1
2014
annual
report
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 2
SUMMAry
003 Key figures electrica group
005 message from Victor cionga, chairman of
the Board of directors electrica sa
006 message from ioan rosca, general manager
electrica sa
007 2014 DIRECTOR’S REPORT (COnSOlID aTED)
074 consolidated financial s tatements for the
year ended 31 decemBer 2014
138 independent auditors’ report for
consolidated financial s tatements for the
year ended 31 decemBer 2014
141 2014 DIRECTOR’S REPORT (InDIVIDUal)
157 indiVidual financial s tatements for the
year ended 31 decemBer 2014
204 independent auditors’ report for
indiVidual financial s tatements for the
year ended 31 decemBer 2014
206 ”comply or explain” statement proVided
By the corporate go Vernance c ode of
Bucharest stocK exchange 27 april 2015
211 declaration of the management
annual report2014 3
key figures
Key figures electrica group
Operational results
Distributed energy (Twh)
Number of users (mil.)
Supplied energy (Twh)
Number of customers (mil.)
2012
16.26
3.6
10.7
3.5
2013
16.07
3.6
9.0
3.6
2014
16.30
3.6
9.7
3.6
Number of employees at period end
13,217
12,780
11,740
financial results
revenues (th. rON)
EBITDA (th. rON)
EBIT (th. rON)
Profit for the year attributable to the owners of the
company (th. rON)
Profit for the year attributable to the owners of
the company excluding the equity accounted
investments (th. rON)
Net cash from operating activities (th. RON)
Investitii (mii RON)
EPS (rON)
5,252,948
5,382,818
5,043,728
645,074
243,229
353,533
671,138
345,450
244,412
855,453
496,941
287,837
106,755
181,453
287,837
996,040
405,527
1.73
511,258
366,845
1.18
981,309
465,232
1.03
net cash from operating actiVities
(mIl. ROn)
EaRnIngS PER ShaRE (ROn)
1.73
996
2012
511
2013
nET PROfIT (mIl. ROn )
414
60
354
2012
316
71
244
2013
981
2014
401
114
288
2014
Profit attributable to non-controlling interests
Profit attributable to owners of the Company
1.18
1.03
2012
2013
2014
distriBution networK area
Others 59%
edmn 12%
edts 14%
edtn 15%
annual report2014
4
key figures
distriBution segment
Distributed energy (TWh)
16
16
16
capital expenditures
Capex 2012 – 2014 (mil RON)
406
367
465
2012
2013
2014
2012
2013
2014
supply segment
Supplied energy (TWh)
Supply market share
10.70
9.00
9.70
23%
22%
21%
2012
2013
2014
2012
2013
2014
Supplied energy on the regulated market (TWh)
Share of regulated supply market
38%
36%
38%
7.50
6.20
6.00
2012
2013
2014
2012
2013
2014
Supplied energy on the competitive market (TWh)
Share of competitive supply market
3.20
2.80
3.70
12%
11%
12%
2012
2013
2014
2012
2013
2014
annual report2014 5
VICToR CIonGA
Chairman of the Board
of Directors of Electrica SA
Dear ladies and gentlemen,
A
s the global economy gradually recovers from
the adverse effects of the financial crisis which
begun in 2008, the Romanian economy con-
tinued to show clear signs of growth. Howev-
er, despite the rather noticeable favorable outlook and
the expected positive impact it will trigger on the me-
dium and long term both on the Romanian industrial
sector and energy market, the road to full recovery and
sustainable growth will most likely last at least over the
medium term.
We are aware that, in order to ensure Electrica Group’s
sustainable growth on the long term, the strategy we
will adopt, needs to be adapted to the future challenges
raised by the technological development, regulato-
ry framework and customers’ demands. We believe
that, to be able to respond to the sector’s trends and
perspectives, all energy market players, including
Electrica Group, will focus their efforts on endeavors
aimed at optimization and internal reorganization of
their core business. Such measures will ensure effec-
tive cost control and capitalization of local market
growth potential, especially on specific niches. To be
in a position to implement certain projects, Electrica
is keen to benefit, by setting mutually advantageous
partnerships, from the expertise of similar companies
carrying their business especially in Western Europe,
as the outlook and trends of the respective markets are
more distinct in that region.
2014 has been an important year and a turning point
to Electrica’s business and perspectives. The successful
listing of its shares on the Bucharest and London stock
exchanges, and more importantly, Electrica Group’s
ability to evolve in line with Romanian and foreign
institutional investors’ expectations, will be a solid ar-
gument in attracting new investors to the Romanian
capital and energy markets.
With the listing, Electrica has initiated an extensive and
complex transformation process, which mainly aims
at improving performance and aligning to the highest
standards and best practices in the Romanian electricity
distribution and supply sector. We strongly believe in
the medium and long term benefits of this process. An
initial specific step towards enhancing transparency
and promoting an integrity and ethical based organi-
zational structure is the recent launching of the Code
of Ethics and Professional Conduct implementation.
This milestone followed the commitments under-
taken during the public offering and the Framework
Agreement concluded with the European Bank for
Reconstruction and Development.
We are confident that the directions and actions we
propose as well as the targets we intend to reach on the
medium term, reflect Electrica’s vision, “to expand its
leading position in the electricity distribution and sup-
ply market segments, both nationally and regionally”.
We consider it our mission to spare no efforts in or-
der “to deliver long term value to our shareholders by
distributing and supplying electricity and providing ex-
ceptional services to our customers in a safe, reliable,
affordable and sustainable manner”.
We strongly believe in the transformation and optimi-
zation of the Group’s current business as a key driver
of achieving the targets set. We acknowledge the sig-
nificant efforts required to implement the directions
and measures we envisage going forward. However,
we firmly consider this to be the path to proceed so as
to meet our strategic goals, namely to achieve excel-
lence in conducting our business and to align Electrica
Group to the current performance of its Romanian
market peers.
In order to carry out the concrete steps of this continu-
ous process, we will reach out to both internal resources
as well as those available outside the Group and we will
have a pragmatic cooperation with all stakeholders. The
Board of Directors has recently approved the new or-
ganizational chart of Electrica S.A. which is designed
to establish the proper setting for the transforming the
company’s operations.
Given the regulated nature of our business, specific to
the Group’s most significant part of operations, which
has an important effect on the predictability of our ac-
tivities as well as the sustainability of the Group’s per-
formance and results, we intend to dedicate our efforts
towards capitalizing on the benefits generally afforded
to regulated business sectors.
Electrica is a success story of the Romanian capi-
tal market, a potential public-to-private partnership
model and an instrument to attracting foreign invest-
ment to Romania, to ensuring the national energy sec-
tor modernization and to supporting the capital mar-
ket. Electrica’s course of evolution is important not
only to the company itself but also to the credibility of
Romania overall. As part of its development, Electrica
needs the joint input of its employees, management
and shareholders.
...
Electrica has
initiated an
extensive
and complex
transformation
process, which
mainly aims
at improving
performance
and aligning
to the highest
standards and
best practices
...
annual report2014 6
IoAn RoSCA
General Manager of Electrica SA
2
014 was a landmark year for Electrica since
our company managed, in addition to its now
historical public listing, to record outstanding
performances. Despite the economic and regu-
latory context, and the new market challenges, Electrica
obtained very good financial results, the high net profit
level being a sign of the effectiveness of our strategy
which was presented in the offering prospectus, a strategy
through which we maintained a leading position in the
distribution and supply of electricity in Romania.
Beyond the outstanding financial performance recorded
in 2014, we made and we continue to make very important
steps in developing an organizational culture based on
performance and professionalism. Adherence to ethical
values and principles is an already accomplished essen-
tial prerequisite for growth of trust capital on the part
of our company‘s stakeholders. We are determined to
continue in the direction of the strategy presented in
the offering prospectus, to implement the best practices
in corporate governance within the Electrica Group, to
continue the application of efficiency measures in all the
business segments and to implement ambitious invest-
ment programs in our own network. All these generate
added value in the long term for all stakeholders and
enable us to adapt and evolve in a market where compe-
tition is becoming increasingly fierce.
Last year we went through a complex process suc-
cessfully completed through the dual listing of the
company on the Bucharest and on the London Stock
Exchanges. This is the starting moment of transforma-
tion for our company, which must become a reference
project for Romania. our journey, very good through-
out 2014, gives us the energy and the confidence to
continue, confident that we chose the right path.
Looking ahead, we rely on the professionalism, passion
and enthusiasm of our people in sustaining the irre-
versible process of implementing the changes that are
so much more needed for a publicly traded company,
as well as for maintaining the leadership position in
the field.
...
our journey,
very good
throughout
2014, gives
us the energy
and the
confidence
to continue
...
annual report2014 7
directors’ report
electrica s.a.
for the year 2014
(based on audited consolidated financial
statements for the year 2014)
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 8
TABlE Of C ONTENTS
Identification details on report and issuer ___________________________________________________ 11
1 Electrica group results in 2014 __________________________________________________________ 12
1.1 Key consolidated financials _________________________________________________________ 12
1.2 Key events 2014 _________________________________________________________________ 14
1.3 Key financials by segments _________________________________________________________ 15
2 group overview ______________________________________________________________________ 18
2.1 General overview ________________________________________________________________ 18
2.2 Mission, Vision, Values ____________________________________________________________ 20
2.3 Strategic Objectives _______________________________________________________________ 21
2.4 Outlook ________________________________________________________________________ 21
3 Business overview ____________________________________________________________________ 22
3.1 Operating segments ______________________________________________________________ 22
3.2 Procurement ____________________________________________________________________ 25
3.3 Sales activity ____________________________________________________________________ 25
3.4 Reorganization and spin-off of assets _________________________________________________ 28
3.5 Personnel ______________________________________________________________________ 28
3.6 Environmental considerations _______________________________________________________ 30
3.7 Research and development activities _________________________________________________ 31
3.8 risk management ________________________________________________________________ 31
4 fixed assets _________________________________________________________________________ 36
5 Securities market _____________________________________________________________________ 40
6 management of the group _____________________________________________________________ 42
6.1 Board of Directors of Electrica S.A. ___________________________________________________ 42
6.2 Activity of the Board of Directors of Electrica S.A.
and of its consultative committees ______________________________________________________ 43
6.3 Board of Directors of Electrica S.A. subsidiaries _________________________________________ 45
6.4 Executive Management____________________________________________________________ 46
7 Corporate governance ________________________________________________________________ 48
7.1 General Meeting of Shareholders ____________________________________________________ 48
7.2 Corporate Governance Code _______________________________________________________ 48
7.3 Implementing action plans undertook by signing
the framework Agreement with EBrD ___________________________________________________ 49
7.4 The Corporate Governance Action Plan _______________________________________________ 49
7.5 The Environment and Social Action Plan ______________________________________________ 51
8 financial overview of the company ______________________________________________________ 52
8.1 Consolidated Balance Sheet ________________________________________________________ 52
8.2 Profit and Loss ___________________________________________________________________ 59
8.2.1 Consolidated figures ___________________________________________________________ 59
8.2.2 Segment reporting - Distribution _________________________________________________ 61
8.2.3 Segment reporting - Supply ______________________________________________________ 62
8.3 Cash flow _______________________________________________________________________ 64
annex 1 – litigations ___________________________________________________________________ 66
annex 2 – Details of realized investments in 2014 by Electrica group ____________________________ 70
annex 3 – Internal audit report ___________________________________________________________ 73
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 9
GlOSSAry
anre
Bps
cagr
capex
cee
cpt
dso
eBit
eBitda
eBrd
ec
ee
eem
edd
edB
edm
edmn
edtn
edts
eiu
eu
eur
gaap
gdp
gWh
hV
kV
lV
mV
mWh
opcom
opex
ppa
raB
roa
roe
ron
saidi
saifi
scada
tso
TWh
Vat
romanian Energy regulatory Authority
Basis points
Compound Annual Growth rate
Capital expenditure
Central-Eastern Europe
Own Technological Consumption
Distribution System Operator
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortization
European Bank for Reconstruction and Development
European Commission
Enel Energie
Enel Energie Muntenia
Enel Distributie Dobrogea
Enel Distributie Banat
Enel Distributie Muntenia
Electrica Distributie Muntenia Nord
Electrica Distributie Transilvania Nord
Electrica Distributie Transilvania Sud
Economist Intelligence Unit
European Union
European monetary unit
Generally accepted accounting principles
Gross Domestic Product
GigaWatt hour
High voltage
kilovolt
low voltage
Medium voltage
MegaWatt hour
romanian Gas and Electricity market operator
Operational expenditure
Power Purchase Agreement
regulated Asset Base
return on assets
return on equity
Monetary unit of romania
System Average Interruption Duration Index
System Average Interruption Frequency Index
Supervisory Control And Data Acquisition
Transmission System Operator
TeraWatts hour
Value added tax
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 10
figure 1 Consolidated revenues of Electrica Group (rON mil) ____________________________________ 12
figure 2 Adjusted EBITDA (rON mil) and Adjusted EBITDA Margin (%) _____________________________ 12
figure 3 Net Income (rON mil) ____________________________________________________________ 13
figure 4 Net Debt/(Cash) (rON mil) ________________________________________________________ 13
figure 5 Romanian Electricity Distribution Map _______________________________________________ 15
figure 6 Number of Users (thousand) _______________________________________________________ 16
figure 7 Distributed Volume (TWh) ________________________________________________________ 16
figure 8 Distribution Revenues (RON mil) ____________________________________________________ 16
figure 9 EBITDA (rON mil) _______________________________________________________________ 16
figure 10 Net Income (rON mil) ___________________________________________________________ 16
figure 11 Net Debt/( Cash) (rON mil) _______________________________________________________ 16
figure 12 Supply revenues (rON mil) _______________________________________________________ 17
figure 13 EBITDA (rON mil) ______________________________________________________________ 17
figure 14 Net Income (rON mil) ___________________________________________________________ 17
figure 15 Net Debt / (Cash) (rON mil) ______________________________________________________ 17
figure 16 Group entities as of 31 December 2014 _____________________________________________ 18
figure 17 Electrica Group Corporate Values __________________________________________________ 20
figure 18 The coverage of companies in the Electrica Group _____________________________________ 24
figure 19 Market share distribution segment _________________________________________________ 25
figure 20 regulated Market, 2013 _________________________________________________________ 26
figure 21 Competitive Market, 2013 _______________________________________________________ 26
figure 22 Volume of electricity supplied on retail market (TWh) __________________________________ 26
figure 23 Growing number of consumers (‘000’s) _____________________________________________ 26
figure 24 Consumers by volume, 2014 ______________________________________________________ 27
figure 25 Consumers by revenues, 2014 ____________________________________________________ 27
figure 26 Investment program pre and post IPO ______________________________________________ 38
figure 27 Electrica investment structure in 2014 ______________________________________________ 39
figure 28 Share price on BVB and lSE ______________________________________________________ 40
figure 29 Performance of Electrica in comparison to BET index (%) _______________________________ 40
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 11
identification details
on report and issuer
Report date: March 26, 2015
name of the Issuer: SC DfEE ElECTrICA SA
headquarter: no. 9 Grigore Alexandrescu Street, 1st District, Bucharest, romania
Telephone/fax number: +4021.208.5002; +4021.208.5004
fiscal Code: rO13267221
Trade Registry no: J40/7425/2000
Share capital: rON 3,459,399,290 subscribed and paid (see Note 1)
Main caracteristic of issued shares: 345,939,929 ordinary shares of 10 rON nominal value, issued in
dematerialized form and freely transferable, nominative, tradable and fully paid.
Regulated market where the issued securities are traded: As at December 31, 2014 the Company shares are
listed on the Bucharest Stock Exchange and Global Depositary receipts are listed on the london Stock Exchange.
(see Note 2)
note 1
Pursuant to the registration certificate no. 2340001 and the resolution no. 78473/ 02.07.2014 issued by the
National Trade Registry Office, the share capital was increased by 1,771,887,440 RON, following the successful
completion of the process of underwriting new shares issued by the Company in the initial public offering. As at
the date of the current report the subscribed and paid up capital of SC Electrica SA is 3,459,399,290 rON.
note 2
Following the completion of initial public offering, the Company’s securities were admitted to trading on the
Bucharest Stock Exchange (BSE) under the trading symbol El and on the london Stock Exchange (lSE) under the
trading symbol ElSA on July 3, 2014.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 12
1 Electrica Group results
in 2014
1.1 Key consolidated financials
In 2014 Electrica Group financial results presented a
consistent improvement compared to 2013, driven
by an exceptional result in supply segment and by the
improvement of the distribution segment profitability.
Electrica’s revenue in 2014 and 2013 amounted to rON
5,044 million and RON 5,383 million, respectively. The
decrease of revenue by rON 339 million, or 6.30% in
the 2014 as compared to 2013 resulted mainly from
the decrease in revenues from supply activity that were
partially offset by the increase in distribution revenues.
(rON mil)
revenues
Other income
Operating expenses
adjusted EBITDa3
eBit
Profit before tax
net profit
Source: Electrica S.A.
20121
5,253
124
(4,765)
613
246
468
416
20132
5,383
128
(4,862)
649
345
397
316
2014
5,044
177
(4,350)
870
497
510
401
As it can be observed in the following graph, EBITDA
margin sharply increased in 2014 as compared to
2013, presenting a strong margin growth, namely from
12% to 17% for EBITDa margin and from 5% to 8% in
terms of net income margin (eexcluding net income
related to equity accounted investments).
As of 31 December 2014, the Company has a capital
structure driven by a negative Net Debt/(Cash)
position of RON 2,551 million based on the proceeds
from the IPO.
fIgURE 1: consolidated reVenues of electrica
gROUP (ROn mil)
fIgURE 2: aDjUSTED EBITDa (ROn mil) anD aDjUSTED
EBITDa maR gIn (%)
5,253
302
5,383
414
5,044
273
4.951
4.969
4.771
17%
870
12%
613
12%
649
2012
2013
2014
Revenues (ex-green Certificates)
Revenues from green Certificates
2012
eBitda
2013
2014
EBITDa margin
Source: Electrica S.A
Source: Electrica S.A
1 No restatement has been performed for the year 2012, as a result of the application of IFRIC 12 starting with 1 January 2014
2 Restated as a result of application of IFRIC 12 and new standards with a date of initial application of 1 January 2014 under IFRS-EU.
3 The Company defines Group adjusted EBITDA as Group EBITDA adjusted for non-recurring events (i) consolidatedimpairment / reversal of
impairment of trade and other receivables, net and (ii) consolidated write down / reversal of write down of inventories, net.
4 Net debt/(Cash) is calculated as bank borrowings + bank overdrafts + financial leases + Financing of PP&E less cash and cash equivalents.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
13
fIgURE 3: nET InCOmE (ROn mil)
fIgURE 4: nET DEBT/(CaSh) (ROn mil)
3%
247
169
2012
(128)
(298)
5%
63
253
8%
402
2013
2014
2012
2013
(2.551)
2014
nI Related to Equity accounted Investments
Datoria neta (cash)
nI group
nI margin
Source: Electrica S.A
Source: Electrica S.A
liquidity
Cash and cash equivalents comprise cash balances
and call deposits and deposits with maturities of three
months or less from the acquisition date that are
subject to an insignificant risk of changes in their fair
value, and are used by the Group in the management
of its short-term commitments.
(rON mil)
Bank current accounts
Call deposits
Cash in hand
Treasury bills and government bonds with original maturity of less than
3 months
Total cash and cash equivalents in the consolidated statement of financial
position
Overdrafts used for cash management purposes
Total cash and cash equivalents in the consolidated statement
of cash flows
Deposits, treasury bills and government bonds
Source: Electrica S.A.
31 December 2014
31 December 2013
77
1,352
0,3
199
1,629
(48)
1,581
1,221
109
542
0,4
-
651
(80)
571
-
Cash and cash equivalents include treasury bonds
denominated in RON with an amortized cost of RON
199 million with original maturity of 3M or less and an
interest rate of 1.7% p.a.
Deposits, treasury bills and government bonds include
treasury bills and government bonds of rON 901
million denominated in rON with original maturity of
more than three months with an average interest rate
of 1.6% and deposits with maturity of more than three
months of rON 319 million.
The treasury bills and government bonds were
classified as investments held to maturity.
use of ipo proceeds
The Company’s strategy was to place the IPO money
through the Underwriter banks, member of the
Syndicate, in risk-free titles and deposits, on short-term.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 14
Source: Electrica S.A
1.2 Key eVents 2014
Main events in the year 2014 related to the core
business:
n An IPO organised between 11 and 27 June
2014, referring to an offering by the Company of
177,188,744 ordinary shares in the form of shares
and in the form of GDRs, each GDR representing four
shares. The allocation of shares and GDRs and the
offering prices were concluded on 27 June 2014. The
transfer of ownership rights on new shares and the
collection of cash by the Company took place on 2 July
2014;
n Starting 4 July 2014 the Company’s shares are listed on
Bucharest Stock Exchange, and the GDrs are listed on
london Stock Exchange;
n following the IPO, Electrica has made major steps
towards alinigng to best practices of publicly listed
companies by putting in place a corporate governance
action plan, defining clear lines of responsibility and
accountability, implementing a code of ethicsand
professional conduct, evaluating management through
an external party and implementing a whistleblowing
policy;
n Electrica continued the strict monitoring and reduction
of costs, in order to achieve the targets imposed by
the regulator for the regulated activity, as well as to
increase the efficiency in the competitive area;
n Multiple meetings and discussions with ANRE
regarding the change in the methodology for
establishing the electricity distribution tariffs; modified
methodology was published on 29 October 2014
(ANrE Order 112/2014);
n RRR was modified from 8.52% to 7.7% through ANRE
Order no.146 published on 12 December 2014;
n Distribution tariffs applicable starting 1 January 2015
were published during 18-21 December 2014 while
the supporting documentation detailing the tariff
elements were made available by ANrE on 9 January
2015;
n Preparation of the updated investment plans for the
3 distribution operators in accordance with the IPO
prospectus, with the efficiency gains requested by the
regulator and amended following the changes of the
regulatory framework at the end of 2014; thetotal
value of the investment plans accepted by ANrE is
3.1 billion rON (in nominal terms, adjustable with
inflation);
n Electrica and its subsidiaries have filed against ANRE,
as claimant, legal actions for the annulment of the
Order No. 146/2014 and for repealing Article 122
of the Methodology for establishing the tariffs for
electric energy distribution services; Electrica has also
requested by the same legal proceeding, as a direct
consequence of the annulment of Order 146/2014,
the annulment of the orders setting the tariffs for the
DSOs; the Group has also initiated legal proceedings
against ANRE for the annulment of the tariff decisions
applicable starting 1 Januarey 2015;
n Since 1 September Cfr is no longer a client of Electrica
furnizare;
n At the beginning of July, a Government Decision for
the exemption from payment of green certificates
for energy intensive consumers was published, which
entered into force on 1 December 2014;
n Electrica Furnizare concluded significant contracts with
several large consumers, among which Metrorex and
Daewoo-Mangalia Heavy Industries;
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 15
n The price liberalisation calendar continued. Since
n SE Dobrogea – entered bankruptcy in January 2015, all
July 1st Ef has purchased 30% of the electricity for
regulated retail customers from the competitive whole
sale market.
personnel being dismissed; tenders have been organised
by the liquidator for valorification of the assets;
n SE Banat entered bankruptcy procedure in August
Regarding distressed subsidiaries, the process of
reducing their activity was thoroughly continued:
n SE Moldova – voluntary liquidation procedure, all
personnel being dismissed; tenders have been
organised by the liquidator for valorification of the
assets;
2014;
n SE Oltenia – insolvency with reorganization since
May 2014; the judicial administrator prepared a
reorganization plan (Feb 2015); 246 employees as at
end of 2014;
n SE Muntenia – insolvency with reorganization since
November 2014; 505 employees as at end of 2014.
1.3 Key financials By segments
distriBution segment
Key Facts
n Electricity distribution in Romania is currently
controlled by eight licensed electricity distribution
companies;
n Each company is responsible for the exclusive
distribution of electricity within its licensed
region, based on a concession agreement with
the Romanian State acting through the Ministry of
Energy, Small and Medium Enterprises and Business
Environments;
n Electrica is a leading player in the distribution
sector, both in terms of area and users covered;
n 2014 regulated asset base (rAB) of rON 4,169mil;
n 189,376 km of voltage lines (8,410 km HV; 45,775
km MV; 135,191 km lV) (H1 2014);
n Area of operation: 97,996 km2, 40.7% of Romania’s
territory;
n 3.56 million users (2014) for distribution activity;
n 16.3 TWh of electricity distributed in 2014, stable
compared to 2013;
n Electrica and Enel own three distribution companies
n 39% market share for distribution of electricity to
each, while CEZ and E.ON own the other two;
end users in 2014.
fIgURE 5: romanian electricity distriBution map
edtn
emd
edB
edts
ceZ
edmn
edm
edd
Source: Electrica S.A.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 16
The three electricity distribution companies part of
Electrica Group have served in 2014 an estimated 3.56
million customers (equivalent of a volume of about
16 TWh). As such, Electrica’s DSOs have distributed
approximately 39% of total electricity distributed
nationwide in 2014, maintaining an average of market
share of approximately 39% during the period 2012-
2014 and estimated to remain at this level for the
following period.
fIgURE 6: nUmBER Of USERS (thousand)
8,969
8,900
8,850
5,367
5,410
5,450
3,483
2010
Electrica
Source: Electrica S.A.
3,490
2011
Rest of market
3,591
2012
fIgURE 7: DISTRIBUTED VOlUmE (TWh)
42
26
16
2010
Electrica
Source: Electrica S.A.
41
25
16
2011
Rest of market
41
25
16
2012
Key financial metrics
Distribution segment
Revenue from the distribution segment increased by
rON 193million, or 8%, to rON 2,475 million in 2014
from rON 2,282million in 2013. This increase was
mainly attributable to the increase of the average
regulated distribution tariff. Electrica Serv slightly
improved the external revenues (services rendered to
companies outside the group) from rON 11 million in
2013 to rON 22 million in 2014.
The increase in revenues together with the decrease
in network losses costs as well as the improvement in
employees costs and other operational expenses led
to a rON 85 million or14% increase in the segment’s
EBITDA.
The EBITDA margin gained 140 bps in 2014, from 26.4%
in 2013 up to 27.8% in 2014, mainly driven by the
EDTN’s performance (a 400 bps improvement y-o-y).
fIgURE 8: DISTRIBUTIOn REVEnUES (ROn mil)
fIgURE 9: EBITDa (ROn mil)
688
2,282
2,475
1,944
623
603
2012
2013
Source: Electrica S.A.
fIgURE 10: nET InCOmE (ROn mil)
2014
306
2012
2013
2014
Source: Electrica S.A.
fIgURE 11: DnET DEBT/( CaSh) (ROn mil)
30
226
176
2012
Source: Electrica S.A.
2013
2014
2012
Source: Electrica S.A.
(139)
2013
(28)
2014
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 17
Supply market Overview
Key facts
n Supply market consists of regulated and competitive
segments;
n The regulated segment comprises 5 companies,
integrated within the same group as the
corresponding distribution operators;
n The competitive segment comprises 62 players, 54 of
which are relatively small (<4% market share);
Electrica furnizare is the market leader also on the
regulated and competitive market with a market
share of 36% and 11% respectively in 2013. In 2014,
the total electricity supplied by Electrica increased by
approximately 7.7% as compared to 2013. In the same
period, the Company experienced also a slight increase
in the number, especially on the competitive market
due to the 100% liberalization of the market for non-
household consumers starting with 1st of January 2014.
From a financial point of view, Electrica Furnizare had
a strong increase at EBITDA level and a significant
improvement of its cash level in 2014.The increase in
Electrica Furnizare profitability was mainly due to some
non-recurring circumstances, namely the electricity
acquisition at reduced prices during the year.
Net revenue from the supply segment decreased by
rON 505 million or 13%, to rON 3,861 million in 2014
from rON 4,366 million in 2013. This decrease was
mainly attributable to the decrease in energy prices
that offset the 8% increase in quantity supplied as well
as to a 5% decrease in the average supply tariff.
An improved cost structure implementation programme
and better sales strategyled to a RON 116 million or
99% increase in the supply segment EBITDA, that
combined with the decrease in revenues led to a 320
bps improvement in EBITDA margin, from 2.4% in 2013
up to 5.6% in 2014.
