Board of Directors appointed Mr. Aristotel Marius Jude as CEO
of Romgaz for a mandate of 4 months, starting with December 15, 2021 until April 15, 2022.
Deputy Chief Executive Officer
the company’s management
including
By Resolution No.32 of August 26, 2020, the Board of Directors appointed Mr. Daniel Corneliu Pena as Deputy
Chief Executive Officer for 2 months (with an interim mandate) as of August 28, 2020.
By Resolution No. 41 of October 14, 2020, the Board of Directors approved the extension by 120 days of the
interim mandate of Mr. Daniel Corneliu Pena, SNGN Romgaz SA Deputy Chief Executive Officer, namely until
February 24, 2021.
46/ 70
2021 Consolidated Board of Directors’ Report
On February 15, 2021, the Board of Directors took note of Mr. Daniel Corneliu Pena’s resignation from the position
as Deputy CEO (with mandate) and agreed to terminate his mandate.
Chief Financial Officer (CFO)
By Resolution No. 50 of December 9, 2020, the Board of Directors appointed Mr. Razvan Popescu as interim
Chief Financial Officer for a period of 4 months as of December 14, 2020.
By Resolution No. 30 of April 7, 2021, the Board of Directors appointed Mr. Razvan Popescu as Chief Financial
Officer for a period of 4 months as of April 14, 2021.
By Resolution No. 48 of June 30, 2021 the Board of Directors appointed Mr. Razvan Popescu as Chief Financial
Officer for a 4 months interim mandate as of August 15, 2021.
By Resolution No. 68 of November 2, 2021, the Board of Directors appointed Mr. Răzvan Popescu, as Chief
Financial Officer for 4 months, starting with December 16, 2021, until April 16, 2022.
Other persons holding management positions without being delegated management powers by the Board of
Directors:
Last name and first name
ROMGAZ - headquarters
Tataru Argentina
Grecu Marius Rareş
Foidaș Ion
Sandu Mircea Valentin
Sasu Rodica
Bîrsan Mircea Lucian
Pinca Gheorghe Ovidiu
Veza Marius Leonte
Bobar Andrei
Boiarciuc Adrian
Lupă Leonard Ionuţ
Chertes Viorel Claudiu
Moldovan Radu Costică
Ioo Endre
Mareș Adrian Alexandru
Antal Francisc
Achimeț Teodora Magdalena
Boșca Mihaela
Bordeu Viorica
Obreja Dan Nicolae
Hățăgan Olimpiu Sorin
Mediaş Branch
Totan Constantin Ioan
Veress Tudoran Ladislau Adrian
Man Ioan Mihai
Târgu Mureş Branch
Roiban Claudiu
Graţian Rusu
Ştefan Ioan
Iernut Branch
Balazs Bela Atila
Oprea Maria Aurica
Bircea Angela
SIRCOSS Branch
Rotar Dumitru Gheorghe
Gheorghiu Sorin
STTM Branch
Lucaci Emil
Cioban Cristian Augustin
Drobeta Turnu – Severin Branch
Săceanu Constantin
Position
Exploration-Production Department Director
Human Resources Director
Production Department Director
Drilling Department Director
Exploration-Production Support Department Director
Technical Department Director
Exploration-Appraisal Department Director
Accounting Department Director
Financial Department Director
Information Technology Department Director
Procurement Department Director
Regulations Department Director
Energy Trading Department Director
Legal Department Director
Strategy, International Relations, European Funds Director
Quality, Environment, Emergency Situations and Infrastructure Department
Economic Director – Mediaș Branch
Economic Director – Târgu-Mureș Branch
Economic Director – SIRCOSS Branch
Economic Director – STTM Târgu-Mureș Branch
Economic Director – SPEE Iernut Branch
Branch Director
Production Director
Technical Director
Branch Director
Production Director
Technical Director
Branch Director
Commercial Director
Technical Director
Branch Director
Technical Director
Branch Director
Technical Director
Branch Director
47/ 70
2021 Consolidated Board of Directors’ Report
The members of the executive management, except for the mandated managers (Chief Executive Officer, Deputy
Chief Executive Officer and the Chief Financial Officer), are employees of the company having an individual
employment contract for an indefinite period.
In compliance with the powers delegated by the Board of Directors, the Chief Executive Officer employs,
promotes and dismisses management and operating personnel.
Information on the Board of Directors and the executive management of Depogaz is available 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 executive management and another person that contributed to their
appointment as members of the upper management.
Table below shows the number of company shares held by the members of the executive management on
December 31, 2021:
Item
no.
0
1
2
3
4
5
Last name and first
name
1
Ştefan Ioan
Dincă Ispasian Ioan
Obreja Dan Nicolae
Andrea Nicolae
Balasz Bela Atila
Number of
shares held
2
2,945
2,095
1,200
200
38
Weight in the share
capital (%)
3
0.00076410
0.00054356
0.00031135
0.00005189
0.00000986
Therewith, from Depogaz executive management the following members hold shares in the Company: Mr.
Cârstea Vasile – 412 shares, representing a weight of 0.00010690% in the share capital and Mr. Gîrlicel Victor
Cristian – 125 shares, representing a weight of 0.00003243% 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 within Romgaz, 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 persons holding management positions and litigations
on Labour Law No. 235/102/2020 and 2751/85/2019(*) (see “Litigations” posted on Romgaz website at
www.romgaz.ro Investors Annual Reports 2021.
48/ 70
2021 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 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 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 the basis of business as a going concern principle
in accordance with the historical cost convention.
Table below presents a summary of the statement of consolidated financial position as of December 31, 2019,
December 31, 2020 and December 31, 2021:
Indicator
0
31.12.2019
(thousand
RON)
1
31.12.2020
(thousand
RON)
2
31.12.2021
(thousand
RON)
3
Variance
(2021/2020)
4=(3-2)/2*100
ASSETS
Non current assets
Property, plant and equipment
Other intangible assets
Investments in associates
Deferred tax assets
Other financial assets
Right of use asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Contract costs
Other financial assets
Other assets
Current tax receivable
Cash and cash equivalents
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Non current liabilities
Retirement benefit obligation
Provisions
Deferred income
Lease liability
5,543,177
5,613,122
5,240,697
9,164
24,772
14,774
26,102
16,133
26,187
230,947
275,328
269,645
5,388
8,590
5,378
7,915
5,616
7,128
5,822,038
5,942,619
5,565,406
311,013
638,158
244,563
592,875
305,241
1,352,345
312
651
483
1,075,224
1,995,523
417,923
42,485
68,023
-
-
67,962
3,201
363,943
416,913
3,580,412
2,431,135
3,318,548
5,727,567
8,253,173
9,261,167
11,292,973
385,422
385,422
385,422
1,587,409
2,251,909
2,998,975
5,201,222
5,149,919
5,596,756
7,174,053
7,787,250
8,981,153
114,876
366,393
21,244
8,285
128,690
538,931
136,308
7,845
156,420
412,846
230,438
7,211
-6.63%
9.20%
0.33%
-2.06%
4.43%
-9.94%
-6.35%
24.81%
128.10%
-25.81%
-79.06%
-0.09%
n/a
758.79%
72.59%
21.94%
0.00%
33.17%
8.68%
15.33%
21.55%
-23.40%
69.06%
-8.08%
49/ 70
2021 Consolidated Board of Directors’ Report
Indicator
0
Total non-current liabilities
Current liabilities
Trade payables and other liabilities
Contract liabilities
Current tax liabilities
Deferred income
Provisions
Lease liability
Other liabilities
Total current liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
31.12.2019
(thousand
RON)
1
31.12.2020
(thousand
RON)
2
31.12.2021
(thousand
RON)
3
510,798
811,774
806,915
Variance
(2021/2020)
4=(3-2)/2*100
-0.60%
109,910
42,705
64,342
3,729
89,132
81,318
59,831
10,899
71,317
204,384
52,299
49
82,701
156,415
237,144
694
264,241
568,322
767
810
263,781
938,902
662,143
1,504,905
1,079,120
1,473,917
2,311,820
8,253,173
9,261,167
11,292,973
-19.99%
151.34%
-12.59%
-99.55%
51.61%
5.61%
255.94%
127.28%
56.85%
21.94%
NON-CURRENT ASSETS
The total of non-current assets decreased by 6.35% by the end of 2021 compared to the end of 2020, namely by
RON 377.2 million. The decrease was caused by amortization and depreciation expenses and impairments of
abandoned projects higher than 2021 investments and the decrease of decommissioning assets recorded as a
result of reducing the well decommissioning provision.
In 2021, the Group invested a total of RON 458.17 million, representing 34.13% of the investment budget.
CURRENT ASSETS
Current assets increased by RON 2,409.02 million on December 31, 2021, due to the increase of cash, cash
equivalents and other financial assets by RON 1,585.9 million; this increase is due to a lower level of investments
compared to the previous year. The Group intends to use this surplus for the investment activities provided in the
strategy approved by the shareholders.
Inventories
Inventories increased at the end of 2021 as compared to December 31, 2020 by 24.81%.
During 2021, Romgaz injected 487.9 million cm in UGSs while it extracted 422.2 million cm.
Trade and other receivables
Trade receivables increased in 2021 as compared to December 31, 2020 by 128.1% as a result of the increase
of gas prices on the open market. Moreover, the Group recorded a net decrease of trade receivables impairment
of RON 349.99 million following receipt of outstanding amounts in 2021 and 2022 (event following 2021).
NON-CURRENT LIABILITIES
At the end of 2021, non-current liabilities decreased by 0.60% as compared to December 31, 2020.
In 2021, an additional amount of 94.1 million was received from the National Investment Plan for financing the
"Combined cycle gas turbine”- Iernut project (the amount is recorded under ”Deferred income”). Also in 2021, the
Romanian Government decided to extend the investment completion deadline until June 30, 2022, the
reimbursement deadline from the National Investment Plan being extended to December 31, 2022.
Decrease of the decommissioning provision (including the short term part) by 21.98% on December 31, 2021 as
compared to December 31, 2020 was caused by the increase of the discount rate used in the calculation of this
provision and the decrease of estimated well decommissioning costs.
CURRENT LIABILITIES
Current liabilities increased by RON 842.76 million, from RON 662.14 million recorded on December 31, 2020,
to RON 1,504.91 million at the end of 2021.
Trade payables and other liabilities
Trade payables decreased by 19.99% compared to December 31, 2020 due to lower payables to providers of
investments (RON -15.69 million) due to a lower level of investments in 2021.
Contract liabilities
50/ 70
2021 Consolidated Board of Directors’ Report
These liabilities represent advances received from customers on December 31, 2021 for 2022 deliveries. The
increase is due to the increase in the gas sale price as compared to the previous year.
Other liabilities
Other liabilities recorded a significant increase of 255.94% as compared to December 31, 2020. Most of these
liabilities are represented by the petroleum royalty owed in Q4 and the windfall tax for deliveries made in
December.
Provisions
On December 31, 2021, short term provisions recorded an increase of 51.61% as compared to December 31,
2020. This increase is mainly due to the provision for greenhouse gas emission certificates (RON 154.9 million
on December 31, 2021, the equivalent of 377,905 certificates, compared to RON 81.2 million on December 2020,
the equivalent of 525,067 certificates).
The Group did not issue bonds or other debt instruments in financial year 2021.
The Group profit and loss account summary for the period January 1 – December 31, 2021, as compared to the
similar period of the years 2019 and 2020, is shown below:
Indicator
0
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Net impairment gains/(losses) on trade
receivables
Changes in inventories
Raw materials and consumables used
Depreciation, amortization and net impairment
expenses
Employee benefit expense
Finance costs
Exploration expense
Share of associates’ result
Other expenses
Other income
Profit before tax
Income tax expense
Profit for the period
Year 2019
(thousand
RON)
1
5,080,482
Year 2020
(thousand
RON)
2
Year 2021
(thousand
RON)
3
4,074,893
5,852,926
Variance
(2021/2020)
4=(3-2)/2*100
43.63%
(107,800)
(18,617)
(281,589)
1,412.54%
38,124
7,519
(81,221)
80,008
(76,048)
47,845
(6,534)
17,551
(16,151)
(58,282)
58,403
23,388
22.07%
n/a
349,989
1,894.13%
74,787
(81,146)
(1,451,766)
(672,063)
(685,772)
(670,408)
(767,251)
(766,639)
(24,740)
(1,636)
1,474
(17,000)
(26,509)
1,330
(16,739)
(1,197)
85
(1,551,642)
(1,158,143)
(2,539,086)
32,834
25,439
169,841
1,275,180
1,426,508
2,157,251
(185,557)
(178,604)
(242,264)
1,089,623
1,247,904
1,914,987
n/a
39.23%
2.04%
-0.08%
-1.54%
-95.48%
-93.61%
119.24%
567.64%
51.23%
35.64%
53.46%
Revenue
In 2021, Romgaz recorded consolidated revenues of RON 5.9 billion, as compared to RON 4.1 billion achieved
in 2020.
The increase resides in a 52.41% increase of revenue from sales of gas produced by Romgaz and of gas
purchased for resale, as well as a 69.9% increase of revenue from sales of electricity. On the other hand,
consolidated revenue from storage services decreased by 30.64%.
Please note that consolidated revenues from storage include revenue from services invoiced by Romgaz for gas
sold from storages; non-consolidated revenues from storages are 6.14% down compared to 2020.
In terms of volumes, compared to 2020, in 2021 the Group:
- Sold 12.7% more gas (including gas purchased for resale);
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2021 Consolidated Board of Directors’ Report
- Provided 16.1% higher gas withdrawal services and 63.4% higher gas injection services;
- Produced 31.7% less electricity.
Cost of Commodities Sold
In 2021, cost of commodities sold increased by 1,412.5% (+RON 263.0 million) as compared to the previous
year, due to the increase of gas quantities purchased on the domestic market for resale. Revenues from sale of
such gas increased by 2,024.9% (+RON 314.8 million) during this period.
Other Gains and Losses
Other net gains of RON 23.4 million include the income recorded following a final settlement in favour of Romgaz
in a litigation against ANAF for cancelling a report issued further to a fiscal investigation performed in December
2016 - April 2017. Following this investigation, the Company paid RON 28.98 million representing additional taxes
and penalties that are going to be recovered. The decision of the court has not been communicated by the date
of this report so that the Company could not take the necessary steps to recover the amounts.
Net Gains from Impairment of Trade Receivables
The Group calculates impairment of trade receivables depending on non-collection risk. Thus, for clients
undergoing bankruptcy procedures the Group records losses from impairment for the entire non-collected
amount; the same policy is applied to old debts.
In 2021, the Group recorded a net gain from impairment of receivables of RON 349.99 million, following collection
of old debts from clients undergoing insolvency procedures.
Changes in Inventories
During 2021 the gas quantity injected by Romgaz in storages was higher by 15.6% than the quantity withdrawn
from storages, thus generating positive changes in inventories. The quantity of gas injected in storages by the
Company in 2021 as compared to 2020 increased by 116%, while the withdrawn quantity increased by 14.8%.
Raw Materials and Consumables Used
Increase of expenses with raw materials and consumables is mainly due to a 72.71% higher technological
consumption for the reviewed period of 2021 as compared to 2020 and due to the increase of expenses with
spare parts used for current repairs.
Depreciation, amortization and net impairment
The depreciation, amortization and net impairment expenses increased by 2.04% due to the increase by 3.4% of
depreciation and amortization expenses and a decrease of 0.76% of net losses from fixed assets impairment.
Due to existing market conditions, the Group considered necessary to update the impairment test for assets used
in natural gas production activity. Considering that the increase of sale prices generated a significant increase in
petroleum royalty costs and windfall tax costs, the test did not result in the cancellation of previously set up
impairments. In 2021, the Group recorded impairment only for specific assets as a result of abandoning wells
that proved to be dry holes or as a result of deciding to stop operation in certain gas fields.
Exploration expenses
Exploration expenses recorded in 2021 of RON 1.2 million decreased by 95.48% compared to the previous year,
performing significantly fewer surveys than in the previous period (-RON 24.5 million).
Government Decision No. 1011 of September 22, 2021, approved the addendum no. 6 to the concession
agreement concluded between ANRM and Romgaz, extending the exploration period for eight petroleum blocks
until October 2027. Pursuant to this addendum, Romgaz undertook to perform a certain minimum 3D seismic
program that will result in increased exploration expenses.
Other expenses
In 2021, other expenses increased by 119.24% as compared to 2020. The increase of RON 1.4 billion is mainly
due to higher windfall tax and royalties. Royalty expenses increased by RON 552.54 million (+280.65%)
compared to previous year, and windfall tax increased by RON 843.1 million (+203.17%) in 2021 compared to
2020.
Other income
Other income increased by 567.64% in the year ended December 31, 2021 as compared to the same period of
2020 following execution of the performance guarantee (RON 114.7 million) after terminating the works contract
for development of CTE Iernut by building a 430 MW combined cycle gas-turbine power plant, concluded between
S.N.G.N. Romgaz S,A. and the Consortium consisting of Duro Felguera S.A. and Romelectro S.A.