The supply segment presents a strong financial position,
namely a negative cash position of RON 403 million,
mainly influenced by the very strong 2014 financial
results.
fIgURE 12: SUPPly REVEnUES (ROn mil)
fIgURE 13: EBITDa (ROn mil)
4,801
302
4,499
4,780
414
4,366
4,133
272
3,861
5.6%
233
2.4%
116
2.4%
117
2012
2013
2014
net Revenues
Source: Electrica S.A.
green Certificates
2012
eBitda
Source: Electrica S.A.
2013
EBITDa margin
2014
fIgURE 14: nET InCOmE (ROn mil)
fIgURE 15: nET DEBT / (CaSh) (ROn mil)
4.5%
180
1.6%
79
1.9%
90
(33)
(50)
(403)
2012
net Income
Source: Electrica S.A.
2013
margin profit net
2014
2012
net Debt / (Cash)
Source: Electrica S.A.
2013
2014
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 18
2 Group overview
2.1 general oVerView
Electrica S.A. (“The Company”) is the majority
shareholder of SC Electrica Distributie Transilvania
Nord S.A. (“EDTN”), SC Electrica Distributie
Transilvania Sud S.A. (“EDTS”), SC Electrica Distributie
Muntenia Nord S.A. (“EDMN”), SC Electrica furnizare
S.A. (“Electrica furnizare”), SC fISE Electrica Serv S.A.
(“Electrica Serv”), SC Servicii Energetice Moldova
S.A. (“SE Moldova”), SC Servicii Energetice Oltenia
S.A. (“SE Oltenia”), SC Servicii Energetice Muntenia
S.A. (“SE Muntenia”), Servicii Energetice Doborgea
(“SE Dobrogea”), together “the Group” or “Electrica
Group”.The Company holds all sharesofSC Servicii
Energetice Banat (“SE Banat”), but starting November
2014, it has lost control over SE Banat, as a result
of SE Banat entering bankruptcy proceedings in
August 2014 and, consequently, SE Banat was not
consolidated in the financial statements.
The registered office of the Company is 9 Grigore
Alexandrescu Street, Sector 1, Bucharest, romania.
The Company has unique registration number
13267221 and Trade Register registration number
J40/7425/2000. According to Decision no. 627 of
July 13th 2000, romanian Government approved the
setting up of Societatea Comerciala de Distributie si
Furnizare a Energiei Electrice “Electrica” - S.A.
As at 31 December 2014 the major shareholder of
Electrica SA is the romanian State, represented by
the Ministry of Energy, Small and Medium-sized
Enterprises and Business Environment (48.78%),
after the ownership dilution following an initial public
offer. The second shareholder based on the share of
ownership is EBrD with 8.66%.
fIgURE 16: group entities as of 31 decemBer 2014
Distribution activity
Supply activity
Energy services activity
78% edmn
22% fp
78% edts
22% fp
78% edtn
22% fp
100% Electrica Serv
Source: Electrica S.A.
78% Electrica furnizare
100% SE muntenia
22% fp
100% SE Oltenia
100% SE moldova
100% SE Dobrogea
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 19
presentation of group suBsidiaries
Subsidiary
activity
Registration
code
headquarters
% stake as of 31
December2014
Electrica Distributie
Muntenia Nord S.A.
Electrica Distributie
Transilvania Nord S.A.
Electrica Distributie
Transilvania Sud S.A.
Electricity distribution in
North Muntenia geographical
area
Electricity distribution in
Northern Transylvania
geographical area
Electricity distribution
in Southern Transylvania
geographical area
14506181
Ploiesti
78.0000021%
14476722
Cluj-Napoca
77.99999%
14493260
Brasov
78.0000019%
Electrica furnizare S.A.
Trading of electrical energy
28909028
Bucharest
77.99997%
Electrica Serv S.A.
Servicii Energetice
Muntenia S.A.
Servicii Energetice Moldova
S.A.
Servicii Energetice Oltenia
S.A.
Servicii Energetice
Dobrogea S.A.
Servicii Energetice Banat
SA* (in bankruptcy)
Services in the energy
sector (maintenance, repair,
construction)
Services in the energy
sector (maintenance, repair,
construction)
Services in the energy
sector (maintenance, repair,
construction)
Services in the energy
sector (maintenance, repair,
construction)
Services in the energy
sector (maintenance, repair,
construction)
Services in the energy
sector (maintenance, repair,
construction)
17329505
Bucharest
100%
29384120
Bucharest
100%
29386768
Bacau
29389861
Craiova
100%
100%
29388378
Constanta
100%
29388211
Timisoara
100%
Source: Electrica S.A.
*) Electrica S.A. has lost control over Servicii Energetice Banat SA in November 2014
The main activities of the Group include operation
and development of electricity distribution networks
and activities related to electricity supply to final
consumers. The Group is the electricity distribution
operator and the main electricity supplier in Muntenia
Nord area (Prahova, Buzau, Dambovita, Braila, Galati
and Vrancea counties), Transilvania Nord area (Cluj,
Maramures, Satu Mare, Salaj, Bihor and Bistrita-
Nasaud counties) and Transilvania Sud area (Brasov,
Alba, Sibiu, Mures, Harghita and Covasna counties),
operating with transformation stations and 0.4 kV and
110 kV power lines.
The Company’s distribution subsidiaries (Electrica
Distributie Muntenia Nord, Electrica Distributie
Transilvania Nord and Electrica Distributie Transilvania
Sud) invoice the electricity distribution service to
electricity suppliers (mainly to Electrica furnizare SA
subsidiary, the main electricity supplier in Muntenia
Nord, Transilvania Nord and Transilvania Sud areas),
which further invoice the electricity consumption to
final consumers.
Electrica furnizare SA is the supplier of last resort
(defined as supplier designated by the regulatory
authority to deliver the universal service of electricity
supply under specific regulated conditions) in
Muntenia Nord, Transilvania Nord and Transilvania
Sud areas. According to the regulations issued by the
National Authority for Energy Regulation (“ANRE”), the
suppliers of last resort have the obligation to ensure
the electricity supply to the final customers which
have not exercised their eligibility right – this is the
right to choose their electricity supplier (hereinafter
named captive consumers).
The electricity supply to captive consumers is made
based on regulated contracts, with prices that are
regulated by ANrE.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 20
2.2 mission, Vision, Values
To continue succeeding over the next ten years, the Group
has set its Vision, Mission and Values which will serve as a
foundation for formulating and implementing its corporate
goals, objectives and strategy and for communicating
them to internal and external stakeholders.
Vision
The Group’s vision is to expand its leading position in the
electricity distribution and supply market segments, both
nationally and regionally.
mission
The mission of the Group is to deliver long term value to
our shareholders by distributing and supplying electricity
and providing exceptional services to our customers in a
safe, reliable, affordable and sustainable manner.
Values
The values exercised across all structures of the Group
are presented in the figure below.
fIgURE 17: electrica group c orporate Values
Robust growth
while demonstrating
environmental and
corporate social
responsibility
Commitment and
focus towards
customers
corporate
Values
Professional and
proficient approach
Commitment towards
labour safety
Transparency and
integrity
Dynamism and
flexibility
Team spirit
Source: Electrica S.A.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 21
2.3 strategic oBjectiVes
The Group’s overriding goalis tocreate sustainable
long term return on investment for our
shareholders.
for reaching this overriding goal, the Group has set
the following strategic goals:
n To achieve sustainable growth
n To maintain financial stability
n To improve operational efficiency
n To actively manage the portfolio of businesses and
build synergies
n To ensure the availability of a committed and
qualified workforce
n To adopt high standards of corporate governance
n To enhance sustainability profile
2.4 outlooK
The regulatory framework has experienced major
changes in the past decade, including market
liberalization, unbundling, and support scheme for
renewable energy. Other legislative changes that
have recently occurred in romania refer to the
remuneration of the Romanian DSOs - according to
the ANRE Order no. 146/2014, starting with 2015 the
distribution operators’ WACC will be reduced to 7.7%
from 8.52%.
ANRE’s changes of the distribution tariff setting
methodology, including the change in remuneration
(ie. the rrr) all these during the regulatory period,
indicate a lack of predictability and stability of
regulatory environment and a negative impact on
the Groups’ distribution operators’ operational and
financial performance.
Although these changes had the overall aim of
converging the Romanian legislation towards EU
legislation, the process has not been completed, and
major changes are expected to occur in the following
years in all EU countries in order to progress towards
completing the Internal Energy Market. Amongst
these changes, we could mention: the implementation
of a harmonized set of rules across member countries,
increase in regional cooperation and a more active
role for consumers.
TaBlE 1: Key driVers for change within the electricity marKet
Key driver
Description
GDP evolution and
industry structure
Changes in Regulation
Economic growth is a key determinant of electricity demand.
Although there is not a one-to-one relationship between GDP
growth rates and electricity demand growth rates, there is a
positive correlation, mainly between the industrial demand for
electricity and economic growth. In the future, household and
industrial electricity demand will also be influenced by energy
efficiency policies.
The regulatory framework has experienced major changes aiming
to align the Romanian legislation with EU legislation. Although
important steps have been accomplished, major changes are
expected to occur in the next decade influencing the electricity
price, the demand and the supply patterns.
Impact on
Electricity
consumption
Electricity prices
Increase in
environmental
awareness
Technological
development
Source: Electrica S.A.
Romania has adapted the EU 20-20-20 targets, aiming to reduce
greenhouse gas emissions, improve energy efficiency and rising
the share of renewable energy. According to the latest discussions
about EU framework for climate and energy policy projected,
these targets will further be increased.
Electricity prices
and consumption,
regulatory
framework
Smart grids and smart meters will create benefits for end-
consumers, distributors and suppliers in terms of energy
efficiency and smarter use of energy, through a more efficient
utilization of information.
Electricity prices
and consumption
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 22
3 Business overview
3.1 operating segments
distriBution segment
Distribution segment contributes with the highest
share to the operational profitability of Electrica.
Electricity distribution is a regulated activity in
Romania and specific tariffs applicable to distribution
services must be approved by ANRE as a “tariff basket
price cap’’ mechanism as established by Order no.
31/2004 (applicable in the first regulatory period
2005-2007), no. 39/2007 (applicable in the second
regulatory period 2008-2012), no. 51/2012 (applicable
in the transition year 2013) and no. 72/2013
(applicable in the third regulatory period 2014-2018).
The methodology “tariff basket price cap” plans to
reduce income fluctuations and avoid significant
fluctuations in the electricity prices charged to
consumers. The tariff model is based on the principle
of remuneration through tariffs of controllable costs
recorded by the distribution operator, the Distributor’s
main source of profit being the rate of return on
capital invested in the distribution activity.
ANrE sets regulated annual income levels required
for each year during the regulatory period, which is
based on projections submitted by the distribution
operators, in line with the methodology requirements.
Details regarding the tariff setting methodology are
available in Annex 3.
Starting 1 January 2015, electricity distribution tariffs
approved by ANrE are as follows (rON/MWh).
TaBlE 2: electricity distriBution tariffs as of j anuary 1, 2015
Tariff (ROn/mWh)
anRE Order no.
high voltage
medium voltage
low voltage
Transilvania Nord
155/15 December 2014
Transilvania Sud
156/15 December 2014
Muntenia Nord
154/15 December 2014
21.10
23.41
18.47
47.34
46.85
42.84
112.15
122.39
138.61
Source: ANRE Order
supply segment
Electricity market is divided into regulated market and
competitive market. On both markets, electricity can
be sold or purchased wholesale or retail.
Regulated market
After the implementation of the Second Energy
Package of EU, the liberalization of the electricity
market in romania started on 1 January 2007. The
tariffs of electricity supply to industrial consumers
have been fully liberalized and only the tariffs for the
electricity supply to households are still subject of
approval by ANrE.
Households are free to change their electricity
supplier, but still have access to regulated tariffs
for electricity supply until this market will be fully
liberalized in 2018. Starting 1 January 2014, the
tariffs of electricity supply to industrial consumers
are determined by the market and freely negotiated.
It is possible that increasing competition on this
market segment that does not any longer work under
regulated tariffs will lead to the switch of electricity
suppliers by consumers and may result in an increased
consumer migration to the competitors of the Group.
Electricity supply market in romania could also
record migration within the segment of householder
consumers segment and the equivalent thereof, as
the liberalization process will advance. However, as a
result of small or no savings that could be obtained
by changing household electricity supplier, the
Management expects that the effect of liberalization
in the segment of households to be relatively small.
Currently, Electrica is “the Provider of last resort” for
approximately 3.56 million consumers. A Provider of
last resort is under Energy law, a supplier designated
by the regulatory authority to provide universal
service for electricity supply under specific regulated
conditions.
Until 2018, when liberalization of households segment
is planned to be completed, tariffs on households
must be approved each year by ANrE based on
relative cost categories as well as on regulated profit
margin. Tariffs are calculated in order to cover the
cost of electricity (including transport costs, network
services, distribution costs and a profit margin
regulated). ANrE’s previous methodology provided
a maximum profit of 2.5% applied to the cost of
electricity purchased for supply to households until 1
December 2013. The new methodology (ANrE Order
no. 82/2013) provides a maximum profit per unit of
electricity sold to consumers tariff setting and CPC
tariffs of 4 RON/MWh and operating cost supply of 4.5
RON/client/month, following that, until the application
of competitive criteria for selecting suppliers of last
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 23
resort, the value of profit per unit of electricity sold to
consumers to be established by ANrE. furthermore,
Electrica records supply costs including closing
costs of contracts, billing, bill collection, database
management and costs of IT and telecommunications
infrastructure.
Starting 1 September 2012 and with the
implementation of Order no. 82/2013 to the
ultimately providers is allowed to determine for final
consumers who have not used the entitlement to
switch suppliers, a new tariff that consists of a mix
of regulated tariff component and a “component of
the competitive market” (CPC) approved by ANRE.
Purchase prices paid to producers controlled by
the state for the purchased electricity to provide to
consumers on the regulated market are established by
ANRE. CPC component of the tariff is based on average
acquisition price of the electricity which the relevant
supplier purchase on the centralized electricity market
to be supplied to industrial consumers and may not
exceed a legal amount with this price multiplied by
1.1. Any difference between estimated and realized
tariff components made by suppliers of electricity in
the last month of a given period of liberalization in the
regulated tariff elimination schedule will be adjusted
in the next period of liberalization.
Cost categories of ultimately provider recognized in
the prices of final consumers, but only up to the level
considered to be justified by ANRE are the following:
n Acquisition costs of electricity and CPC, depending
on the allocation level of the necessary electricity
by ANrE through the regulated contracts;
n Cost for electricity transmission service;
n Costs related to system technological and functional
services;
n Costs related to services provided by the operator
of the centralized electricity market to the
participants on the centralized electricity market;
n Costs related to service charges for electricity
distribution;
n Costs related to electricity supply activity of
electricity for final consumers who have not used
the entitlement;
n Occasional costs incurred by force majeure (if
applicable).
According to law no. 134/2012, since September
2012, the cost of Green Certificates which are
billed to final consumers separately from tariffs for
electricity. Electricity providers have a legal obligation
to purchase Green Certificates every year based on
annual targets or quotas calculated by ANrE based on
gross production from renewable sources and the final
net consumption of electricity in Romania.
Although the cost of Green Certificates has been
shown separately in electricity bill, for reasons of
transparency, since September 2012, ANrE did not
properly reduced the regulated tariff by the supply.
This has led to incurring of double cost with the Green
Certificates to consumers (through the inclusion of
these costs in the regulated tariff and the separate
invoicing of the cost of Green Certificates) for the
period September 2012 - July 2013.
Competitive market
Trading on competitive wholesale market
is transparent, public, centralized and non-
discriminatory. Prices may be freely negotiated by the
parties on the competitive retail market. Participants
on wholesale Market can trade electricity on the basis
of bilateral agreements concluded on the dedicated
centralized market. Since 19 July 2012 Energy law
does not allow contracts of sale on the wholesale
electricity market outside centralized markets, unless
for import/export energy contracts.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 24
In the following figure are shown the areas covered by the subsidiaries of the Group and the number of clients
they serve:
fIgURE 18: the coVerage of companies in the electrica group
electrica
distriButie
transilVania
nORD (EDTn)
1.2 mil clients
electrica
distriButie
transilVania
SUD (EDTS)
1.2 mil clients
Source: Electrica S.A.
edtn
edts
electrica
distriButie
muntenia
nORD (EDmn)
1.3 mil clients
edmn
electrica
fURnIzaRE (Ef)
3.5 mil clients
Electrica’s distribution segment operates through its
subsidiaries: EDMN, EDTN, EDTS and Electrica Serv,
the latter mainly through maintenance and repair
services of distribution networks, and the activity
is limited geographically and through the services
provided, being the operator of electricity distribution
in North Muntenia region (counties Prahova, Buzau,
Dambovita, Braila, Galati and Vrancea), Northern
Transylvania (counties Cluj, Maramures, Satu
Mare, Salaj, Bihor, Bistrita-Nasaud) and Southern
Transylvania (counties Brasov, Alba Sibiu, Mures,
Harghita and Covasna), operating transformer stations
and transmission lines with voltages of 0.4 kV and 110
kV. The Group holds exclusive distribution licenses for
these regions which will still be valid 13 years with the
possibility of extension. In the distribution business,
Electrica provides equipment maintenance services,
repair and other services for its network and with a
lesser extent, to third parties.
Electricity supply segment operates through its
subsidiary, Electrica furnizare and delivers electricity
to consumers in both the regulated electricity market
(in geographic regions in which the Group operates its
distribution segment), and in the competitive market
throughout romania. The Group holds two licenses
covering the entire supply on the territory of Romania,
with a remaining period of validity of 7 and 8 years
respectively, and extendable.
The Group’s portfolio also includes the energy services
segment (equipment maintenance, repair and other
additional services related to the network), performed
almost entirely by the distribution subsidiaries.
Energy services segment consists of Servicii Energetice
Dobrogea S.A., Servicii Energetice Moldova S.A.,
Servicii Energetice Oltenia S.A. and Servicii Energetice
Muntenia S.A.
Servicii Energetice Dobrogea S.A. and Servicii
Energetice Moldova S.A. are in the process of
liquidation, which is expected to conclude by the
end of 2015; also Servicii Energetice Oltenia S.A. and
Servicii Energetice Muntenia S.A. are in the process of
reorganization.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 25
3.2 procurement
Electrica S.A. will continue to centralize its acquisition
process within the Group, by means of which
centralized acquisition will be delegated to Electrica
S.A. The aim is to reduce costs, optimize acquisition
and ensure a unified policy within the Group. The
centralization process will enable a standardized
acquisition process and at the same time will lead to
an increased level of integrity.
3.3 sales actiVity
The following summary describes the operations of each reportable segment.
Reportable segments
Operations
Electricity supply
Buying and supplying electricity to final consumers (includes Electrica Furnizare
SA and the supply activity of Electrica SA)
Electricity distribution
Electricity distribution service (includes Electrica Distributie Muntenia Nord SA,
Electrica Distributie Transilvania Nord SA, Electrica Distributie Transilvania Sud
SA, Electrica Serv SA and the investments in the distribution activity done by
Electrica SA)
External electricity network
maintenance
repairs, maintenance and other services for electricity networks owned by other
distributors (includes Servicii Energetice Banat SA, Servicii Energetice Dobrogea
SA, Servicii Energetice Moldova SA, Servicii Energetice Oltenia SA and Servicii
Energetice Muntenia SA)
Headquarter
Source: Electrica S.A.
Includes corporate services at parent level
The main drivers of Electrica revenues is represented
by the distribution and supply segment. In 2014, the
contribution of the electricity distribution segment
and electricity supply segment to the revenues of
Electrica are expected to be 37% and 62% respectively.
In comparison, in 2013 the contribution of the
electricity distribution segment and electricity supply
segment in total revenues of Electrica was 34.58% and
61.08% respectively.
The Group’s distribution operators are natural
monopolies in their respective markets and as such,
they enjoy a dominant position. Also, the Group’s
distribution operators have a legal monopoly in their
relevant regions and hence, other entities cannot set
up a competing electricity distribution business.
The following figure shows the national market
shares held by Group subsidiaries in the segment of
distribution of electricity.
fIgURE 19: marKet share distriBution segment
Electrica 39%
Other 61%
Source: Electrica S.A.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 26
In addition, the Group’s supply operations enjoy a
dominant position on the electricity supply market,
due to it being a supplier of last resort. On the hand,
Electrica faces a growing competition on the supply
competitive market. Supply market consists of
Regulated and Competitive segments:
n The regulated segment comprises 5 companies,
integrated within the same group as the
corresponding distribution operators
n The competitive segment comprises 62 players, 54
of which are relatively small (<4% market share)
The following figure presents the market share of Electrica supply business:
fIgURE 20: regulated marKet, 2013
fIgURE 21: competitiVe marKet, 2013
e.on Energie
Romania
13%
ceZ
Vanzare
13%
Electrica
furnizare
36%
Source: ANRE
E.On Energie
Romania 5%
Complexul Energetic
Oltenia 4%
Enel Energie
- Total 38%
arcelormittal
galati 5%
altii 40%
EfT Romania 5%
Repower furnizare
Romania 5%
OmV Petrom 5%
Tinmar Ind 8%
Electrica furnizare 11%
Source: ANRE
alro 12%
Total number of consumers was 3.59 mil in 2014, with 176 sale points.
fIgURE 22: Volume of electricity supplied
On RETaIl maRKET (TWh)
fIgURE 23: growing numBer of consumers
(‘000’S)
15.0
mil. ROn
10.0
5.0
-
11
3.2
7.5
2012
9
2.8
6.2
2013
10
3.7
6.0
2014
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
3,549
17
3,556
34
3,591
74
3,532
3,532
3,517
2012
2013
2014
Regulated
Competitive
Regulated
Competitive
Source: Electrica S.A.
Source: Electrica S.A.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 27
fIgURE 24: consumers By Volume, 2014
fIgURE 25: consumers By reVenues, 2014
Regulated
household
47%
Competitive
Eligible
36%
Regulated
household
50%
Competitive
Eligible
32%
Regulated -
non household
17%
Regulated -
non household
18%
Source: Electrica S.A.
Source: Electrica S.A.
major client exposure
Electrica does not have a significantexposure to a
certain client or group of clients that could influence
drastically its activity.
However, under romanian law, certain electricity
consumers, such as hospitals, rescue stations, schools,
retirement homes, or air, naval and railroad traffic
services are deemed of special importance, and
cannot be disconnected by an electricity supplier.
As a result, electricity must be provided to them by
Electrica furnizare even if they are in payment default.
3.4 REORganIzaTIOn anD SPIn-Off Of aSSETS
On 18 December 2013, an EGMS of the Company
proposed thetransfer of the Company’s interests in:
ENEL EnergieMuntenia S.A., ENEL Distributie Muntenia
S.A., ENEL Distributie Banat S.A., ENEL, Distributie
Dobrogea S.A.,ENEl Energie S.A., E.ON Moldova
Distributie S.A., E.ON Energie Romania S.A., Electrica
Soluziona S.A., Bursa romana De Marfuri S.A. and
Hidro Tarnita S.A. to a newly formed entity Societatea
de Administrare a Participatiilor in Energie (“SAPE”)
through the Spin-off. As part of the Spin-off, which
was approved by thecourt in April 2014 and registered
with the Trade registry in May 2014, Electrica reduced
its capital by approximately rON 431 million through
the cancellation of 43,123,780 Shares.
In 2013 the Company approved the liquidation of
3 subsidiaries: Servicii Energetice Banat, Servicii
Energetice Dobrogea and Servicii Energetice Moldova.
In January 2014 the Board of Directors of Servicii
Energetice Oltenia and in October 2014 the Board of
Directors of Servicii Energetice Muntenia decided the
commencement of the insolvency process with a view
to reorganization.Servicii Energetice Banat entered in
bankruptcy in November 2014 and consequently the
Company discontinued consolidation at that date as it
no longer has control over it.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 28
3.5 personnel
As of 31 December 2014, the Group employed 11,740 people.
The table below provides an overview of employment in the Group, by business segment, as follow:
factor
Electricity distribution
EDMN
EDTN
EDTS
Electrica Serv
Supply
Electrica furnizare
Services related to other distribution networks
SE
headquarter
Electrica
Total
Source: Electrica S.A.
2012
9,450
2,111
2,025
1,859
3,455
2,332
2,332
1,236
1,236
199
199
as at 31 December
2013
9,347
2,092
2,007
1,874
3,374
2,059
2,059
1,225
1,225
149
149
2014
9,386
2,156
2,011
1,874
3,345
988
988
1,217
1,217
149
149
13,217
12,780
11,740
The reduction in number of employees of the Group
during the year 2014 is the result of liquidation
or reorganization procedures of energy services
subsidiaries.
As of 31 December 2014 approximately 58% of
the Group’s employees are directly productive and
42% indirectly productive, which includes technical,
economic, social and administrative personnel.
The table below presents the Group’s employment, broken down by age as follows:
Below 18 years of age
18-30
31-40
41-50
51-60
above 60 years of age
Total
Source: Electrica S.A.
31 December 2013
31 December 2014
0%
6.76%
21.39%
38.42%
28.85%
4.58%
100%
0%
6.16%
20.37%
38.90%
29.90%
4.67%
100%
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 29
As of 31 December 2014, approximately 98% of the
Group’s employees are members of labour unions
and their employment conditions are governed by a
collective bargaining agreement that is renegotiated at
least every two years and filed with the relevant labour
authorities in Romania.
None of Electrica and its subsidiaries has experienced
any strike or other form of labour disturbances that
have interfered with its operations, and management
considers its relationship with employees of the Group to
be appropriate.
Electrica SA and its subsidiaries have in place internal
regulations that generally relate to general employment
provisions, non-discrimination, labour safety and health,
rights and obligations of the employer and of the
employees, employee complaint procedures, rules on
labour discipline, disciplinary sanctions and disciplinary
infringements, rules regarding disciplinary procedure, the
criteria and procedure for the professional evaluation of
employees and final provisions.
Electrica’s training programmes aim to upgrade the skills
of the Group’s employees so they can adapt to broader
tasks to better utilise its existing resources. Management
believes that its emphasis on training and development
helps its employees meet business challenges effectively.
safety and health at worK
Achieving safety and health at work at Electrica SA
level represents an integrated part of designing,
organizing and conducting work processes and includes
the measures and actions assembly which results in
preventing accidents and professional disease and
improvement of work environment.
The surveillance audit of quality, environment, health and
work safety integrated management system took place in
2014, resulting that the activity of work safety and health
being carried out in compliance with standard OHSAS
18001/2009.
Electrica SA is focused on training the employeers, in
compliance with the legislation in force, and also focusing
on danger awareness trainings, with the purpose of
eliminating the accidents and professional disease
identified by assessing the risk level in all the workplaces.
The labour Health and Security Comitee coordinated by
at Electrica SA coordinating level, meets periodicaly to
analyize and solvethe problems identified in a common
and unitary manner, for all hierarchic levels. In 2014,
was conducted the analysis of work health and security
for 2013 and also the analysis of individual protection
ecquipments, proposed for centralized acquisition for
employees, mainly the electricians.
Preventive actions in the field of work safety
and health
Mentoring and controlling actions regarding the
compliance with the legal requirements for work
health and security, including defense against fire, were
conducted in compliance with the framework approved
by Electrica SA and respectively byeach subsidiary
level. Some impaiments were operational eliminated
during the control and for the others are set corrective/
preventive measures with specific deadlines. The
measures established are followed and reported upon
maturity by the designated project managertowords
the protection and prevention service of each
subsidiary, finally being forwarded to Electrica SA for
the agregattedanalysis of Labour Health and Security
Comitee.
Impementing the measurements programme
To ensure the safety and health status for 2014, the
prevention and procection plan at each subsidiary
level set measures that require funds allocation. At
Electrica SA level it was approved a expense budget
of 18 thd RON for implementing the program, mainly
representing production funds.
For conducting operational activity in maximum security
conditions, namely for preventing work accidents and
professional deseases, each subsidiary individualy
acquired protection ecquipment (EIP) in2014, through
out approved budget for work health and security.
The status of Electrica S.a. group`s work accidents
In 2014, Electrica SA group had no mortally working
accident.