Statements of cash flows recorded in the period 2019 – 2021 are shown in the table below:
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2021 Consolidated Board of Directors’ Report
INDICATOR
2019
2020
2021
*RON thousand*
Cash flow from operating activities
Net profit for the year
Ajustments for:
Income tax expense
Share from associates’ result
Interest expense
Unwinding of decommissioning provision
Interest revenue
(Gane)/loss on disposal of non-current assets
Cahnge 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
(Gains)/(losses) on financial investments evaluated at fair value through
profit or loss
Net(losses)/gains 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
Investments in other entities
Bank deposits set up and acquisition of state bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Proceeds from disposal of other investments
Acquisition of non-current assets
Acquisition of exploration assets
Net cash used in investment 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 begining of the year
Cash and cash equivalents at the end of the year
1,089,623
1,247,904
1,914,987
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
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
2,261,563
(3)
(224,796)
2,036,764
242,264
(85)
557
16,182
(58,403)
(321)
(20,750)
68,578
37,046
33
184,943
463,783
1,626
10
(378,352)
-
5,014
(810)
(9)
2,476,293
(64,913)
(400,838)
790,347
2,800,889
(3)
(233,084)
2,567,802
-
(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)
(250)
(3,896,521)
5,463,332
58,340
513
2
(340,695)
(91,865)
1,192,856
(1,607,246)
(620,346)
(690,027)
-
(861)
-
(1,608,107)
(202,893)
566,836
363,943
115,027
(1,196)
(50)
(506,565)
52,970
363,943
416,913
94,148
(1,280)
-
(597,159)
3,163,499
416,913
3,580,412
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2021 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 corporate governance
of public enterprises, as subsequently 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 indicators 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.
The provisions of the Ordinance 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 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 published on the webpage www.romgaz.ro, at “Investors
– Corporate Governance – Reference Documents”.
Since November 12, 2013, Romgaz shares have been traded on the regulated market governed by BVB, 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 Code of Corporate Governance of BVB,
published on the internet webpage www.bvb.ro, at “Investors – Regulations - BVB Regulations”.
The Corporate Governance system of the company was and will be continuously improved according to the 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 Code of Corporate Governance, in accordance with the new Code of Corporate Governance
of BVB applicable since January 4, 2016 – the document was approved by Romgaz Board of Directors by
Resolution no.2/January 28, 2016. The Code of Corporate Governance was updated and will be submitted
for approval to the Board of Directors.
The Company’s Code of Corporate Governance is posted on the webpage www.romgaz.ro, at “Investors –
Corporate Governance – Reference Documents”;
Board of Directors approval and update of the Internal Rules of 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 the latest 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
subsequently updated in January 2018 and in February 2019;
Approval of the Policy related to the assessment of the Board of Directors during March 12, 2019 meeting;
Approval of the Policy related to remuneration of Board members and managers by the OGMS during April
27, 2021 meeting;
Approval of Romgaz Policy related to transactions with affiliates and the draft statement on Board of Directors
commitment to develop and implement the internal management control system and the risk management
policy on March 20, 2019;
Drafting/updating a series of internal regulations/policies in compliance with BVB Code of Corporate
Governance;
Inclusion in the Board of Directors Annual Report of a chapter dedicated to corporate governance referring,
among others, to : the applicable Code of Corporate Governance, the duties of the corporate management
bodies and of the three advisory committees of the Board of Directors (the Nomination and Remuneration
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2021 Consolidated Board of Directors’ Report
Committee, the Audit Committee and the Strategy Committee), aspects related to remuneration of members
of the Board and of managers, measures to improve corporate governance, aspects related to internal control
and risk management system, internal audit and aspects related to social responsibility;
Incorporation in the Board of Directors Annual Report of a section referring to compliance with the provisions
of BVB Code of Corporate Governance (Annex 1);
Diversification of communication 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 an “Infoline” for shareholders/investors to
respond to their requirements and/or questions;
Setting up a specialized department dedicated to investor and shareholder relations;
Continuation of the necessary steps for the implementation of 2016-2020 National Anti-corruption Strategy
in 2021. In this regard, the Commission responsible for the implementation of the strategy drafted and
submitted to the Ministry of Energy – Antifraud, Integrity and Inspection Department the Narrative Report on
the status of implementation of the measures provided in the NAS, the Inventory of institutional transparency
and corruption prevention measures as well as evaluation indicators for 2021.
Among the measures to be implemented, we mention:
Revision of the Remuneration Policy for the members of the Board and managers with mandate and
submission to shareholders for approval;
Conclusion of professional liability insurance contracts for members of the Board and managers and
appointment of a person to monitor these contracts;
Commencement of necessary actions to align with the new 2021-2025 National Anti-Corruption Strategy,
approved by Government Decision No. 1269/December 17, 2021;
Drafting the organizational integrity agenda and company integrity plan in compliance with NAS 2021-2025.
Aspects related to shareholders
The shareholders structure is presented within Chapter II “Parent Company at a Glance”.
Romgaz respects and protects the rights and legitimate interests of all shareholders, constantly informing them
on the rules and procedures governing the General Meeting of Shareholders, on decisions concerning corporate
changes and significant events within the company. Rights of minority shareholders are also protected in
accordance with the legal provisions in force and with the Articles of Incorporation.
All relevant information on exercising all legitimate rights of shareholders are to be found on company’s website,
www.romgaz.ro, under “Investors”.
General Meeting of Shareholders
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 “Investors – General Meeting of
Shareholders”.
The Ordinary General Meeting of Shareholders has the following main competencies:
a)
b)
to approve the company’s strategic objectives;
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, supplementation or review of the company’s governance
plan, under legal provisions;
to set the income and expenditure budget for the following financial year;
to appoint and revoke Board members and to set their remuneration;
to make an opinion on the governance of the Board of Directors;
to appoint and to dismiss the financial auditor and to set the minimum term of the financial audit contract;
to approve the contracting of bank loans, the value of which exceeds, individually or cumulatively with other
bank loans in progress, over a financial year, the equivalent in RON of EUR 100 million;
to approve conclusion of documents establishing guarantees, other than guarantees for the company’s non-
current assets, the value of which exceeds, individually or cumulatively with other guarantees in progress,
c)
d)
e)
f)
g)
h)
i)
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2021 Consolidated Board of Directors’ Report
other than guarantees for the company’s non-current assets, over a financial year, the equivalent in RON of
EUR 50 million.
The Extraordinary General Meeting of Shareholders has the following main competencies:
a)
b)
c)
d)
to change company’s legal form;
to move the headquarters;
to change the Company’s scope of activity;
to establish companies, as well as conclude or amend incorporation documents of the companies where
Romgaz is associate;
to conclude or amend joint venture contracts where the company is contracting party;
to increase the share capital;
to reduce the share capital or to restore it by issuing new shares;
to merge with other companies or to spin-off the company;
the anticipated winding up of the company;
to convert shares from a category into the other;
to convert one category of bonds into another one or in shares;
to issue bonds;
e)
f)
g)
h)
i)
j)
k)
l)
m) to conclude documents related to the acquisition of non-current assets the value of which exceeds,
individually or cumulatively, during a financial year, 20% of the total non-current assets of the company,
except for receivables;
to conclude the documents related to disposal, exchange or set up of guaranties referring to non-current
assets the value of which exceeds, individually or cumulatively, during a financial year, 20% of the total non-
current assets, except for receivables;
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, the value of which exceeds, individually 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
o)
n)
extraordinary general meeting of shareholders.
Board of Directors
Romgaz is a joint-stock company governed under a one-tier system.
The Board of Directors consists of 7 (seven) members elected by the Ordinary General Meeting of Shareholders,
in compliance with applicable legal provisions and with the Articles of Incorporation and 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, studies and competencies, experience and gender diversity (criteria detailed in the Board
of Directors Terms of Reference).
Board of Directors componence on December 31, 2021 is presented in Chapter VI “Company management”.
According to the statements of independency sent to the company, three board members declared to be
independent and four declared to be non-independent. The independence of Board members is determined
based on the criteria detailed in Romgaz Code of Corporate Governance (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, 2021, the Board of Directors did not make a self- assessment for 2021.
Advisory Committees
The activity of 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 duties provided in Article 65 of Law No. 162/201712 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 supervising the statutory audit activity related to annual financial statements
and in 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 members 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
12 Law No. 162 of July 15, 2017 on the statutory audit of annual financial statements and of annual consolidated financial
statements and on amending pieces of legislation
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2021 Consolidated Board of Directors’ Report
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 “Investors– Corporate
Governance – Reference Documents”.
On December 31, 2021, the advisory committees’ structure was the following:
I) Nomination and Remuneration Committee:
Sorici Gheorghe Silivan (chairman)
Drăgan Dan Dragoş
Jude Aristotel Marius
II) Audit Committee
Sorici Gheorghe Silivan (chairman)
Simescu Nicolae Bogdan
Stan-Olteanu Manuela-Petronela
III) Strategy Committee
Balazs Botond (chairman)
Drăgan Dan Dragoş
Jude Aristotel Marius
Niculescu George Sergiu
Simescu Nicolae Bogdan.
Information regarding the Board of Directors’ meetings and the Advisory Committees meetings held in 2021
The Board of Directors held in 2021 a number of 36 meetings, in compliance with the legal and statutory
provisions, out of which:
26 meetings with physical attendance of board members and
10 electronic vote meetings.
The attendance at the Board of Directors’ meetings:
Last name and first name
Number of meetings
during mandate
P
PA
NP
No.
%
No.
%
No.
%
Stan Manuela Petronela
Jude Aristotel Marius
Marin Marius Dumitru
Ciobanu Romeo Cristian
Jansen Petrus Antonius Maria
Balazs Botond
Simescu Nicolae Bogdan
Drăgan Dan Dragoş
Sorici Gheorghe Silivan
Niculescu George
where:
P = participation;
PA = power of attorney;
NP = non-participation.
36
36
6
6
6
36
36
30
30
30
36
36
6
6
5
36
36
30
25
25
100.0
100.0
100.0
100.0
83.33
100.0
100.0
100.0
83.33
83.33
1
16.67
5
5
16.67
16.67
Board members’ attendance at Advisory Committee meetings:
Nomination and Remuneration Committee: 10 meetings
Last name and first name
Physical attendance
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2021 Consolidated Board of Directors’ Report
Ciobanu Romeo Cristian
Balazs Botond
Jansen Petrus Antonius Maria
Jude Aristotel Marius
Drăgan Dan Dragoș
Sorici Gheorghe Silvian
Marin Marius Dumitru
Audit Committee: 12 meetings
Last name and first name
Jansen Petrus Antonius Maria
Marin Marius Dumitru
Jude Aristotel Marius
Balazs Botond
Sorici Gheorghe Silvian
Stan Manuela Petronela
Ciobanu Romeo Cristian
Simescu Nicolae Bogdan
Strategy Committee: 4 meetings
Last name and first name
Jansen Petrus Antonius Maria
Jude Aristotel Marius
Ciobanu Romeo Cristian
Balazs Botond
Niculescu George Sergiu
Drăgan Dan Dragoș
Simescu Bogdan Nicolae
4/4
4/4
3/4
10/10
6/6
6/6
1/4
Physical attendance
5/5
5/5
4/5
5/5
7/7
7/7
4/5
7/7
Physical attendance
1/1
4/4
1/1
4/4
2/3
2/3
4/4
Chief Executive Officer
In compliance with the company’s Articles of Incorporation “the Board of Directors shall assign, in whole or in
part, 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 year mandate.
By Resolution No. 1 of January 13, 2021, the Board of Directors revoked as of January 13, 2021, Mr. Constantin
Adrian Volintiru as Chief Executive Officer of Romgaz, company management including legal representation
being assigned to the Deputy Chief Executive Officer until appointment of a new CEO no later than February 13,
2021.
The Board of Directors appointed Mr. Aristotel Marius Jude as SNGN Romgaz SA CEO for a 2 months temporary
mandate starting from February 13, 2021.
By Resolution No. 29 of April 7, 2021, the Board of Directors approved the extension of Mr. Aristotel Marius Jude
CEO mandate, for a 4 months period starting with April 13, 2021.
By Resolution No. 47 of June 30, 2021, the Board of Directors appointed Mr. Aristotel Marius Jude as CEO of
Romgaz for a mandate of 4 months starting with August 14, 2021.
By Resolution No. 67 of November 2, 2021, the Board of Directors appointed Mr. Aristotel Marius Jude as CEO
of Romgaz for a mandate of 4 months, starting with December 15, 2021 until April 15, 2022
The powers of the CEO were established by Board of Directors Resolution No. 47 of June 30, 2021 amended by
Resolution No. 54 of August 12, 2021.
Thus, the powers delegated to the interim CEO are as follows:
a) Approves the employment, promotion and dismissal of employees;
b) Approves work duties and tasks of employees;
c) Approves employees’ awards and sanctions;
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2021 Consolidated Board of Directors’ Report
d) Approves material operations (technical, economical, commercial etc. actions or processes) that are
necessary and useful to fulfil the business scope of the company;
e) Approves operations having as object conclusion/issuance of legal documents:
Up to an amount of RON 400 million, concluded on centralized markets (stock exchange) or
subject to sector specific procurement law;
Up to an amount of RON 400 million, concluded outside centralized markets (stock
exchange) or outside the scope of sector specific procurement law;
f) Approves sponsorship and patronage contracts;
g) Approves the Rules of Organization and Operation;
h) Change and appointment of managers (with individual employment contract);
i) Any other duty except those not assigned pursuant to the above mentioned BoD Resolution;
j) Fulfilment of any ancillary duties, material acts and operations necessary and useful to perform the
duties under a) – i).
The Board of Directors established duties that are not delegated to the interim CEO such as:
a) Approves Romgaz organizational chart;
b) Approves operations the scope of which is to conclude/issue legal acts other than those provided at
article 2) letter e);
c) Management powers which cannot be delegated to company managers pursuant to legal
provisions and to the Articles of Incorporation.
Deputy Chief Executive Officer
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 28 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, namely until February 24, 2021. On February 15, 2021, the Board of Directors took note of Mr. Daniel
Corneliu Pena’s resignation as Deputy Chief Executive Officer (with mandate) and agreed on the termination of
his mandate as of February 15, 2021.
Prin Hotărârea nr.32 din 26 august 2020, Consiliul de Administrație deleagă Directorului General Adjunct
următoarele atribuții:
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 implementation of the accounting and financial control policies and endorses 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 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 collective labour agreement;
g) Endorses the appointment, suspension and/or dismissal of the units’ managers and executive managers
hired by the company;
h) Endorses the Rules of Organization and Operation, the organizational structure;
i) prospects, together with the Chief Executive Officer, business opportunities with partners inside and outside
the country in the interest of the Company;
j) Ensures efficiency of the internal control system and the management system in compliance with legal
provisions and applicable corporate rules;
k) ensures and promotes 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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Chief Financial Officer
By Resolution No. 50 of December 9, 2020, the Board of Directors appointed Mr. Razvan Popescu as interim
Chief Financial Officer for a period of 4 months as of December 14, 2020.
By Resolution No. 30 of April 7, 2021, the Board of Directors appointed Mr. Razvan Popescu as Chief Financial
Officer for a period of 4 months as of April 14, 2021.
By Resolution No. 48 of June 30, 2021 the Board of Directors appointed Mr. Razvan Popescu as Chief Financial
Officer for a 4 month interim mandate as of August 15, 2021.
By Resolution No. 68 of November 2, 2021, the Board of Directors appointed Mr. Răzvan Popescu, as Chief
Financial Officer for a 4 month mandate, starting with December 16, 2021, until April 16, 2022
The Chief Executive Officer, the Deputy Chief Executive Officer and the Chief Financial Officer have the obligation
to inform the Board of Directors periodically 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
Internal audit activity is organised and conducted in compliance with:
Law No. 672/2002 on the public internal audit, as subsequently amended and supplemented;
Methodological norms, issued under GD No. 1086/2013 on approving the General Norms on exercising
the public internal audit;
Minister of Public Finance Order No. 252/2004, code of ethics of the internal auditor, as subsequently
amended and supplemented;
SNGN Romgaz SA Internal Audit Charter.
Therefore, pursuant to Law No. 672/2002 the public internal audit aims at improving management by means of:
assurance activities that represent objective examinations of evidence, carried out in order to make an
-
independent assessment of risk management, control and governance processes, and
advisory activities aimed at adding value and improving governance processes without the public internal
auditors taking management responsibilities.
-
With respect to how the internal public audit is carried out, the types of audit are:
-
system audit - represents an in-depth assessment of management and internal control systems in order to
determine whether they are economically, effectively and efficiently operating in order to identify deficiencies
and to make recommendations for corrective actions and
performance audit – examines whether the criteria set for implementing the objectives and duties of the
public entity are correct in order to evaluate the results and assesses whether the results are consistent
with the objectives.
-
In order to achieve its objectives, the Public Internal Audit Department prepares the draft Annual Public Internal
Audit Plan.
The draft plan is prepared based on the assessment of risk associated with the different activities,
programs/projects or operations, as well as by taking the suggestions of the Chief Executive Officer, Board of
Directors and by takin into account the recommendations made by the Romanian Court of Accounts.
Moreover, it performs public internal audit activities to assess whether the financial management and control
systems of the public entity are transparent and consistent with the criteria of legality, regularity, economy,
efficiency and effectiveness.
Romgaz sets and permanently and operatively maintains the internal audit function which is carried out
independently of other functions and activities.
According to the applicable laws, the Internal Audit Department is directly subordinated to the Chief Executive
Officer but also reports to the Board of Directors through the Audit Committee.
The mission, attributions and responsibilities of the internal audit are defined in the Internal Audit Charter
approved by the Chief Executive Officer.
The Charter sets the following as a minimum:
the position of the internal audit within the company;
the way of accessing company documents in order to properly fulfil audit missions and defines the scope of
public internal audit.
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The internal audit activity is independent and objective giving the company an assurance on the degree of control
over operations and is carried out in compliance with drafted and approved procedures.
In order to observe and to meet the above mentioned conditions and subject to the 2021 Activity Plan of the
Public Internal Audit Department, No. 37253/November 25, 2020, endorsed by the Audit Committee and
approved by the Chief Executive Officer, in 2020, the audit activity consisted of 8 assurance audit missions aimed
at confirming regularity/conformity of procedures and operations with the regulatory framework, by comparing
reality with the established reference system. In 2021, the annual audit plan was updated pursuant to Report No.
24445/July 27, 2021, approved by the CEO.
Therefore, a total of 8 audit missions were performed in 2021:
7 planned missions, in accordance with 2021 annual plan, revision 1;
1 ad-hoc mission;
The missions were performed in the following fields:
financial-accounting;
public procurement;
human resources;
entity specific functions;
internal management control system.
The level of fulfilment of the internal audit plan for 2021 was 88%, due to one ad-hoc audit mission requested by
the Board of Directors and to the postponement of the planned public internal audit mission, ”Organisation of
In-House Preventive Financial Control”, approved by the Chief Executive Officer.
The missions analysed the actions with financial effects on the budget, evaluating observance of applicable
principles and procedural and methodological rules. The missions evaluated the effectiveness and performance
of functional structures in implementing policies, programs and actions, aiming at their continuous improvement.
Table below shows the assurance level for each audit mission carried out in 2021:
Item
No.
Audited activity
Global
Assessment
Result
Mission
Type
1.
2.
3.
4.
5.
6.
7.
8.
Assessment of the activity related to provision of social assistance in
accordance with applicable regulations
Assessment of sector specific procurement process within SIRCOSS
Assessment of the conformity and legality of carrying out the
remuneration process
Assessment of the corruption prevention system – year 2021
Assessment of the manner of carrying out the inventory of receivables
and liabilities towards third parties
Assessment of the activity of granting site approvals requested by third
parties
Assessment of the activity of well drilling design within SNGN Romgaz
SA
Assessment of the manner of carrying out pipe maintenance activities
within S.N.G.N
Planned
Planned
Ad-hoc
Planned
Planned
Planned
Planned
Planned
High assurance level
Medium assurance level
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Low assurance level
laws and contracts,
Internal auditing is conducted permanently in order to provide an independent assessment of operations, control
and management processes, evaluates the potential risk exposure of various business segments (asset security,
compliance with
information etc.) makes
recommendations for improving the systems, controls and procedures to ensure efficiency and effectiveness of
operations and monitors the proposed corrective actions and the results.
As a general note, Romgaz focused on compliance with internal integrity rules and on a continuous self-
assessment of the implementation level of internal anti-corruption mechanisms, as described in the 2016 – 2020
National Anti-Corruption Strategy and other subsequent documents (Order No.600/2018 on approving the
Internal Management Control Code of public entities).
integrity of operational and
financial
Risk Management and Internal Control
Policies and Objectives related to Risk Management
Risk management is a complex process of identifying, analysing and responding to possible company risks
through a documented approach which uses material, financial and human resources to achieve the objectives,
aiming at reducing exposure to losses.
One major concern of the management is to raise 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.
In March 2019, the Board of Directors approved the draft BoD Statement on the commitment to develop and
implement 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 on internal/management control and preventive financial control,
republished, as subsequently amended and supplemented;
O Emergency Ordinance No. 109 of November 2011 on corporate governance of public enterprises;
Law No. 174/2015 for the approval of Government Emergency Ordinance No. 86/2014 on establishing
certain reorganisation measures for the central public administration and for amending and
supplementing certain legislative acts. International Standard ISO 31010: 2011: “Risk Management: Risk
Assessment Techniques”;
Order of the General Secretary of the Government No. 600/2018 for the approval of the Code of Internal
Management Control of public entities;
Order of the General Secretary of the Government No. 201/2016 for the approval of methodological
norms concerning coordination, methodological guidance and supervision of the implementation and
development status of the internal management control system of public entities;
BVB Code of Corporate Governance
SNGN Romgaz S.A. Code of Corporate Governance
Considering that the risk management standard is unanimously accepted in EU, being one of the important
standards of the internal management control system (SCIM)3 in risk management, the company systematically
reviews risks associated with its objectives and activities, drafts appropriate treatment plans towards limiting the
possible consequences of such risks and establishes the responsibilities related to their implementation.
The main benefits of the risk management process are the improvement of company’s performance by identifying,
analysing, assessing and managing all risks of 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, Plan for Implementing Measures and Company’s Risk Profile.
Three role levels are set up in the risk management system:
base level, represented by risk identifiers and by the risk responsible persons (head of each
organizational unit) who are responsible for preparing risk management documents of their organizational
unit;
middle level, represented by the company’s middle management which together with the heads of the
organizational units make up the Risk Management Commission that facilitates and coordinates the risk
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 the objectives of the company.
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General objectives 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. providing a description of 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 specific objective addressed by the risk;
causes of risk occurrence;
consequences further to risk materialization;
probability of occurrence;
risk materialization impact;
risk exposure;
risk response strategy;
recommended control (treatment) measures;
residual risks remaining after handling initial risks.
Financial and Commercial Risk Exposure
The Company is exposed to a variety of financial risks: market risk (which includes currency risk, inflation risk,
interest rate risk), credit risk, liquidity risk. The Company’s risk management program is focused on the
unpredictability of financial markets and seeks to minimize, within some limits, the potential negative
consequences on the Company’s financial performance. However, this approach does not prevent losses 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 currency risks following the exposure to different foreign currencies. The currency risk arises
from future commercial 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 receivables following the adjustment for impairment
of doubtful debts, represents the maximum value exposed to credit risk. The Group has a credit risk concentration
related to its biggest clients.
Despite the above-mentioned policies, the Group is compelled by court orders to supply gas to insolvent clients
considered “captive” according to insolvency laws. In respect of these clients, the Group estimates losses
throughout the entire life of current and outstanding receivables and records corresponding impairment losses.
Even though collection of receivables might be influenced 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 final responsibility for the liquidity risk lies with the company’s management, which established a suitable
framework for liquidity risk management for the Company’s short, medium and long-term financing and for
complying with requirements concerning liquidity risk management. The Company manages liquidity risk by
maintaining an adequate level of the reserves by continuous monitoring of the forecasts and current cash flows
and by connecting the maturity profile of financial assets with those of financial debts.
The risk management system continuously evaluates 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, is systematically and continuously assessed and
quantified, evaluated and minimized/treated, as the case may be.
The main risks identified are quantitative (volatility of demand/supply ratio on the market) with consequences in
underselling or 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 (regulatory/political) and also external factors related
to import sources and weather conditions.
By not adapting to market conditions, sales strategy and tactics, besides offering opportunities, represent a risk
which needs to be constantly assessed and mitigated through specific marketing actions in order to optimize sale
results.
Currently, one of the main risk factors with direct consequences on the company’s commercial outcome is the
political and regulatory risk. The Company uses all available instruments in order to minimize/treat this risk
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through dialogue with competent authorities, in the phase of drafting the regulatory documents as well as
afterwards in the phase of enforcement. In recent years, the regulatory framework underwent major changes in
order to adopt a European market model of the Network Code. However, the Group is exposed to unfavourable
changes of the primary and/or secondary legislative framework. The amendments made to the primary legislation
or the ones that are going to be made as well as ANRE secondary regulations may bring major changes to the
commercial activity of the company as well as financial exposure caused by the legislative volatility.
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.
Internal Control
The internal control system operates in a continuously changing control environment that requires the adjustment
of control at the level of every activity in relation to the company’s interests.
Internal control is a process carried out by personnel at all levels: Board of Directors, executive management,
entire personnel.
Romgaz internal management control system is developed and implemented in order to reach the following
objectives:
-
-
-
-
compliance with legal regulations, with internal rules, with contracts and administrative and jurisdictional
decisions applicable to the company’s activity;
fulfilment of Romgaz objectives under effectiveness, economy and efficiency conditions;
protection of Romgaz patrimony against losses due to errors, waste, 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 of Government Ordinance No. 119/1999 and with the standards provided by SGG[1] Order No.
600/2018.
Below are some of the development/improvement actions of the internal management control system during
2021:
to raise awareness among 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 organizational
unit in order to implement the standards;
in order to strengthen the knowledge on the regulations concerning the internal management control system,
the Internal Management Control Office carried out a methodological guidance action concerning the
implementation of internal management control system and NAS [2] between September 09, 2021 and
September 30, 2021;
During April 07, 2021 and July 07, 2021 an internal public audit mission was carried out under the
“Assessment of corruption prevention system – year 2021” theme. The scope of the audit mission was to
verify compliance with the legal framework provided in Annex 3 to the 2016-2020 National Anticorruption
Strategy, for each of the following measures: conflict of interest, incompatibilities and pantouflage. Based on
the findings of the internal audit report no. 24560 of July 27,.2021, the opinion of the audit team given on
each preventive measure included in the scope of the internal public audit mission, is as follows:
- Conflict of interest – implemented measure;
-
- Pantouflage – implemented measure;
Incompatibilities – partially implemented measure;
During 2021 the Internal Management Control Office prepared the Methodology on managing non-
conformities and irregularities in accordance with the recommendation - “Drafting a system methodology on
reporting SNGN Romgaz SA non-conformities to define specific terminology and types of non-conformities”,
issued following the public internal audit mission on “ The Assessment of corruption prevention system year
– 2019”.
Analysis and identification of sensitive positions at the level of each organisational unit pursuant to PS-16
Inventory of Sensitive Positions procedure. Risks identified further to the analysis were centralised and
submitted to the monitoring commission which, following debates and final vote, drafted the inventory of
sensitive positions and the list of persons holding such positions no.5262/February 12, 2021;
Drafting and updating the Risk Register at company level.
[1] General Secretariat of the Government.
[2] National Anticorruption Strategy.
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As a result of the ample action of self-assessing the status of implementation of the internal management control
system for 2021 (relative to the 16 internal management control standards set out in Order No. 600/2018), the
system is compliant.
Non-achievements:
the methodological guidance action performed at the beginning of each year by the Internal Management
Control Office was carried out online in 2021. 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 holding management
positions which would have raised awareness on the importance of internal management control, but which
could not be organized due to COVID-19 pandemic.
Code of Ethics and Integrity
In order to improve the activity, starting with July 1st, 2020 the upper management appointed a full-time ethics
adviser.
Romgaz Code of Conduct, which was first prepared in 2013, underwent many amendments, the latest was in
November 2020, resulting in SNGN Romgaz SA Code of Ethics and Integrity - November 2020, approved by the
Board of Directors Resolution No. 48/ November 20, 2020.
With this Code of Ethics and Integrity the company complies with the provisions of Standard 1 of Internal
Management Control which highlights the importance of knowing and supporting ethical values and integrity.
The Code of Ethics and Integrity contributes to the protection of company integrity and highlights the importance
of ethical values both in professional and interpersonal relations within the company and in relations with clients,
suppliers, investors, partners, public authorities and the community.
The Code governs the following key aspects: health and safety at work, fight against corruption, avoidance of
conflict of interest and incompatibility, protection of company image, efficient use of resources, confidentiality of
information, harassment, relationship with authorities/business partners/community, transparency etc.
The Code of Ethics and Integrity was brought to the attention of Romgaz personnel by means of training sessions
and, in order to assess the implementation of employees’ professional conduct rules, actions will be carried out
annually.
In order to monitor compliance of Romgaz’s personnel with the rules of conduct, the ethics adviser prepares
analyses and half-yearly reports on aspects brought to the attention of the Chief Executive Officer. The reports
and analyses are sent for information to the Commission that monitors and coordinates the implementation and
development of the internal management control system and to the Audit Committee.
The Code of Ethics and Integrity can be accessed by any interested person at www.romgaz.ro, under “Investors
– Corporate Governance – Reference Documents”.
Corporate Social Responsibility (CSR)
Romgaz activities in the field of social responsibility are performed voluntarily, beyond the legal responsibilities,
the company being aware of its role in society.
Social responsibility means for Romgaz a business culture which includes business ethics, customer rights,
economic and social equity, environmental friendly technologies, fair treatment of workforce, transparent
relationship with public authorities, moral integrity and investments in community.
Moreover, Romgaz supports a sustainable development of society and community, through financial support/ full
or partial sponsorship for some actions and initiatives in the following main fields: education, social, sport, health
and environment.
Granting financial support/partial or full sponsorship for actions and initiatives, within the budgeted limits, Romgaz
had a pro-active attitude towards social responsibility and increased the awareness of the parties involved
regarding the importance and benefits of social responsibility actions.
In 2021, Romgaz supported, fully or partially, actions and initiatives in the fields stipulated in Government
Emergency Ordinance No.2/2015, complying with the budget, as follows:
Total of sponsorship expenses, out of which:
Expenses/activities
Expenses with sponsorships in medical and health fields – Article XIV letter a)
Expenses with sponsorships in education, training, social and sports fields – Article
XIV letter b) – total, out of which:
Achieved (RON)
22,839,891
11,266,731
10,012,360
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o For sports clubs
Sponsorships for other actions and activities – Article XIV letter c)
4,235,000
1,560,800
A detailed description of the projects for each sponsorship category provided in GEO No.2/2015 is included in
the 2021 Annual Report on Social Responsibility and Patronage published on www.romgaz.ro at “Investors -
Corporate Governance - Social Responsibility”.
Besides the positive impact on the environment and community, projects supported in 2021 had an important
benefit for the company by inspiring the organisational culture and gaining a good reputation of being a
responsible employer as well as an involved social partner and a promotor of transparent and open relationships.
This is positively reflected in Romgaz image, at national and international level, in relations with investors,
government and local authorities as well as in relations with other interested parties.
When supporting/participating in the implementation of projects, actions and social responsibility initiatives,
Romgaz took into consideration the provisions of Sponsorship Policy and Sponsorship Guide applicable in 2021,
published on the company’s website at Corporate Social Responsibility.
(link: https://www.romgaz.ro/sponsorizari).
Remuneration Policy and Criteria of the Executive and Non-Executive Members of the Board of
Directors and of Managers
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 enterprises, 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, endorsed by the Board of Directors by Resolution No. 22 of March
23, 2021 and approved by the OGMS by Resolution No. 2 of April 27, 2021;
Resolution No. 8/ July, 2018 of the Ordinary General Meeting of Shareholders approving the form of the
contract signed with the board members elected for a 4 year mandate;
BoD Resolution No. 45/ October 1, 2018 appointing the Chief Executive Officer for a 4 year term;
BoD Resolution No. 48 /October 9, 2018 approving CEO’s mandate contract;
BoD Resolution No. 32/August 26, 2020 appointing the interim Deputy Chief Executive Officer for a 2 month
mandate as of August 28, 2020 until October 26, 2020;
BoD Resolution No. 39/ September 30, 2020 approving the contract of mandate concluded with the Deputy
Chief Executive Officer.
BoD Resolution No.41/ October 14, 2020 extending the interim mandate of the Deputy Chief Executive Officer
by 120 days, namely until February 24, 2021;
BoD Resolution No.50/December 9, 2020, appointing the interim Chief Financial Officer for a 4 month
mandate as of December 14, 2020;
BoD Resolution No.53/December 14, 2020, approving the interim Chief Financial Officer’s contract of
mandate;
OGMS Resolution No.14/ December 21, 2020 appointing five interim members of the Board of Directors,
approving the form and content of the contract of mandate to be concluded with the interim members of the
Board for a 4 month mandate and the amount of the gross fixed allowance of such members;
BoD Resolution No.1/January 13, 2021 terminating the contract of mandate concluded on October 9, 2018
between Romgaz and the Chief Executive Officer;
BoD Resolution No. 11/February 12, 2021 appointing the Chief Executive Officer for a 2 month mandate and
establishing the gross fixed allowance;
BoD Resolution No.12/February 12, 2021 approving the conclusion of an addendum to the contract of
mandate concluded between Romgaz and the Chief Financial Officer;
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BoD Resolution No.13/February 15, 2021 acknowledging Deputy Chief Executive Officer’s resignation and
approving termination of his mandate as of February 15, 2021;
BoD Resolution No.18/February 24, 2021 approving the conclusion of Chief Executive Officer’s contract of
mandate;
OGMS Resolution No.1/March 11, 2021 approving the form of the mandate contracts of interim members of
the Board appointed for 4 months and their gross fixed allowance.
BoD Resolution No.29/April 7, 2021 extending Chief Executive Officer’s mandate for a period of 4 months as
of April 13, 2021;
BoD Resolution No. 30/ April 7, 2021 appointing the Chief Financial Officer for a period of 4 months as of
April 14, 2021 and establishing his gross fixed allowance;
BoD Resolution No. 32/April 13, 2021 approving the addendum to Chief Executive Officer’s mandate contract
and the mandate contract concluded with the Chief Financial Officer;
BoD Resolution No. 47/June 30, 2021, appointing Romgaz Chief Executive Officer for an interim mandate of
4 months as of August 14, 2021, approving conclusion of the mandate contract and establishing the monthly
gross fixed allowance;
BoD Resolution No.48/June 30, 2021, appointing Romgaz Chief Financial Officer for an interim mandate of
4 months as of August 15, 2021, approving conclusion of the mandate contract and establishing the monthly
gross fixed allowance;
GMS Resolution No.5/July 9, 2021, approving extension of interim members’ mandate for 2 months from the
expiry date and approving the form of the addendum to the mandate contract concerning the extension of
the term ;
GMS Resolution No.7/September 9, 2021, appointing the interim members of the Board of Directors for a 4
month term, approving the form of the mandate contract and establishing the monthly gross fixed allowance;
BoD Resolution No.67/November 2, 2021 appointing Romgaz Chief Executive Officer for a 4 month term as
of December 15, 2021, approving conclusion of the mandate contract and the monthly gross fixed allowance;
BoD Resolution No.68/November 2, 2021 appointing Romgaz Chief Financial Officer for a 4 month term as
of December 16, 2021, approving conclusion of the mandate contract and the monthly gross fixed allowance.
For compliance with the requirements of BVB Code of Corporate Governance, GEO No. 109/2011 and Law
No.24/2017 on issuers of financial instruments and market operations amended and supplemented by Law No.
158/2020, the Policy on Remuneration was revised and approved by the Ordinary General Meeting of
Shareholders by Resolution No. 2/April 27, 2021.