There were eight accidents with temporary
unavailability of working (ITM) with 9 injured workers,
namely:
n 3 accidents at FDEE Electrica Distributie Transilvania
Sud, in branches SDEE Alba, SDEE Sibiu, SDEE
Harghita;
n 4 accidents at fISE Electrica Serv, at SISE Transilvania
Sud – AISE Brasov and SSE Sf.Gheorghe (with 2
injured workers) and at SISE Transilvania Nord – AISE
Oradea (2 accidents);
n 1 accident at Servicii Energetice Muntenia.
Because of the 2014 accidents, a total amount of 494
days of unavailability of working was recorded.
The causes and favouring factors for each accident were
separately analysed by committee set up for this exact
purpose, and the investigating files were approved
by the Territorial labour Inspectorate. It is worth
mentioning that there was just one labour accident
caused by electric risk, the rest of the accidents were
caused by mechanical risks (fall, failure in respecting the
technological specifications, other causes).
The statistical analysis revealed no factors that might
lead to imposing general measures, but only specific
measures for each case.
Most of the accidents are recorded for the 40 and 49
years age group (6 out of 9 injured workers), 4 injured
workers with more than 25 years seniority, and in terms
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 30
of qualification the injured workers were: electrician,
electrician-driver, mechanical locksmith and driver.
As in previous years, the labour accidents are caused by
complementary causes, mainly of human nature factor
(distraction, lack of technological discipline, lack of
control/supervision).
In Electrica SA electrical instalations there were
reported 8 externalinjuries, out of wich 6 died being
electrocuted. The accidents are mainly caused by
unauthorized intervention to the electrical instalations,
in order to substract metallic components.
Status of Electrica Sa employees` health in 2014
Surveilance of the employees` health is conducted
by doctors employeed by fISE, based on a services
agreement and also outsourcingcontracts. The
control of health of all Electrica`s employees and
diagnosis of professional diseases, respectively the
work related diseases, is conducted by the labour
medicine specialized doctor, by interpreting a series
of statistical indexes included in the framework
operational procedure, received from each
subsidiary.
The main health indicators are given by the degree of
impacting the ability to work, respectively medical/
psyhological chronic diseases that limits the ability to
work, physical efforts, working in heights, work under
voltage, and the total number of days of temporary
incapacity to work (medical leaves caused by chronic
and/or acute medical conditions).
Thus, in 2014, the conditional aptitude indicator is
estimated at 9% out of total number of employees,
out of which one third is represented by cardiovascular
issues, rest of the issuesbeing of ophtalmological/
psychological nature.
In 2014, the main causes for temporary inability to
work that lead to medical leaves, are caused by injuries
occuered outside of workplace (spains, fractures,
contusions), cardiovascular conditions (hypertension,
ischemic heart disease, chronic venouse insufficiency),
malignant tumors, musculoskeletal disorders
(discopathy, arthrosis), respiratory diseases, pregnancy
and confinement, digestive disorders, psychiatric
disorders.
Prevention is achieved through medical consultsby
occupational doctors, other than the mandatory ones,
medical laboratory analyzes, anti-influenza vaccination,
occupational medicine and first aid training and checks
of hygienic conditions.
3.6 enVironmental considerations
In developing the activites and implementing
its business strategy, the Group promotes
environmentally friendly policies and procedures. for
example, the implementation of smart grid networks
and the expected reduction in network losses, in order
to improve energy efficiency and a reduction in CO2
emissions.
The Group’s Management systems in relation to
environmental and health and operational safety
matters are implemented and operated on a
standalone basis by each of the Group’s subsidiaries.
The annual capital investment budgets of each of
the Group’s subsidiaries include expenditure for
environmental matters.
The Group’s activities impact the environment,
principally as a result of emissions of noise by
equipment and transformer posts from the
transformers’ stations, and secondly, because the
Group uses equipment containing insulating oil with
polychlorinated biphenylsor ‘‘PCBs’’, sulphuric acid
and other polluting substances, whose operation
is subject to regulation, being subject to specific
environmental laws and regulations, including
the provisions of the EGO no. 195/2005 relating
to environmental protection (the ‘‘Environmental
Protection Law’’). The Groups functions based on
environmental authorisations and environmental
authorities monitor the compliance with granted
authorisations and endorsements, which may be
suspended for compliance failures. In addition to
compliance with the Environmental Protection Law,
the Group is also subject to:
n EGO no. 68/2007 on the environmental liability
with respect to the prevention and remedying of
environmental damage to land water and air in the
case of pollution event;
n law no. 104/2011 regarding air quality published in
the Official Gazette on 28 June 2011, which relates
to restrictions on atmospheric pollutants and the
elaboration of air quality plans;
n law no. 211/2011 on waste management,
published in the Official Gazette on 25 November
2011, which relates to ensuring a high level of
environmental protection and the safety of the
public’s health through management of waste and
prevention or reduction of the adverse impact of
waste generation; and
n other specific restrictions relating to package and
packaging waste, disposal of waste oils, batteries,
tyres, PCBs and other materials used in the
distribution segment’s business;
n the privatisation legislation regarding the notification
of National Agency for Environmental Protection and
obtaining the confirmation that is not necessary to set
environmental obligations in the privatisation process,
except for EDMN in respect of compliance with the
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 31
regulation of the special regime on management
and control of PCBs and AISE Buzau, AISE Galati, AISE
Ploiesti, AISE Targoviste, AISE Focsani, AISE Brasov,
AISE Miercurea Ciuc, AISE Sibiu, AISE Bistrita, AISE Baia
Mare, AISE Satu Mare, AISE Cluj, AISE Braila.
As at the date of this report, the Group holds all
193 material permits required for it to conduct its
business, and the Group’s business is conducted in
compliance with all specific environmental regulations.
Integrated Quality, Environment, Occupational
Health and Safety management systems certified in
accordance with ISO 9001:2008, ISO 14001:2014 and
EN OHSAS 18001:2007 have been implemented in
each of the Group’s subsidiaries.
3.7 research and deVelopment actiVities
With respect to Electrica’s concern for promoting
technological innovation by participating in research
and development projects cofinanced through
European funds, namely for testing new technologies,
simulating and managing behaviours which can be
integrated in the distribution electricity networks,
Electrica stress out the involvement in accessing funds
by participating in calls for VSYNC, SiNGULAR and
Horizon 2020, among:
n ”VSynC”, a fP6 cofinancing project, wasdesignated
to test a virtual sincron generator in a network
node where generation sources could have a
bigger share compared to the energetic system.
Various functioning regimes where simulated and
emphasis was made on the role of an electricity
storage system in a low voltage network, where the
voltage level is highly influenced by consumption
evolution from turstic areas. Systems for measuring
and distance control through GSM confirmed the
premises of the project through the demonstrations
performed;
n ”SingUlaR ”, an ongoing research project,
cofinanced through fP7, has the purpose to test
software programs aimed at forecasting loads in
network nodes and the production generated by
wind power plants and photovoltaic plants, based
upon measures from counters read from the
distance. Managing of forecasted consumption/
production in a network island area might ensure
allocation of electricity losses and an improved
monitoring aimed at mitigating losses. Moreover,
testing software applications on a real network
for optimizing power flows followed by demos
constitutes a way to develop methodologies in
determining electricity losses in networks with
renewable sources, in order to obtain energy
and operational efficiencies for network with an
increased degree of penetration of renewable
sources;
An additional important endeavour in promoting
technological innovation constitutes the dissemination
of improvement solutions for electricity networks
related to smart grid concepts. As such, Electrica is
organizing every year in November conferences with
international attendance which have as an alternative
theme smart grid solutions in one year and smart
metering solutions in the next year. Best practices in
the field for each investment category are presented.
Moreover, we can emphazise the participation at
international conferences organized by the World
Energy Council, CIGRE and CIRED international
conferences which aim at tackling technological
innovation and promoting new technologies which
improve operational efficiency.
3.8 risK management
risK management and internal c ontrol
Underlying legislation for implementing a risk
management system as well as a system for internal
control/management has been:
n Order of the Ministry of Public finance no.
946/2005 regarding development of a internal
control/management system with all subsequent
ammendments;
n Government Order n. 119/1999 regarding internal
control and preventive financial control with all
susbsequent ammendments.
In addition, the risk management together with the
internal control and management system at Electrica
SA level takes place in accordance with internal
procedures agreed.
A major concern for the management is building
awareness of employees regarding the importance
of managing risk inside the organization and the
necessity of direct involvement in unfolding the
risk management process, as well as aligning best
practices on national and international level by
following legislation in place, standards and related
norms.
Subsidiaries of Electrica Group have their own legal
personality and have implemented at their level risk
management and internal control/management
systems, in accordance with legislative provisions as
mentioned before.
In June last year Executive management of Electrica
SA started with classifying the risks for the Company in
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 32
terms of probability of occurrence and impact on the
Company. Five impact levels and five probability levels
were identified, ranging from risks that are tolerable
and risks that have zero tolerance and risks that have
low probability and risks with high probability. One
risk, which has to do with loss of intellectual capital,
was quantified in the highest category, which means
that urgent managerial control measures are needed.
A further five risks were classified in the area of low
tolerance, for which short term managerial control
measures are required.Corrective actions have
been taken for these six risk areas. During 2015 the
risk management system will be further detailed,
improved and discussed with the board.
Risks related to the activity and sector of Electrica in
2014 can be presented as follows:
n Group’s supply segment may be exposed to
increasing competition due to the market
liberalization
n Group’s financial performance may be negatively
influenced by changing tariffs on the regulated
market;
n Group’s supply segment might loose its status of
supplier of last resort;
n Group’s financial performance may be negatively
influenced by changing prices for energy;
n romania’s electricity demand is linked to various
factors beyond control of the Group, such as
economical, political and climate-changing
instances;
n The Group has to comply with regulatory
requirements and has to keep in place regulated
approvals, being exposed to significant liabilities in
case of non-compliance;
n Components of the Group’s distribution network
are subject to deterioration over time;
n The Group’s assets and/or business could be
damaged by natural and man-made acts or
disasters;
n The Group’s IT systems are outdated and are not
integrated;
n The migration of the Group to a new integrated ERP
system may encounter difficulties and delays;
n The Group may face risks associated with restitution
claims with regard to certain real estate properties;
n Electrica furnizare may be prohibited from
suspending or interrupting the supply of electricity
to certain of the Group’s customers, even if such
customers are in payment default;
n Failure to observe public procurement legislation by
members of the Group may lead to fines and voided
contracts;
n The Group’s position in electricity distribution and
supply markets may expose it to claims relating to
abuse of dominant position;
n A strike or other labour disruption could adversely
affect the Group’s business;
n failure to execute management’s business strategy
may lead to cost savings and revenue forecasts
being lower than predicted for the Group;
n The Group’s reputation, future prospects or results
of operations may be materially adversely affected
by claims or litigation.
Risk exposure
The Group has exposure to the following risks arising
from financial instruments:
n credit risk
n liquidity risk
n market risk.
(i) Credit risk
Credit risk is the risk of financial loss to the Group if
a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises
principally from the Group’s receivables from
customers, cash and cash equivalents, bank deposits
and treasury bills and government bonds.
Cash, bank deposits, treasury bills and government
bonds are placed in financial institutions, which are
considered to have minimal risk of default.
The carrying amount of financial assets represents the
maximum credit exposure.
Trade receivables
The Group’s credit risk in respect of receivables is
concentrated around state-controlled companies.
The Group establishes an allowance for impairment
that represents its estimate of incurred losses in
respect of trade receivables.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 33
Impairment
The ageing of trade receivables was as follows:
factor
ROn thousand
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Past due 2-3 years
Past due more than 3 years
Total
Source: Electrica S.A.
factor
ROn thousand
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Total
Source: Electrica S.A.
31 December 2014
31 December 2013
gross value
Bad debt
allowance
gross value
Bad debt
allowance
501,052
240,421
23,542
29,463
52,801
105,710
975,487
1,928,476
-
-
-
(13,657)
(52,801)
(105,710)
(975,487)
(1,147,655)
686,315
201,939
64,846
121,536
180,802
244,905
752,726
2,253,069
-
-
(1,947)
(33,543)
(132,403)
(244,905)
(752,726)
(1,165,524)
net trade receivables
31 December 2014
31 December 2013
501,052
240,421
23,542
15,806
-
780,821
686,315
201,939
62,899
87,993
48,399
1,087,545
(ii) Liquidity risk
liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash
or another financial asset. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it
will have sufficient liquidity to meet its liabilities when
they are due, under both normal and stressed conditions,
without incurring unacceptable losses The Group aims to
maintain the level of its cash and cash equivalents at an
amount in excess of expected cash outflows on financial
liabilities. The Group also monitors the level of expected
cash inflows on trade receivables together with expected
cash outflows on trade and other payables. In addition,
the Group maintains overdrafts (refer to Note 21 of the
Consolidated financial Statements).
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts
are gross and undiscounted, and include estimated interest payments.
ROn thousand
financial liabilities 31 December 2014
Contractual cash flows
Carrying
amount
Total
less than
1 year
1-2 years
2-5 years
more than
5 years
Bank overdrafts
48,132
48,132
48,132
-
-
Financing for network construction related to
concession agreements
250,550
262,332
101,633
87,114
73,484
finance lease
Trade payables
Total
Sursa: Electrica S.A.
294
555,256
854,232
294
555,256
866,014
294
555,256
705,315
-
-
87,114
-
73,484
-
101
-
-
101
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 34
ROn thousand
financial liabilities 31 December 2013
Contractual cash flows
Carrying
amount
Total
less than
1 year
1-2 years
2-5 years
more than
5 years
Bank overdraft
79,684
79,684
79,684
-
-
Financing for network construction related to
concession agreements
272,411
288,693
144,623
93,755
50,315
finance lease
Trade payables
Total
Source: Electrica S.A.
788
581,522
934,405
788
581,522
950,687
498
581,522
806,327
290
-
94,045
-
-
50,315
-
-
-
-
-
(iii) Market risk
Market risk is the risk that changes in market prices
– such as foreign exchange rates, interest rates– will
affect the Group’s income or the value of its holdings
of financial instruments. The objective of market
risk management is to manage and control market
risk exposures within acceptable parameters, while
optimising the return.
Currency risk
The Group is exposed to currency risk to the extent
that there is a mismatch between the currencies
in which sales, purchases and borrowings are
denominated and the functional currency of the
Group. The functional currency of the Group is the
romanian leu (rON).
The currencies in which these transactions are
primarily denominated are rON and EUr. Certain
liabilities are denominated in foreign currency (EUR).
The Group also has bank accounts denominated
in foreign currency (EUr). The Group’s policy is to
use the local currency in its transactions as much
as possible. The Group does not use derivative or
hedging instruments.
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk is as follows:
factor
in thousands of ROn
Cash and cash equivalents
Deposits (deposits, treasury bills and government bonds)
Financing for network construction related to concession
agreements
finance lease
net statement of financial position exposure
Source: Electrica S.A.
31 December 2014
31 December 2013
eur
eur
10,138
136,704
(250,550)
(294)
(104,002)
136,173
-
(272,411)
(788)
(137,026)
The following significant exchange rates have been applied during the year:
factor
rON/EUr 1
average rate
year-end spot rate
2014
4.4446
2013
4.4190
2014
4.4821
2013
4.4847
Sensitivity analysis
A reasonably possible strengthening (weakening) of
the EUr against rON at 31 December would have
affected the measurement of financial instruments
denominated in a foreign currency and profit before
tax. The analysis assumes that all other variables, in
particular interest rates, remain constant and ignores
any impact of forecast sales and purchases.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 35
ROn thousand
Effect
31 December 2014
EUr (5% movement)
31 December 2013
EUr (5% movement)
Source: Electrica S.A.
Profit before tax
Strengthening
Weakening
(5,200)
(6,851)
5,200
6,851
Interest rate risk
The Group’s policy is to use mainly supplier credit for financing its investments. The Group does not have
significant long-term bank loans.
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
ROn thousand
fixed-rate instruments
Financial assets
Bank deposits (cash and cash equivalent)
Deposits, treasury bills and government bond (cash and cash
equivalent)
Deposits, treasury bills and government bond
Financial liabilities
Financing for network construction
related to concession agreements
finance lease
Variable-rate instruments
Financial liabilities
Overdrafts
Source: Electrica S.A.
31 December 2014
31 December 2013
1,352,487
199,500
1,220,521
(250,550)
(294)
2,521,664
541,891
-
-
(272,411)
(788)
268,692
(48,132)
(48,132)
(79,684)
(79,684)
fair value sensitivity analysis for fixed-rate
instruments
The Group does not account for any fixed-rate
financial assets or financial liabilities at fair value
through profit or loss. Therefore, a change in interest
rates at the reporting date would not affect profit or
loss.
Cash flow sensitivity analysis for variable-rate
instruments
A reasonably possible change of 50 basis points
in interest rates at the reporting date would have
increased (decreased) profit before tax and equity
by the amounts shown below. This analysis assumes
that all other variables, in particular foreign currency
exchange rates, remain constant.
factor
ROn thousand
31 December 2014
Variable-rate instruments
31 December 2013
Variable-rate instruments
Source: Electrica S.A.
Profit before tax
50bp increase
50bp decrease
(240)
(399)
240
399
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
36
4 fixed assets
The following table presents the number of customers
and the volume of equipment of Electrica Group
distribution companies (FDEE Electrica Distributie
Transilvania Nord – TN, FDEE Electrica Distributie
Transilvania Sud – TS and FDEE Electrica Distributie
Muntenia Nord – MN) as at 31 December 2014:
TaBlE 3: ElECTRICa gROUP DISTRIBUTIOn SECTOR EqUIPmEnT OVERVIEW:
geographical coverage
no.of customers, of which
110 kV
medium voltage (MV)
low voltage (lV)
Overhead power lines length, of which
110 kV
medium voltage (MV)
low voltage (lV)
whereof connections
Underground power lines length, of which
110 kV
medium voltage (MV)
low voltage (lV)
whereof connections
Cumulative transformers' power:
Electricity stations (110 kV/MV + MV/MV)
Electricity stations 110 kV/MV
Electricity stations 110 MV/MV
Switching stations/Transformer stations
no. of substations, of which:
100 kV/MT substations
100 MT/MT substations
number of switching stations and transformer stations
Source: Electrica S.A.
um
Km2
tn
ts
34,162
34,072
mn
28,962
Total
97,196
#
#
#
#
km
km
km
km
km
km
km
km
km
km
mVa
MVA
MVA
MVA
#
#
#
#
#
1,218,831
1,102,885
1,302,330
3,624,046
30
3,637
62
2,745
34
3,448
126
9,830
1,215,164
52,045
1,100,078
43,576
1,298,848
62,439
3,614,090
158,060
2,180
11,684
38,181
17,885
15,100
26
3,432
11,642
6,635
6,081
3,774
3,668
106
2,307
119
90
29
2,257
10,217
31,102
16,460
10,719
28
3,274
7,417
1,765
6,543
4,018
3,854
164
2,525
103
98
5
2,148
12,587
47,704
23,720
12,005
15
3,622
8,368
2,112
8,527
5,429
5,074
355
3,098
216
124
92
6,585
34,488
116,987
58,065
37,824
69
10,328
27,427
10,512
21,151
13,221
12,596
625
7,930
438
312
126
8,438
8,556
10,035
27,029
The vast majority of distribution companies’
equipment were constructed in the last 60 years,
following the successive development phases of the
National Electricity System.
A relatively low proportion of western standards
equipment (approximately 20%) was constructed
after 1990. On the other hand, the vast majority of
equipment were put into function between 1960
–1990. Hence, most of it presents a relatively high
wear rate.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
37
The following table presents the structure of equipment wear rates divided by voltage level:
TaBlE 4: wear rates
Wear rates (%)
High voltage power lines (110 kV)
Medium voltage power lines
low voltage power lines
Substations
Transformers
Source: Electrica S.A.
edmn
edtn
Underground
Overhead
Underground
Overhead
Underground
Overhead
Pole - Amount
Concrete enclosure
Pad-Mount
Underground
40%
75%
75%
70%
70%
70%
70%
65%
70%
80%
90%
25%
75%
70%
75%
70%
70%
75%
70%
75%
85%
90%
edts
50%
75%
65%
60%
75%
70%
60%
65%
75%
15%
85%
inVestment program
Electrica intends to modernise and develop the
distribution network based on the smart grid
concept through installation of smart meters and
infrastructure development for system such as SCADA,
SAD etc. The main objectives of Electrica investment
program is to increase the operating efficiency, to
reduce network losses, to raise network flexibility, to
increase the quality, stability and safeness of the grid.
The investment program was developed taking into
account te wear rate of the equipments.
criteria for implementing the inVestment
PROgRam:
Through the implementation process of the
investment program, Electrica follows a set of rules
mainly consisting of the following:
n aligning to Group’s strategy;
n inclusion in rAB of regulated investments;
n non-regulated investments should provide an IRR
higher than Group’s WACC;
n investment program will follow the Group financial
strategy to maintain a solidcapital structure.
Based on above criteria and in the context of Electrica
Group`s engagement stated in the Prospectus, the
IPO proceeds will be used to improve the existing grid
infrastructure, to develop new ones for connecting
new customers and for investments in smart grid and
smart metering.
According to the Electrica’s strategy, the main
objective of the investment programme is to increase
Group profitability as well as to raise the accessiblity
of custormers and electricity producers to the grid.
The main cathegories of investments are:
n grid automatisation through SCADA, SAD
integration;
n extension of the modern smart metering
equipment,
n modernization of the transformer station and of the
medium voltage network;
n introduction of equipment with low network losses,
higher efficiency rate and which comply with
environmental requirements;
n modernization of the connections.
At the same time, the Group takes into consideration
important investments related to development and
upgrade of IT infrastructure, as well as investments
related to cyber security and business continuity. All
these investments are based on the findings of the IT
audit and have the aim to improve the data privacy
and implicitly the quality of services provided.
The following table presents the volume of investments approved by ANRE, as follows:
TaBlE 5: inVestment programs appro Ved By anre for distriBution operators of the group for
ThE PERIOD 2014 - 2018
Investment programs approved by anRE for distribution operators of the group for the period 2014-2018 (ROn mil)
EDTS
EDTN
EDMN
Source: ANRE
2014
117.00
126.00
113.81
2015
180.00
184.00
171.33
2016
219.60
223.20
205.04
2017
250.00
259.20
252.41
2018
287.50
288.00
287.09
Total
1,054.10
1,080.40
1,029.68
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
38
Based on the IPO proceeds, Electrica decided to
increase the investment program for the third
regulatory period as compared with the initial level
approved by ANrE in December 2013. Based on the
following graph, Electrica’s IPO positively influenced
the level of investment programs, which will positively
impact the quality of the electricity distribution
process.
fIgURE 26: inVestment program pre and post ipo
1, 000
ROn mil.
963
762
648
535
369
375
384
384
post IPO investments
pre IPO investments
2015
2016
2017
2018
800
600
400
357
200
357
357
-
2014
Source: Electrica S.A.
The investment programs approved for the third
regulatory period (2014 – 2018) may be supplemented
with investments, which even if not remunerated
through RAB, provide efficiency and cost reduction,
the benefit being at the level or superior to the RRR.
In 2014, the companies of Electrica Group realised
the following investments as compared to the ones
budgeted at the beginning of the year:
Electrica Sa subsidiary (ROn mil)
Budgeted
Realised
SC Transilvania Nord SA
SC Transilvania Sud SA
SC Muntenia Nord SA
Electrica furnizare
fISE
Electrica SA
total
Source: Electrica S.A.
140
127
122
16
4
47
457
140
132
139
15
3
35,7
465
In 2014, the Group investment program was
accomplished in a proportion of 102%. For the
distribution segment an increase from RON 389
million budgeted at the beginning of the year to
RON 411 million actually realized, representing a 6%
overrun.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 39
The synthetic structure of the investments realized in 2014, is presented in the
following table (for a more detailed presentation please see Annex 2):
Investment cathegory (ROn mil)
Efficiency
CPT reduction
Operating efficiency
Quality improvement
Distribution process continuity process
Electricity quality improvement
Other
Independent equipment
Studies
total
Source: Electrica S.A.
total
164
147
18
181
181
-
14
39
14
411
The main investments in 2014 focused predominantly on the improvement quality and efficacy of the
distribution service.
fIgURE 27: electrica inVestment structure in 2014
Independent
equipment
10%
Other
4%
Electricity
quality
0%
Studies
3%
Energy
Efficiency
(CPT reduction)
36%
Distribution process
continuity
43%
Source: Electrica S.A.
EOperating
efficiency
4%
Based on the implementation of the 2011 – 2014 investment programme, Electrica’s distribution companies RAB
is presented in the following table:
TaBlE 6: 2011 – 2014 RaB EVOlUTIOn
RaB (ROn mil)
EDTS
EDTN
EDMN
Source: Electrica S.A.
2011
1,213
1,166
1,312
2012
1,321
1,261
1,408
2013
1,332
1,292
1,434
2014
1,343
1,335
1,490
During 2011 – 2014, RAB had an upward trend for all the Group distribution companies, being directly reflected
in a Group profitability increase.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 40
5 Securities market
initial puBlic offering
The Government Decision no. 85/2013, amended and
completed by Government Decision no. 477/2014
approved the privatization strategy of Electrica SA by
initial public offer (“IPO”). The privatization strategy
included the offer for sale of a 51% stake by issuance
of new shares representing 105% of the existing share
capital as at the date of the IPO. The shares were
offered to both individual and institutional investors
on the Romanian market, as well as to qualified
institutional investors on the US market and outside
USA, and Global Depository receipts (“GDrs”) on the
UK market.
The IPO was organised in June 2014 and referred to
an offering by the Company of 177,188,744 ordinary
shares in the form of shares and in the form of GDrs,
each GDR representing four shares. Following the IPO,
the Company sold 142,007,744 shares and 8,795,250
GDRs, at the offer prices of RON 11 per share and 13.66
USD per GDR. The allocation of shares and GDRs and
the offering prices were concluded on 27 June 2014.
The transfer of ownership rights on new shares and the
collection of cash by the Company took place on 2 July
2014. At the same date the increase in share capital
was recorded in the Trade register.
Starting 4 July 2014 the Company’s shares are listed on
Bucharest Stock Exchange, and the GDrs are listed on
london Stock Exchange.
share price eVolution since ipo
fIgURE 28: share price on BVB and lse
14
13.5
13
12.5
12
11.5
11
10.5
10
7/4/2014
8/4/2014
9/4/2014
10/4/2014
11/4/2014
12/4/2014
ElSa gDR (USD/share)
Electrica Sa (ROn/share)
Source: BVB. LSE
1/4/2015
2/4/2015
3/4/2015
fIgURE 29: PERf ORmanCE Of ElECTRICa In COmPaRISOn TO BET InDEx (%)
120
115
110
105
100
95
90
85
80
7/4/2014
8/4/2014
9/4/2014
10/4/2014
11/4/2014
12/4/2014
1/4/2015
2/4/2015
elsa gdr
romania Bet
Electrica Sa
3/4/2015
Source: Electrica S.A.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 41
diVidend distriBution
romanian companies may distribute dividends from
statutory earnings only, as per separate financial
statements prepared in accordance with romanian
accounting regulations.
The dividends distributed by the Company in
2014, 2013 and 2012 (from the statutory profits of
preceding years) were as follows:
(ROn mil)
Dividends distributed
Dividends/share (rON)
2012
6.0
0.029
2013
13.2
0.064
2014
22.5
0.108
The dividends per share paid to the owners of the Company were: 2014: RON 0.108, 2013: RON 0.064 and 2012:
rON 0.029 per share.
diVidend policy
Dividends, if and when declared, are distributed to
shareholders on a pro-rata basis proportionately to
their participation in the paid-up share capital of the
Company. Each fully paid Share gives its owner the
right to receive dividends. The Company will pay any
dividends in RON. Prior to the Offering, the Company
was subject to Government Ordinance no. 64/2001 on
distribution of profits of national companies and State
owned companies (the ‘‘Dividend Ordinance’’).
Management will distribute dividends on the basis
of the Company’s annual financial statements which
starting with 2014 will be prepared in accordance
with IFRS-EU. Management’s intention is to distribute
dividends, based on a guidance of approximately 85%
of consolidated profit attributable to shareholders of
Electrica SA.
For the financial years ending 31 December 2011
and 2012, State-owned companies were obliged to
distribute 85% share of their distributable profit as
dividends.