The structure of the remuneration granted to non-executive members of the Board of Directors
The fixed monthly remuneration was established in accordance with the applicable legal provisions (detailed in
the 2021 Annual Report on Remuneration and Other Benefits Granted to Members of the Board and Managers
of SNGN Romgaz SA) and provided in the Director Agreement of each board member, as approved by the
applicable GMS resolutions.
The fixed monthly remuneration for 2021 was established at a gross monthly allowance equal to twice the average
of the gross monthly average salary over the last 12 months for the activity carried out pursuant to the company’s
main business, at the level of class of activity, in accordance with the classification of activities in the national
economy, as communicated by the National Institute of Statistics prior to appointment.
The variable remuneration will be established and granted depending on the achievement of the objectives
included in the governance plan and of the financial and non-financial performance indicators approved by the
General Meeting of Shareholders. The variable component as well as the conditions to revise the objectives and
performance indicators will be subject to an addendum to the director agreement.
Director agreements do not include key financial and non-financial performance indicators, therefore members
of the Board of Directors do not benefit from a variable allowance.
The structure of the remuneration granted to the executive member of the Board of Directors, namely the
Chief Executive Officer
The Interim Chief Executive Officer, who is also an executive member of the Board of Directors, concluded a
director agreement as member of the Board of Directors as well as a mandate contract as Chief Executive Officer.
The Chief Executive Officer was strictly entitled to receive remuneration pursuant to the mandate contract.
The structure of remuneration granted to managers
The fixed monthly remuneration, was granted under the applicable legal provisions (detailed in the 2021 Annual
Report on the Remuneration and Other Benefits Granted to Members of the Board and Managers of SNGN
67/ 70
2021 Consolidated Board of Directors’ Report
Romgaz SA), being provided in the contract of mandate concluded with each manager and approved by Board
resolutions.
The fixed monthly remuneration for 2021 was set at a gross monthly allowance of up to 6 times the average of
the gross monthly average salary over the last 12 months for the work carried out in accordance with the
company’s main 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 fixed monthly remuneration was six times the average, for the
interim Chief Financial Officer the fixed monthly remuneration increased from 4 to 6 times the average and for
the interim Deputy Chief Executive Officer the fixed remuneration was set to 5.2 times the average.
The variable remuneration established depending on the fulfilment of the objectives and of the approved financial
and non-financial performance indicators will be subject to an addendum to the mandate contract. In 2021, the
Chief Executive Officer, the Deputy Chief Executive Officer and the Chief Financial Officer did not benefit from a
variable remuneration.
NON-FINANCIAL STATEMENT
Romgaz prepares a separate report for financial year 2021, that will be public on the company’s website by the
end of June 2022, according to the Order of the Ministry of Public Finance No. 2844/201613 (chapter 7, item 42,
paragraph (1))
13 Order of the Ministry of Public Finances no.2844 of December 12, 2016 on approving Accounting Regulations compliant
with the International Financial Reporting Standards.
68/ 70
2021 Consolidated Board of Directors’ Report
IX.
PERFORMANCE OF DIRECTOR AGREEMENTS AND CONTRACTS OF
MANDATE
Director Agreement
The General Meeting of Shareholders approved the template and the content of director agreements.
In 2021, board members’ mandates were interim mandates with an initial term of four months and a maximum
term of six months, following their extension. Two board members make an exception from interim mandates as
they exercised in Q1 2021 a four-year mandate, started in 2018 and ended in March 2021 before expiration term.
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 Governance Plan, the General Meeting of Shareholders was called to
negotiate and approve the financial and non-financial performance indicators to be included in the director
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
Governance Plan prepared for 2018-2022.
By Resolution no. 14/December 21, 2020, of the Ordinary General Meeting of Shareholders, the shareholders
appointed five interim board members, approved the contract of mandate to be concluded with interim board
members for a four-month mandate and set the fixed gross allowance.
The Ordinary General Meeting of Shareholders appointed by Resolution No.1 of March 11, 2021, by cumulative
vote, interim board members for a four-month mandate, approved the contract of mandate and set the fixed gross
allowance.
GMS Resolution No.5 of July 9, 2021 approved to extend the interim board members mandate by two months
from the expiration date, approved the addendum to the contract of mandate related to the term extension.
By Resolution No7 of September 9, 2021, company shareholders appointed interim board members for four
months, set the monthly fixed gross allowance and the contract of mandate.
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
The Board of Directors approved the template and the content of the contract of mandate for the Chief Executive
Officer, Deputy Chief Executive Officer and for the Chief Financial Officer.
The mandates of Romgaz managers were interim ones with a term of minimum two months and maximum four
months. Exception thereof, was the mandate held by Mr. Constantin Adrian Volintiru, Chief Executive Officer,
appointed in 2018 for a four-year mandate, whose contract of mandate terminated before its expiration, in January
2021.
Chief Executive Officer
The Board of Directors appointed under Resolution No. 45 of October 1, 2018 Mr. Constantin Adrian Volintiru as
Chief Executive Officer for a four-year mandate and approved by Resolution No.48 of October 9, 2018 his contract
of mandate.
The Board of Directors revoked by Resolution No.1 of January 13, 2021 Mr. Constantin Adrian Volintiru from the
position of Chief Executive Officer, terminating the contract of mandate concluded between the company and Mr.
Volintiru.
As of February 13, 2021, Mr. Aristotel Marius Jude was appointed Chief Executive Officer. The Board of Directors
approved his appointment and the contract of mandate by successive resolutions, as follows:
Resolution No. 11 of February 12, 2021: appointment for a two month period, as of February 13, 2021;
Resolution No.18 of February 24, 2021: conclusion of the contract of mandate;
Resolution No.29 of April 7, 2021: extended the interim mandate by four months, as of April 13, 2021;
Resolution No.47 of June 30, 2021: appointment for an interim mandate of four months as of August 14, 2021
and conclusion of the contract of mandate
Resolution No.67 of November 2, 2021: appointment for four months as of December 15, 2021 and
conclusion of the contract of mandate.
Deputy Chief Executive Officer
By Resolution no. 32/August 26, 2020, the Board of Directors appointed Mr. Daniel Corneliu Pena as Deputy
Chief Executive Officer for an interim mandate of two months, from August 28, 2020 and by Resolution No.39 of
September 30, 2020, the Board approved his contract of mandate.
69/ 70
2021 Consolidated Board of Directors’ Report
By Resolution No. 41/October 14, 2020, the Board of Directors extended the interim mandate as Deputy Chief
Executive Officer by 120 days, until February 24, 2021 and conclusion of an addendum to the contract of
mandate.
The Board of Directors takes note on February 15, 2021 of Mr. Daniel Corneliu Pena resignation as Deputy Chief
Executive Officer and agreed with the termination of his mandate as Deputy Chief Executive Officer as of
February 15, 2021.
Chief Financial Officer
The Board of Directors appointed on December 14, 2020, Mr. Razvan Popescu as Chief Financial Officer and
approved the contract of mandate. The Board of Directors approved his appointment and the contract of mandate
by successive resolutions, as follows:
Resolution No. 50 of December 9, 2020: appointment for an interim four-month mandate, as of December
14, 2020;
Resolution No.53 of December 14, 2020: conclusion of the contract of mandate;
Resolution No.12 of February 12, 2021: conclusion of an addendum to the contract of mandate;
Resolution No.30 of April 7, 2021: appointment for a new four-month mandate, as of April 14, 2021;
Resolution No.32 of April 13, 2021: conclusion of the contract of mandate;
Resolution No.48 of June 30, 2021: appointment for a four-month interim mandate, as of August 15, 2021
and conclusion of the contract of mandate;
Resolution No.68 of November 2, 2021: appointment for a four-month mandate as of December 16, 2021
and conclusion of a contract of mandate.
The contracts of mandate concluded with 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 by an addendum to the contract of mandate, following the General Meeting of Shareholders approval
of financial and non-financial key performance indicators.
Chairman of the Board of Directors,
DRĂGAN DAN DRAGOŞ
……………………………………
Chief Executive Officer,
JUDE ARISTOTEL MARIUS
Chief Financial Officer,
POPESCU RĂZVAN
……………………………………
……………………………………
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Board of Directors’ Report 2021
Annex 1
Table on compliance with BVB Code of Corporate Governance
Noncompliance/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
BVB CGC Provisions
Compliance
2
x
x
A.1
A.2
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.
A.3
The BoD should comprise at least five members.
x
A.4
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.
x partially
One member of the
Board is a non-executive
independent Director
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.5
A.6
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
to his/her
and
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.
A.7
The company should appoint a Board secretary
responsible for supporting the work of the BoD
x
x
x
2020
BVB CGC Provisions
Compliance
2
x
x
x
x
x
x
A.8
A.9
A.10
A.11
1
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
purpose, criteria and frequency of the evaluation
process.
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.
The Chairperson of the Audit Committee should be
an independent non-executive member.
Among its responsibilities, the Audit Committee
should perform an annual assessment of the internal
control system.
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 Board,
B.2
B.3
B.4
Noncompliance/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
In 2021 the evaluation of
the Board of Directors
was carried out
x partially
One member of the
Nomination and
Remuneration Commitee
is a non-executive
independent Director
x partially
One member of the Audit
is a non-
Committee
independent
executive
Director
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2020
BVB CGC Provisions
Compliance
Noncompliance/
Partial
compliance
1
B.5
The Audit Committee should review conflicts of
interests in transactions of the company and its
subsidiaries with affiliated parties.
2
3
x partially
B.6
B.7
B.8
B.9
B.10
B.11
The Audit Committee should evaluate
the
effectiveness of the internal control system and the
risk management system
The Audit Committee should monitor
the
application of statutory and generally accepted
internal auditing. The Audit
standards of
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
x
x
x
x
x
x
Reason for
noncompliance/
Explanation on
compliance
4
This provision is already
mentioned in Article 8,
par. 2 of Romgaz CCG.
The Audit Committee
Rules approved by the
BoD in the meeting of
May 14, 2018 includes
provisions
such
obligation.
on
Moreover, a Policy on
party
related
transactions
was
developed by Romgaz,
and
it obtained BoD
approval on March 20,
2019.
Following approval
was published on
company’s website.
it
the
Pagina 3 din 6
2020
BVB CGC Provisions
Compliance
B.12
C.1
1
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
the
should be
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
the
a statement on
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.
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
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
2
x
x
x
x
x
x
Noncompliance/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
x partially
the GMS
Items on
organization
are
presented to shareholders
at each meeting.
Pagina 4 din 6
2020
BVB CGC Provisions
Compliance
1
together with their professional CVs; shareholders’
questions related to the agenda and the company’s
answers, including decisions taken;
D.1.5
and
other
dividends
Information on corporate events (such as payment
to
of
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;
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
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.
GMS 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.
2
x
x
x
x
x
x
x
x
x
Noncompliance/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
Pagina 5 din 6
Noncompliance/
Partial
compliance
3
Reason for
noncompliance/
Explanation on
compliance
4
2020
BVB CGC Provisions
Compliance
D.8
D.9
D.10
1
Accredited journalists may also attend the GMS,
the Board decides
unless
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.
sport
cultural
expression,
If the company supports various forms of artistic
and
activities,
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
x
x
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
Pagina 6 din 6
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 Medias, Piata Constantin I.
Motas 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,
2021, 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, 2021 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 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.
Specific impairment testing of production assets, at individual field level, 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 2021 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 2,177 million
as at 31 December 2021, is significant.
In respect of our specific impairment testing,
at individual field level, 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)
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 in production and reserves at the
individual field level constitute impairment
indicators and, consequently, has carried out
an impairment test for the production assets in
the Upstream Gas segment for which
impairment indicators existed, which resulted
in no additional impairment being recognised.
Considering the above, we determined that
specific Impairment testing of production
assets, at individual field level, in the Upstream
Gas segment is a key audit matter.
4
- 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
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
2021 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 projections;
- 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
5
We also assessed the adequacy of the Group’s
disclosures in the financial statements.
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.
Our work in respect of management’s
estimation of decommissioning and
restoration provisions included, but was not
limited to, the following procedures:
The decommissioning provision is significant to
our audit because of its magnitude (carrying
value of RON 437.6 million at 31 December
2021) 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.
- 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, the Corporate Governance Statement and the
Remuneration Report), but does not include the consolidated financial statements and our
auditors’ report thereon. The Corporate responsibility and sustainability report will be published
separately at a later date. 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.
8
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.
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 and Remuneration Report, we
have read these reports 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 in the
accompanying Group consolidated financial statements as at December 31, 2021;
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, 2021,
we have not identified information included in the Directors’ Consolidated Report that
contains a material misstatement of fact.
the Remuneration Report identified above includes, in all material respects, the required
information according to the provisions of article 107 (1) and (2) from Law 24/2017 on
issuers of financial instruments and market operations
d)
9
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
October 2021 to audit the consolidated financial statements for the financial year ended
December 31, 2021, 2022 and 2023. Total uninterrupted engagement period, for the statutory
auditor, has lasted for four years, covering the years ended December 31, 2018, 2019,2020 and
2021.
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 March 21,
2022.
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.
Report on the compliance of the electronic format of the consolidated financial statements,
with the requirements of the ESEF Regulation
We have performed a reasonable assurance engagement on the compliance of the electronic
format of the consolidated financial statements of SNGN Romgaz SA (the Company) and its
subsidiaries (together referred to as “the Group”) for the year ended December 31, 2021,
included in the attached electronic file „Romgaz-2021-12-31-en.zip“ (identified with the key
5f3ee0cc749896f9c12e63ff837e85abb0fb126b9f369e79fb3b52bed659ed50) with the
requirements of the Commission Delegated Regulation (EU) 2019 /815 of 17 December 2018
supplementing Directive 2004/109/EC of the European Parliament and of the Council with
regard to regulatory technical standards on the specification of a single electronic reporting
format (the “ESEF Regulation). Our opinion is expressed only in relation to the electronic format
of the consolidated financial statements.
10
Description of the subject matter and the applicable criteria
The Management has prepared electronic format of consolidated financial statements of the
Group for the year ended December 31, 2021 in accordance and to comply with ESEF Regulation
requirements. The requirements for the preparation of the consolidated financial statements in
ESEF format are specified in the ESEF Regulation and represent, in our opinion, applicable
criteria for us to express an opinion providing reasonable assurance.
Responsibilities of the Management and Those Charged with Governance regarding the
electronic format of the consolidated financial statements
The Management of the Group is responsible for the compliance with the requirements of the
ESEF Regulation in the preparation of the electronic format of the consolidated financial
statements in XHTML format. Such responsibility includes the selection and application of
appropriate iXBRL tags using the taxonomy specified in the ESEF Regulation, ensuring
consistency between the human-readable layer of electronic format of the consolidated financial
statements and the audited consolidated financial statements. The responsibility of Group’s
Management also includes the design, implementation and maintenance of such internal control
as determined is necessary to enable the preparation of the consolidated financial statements in
ESEF format that are free from any material non-compliance with the ESEF Regulation.
Those charged with governance are responsible for overseeing the financial reporting process
for the preparation of consolidated financial statements of the Group, including the application of
the ESEF Regulation.
Auditor’s Responsibility
Our responsibility is to express an opinion providing reasonable assurance on the compliance of
the electronic format of the consolidated financial statements with the requirements of the ESEF
Regulation.
We have performed a reasonable assurance engagement in accordance with ISAE 3000 (revised)
Assurance Engagements Other Than Audits or Reviews of Historical Financial Information [ISAE
3000 (revised)]. This standard requires that we comply with ethical requirements, plan and
perform our engagement to obtain reasonable assurance about whether the electronic format of
the consolidated financial statements of the Group is prepared, in all material respects, in
accordance with the applicable criteria, specified above. The nature, timing, and extent of the
procedures selected depend on our judgment, including an assessment of the risk of material
non-compliance with the requirements of the ESEF Regulation, whether due to fraud or error.
11
Reasonable assurance is a high level of assurance, but it is not guaranteed that the assurance
engagement conducted in accordance with ISAE 3000 (revised) will always detect material non-
compliance with the requirements when it exists.
Our Independence and Quality Control
We apply International Standard on Quality Control 1, Quality Control for Firms that Perform
Audits and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements, and accordingly, maintain a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements,
professional standards, and applicable legal and regulatory requirements to the registered
auditors in Romania.
We have maintained our independence and confirm that we have met the ethical and
independence requirements of the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code).