According to the Companies law, in case of
assignment of shares, the assignee shall be entitled
to the right to dividends due for the period after the
assignment is complete. Thus, the investors shall be
entitlted to dividends according to this rule.
repurchase of treasury shares
In July 2014 the Company purchased for price
stabilization purposes, 5,206,593 ordinary shares and
421,000 Global Depositary receipts, equivalent of
1,684,000 shares. The total amount paid for acquiring
the shares and Global Depositary receipts was rON
75,372 thousand.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 42
6 Management of the Group
6.1 Board of directors of electrica s.a.
The board of directors consists of five non-executive
directors appointed by the general meeting of
shareholders. One of the Directors was appointed on
the proposal of the romanian state, represented by the
Ministry of Energy, Small and Medium Enterprises and
Business Environment, three were appointed on the
proposal of the private shareholders and one was named
both on the proposal of the romanian state and private
shareholders. Four of the five directors meet the criteria
for independence provided by the Article of Association
of Electrica.
The Board is entrusted with fulfilling all the necessary and
useful acts for performing the Company’s business object
and for supervising the management’s activity, save for the
ones assigned to the General Meeting of Shareholders.
The composition, organisation, duties and responsibilities
of the Board of Directors are set out in the Articles of
Associationand in the Charter of the Board of Directors.
The current members of the Board of Directors were
elected for four years, through the cumulative voting
method, by the General Meeting of Shareholders, during
the first meeting after the IPO, on 22 September 2014.
The composition of the Board of Directors is the following:
n Mr. Victor Cionga – non-executive administrator, elected as Chairman of the Board of Directors until January 2016
n Ms. Arielle Malard de Rothschild – non-executive administrator
n Mr. Michael Boersma – non-executive administrator
n Mr. Cristian Busu – non-executive administrator
n Mr. Victor Vlad Grigorescu – non-executive administrator
During the first Board of Directors meeting on 14 October 2014, the Board has established three consultative
committees, with the following composition:
a) The nomination and Remuneration Committee
n Ms. Arielle Malard de Rothschild – Chair of the committee
n Mr. Michael Boersma
n Mr. Cristian Busu
b) The audit Committee
n Mr. Cristian Busu – Chair of the committee
n Mr. Victor Vlad Grigorescu
n Ms. Arielle Malard de rothschild
c) The Strategy, Restructuring and Corporate governance Committee
n Mr. Michael Boersma – Chair of the committee
n Mr. Victor Vlad Grigorescu
n Mr. Victor Cionga
The members of the committees are elected for a one-
year term. The organisation, duties and responsibilities
of each committee are laid down in Electrica’s Articles
of Association, respectively in the charters of each
committee.
The Board of Directors delegates Electrica’s
management to one or more managers, appointing
one of them as general manager. The duties and
responsibilities of the general manager are set out in
Electrica’s Articles of Association.
According to our information, there is no agreement,
understanding or family relationship between
the Company’s directors and another person that
contributed to their appointment as managers.
Details regarding the bios of the members of the Board
of Directors can be accessed on the company’s website.
The table below comprises the number of Electrica S.A. shares held by the Company’s directors as of March 2015:
no. name
number of shares
Stake held(as % of the share capital)
1. Mr. Victor Cionga
5.000
0.00144534%
2. Ms. Arielle Malard de rothschild
3. Mr. Cristian Busu
4. Mr. Michael Boersma
5. Mr. Victor Vlad Grigorescu
-
-
-
-
-
-
-
-
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 43
According to our information, the persons mentioned
in section 6.1., have not been involved in litigations or
administrative proceedings related to their activity in
the Company in the last 5 years, nor in proceedings
related to their capacity of fulfilling the duties in the
Company.
Until September 22, 2014 the Board of Directors
members were:
n Mr. Marius Eugen Untescu – non-executive director, president of the board of directors
n Mr. Niculae Plesa – non-executive director
n Mr. Constantin Dinescu – non-executive director
n Mr. Rares Ion Popescu – non-executive director
n Mr. Ioan Rosca – executive director, general manager
6.2 actiVity of the Board of directors of
electrica s.a. and of its consultatiVe committees
During 2014, the Board of Directors nominated on
September 22nd 2014 met 6 times. Out of the 6
meetings, one was an electronic board meeting,
convened in accordance with art. 17 (22) in the
Articles of Incorporation.
The main decisions of the Board of Directors during
the 6 meetings refer to:
n Establishing three consultative committees;
n Drafting the charter of the board and of the
of a treasury department and a major projects
department
n Endorsement of the 2014 income and expenses
budgets for Electrica SA - standalone and
consolidated;
n Endorsement of the 2014 income and expenses
budgets for Electrica’s subsidiaries;
n Endorsement of the 2014 consolidated investment
plan;
consultative committees;
n Discussionof acquisition opportunities for Electrica
n Proposals regarding the organizational structure and
redefining the internal processes, which will reflect
the current context of the Company. Competencies
evaluation for the key personnel in the Company
and proposals for a remuneration system for the
members of the Board, director, managers and key
personnel;
n Negociations with the Unions on the CLA
n Changes to the organizational chart – creation
SA;
n Discussionof the investment opportunities,
respectively the strategy of implementing smart-
metering in the Group, dispatch centralization, GIS
etc.;
n Endorsement of the external auditor for Electrica
SA and subsidiaries and approval of the external
auditor for the subsidiaries.
During 2015, until March 26th 2015, the Board of
Directors met 9 times. Out of the 9 meetings, 6 were
electronic board meetings, convened in accordance
with art. 17 (22) in the Articles of Incorporation.
The main decisions of the Board of Directors during
the 9 meetings refer to:
n Approval of the charters of the board and of its
n Endorsement of the 2014 financial statements
Electrica SA – standalone and consolidated;
n Endorsement of the 2014 statutory financial
statements for Electrica’s subsidiaries;
n Endorsement of the 2015 income and expenses
budgets for Electrica SA - standalone and
consolidated;
consultative committees;
n Endorsement of the 2015 income and expenses
n Approval of the Code of Ethics and Professional
budgets for for Electrica’s subsidiaries;
Conduct;
n Approval of the Corporate Governance Code;
n Approval of the whistleblower policy;
n Approval of the Chart of internal auditor;
n Approval of the Code of Ethics for the internal
auditor;
n Approval of the audit plan for 2015;
n Approval of the internal audit operational
procedure;
n Applying in the subsidiaries the same corporate
governance model as in Electrica SA, namely replacing
the executive directors with non-executive ones;
n Endorsement of the draft management agreement
of the Board members, taking into account EBrD’s
request to modify the management agreement,
approved by the GMS on September 22nd 2014,
and present to the GMS a new proposal drafted by a
reputable legal consultant, in accordance with best
practices and standards.
n Approval of the change in accounting policies
(application of IFRIC 12);
n Discussions about ITC security at group level
n Discussion of Electrica’s strategy
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 44
nomination and remunerations c ommittee
During the period September 22nd, 2014 - March
26th, 2015 thiscommittee hasmet 5 times. During
these meetings the following subjects were discussed
and submitted to the Board for discussions and, when
the case, for the approval of the Board:
n Recommendations regarding the Company’s
remuneration and compensation policies;
n Endorsement of the charter of the committee;
n The organizational structure of the Company,
updated to reflect the current status of the
Company;
audit committee
During the period September 22nd, 2014 - March
26th, 2015 this committee has met 3 times. During
these meetings the following subjects were discussed
and submitted to the Board for discussions and, when
the case, for the approval of the Board:
n Endorsement of the chater of the committee;
n Endorsement of the Code of ethics and professional
conduct;
n Endorsement of the whistleblower policy;
n Endorsement of the internal auditor’s charter;
n Endorsement of the Code of ethics for the internal
auditor;
n Endorsement of the audit plan for 2015;
n Endorsement of the internal audit operational
procedure;
n Evaluation of the competencies of key personnel in
the company and proposal for a remuneration and
compensation system for the board, managers and
key personnel;
n Applying in the subsidiaries the same corporate
governance model as in Electrica SA, namely
replacing the executive directors with non-executive
ones;
n Interviewing the candidates proposed to be
nominated in the board of Directors of the
subsidiaries.
n Endorsement of the 2014 financial statements
Electrica SA – standalone and consolidated;
n Endorsement of the 2014 statutory financial
statements for Electrica’s subsidiaries;
n Endorsement of the 2015 income and expenses
budgets for Electrica SA - standalone and
consolidated;
n Endorsement of the 2015 income and expenses
budgets for for Electrica’s subsidiaries;
n Endorsement of the change in accounting policies
(application of IFRIC 12);
n Endorsement of the manual of accounting policies
n Ordering two spotcheck audit missions.
strategy, restructuring and c orporate go Vernance c ommittee
During the period September 22nd, 2014 - March
26th, 2015 this committee has met 6 times. During
these meetings the following subjects were discussed
and submitted to the Board for discussions and, when
the case, for the approval of the Board:
n Endorsement of the charter of the board;
n Endorsement of the charter of the committee;
n Endorsement of the Code of ethics and professional
investment plan;
conduct;
n The potential acquisition of Enel shareholdings in
romania;
n Discussions regarding the potential acquisition
of the shareholdings of fondul Proprietatea in
Electrica’s subsidiaries;
n Redefinition of the processes, to reflect the current
status of the Company;
n Analysis of acquisition opportunities for Electrica SA;
n Anaysis of the investment opportunities,
respectively the strategy of implementing smart-
metering in the Group, dispatch centralization, GIS
etc.;
n Endorsement of the Corporate Governance Code;
n Endorsement of the 2014 and 2015 consolidated
n Endorsement of the draft management agreement
of the Board members, taking into account EBrD’s
request to modify the management agreement,
approved by the GMS on September 22nd 2014,
and present to the GMS a new proposal drafted by a
reputable legal consultant, in accordance with best
practices and standards.
n The Group’s development strategy;
n Occupational safety and health at group level;
n The possibility of accessing European funds;
n Endorsement of the whistleblower policy;
n The organizational structure of the Company,
updated to reflect the current status of the
Company;
n Applying in the subsidiaries the same corporate
governance model as in Electrica SA, namely
replacing the executive directors with non-executive
ones.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 45
6.3 Board of directors of electrica s .a.
suBsidiaries
edts
edtn
edmn
ef
es
Structure of the Board of Directors in Electrica’s Subsidiaries
Geanta Marian - non-executive director, chairman of the board
Coman Claudiu - non-executive director
Carmen Mihaela Pirnea - non-executive director
Simona Fatu - non-executive director
Ion Dobre - executive director (general manager) (general manager)
Dumbrava Ioan - non-executive director, chairman of the board
Ciprian Gheorghe Diaconu - non-executive director
Vlad Costica - non-executive director
Oana Valentina Truta - non-executive director
Merdan Emil - executive director (general manager)
Rosca Ioan - non-executive director, chairman of the board
Oana Valentina Truta - non-executive director
Paun Costin - Mihai - non-executive director
Gubandru Aurel - non-executive director
Mesca Darius Dumitru - executive director (general manager)
Rosca Ioan - non-executive director, chairman of the board
Oana Valentina Truta - non-executive director
Ionescu Valentin - non-executive director
Lupu Victoria - non-executive director
Patrascoiu Mircea - executive director (general manager)
Marin Adrian Gheorghe - non-executive director, chairman of the board
Badan Gabriel Razvan - non-executive director
Leonte Catalin - non-executive director
Sandu Gabriela - non-executive director
Davidoiu Eugen - executive director (general manager)
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 46
6.4 executiVe management
Ioan ROSCa – General Manager (CEO)
Pursuant to the decision of the Board of Directors
no. 24 dated 5th July 2013, the Board of Directors
has appointed Mr. Ioan Rosca to the position of
general manager of the Company and delegated
him responsibilities and duties related to internal
management and representation. His mandate is until
July 8th, 2017.
The table below shows the company’s managers who have delegated powers from the Board of Directors:
name
Mesca Darius Dumitru
Dobre Ion
Merdan Emil
Patrascoiu Mircea
Davidoiu Eugen
Position
General Manager
General Manager
General Manager
General Manager
General Manager
Subsidiary
EDMN
EDTS
EDTN
Electrica furnizare
Electrica Serv
The table below shows the company’s managers who do not have delegated powers from the Board of Directors:
Position
Department
name
Electrica headquarters
Angelescu ramiro robert Eduard
Dumbrava Ioan
Petre Marin
Geanta Marian
Marin Emilia - Elena
Popescu Borislavschi Alexandra
romana Augusta
Stan Corneliu
Crisan Mariana
Deputy General Manager
Manager
Deputy Manager
Deputy Manager
Manager
Manager
Deputy Manager
Manager
Pindichi Valentin Cosmin
Deputy Manager
edmn
Blagoi Gabriela
Coman Constantin
Branescu Valentin
Gheorghe Gabriel
Preda Ion
EDTS Subsidiary
radulescu Monica
radu Holom
Constandache Nicu
Grama Catalin
EDTn Subsidiary
fataceanu Dora
filip Vasile
Buda Constantin
ladislau reider
Muresan Cristian Marius
Electrica furnizare Subsidiary
Pana Cristina
Beu Mihai
Pirvulete Oana
Gheorghe roxana
Electrica Serv Subsidiary
Hateganu Constantin Nicolae
Andruhovici Cristian
Ivan Alexandru
Vasiu Viorel
Beleuzu Viorel
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Deputy Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Operations
Operations
Operations
Economic
Corporate finance
and Governance
Corporate finance and Governance
Human resources, Control
and Communication
Human resources, Control
and Communication
Economic
Distribution
110 kV
Development
Control, Regulation and Communication
Economic
Distribution
110 kV
Development
Economic
Distribution
110 kV
Development
Development
Economic
Commercial
legal
Commercial Operations
Economic
Human resources
Procurement and International Relations
Production
legal and Assets
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 47
According to the Articles of Incorporation, the Board of
Directors appoints and revokes the General Manager and
the other managers with mandate agreements –art.18,
letter A, paragraph (f) and (k).The General Manager
performs his activity according to the provisions of the
mandate agreement concluded with the Company.
The Managers with managing functions are employees
of the company, having an individual labor agreement
and they are appointed and revoked by the General
Manager.
According to our information, there is no agreement,
understanding or family relationship between the
Company’s managers and another person that
contributed to their appointment as managers.
The table below shows the number of shares held by the Company’s managers as of March, 2015:
no.
name
number of shares
Share in the share capital (%)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Ioan rosca
Angelescu ramiro robert Eduard
Geanta Marian
Dobre Ion
Merdan Emil
Patrascoiu Mircea
Davidoiu Eugen
radulescu Monica
radu Holom
fataceanu Dora
filip Vasile
Beu Mihai
Pirvulete Oana
Beleuzu Viorel
25,000
1,000
1,000
1,800
7,277
1,000
2,478
1,800
1,000
1,000
8,745
1,000
6,836
1,000
0.00722669%
0.00028907%
0.00028907%
0.00052032%
0.00210354%
0.00028907%
0.00071631%
0.00052032%
0.00028907%
0.00028907%
0.00252790%
0.00028907%
0.00197607%
0.00028907%
According to information at hand the persons
mentioned in section 6.3 have not been involved in
any litigations or administrative proceedings related
to their activity within the Company in the last 5
years and their capacity to fulfil their work-related
attributes.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 48
7 Corporate Governance
7.1 general meeting of shareholders
The General Meeting of Shareholders (GMS) is
the main corporate governance body of Electrica,
deciding on the items as outlined in the Articles of
Association.The convening, functioning, voting as well
as other provisions regarding the GMS are detailed in
Electrica’s Articles of Association
Until July 2014, the Romanian State, acting through
the Ministry of Energy, Small and Medium Enterprises
and Business Environment, was the sole shareholder
of Electrica. Starting 4 July 2014 the Company’s shares
are listed on Bucharest Stock Exchange, and the GDrs
are listed on london Stock Exchange.
The latest available information regarding the shareholder structure has been provided by Depozitarul Central
on 21 November 2014 and is presented in the table below:
Shareholder
Shares
Percent of share capital
Ministry of Energy, Small and Medium Enterprises and
Business Environment, Bucharest, romania
EUrOPEAN BANK fOr rECONSTrUCTION AND
DEVElOPMENT, lONDON, UK
BNy MEllON DrS, NEW yOrK, USA
legal persons
Individual persons
total
Source: Central Depository, Electrica S.A.
168,751,185
29,944,090
27,442,180
100,506,060
19,296,414
345,939,929
48.7805 %
8.6559 %
7.9326 %
29.0530 %
5.5780 %
100 %
Following the stabilization process after the IPO, Electrica
SA owns 6,890,593 of its own shares, representing
1.9918% of the total share capital. These shares do not
entitle Electrica to voting rights, nor dividends.
7.2 corporate goVernance c ode
The Board of Directors of Electrica S.A. has approved
on 2 february 2015 the Corporate Governance Code
(CGC), which can be accessed on the company’s
website.
Starting with 4 July 2014, the shares issued by
Electrica are traded on the Bucharest Stock Exchange
(the BSE) and the global depositary receipts (GDrs)
issued by The Bank of New york Mellon (BNyM) having
Electrica’s shares as underlying security, are traded on
the london Stock Exchange (the lSE).
Electrica adheres to and applies wilfully the provisions
of the Corporate Governance Code issued by the BSE
as may be amended or replaced from time to time.
This CGC embeds Electrica’s general principles and
conduct rules which set forth and regulate the
corporate values, the responsibilities, obligations and
business conduct of the company.
The CGC is also a guide for the management and the
employees of Electrica and other stakeholders on
the business conduct and governance matters and
provides information about aspects of the Company’s
principles and policies. It also incorporates the Code
of Ethics and Professional Conduct (Schedule 7 of the
CGC).
In compliance with Companie`s policies and with the
Code of Ethics and professional conduct, the Audit
Committee ensures that the Companie`s activity is
developed with honesty and integrity, including the
approvalof the integrity warning procedure. The
scope of integrity warning procedure is to protect
the Company from ethical deviations, frauds and any
other aspects of non-compliance that would harm the
image, prestige and profitability of the Company. This
procedure can be accesed on Electrica SA website.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 49
7.3 implementing action plans undertooK By
signing the frameworK agreement with eBrd
As a result of EBrD and SDfEE Electrica S.A.
signing the framework Agreement, the Company
undertook to implement the “EBRD Anti – Corruption
Guidelines”, the “Corporate Governance Action Plan”
and the “Environmental and Social Action Plan” and to
report on their implementation progress.
The first step was to adhere to “EBRD anti –
Corruption guidelines” and to integrate those
guidelines into the Company’s Code of Ethics in
force. Electrica initiated the “Socrates” project for
elaborating and disseminating the new code of
conduct and best practices for preventing fraud
and corruption, with the support of Transparency
International Romania (a prestigious international
NGO with expertise in integrity/ethics best practice
contracted for support).
The Code of Ethics and Professional Conduct was
finalized in December 2014 and submitted to the
Board of Directors, following the completion of
Socrates Project phases mentioned below:
stage ii
action: analyzing the processes, the internal and external
interactions and diagnosing the corporate culture.
Result: identifying risks and sensitive areas or
activities, related to both the intragroup and external
interactions from moral/ethical/deontological
standpoint; identifying shared values inside the group,
describing practices specific to Electrica corporate
culture; identifying the values that need and may be
adopted by the Company.
Deliverables: analysis report on Company’s processes
from an ethical perspective and corporate culture
diagnose.
stage iii
action: developing an integrated code of ethics
applicable by the Company.
Result: setting the values and principles that need to
be adopted and respected by the Company.
Deliverables: Electrica’s Code of Ethics and
Professional Conduct.
stage i
action: analyzing the organization’s socioeconomic
environment and also the relevant legislation,
regulations and governance principles.
Result: defining the regulatory framework, the
standards and best practices and also the values and
principles.
Deliverables: analysis report of the external
environment from an ethical and integrity standards
perspective.
The next step consisted of the reconciliation of the
Code of Ethics and Professional Conduct with the
Corporate Governance Code (documents drafted in
parallel) and the final form of the Code of Ethics and
Professional Conduct has been approved by the Board
of Directors on 02.02.2015 through HCA 3/02.02.2015.
Pursuant to its approval, the Company has drafted the
project for the second phase of Project Socrate, which
consists of a 12 months implementation process aimed
at changing the organizational culture.
7.4 the corporate goVernance action plan
1. independent directors’ selection
After its IPO and being listed on the stock exchange,
Electrica’s convened its General Shareholders Meeting
on 22.09.2014 for the appointmentof its newBoard of
Directors.
For selecting the candidates for independent non-executive
director positions Electrica contracted an international
reputable executive search agency in August 2014. The
international reputable executive search agency delivered a
long list of 10 potential independent non-executive directors
2. nomination and remuneration policies
In order to assistthe Company in preparing its
Nomination and Remuneration Policies, an international
specialized consultant was contracted to assist. In
December 2014 a Nomination and Remuneration Policy
Proposal was submitted to the Board of Directors by the
and a short list of 4 potential independent non-executive
directors that was made public.
On 22.09.2014 the General Shareholder Meeting
nominated the 5 new directors of the company, in
compliance with the independence principlefor 3 of
the directors. Electrica’s Board of Directors designated
members are: Arielle Malard de Rothschild, Victor
Cionga, Michael Adriaan Maria Boersma, Victor Vlad
Grigorescu and Cristian Busu.
Nomination and Remuneration Committee. The policy
was endorsed by the Board of Directors and was included
for approval on the agenda of the first GSM in 2015
(programed for 27 -28 of April 2015).
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 50
3. Board committees
Three consultation committees were set during the
first Board of Directors meeting: the Audit Committee,
the Nomination and Remuneration Committee and
the Strategy, restructuring and Corporate Governance
Committee, according to Board of Directors decision
44/14.10.2014. The committees’ charts were prepared
by the Company’s legal consultant and submitted to the
4. internal control frameworK
Electrica’s Internal Control Framework was defined
in accordance with international best practice and
International Standards for the Professional Practice
of Internal Auditing, as requested. The Internal Audit
Department in Electrica updated the Internal Auditing
Procedure and the related documents in accordance with
international best practices and standards, submitting
them to the Audit Committee of the Board of Directors
for endorsement in November 2014. The Internal Audit
Charter, The Procedure and The Auditor Code of Conduct
were developed according to the International Standards
for the Professional Practice of Internal Auditing that
were totally assimilated by The romanian financial
5. company’s articles of incorporation
Electrica reviewed and updated its Articles of
Incorporation according to EBRD guidelines with
respect to the laws in force, the new version of the
Company’s Articles of Incorporation being approved
by the Extraordinary General Shareholders Meeting
Board of Directors committees for endorsement and to
Board of Directors for approval in November 2014 (for
Nomination and Remuneration and Audit Committee)
and in December 2014 (for Strategy, restructuring
and Corporate Governance Committee). Committees’
charts were approved by Board of Directors Decision
03/02.02.2015.
Auditors Chamber through Decision No.35/30.11.2004
and the reviewed Government Emergency Ordinance
No. 75/1999 regarding financial audit. In June 2014,
the romanian financial Auditors Chamber adopted
the International Mandatory Regulation issued by
Global Internal Auditors Institute through Decision
No.48/26.06.2004. This international mandatory
regulations were also used for amending Electrica’s
internal auditing documents which were endorsed
by the Audit Committee of the Board of Directors on
23.12.2014 and approved by Board of Directors Decision
3/02.02.2015.
Decision 9/10.06.2014. Through the General Meeting
of Shareholders’ Resultion on December 18th 2014,
the Articles of Incorporation were updated (the
term “comerciala” as removed from the name of the
company).
6. clear lines of responsiBility and accountaBility
At group level, Electrica prepared with its legal advisor a
framework document on reporting and accountability
corporate policy (the status quo and the options).
Electrica’s and its subsidiaries’ lines of responsibility and
Accountability were defined until now by the Integrated
Quality Environment Health and Safety Management
Systems with respect to ISO 9001:2008, ISO 14001:2004
and OHSAS 18001:2007, certified by an internationally
accredited certification entity (SRAC CERT). Each subsidiary
of Electrica group has its own SRAC certified Integrated
Quality Environment Health and Safety Management
System. The implementation of the standards followed a
consistent approach, based on a unique set of guidelines,
but differences in management systems appeared in time
as a result of core activity differences.
At Company level, the consultant engaged elaborated
a proposal regarding Electrica’s new organizational
chart and defined the key functions. The proposal
was submitted to the Nomination and Remuneration
Committee of the Board for study and endorsement and
after, to the Board of Directors approval.
7. code of conduct
The code of conduct requirements are covered partly by
the code of ethics developed as part of the “Socrates”
Project and partially by Electrica’s Governance Code.
The Company and its external legal advisor elaborated
Electrica’s Corporate Governance Code and submitted it
to the Strategy, restructuring and Corporate Governance
Committee on 17.12.2014. The reconciliation of the code
of ethics with the corporate governance code and with
the policy regarding integrity was finalized on 27.01.2015
and the final form of the Corporate Governance Code
was approved by the Board of Directors by decision
3/02.02.2015.
For details regarding the Code of Conduct visit http://
www.electrica.ro/cod-de-etica-si-conduita-profesionala/
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 51
8. compliance with the Bse corporate go Vernance c ode
regarding the compliance with the BSE Corporate
Governance Code, Electrica included all its provisions in
the Company’s Corporate Governance Code elaborated
with the help of its external legal advisor.
7.5 the enVironment and social a ction plan
Some of the actions included have extended
implementation deadlines (one to two years), but the
measures with short deadlines were implemented by
the end of 2014:
n regarding Environmental health and Safety
management, Electrica reviewed its procedure
on investment projects endorsement in order to
ensure publicity on the Company’s web site and
public consultation on investment project with
significant environmental impact. The updated
internal procedure was approved on 19.12.2014,
getting into force on 20.12.2014 (the term
according to EBrD being 31.12.2014).
n regarding Corporate Social Responsibility, Electrica
developed an organizational structure aimed at
elaborating and managing the implementation of
the Company’s major projects/programs, one of
these being on Corporate Social Responsibility
(CSR). The new organizational chart was approved
by the Board of Directors on the 18.12.2014, thus
meeting the 31.12.2014 deadline agreed with EBRD.
The Project/Program Manager and its team should
develop the Corporate responsibility Program
including the Stakeholder Engagement Plan 2015
and submit them to the Board of Directors for
approval in early 2015.
n regarding the restructuring policy, Electrica
requested the deadline to be rescheduled,
considering that the new Collective Labor
Contract signed with the trade unions requires
the elaboration and negotiation of such a policy
as part of the contract within 6 month from the
contract signing (27.11.2014). Along with this policy,
Electrica also needs to develop and implement a
National Integrated Training Program aimed at using
professional reconversion in order to avoid future
staff reductions.
The framework procedure regarding restructuring
related actions management at group level, including
terms for reporting and informing stakeholders was
elaborated and approved by the General Manager on
22.12.2014 and entered into force the following day,
while the term agreed with EBrD was 31.12.2014.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 52
8 financial overview of the company
The consolidated financial statements have been prepared
in accordance with International Reporting Standards
(“IFRS”) as endorsed by the European Union (“IFRS-EU”).
These consolidated financial statements are presented
in Lei (RON), which is the functional currency of all
group companies.
8.1 consolidated Balance sheet
The table below presents a summary of the statement of individual financial position:
ROn mil
assets
non-current assets
Intangible assets related to concession agreements
Property, plant and equipment
Other Intangible assets
Equity-accounted investees
Other investments
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Trade receivables
Other receivables
Green Certificates
Cash and cash equivalents
Deposits, treasury bills and government bonds
Inventories
Prepayments
Income tax receivable
Assets held for distribution
Total current assets
Total assets
equity and liaBilities
Equity
Share capital
Share premium
Pre-paid capital contribution in kind from shareholders
Revaluation reserves
Treasury share reserve
Other reserves
retained earnings
Total equity attributable to the owners of the Company
Non-controlling interests
total equity
December 31st
20135
2014
20125 Variation 2014/2013
3,501
805
9
-
-
60
8
4,382
781
25
54
1,630
1,221
24
9
23
-
3,765
8,148
3,814
103
3
156
(75)
237
1,269
5,507
811
6,317
3,340
876
5
-
-
85
1
4,307
1,088
57
-
651
-
34
6
37
2,243
4,116
8,423
2,509
-
48
573
-
615
1,937
5,681
764
6,446
3,318
848
8
1,042
1,138
106
6
6,467
1,011
95
-
642
-
35
40
17
-
1,840
8,307
2,493
-
55
589
-
602
1,700
5,439
718
6,157
4.82%
(8.10%)
79.40%
-
-
(30.15%)
612.88%
1.75%
(28.20%)
(56.98%)
-
150.37%
-
(28.11%)
35.53%
(36.63%)
(100.00%)
(8.52%)
(3.27%)
52.00%
-
(93.13%)
(72.76%)
-
(61.52%)
(34.48%)
(3.08%)
6.05%
(1.99%)
5 Restated as a result of application of IFRIC 12 and new standards with a date of initial application of 1 January 2014 under IFRS-EU
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 53
ROn mil
liabilities
non-current liabilities
Long-term bank liabilities
finance lease
Trade payables
Financing for network construction related
to concession agreements
Deferred revenue
Deferred tax liabilities
EMplOyEE bENEFiTS
Other payables
TOTal nOn-CURREnT lIaBIlITIES
Current liabilities
Short term bank borrowings
Bank overdrafts
finance lease
Financing for network construction related to concession
agreementsagreements
Trade payables
Other payables
Current income tax liability
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
Source: Electrica S.A.