Summary of procedures performed
The objective of the procedures that we have planned and performed was to obtain reasonable
assurance that the electronic format of the consolidated financial statements is prepared, in all
material respects, in accordance with the requirements of ESEF Regulation. When conducting our
assessment of the compliance with the requirements of the ESEF Regulation of the electronic
(XHTML) reporting format of the consolidated financial statements of the Group, we have
maintained professional skepticism and applied professional judgement. We have also:
obtained an understanding of the internal control and the processes related to the
application of the ESEF Regulation in respect of the consolidated financial statements of
the Group, including the preparation of the consolidated financial statements of the Group
in XHTML format and its tagging in machine readable language (iXBRL);
tested the validity of the applied XHTML format;
checked whether the human-readable layer of electronic format of the consolidated
financial statements (XHTML) corresponds to the audited consolidated financial
statements;
assessed the completeness of the tagging of information in the consolidated financial
statements while using the machine-readable language (iXBRL) under the requirements of
the ESEF Regulation;
12
assessed the appropriateness of the applied iXBRL tags selected from the core taxonomy
and the creation of extensions to the elements in the extended taxonomy specified in the
ESEF Regulation when there were no suitable elements in the core taxonomy;
evaluated the anchoring of the taxonomy extensions to the elements in the extended
taxonomy specified by the ESEF Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion on the compliance of the electronic format of the consolidated financial statements
with the requirements of the ESEF Regulation
Based on the procedures performed, in our opinion, the electronic format of the consolidated
financial statements of the Group for the year ended 31 December 2021 is prepared, in all
material respects, in accordance with the requirements of ESEF Regulation
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: Lupea Alexandru
Registered in the electronic Public Register under No. AF273
Bucharest, Romania
28 March 2022
S.N.G.N. ROMGAZ S.A. GROUP
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2021
PREPARED IN ACCORDANCE WITH
THE ORDER OF THE MINISTRY OF PUBLIC FINANCE 2844/2016
CONTENTS:
PAGE:
Statement of consolidated comprehensive income
Statement of consolidated financial position
Statement of consolidated changes in equity
Statement of consolidated cash flow
Notes to the consolidated financial statements
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
20
21
23
25
26
27
27
29
30
30
32
33
33
35
35
37
39
40
43
43
43
44
44
45
45
45
45
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
Note
3
5
4
6
16
5
7
8
9
13
25
10
3
11
19 c)
11
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Net impairment gains/(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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
5,852,926
(281,589)
58,403
23,388
349,989
74,787
(81,146)
(685,772)
(766,639)
(16,739)
(1,197)
85
(2,539,086)
169,841
2,157,251
(242,264)
1,914,987
(37,116)
5,938
(31,178)
(31,178)
1,883,809
0.0050
4,074,893
(18,617)
47,845
(6,534)
17,551
(16,151)
(58,282)
(672,063)
(767,251)
(17,000)
(26,509)
1,330
(1,158,143)
25,439
1,426,508
(178,604)
1,247,904
(16,877)
2,700
(14,177)
(14,177)
1,233,727
0.0032
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
1
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
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
Current tax receivable
Note
12
14 a)
25
11
14 b)
26
15
16 a)
29
16 b)
Cash and cash equivalents
28
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
17
18
19
20
19
December 31, 2021
'000 RON
December 31, 2020
'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
5,240,697
16,133
26,187
269,645
7,128
5,616
5,565,406
305,241
1,352,345
483
417,923
67,962
3,201
3,580,412
5,727,567
11,292,973
385,422
2,998,975
5,596,756
8,981,153
156,420
230,438
7,211
412,846
806,915
2
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
Note
December 31, 2021
'000 RON
December 31, 2020
'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
71,317
204,384
52,299
49
237,144
810
938,902
1,504,905
2,311,820
11,292,973
89,132
81,318
59,831
10,899
156,415
767
263,781
662,143
1,473,917
9,261,167
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
3
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Balance as of January 1, 2021
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, 2021
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
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
83,537
-
-
1,713
-
-
-
85,250
79,921
-
-
3,616
-
-
-
83,537
2,168,372
-
-
-
675,203
70,150
-
2,913,725
1,507,488
-
-
-
598,840
62,044
-
2,168,372
5,149,919
1,914,987
(689,906)
(1,713)
(675,203)
(70,150)
(31,178)
5,596,756
5,201,222
1,247,904
(620,530)
(3,616)
(598,840)
(62,044)
(14,177)
5,149,919
Total
'000 RON
7,787,250
1,914,987
(689,906)
-
-
-
(31,178)
8,981,153
7,174,053
1,247,904
(620,530)
-
-
-
(14,177)
7,787,250
*) In 2021 the Group’s shareholders approved the allocation of dividends of RON 689,906 thousand (2020: RON 620,530 thousand), dividend per share being RON 1.79 (2020: RON 1.61).
**) 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, 2021 the geological quota reserve is of RON 806,840 thousand (December 31, 2020: RON 927,499 thousand).
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
4
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CASH FLOW
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
13)
Exploration projects written off (note 13)
Net impairment of property, plant and equipment
and intangibles (note 7)
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
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
1,914,987
1,247,904
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
2,261,563
(3)
(224,796)
2,036,764
242,264
(85)
557
16,182
(58,403)
(321)
(20,750)
68,578
37,046
33
184,943
463,783
1,626
10
(378,352)
5,014
(810)
(9)
2,476,293
(64,913)
(400,838)
790,347
2,800,889
(3)
(233,084)
2,567,802
5
S.N.G.N. ROMGAZ S.A. GROUP
STATEMENT OF CONSOLIDATED CASH FLOW
Cash flows from investing activities
Investment in other entities
Bank deposits set up and acquisition of state bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Receipts from disposal of other financial
investments
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
(250)
(3,896,521)
5,463,332
58,340
513
2
(340,695)
(91,865)
1,192,856
(690,027)
(1,280)
-
94,148
(597,159)
3,163,499
416,913
3,580,412
-
(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)
52,970
363,943
416,913
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
6
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 Energy, 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
Ministry of Finance Order 2844/2016, with subsequent amendments, to approve accounting regulations in
accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (MOF
2844/2016). MOF 2844/2016, with subsequent amendments, is in accordance with the IFRS adopted by the
European Union, except for IAS 21 The effects of changes in foreign exchange rates regarding functional currency,
except for the provisions of IAS 20 Accounting for Government Grants regarding the recognition of revenue from
green certificates, except for the provisions of IFRS 15 Revenue from contracts with customers regarding the
revenue from taxes of connection to the distribution grid.
For the purposes of the preparation of these financial statements, the functional currency of the Group is deemed to
be the Romanian Leu (RON).
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).
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”.
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:
7
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
8
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Standards and interpretations applicable for the first time
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 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 (effective for
annual periods beginning on or after April 1, 2021);
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);
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (effective for annual periods beginning on or
after January 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:
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 IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of
Accounting policies (effective for annual periods beginning on or after January 1, 2023);
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of
Accounting Estimates (effective for annual periods beginning on or after January 1, 2023);
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (effective for annual periods beginning on or after January 1, 2023);
Amendments to IFRS 17 “Insurance Contracts”: initial application of IFRS 17 and IFRS 9 - comparative
information (applicable to annual periods beginning on or after January 1, 2023).
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:
IFRS 17 Insurance Contracts, including Amendments to IFRS 17 (applicable to 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).
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.
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.
9
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
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.
10
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Exploration expenses also include the carrying value 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.
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 and the estimated costs for decommissioning are updated annually.
11
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The decommissioning provision is based on the economic life of the fields wells are located on, even if this is longer
than the period of the related concession agreements, as it is considered the period may be extended.
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.
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.
12
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
13
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 tariffs are set by
analyzing the storage activity as a whole, not every single storage.
In 2021, 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 2021, 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
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.
14
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
Elements similar to the above are also considered when determining impairment losses for producing assets.
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.
15
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
16
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 estimates 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 and
estimated decommissioning costs are updated annually (note 19).
17
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Revenue from gas sold - own production
Revenue from gas sold – other arrangements
Revenue from gas acquired for resale
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
4,685,389
27,456
330,309
191,184
35,006
33,809
321,596
166,270
53,959
413
5,845,391
7,535
5,852,926
169,841
6,022,767
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
*) In 2021, other operating income include, besides penalties charged to clients for late payment or non-fulfillment of
the obligation of taking the natural gas, the amount of RON 114,628 thousand representing the performance
guarantee set up for the construction of the 430 MW Iernut power plant, with combined cycle with gas turbines,
following the termination of the work contract signed for this purpose.
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.
18
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenues from storage services are recognized when they are provided at the rates in force during the storage cycle.
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
58,403
58,403
47,845
47,845
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
Cost of electricity imbalance
Cost of other goods sold
Other consumables
Total
6.
OTHER GAINS AND LOSSES
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
42,673
33,259
246,819
33,867
903
5,214
362,735
35,005
19,257
7,650
10,375
592
4,020
76,899
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Forex gain
Forex loss
Net gain/(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
Losses from other debtors
Total
45
(317)
321
28,369
(5,014)
(10)
(6)
23,388
52
(291)
(7)
2,151
(8,427)
(10)
(2)
(6,534)
19
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT EXPENSES
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
Total depreciation, amortization and impairment
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
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
463,783
458,747
4,114
922
221,989
685,772
448,371
445,327
2,130
914
223,692
672,063
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
800,360
27,830
24,955
23,434
11,415
6,924
894,918
(128,279)
766,639
798,382
28,044
23,231
20,613
11,763
5,980
888,013
(120,762)
767,251
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
557
16,182
16,739
593
16,407
17,000
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'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
51,537
145,177
2,013,806
47,828
280,738
2,539,086
40,945
167,937
633,160
90,740
225,361
1,158,143
*) In the year ended December 31, 2021, the major taxes and duties included in the amount of RON 2,013,806
thousand (year ended December 31, 2020: RON 633,160 thousand) are:
20
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RON 1,257,998 thousand representing 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, 2020: RON 414,943 thousand);
RON 749,411 thousand representing royalty on gas production and storage activity (year ended December
31, 2020: RON 196,875 thousand).
**) The increase in other operating expenses compared to 2020 is mainly due to the increase in expenditure on
greenhouse gas emission certificates (RON 121,583 thousand in 2021, compared to RON 24,208 thousand in 2020).
The expense of RON 121,583 thousand in 2021 was partially offset by releasing to income the provision set up for
these certificates on December 31, 2020 of RON 81,217 thousand (note 19) (2020: the expense of RON 24,208
thousand was offset by releasing to income the provision set up on December 31, 2019 of RON 23,410 thousand).
11.
INCOME TAX
Current tax expense
Deferred income tax (income)/expense
Income tax expense
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
230,643
11,621
242,264
220,285
(41,681)
178,604
The tax rate used for the reconciliations below for the year ended December 31, 2021, respectively year ended
December 31, 2020 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, 2021
'000 RON
Year ended
December 31, 2020
'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
2,157,251
3,806
2,161,057
345,769
(81,238)
20,649
(20,232)
(11,394)
(306)
30,452
(23,375)
(18,061)
-
242,264
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
21
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Components of deferred tax (asset)/liability:
December 31, 2021
December 31, 2020
Cumulative
temporary
differences
'000 RON
Deferred tax
(asset)/ liability
'000 RON
Cumulative
temporary
differences
'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
(651,505)
(16,382)
(610,253)
(977)
(33,205)
(372,912)
388
1
(434)
-
(104,241)
(2,621)
(97,641)
(156)
(5,313)
(59,666)
62
-
(69)
-
(736,102)
274,492
(828,989)
(977)
(29,817)
(395,488)
474
9
(507)
(3,900)
Deferred
tax (asset)/
liability
'000 RON
(117,776)
43,919
(132,638)
(156)
(4,771)
(63,278)
76
1
(81)
(624)
Total
(1,685,279)
(269,645)
(1,720,805)
(275,328)
Change, out of which:
-
-
in current year’s result
in other comprehensive
income
(5,683)
(11,621)
5,938
44,381
41,681
2,700
*) 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.
22
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
117,671
916,115
7,103,831
1,090,625
114,700
1,722,484
333,606
1,914,999
13,314,031
Additions
Transfers
Disposals
78
263
-
237
23,295
(143)
9,205
149,970
(116,607)
799
61,421
(4,310)
-
9,327
1,596
34,144
91,862
359,094
462,871
-
(278,420)
-
-
(13,131)
(89,528)
(21,956)
(245,675)
As of December 31, 2021
118,012
939,504
7,146,399
1,148,535
124,027
1,745,093
335,940
1,973,717
13,531,227
Accumulated depreciation
As of January 1, 2021
Charge *)
Disposals
As of December 31, 2021
Impairment
-
-
-
-
358,880
4,325,133
29,753
(36)
327,414
(178)
388,597
4,652,369
703,906
73,394
(4,278)
773,022
84,136
7,908
(1)
92,043
705,426
44,282
-
749,708
-
-
-
-
-
-
-
-
6,177,481
482,751
(4,493)
6,655,739
As of January 1, 2021
8,255
Charge
Transfers
Release
-
-
-
41,588
1,857
16,500
(415)
553,625
101,784
21,675
(27,370)
83,098
1,205
366,335
213,398
255,924
1,523,428
422
-
(612)
17
-
(11)
993
-
-
38,035
-
(90,348)
125,111
(38,175)
(38,100)
268,219
-
(156,856)
As of December 31, 2021
8,255
59,530
649,714
82,908
1,211
367,328
161,085
304,760
1,634,791
Carrying value
As of January 1, 2021
109,416
515,647
2,225,073
303,621
29,359
650,723
120,208
1,659,075
5,613,122
As of December 31, 2021
109,757
491,377
1,844,316
292,605
30,773
628,057
174,855
1,668,957
5,240,697
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 24,001 thousand.
23
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Land and
land
improvements
'000 RON
Buildings
'000 RON
109,368
8,049
254
-
909,979
1
7,477
(1,342)
Gas
properties
'000 RON
6,730,173
130,268
259,441
(16,051)
Plant,
machinery
and
equipment
'000 RON
1,017,465
9
82,079
(8,928)
Fixtures,
fittings and
office
equipment
'000 RON
104,110
-
10,876
(286)
Storage
assets
'000 RON
1,693,062
9,819
20,109
(506)
Tangible
exploration
assets
'000 RON
402,445
66,516
(4,690)
(130,665)
Capital
work in
progress
'000 RON
1,794,654
554,384
(375,546)
(58,493)
Total
'000 RON
12,761,256
769,046
-
(216,271)
Cost
As of January 1, 2020
Additions
Transfers
Disposals
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
Charge
Transfers
Release
-
-
-
-
8,255
-
-
-
328,847
4,022,145
646,360
77,281
648,959
30,872
(839)
306,002
(3,014)
66,428
(8,882)
358,880
4,325,133
703,906
40,306
1,664
-
(382)
493,729
85,085
25,804
(50,993)
80,567
557
2,374
(400)
83,098
7,141
(286)
84,136
1,148
76
-
(19)
1,205
56,536
(69)
705,426
378,332
(11,341)
-
(656)
-
-
-
-
-
-
-
-
245,532
100,189
-
(132,323)
246,618
106,849
(28,178)
(69,365)
5,723,592
466,979
(13,090)
6,177,481
1,494,487
283,079
-
(254,138)
366,335
213,398
255,924
1,523,428
As of December 31, 2020
8,255
41,588
553,625
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.
24
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 (significant increase in prices, but also in costs with royalties and windfall tax),
the Group considered there are major changes in the assumptions used in the previous impairment test on 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 or submitted for approval, but no later than 2043, this being the limit year of the
concession agreements, according to the legislation in force.
Following the impairment test, no additional impairment was recorded and there was no decrease of previously
recognized impairment losses.
In the impairment test the following assumptions were used:
Weighted average cost of capital: 10%;
The inflation rate for the years 2022-2024 was the one reported by the National Prognosis Commission in the
2021-2025 mid-term forecast, 2021 autumn edition. For the 2025-2043 period a constant inflation rate of 2.6%
was used;
Average estimated price for the period was 190.64 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
Seismic, geological, geophysical studies
Total exploration expense
Net movement in exploration assets’ impairment
(net income)/net loss
Net cash used in exploration investing activities
Exploration assets (note 12)
Liabilities
Net assets
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
(33)
(1,164)
(1,197)
37,046
(91,865)
(836)
(25,673)
(26,509)
97,695
(66,516)
December 31, 2021
'000 RON
December 31, 2020
'000 RON
174,855
(7,904)
166,951
120,208
(5,285)
114,923
25
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. OTHER INTANGIBLE ASSETS. RIGHT OF USE ASSETS
a) Other intangible assets
2021
'000 RON
2020
'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
Effects of rent index updates
As of December 31
Accumulated amortization
As of January 1
Charge
As of December 31
Carrying value
As of January 1
As of December 31
186,899
5,592
(22,896)
169,595
172,125
4,114
(22,777)
153,462
14,774
16,133
186,136
7,990
(7,227)
186,899
176,972
2,130
(6,977)
172,125
9,164
14,774
2021
'000 RON
2020
'000 RON
9,514
135
9,649
1,599
922
2,521
7,915
7,128
9,275
239
9,514
685
914
1,599
8,590
7,915
26
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
'000 RON
December 31, 2020
'000 RON
171,542
189,594
870
(56,674)
(91)
305,241
171,990
123,438
886
(51,747)
(4)
244,563
December 31, 2021
'000 RON
December 31, 2020
'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
1,757,243
(924,030)
526,971
(7,839)
1,352,345
1,561,742
(1,279,164)
312,991
(2,694)
592,875
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, 2021
'000 RON
December 31, 2020
'000 RON
18,374
2,384
64,471
(28,981)
50,079
(49,016)
5,808
4,898
6
68,023
109
8,201
47,941
(186)
49,932
(49,442)
5,606
5,795
6
67,962
27
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
*) 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 recovered this amount in 2021.
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. In 2021, the court ruled in favor of the Company, so that the related allowance was released
to income. By the date of these financial statements, the court's decision was not communicated, therefore the
Company could not initiate recovery proceedings.
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
2021
'000 RON
1,359,855
1,402
32,529
(29,771)
(382,518)
981,497
2020
'000 RON
1,379,557
2,792
61,595
(4,943)
(79,146)
1,359,855
*) In 2022, the Group collected RON 324,733 thousand from the old receivable from Electrocentrale Bucuresti, thus
reducing the allowance recorded as of December 31, 2021.
As of December 31, 2021, the Group recorded allowances for expected credit losses, of which Interagro RON
264,529 thousand (December 31, 2020: RON 271,621 thousand), GHCL Upsom of RON 68,103 thousand
(December 31, 2020: RON 68,103 thousand), CET Iasi of RON 46,271 thousand (December 31, 2020: RON 46,271
thousand), Electrocentrale Galati with RON 192,342 thousand (December 31, 2020: RON 226,338 thousand),
Electrocentrale Bucuresti with RON 252,225 thousand (December 31, 2020: RON 576,080 thousand), G-ON
EUROGAZ of RON 14,848 thousand (December 31, 2020: RON 14,848 thousand) and Electrocentrale Constanta of
RON 60,766 thousand (December 31, 2020: RON 58,227 thousand) due to existing financial conditions of these
clients as well as ongoing litigating cases related to these receivables or exceeding payment terms.
28
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
d)
Credit risk exposure for trade receivables
December 31, 2021
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, 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
17.
SHARE CAPITAL
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
1,022,513
15,702
578
14,213
1,231,208
2,284,214
0.78
0.85
46.15
99.07
73.86
7,973
134
267
14,081
909,414
931,869
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
December 31, 2021
‘000 RON
December 31, 2020
‘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, 2021 is as follows:
No. of shares
Value
‘000 RON
Percentage
(%)
The Romanian State through the
Ministry of Energy
Legal persons
Physical persons
Total
269,823,080
96,615,074
18,984,246
385,422,400
269,823
96,615
18,984
385,422
70.01
25.07
4.92
100
All shares are ordinary and were subscribed and fully paid as at December 31, 2021. All shares carry equal voting
rights and have a nominal value of RON 1/share (December 31, 2020: RON 1/share).
29
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
'000 RON
December 31, 2020
'000 RON
85,250
2,913,725
2,046,460
361,152
486,388
19,725
2,998,975
83,537
2,168,372
1,371,257
291,002
486,388
19,725
2,251,909
December 31, 2021
'000 RON
December 31, 2020
'000 RON
412,846
156,420
569,266
24,792
3,554
208,798
237,183
806,410
538,931
128,690
667,621
22,027
1,380
133,008
156,415
824,036
*) On December 31, 2021, other provisions of RON 208,798 thousand include the provision for employee’s
participation to profit of RON 38,677 thousand (December 31, 2020: RON 36,938 thousand), the provision for taxes
of RON 7,161 thousand (December 31, 2020: RON 6,716 thousand) and the provision for CO2 certificates of 154,904
thousand (December 31, 2020: RON 81,217).
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
2021
'000 RON
560,958
10,808
16,182
(20,750)
(129,560)
437,638
2020
'000 RON
384,236
139,913
16,407
24,273
(3,871)
560,958
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 5.14% (year ended December 31, 2020: 2.97%). 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 increase with 1 percentage point of the discount rate would decrease the decommissioning provision with RON
77,109 thousand. The decrease with 1 percentage point of the discount rate would increase the decommissioning
provision with RON 102,191 thousand.
30
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The increase with 1 percentage point of the inflation rate would increase the decommissioning provision with RON
103,485 thousand. The decrease with 1 percentage point of the discount rate would decrease the decommissioning
provision with RON 79,168 thousand.
b)
Other provisions
At January 1, 2021
Additional provision in period
Provisions used in the period
Unused amounts during the period, reversed
At December 31, 2021
At January 1, 2020
Additional provision in the period
Provisions used in the period
Unused amounts during the period, reversed
At December 31, 2020
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
1,380
2,966
(439)
(353)
3,554
133,008
243,940
(166,346)
(1,804)
208,798
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
2021
'000 RON
128,690
3,998
6,021
(19,405)
37,116
156,420
Total
‘000 RON
134,388
246,906
(166,785)
(2,157)
212,352
Total
‘000 RON
64,858
147,403
(76,443)
(1,430)
134,388
2020
'000 RON
114,876
2,642
5,904
(11,609)
16,877
128,690
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: 5%;
Average inflation rate: 5.9% in 2022; 3.2% in 2023; 3% in 2024; 2.8% in 2025; 2.5% in the 2026-2031 period,
following a decreasing trend in the next years.
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
Salaries’ growth rate
(14,771)
17,252
17,168
(15,090)
31
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
9,632
9,205
33,809
87,798
425,997
December 31, 2021
'000 RON
December 31, 2020
'000 RON
230,169
157
112
230,438
7
42
49
230,487
136,021
167
120
136,308
8
10,891
10,899
147,207
*) 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, 2021 the Group collected RON
230,169 thousand. Amounts received under this contract will be transferred to income based on the depreciation rate
of the investment.
By Government Decision no. 669/2021 the deadline until the investments financed from the National Investment Plan
must be put into operation has been extended until June 30, 2022.
By December 31, 2021, the Group submitted two other reimbursement requests amounting to RON 62,150 thousand.
As the term of the work contract for the realization of the investment was not extended, the Group is in the process of
identifying solutions for completing the works.
At January 1, 2021
Received
Amounts in revenue
At December 31, 2021
Total
'000 RON
136,149
94,148
(9)
230,288
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
128
-
(9)
119
136,021
94,148
-
230,169
32
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amounts collected from
NIP
'000 RON
Other amounts received
as subsidies
'000 RON
January 1, 2020
Received
Other decreases (reimbursements)
Amounts in revenue
December 31, 2020
20,994
115,027
-
-
136,021
21.
TRADE AND OTHER CURRENT LIABILITIES
185
-
(50)
(7)
128
Total
'000 RON
21,179
115,027
(50)
(7)
136,149
December 31, 2021
'000 RON
December 31, 2020
'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
30,055
19,171
22,091
71,317
43,800
400,278
34,053
7,567
86,763
1,116
363,996
1,329
938,902
Total trade and other liabilities
1,010,219
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
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, 2021, the official exchange rates were RON 4.3707 to USD 1 and RON 4.9481 to EUR 1 (December 31,
2020: RON 3.9660 to USD 1 and RON 4.8694 to EUR 1).
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.
33
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ii)
Inflation risk
The official inflation rate in Romania, during the year ended December 31, 2021 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 client, which amounts to 89.84% of net trade receivable balance at December 31, 2021 (top 4 clients: 85.41% as of
December 31, 2020).
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, 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.
e)
Maturity analysis for financial assets and financial liabilities at amortized cost
Due in
1-3 months
‘000 RON
Due in
3 months
to 1 year
‘000 RON
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
December
31, 2021
Trade
receivables
Bank deposits
Treasury bonds
Total
Due in
less than
a month
‘000 RON
441,119
293,629
92,010
826,758
Trade payables
(37,989)
Lease liabilities
(64)
(38,053)
Total
Net
392,094
10,000
-
402,094
(3,238)
(155)
(3,393)
Total
‘000 RON
833,213
314,129
92,010
1,239,352
(41,262)
(8,021)
(49,283)
-
-
-
-
-
(3,889)
(3,889)
-
-
-
-
-
(3,322)
(3,322)
(3,322)
-
10,500
-
10,500
(35)
(591)
(626)
9,874
34
788,705
398,701
(3,889)
1,190,069
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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)
Total
Net
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
-
-
-
-
-
-
-
-
-
-
(3,365)
(3,365)
(4,480)
(4,480)
Total
‘000 RON
282,578
925,416
1,067,505
2,275,499
(58,271)
(8,612)
(66,883)
243,038
764,299
1,209,124
(3,365)
(4,480)
2,208,616
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
13,115
13,115
10,551
10,551
Transactions with other companies controlled by the Romanian State are not considered transactions with related
parties, for financial statements purposes.
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, 2021 and December 31, 2020, 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)
Year ended
Dec 31, 2021
'000 RON
18,622
1,406
3,035
711
Year ended
Dec 31, 2020
'000 RON
17,754
1,327
2,831
491
35
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Salaries payable to executives
Salaries payable to directors
December 31, 2021
'000 RON
December 31, 2020
'000 RON
666
116
552
117
In addition to the above, on December 31, 2021 the Group recorded a provision for bonuses for executives and directors
of RON 1,299 thousand (December 31, 2020: RON 1,299 thousand).
36
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021, respectively, December 31, 2020.
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, 2021
December 31, 2020
40
25
40
25
Name of associate
SC Depomures SA
Tg.Mures
SC Agri LNG
Project Company
SRL
Total
Cost as of
December 31, 2021
’000 RON
Impairment as of
December 31, 2021
’000 RON
Carrying value as of
December 31, 2021
’000 RON
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
26,187
977
27,164
-
(977)
(977)
26,187
-
26,187
26,102
977
27,079
-
(977)
(977)
26,102
-
26,102
37
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarized financial information for significant investments in associates (Depomureş)
December 31, 2021
'000 RON
December 31, 2020
'000 RON
68,993
12,895
9,729
9,031
9,031
4,232
3,434
72,868
11,928
7,113
12,461
12,461
4,011
3,435
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
33,717
17
(3,939)
(584)
(153)
212
28,994
20
(3,959)
(723)
(133)
3,325
2020
'000 RON
24,772
1,330
26,102
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
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
2021
'000 RON
26,102
85
26,187
38
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
December 31, 2020
Electrocentrale
București S.A.
Patria Bank S.A.
Mi Petrogas Services
S.A.
GHCL Upsom
Lukoil association
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
Non-governmental,
Romania
Romania
Romania
Romania
Romania
2.49
0.02
10
-
12.2
Electricity Producers
Association-
HENRO
non-profit,
independent
association
Romania
33.33
2.49
0.03
10
4.21
12.2
-
Company
Electrocentrale București S.A.*)
Patria Bank S.A.**)
Mi Petrogas Services S.A.
GHCL Upsom
Lukoil association
Electricity Producers Association-HENRO
Total
Fair value as of
December 31, 2021
’000 RON
Fair value as of
December 31, 2020
’000 RON
-
79
60
-
5,227
250
5,616
-
91
60
-
5,227
-
5,378
*) The fair value of the investment in Electrocentrale Bucuresti at December 31, 2021 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.
**) In 2016, the Company's shareholders decided to withdraw Romgaz from the bank's shareholders, as a result of
the merger process in which Patria Bank was involved. In 2021, the approval of the BNR was obtained for the partial
redemption of the shares that the Company holds in Patria Bank. The shares of Patria Bank S.A. are listed, but
following the merger process, the price at which the redemption of the shares held by the shareholders who
requested the withdrawal from the shareholding was set to a fixed value. Thus, the investment is measured at this
redemption value.
39
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
SEGMENT INFORMATION
a)
Segment assets and liabilities
December 31,
2021
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
Current tax
receivable
Net investments in
leasing
Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Consolidation
adjustments
'000 RON
Total
'000 RON
2,786,660
810,784
1,183,357
589,114
(129,218)
5,240,697
3,666
870
-
-
-
-
275,930
11,153
1,312,736
483
20,312
-
-
-
-
-
1,953
25,564
12,276
1,477
34,635
-
7,761
388
3,201
-
-
-
-
-
-
2,435
1,712
11,597
26,187
5,616
267,692
392,359
14,600
53,620
-
-
-
-
-
-
-
11,239
11,142
(17,407)
-
412
-
3,551,927
-
-
-
6,739
-
432
‘-
-
1
-
(432)
16,133
26,187
5,616
269,645
417,923
305,241
67,962
1,352,345
483
3,580,412
7,128
3,201
-
Total assets
4,410,940
898,909
1,199,155
4,931,025
(147,056)
11,292,973
Retirement benefit
obligation
Contract liabilities
Provisions
Trade payables
Current tax
liabilities
Deferred revenue
Lease liability
204,384
418,997
51,647
-
276
-
Other liabilities
805,835
-
11,540
-
43,955
17,456
-
-
434
11,276
-
-
157,438
7,033
144,880
-
29,600
12,588
-
52,299
230,169
-
42
8,019
5,003
116,788
-
-
-
(17,407)
-
-
(432)
-
156,420
204,384
649,990
71,317
52,299
230,487
8,021
938,902
Total liabilities
1,481,139
84,661
399,643
364,216
(17,839)
2,311,820
40
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Consolidation
adjustments
Total
'000 RON
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
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
41
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b)
Segment revenues, results and other segment information
Year ended
December 31, 2021 Upstream
'000 RON
Storage
'000 RON
Electricity
'000 RON
Other
'000 RON
Adjustment
and
eliminations
'000 RON
Total
'000 RON
5,338,316
313,456
442,412
408,161
(649,419)
5,852,926
Third party revenue
5,280,952
243,798
320,989
(57,364)
(69,658)
(121,423)
(400,974)
649,419
133
(3)
-
534
-
-
7
-
-
7,187
57,759
-
85
-
(30)
-
-
-
5,852,926
58,403
(3)
85
(362,185)
(8,506)
(5,484)
(26,087)
(61,521)
(463,783)
(263,383)
45,275
-
-
(1,618)
(745)
(2,472)
(268,218)
-
954
-
46,229
1,843,943
33,342
147,850
217,799
(85,683)
2,157,251
*) The amount of RON 61,521 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
3,690,235
333,939
261,112
376,937
(587,330)
4,074,893
Third party revenue
3,614,241
(75,994)
107
(3)
-
(67,757)
266,182
1,018
-
-
(72,203)
(371,376)
587,330
188,909
152
-
-
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
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,
2020
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)
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In the year ended December 31, 2021, the Group's three largest clients each individually represents more than 10%
of revenue, sales to these clients being of RON 1,013,764 thousand, RON 894,491 thousand, RON 834,420
thousand, (in the year ended December 31, 2020 the Group's three largest customers represented individually, over
10% of revenue, sales to these clients being of RON 863,538 thousand, RON 808,818 thousand, RON 694,827
thousand), together totaling 46.86% of total revenue (year ended December 31, 2020: 58.09%). Of the total revenue
generated by those three clients, 4.94% are shown in the "Storage" segment and 95.06% in the "Upstream" segment
(year ended December 31, 2020: 6.08% in the "Storage" segment, 93.92% 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, 2021
'000 RON
December 31, 2020
'000 RON
78,216
326
48
3,500,288
1,534
-
3,580,412
95,066
174
56
319,203
2,412
2
416,913
*) Current bank accounts include overnight deposits.
**) At December 31, 2021 restricted cash refers to bank accounts used only for dividend payments to shareholders,
according to stock market regulations.
29. OTHER FINANCIAL ASSETS
Other financial assets represent mainly treasury bonds and deposits with a maturity of over 3 months, from
acquisition date. The Group did not identify any risk of loss for these assets, therefore it did not record any
impairment.
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, 2021
'000 RON
December 31, 2020
'000 RON
90,070
314,129
11,784
1,940
417,923
1,045,593
925,416
2,602
21,912
1,995,523
December 31, 2021
'000 RON
December 31, 2020
'000 RON
62,947
62,947
224,063
224,063
In 2021, 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 RON 350,000 thousand. On December 31, 2021
are still available for use RON 289,745 thousand.
As of December 31, 2021, the Group’s contractual commitments for the acquisition of non-current assets are of RON
267,246 thousand (December 31, 2020: RON 419,104 thousand).
43
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31.
COMMITMENTS RECEIVED
Endorsements and collaterals received
Total
December 31, 2021
'000 RON
December 31, 2020
'000 RON
1,255,235
1,255,235
1,524,480
1,524,480
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.
(c)
Environmental contingencies
Environmental regulations are developing in Romania and the Group has not recorded any liability at December 31,
2021 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 437,638 thousand (December 31,
2020: RON 560,958 thousand), representing the decommissioning liability.
44
S.N.G.N. ROMGAZ S.A. GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2021 annual financial statements is RON 425 thousand.
The fees charged for other assurance services in 2021 are RON 320 thousand.
35.
EVENTS AFTER THE BALANCE SHEET DATE
In the context of the conflict between Russia and Ukraine, started on February 24, 2022, the EU, USA, UK and other
countries imposed various sanctions against Russia, including financing restrictions on certain Russian banks and
state-owned companies as well as personal sanctions against a number of individuals.
Considering the geopolitical tensions, since February 2022, there has been an increase in financial markets volatility
and exchange rate depreciation pressure.
It is expected that these events may affect the activities in various sectors of the economy, could result in further
increases in European energy prices and increased risk of supply chain disturbances.
The Group does not have direct exposures to related parties and/or key customers or suppliers from those countries.
The Group regards these events as non-adjusting events after the reporting period, the quantitative effect of which
cannot be estimated at the moment with a sufficient degree of confidence. Currently, the Group's management is
analyzing the possible impact of changing micro- and macroeconomic conditions on the Group's financial position
and results of operations.
36. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
45
Societatea Naţională de Gaze Naturale Romgaz S.A. – Mediaş - România
STATEMENT
in accordance with the provisions of art. 65 (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, 2021, 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
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 separate financial statements
Opinion
We have audited the separate financial statements of SNGN ROMGAZ S.A (the Company) with
official head office in Medias, Piata Constantin I. Motas 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, 2021 and the 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 accompanying separate financial statements give a true and fair view of the
financial position of the Company as at December 31, 2021 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
Separate 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 separate 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 separate 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 separate 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 separate 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 separate financial statements.
Estimation of the gas reserves is a focus area
in our audit because it has a significant impact
on the separate 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 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 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;
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
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.
Specific impairment testing of production assets, at individual field level, 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 separate 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 December 31, 2021 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 2,177 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 in
production and reserves at the individual field
In respect of our specific impairment testing,
at individual field level, 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 units
for which triggering events were
identified;
level constitute impairment indicators and
consequently, has carried out an impairment
test for the production assets in the Upstream
Gas segment for which impairment indicators
existed, which resulted in no additional
impairment being recognised.
Considering the above, we determined that
specific Impairment testing of production
assets, at individual field level, 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 in the
impairment test as of 31 December
2021 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 projections;
- 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 separate 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 437.6 million at 31 December
2021) 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
benchmarking 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, the Corporate Governance Statement and the
Remuneration Report, but does not include the financial statements and our auditors’ report
thereon. The Corporate responsibility and sustainability report will be published separately, at a
later date. Management is responsible for the other information.
Our audit opinion on the separate 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 separate financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially
inconsistent with the separate 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 separate 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 separate
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 separate 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 separate 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 separate 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 separate 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 and Remuneration Report, we
have read these reports 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
separate financial statements as at December 31, 2021;
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, 2021, we have not
identified information included in the Consolidated Directors’ Report that contains a material
misstatement of fact.
the Remuneration Report identified above includes, in all material respects, the required
information according to the provisions of article 107 (1) and (2) from Law 24/2017 on
issuers of financial instruments and market operations.
d)
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
October 2021 to audit the financial statements for the financial years ended December 31,
2021, 2022 and 2023. Total uninterrupted engagement period, for the statutory auditor, has
lasted for four years, covering the years ended December 31, 2018 and 2019 and 2020 and
2021.