December 31st
20135
2014
20125 Variation 2014/2013
-
-
-
151
-
189
220
53
614
-
48
0
99
555
277
14
3
147
73
1,216
1,831
8,148
-
0
-
130
-
201
213
66
611
-
80
0
143
582
307
15
3
152
85
1,366
1,977
8,423
-
1
-
196
1
202
217
77
693
9
167
27
114
681
247
11
2
120
80
1,457
2,150
8,307
-
(100.00%)
-
16.68%
-
(5.98%)
3.37%
(19.88%)
0.54%
-
(39.60%)
(40.96%)
(30.52%)
(4.52%)
(9.93%)
(6.01%)
14.88%
(3.60%)
(14.28%)
(10.99%)
(7.43%)
(3.27%)
nOn-CURREnT aSSETS
Until 2014, the Company considered the concession
services agreements related to the distribution
of electricity concluded by the Subsidiaries to be
public-public, and thus considered that the model
IAS 16 regarding accounting treatement of assets
subject to concession agreements as more adequate,
taking into account that the Company was State
owned. Following the initial public offering,Electrica’s
management considers that it may not be concluded
that the romanian State holds the de facto control
through its shareholding of 48.78% and reassessed the
accounting treatment used for concession agreements
and as a result adopted IfrIC 12 for concession
services arrangements, applicable to public-private
arrangements.
Applying IFRIC 12 has the following effects on the
financial statements:
a. the assets of the distribution subsidiaries will no
longer be classified as tangible fixed assets and will
be classified as intangible fixed assets, representing
the consideration to be received (the right to charge
distribution tariffs based on the consumption
of electricity) by the concessionaire for the
rendered service, consisting of the construction,
modernisation, rehabilitation of electric networks;
b. the tangible fixed assets acquired from
contributions paid by clients (the connection fee),
as well as the tangible fixed assets funded from
subventions or other subvention-like operations
are derecognized, simultaneously with the related
deferred revenues;
c. the reduction of debts related to the deferred tax as
a result of reducing the IFRS accounting basis of the
tangible and intangible fixed assets;
d. the concessionaires act as services supplier (it
builds, modernizes and rehabilitates the distribution
network) and will have to enter into the accounting
records the revenues related to the construction or
improvement of infrastructure as per IAS 11. This
results in additional revenues and expenditures
being recognized in the profit and loss account
(related to the construction and modernization
of infrastructure), as well as of a margin resulting
from rendering the construction services (the used
profit margin was estimated at 3%, relying on the
experience of the subsidiary Electrica Serv for
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 54
construction-installation services);
e. the depreciation of the intangible fixed assets will
created according to the repairs and investment
plans.
be based on the BAr value recovery model;
f. the contributions paid by clients will no longer be
recognized as revenues as per IfrIC 18 “Transfer of
assets from customers”;
g. the Company estimates that provisions are not
required for the obligations related to maintenance
or capital expenditures, since they are annually
The application of the interpretation that an
amendment to the accounting policy entails
restatingthe comparative numbers related to the
financial positionas of31 December 2013 and 31
December 2012, and the profit or loss and other
elements of the global result and the cash flows for
the year ended on 31 December 2013.
The summary of the estimated effects of applying the interpretation at the level of the consolidated financial
statements is as follows:
TaBlE 7: ifric 12 impact
ROn mil
Gross profit increase
Operating revenues increase
Operating expenses increase
2012
Net assets reduction as at 31 December
216
Source: Electrica S.A.
2013
8
222
214
214
2014
8
360
352
212
The application model of IFRIC 12, being to a large
extent correlated to the recognition and depreciation
of the asset components of BAR, reflects the principle
of generating revenues.
At 31 December 2014 the Group performed the
revaluation of land and buildings with a net effect of
rON (42) million.
Non-current assets have increased by 1.75% in 2014
as compared to 2013, from rON 4,307 million to
rON 4,382 million, mainly due to the increase in
intangible assets related to concession agreements
(investments made in the network).The increase in
non-current assets is driven mainly by investments in
the distribution network (see Annex 2).
current assets
Current assets have decreased by 8.52% in 2014 as
compared to 2013, from rON 4,116 million to rON
3,765 million, due to the decrease in assets held
for distribution related to the transfer of the shares
held by the Company in 10 entities (Enel Distributie
Muntenia, Enel Energie Muntenia, Enel Distributie
Banat, Enel Distributie Dobrogea, Enel Energie, E.On
Moldova Distributie, E.On Energie, Electrica Soluziona,
Hidro Tarnita and BRM), following the spin-off of
the Company’s shareholdings to a new company
- „Societatea de Administrare a Participatiilor in
Energie SA” - wholly owned by the Company’s major
shareholder and on other hand the increase in cash
and cash equivalents following the capital increase
through the IPO.
trade receiVaBles
Trade receivables decreased by rON 306.6 million,
equivalent to 28%, to rON 781 million in 2014 from
rON 1,088 million as of 31 December 2013. This
decrease was mainly attributable to the collection
by Electrica furnizare SA subsidiary of the overdue
receivables from the National Railway Company
- Compania Nationala Caile Ferate Romane CFR SA
(“CFR”) (a state-owned company). On 13 May 2014
the Group collected the value of electricity invoiced as
of31 December 2013 of rON 221 million.
cash and cash equiValents
Cash and cash equivalents have increased by 150.37%
in 2014 as compared to 2013, from rON 651 million
to rON 1,630 million, as a result of the funds received
from IPO.
deposits, treasury Bills and go Vernment
Bonds
Deposits, treasury bills and government bonds have
increased with rON 1,221 million in 2014 as compared
to 2013, as a consequence of the IPO process.
assets held for distriBution
Based on the Extraordinary General Shareholders
decision dated 20 March 2014 and the resolution of
the Bucharest Court dated 10 April 2014, the Group
recognised the spin-off of the Company’s shareholdings
to a new company - „Societatea de Administrare a
Participatiilor in Energie SA” - wholly owned by the
Company’s main shareholder (Ministry of Energy, Small
and Medium Enterprises and Business Environment).
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
55
The investments included equity accounted investees and other investments and were classified as assets held
for distribution as of31 December 2013, as follows:
assets held for distribution (ROn mil)
Carrying amount
at 31 December 2013
Percentage Ownership
interest
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Distributie
E.On Energie
Electrica Soluziona
Hidro Tarnita
BrM
Total assets held for distribution
Source: Electrica S.A.
823.18
91.05
552.15
394.30
158.67
213.00
11.00
0.05
0.06
0.04
2,243
23.57%
23.57%
24.87%
24.90%
36.99%
27.00%
3,78%
49.00%
50.00%
share capital and share premium
The issued share capital in nominal terms consists of
345,939,929 ordinary shares at 31 December 2014
(2013: 207,839,904) with a nominal value of RON 10
per share.
All shares rank equally with regard to the Company’s
residual assets. The holders of ordinary shares are
entitled to receive dividends as declared, and are
entitled to one vote per share at General Shareholders
Meetingsof the Company.
Number of shares at 1 January
Shared issued during the year
Decrease of the number of shares by spin-off
number of shares at 31 December
Source: Electrica S.A.
Ordinary shares
2014
207,839,904
181,223,805
(43,123,780)
345,939,929
2013
206,229,044
1,610,860
-
207,839,904
The Company recognizes the changes in share capital
only after their approval in the General Shareholders
Meeting and their registration by the Trade Register. The
contributions made by the shareholder which are not
yet registered with the Trade register at year end are
recognized as “pre-paid capital contributions in kind from
shareholders”.
On 25 february 2014 an increase of share capital of
188,264 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods.
On 10 April 2014 Bucharest Court approved the spin-off
by Electrica SA through transfer of part of its assets
(investments held by Electrica SA in other entities – see
Note 24 of the Consolidated financial Statements)
to a new company „Societatea de Administrare a
Participatiilor in Energie SA”, owned by the Romanian
State, represented by the Ministry of Energy, Small
and Medium Enterprises and Business Environment.
Following this transaction, the share capital decreased by
43,123,780 ordinary shares.
On 16 May 2014 an increase of share capital of 3,846,797
ordinary shares was registered in the Trade registry. The
shares were issued in respect of land contributed by the
shareholder in previous periods for shares.
Between 11 and 27 June 2014 the Company organised
an IPO, which referred to an offering of 142,007,744
shares and 8,795,250 GDRs, each GDR representing
four shares (see Note 1 of the Consolidated financial
Statements). The underwritings amounted to RON
1,556,095 thousand and USD 120,143,115. On 2 July
2014 the increase of share capital by 177,188,744
ordinary shares was recorded in the Trade register.
Consequently, the Group recognised an increase of share
capital of rON 1,771,887 thousand and a share premium
of RON 171,128 thousand. The transaction costs of
rON 68,079 thousand were deducted from the share
premium.
Until 31 December 2003, the statutory share capital
in nominal terms was restated according to IAS 29
“Financial Reporting in Hyperinflationary Economies”
with a corresponding adjustment to retained earnings.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
56
treasury shares
In July 2014 the Company purchased for price stabilization purposes, 5,206,593 ordinary shares and 421,000
Global Depositary receipts, equivalent of 1,684,000 shares. The total amount paid for acquiring the shares and
Global Depositary receipts was rON 75,372 thousand.
diVidends
Dividends for the year ended 31 December 2013, in amount of rON 22.48million, were declared on the basis of
individual annual statutory financial statements.
The dividends in respect of the year ended 31 December 2013 were approved by OGMS of the Company no. 29
on 28 May 2014 and were paid on 28 July 2014.
reValuation reserVes
The reconciliation between opening and closing revaluation reserve is as follows:
ROn mil.
Balance at 1 january
Revaluation of property, plant and equipment attributable to the
owners of the company
Share of changes in revaluation reserve of equity accounted investees
Release of revaluation reserve to retained earnings due to
depreciation and disposals of property, plant and equipment
Spin-off effect
loss of control over subsidiaries
Balance as at 31 December
Source: Electrica S.A.
2014
573
(1)
-
(15)
(388)
(13)
156
2013 restated
589
-
(2)
(15)
-
-
573
other reserVes
Other reserves include:
n legal reserves – set up as 5% of the gross profit for the year in the statutory individual financial statements
of the companies within the Group, until the total legal reserves reach 20% of the paid-up nominal
share capital of each company, according to the legislation. These reserves are deductible for income tax
purposes and are not distributable;
n other reserves set up in compliance with legislation in force.
ROn mil
Balance at 1 january 2013
Set-up of legal reserves
Balance at 31 December 2013
Set-up of legal reserves
Spin-off effect
Balance at 31 December 2014
Source: Electrica S.A.
legal reserves
Other reserves
Total other reserves
233
13
246
30
(39)
237
369
-
369
-
(369)
-
602
13
615
30
(408)
237
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 57
nOn-COnTROllIng InTERESTS
The following table summarises the information related to each of the Group’s subsidiaries that has material
NCI, before any intra-group elimination.
31 December 14
ROn mil
nCI percentage
Non-current assets
Current assets
Non-current liabilities
Current liabilities
net assets
Carrying amount of nCI
revenues
Profit
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
Other comprehensive income allocated
to NCI
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities**
net increase in cash and cash equivalents*
Dividends paid to NCI during the year
Source: Electrica S.A.
edmn
edtn
edts
ef
Intra-group
eliminations
Total
22.00%
22.00%
22.00%
22.00%
1,232
1,110
1,160
130
449
(205)
(163)
1,313
289
876
133
(2)
131
29
(0)
181
(276)
(135)
(230)
23
156
(92)
(183)
990
218
751
128
1
129
28
0
163
(134)
(82)
(53)
12
178
1,065
(133)
(225)
980
216
(71)
(729)
394
87
2
811
816
3,995
74
(2)
72
16
(0)
182
(80)
(142)
(40)
13
181
3
184
40
1
444
(1)
(89)
354
20
114
(0)
67
*Amounts presented represent cash flows of the subsidiaries
**Cash flows from financing activities include dividends paid to subsidiaries
nOn-CURREnT lIaBIlITIES
Non-current liabilities have slightly increased by 0.54%
in 2014 compared to 2013.
current liaBilities
Current liabilities have decreased by 10.99% in 2014
compared to 2013, from rON 1,366 million to rON
1,216 million, as a result of the following categories
(that represent 87% of total current liabilities):
proVisions
In 2013 several companies from the Group had control
from the Court of Accounts that were concluded with
several findings and recommendations, some of them
with fiscal impact. The Group set-up provisions for
the amount it estimated that will probably result in
an outflow of economic resources in the future. The
Group considered as contingent liabilities the possible
amounts related to uncertain aspects.
trade payaBles
Trade payables have decreased by 4.52% in 2014
compared to 2013. The main categories included in
trade payables are: electricity suppliers (state-owned
power generators and other participants on the
electricity market), CAPEX suppliers and other suppliers
(suppliers of services, materials, consumables, etc.).
As of 31 December 2014, provisions for litigation and
other risks refer mainly to:
n RON 34.2 million representing potential fiscal
obligations of the Group (including interest and
penalties);
n RON 17.9 million representing claims of individuals
in respect of land owned by the Group.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
58
employee Benefits
Employee benefits have decreased by 3.6% in 2014 compared to 2013.
ROn mil.
31 Dec 14
31 Dec 13
Personnel payables
Current portion of defined benefit liability and other long-term
employee benefits
Social security charges
Tax on salaries
Termination benefits
Other employee benefits
Total
Source: Electrica S.A.
39
13
64
16
0
16
147
30
11
80
15
16
-
152
In romania, all employers and employees, as well as
other persons, are contributors to the state social
security system. The social security system covers
pensions, allocations for children, temporary inability to
work, risks of works and professional diseases and other
social assistance services, unemployment benefits and
incentives for employers creating new workplaces.
The Group has overdue social security and other
salary taxes of rON 39,541 thousand at 31 December
2014 (2013: RON 58,476 thousand) which relate to
the four subsidiaries with financial difficulties (SC
Servicii Energetice Moldova SA, SC Servicii Energetice
Dobrogea SA, SC Servicii Energetice Muntenia and SC
Servicii Energetice Oltenia SA).
other current payaBles
Other payables have decreased by 9.93% in 2014 compared to 2013.
ROn mil.
VAT payable
Late payment penalties to the State budget
Liabilities related to radio and TV tax
Liabilities related to Green Certificates
Other liabilities
Total
Source: Electrica S.A.
31 December 2014
31 December 2013
137
71
12
42
15
277
167
69
12
46
13
307
Part of the late payment penalties to the State are
rescheduled for payment based on a plan issued by
ANAf to Electrica Serv for a period of 48 months
starting August 2012. In relation to this ANAF
instituted a pledge on certain property, plant and
equipment of Electrica Serv (see Note 35 c) of the
Consolidated financial Statements). The late payment
penalties refer to services subsidiaries, including those
in financial distress.
In accordance with law no. 533/2003, whichamended
Law no. 41/1994 regarding the organization and
functioning of Romanian Radio Company and
romanian Television Company, radio and TV taxes are
collected by Electrica furnizare SA on behalf of these
companies. The payable of the Group to the above
mentioned institutions represents radio and TV tax
collected and not paid by the year-end.
Other liabilities include mainly guarantees and sundry
creditors.
Other non-current liabilities refer to guarantees from
customers related to electricity supply.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 59
8.2 profit and l oss
In the following table is presented the Consolidated Income Statement of Electrica Group, for the period 2012 – 2014.
ROn mil
revenues
Other income
Electricity purchased
Green certificates
Construction costs
Employee benefits
repairs, maintenance and materials
Depreciation and amortisation
Impairment of property, plant and equipment, net
reversal of impairment / (impairment) of trade and other
receivables, net
Other operating expenses
Operating profit
finance income
finance costs
net finance (income) /cost
2014
5,044
177
20136
5,383
128
(2,349)
(2,845)
(272)
(440)
(739)
(85)
(326)
(33)
(5)
(475)
497
36
(23)
13
(414)
(290)
(766)
(111)
(313)
(12)
21
(434)
345
24
(35)
(12)
20127
Variation 2014/2013
5,253
124
(3,089)
(302)
-
(755)
(179)
(398)
(4)
53
(460)
243
22
(46)
(24)
(6.30%)
37.56%
(17.43%)
(34.21%)
51.63%
(3.57%)
(23,56%)
3.98%
163.33%
(122.30%)
9.32%
43.85%
54.81%
(33.99%)
(214.73%)
Share of profit or loss of equity-accounted investees, net of tax
-
63
247
(100.00%)
Profit before tax
Income tax expense
Profit for the year
Source: Electrica S.A.
510
(109)
401
397
(81)
316
466
(53)
413
28.56%
33.96%
27.17%
8.2.1 consolidated figures
Electrica’s revenue in 2014 and 2013 amounted to
RON 5,044 million and RON 5,383 million, respectively.
The decrease of revenue by rON 339 million, or 6.3%
in 2014 as compared to 2013 resulted mainly from
the decrease in revenues from supply activity that
were partially offset by the increase in distribution
revenues.
electricity purchased
The expense for electricity purchased by the group
decreased by rON 496 million, or 17%, to rON 2,349
million in 2014 from rON 2,845 million in 2013, this
decrease being mainly attributable to the decrease in
the average electricity acquisition price as well as to a
decrease in quantities supplied.
6 Restated as a result of application of IFRIC 12 and new standards with a date of initial application of 1 January 2014 under IFRS-EU
7 No restatement has been performed for the year 2012, as a result of the application of IFRIC 12 starting with 1 January 2014
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
60
The table below presents the structure of the electricity purchased for the periods indicated.
ROn mil
Electricity acquired to cover network losses
Transmission and system services
Electricity purchased for supply and trading
Total electricity purchased
Source: Electrica S.A.
As a percentage of revenue, the cost of electricity
purchased was the main cost element of the Group,
representing 46.6% in 2014 and 52.9% in 2013.
green certificates
Green Certificates are accrued in the profit and loss
based on the quantitative quota determined by the
regulator representing the amount of the Green
Certificates that the Group has to purchase for the
year and based on the price of Green Certificates on
the centralised market.
The cost with the acquisition of Green Certificates is a
pass through cost.
As a percentage of revenue, the cost with the
acquisition of Green Certificates represented 5.4% in
2014 and 7.7% in 2013.
construction costs
In 2014, the costs of construction contracts increased
by rON 150 million, or 51.6%, to rON 440 million
from rON 290 million in 2013. This increase is mainly
due to the increase of RAB in 2014, resulting from
investments undertaken in 2014.
employee Benefits
Expense for salaries and employee benefits decreased
by rON 27.3 million, or 4%, to rON 739 million in
2014 from rON 766 million in 2013. This decrease
was attributable to the decrease in employee benefits
from both distribution and supply segments, which
was partially offset by an increase related to dismissed
employees that enforced their claims against the
assets of SE Moldova, in voluntary liquidation.
As a percentage of revenue, the expense for salaries
and employee benefits represented 15.6% in 2014
and 14.8% in 2013.
repairs, maintenance and materials
repairs, maintenance and materials expenses
decreased by rON 26.1 million, or 23.6%, to rON
85million in 2014 from rON 111 million in 2013. This
decrease was primarily attributable to a decrease
of activity of the services companies of the Group
performing external electricity network maintenance,
2014
426
324
1,599
2,349
2013
521
304
2,020
2,845
as well as to the decrease in expenses with network
maintenance of the distribution companies. As a
percentage of revenue, the expense for repairs,
maintenance and materials represented 1.7% 2014
and 2.1% 2013.
other operating expenses
Other operating expenses remained relatively constant
in 2014 and in 2013, the increase by rON 40.5 million
due to the special construction tax introduced in 2014
being partially offset by efficiency measures. As a
percentage of revenues, other expenses represented
9.4% 2014 and 8.1% in 2013.
operating profit
As a result of the factors described above, the
operating profit increased by RON 151 million, or 44%
to rON 497 million in 2014 from rON 345 million
in 2013, driven by an exceptional result in supply
segment and by the improvement of the distribution
segment rentability.
nET fInanCE InCOmE /COST
The group’s financial result turned positive in 2014
due to the interest received related to both IPO
proceeds and the Cfr receivables cash in.
profit Before tax
The profit before tax increased by RON 113 million, or
28.6 % to rON 510 million in 2014 from rON 397 in
2013.
income tax
The income tax increased by rON 27.6 million, or
34%, to rON 109 million in 2014 from rON 81 million
in 2013. This increase was primarily attributable to
the tax paid in connection to the sale of shares held
in in E.On Moldova Distributie and E.On Energie
romania.
net profit for the period
For the reasons discussed above, net profit for the
year increased by rON 85.8 million, or 27.2%, to rON
401 million in 2014 from rON 316 million in 2013.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 61
8.2.2 SEgmEnT REPORTIng - DISTRIBUTIOn
KEy fa CTS – DISTRIBUTIOn SE gmEnT (ROn mil)
distriBution segment reVenues
distriBution segment eBitda
3,000
ROn mil
2,500
2,000
1,500
1,000
500
0
2,313
403
700
574
636
2012
2,657
396
805
714
742
2013
2,838
395
876
751
816
2014
800
700
600
500
400
300
200
100
0
ROn mil
623
22
203
202
197
2012
603
20
206
184
193
2013
688
20
232
225
211
2014
edts
edtn
edmn
Electrica Serv
edts
edtn
edmn
Electrica Serv
Source: Electrica S.A.
Source: Electrica S.A.
distriBution segment net income
DISTRIBUTIOn SEgmEnT nET DEBT/(nET CaSh)
350
300
250
200
150
100
50
0
-50
ROn mil
176
82
53
46
5
2012
226
12
106
55
53
306
5
127
104
70
2013
2014
edts
edtn
edmn
Electrica Serv
300
200
100
0
(100)
(200)
(300)
ROn mil
30
19
57
162
(208)
2012
edts
-139
23
93
(246)
(9)
2013
-28
52
105
(168)
(17)
2014
edtn
edmn
Electrica Serv
Source: Electrica S.A.
Source: Electrica S.A.
The following table presents the Segment reporting Income Statement of the group`s distribution segment,
for the period 2013 –2014.
ROn mil
External revenues
Inter-segment revenue
Segment revenue
Segment profit (loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment, net
eBitda
net profit / (loss)
Source: Electrica S.A.
31 Dec 14
31 Dec 13
955
1,519
2,475
370
(7)
(311)
688
306
712
1,570
2,282
286
(15)
(302)
603
226
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 62
reVenues
Revenue from the distribution segment increased by
rON 243.5 million, or 34.2%, to rON 955 million 2014
from rON 712 million in 2013.
This increase was mainly attributable the increase
of the average regulated distribution tariff. Electrica
Serv slightly improved the external revenues
(services rendered to companies outside the group)
from rON 11 million in 2013 to rON 22 million in
2014.
electricity purchased
The table below presents the structure of the electricity purchased for the periods indicated.
ROn mil
Electricity acquired to cover network losses
Transmission and system services
2014
426
324
2013
521
304
The cost of electricity purchased to cover network
losses decreased by rON 95 million, or 18.2%, to rON
426 million in 2014 from rON 521 million in 2013. The
decrease was mainly attributable to the decrease in
the electricity acquisition price.
employee Benefits
Employee benefits decreased by RON 28.5 million,
or 5%, to rON 545.2 million in 2014 from rON 573.7
million in 2013, driven mainly by efficiency measures.
repairs, maintenance and materials
repairs, maintenance and materials expenses
decreased by rON 49.4 million, or 19%, to rON
209 million in 2014 from rON 259 million in 2013.
This decrease was attributable to to the decrease
in expenses with network maintenance that were
capitalized starting 2014.
eBitda
The increase in revenues together with the decrease
in network losses costs as well as the improvement in
employee costs and other operational expenses led to
a rON 85 million and 14% increase in the segment’s
EBITDA,
The EBITDA margin gained 160 bps in 2014, from
26.4% in 2013 up to 28% in 2014, mainly driven by the
EDTN’s performance (a 400 bps improvement y-o-y).
segment net profit
The net profit followed the main trend as the EBITDA,
sustained also by the reductionof the segments
financial loss. The net profit margin improved from
9.9% in 2013 up to 12.4% in 2014.
8.2.3 SEgmEnT REPORTIng - SUPPly
KEy fa CTS – SUPPly SEgmEnT
supply segment reVenues
supply segment eBitda
6,000
ROn mil
ROn mil
4,801
302
4,780
414
4,499
4,366
4,133
272
3,861
2,4%
2,4%
116
117
5,000
4,000
3,000
2,000
1,000
-
2012
2013
2014
net Revenues
green Certificates
Source: Electrica S.A.
2012
eBitda
2013
2014
marja EBITDa
5,6%
233
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 63
supply segment net income
SUPPly SEgmEnT nET DEBT/(nET CaSh)
400
350
300
250
200
150
100
50
-
ROn mil
1.6%
1.9%
79
90
4.5%
180
2012
net Income
Source: Electrica S.A.
2013
2014
net Income margin
6%
4%
2%
0%
-2%
-4%
-6%
-8%
(50)
(100)
(150)
(200)
(250)
(300)
(350)
(400)
(450)
(33)
ROn mil
(50)
(403)
2012
2013
2014
net Debt/(net Cash)
Source: Electrica S.A.
The following table is presented the Segment reporting Income Statement of the group`s distribution
segment, for the period 2013 –2014.
ROn mil
External revenues
Inter-segment revenue
Segment revenue
Segment profit (loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment, net
eBitda
net profit / (loss)
Source: Electrica S.A.
reVenues
Net revenue (excluding revenues from green certificates)
from the supply segment decreased by rON 505 million
or 12%, to rON 3,861 million in 2014 from rON 4,366
million in 2013. This decrease was mainly attributable to
the decrease in energy prices which offset an 8% increase
in quantity supplied and a 5% decrease in the average
supply tariff.
electricity purchased
The expense for electricity purchased decreased by rON
320 million, or 22%, to rON 1,134 million in 2014 from
rON 1,454 million in 2013. This decrease was primarily
attributable to the decrease in the cost of electricity
purchased for supply and trading by rON 297 million, or
25%, to rON 885 million in 2014 from rON 1,182 million
in 2013. The decrease was mainly attributable to the
decrease in the average electricity acquisition price.
green certificates
The 34% decrease in the value of Green Certificates
included in the invoice to the final consumer from 51.29
rON/MWh in 2013 to 32.84 rON/MWh in 2014, in
accordance with ANRE regulations, generated a RON 142
million decrease in the revenues from green certificates,
without an impact on the profitability as Green
Certificates are reinvoiced to the customers at cost.
The cost with the acquisition of the Green Certificates
31 Dec 14
31 Dec 13
4,030
103
4,133
230
4
(7)
233
180
4,570
210
4,780
110
(0)
(7)
117
90
decreased by rON 142 million, or 34%, to rON 272
million in 2014 from rON 414 million in 2013. This
decrease was mainly attributable to the 39% reduction in
the price of Green Certificates from RON 229 per Green
Certificate in 2013 to RON 138.6 per Green Certificate in
2014.