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 March 21, 2022.
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.
Report on the compliance of the electronic format of the separate financial statements, with
the requirements of the ESEF Regulation
We have performed a reasonable assurance engagement on the compliance of the separate
financial statements presented in XHTML format of SNGN ROMGAZ S.A (the Company) for the
year ended December 31, 2021, with the requirements of the Commission Delegated Regulation
(EU) 2019 /815 of 17 December 2018 supplementing Directive 2004/109/EC of the European
Parliament and of the Council with regard to regulatory technical standards on the specification
of a single electronic reporting format (the “ESEF Regulation).
These procedures refer to testing the format and whether the electronic format of the separate
financial statements (XHTML) corresponds to the audited separate financial statements and
expressing an opinion on the compliance of the electronic format of the separate financial
statements of the Company for the year ended December 31, 2021 with the requirements of the
ESEF Regulation. In accordance with these requirements, the electronic format of the separate
financial statements, included in the annual report should be presented in XHTML format.
Responsibilities of the Management and Those Charged with Governance regarding the
separate financial statements presented in XHTML format
The Management of the Company is responsible for the compliance with the requirements of the
ESEF Regulation in the preparation of the electronic format of the separate financial statements
in XHTML format and for ensuring consistency between the electronic format of the separate
financial statements (XHTML) and the audited separate financial statements.
The responsibility of the Management also includes the design, implementation and maintenance
of such internal control as determined is necessary to enable the preparation of the separate
financial statements in ESEF format that are free from any material non-compliance with the
ESEF Regulation.
10
Those charged with governance are responsible for overseeing the financial reporting process
for the preparation of separate financial statements, including the application of the ESEF
Regulation.
Auditor’s Responsibility
Our responsibility is to express an opinion providing reasonable assurance on the compliance of
the electronic format of the separate financial statements with the requirements of the ESEF
Regulation.
We have performed a reasonable assurance engagement in accordance with ISAE 3000 (revised)
Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE
3000 (revised)). This standard requires that we comply with ethical requirements, plan and
perform our engagement to obtain reasonable assurance about whether the electronic format of
the separate financial statements of the Company is prepared, in all material respects, in
accordance ESEF regulation. The nature, timing, and extent of the procedures selected depend
on our judgment, including an assessment of the risk of material non-compliance with the
requirements of the ESEF Regulation, whether due to fraud or error.
Reasonable assurance is a high level of assurance, but it is not guaranteed that the assurance
engagement conducted in accordance with ISAE 3000 (revised) will always detect material non-
compliance with the requirements when it exists.
Our Independence and Quality Control
We apply International Standard on Quality Control 1, Quality Control for Firms that Perform
Audits and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements, and accordingly, maintain a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements to the registered
auditors in Romania.
We have maintained our independence and confirm that we have met the ethical and
independence requirements of the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code).
11
Summary of procedures performed
The objective of the procedures that we have planned and performed was to obtain reasonable
assurance that the electronic format of the separate financial statements is prepared, in all
material respects, in accordance with the requirements of ESEF Regulation. When conducting our
assessment of the compliance with the requirements of the ESEF Regulation of the electronic
reporting format (XHTML) of the separate financial statements of the Company, we have
maintained professional skepticism and applied professional judgement. We have also:
obtained an understanding of the internal control and the processes related to the
application of the ESEF Regulation in respect of the financial statements of the Company,
including the preparation of the separate financial statements of the Company in XHTML
format
tested the validity of the applied XHTML format
checked whether the electronic format of the separate financial statements (XHTML)
corresponds to the audited separate financial statements
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion on the compliance of the electronic format of the separate financial statements with
the requirements of the ESEF Regulation
Based on the procedures performed, our opinion is that the electronic format of the separate
financial statements is prepared, in all material respects, in accordance with the requirements of
ESEF Regulation.
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: Lupea Alexandru
Registered in the electronic Public Register under No. AF273
Bucharest, Romania
28 March 2022
S.N.G.N. ROMGAZ S.A.
SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2021
PREPARED IN ACCORDANCE WITH
MINISTRY OF FINANCE ORDER 2844/2016
CONTENTS:
PAGE:
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flow
Notes to the financial statements
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
39
39
40
40
41
41
41
42
42
42
42
S.N.G.N. ROMGAZ S.A.
STATEMENT OF COMPREHENSIVE INCOME
Note
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Revenue
Cost of commodities sold
Investment income
Other gains and losses
Net impairment gains/(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
3
5
4
6
16
5
7
8
9
13
10
3
11
Other comprehensive income
Items that will not be reclassified
subsequently to profit or loss
Actuarial gains/(losses) on post-employment
benefits
19 c)
Income tax relating to items that will not be
reclassified subsequently to profit or loss
11
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
5,725,214
(281,587)
85,963
18,838
349,989
74,787
(68,862)
(613,272)
(694,324)
(16,739)
(1,197)
(2,546,438)
169,567
2,201,939
(239,430)
1,962,509
(34,357)
5,496
(28,861)
(28,861)
1,933,648
3,926,034
(18,615)
67,957
(5,583)
17,551
(16,151)
(49,629)
(594,689)
(696,518)
(16,999)
(26,509)
(1,163,456)
25,378
1,448,771
(169,886)
1,278,885
(16,172)
2,588
(13,584)
(13,584)
1,265,301
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
1
S.N.G.N. ROMGAZ S.A.
STATEMENT OF FINANCIAL POSITION
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
Trade and other receivables
Contract costs
Other financial assets
Other assets
Net lease investment
Cash and cash equivalents
Total current assets
Assets held for disposal
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
December 31, 2021
'000 RON
December 31, 2020
'000 RON
4,559,588
15,263
66,056
120
288,087
354
6,739
5,616
4,888,163
14,030
66,056
120
294,268
424
7,442
5,378
4,941,823
5,275,881
292,966
1,335,118
483
392,359
66,485
78
3,572,651
5,660,140
693,035
11,294,998
385,422
2,920,174
5,684,411
8,990,007
144,880
230,438
7,211
377,157
759,686
229,945
574,273
651
1,975,507
56,025
71
392,857
3,229,329
710,944
9,216,154
385,422
2,219,941
5,140,902
7,746,265
119,432
136,308
7,844
493,176
756,760
Note
12
14
25 a)
25 b)
11
14
26
15
16 a)
28
16 b)
27
29
17
18
19
20
19
2
S.N.G.N. ROMGAZ S.A.
STATEMENT OF FINANCIAL POSITION
Note
December 31, 2021
'000 RON
December 31, 2020
'000 RON
Current liabilities
Trade payables
Contract liabilities
Current tax liabilities
Deferred revenue
Provisions
Lease liability
Other liabilities
Total current liabilities
21
20
19
21
Liabilities directly associated with the assets
held for disposal
29
Total liabilities
Total equity and liabilities
71,268
204,384
52,299
49
228,877
809
927,625
1,485,311
59,994
2,304,991
11,294,998
91,060
81,318
57,890
10,899
147,566
757
252,150
641,640
71,489
1,469,889
9,216,154
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
3
S.N.G.N. ROMGAZ S.A.
STATEMENT OF CHANGES IN EQUITY
Balance as of January 1, 2021
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, 2021
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
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
2,142,857
-
-
650,228
50,005
-
2,843,090
1,502,818
-
-
580,630
59,409
-
2,142,857
Retained
earnings **)
'000 RON
5,140,902
1,962,509
(689,906)
(650,228)
(50,005)
(28,861)
5,684,411
5,136,170
1,278,885
(620,530)
(580,630)
(59,409)
(13,584)
5,140,902
Total
'000 RON
7,746,265
1,962,509
(689,906)
-
-
(28,861)
8,990,007
7,101,494
1,278,885
(620,530)
-
-
(13,584)
7,746,265
*) In 2021 the Company’s shareholders approved the allocation of dividends of RON 689,906 thousand (2020: RON 620,530 thousand), dividend per share being RON 1.79 (2020: RON 1.61).
**) 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, 2021 the geological quota reserve is of RON 806.840 thousand (December 31, 2020: RON 927,499 thousand).
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
4
S.N.G.N. ROMGAZ S.A.
STATEMENT OF CASH FLOW
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
13)
Exploration projects written off (note 13)
Net impairment of property, plant and equipment
and intangibles (note 7)
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
1,962,509
1,278,885
239,430
557
(28,065)
16,182
(57,898)
(321)
(20,646)
69,366
37,046
33
182,470
393,756
1,626
10
(378,352)
6,273
3,300
(810)
(9)
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)
2,426,457
2,071,945
(65,944)
(412,742)
788,724
2,736,495
(4)
(226,210)
2,510,281
59,201
47,383
20,914
2,199,443
(3)
(211,720)
1,987,720
5
S.N.G.N. ROMGAZ S.A.
STATEMENT OF CASH FLOW
Cash flows from investing activities
Investment in other entities
Bank deposits set up and acquisition of state
bonds
Bank deposits and state bonds matured
Interest received
Proceeds from sale of non-current assets
Receipts from disposal of other financial
investments
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
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
(250)
(3,821,852)
5,394,162
57,854
513
2
28,065
(300,072)
(91,865)
105
1,266,662
(690,027)
(1,270)
-
94,148
(597,149)
3,179,794
392,857
3,572,651
-
(2,877,758)
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
These financial statements were endorsed by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
6
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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 Energy 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 separate financial statements (“financial statements”) of the Company have been prepared in accordance with
the provisions of 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).
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).
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;
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.
7
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
Standards and interpretations applicable for the first time
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 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 (effective for
annual periods beginning on or after April 1, 2021);
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);
8
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 (effective for annual periods beginning on or
after January 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:
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 IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of
Accounting policies (effective for annual periods beginning on or after January 1, 2023);
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of
Accounting Estimates (effective for annual periods beginning on or after January 1, 2023);
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (effective for annual periods beginning on or after January 1, 2023);
Amendments to IFRS 17 “Insurance Contracts”: initial application of IFRS 17 and IFRS 9 - comparative
information (applicable to annual periods beginning on or after January 1, 2023).
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:
IFRS 17 Insurance Contracts, including Amendments to IFRS 17 (applicable to 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).
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.
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.
9
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
Considering the insertion of separate and consolidated financial statements in a single annual financial report, the
Company does not disclose segment information in the separate 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.
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.
Exploration expenses also include the carrying value 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.
10
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
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 and the estimated costs for decommissioning are updated annually.
The decommissioning provision is based on the economic life of the fields wells are located on, even if this is longer
than the period of the related concession agreements, as it is considered the period may be extended.
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.
11
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
12
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
13
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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 tariffs are set by analyzing the storage activity as a whole, not every single storage.
In 2021, 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 2021, 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 2021 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.
14
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
Elements similar to the above are also considered when determining impairment losses for producing assets.
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.
15
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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.
16
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
The Company derecognizes financial liabilities when, and only when, the Company’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 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 estimates 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 (note 16).
17
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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 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 (note 7).
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 and
estimated decommissioning costs are updated annually (note 19).
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) (note 19).
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.
18
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
3.
REVENUE AND OTHER INCOME
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Revenue from gas sold - own production
Revenue from gas sold – other arrangements
Revenue from gas acquired for resale
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
4,693,949
27,456
330,309
321,611
186,716
53,955
384
5,614,380
110,834
5,725,214
169,567
5,894,781
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
*) In 2021, other operating income include, besides penalties charged to clients for late payment or non-fulfillment of
the obligation of taking the natural gas, the amount of RON 114,628 thousand representing the performance
guarantee set up for the construction of the 430 MW Iernut power plant, with combined cycle with gas turbines,
following the termination of the work contract signed for this purpose.
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
28,065
57,898
85,963
21,097
46,860
67,957
Interest income is derived from the Company's investments in bank deposits and government bonds.
19
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
5.
COST OF COMMODITIES SOLD, RAW MATERIALS AND CONSUMABLES
Consumables used
Technological consumption
Cost of gas acquired for resale, sold
Cost of electricity imbalance
Cost of other goods sold
Other consumables
Total
6.
OTHER GAINS AND LOSSES
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
37,406
26,817
246,819
33,867
901
4,639
350,449
31,390
14,541
7,650
10,375
590
3,698
68,244
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Forex gain
Forex loss
Net gain/(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
Other gains and losses
Losses from other debtors
Total
45
(308)
321
28,369
(3,300)
(10)
(6,273)
(6)
18,838
52
(279)
(7)
2,151
(7,488)
(10)
-
(2)
(5,583)
7.
DEPRECIATION, AMORTIZATION AND IMPAIRMENT EXPENSES
Year ended
December 31, 2021
Year ended
December 31, 2020
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
Total depreciation, amortization and
impairment
'000 RON
393,756
389,070
3,851
835
219,516
613,272
'000 RON
370,997
368,193
1,977
827
223,692
594,689
20
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
735,649
25,880
22,829
21,302
10,454
6,479
822,593
(128,269)
694,324
733,979
26,132
21,260
19,138
10,791
5,980
817,280
(120,762)
696,518
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
557
16,182
16,739
592
16,407
16,999
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
19,010
145,177
2,004,377
48,720
69,658
259,496
2,546,438
16,322
167,937
623,012
90,382
67,757
198,046
1,163,456
*) In the year ended December 31, 2021, the major taxes and duties included in the amount of RON 2,004,377
thousand (year ended December 31, 2020: RON 623,012 thousand) are:
RON 1,257,998 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, 2020: RON 414,943 thousand);
RON 740,008 thousand represent royalty on gas production (year ended December 31, 2020: RON 186,857
thousand).
**) The increase in other operating expenses compared to 2020 is mainly due to the increase in expenditure on
greenhouse gas emission certificates (RON 121,583 thousand in 2021, compared to RON 24,208 thousand in 2020).
The expense of RON 121,583 thousand in 2021 was partially offset by releasing to income the provision set up for
these certificates on December 31, 2020 of RON 81,217 thousand (note 19) (2020: the expense of RON 24,208
thousand was offset by releasing to income the provision set up on December 31, 2019 of RON 23,410 thousand).
21
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
11.
INCOME TAX
Current tax expense
Deferred income tax (income)/expense
Income tax expense
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
228,911
10,519
239,430
210,174
(40,288)
169,886
The tax rate used for the reconciliations below for the year ended December 31, 2021, respectively year ended
December 31, 2020 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, 2021
'000 RON
Year ended
December 31, 2020
'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
2,201,939
3,806
2,205,745
352,919
(112,807)
39,260
(19,906)
(8,001)
30,505
(24,479)
(18,061)
-
239,430
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
22
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
Components of deferred tax (asset)/liability:
December 31, 2021
December 31, 2020
Cumulative
temporary
differences
'000 RON
(596,010)
(187,193)
(610,253)
(977)
(33,205)
(372,912)
(1,800,550)
167,077
Deferred tax
(asset)/ liability
'000 RON
(95,361)
(29,951)
(97,640)
(156)
(5,313)
(59,666)
(288,087)
26,732
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
(39,598)
(6,336)
(50,269)
(8,044)
127,479
(1,673,071)
134,717
(1,704,455)
20,396
(267,691)
(5,023)
(10,519)
5,496
21,554
(272,714)
42,876
40,288
2,588
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.
23
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
12.
PROPERTY, PLANT AND EQUIPMENT
Cost
As of January 1, 2021
Additions
Transfers
Disposals
Land and
land
improvements
'000 RON
96,737
78
-
-
Buildings
'000 RON
689,051
237
19,349
(143)
Gas
properties
'000 RON
7,103,831
9,204
149,970
(116,607)
As of December 31, 2021
96,815
708,494
7,146,398
Accumulated depreciation
As of January 1, 2021
Depreciation *)
Disposals
As of December 31, 2021
Impairment
-
-
-
-
288,584
4,325,133
21,772
(36)
327,414
(178)
310,320
4,652,369
As of January 1, 2021
3,180
Charge
Transfers
Release
-
-
-
As of December 31, 2021
3,180
Carrying value
33,635
389
16,500
(415)
50,109
553,625
101,784
21,675
(27,370)
649,714
As of January 1, 2021
93,557
366,832
2,225,073
As of December 31, 2021
93,635
348,065
1,844,315
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
1,909,977
318,856
(237,546)
(21,554)
Total
'000 RON
11,360,341
421,036
-
(232,142)
99,461
-
8,233
-
213,387
-
-
-
333,606
91,862
-
(89,528)
107,694
213,387
335,940
1,969,733
11,549,235
77,057
6,040
(1)
83,096
1,178
16
-
(11)
1,183
21,226
23,415
7,765
2
-
7,767
-
-
-
-
-
-
-
-
5,326,142
413,072
(4,493)
5,734,721
2,101
213,398
255,924
1,146,036
-
-
-
38,035
-
(90,348)
125,111
(38,175)
(38,100)
265,746
-
(156,856)
2,101
161,085
304,760
1,254,926
203,521
120,208
1,654,053
4,888,163
203,519
174,855
1,664,973
4,559,588
914,291
799
59,994
(4,310)
970,774
627,603
57,844
(4,278)
681,169
82,995
411
-
(612)
82,794
203,693
206,811
*) The amounts include depreciation of tangible assets used in the production of other fixed assets, capitalized in their cost, amounting to RON 24,001 thousand.
24
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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
Plant,
machinery
and
equipment
'000 RON
Fixtures,
fittings and
office
equipment
'000 RON
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
Storage
assets
'000 RON
206,470
-
-
7,338
(421)
213,387
7,565
4,200
(4,000)
7,765
Tangible
exploration
assets
'000 RON
402,445
66,516
(4,690)
-
(130,665)
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)
333,606
1,909,977
11,360,341
-
-
-
-
-
-
-
-
4,953,319
389,844
(17,021)
5,326,142
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
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.
25
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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 (significant increase in prices, but also in costs with royalties and windfall tax),
the Company considered there are major changes in the assumptions used in the previous impairment test on
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 or submitted for approval, 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 was recorded and there was no decrease of
previously recognized impairment losses.