In 2014, the regulatory Green Certificates quota imposed
to the electricity suppliers by ANrE decreased from 0.224
Green Certificates per MWh supplied in 2013 to 0.218
Green Certificates per MWh supplied in 2014.
salaries and employee Benefits
Employee benefits decreased by RON 1.4 million, or 4%,
to rON 83.1 million in 2014 from rON 84.5 million in
2013, driven mainly byefficiency measures.
eBitda
The above mentioned factors led to a 94%/RON 110
million increase in the supply segment EBITDA, that
combined with the decrease in revenues led to a 330 bps
improvement in EBITDA margin, from 2.4% in 2013 up to
5.7% in 2014.
segment net profit
The net profit increased by RON 91 million/101.1%,
driven also by the improvements of the financial profit,
following the cash in of the Cfr receivables.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 64
8.3 cash flow
ROn mil
Cash flows from operating activities
Profit
adjustments for:
Depreciation
Amortisation
Impairment of property, plant and equipment
loss on disposal of property, plant and equipment
Impairment loss on trade and other receivables, net
Write-down of inventories, net
Change in provisions
release of deferred income
Net finance cost
Share of profit or loss of equity-accounted investees, net of tax
Gain on loss of control over subsidiaries
Income tax expense
Changes in :
Trade receivables
Other receivables
Green Certificates
Deposits, treasury bills and government bonds
Prepayments
Inventories
Trade payables
Other payables
Provisions and employee benefits
Deferred revenue
Cash generated from operating activities
Interest paid
Income tax paid
2014
2013
2012 Variation 2014/2013
401
316
416
27.17%
33
292
33
5
5
10
-
-
(13)
-
(32)
109
229
27
(54)
(3)
(2)
(1)
49
(40)
21
0
1,068
(11)
(76)
31
283
12
4
(21)
(1)
-
-
12
(63)
-
81
381
16
4
6
(53)
18
-
(68)
24
(247)
-
53
(118)
103
21
-
-
34
2
(74)
25
36
-
579
(21)
(47)
7
-
-
(4)
(19)
62
123
65
181
1,070
(29)
(45)
9.07%
3.43%
163.33%
26.27%
(122.30%)
(1080.81%)
-
-
(214.73%)
(100.00%)
-
33.96%
(293.99%)
25.49%
-
-
(106.68%)
(138.83%)
(166.22%)
(260.00%)
(43.08%)
-
70.19%
(47.62%)
61.70%
net cash from operating activities
981
511
996
91.98%
Cash flows from investing activities
Payments for network construction and rehabilitation
Payments for purchases of property, plant and equipment**
Payments for purchases of property, plant and equipment from customers
contribution
Payments for purchases of other intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments
Payments for purchase of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Payments in deposits with maturity of 3 months or longer
Interest received
net cash used in investing activities
(318)
(39)
-
(8)
0
141
(1,194)
296
(319)
36
(1,406)
(178)
(72)
-
(2)
1
-
-
-
-
-
(378)
(181)
(15)
1
-
-
-
-
78.65%
(45.78%)
-
217.68%
(74.76%)
-
-
-
-
21
(231)
23
(549)
70.36%
328.32%
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
65
ROn mil
Cash flows from financing activities
Proceeds from issue of shares, net of transaction cost
repurchase of treasury shares
Repayment of financing for network construction related to concession agreements
repayment of bank borrowings
Dividends paid
Payment of finance lease liabilities
Cash transferred at spin-off
net cash from financing activities
net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of loss of control over subsidiaries on cash
Effect of movements in exchange rates on cash held
Cash and cash equivalents at 31 December
Source: Electrica S.A.
2014
20138
20128 Variation 2014/2013
1,875
(75)
(143)
-
(90)
(2)
(130)
1,435
1,011
571
-
-
1,581
-
-
(130)
(10)
(39)
(6)
-
(185)
95
474
-
2
571
-
-
(151)
(30)
(8)
(6)
-
(194)
252
218
-
4
474
-
-
9.41%
(100.00%)
131.97%
(66.26%)
-
(876.08%)
962.53%
20.41%
-
(100.00%)
176.88%
cash flow
In 2014, net cash from operating activities amounted
to RON 981 million. The profit before tax for the
period was rON 510 million. The key adjustments
were: (i) adding depreciation, amortisationof RON 325
million, a change inimpairment and loss on disposal
of PP&E in amount of RON 38 million, a net change in
trade and other receivables of rON 4.6 million (mainly
due to a decrease in the trade receivables collection
period in 2014 compared to 2013), a change in trade
and other payables of rON 149 million and a change in
employee benefits and provisions of RON 21million, a
change in inventories of RON 10 million (ii) deducting a
net finance cost of RON 13 million, a loss from control
over subsidiaries of rON 32 million, a cost withgreen
certificates of RON 54 million and other adjustments
in effect of RON 5 million. Income tax and interest paid
amounted to a total of rON 87 million.
In 2013, net cash from operating activities amounted
to RON 511 million. The profit before tax for the
period was rON 397 million. The key adjustments
were: (i) adding depreciation, amortisation of RON
313 million, a change in impairment and loss on PP&E
in amount of rON 16 million, a change in trade and
other payables of rON 81 million (mainly due to an
increase in the VAT payable), a change in provisions
and employee benefits of RON 36 million, a net
finance gain of RON 12million, prepayments of RON
34 million, a change in inventories of rON 1 million
and (ii) deducting a net change in trade and other
receivables of rON 118 million (mainly due to an
increase in receivables from CFR),the share of profit
of equity-accounted investees in amount of RON 63
million related to the minority stakes held by Electrica
in the privatised electricity distribution and supply
companies Enel Distributie Banat, Enel Distributie
Dobrogea and Enel Energie). Income tax and interest
paid amounted to a total of rON 68 million.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014
66
2014 DireCTOrs’ rePOrT (CONsOLiDATeD)
annex 1 litigations
Electrica S.A. and its subsidiaries are part of a series of litigations, out of which we present additional details pertaining to the most material ones:
1. fiscal litigations
no. Parties/ Case no.
Object
Court
Case status
2014
annual
report
1
2
3
4
5
Plaintiff: Electrica S.A.
Defendant: ANAF
No. 24402/302/2013
Appeal against enforcement regarding the writ of
execution no. 335/4.11.2013
Court of District 5, Bucharest
Electrica’s appeal was accepted on 06/17/2014. The decision is not final, ANAF may
lay an appeal. We mention that the term for lodging an appeal runs from the date of
communication of the court decision, and the decision was communicated to Electrica
SA on 03/20/2015.
Plaintiff: Electrica S.A.
Defendant: ANAF
No. 7614/2/2013
Plaintiff: Electrica S.A.
Defendant: ANAF
No. 55166/299/2010
Appellant - Challenger:
Electrica S.A.
Respondent: ANAF
No. 4841/299/2013
Appellant - Challenger:
ElECTrICA S.A.
Respondent: ANAF
No. 39910/299/2012
Contestation of Decision no. 147/22.05.2013
for the value of 2,387,992 lei
(action for annulment against Decision no.
147/22.05.2013, issued by ANAf within the
procedure for solving administrative contestations
formulated against the debentures which
established ancillary payment obligations for the
delayed payment of the current state budget
payment obligations, by Decision no. 214/2012 for
the amount of 2,387,992 lei).
Appeal against enforcement and stay of
execution regarding the writ of execution no.
3166/09.11.2010
- adjournment of the forced execution initiated in
the fiscal case no. 13267221;
- annulment of the writ of execution No.
3166/2010 for the amount of 31,250,651 lei tax on
revenue;
- annulment of the demand for payment no.
61/90/1/2010/13875 for the amount of 31,250,651
lei tax on revenue.
Bucharest Court of Appeal
On 06.03.2015 the court admitted the contestation in part and partly cancelled the
Decisions no. 147/22.05.2013 and no. 214/30.10.2012, issued by the defendant for the
amount of 2,383,070 lei, which represent ancillary tax payment obligations. The court
maintained the challenged administrative- fiscal deeds for the amount of 4,922 lei. The
court summoned ANAf to pay to Electrica the amount of 30,961.35 lei as court fees.
ANAf may lay an appeal.
We mention that the term for the appeal runs from the date of communication of the
court decision, and until the present, the decision was not communicated.
Tribunalul Bucuresti
Instanta de fond a admis contestatia la executare, astfel cum a fost precizata si
a dispus anularea titlului executoriu nr. 3166/09.11.2010 emis de ANAF pentru
suma de 31.250.651 RON, reprezentând impozit pe profit; a anulat somatia nr.
61/90/2010/13875 din data de 09.11.2010 emisa de ANAf in dosarul de executare
nr. 13267221 pentru suma de 31.250.651 rON si a tuturor actelor de executare
subsecvente emise in dosarul de executare nr. 13267221. A dispus intoarcerea
executarii silite si a obligat ANAf sa achite Electrica suma de 31.250.651 rON.
ANAf a atacat hotararea cu recurs, dosarul avand termen de judecata la 30.03.2015.
Contestation of the writ of execution no.
61/08.01.2013 for the amount of 2,391,528.00 lei
Court of District 5, Bucharest
Electrica’sappeal was acceptedon06/17/2014. The decisionis not final,
ANAF may lay an appeal.We mentionthat the termfor lodging an appealruns
from thedate of communication ofthe court decision, and the decision
wascommunicatedtoElectricaSAon03/20/2015.
Contestation for annulment of the writ of
execution no. 983/2012 issued by ANAF, demand
for payment no. 61/09.08.2012 for the amount of
13,592,890.00 lei (this amount represents current
obligations for the tax on revenue, paid in due
time by our company).
Bucharest Court of Justice
The court irrevocably dismissed the contestation formulated by Electrica.
67
2014 DireCTOrs’ rePOrT (CONsOLiDATeD)
2. litigations against the c ourt of accounts
no.
Parties/ Case no.
Object
Court
Case status
2014
annual
report
Appellant - Plaintiff:
Electrica S.A. – exonerated,
Societatea de Administrare a
Participatiilor in Energie brought in
the proceedings - defendant
No. 5699/2/2013
Appellant - Plaintiff:
Electrica S.A. – exonerated,
Societatea de Administrare a
Participatiilor in Energie brought
in the proceedings romanian
Court of Accounts – Respondent -
Defendant
No. 8335/2/2012
Plaintiff - Electrica Serv;
Defendant - The Romanian Court of
Accounts.
No. 368/2/2014
Plaintiff - Electrica Furnizare;
Defendant - The Romanian Court of
Accounts.
No. 5755/2/2013
Plaintiff - Electrica Transilvania Nord
Defendant - The Romanian Court of
Accounts
No. 1499/117/2014
Plaintiff - Electrica Transilvania Sud
Defendant - The Romanian Court of
Accounts
No. 2251/62/2014
1
2
3
4
5
6
Arrest of measures
Annulment of administrative deed and
adjournment.
S Electrica SA requested the partial adjournment
of the measures ordered by C.C. through decision
no. X/40147/2013 and annulment of the final
statement no. 25/2013.
Bucharest Court of Appeal
Societatea de Administrare a Participatiilor in Energie, established by the
division of Electrica S.A., was brought in the proceedings to replace Electrica
SA.
Adjournment and annulment of administrative
and fiscal deed.
Litigations with the Court of Accounts Law no.
94/1992.
THE HIGH COUrT Of CASSATION
AND JUSTICE
Societatea de Administrare a Participatiilor in Energie, established by the
division of Electrica S.A., was brought in the proceedings to replace Electrica
SA.
Litigations with the Court of Accounts Law no.
94/1992.
THE HIGH COUrT Of CASSATION
AND JUSTICE
Appeal. The case undergoes the screening procedure. The first judgment
term is to be established by the court at a later date.
Litigations with the Court of Accounts (Law no.
94/1992) final statement no. 82/01.08.2013
THE HIGH COUrT Of CASSATION
AND JUSTICE
The court of first instance admitted the action in part. The court cancelled in
part the final Statement no. 82/2013 and Decision no. 20/2013, regarding
measure no. II 6 of the Decision. The Court dismissed the remainder of the
action as unfounded.
Electrica furnizare brought an appeal.
Adjournment of administrative deed
Cluj Court of Appeal
The court admitted the plea of lack of object and dismissed the action for
being left without object.
Adjournment of administrative deed
Brasov Court of Appeal
The court dismissed the contestation formulated by the plaintiff S.C
FILIALA DE DISTRIBUŢIE A ENERGIEI ELECTRICE „ELECTRICA DISTRIBUŢIE
TrANSIlVANIA SUD” S.A as opposed to the defendants CUrTEA DE CONTUrI
A rOMÂNIEI (romanian Court of Accounts) and CAMErA DE CONTUrI A
JUDEŢULUI BRAŞOV (the Chamber of Accounts of Brasov County) against
the final Statement no. 30/28.03.2014, the Decision no. 75/23.12.2013 and
the Control Report no. 700/23618/04.12.2013. It dismissed the plaintiff’s
request to suspend the execution of Decision no. 75/23.12.2013 until the
final settlement of the case.
The solution is irrevocable.
68
2014 DireCTOrs’ rePOrT (CONsOLiDATeD)
3. other significant litigations
2014
annual
report
no.
Parties/ Case no.
Object
Court
Case status
1
2
3
4
SC Termoelectrica SA –Appellant - Plaintiff
Electrica SA – Respondent - Defendant
No. 5651/2/2014 (in the first instance
the case had no. 15350/3/2010)
Plaintiff– Terradox Solutions
Defendant – Electrica S.A.
No. 4875/2/2014
Plaintiff: .S.C.Orange Media SRL;
S.C.Electrica S.A.
No. 47304/3/2012*
Plaintiff: Toma Sevasta et. al.;
Defendant: Electrica Muntenia Nord S.A.
et. al.
No. 31617/281/2011*
Claims: the amount of 25,047,353.32 lei which represents penalties of
delay for electricity bills between 1.04.2007-31.03.2008.
Bucharest Court of Appeal
The court of first instance dismissed the action as it was
specified as unfounded.
Nullity of legal deed
Bucharest Court of Justice
The court admitted the plea of the lack of capacity to sue
and dismissed the action as being brought by a person
who lacked capacity. The solution is irrevocable.
Declaratory action and action for claims for the amount of
17,008,850.15 lei (the amount consists of:
-971,042.22 lei registered expenses;
-16,037,807.93 lei stands for loss of profit as a consequence of the
termination of the subsequent Service Contract no. 138/2011 and the
framework agreement for services no. 132/2011).
Bucharest Court of Appeal
The court of first instance dismissed the request
formulated by Orange Media Srl as unfounded.
SC Orange Media Srl brought an appeal.
real estate claim
Ploiesti Court of Appeal
The court of first instance dismissed the the action as
unfounded.
Toma Sevasta and the other plaintiffs appealed the
court’s decision.
4. litigations with “fondul proprietatea”
no.
Parties/ Case no.
Object
Court
Case status
1
2
3
4
Plaintiff: Fondul Proprietatea
Defendant: ELECTRICA DISTRIBUTIE
MUNTENIA NOrD
No. 3537/105/2014
Plaintiff: Fondul Proprietatea
Defendant: Electrica Distributie Transilvania
Sud
No. 2362/62/2014
Plaintiff: Fondul Proprietatea
Defendant: Electrica Distributie Transilvania
Nord
No. 532/1285/2014
Plaintiff: Fondul Proprietatea
Defendant: Electrica Furnizare
No. 14173/3/2014
Annulment of GAM Decision approving the
corporate governance strategy
Prahova Court
Annulment of AGM Decision approving the
corporate governance strategy
Brasov Court of Appeal
Annulment of AGM Decision approving the
corporate governance strategy
Cluj Commercial Court
Annulment of AGM Decision approving the
corporate governance strategy
Bucharest Court of Justice
The court admitted the request formulated by Fondul Proprietatea. The
decision may be challenged by an appeal.
We mentionthat the termfor lodging an appealruns from thedate of
communication of the court decision, anduntilthe present, the decision was
not communicated.
In the first instance the court admitted the request formulated by Fondul
Proprietatea. The decision was challenged by appeal by both parties in litigation.
The first judgment term in appeal is to be established by the court at a
later date.
The court admitted the request formulated by Fondul Proprietatea. The
decision was challenged by appeal by Electrica Distributie Transilvania Nord.
The first judgment term in appeal is to be established by the court at a later
date.
The court dismissed the request formulated by fondul Proprietatea. The
decision may be challenged by an appeal.
We mentionthat the termfor lodging an appealruns from thedate of
communication of the court decision, anduntilthe present, the decision was
not communicated.
69
2014 DireCTOrs’ rePOrT (CONsOLiDATeD)
2014
annual
report
5. litigations with anre
no.
1
Parties/ Case no.
Plaintiff: Electrica S.A.
Defendant: ANRE
No. 192/2/2015
2
3
4
5
6
7
8
9
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Muntenia Nord (EDMN
Electricity Distribution Subsidiary)
Defendant: ANRE
No. 184/2/2015
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Transilvania Nord (EDTN)
Defendant: ANRE
No. 213/2/2015
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Transilvania Sud (EDTS
Electricity Distribution Subsidiary)
Defendant: ANRE
No. 208/2/2015
Plaintiff: Electrica S.A.
Defendant: ANRE
No. 317/2/2015
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Muntenia Nord (EDMN)
Defendant: ANRE
No. 318/2/2015
Plaintiff: Electrica S.A.
Defendant: ANRE
No. 361/2/2015
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Transilvania Nord (EDTN)
Defendant: ANRE
No. 353/2/2015
Plaintiff: Electrica S.A.
Defendant: ANRE
No. 361/2/2015
10
Plaintiff: Filiala de Distribuţie a Energiei Electrice
Electrica Distribuţie Transilvania Sud (EDTS)
Defendant: ANRE
No. 371/2/2015
Object
Court
Case status
Annulment of the Order of the President of ANrE
(the National Regulatory Authority for Energy) no.
146/2014
Annulment of the Order of the President of ANrE
(the National Regulatory Authority for Energy)
no. 146/2014
Annulment of the Order of the President of ANrE
(the National Regulatory Authority for Energy)
no. 146/2014
Annulment of the Order of the President of ANrE
(the National Regulatory Authority for Energy) no.
146/2014
Bucharest Court of Appeal The first hearingwas seton04/27/2015
Bucharest Court of Appeal The first hearingwas seton04/23/2015
Bucharest Court of Appeal The first hearingwas seton05/13/2015
Bucharest Court of Appeal The first judgment term in appeal is to be established by the court
at a later date.
Annulment of the Order of ANrE President no.
154/2014
Bucharest Court of Appeal The first judgment term in appeal is to be established by the court
at a later date.
Annulment of the Order of ANrE President no.
154/2014
Bucharest Court of Appeal The first hearingwas seton05/12/2015
Annulment of the Order of ANrE President no.
155/2014
Bucharest Court of Appeal The first hearingwas seton04/17/2015
Annulment of the Order of ANrE President no.
155/2014
Bucharest Court of Appeal The first hearingwas seton04/06/2015
Annulment of the Order of ANrE President no.
156/2014
Bucharest Court of Appeal The first judgment term in appeal is to be established by the court
at a later date.
Annulment of the Order of ANrE President no.
156/2014
Bucharest Court of Appeal The first hearingwas seton05/15/2015
70
annex 2 details of realiZed inVestments in 2014
By electrica group
Description
Value (ROn mil)
Implementation of the SAD-R rural system throughout the branches of the Muntenia Nord distribution
subsidiary, Step IV vol. 1
Capitalization of repair works according to OMF 1898/2013
Implementation of the SAD-R rural system throughout the branches of the Muntenia Nord distribution
subsidiary, Step IV vol. 2
Equipments
Electricity meters
Modernisations and integration of existing network into SCADA ST110/20KV Liesti, Galati county
Expenses for development of pre-feasibility studies, feasibility studies and other studies related to the
investment objectives
Systematisation of the Sinaia MV grid
Improvement of the technical conditions for the distribution of electricity for consumers (ICTAEE) in Insuratei,
Braila county
Modernisation of the connections and expansion of the tele-management blocks (FDCP), Targoviste, Micro VI
Upgrading and expansion of the AMR tele-management system in Sfantu Gheorghe, Covasna county
Integration of existing network into SCADA DMS
LEA 110 kV Ghimbav - Cristian and Bartolomeu, Brasov county
Substation110/20 kV 2x25 MVA Sanpaul, Mures county
Modernisations through repairs – electricity meters replacement
INT areas PTA1, PTA2, Ghidfalau, Covasna county
Modernisation of the 35/20 kV substation in Feldioara, Brasov county
Modernisation of the 110 kV Beius substation
Smart-metering pilot project SDEE Zalau
Smart-metering SDEE Oradea
Modernisation of the 110/20/6 KV Carei 1 substation
Modernisation of the Baia Mare 5 substation
Smart-metering pilot project SDEE Cluj
Construction of 20kV Baia Mare 2 bar
Rehabilitation of the Uzina Veche Baia Mare building (former thermal plant)
Distribution automation system SAD 2014-2015 Satu Mare
Increasing security for the supply of electricity for consumers in Turt, Vama, Binesti
Modernisation of the 110 kV switchgears from transformation stations - Step 2
Modernisation of the substation 110/20kV Aghires – secondary wiring
Distribution automation system SAD 2014 - 2015 Bistrita
Distribution automation system SAD 2014 - 2015 Baia Mare
34.0
20.5
16.7
13.2
10.3
6.9
6.0
3.4
1.8
1.6
16.2
12.2
4.0
2.6
1.7
1.5
1.0
5.2
4.5
2.9
2.2
2.0
2.0
1.7
1.6
1.5
1.2
1.2
1.1
1.1
1.0
Total 183
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 71
During 2014, the main cathegories of the transfered tangible assets in progress to tangible assets, are the following:
Description
Implementation of the SAD-R rural system
Equipments
Capitalization of repair works according to OMF 1898/2013
Electricity meters replacement
Solutions on increasing efficiency by reducing losses in the network
Modernisation through repairs DD
Modernisation of the measurement groups at the distribution subsidiaries
Modernisation of the 110/20/6 kV Blaj substation, Alba county
110/20KV Biharia substation
Upgrading and expansion of the Avrig tele-management system, Sibiu county
Smart-metering pilot project at SD
Modernisation of the 110 kV switchgears from transformation stations – step II
Modernisation of the metering system in Iernut city, Mures county
20 kV Distributor between Hipodrom substation and Port substation, Braila municipality
Improvement of the substation 110/20 kV Prejmer, Brasov county
Upgrading and expansion of the AMR tele-management system in Sfantu Gheorghe, Covasna county
16 MVA,110/20kV and 25 MVA,110/20kV transformers
Increasing security for the supply of electricity for consumers in Salonta - Tinca
Systematisation of the Sinaia MV grid
Modernisation of the substation 110/20kV Valea Calugaresca
Migration of the MV grid to 20 kV in Satu Mare municipality, Step 1 - old town area
Modernisation of the 110/20kV Valeni substation
Modernisation of the trafo 25 MVA, 110/6kV si 110/22kV
Modernisation of the low voltage lines – Cluj Napoca – step 1 – modernisation of the electrical network,
Calea Turzii street
Modernisation of the low voltage in Stejeris, Modernisation of the connections in Copaceni, modernisation of
LEA 0,4kV Lujerdiu, modernisation LEA 0,4kV Aghires PTZ Moara
Modernisation of the distribution network through assembly of measurement and protection blocks for
public lighting (BMPIP)
Increasing the security and continuity in supply for consumers from the municipality Marghita
Switching to 20kV Stei
Improvement of the technical conditions for the supply of electricity for consumers in Insuratei, Braila county
Modernisation of the LEA 04 kV in Huta (Principala street), Remetea (PT 4203 area), Stana, Lelei, Scarisoara
Ferneziu substation- modernisation of the 20Kv bar for increasing the distribution capacity to 20kV
Automatic tele-measurement of electric energy for consumers at LEA 20kV Scurtesti – step 1
Optimisation and integration of existing network into SCADA
Modernisation of the connections and expansion of the telemanagement blocks Targoviste, Micro VI
Value (ROn mil)
44.3
23.9
19.7
19.4
18.6
18.0
17.0
10.1
9.9
9.1
6.6
5.9
4.5
4.3
4.2
4.1
3.8
3.6
3.6
3.3
3.2
3.2
3.1
2.7
2.6
2.6
2.4
2.4
2.4
2.2
2.0
1.9
1.9
1.7
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 72
Description
Improvement of voltage levels in Barsana (Stramtura), Chechis, Ungureni (and modernization of LEA 0,4kV
PTA 1 and PTA 2 zones), Mara (and modernization LEA 0,4 kV Mara (Baia Sprie)), Desesti, Maramures county
RED expansion in Plaiul Foii, Zarnesti, Brasov county areas
Switching to 20kV Velenta Oradea Step 1
Improvement of the technical conditions for the supply of electricity for consumers in central area of the
municipality Braila, Braila county
Modernisation of the Lukoil distributor in Nufarul substation
Portable terminal for manual readings (PDA) with car charger
Modernisations and integration of existing network into SCADA ST110/20KV Liesti, Galati county
Modernisation of the low voltage L.E.A. in: Rodna zona PT Graniceri, Calea Moldovei area, Ilva Mica PT2 zone,
Sângeorz Băi, Persa and Stejarului streets
Increasing security for the supply of electricity for consumers in rodna and Valea Ilvelor areas
Increasing security for the supply of electricity for consumers in Tusa rural area
Switching to 20kV of PA 5 Baia Mare- step 2
Increasing security for the supply of electricity for consumers in Ulmeni
INT lEA j.t. lisnau, areas PTA1,PTA2, comm. Ozun, Covasna county
Module for SAP-ISU for interface + modernisation of the manual reading equipment
Fueling of the LEA 20 kV Budesti rezerve from Cavnic substation
Improvement of voltage levels and modernization of LEA 0.4 kV zona PTa1 Sacele, Brasov county
Value (ROn mil)
1.6
1.6
1.5
1.4
1.3
1.3
1.3
1.3
1.2
1.1
1.1
1.1
1.1
1.0
1.0
1.0
Total 288
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 73
annex 3 internal audit report
report
regarding the internal audit actiVity of electrica s .a.
during the year 2014
During 2014, internal audit activity at Company level
has been conducted on the basis of the annual internal
audit plan, registered with no. 9900/27250/26.11.2013,
signed-off by the General Manager of Electrica S.A. and
approved by the Board of Directors.
As a result of closing the audit engagements and
acceptance of proposed recommendations, the
audited entities are defining their own action plan in
order to align and fulfil the recommendations.
Within the company there were six audit
engagements planned for the year 2014. The
six internal audit engagements took place in the
distribution and supply subsidiaries, followed by an
ad-hoc audit solicited by the Board of Directors for
Electrica S.A. The engagements were carried out by
teams of two internal auditors.
All seven engagements were carried out and
completed within the defined schedule. The audit
reports written as a result were acknowledged by
the management of the subsidiaries, signed-off by
the General Managaer of the Company and the
implementation of recommendations has been
consistently monitored through follow-up registers.
The internal audit engagements have confirmed the
positive impact of an internal audit on the activities
carried out within the Company and its subsidiaries.
Since the initial public offering on BVB (Bucharest
Stock Exchange) and lSE (london Stock Exchange)
and year end, an update has been performed for the
Operational Procedure of Internal Audit, Handbook
of Internal Audit and Code of Ethics of the internal
auditor, taking into account the national legislation
and international standards for professional practice
of an internal auditor. All of these procedures have
been signed-off by the Audit Comitee and approved
by the Board of Directors.
2014 DIRECTORS’ REPORT (CONSOLIDATED)annual report2014 74
CONsOLiDATeD fiNANCiAL sTATeMeNTs As AT AND fOr THe yeAr eNDeD
31 DeCeMBer 2014
PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ENDORSED BY THE EUROPEAN UNION
consolidated
financial s tatements
for the year ended
31 December 2014
annual report2014 75
siTuATii fiNANCiAre CONsOLiDATe LA DATA De si PeNTru ANuL iNCHeiAT
LA 31 DeCeMBrie 2014
INTOCMITE IN CONFORMITATE CU STANDARDELE INTERNATIONALE DE RAPORTARE FINANCIARA ADOPTATE DE UNIUNEA EUROPEANA
Contents
Consolidated statement of financial position __________________________________________________ 77
Consolidated income statement _____________________________________________________________ 79
Consolidated statement of profit or loss and other comprehensive income __________________________ 80
Consolidated statement of changes in equity ___________________________________________________ 81
Consolidated statement of cash flows ________________________________________________________ 83
notes to the consolidated financial statements
Basis of preparation
1 Reporting entity and general information _____________________________________________________ 85
2 Basis of accounting _______________________________________________________________________ 89
3 Functional and presentation currency ________________________________________________________ 89
4 Use of judgments and estimates ____________________________________________________________ 89
accounting policies
5 Basis of measurement ____________________________________________________________________ 90
6 Significant accounting policies ______________________________________________________________ 90
7 Changes in accounting policies and changes in classification and presentation ________________________ 98
8 New standards and interpretations not yet adopted ___________________________________________ 100
Performance for the year
9 Operating Segments _____________________________________________________________________ 101
10 revenue _____________________________________________________________________________ 107
11 Income and expenses ___________________________________________________________________ 107
12 Net finance cost _______________________________________________________________________ 108
13 Earnings per share _____________________________________________________________________ 108
Employee benefits
14 Short-term employee benefits ___________________________________________________________ 109
15 Post-employment and other long-term employee benefits _____________________________________ 109
16 Employee benefit expenses ______________________________________________________________ 112
Income taxes
17 Income taxes _________________________________________________________________________ 112
assets
18 Trade receivables ______________________________________________________________________ 115
19 Deposits, treasury bills and government bonds ______________________________________________ 115
20 Other receivables ______________________________________________________________________ 116
21 Cash and cash equivalents _______________________________________________________________ 116
22 Property, plant and equipment ___________________________________________________________ 117
23 Intangible assets ______________________________________________________________________ 120
24 Spin off ______________________________________________________________________________ 121
annual report2014 76
siTuATii fiNANCiAre CONsOLiDATe LA DATA De si PeNTru ANuL iNCHeiAT
LA 31 DeCeMBrie 2014
INTOCMITE IN CONFORMITATE CU STANDARDELE INTERNATIONALE DE RAPORTARE FINANCIARA ADOPTATE DE UNIUNEA EUROPEANA
Equity and liabilities
25 Capital and reserves ____________________________________________________________________ 122
26 Non-controlling interests ________________________________________________________________ 124
27 Financing for network construction related to concession agreements ____________________________ 126
28 Trade payables ________________________________________________________________________ 126
29 Other payables ________________________________________________________________________ 126
30 Provisions ____________________________________________________________________________ 127
financial instruments
31 Financial instruments - Fair values and risk management _______________________________________ 127
Other information
32 Related parties ________________________________________________________________________ 132
33 Subsidiaries in financial distress __________________________________________________________ 135
34 Contingencies ________________________________________________________________________ 136
35 Commitments ________________________________________________________________________ 137
annual report2014 77
CONsOLiDATeD sTATeMeNT Of fiNANCiAL POsiTiON As AT 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
note
31 December
2014
31 December
2013 restated*
1 january
2013 restated*
assets
non-current assets
Intangible assets related to concession
arrangements
Other intangible assets
Property, plant and equipment
Equity-accounted investees
Other investments
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Deposits, treasury bills and government bonds
Inventories
Prepayments
Green certificates
Income tax receivable
Assets held for distribution
Total current assets
Total assets
equity and liaBilities
Equity
Share capital
Share premium
Treasury shares reserve
Pre-paid capital contributions in kind from
shareholders
Revaluation reserve
Other reserves
retained earnings
Total equity attributable to the owners of the
Company
Non-controlling interests
Total equity
(continued on page 78)
*See Note 7
23
23
22
24
24
17
18
20
21
19
24
25
25
25
25
25
26
3,501,184
3,340,103
3,318,332
8,812
804,823
4,912
875,715
-
-
-
-
59,625
7,970
4,382,414
85,361
1,118
4,307,209
7,781
848,440
1,042,153
1,138,326
106,105
5,804
6,466,941
780,821
24,611
1,629,508
1,220,521
24,305
8,644
53,708
23,135
-
3,765,253
1,087,545
1,010,909
57,210
650,835
-
33,809
6,378
-
36,510
2,243,494
4,115,781
94,824
641,811
-
34,999
40,306
-
17,420
-
1,840,269
8,147,667
8,422,990
8,307,210
3,814,242
2,509,413
2,493,305
103,049
(75,372)
-
-
-
-
3,273
47,657
54,645
156,018
236,597
572,825
614,906
588,951
601,642
1,268,811
1,936,547
1,700,277
5,506,618
5,681,348
5,438,820
810,520
6,317,138
764,270
6,445,618
717,941
6,156,761
annual report2014
78
CONsOLiDATeD sTATeMeNT Of fiNANCiAL POsiTiON As AT 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
note
31 December
2014
31 December
2013 restated*
1 january
2013 restated*
liabilities
non-current liabilities
finance lease
Financing for network construction related to
concession agreements
Deferred tax liabilities
Employee benefits
Other payables
Total non-current liabilities
Current liabilities
Short term bank borrowings
Bank overdrafts
finance lease
Financing for network construction related to
concession agreements
Trade payables
Other payables
Current income tax liability
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
27
17
15
29
21
27
28
29
14,15
30
-
290
788
151,486
129,827
195,508
189,168
220,382
53,181
614,217
-
48,132
294
99,064
555,256
276,961
14,270
2,987
146,714
72,634
201,208
213,187
66,376
610,888
-
79,684
498
201,963
217,147
77,112
692,518
9,292
167,467
26,677
142,584
113,700
581,522
307,487
15,183
2,600
152,191
84,735
681,069
247,131
10,628
2,362
119,654
79,951
1,216,312
1,830,529
1,366,484
1,977,372
1,457,931
2,150,449
Total equity and liabilities
8,147,667
8,422,990
8,307,210
The accompanying notes are an integral part of these consolidated financial statements.
*See Note 7
general Director
Ioan rosca
Economic Director
Emilia Elena Marin
annual report2014
79
CONsOLiDATeD iNCOMe sTATeMeNT
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, except per share data)
note
2014
2013 restated*
Revenues
Other income
Electricity purchased
Green certificates
Construction costs
Employee benefits
repairs, maintenance and materials
10
11
11
23
16
11
Depreciation and amortization
22,23
Impairment of property, plant and equipment, net
22,23
reversal of impairment/ (Impairment) of trade and
other receivables, net
18,20
Other operating expenses
Operating profit
finance income
finance costs
net finance income/(cost)
Share of profit or loss of equity-accounted
investees, net of tax
Profit before tax
Income tax expense
Profit for the year
Profit for the year attributable to:
- owners of the Company
- non-controlling interests
Profit for the year
Earnings per share
11
12
12
24
17
26
5,043,728
176,509
(2,349,200)
(272,265)
(440,337)
(738,606)
(84,866)
(325,698)
(32,814)
(4,632)
(474,878)
496,941
36,404
(23,149)
13,255
5,382,818
128,317
(2,845,179)
(413,847)
(290,405)
(765,932)
(111,029)
(313,227)
(12,461)
20,770
(434,375)
345,450
23,515
(35,068)
(11,553)
-
62,959
510,196
(108,791)
401,405
287,837
113,568
401,405
396,856
(81,209)
315,647
244,412
71,235
315,647
Basic and diluted earnings per share (rON)
13
1.03
1.18
The accompanying notes are an integral part of these consolidated financial statements.
*See Note 7
general Director
Ioan rosca
Economic Director
Emilia Elena Marin
annual report2014
80
CONsOLiDATeD sTATeMeNT Of PrOfiT Or LOss AND OTHer COMPreHeNsiVe
iNCOMe FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Profit for the year
401,405
315,647
nota
2014
2013 retratat*
Other comprehensive income
Items that will never be reclassified to profit or
loss
Remeasurements of the defined benefit liability
Tax related to remeasurements of the defined
benefit liability
Revaluation of property, plant and equipment
15
17
22
Other comprehensive income, net of tax
(3,922)
628
59
(3,235)
3,297
(528)
-
2,769
Total comprehensive income
398,170
318,416
Total comprehensive income attributable to:
- owners of the Company
- non-controlling interests
Total comprehensive income
The accompanying notes are an integral part of these consolidated financial statements.
*See Note 7
284,670
113,500
398,170
246,619
71,797
318,416
general Director
Ioan rosca
Director Economic
Emilia Elena Marin
annual report2014
81
CONsOLiDATeD sTATeMeNT Of CHANges iN eQuiTy FOR THE YEAR ENDED 31 DECEMBER 2014
(All AmOUNTS ARe iN THOUSAND RON, if NOT OTHeRwiSe STATeD)
2014
annual
report
note
Share capital
Share
premium
Treasury
shares
Pre-paid capital
contributions
in kind from
shareholders
Revaluation
reserve
Other reserves
Retained
earnings
Total
non-
controlling
interests
Total equity
attributable to the owners of the Company
Balance at 31 December 2013 (restated)
2,509,413
-
-
47,657
572,825
614,906
1,936,547
5,681,348
764,270
6,445,618
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income
Transactions with owners of the
Company
Contributions and distributions
Underwritings from the IPO, net
Treasury shares acquired
Issue of ordinary shares in respect of land
contributed by the shareholders
Dividends
Spin-off effect
Total transactions with owners of the
Company
-
-
-
-
-
-
-
-
-
25
25
25
25
24
1,771,887
103,049
-
40,371
-
(507,429)
-
-
-
-
-
(75,372)
-
-
-
-
-
-
-
-
(44,384)
-
(835)
(835)
-
-
-
-
-
-
-
-
-
-
-
-
287,837
(2,332)
285,505
287,837
(3,167)
284,670
113,568
(68)
113,500
401,405
(3,235)
398,170
-
-
-
1,874,936
(75,372)
(4,013)
(22,475)
(22,475)
-
-
-
-
-
-
1,874,936
(75,372)
(4,013)
(22,475)
(2,232,476)
(459,400)
1,304,829
103,049
(75,372)
(44,384)
(388,018)
(408,195)
(951,309)
(459,400)
-
(388,018)
(408,195)
(928,834)
(2,232,476)
Other changes in equity
Dividends to non-controlling interests
25
Set up of legal reserves
Release of revaluation reserve to retained
earnings due to depreciation and disposals
of property, plant and equipment
loss of control over subsidiaries in
financial distress
33
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(15,202)
(12,752)
-
-
-
-
29,886
(29,886)
15,202
12,752
-
-
-
-
(67,250)
(67,250)
-
-
-
-
-
Balance at 31 December 2014
3,814,242
103,049
(75,372)
3,273
156,018
236,597
1,268,811
5,506,618
810,520
6,317,138
(continued on page 82)
82
CONsOLiDATeD sTATeMeNT Of CHANges iN eQuiTy FOR THE YEAR ENDED 31 DECEMBER 2014
(All AmOUNTS ARe iN THOUSAND RON, if NOT OTHeRwiSe STATeD)
attributable to the owners of the Company
2014
annual
report
8
2
note
Share capital
Share
premium
Treasury
shares
Pre-paid capital
contributions
in kind from
shareholders
Revaluation
reserve
Other reserves
Retained
earnings
Total
non-
controlling
interests
Total equity
Balance at 1 January 2013, as previously
reported
Impact of change in accounting policy
Balance at 1 january 2013 (restated)
7
7
2,493,305
-
2,493,305
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income (restated)
Transactions with owners of the
Company
Contributions and distributions
Issue of ordinary shares in respect of land
contributed by the shareholders
land for which ownership rights were
obtained
Dividends
Total transactions with owners of the
Company
25
25
25
Other changes in equity
Dividends to non-controlling interests
25
Set up of legal reserves
Release of revaluation reserve to retained
earnings due to depreciation and disposals
of property, plant and equipment
-
-
-
16,108
-
-
16,108
-
-
-
Balance at 31 December 2013 (restated)
2,509,413
The accompanying notes are an integral part of these consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54,645
1,132,815
599,226
1,326,572
5,606,563
765,253
6,371,816
-
54,645
(543,864)
588,951
2,416
373,705
601,642
1,700,277
(167,743)
5,438,820
(47,312)
717,941
(215,055)
6,156,761
244,412
3,765
248,177
244,412
2,207
246,619
71,235
562
71,797
315,647
2,769
318,416
-
-
-
9,120
(13,211)
(13,211)
(13,211)
(4,091)
-
-
-
-
-
9,120
(13,211)
(4,091)
-
-
-
-
(1,558)
(1,558)
(16,108)
9,120
-
(6,988)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,264
(13,264)
(14,568)
-
14,568
-
-
-
(25,468)
(25,468)
-
-
-
-
47,657
572,825
614,906
1,936,547
5,681,348
764,270
6,445,618
83
CONsOLiDATeD sTATeMeNT Of CAsH fLOWs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All AmOUNTS ARe iN THOUSAND RON, if NOT OTHeRwiSe STATeD)
note
2014
2013 restated*
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Impairment loss on property, plant and equipment
loss on disposal of property, plant and equipment
22
23
22
Impairment loss on trade and other receivables,
net
18,20
12
24
11
17
24
19
19
Write-down of inventories, net
Net finance cost/(income)
Share of profit or loss of equity-accounted
investees, net of tax
Gain on loss of control over subsidiaries
Income tax expense
Changes in:
Trade receivables
Other receivables
Deposits, treasury bills and government bonds
Prepayments
Green certificates
Inventories
Trade payables
Other payables
Employee benefits and provisions
Cash generated from operating activities
Interest paid
Income tax paid
net cash from operating activities
Cash flows from investing activities
Payments for purchases of property, plant and
equipment
Payments for network construction related to
concessionagreements
Payments for purchase of other intangible assets
Proceeds from sale of property, plant and
equipment
Proceeds from sale of other investments
Payments for purchase of treasury bills and
government bonds
Proceeds frommaturity oftreasury bills and
government bonds
Payments in deposits with maturity of 3 months
or longer
Interest received
net cash used in investing activities
(Continued on page 84)
*See Note 7
401,405
315,647
33,284
292,414
32,814
4,542
4,632
10,377
(13,255)
-
(32,349)
108,791
842,655
228,893
26,592
(2,764)
(2,266)
(53,708)
(873)
49,095
(39,871)
20,567
1,068,320
(11,290)
(75,721)
981,309
30,516
282,711
12,461
3,597
(20,770)
(1,058)
11,553
(62,959)
-
81,209
652,907
(117,991)
21,191
-
33,928
-
2,248
(74,401)
25,390
36,131
579,403
(20,932)
(47,213)
511,258
(39,152)
(72,206)
(318,237)
(178,362)
(7,653)
237
140,920
(1,194,251)
295,598
(319,104)
35,502
(1,406,140)
(2,409)
939
-
-
-
-
20,839
(231,199)
annual report2014
84
CONsOLiDATeD sTATeMeNT Of CAsH fLOWs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All AmOUNTS ARe iN THOUSAND RON, if NOT OTHeRwiSe STATeD)
note
2014
2013 restated*
Cash flows from financing activities
Proceeds from issue of shares, net of transaction
costs
Re-purchase of treasury shares
Repayment of financing for network construction
related to concession agreements
repayment of bank borrowings
Dividends paid
Payment of finance lease liabilities
Cash transferred at spin off
net cash from /(used in) financing activities
net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of loss of control over subsidiaries on cash
Effect of movements in exchange rates on cash
held
Cash and cash equivalents at 31 December
25
25
27
25
24
21
21
1,874,936
(75,372)
(142,680)
-
(89,725)
(1,889)
(129,902)
1,435,368
1,010,537
571,151
(312)
-
1,581,376
-
-
(130,404)
(10,271)
(38,679)
(5,598)
-
(184,952)
95,107
474,344
-
1,700
571,151
The accompanying notes are an integral part of these consolidated financial statements.
*See Note 7
general Director
Ioan rosca
Economic Director
Emilia Elena Marin
annual report2014
85
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
1 reporting entity and general information
(a) gEnERal InfORmaTIOn aBOUT ThE gROUP
These financial statements are the consolidated
financial statements of Societatea de Distributie
si furnizarea Energiei Electrice Electrica S.A. (“the
Company” or “Electrica SA”) and its subsidiaries
(together “the Group”).
The registered office of the Company is 9 Grigore
Alexandrescu Street, Sector 1, Bucharest, romania.
The Company has unique registration number
13267221 and Trade Register registration number
J40/7425/2000.
As at 31 December 2014 the major shareholder of
Electrica SA is the romanian State, represented by
the Ministry of Energy, Small and Medium-sized
Enterprises and Business Environment (48.78%),
after the ownership dilution following an initial public
offer. The second shareholder based on the share of
ownership is EBrD with 8.66%.
The Company’s subsidiaries are the following:
Subsidiary
activity
Tax code
head Office
% shareholding as at
31 Dec 2014
% shareholding
as at 31 Dec 2013
Electrica Distributie
Muntenia Nord SA
Electrica Distributie
Transilvania Nord SA
Electrica Distributie
Transilvania Sud SA
Electricity distribution
in geographical area of
Muntenia Nord
Electricity distribution
in geographical area of
Transilvania Nord
Electricity distribution
in geographical area of
TransilvaniaSud
14506181
Ploiesti
78.0000021%
78.0000021%
14476722
Cluj-Napoca
77.99999%
77.99999%
14493260
Brasov
78.0000019%
78.0000019%
Electrica furnizare SA
Electricity supply
28909028
Bucuresti
77.99997%
77.99997%
ElectricaServ SA
Servicii Energetice
Muntenia SA
Servicii Energetice
Moldova SA
Servicii Energetice Banat
SA*
Servicii Energetice
Dobrogea SA
Servicii Energetice
Oltenia SA
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
17329505
Bucuresti
29384120
Bucuresti
29386768
Bacau
29388211
Timisoara
29388378
Constanta
29389861
Craiova
* Electrica SA lost the control of Servicii Energetice Banat starting with November 2014 (see Note 33).
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
group’s main activities
The main activities of the Group include operation
and construction of electricity distribution networks
and activities related to electricity supply to final
consumers. The Group is the electricity distribution
operator and the main electricity supplier in Muntenia
Nord area (Prahova, Buzau, Dambovita, Braila, Galati
and Vrancea counties), Transilvania Nord area (Cluj,
Maramures, Satu Mare, Salaj, Bihor andBistrita-
Nasaud counties) and Transilvania Sud area (Brasov,
Alba, Sibiu, Mures, Harghita and Covasna counties),
operating with transformation stations and 0.4 kV and
110 kV power lines.
The Company’s distribution subsidiaries (Electrica
Distributie Muntenia Nord, Electrica Distributie
Transilvania Nord and Electrica Distributie
TransilvaniaSud) invoice the electricity distribution
service to electricity suppliers (mainly to Electrica
furnizare SA subsidiary, the main electricity supplier
in Muntenia Nord, Transilvania Nord and Transilvania
Sud areas), which further invoice the electricity
consumption to final consumers.
Electrica furnizare SA is the supplier of last resort
annual report2014 86
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(defined as supplier designated by the regulatory
authority to deliver the universal service of electricity
supply under specific regulated conditions) in
Muntenia Nord, Transilvania Nord and Transilvania
Sud areas. According to the regulations issued by the
National Authority for Energy Regulation (“ANRE”), the
suppliers of last resort have the obligation to ensure
electricity supply to final customers which have not
exercised their eligibility right – this is the right to
choose their electricity supplier (hereinafter named
captive consumers).
The electricity supply to captive consumers is made
based on regulated contracts, with prices that are
regulated by ANrE.
In 2013 the Company approved the liquidation of
3 subsidiaries: Servicii Energetice Banat, Servicii
Energetice Dobrogea and Servicii Energetice Moldova.
In January 2014 the Board of Directors of Servicii
Energetice Oltenia and in October 2014 the Board
of Directors of Servicii Energetice Muntenia decided
the commencement of the insolvency process with
a view to reorganization. For further information on
the financial position of these subsidiaries refer to
Note 33.
Initial public offering
The Government Decision no. 85/2013, amended and
completed by Government Decision no. 477/2014
approved the privatization strategy of Electrica SA by
initial public offer (“IPO”). The privatization strategy
included the offer for sale of a 51% stake by issuance
of new shares representing 105% of the existing share
capital as at the date of the IPO. The shares were
offered to both individual and institutional investors
on the Romanian market, as well as to qualified
investors on the US market and outside USA, and Global
Depository receipts (“GDrs”) on the UK market.
The IPO was organised between 11 and 27 June
2014 and entailed to an offering by the Company of
177,188,744 ordinary shares in the form of shares
and in the form of GDRs, each GDR representing
four shares. following the IPO, the Company sold
142,007,744 shares and 8,795,250 GDRs, at the offer
prices of rON 11 per share and 13.66 USD per GDr.
The allocation of shares and GDRs and the offering
prices were concluded on 27 June 2014. The transfer
of ownership rights to new shares and the collection of
cash by the Company took place on 2 July 2014. At the
same date the increase in share capital was recorded in
the Trade register.
Starting 4 July 2014 the Company’s shares are listed on
the Bucharest Stock Exchange, and the GDrs are listed
on the london Stock Exchange.
(B) reglementari in sectorul energetic
Regulatory environment
The activity in the energy sector is regulated by
National Authority for Energy Regulation (“ANRE”).
Some of the main responsibilities of ANRE are to
approve prices and tariffs and to prepare computation
methodologies used to establish regulated prices and
tariffs.
Electricity distribution
Electricity distribution is a monopoly activity.
Distribution tariffs are established by a „tariff basket-
price cap” mechanism.The tariff setting methodology
is approved by ANrE Orders no. 39/2007 and no.
72/2013.
The specific distribution tariffs applicable for the years 2014 and 2013for the three voltage levels (high, medium
and low) by regionswere approved by ANRE orders as follows (RON/MWh, presented cumulatively for medium
and low voltage):
Order 104, 105, 98/18.12.2013
1 january-31 December 2014
Order 51/19.12.2012
1 january-31 December 2013
High voltage
Medium voltage
low voltage
High voltage
Medium voltage
low voltage
Transilvania Nord
Transilvania Sud
Muntenia Nord
20.65
23.46
18.90
67.28
70.45
63.13
178.75
194.74
206.05
22.07
22.07
18.92
66.21
66.19
63.06
172.80
195.75
209.15
annual report2014 87
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
The following items are considered by ANrE when
setting the target revenue for one year of one
regulatory period: controllable and non-controllable
operating and maintenance costs; costs of electricity
purchased for own technological consumption
(distribution network losses); regulated depreciation
charge;the return on the regulated assets base
(“rAB”); and working capital requirements.
The controllable operating and maintenance costs
include, without limitation, the following: raw
materials and consumables; utilities; maintenance
and repairs; rental; insurance; studies and research;
other services; employee benefits (salaries, per diem,
bonuses); damages paid by the main distribution
operator to third parties for maintenance works
agreed between parties.
The uncontrollable operating and maintenance
costs include: costs resulting from payment of taxes,
royalties, duties and similar payments; regulated
costs related to special expenditure; contributions to
the health fund, special funds and other similar funds
related to the salary fund; regulated distribution
costs generatedby the use of distribution networks
of other operators; extraordinary costs produced
by force majeure; termination benefits; costs
generated by the impossibility of shutting down the
electricity supply for certain consumers, according
to the legislation; loss on receivables from electricity
distribution; damages paid by the main distribution
operator to third parties for maintenance works
established in court.
The regulated rate of return on the rAB is 8.52%
for the years 2013and 2014. Starting with 2015,
the regulated rate of return on the rAB decreased
to 7.7%, in accordance with the ANrE Order no.
51/2014.
Regulatory asset base (RaB)
In accordance with the ANrE Orders no. 31/2004,
39/2007,and 72/2013, the determination of the
distribution tariffs is based on, inter alia, the
regulated asset base (“RAB”). The RAB calculation is
based on statutory amounts of capital expenditure.
The regulatory asset base at the beginning of the
first regulatory period (1 January 2005) (initial RAB)
includes the net book value of the property, plant
and equipment and intangible assets as approved
by ANrE and used only for regulated electricity
distribution. The RAB subsequently calculated
includes the net value of the initial RAB and the
net value of property, plant and equipment and
intangible assets subsequently acquired through
investments approved by ANrE. rAB does not
include the property, plant and equipment financed
through donations, or other irredeemable funds,
including the connection fee from the new users of
the electricity distribution network (property and
equipment obtained through contributions of cash by
customers to establish a connection to the network).
According to the tariff setting legislation, the
distribution operator may request the regulator to
recognise in the tariff the revaluation of property,
plant and equipment commissioned after 1 January
2005, based on the revaluations performed
according to the legislation in force. However, the
maximum amount of the revaluation that would
be accepted by the regulator may not exceed the
cumulative inflation applied to the value of the assets
commissioned after 1 January 2005.
Tariff adjustments
Annually, ANRE makes revenue adjustments due to:
change in the quantities of electricity distributed
compared to the forecast;change in quantities and
acquisition price for the regulated own technological
consumption (electricity network losses) compared
to the forecast;annual change in uncontrollable
operating and maintenance costs compared to
the forecast; under-/overrunsof the approved
investments programme; and revenues generated
from other operations made by the distribution
operator.
The differences in revenuearising in relation to the
above mentioned stipulations are used to modify the
regulated tariffsfor the subsequentyears.
The annual corrections are adjusted by the interest
rate on one year treasury bills, in real terms. The
annual regulated revenue in nominal terms is
obtained by applying the adjusted inflation rate for
the year of revenue adjustments.
In regulated activities, the regulator establishes
through the tariff adjustment mechanism (as
presented above), the criteria to recognise over or
under recoveries of one period in future periods.
The Group does not recognise regulatory assets
and liabilities in respect of these under or over
recoveries, as these differences are recovered or
returned through the tariffs charged in subsequent
periods. As at 31 December 2014 the Group is in
an over-recovery position of approximately RON
164 million (2013: RON 142 million), which will be
deducted from the tariffs for the next regulatory
period (2015 – 2018).
annual report2014 88
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Tariffs increase limitations
During the third regulatory period (2014-2018) the
distribution tariffs shall not increase year on year by
more than 7% in real terms for the weighted average
tariff and 10% for each specific distribution tariff.
Where the increase in tariffs is limited and does not
allow distribution operators to obtain the approved
regulated revenues in full, the difference shall be
recovered in the following year(s)limited to the cap
set for tariff increases. Such difference is adjusted
with the interest rate on one year treasury bills, in
nominal terms.
Electricity supply
According to Electricity law and the European
Directive 54/2003 the electricity market is fully open
starting from 1 July 2007 and all consumers were
declared eligible. The eligible consumers are free
to choose their electricity supplier from which they
purchase electricity at negotiated prices. For the
other consumers (including those that did not use
their eligibility right), the tariffs are regulated by
ANrE orders.
Starting from 1 September 2012, the methodology
for setting tariffs to consumers that do not use the
eligibility right is established by ANrE Order no.
30/2012 that includes a proposed timetable for
gradual elimination of the regulated tariffs between
2012 and 2017 (“the timetable”) that sets the share
of electricity purchased on the competitive market,
in three-month period stages, for sale to consumers
that do not use the eligibility right (household and
non-household consumers).
The categories of justified costs of the last resort
supplier, recognized by ANRE in the tariffs applied
to the consumers that did not use the eligibility
right, according to the methodology, are: electricity
acquisition costs, transmission and system services
costs, services provided by the centralized electricity
market operator to the participants in the centralized
electricity markets, electricity distribution cost,
electricity supply costs related to consumers that
did not use the eligibility right (including cost for
concluding contracts, invoicing, call-centre, mass-
media, salaries and other personnel related costs,
rental, taxes, borrowing costs, interest, loss on
receivables, debt recovery, financing of cash flow
deficits and investments, legal expenses, costs
related to the implementation of legislative changes).
Starting from 1 September 2012, in correlation with
the proposed timetable for eliminating the regulated
tariffs, the last resort suppliers apply a new electricity
tariff called “the competitive market component”
(“CPC”) in the invoice to customers that did not use
the eligibility right. The CPC is based on costs for
the electricity acquisition on the competitive market
estimated by the last resort suppliers, plus costs for
transmission and system services, services rendered
by the centralized market operator, distribution and
supply costs, profit margin, and adjustments for the
difference between estimated and actual costs for
the previous stage of the timetable. The last resort
suppliers submit the CPC pricing proposals to ANrE
for approval and the related calculations for the 3
distinct voltage levels.
ANrE’s previous methodology provided a maximum
profit of 2.5% applied to the cost of electricity
purchased for supply to households until 1 December
2013. The new methodology (ANrE Order no.
82/2013) provides a maximum profit per unit of
electricity sold to consumers tariff setting and CPC
tariffs of 4 RON/MWh and operating cost supply
of 4.5 RON/client/month, following that, until the
application of competitive criteria for selecting
suppliers of last resort, the value of profit per unit
of electricity sold to consumers to be established
by ANrE. furthermore, Electrica records supply
costs including closing costs of contracts, billing, bill
collection, database management and costs of IT and
telecommunications infrastructure.