In the impairment test the following assumptions were used:
Weighted average cost of capital: 10%;
The inflation rate for the years 2022-2024 was the one reported by the National Prognosis Commission in the
2021-2025 mid-term forecast, 2021 autumn edition. For the 2025-2043 period a constant inflation rate of 2.6%
was used;
Average estimated price for the period was 190.64 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.
Year ended
December 31, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
Exploration assets written off
Seismic, geological, geochemical studies
Exploration expenses
Net movement in exploration assets’ impairment
(net income)/net loss
Net cash used in exploration investing activities
(33)
(1,164)
(1,197)
37,046
(91,865)
(836)
(25,673)
(26,509)
97,695
(66,516)
Exploration assets (note 12)
Liabilities
Net assets
December 31, 2021
'000 RON
December 31, 2020
'000 RON
174,855
(7,904)
166,951
120,208
(5,285)
114,923
26
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
14. OTHER INTANGIBLE ASSETS. RIGHT OF USE ASSETS
a) Other intangible assets
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
Effects of rent index updates
As of December 31
Accumulated amortization
As of January 1
Charge
As of December 31
Carrying value
As of January 1
As of December 31
2020
'000 RON
184,797
7,877
(7,840)
184,834
176,667
1,977
(7,840)
170,804
8,130
14,030
2020
'000 RON
8,657
230
8,887
618
827
1,445
8,039
7,442
2021
'000 RON
184,834
5,110
(22,803)
167,141
170,804
3,851
(22,777)
151,878
14,030
15,263
2021
'000 RON
8,887
132
9,019
1,445
835
2,280
7,442
6,739
27
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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, 2021
'000 RON
December 31, 2020
'000 RON
156,144
189,594
867
(53,548)
(91)
292,966
155,965
123,638
681
(50,335)
(4)
229,945
December 31, 2021
'000 RON
December 31, 2020
'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
1,747,458
(924,030)
519,529
(7,839)
1,335,118
1,553,276
(1,279,164)
302,855
(2,694)
574,273
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, 2021
'000 RON
December 31, 2020
'000 RON
109
8,201
47,103
(186)
49,922
(49,442)
5,368
5,404
6
66,485
7,934
2,384
63,638
(28,981)
50,072
(49,016)
5,719
4,269
6
56,025
*) 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.
28
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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 recovered this amount in 2021..
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. In 2021, the court ruled in favor of the Company, so that the related allowance was released
to income. By the date of these financial statements, the court's decision was not communicated, therefore the
Company could not initiate recovery proceedings.
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
2021
'000 RON
1,359,855
1,402
32,529
(29,771)
(382,518)
981,497
2020
'000 RON
1,379,557
2,792
61,595
(4,943)
(79,146)
1,359,855
*) In 2022, the Company collected RON 324,733 thousand from the old receivable from Electrocentrale Bucuresti,
thus reducing the allowance recorded as of December 31, 2021.
As of December 31, 2021, the Company recorded allowances for doubtful debts, of which Interagro RON 264,529
thousand (December 31, 2020: RON 271,621 thousand), GHCL Upsom of RON 68,103 thousand (December 31,
2020: RON 68,103 thousand), CET Iasi of RON 46,271 thousand (December 31, 2020: RON 46,271 thousand),
Electrocentrale Galati with RON 192,342 thousand (December 31, 2020: RON 226,338 thousand), Electrocentrale
Bucuresti with RON 252,225 thousand (December 31, 2020: RON 576,080 thousand), G-ON EUROGAZ of RON
14,848 thousand (December 31, 2020: RON 14,848 thousand) and Electrocentrale Constanta of RON 60,766
thousand (December 31, 2020: RON 58,227 thousand), due to existing financial conditions of these clients as well as
ongoing litigating cases related to these receivables or exceeding payment terms.
29
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
d)
Credit risk exposure for trade receivables
December 31, 2021
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, 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
17.
SHARE CAPITAL
Gross carrying amount
'000 RON
Expected credit loss
rate
%
Lifetime expected
credit losses
‘000 RON
1,010,199
10,789
578
14,213
1,231,208
2,266,987
0.79
1.24
46.19
99.07
73.86
7,973
134
267
14,081
909,414
931,869
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
December 31, 2021
‘000 RON
December 31, 2020
‘000 RON
385,422,400 fully paid ordinary shares
Total
385,422
385,422
The shareholding structure as at December 31, 2021 is as follows:
The Romanian State through the
Ministry of Energy
Legal persons
Physical persons
Total
No. of shares
269,823,080
96,615,074
18,984,246
385,422,400
Value
‘000 RON
269,823
96,615
18,984
385,422
385,422
385,422
Percentage (%)
70.01
25.07
4.92
100
All shares are ordinary and were subscribed and fully paid as at December 31, 2021. All shares carry equal voting
rights and have a nominal value of RON 1/share (December 31, 2020: RON 1/share).
30
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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, 2021
'000 RON
December 31, 2020
'000 RON
77,084
2,843,090
2,003,275
333,702
486,388
19,725
2,920,174
77,084
2,142,857
1,353,047
283,697
486,388
19,725
2,219,941
December 31, 2021
'000 RON
December 31, 2020
'000 RON
377,157
144,880
522,037
20,882
3,554
204,441
228,877
750,914
493,176
119,432
612,608
17,846
1,380
128,340
147,566
760,174
*) On December 31, 2021, other provisions of RON 204,441 thousand include the provision for employee’s
participation to profit of RON 35,777 thousand (December 31, 2020: RON 33,848 thousand), the provision for taxes
of RON 7,161 thousand (December 31, 2020: RON 6,716 thousand) and the provision for CO2 certificates of RON
154,904 thousand (December 31, 2020: RON 81,217 thousand).
a)
Decommissioning provision
(i) Decommissioning provision movement for non-current assets
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
At December 31
2021
'000 RON
511,022
9,209
14,825
(20,588)
(116,429)
398,039
2020
'000 RON
345,724
130,094
14,860
24,130
(3,786)
511,022
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 5.14% (year ended December 31, 2020: 2.97%). 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.
31
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
The increase with 1 percentage point of the discount rate would decrease the decommissioning provision (including
the decommissioning provision for assets held for disposal) with RON 77,109 thousand. The decrease with 1
percentage point of the discount rate would increase the decommissioning provision (including the decommissioning
provision for assets held for disposal) with RON 102,191 thousand.
The increase with 1 percentage point of the inflation rate would increase the decommissioning provision (including
the decommissioning provision for assets held for disposal) with RON 103,485 thousand. The decrease with 1
percentage point of the inflation rate would decrease the decommissioning provision (including the decommissioning
provision for assets held for disposal) with RON 79,168 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
At December 31
b)
Other provisions
At January 1, 2021
Additional provision recorded in the result
of the period
Provisions used in the period
Unused amounts during the period,
reversed
At December 31, 2021
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
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
2021
'000 RON
49,935
1,702
1,357
(58)
(13,338)
39,598
Litigation provision
‘000 RON
Other provisions
‘000 RON
1,380
2,966
(439)
(353)
3,554
128,340
239,608
(161,703)
(1,804)
204,441
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
2021
'000 RON
119,432
3,721
5,547
(18,177)
34,357
144,880
32
2020
'000 RON
38,512
9,843
1,547
118
(85)
49,935
Total
‘000 RON
129,720
242,574
(162,142)
(2,157)
207,995
Total
‘000 RON
60,688
142,764
(72,302)
(1,430)
129,720
2020
'000 RON
106,158
2,441
5,438
(10,777)
16,172
119,432
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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: 5%;
Average inflation rate: 5.9% in 2022; 3.2% in 2023; 3% in 2024; 2.8% in 2025; 2.5% in the 2026-2031 period,
following a decreasing trend in the next years.
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
Salaries’ growth rate
Maturity analysis of payment cash flows
Increase of 1% in assumptions
'000 RON
Decrease of 1% in assumptions
'000 RON
(13,694)
15,993
15,914
(13,991)
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
8,659
8,148
31,859
80,837
391,421
December 31, 2021
'000 RON
December 31, 2020
'000 RON
230,169
157
112
230,438
7
42
49
230,487
136,021
167
120
136,308
8
10,891
10,899
147,207
*) 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, 2021 the Company collected
RON 230,169 thousand. Amounts received under this contract will be transferred to income based on the
depreciation rate of the investment.
By Government Decision no. 669/2021 the deadline until the investments financed from the National Investment Plan
must be put into operation has been extended until June 30, 2022.
33
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
Until December 31, 2021, the Company submitted two other reimbursement requests amounting to RON 62,150
thousand.
As the term of the work contract for the realization of the investment was not extended, the Company is in the
process of identifying solutions for completing the works.
At January 1, 2021
Received
Amounts in revenue
At December 31, 2021
Amounts collected
from NIP
'000 RON
Other amounts
received as subsidies
'000 RON
136,021
94,148
-
230,169
128
-
(9)
119
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
21.
TRADE AND OTHER CURRENT LIABILITIES
185
-
(50)
(7)
128
Total
'000 RON
136,149
94,148
(9)
230,288
Total
'000 RON
21,179
115,027
(50)
(7)
136,149
December 31, 2021
'000 RON
December 31, 2020
'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
28,268
27,315
35,477
91,060
63,452
60,714
24,341
5,711
62,740
2,047
31,842
1,303
252,150
343,210
28,123
23,830
19,315
71,268
39,487
397,887
31,668
7,413
84,764
1,116
363,996
1,294
927,625
998,893
34
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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, 2021, the official exchange rates were RON 4.3707 to USD 1 and RON 4.9481 to EUR 1 and
(December 31, 2020: RON 3.9660 to USD 1 and RON 4.8694 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, 2021 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 client, which amounts to 90.91% of net trade receivable balance at December 31, 2021 (top 4
clients: 85.14% as of December 31, 2020).
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.
35
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
(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, 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
December
31, 2021
Trade
receivables
Bank deposits
Treasury
bonds
Total
Trade
payables
Lease
liabilities
Total
Net
December
31, 2020
Trade
receivables
Bank deposits
Treasury bonds
Total
Trade payables
Lease liabilities
Total
Net
Due in
less than
a month
‘000 RON
420,823
288,629
92,010
801,462
(39,874)
(63)
(39,937)
761,525
Due in
less than
a month
‘000 RON
138,091
137,000
-
275,091
(60,271)
(57)
(60,328)
214,763
Due in
1-3 months
‘000 RON
Due in
3 months
to 1 year
‘000 RON
Due in
1-5 years
‘000 RON
Due in over
5 years
‘000 RON
402,605
-
-
402,605
(3,236)
(155)
(3,391)
399,214
Due in
1-3 months
‘000 RON
135,993
371,259
270,000
777,252
(2,519)
(144)
(2,663)
-
-
-
-
(35)
(591)
(626)
(626)
Due in
3 months
to 1 year
‘000 RON
28
397,157
797,505
1,194,690
(2)
(556)
(558)
774,589
1,194,132
-
-
-
-
-
-
-
-
-
-
(3,322)
(3,322)
(3,322)
(3,889)
(3,889)
(3,889)
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)
Total
‘000 RON
823,428
288,629
92,010
1,204,067
(43,145)
(8,020)
(51,165)
1,152,902
Total
‘000 RON
274,112
905,416
1,067,505
2,247,033
(62,792)
(8,601)
(71,393)
2,175,640
f)
Liquidity risk management
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.
36
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
23.
RELATED PARTY TRANSACTIONS AND BALANCES
i.
Sales of goods and services
Subsidiaries *)
Associates
Total
Year ended
Dec 31, 2021
'000 RON
116,086
21,858
137,944
Year ended
Dec 31, 2020
'000 RON
117,322
17,584
134,906
*) Of RON 116,086 thousand representing revenue obtained from transactions with subsidiaries, RON 103,300
thousand relate to rental revenues (2020: RON 104,045 thousand).
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, 2021
'000 RON
69,658
69,658
Year ended
Dec 31, 2020
'000 RON
67,757
67,757
December 31, 2021
'000 RON
December 31, 2020
'000 RON
11,131
11,131
15,371
15,371
December 31, 2021
'000 RON
December 31, 2020
'000 RON
5,663
5,663
8,389
8,389
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, 2021 and December 31, 2020, 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, 2021
'000 RON
Year ended
December 31, 2020
'000 RON
15,728
1,191
1,580
-
15,509
775
1,629
-
37
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
Salaries payable to executives
Salaries payable to directors
December 31, 2021
'000 RON
December 31, 2020
'000 RON
616
80
520
81
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, 2021
December 31, 2020
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, 2021
’000 RON
Cost at
December 31, 2020
’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, 2021
December 31, 2020
40
25
40
25
Name of
associate
SC
Depomures
SA Tg.Mures
SC Agri LNG
Project
Company
SRL
Total
Cost
as of
December
31, 2021
Impairment
as of
December
31, 2021
Carrying
value as of
December
31, 2021
Cost
as of
December
31, 2020
Impairment
as of
December
31, 2020
Carrying
value as of
December
31, 2020
’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
38
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
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
Non-governmental, non-
profit, independent
association
Electrocentrale
București S.A.
Patria Bank S.A.
Mi Petrogas
Services S.A.
GHCL Upsom
Lukoil
association
Electricity
Producers
Association-
HENRO
Company
Electrocentrale București S.A. *)
Patria Bank S.A.**)
Mi Petrogas Services S.A.
GHCL Upsom
Lukoil association
Electricity Producers Association-HENRO
Total
Place of
incorporation and
operation
Proportion of ownership interest and voting
power held (%)
December 31, 2021
December 31, 2020
Romania
Romania
Romania
Romania
Romania
2.49
0.03
10
-
12.2
Romania
33.33
2.49
0.03
10
4.21
12.2
-
Fair value as of
December 31, 2021
’000 RON
Fair value as of
December 31, 2020
’000 RON
-
79
60
-
5,227
250
5,616
-
91
60
-
5,227
-
5,378
*) The fair value of the investment in Electrocentrale Bucuresti at December 31, 2021 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.
**) In 2016, the Company's shareholders decided to withdraw Romgaz from the bank's shareholders, as a result of
the merger process in which Patria Bank was involved. In 2021, the approval of the BNR was obtained for the partial
redemption of the shares that the Company holds in Patria Bank. The shares of Patria Bank S.A. are listed, but
following the merger process, the price at which the redemption of the shares held by the shareholders who
requested the withdrawal from the shareholding was set to a fixed value. Thus, the investment is measured at this
redemption value.
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, 2021
'000 RON
December 31, 2020
'000 RON
70,458
326
46
3,500,287
1,534
-
3,572,651
39
101,014
174
53
289,203
2,412
1
392,857
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
*) Current bank accounts include overnight deposits.
**) At December 31, 2021 restricted cash refers to bank accounts used only for dividend payments to shareholders,
according to stock market regulations.
28. OTHER FINANCIAL ASSETS
Other financial assets represent mainly treasury bonds and deposits with a maturity of over 3 months, from
acquisition date. The Company did not identify any risk of loss for these assets, therefore it did not record any
impairment.
Treasury bonds in RON
Bank deposits in RON
Accrued interest receivable on bank deposits
Accrued interest on bonds
Total other financial assets
December 31, 2021
'000 RON
December 31, 2020
'000 RON
90,070
288,629
11,720
1,940
392,359
1,045,593
905,416
2,586
21,912
1,975,507
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, 2021 and 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 are:
December 31, 2021
'000 RON
December 31, 2020
'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
693,020
15
693,035
39,598
20,396
59,994
633,041
40
710,929
15
710,944
49,935
21,554
71,489
639,455
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
30.
COMMITMENTS UNDERTAKEN
Endorsements and collaterals granted
Total
December 31, 2021
'000 RON
December 31, 2020
'000 RON
62,947
62,947
224,063
224,063
In 2021, 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 RON 350,000 thousand. On December 31, 2021
are still available for use RON 289,745 thousand.
As of December 31, 2021, the Company’s contractual commitments for the acquisition of non-current assets are of
RON 264,129 thousand (December 31, 2020: RON 379,808 thousand).
31.
COMMITMENTS RECEIVED
Endorsements and collaterals received
Total
December 31, 2021
'000 RON
December 31, 2020
'000 RON
1,251,309
1,251,309
1,508,192
1,508,192
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.
41
S.N.G.N. ROMGAZ S.A.
NOTES TO THE FINANCIAL STATEMENTS
(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, 2021 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 437,637 thousand (December 31,
2020: RON 560,958 thousand), representing the decommissioning liability.
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 2021 annual financial statements is RON 350 thousand.
The fees charged for other assurance services in 2021 are RON 300 thousand.
35.
EVENTS AFTER THE BALANCE SHEET DATE
In the context of the conflict between Russia and Ukraine, started on February 24, 2022, the EU, USA, UK and other
countries imposed various sanctions against Russia, including financing restrictions on certain Russian banks and
state-owned companies as well as personal sanctions against a number of individuals.
Considering the geopolitical tensions, since February 2022, there has been an increase in financial markets volatility
and exchange rate depreciation pressure.
It is expected that these events may affect the activities in various sectors of the economy, could result in further
increases in European energy prices and increased risk of supply chain disturbances.
The Company does not have direct exposures to related parties and/or key customers or suppliers from those
countries.
The Company regards these events as non-adjusting events after the reporting period, the quantitative effect of which
cannot be estimated at the moment with a sufficient degree of confidence. Currently, the Company's management is
analyzing the possible impact of changing micro- and macroeconomic conditions on the Company's financial position
and results of operations.
36.
APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved by the Board of Directors on March 28, 2022.
Aristotel Marius Jude
Chief Executive Officer
Răzvan Popescu
Chief Financial Officer
42
Societatea Naţională de Gaze Naturale Romgaz S.A. – Mediaş - România
STATEMENT
in accordance with the provisions of art. 65 (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, 2021, 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