The tariffs for electricity supplied under regulated
regime in 2014 and 2013are those established by
ANrE Orders no. 57/2014 and no. 40/2013.
The acquisition prices paid to producers for
electricity purchased based on regulated contracts
for delivery under the regulated regime to captive
consumers / consumers that did not use the
eligibility right are established by ANrE.
green certificates
Electricity suppliers have a legal obligation to
purchase green certificates from producers of
electricity from renewable sources, based on annual
targets or quotas set by law, which are applied to the
quantity of electricity purchased and supplied to end
consumers.
Cost of green certificates is billed to end consumers
separately from the tariffs for electricity. Starting
March 2014 the electricity suppliers have the
obligation to purchase green certificates before they
bill the related costs to end consumers.
annual report2014 89
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
2 Basis of accounting
These consolidated financial statements have
been prepared in accordance with International
Reporting Standards (“IFRS”) as endorsed by the
European Union (“IFRS-EU”). They were authorized
for issue by the Board of Directors on 26March
2015. The financial statements will be submitted for
shareholders’ approval in the meeting scheduled on
27 April 2015.
The Company also issues an original version of
consolidated financial statements prepared in
accordance with IFRS-EU in Romanian language that
will be used for filing with Romanian authorities.
Details of the Group’s accounting policiesare included
in Note 6. The Group has consistently applied the
accounting policies to all periods presented in these
consolidated financial statements, except for the
changes described in Note 7.
3 functional and presentation currency
These consolidated financial statements are
presented in Lei (RON), which is the functional
currency of all group companies. All amounts have
been rounded to the nearest thousand, unless
otherwise indicated.
4 use of judgements and estimates
In preparing these consolidated financial statements,
management has made judgements, estimates
and assumptions that affect the application of
the Group’s accounting policies and the reported
amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to estimates are
recognised prospectively.
(a) jUDgEmEnTS
Information about judgements made inapplying
accounting policies that have the most significant
effects on the amounts recognised in the
consolidated financial statements is included below.
Service Concession arrangements
IFRIC 12 deals with public-to-private service
concession arrangements. Until 4 July 2014,the
Group was controlled by the romanian State,
therefore the concession arrangements(see Note 23)
were considered a form of public-to-public service
arrangements and therefore not directly within the
scope of IfrIC 12.The management determined
that IAS 16 model of accounting for the assets that
are subject to the service concessions was more
appropriate in those circumstances.
following the IPO (see Note 1), the act of
incorporation of Electrica changed.Significant
decisions in the General Shareholders Meeting
are taken with a super majority of 55% of the total
voting rights as a protective right of the minority
shareholders.The Board of Directors has 3 out of 5
members who are independent and non-executive,
appointed by private shareholders.The Board of
Directors also has increased powers.
Given these major changes in the circumstances, the
management reassessed the applicability of IfrIC 12.
Since de facto control bythe State,with its 48.78%
shareholding,cannot be proved and given that it
is expected that the Group will be operated as a
“private” entity, the Group changed its accounting
policy with respect to the accounting for the service
concession arrangements (see Note 7).
Commissions
Group assesses its revenue arrangements against
specific criteria to determine if it is acting as principal
or agent. The Group has concluded that it is acting
as a principal in all of its revenue arrangements
except for collection of radio and TV taxes. If the
Group acts in the capacity of an agent rather than
as the principal in a transaction, then the income
recognised is the net amount of commission earned
by the Group.
(B) aSSUmPTIOnS anD ESTImaTIOn
uncertainties
Information about assumptions and estimation
uncertainties that may result in a material
adjustment in the subsequent twelve month period
is included in the following notes:
n Note 6 k), l) – assumptions regarding the useful
life of the intangible assets related to concession
arrangements and other intangible assets;
n Notes 18and 31– assumptions and estimates
about the recoverability of trade receivables;
n Note6 j) – estimates regarding the useful lives of
property, plant and equipment;
n Note 22 - assumptions regarding the revalued
amount of property, plant and equipment;
n Note 33 – assumptions and estimates regarding
the measurement of assets of the subsidiaries
under financial distress;
annual report2014 90
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
n Note 17 – recognition of deferred tax assets:
availability of future taxable profit against which
tax losscarried forward can be used;
n Notes 30 and 34 – recognition and measurement
of provisions and contingencies;
n Note 15 – measurement of defined benefit
obligations and other long-term employee
benefits: key actuarial assumptions.
measurement of fair values
A number of the Group’s accounting policies and
disclosures require the measurement of fair values,
for both financial and non-financial assets and
liabilities.
When measuring the fair value of an asset or a
liability, the Group uses market observable data
as far as possible. fair values are categorised into
different levels in a fair value hierarchy based on the
inputs used in the valuation techniques as follows.
n Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities;
n Level 2: inputs other than quoted prices included
5 Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis except for the
land and buildings which are measured based on
revaluation model. The assets and liabilities of the
in level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices);
n Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable
inputs).
If the inputs used to measure the fair value of an
asset or a liability might be categorised in different
levels of the fair value hierarchy, then the fair
value measurement is categorised in its entirety
in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the
fair value hierarchy at the end of the reporting period
during which the change has occurred.
Further information about the assumptions made
in measuring fair values is included in the following
notes:
n Note 31 – financial instruments;
n Note 22 – property, plant and equipment.
subsidiaries in financial distressare not recognised on
a going concern basis but on an alternate basis, as
disclosed in Note 33.
6 significant accounting policies
Except as disclosed in Note 7, the Group has
consistently applied the following accounting policies
to all periods presented in these consolidated
financial statements.
(a) BaSIS Of COnSOlID aTIOn
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The
Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with
the entity and has the ability to affect those returns
through its power over the entity. The financial
statements of subsidiaries are included in the
consolidated financial statements from the date that
control commences until the date on which control
ceases.
(ii) loss of control
On the loss of control, the Group derecognizes the
assets and liabilities of the subsidiary, any non-
controlling interests and the other components of
equity related to the subsidiary. Any surplus or deficit
arising on the loss of control is recognized in profit or
loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair
value at the date that control is lost. Subsequently
that retained interest is accounted for as an equity-
accounted investee or as an available-for-sale
financial asset depending on the level of influence
retained.
(iii) non-controlling interests
The Group measures any non-controlling interests
in the subsidiary at their proportionate share of the
subsidiary’s identifiable net assets.
Changes in the Group’s interest in a subsidiary that
do not result in a loss of control are accounted for as
equity transactions. Adjustments to non-controlling
interests are based on a proportionate amount of the
net assets of the subsidiary.
(iv) Investments in equity-accounted investees
Equity-accounted investees (or associates) are those
entities in which the Group has significant influence,
but not control or joint control, over the financial and
operating policies. Significant influence is presumed
to exist when the Group holds between 20 percent
and 50 percent of the voting power of another entity.
Investments in associates are accounted for under
the equity method and are recognized initially at
annual report2014 91
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
cost. The cost of the investment includes transaction
costs.
The consolidated financial statements include
the Group’s share of the profit or loss and other
comprehensive income of equity-accounted
investees, from the date that significant influence
commences until the date that significant influence
ceases.
(v) Transactions eliminated on consolidation
Intra-group balances and transactions, and any
unrealized income and expenses arising from intra-
group transactions, are eliminated in preparing the
consolidated financial statements.
Unrealized gains arising from transactions with
equity-accounted investees are eliminated against
the investment to the extent of the Group’s interest
in the investee. Unrealized losses are eliminated in
the same way as unrealized gains, but only to the
extent that there is no evidence of impairment.
(B) REVEnUE
revenue is recognized when it is probable that the
economic benefits associated with the transaction
will flow to the Group, and the amount of the
revenue can be measured reliably. revenue is
recognized at the fair value of the services rendered
or goods delivered, net of VAT, excises or other taxes
related to the sale.
Supply and distribution of electricity
The revenue from supply and distribution of
electricity to consumers is recognized when
electricity is delivered to consumers, based on meter
readings and based on estimates for electricity
delivered and for which no reading was performed
yet. The invoicing of electricity sales is performed
on a monthly basis. Monthly electricity invoices
are based on meter readings or on estimated
consumptions based on the historical data of each
consumer. Electricity supplied to consumers which is
not yet billed as at the reporting date is accrued on
the basis of recent average consumption or based
on subsequent meter readings. Differences between
estimated and actual amounts are recorded in
subsequent periods.
The revenues from supply and distribution of
electricity also includes the cost of green certificates
recharged by the Group to final consumers (see
paragraph (h)).
of when paid or received, in accordance with the
accrual basis.
Sales of goods
revenue from sale of goods is recognized when the
goods are delivered and significant risks and rewards
of ownership of the goods have passed to the buyer.
Service concession arrangement
revenue related to construction or upgrade services
under service concession arrangement is recognised
based on the stage of completion of the work
performed, consistent with the accounting policy on
recognising revenue on construction contracts, as
follows:
Contract revenue includes the initial amount
agreed plus any variation in contract work, claims
and incentive payments, to the extent that it is
probable that they will result in revenue and can be
measured reliably.
If the outcome of a construction contract can
be estimated reliably, then contract revenue is
recognised in profit or loss in proportion to the
stage of completion of the contract. The stage of
completion is assessed with reference to surveys
of work performed. Otherwise, contract revenue
is recognized only to the extent of contract costs
incurred that are likely to be recoverable.
Contract expenses are recognized as incurred
unless they create an asset related to future
contract activity. An expected loss on a contract is
recognised immediately in profit or loss.
(C) COmmISSIOnS
Group assesses its revenue arrangements against
specific criteria to determine if it is acting as
principal or agent. The Group has concluded
that it is acting as a principal in all of its revenue
arrangements except for collection of radio and
TV taxes. If the Group acts in the capacity of an
agent rather than as the principal in a transaction,
then the income recognised is the net amount of
commission earned by the Group.
(D) fInanCE InCOmE anD fInanCE COSTS
The Group’s finance income and finance costs
include:
n interest income;
n interest expense;
n the foreign currency gain or loss on financial
assets and financial liabilities;
Rendering of services
revenues related to services rendered are recognised
in the period in which the services were rendered
based on statements of work performed, regardless
n impairment losses recognised on financial assets
(other than trade receivables).
Interest income or expense is recognised using the
effective interest method.
annual report2014
92
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(E) fOREIgn CURREnCy TRanS aCTIOnS
Transactions in foreign currencies are translated to
the functional currency at the exchange rates at the
dates of the transactions.
Monetary assets and liabilities denominated in
foreign currencies are translated to the functional
currency at the exchange rate at the reporting
date, as communicated by the National Bank of
Romania. Non-monetary assets and liabilities that
are measured at fair value in a foreign currency
are translated to the functional currency at the
exchange rate when the fair value was determined.
foreign currency differences are recognised in profit
or loss. Non-monetary items that are measured
based on historical cost in a foreign currency are
not translated.
(f) EmPl OyEE BEnEfITS
(i) Short-term employee benefits
Short-term employee benefits are measured on
an undiscounted basis and are expensed as the
related service is provided. A liability is recognised
for the amount expected to be paid if the Group
has a present legal or constructive obligation to pay
this amount as a result of past service provided by
the employee and the obligation can be estimated
reliably.
(ii) Defined contribution plans
Obligations for contributions to defined
contribution plans are expensed as the related
service is provided. Prepaid contributions are
recognised as an asset to the extent that a cash
refund or a reduction in future payments is
available.
(iii) Defined benefit plans
The Group’s net obligation in respect of defined
benefit plans is calculated separately for each plan
by estimating the amount of future benefit that
employees have earned in the current and prior
periods, discounting that amount.
The calculation of defined benefit obligations is
performed annually by a qualified actuary using the
projected unit credit method.
remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, are
recognised immediately in other comprehensive
income. The Group determines the net interest
expense (income) on the net defined benefit
liability for the period by applying the discount rate
used to measure the defined benefit obligation at
the beginning of the annual period to the then-net
defined benefit liability, taking into account any
changes in the net defined benefit liability during
the period as a result of contributions and benefit
payments. Net interest expense and other expenses
related to defined benefit plans are recognised in
profit or loss.
When the benefits of a plan are changed or when
a plan is curtailed, the resulting change in benefit
that relates to past service or the gain or loss on
curtailment is recognised immediately in profit
or loss. The Group recognises gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
(iv) Other long-term employee benefits
The Group’s net obligation in respect of long-
term employee benefits is the amount of future
benefit that employees have earned in return for
their service in the current and prior periods. That
benefit is discounted to determine its present value.
remeasurements are recognised in profit or loss in
the period in which they arise.
(v) Termination benefits
Termination benefits are expensed at the earlier of
when the Group can no longer withdraw the offer of
those benefits and when the Group recognises costs
for a restructuring. If benefits are not expected to
be settled wholly within 12 months of the end of
the reporting period, then they are discounted.
(g) InCOmE Tax
Income tax expense comprises current and deferred
tax. It is recognised in profit or loss except to the
extent that it relates to a business combination
or items recognised directly in equity or in other
comprehensive income.
(i) Current tax
Current tax comprises the expected tax payable
or receivable on the taxable income or loss for
the year and any adjustment to tax payable
or receivable in respect of previous years. It is
measured using tax rates enacted or substantively
enacted at the reporting date. Current tax also
includes any tax arising from dividends.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for taxation purposes. Deferred
tax is not recognised for:
n temporary differences on the initial recognition
of assets or liabilities in a transaction that is not
a business combination and that affects neither
accounting nor taxable profit or loss;
n temporary differences related to investments in
subsidiaries, associates and joint arrangements
to the extent that the Group is able to control
the timing of the reversal of the temporary
annual report2014 93
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
differences and it is probable that they will not
reverse in the foreseeable future; and
n taxable temporary differences arising on the
initial recognition of goodwill.
Deferred tax assets are recognised for unused tax
losses, unused tax credits and deductible temporary
differences to the extent that it is probable that
future taxable profits will be available against which
they can be used. Deferred tax assets are reviewed
at each reporting date and are reduced to the
extent that it is no longer probable that the related
tax benefit will be realised.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences
when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
The measurement of deferred tax 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 only if
certain criteria are met.
Unrecognized deferred tax assets are reassessed at
each reporting date and recognized to the extent
that it has become probable that the future taxable
profits will be available against which they can be
used.
(h) gREEn CERTIfICa TES
The cost of green certificates is accrued in the
profit or loss based on the quantitative quota
determined by the regulator representing the
amount of the green certificates that the Group
has to purchase for the year and based on the price
of green certificates acquired on the centralized
market. Staring 2014, the Group implemented a
procedure in order to allocate the green certificates
acquired either for future recharges to customers
(see note 1 for the changes in the regulations
regarding green certificates) or to cover the annual
green certificates acquisition obligation. The
green certificates acquired for future recharges
to customers are recognised in the statement of
financial position until the moment their cost is
recharged to final consumer. The obligation for
covering the annual acquisition quota is accrued in
profit or loss and other non-financial liabilities.
(I) InVEnTORIES
Inventories consist mainly of consumables, goods
for resale and other inventories.
Inventories are measured at the lower of cost and
net realizable value.
The cost of inventories is based on the weighted
average cost method. The cost of inventories
includes all the acquisition costs and other
expenses related to bringing the inventories to their
current place and condition.
Consumables used for the repairs and maintenance
of the electricity network are included in profit and
loss when consumed and presented in “repairs,
maintenance and materials”.
(j) PROPERTy, PlanT anD EqUIPmEnT
(i) Recognition and measurement
Property, plant and equipment are stated initially at
cost, which includes purchase price and other costs
directly attributable to acquisition and bringing the
asset to the location and condition necessary for
their intended use.
After initial recognition, land and buildings are
measured at revalued amountsless any accumulated
depreciation and any accumulated impairment
losses since the most recent valuation. The other
items of property, plant and equipment are
measures at cost less any accumulated depreciation
and any accumulated impairment losses.
Until 31 December 2003 the Group has restated the
cost of property, plant and equipment according
to IAS 29 “financial reporting in Hyperinflationary
Economies”, with its effect being recognized in
retained earnings.
revaluations of land and buildings are made with
sufficient regularity to ensure that the carrying
amount does not differ materially from that which
would be determined using the fair value at the end
of the reporting period.
When a building is revalued, the accumulated
depreciation is eliminated against the gross carrying
amount of that item, and the net amount is restated
to the revalued amount of the asset.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.
Spare parts, stand-by and servicing equipment are
classified as property, plant and equipment if they
are expected to be used during more than one
period or can be used only in connection with an
item of property, plant and equipment.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to the
Group.
(iii) Depreciation
Depreciation is calculated to write off the cost of
items of property, plant and equipment less their
estimated residual values using the straight-line
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FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
method over their estimated useful lives, and
is recognised in profit or loss. leased assets are
depreciated over the shorter of the lease term and
their useful lives unless it is reasonably certain that
the Group will obtain ownership by the end of the
lease term. land and construction in progress are
not depreciated.
The estimated useful lives of property, plant and equipment are as follows:
Category
Buildings
Equipment
Motor vehicles
Office equipment
Useful lives
60-70 (average 67 years)
4-12 (average 7 years)
4-10 (average 7 years)
5-10 (average 7 years)
Depreciation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
(K) InTangIBlE aSSET In a SERVICE
concession arrangement
(i) recognition and measurement
The Group recognises an intangible asset arising
from a service concession arrangement when it
has a right to charge for use of the concession
infrastructure. An intangible asset received as
consideration for providing construction or upgrade
services in a service concession arrangement is
measured at fair value on initial recognition with
reference to the fair value of the services provided.
Subsequent to initial recognition, the intangible
asset is measured at cost, less accumulated
amortisation and accumulated impairment losses.
(ii) amortisation
The amortization method used is selected on the
basis of the expected pattern of consumption of
the expected future economic benefits embodied
in the asset, and is applied consistently from
period to period, unless there is a change in the
expected pattern of consumption of those future
economic benefits. The Group determined that the
amortisation method that reflects appropriately
the expected pattern of consumption of the
expected future economic benefits is correlated
with the amortisation of the regulated asset base
“rAB” (refer to Note 1). The remaining useful life
of the intangible assetsrelated to the concession
arrangementsis 12 years at 31 December 2014
(useful life 25 years).
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in
profit or loss as incurred.
(iii) amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
using the straight-line method over their estimated
useful lives, and is generally recognised in profit or
loss.
The estimated useful lives of software and licenses
are 3-5 years.
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
(m) aSSETS hElD fORDISTRIBUTIOn
Non-current assets, or disposal groups comprising
assets and liabilities, are classified as held-for-
distribution if it is highly probable that they will be
recovered primarily through distribution rather than
through continuing use.
Such assets, or disposal groups, are measured at
the lower of their carrying amount and fair value
less costs of distribution. Impairment losses on
initial classification as held-for-distribution and
subsequent gains and losses on remeasurement are
recognised in profit or loss.
Once classified as held-for-distribution, equity-
accounted investee is no longer equity accounted.
(l) OThER InTangIBlE aSSETS
(i) Recognition and measurement
Other intangible assets that are acquired by the
Group and have finite useful lives are measured
at cost less accumulated amortisation and any
accumulated impairment losses.
(n) fInanCIal InSTRUmEnTS
The Group classifies non-derivative financial
assets into the following categories: loans and
receivablesand held to maturity investments.
The Group classifies non-derivative financial
liabilities into the other financial liabilities category.
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NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(i) non-derivative financial assets and financial
liabilities – recognition and derecognition
The Group initially recognises loans and receivables
on the date when they are originated. financial
liabilities are initially recognised on the trade date,
which is the date the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in
which substantially all of the risks and rewards of
ownership of the financial asset are transferred,
or it neither transfers nor retains substantially all
of the risks and rewards of ownership and does
not retain control over the transferred asset. Any
interest in such derecognised financial assets that is
created or retained by the Group is recognised as a
separate asset or liability.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled,
or expire.
financial assets and financial liabilities are offset
and the net amount presented in the statement of
financial position when, and only when, the Group
has a legal right to offset the amounts and intends
either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
(ii) non-derivative financial assets – measurement
loans and receivables
These assets are initially recognised at fair
value plus any directly attributable transaction
costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective
interest method.
loans and receivables comprise trade receivables,
cash and cash equivalents and deposits, treasury
bills and government bond.
Trade receivables
Trade receivables include mainly unsettled
invoices issued until reporting date for supply and
distribution of electricity and services, late payment
penalties and accrued revenue for electricity
delivered and services rendered until the end of the
year, but invoiced after the end of the year.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances
and call deposits and deposits with maturities of
three months or less from the acquisition date that
are subject to an insignificant risk of changes in
their fair value, and are used by the Group in the
management of its short-term commitments.
held-to-maturity investments
Held-to-maturity financial assets are initially
recognized at fair value plus any directly
attributable transaction costs. Subsequent to initial
recognition, they are measured at amortized cost
using the effective interest method.
(iii) non-derivative financial liabilities –
measurement
Non-derivative financial liabilities are initially
recognised at fair value less any directly attributable
transaction costs. Subsequent to initial recognition,
these liabilities are measured at amortised cost
using the effective interest method.
Other financial liabilities include bank borrowings,
bank overdrafts, financing for network construction
related to concession agreementsand trade
payables.
Bank overdrafts that are repayable on demand
and form an integral part of the Group’s cash
management are included as a component of cash
and cash equivalents in the statement of cash flows.
(iv) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary
shares, net of any tax effects, are recognised as a
deduction from equity.
Repurchase and reissue of ordinary shares
(treasury shares)
When shares recognised as equity are repurchased,
the amount of the consideration paid, which
includes directly attributable costs, net of any tax
effects, is recognised as a deduction from equity.
repurchased shares are classified as treasury
shares and are presented in the treasury share
reserve. When treasury shares are sold or reissued
subsequently, the amount received is recognised as
an increase in equity and the resulting surplus or
deficit on the transaction is presented within share
premium.
(O) ImPaIRmEnT
(i) non-derivative financial assets
financial assets are assessed at each reporting date
to determine whether there is objective evidence of
impairment.
Objective evidence that financial assets are
impaired includes:
n default or delinquency by a debtor;
n restructuring of an amount due to the Group
on terms that the Group would not consider
otherwise;
n indications that a debtor or issuer will enter
bankruptcy;
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FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
n adverse changes in the payment status of
borrowers or issuers;
n the disappearance of an active market for a
security; or
n observable data indicating that there is
measurable decrease in expected cash flows from
a group of financial assets.
financial assets measured at amortised cost
The Group considers evidence of impairment for
these assets at both an individual asset and a
collective level. All individually significant assets are
individually assessed for impairment. Those found
not to be impaired are then collectively assessed
for any impairment that has been incurred but
not yet individually identified. Assets that are not
individually significant are collectively assessed
for impairment. Collective assessment is carried
out by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses
historical information on the timing of recoveries
and the amount of loss incurred, and makes
an adjustment if current economic and credit
conditions are such that the actual losses are likely
to be greater or lesser than suggested by historical
trends.
An impairment loss is calculated as the difference
between an asset’s carrying amount and the
present value of the estimated future cash flows
discounted at the asset’s original effective interest
rate. losses are recognised in profit or loss and are
reflected in an allowance account. for household
customers the receivables are written off when
the Group considers that there are no realistic
prospects of recovery of the asset. for customers
other than households, the amounts are written
off after the legal proceedings regarding the
bankruptcy or liquidation of the customer are
completed. If the amount of impairment loss
subsequently decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised, then the previously
recognised impairment loss is reversed through
profit or loss.
Equity-accounted investees
An impairment loss in respect of an equity-
accounted investee is measured by comparing the
recoverable amount of the investment with its
carrying amount. An impairment loss is recognised
in profit or loss, and is reversed if there has been
a favourable change in the estimates used to
determine the recoverable amount.
(ii) non-financial assets
At each reporting date, the Group reviews the
carrying amounts of its non-financial assets
(other than inventories and deferred tax assets)
to determine whether there is any indication of
impairment. If any such indication exists, then the
asset’s recoverable amount is estimated.
for impairment testing, assets are grouped together
into the smallest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
cash generating units (“CGUs”).
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less
costs to sell. Value in use is based on the estimated
future cash flows, discounted to their present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money and
the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its recoverable
amount.
Impairment losses are recognised in profit or loss,
except for the property, plant and equipment
measured at the revalued amount, in which
case the impairment loss is recognised in other
comprehensive income and decreases the
revaluation reserve within equity to the extent that
it reverses a previous revaluation surplus related to
the same asset.
An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed
the carrying amount that would have been
determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
A reversal of an impairment loss other than on
revalued assets is recognised in profit or loss. A
reversal of an impairment loss on a revalued asset
is recognised in profit or loss to the extent that it
reverses an impairment loss on the same asset that
was previously recognised as an expense in profit or
loss. Any additional increase in the carrying amount
of the asset is treated as a revaluation increase.
(P) REValUaTIOn RESERVE
The difference between the revalued amount and
the net carrying amount of property, plant and
equipment is recognised as revaluation reserve
included in equity.
If an asset’s carrying amount is increased as a
result of a revaluation, the increase is recognised
and accumulated in equity under the heading
of revaluation reserve. However, the increase is
recognised in profit and loss to the extent that it
reverses a revaluation decrease of the same amount
of the asset previously recognised in profit and loss.
If an asset’s carrying amount is decreased as a
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NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
result of a revaluation, the decrease is recognised in
profit or loss. However, the decrease is recognized
in equity in revaluation reserves if there is any
credit balance existing in the revaluation reserve in
respect of that asset.
The revaluation reserve is transferred to retained
earnings inan amount corresponding to the use
of the asset(as the asset is depreciated) and upon
disposal of the asset.
(q) DIVIDEnDS
Dividends are recognized as a deduction from
equity in the period in which their distribution is
approved and recognised as a liability to the extent
it is unpaid at the reporting date. Dividends are
disclosed in the notes to financial statements when
their distribution is proposed after the reporting
date and before the date of the issuance of the
financial statements.
(R) PRE-PaID CaPITal COnTRIBUTIOnS In KInD
from shareholders
These contributions from a shareholder (the
Romanian State) represent pre-paid contributions of
land for which the Company obtained title deeds in
respect of future issuance of shares. The amounts
recorded are based on the fair value of the land.
(S) PROVISIOnS
A provision is recognised if, as a result of a past
event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are
determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market
assessments of the time value of money and the
risks specific to the liability. The unwinding of the
discount is recognised as finance cost.
A provision for restructuring is recognised when
the Group has approved a detailed and formal
restructuring plan, and the restructuring either
has commenced or has been announced publicly.
future operating losses are not provided for.
(T) lE aSES
(i) Determining whether an arrangement contains
a lease
At inception of an arrangement, the Group
determines whether the arrangement is or contains
a lease.
At inception or on reassessment of an arrangement
that contains a lease, the Group separates
payments and other consideration required by the
arrangement into those for the lease and those
for other elements on the basis of their relative
fair values. If the Group concludes that, for a
finance lease, it is impracticable to separate the
payments reliably, then an asset and a liability are
recognised at an amount equal to the fair value of
the underlying asset; subsequently, the liability is
reduced as payments are made and an imputed
finance cost on the liability is recognised using the
Group’s incremental borrowing rate.
(ii) leased assets
Assets held by the Group under leases that transfer
to the Group substantially all of the risks and
rewards of ownership are classified as finance
leases. The leased assets and finance lease liability
are measured initially at an amount equal to the
lower of their fair value and the present value
of the minimum lease payments. Subsequent to
initial recognition, the assets are accounted for in
accordance with the accounting policy applicable to
that asset.
Assets held under other leases are classified
as operating leases and are not recognised in
the Group’s consolidated statement of financial
position.
(iii) lease payments
Payments made under operating leases are
recognised in profit or loss on a straight-line
basis over the term of the lease. lease incentives
received are recognised as an integral part of the
total lease expense, over the term of the lease.
Minimum lease payments made under finance
leases are apportioned between the finance
expense and the reduction of the outstanding
liability. The finance expense is allocated to each
period during the lease term so as to produce a
constant periodic rate of interest on the remaining
balance of the liability.
(iv) Rental income
rental income from property other than investment
property is recognised as other income. rental
income is recognised on a straight-line basis over
the term of the lease.
(U) SE gmEnT REPORTIng
Segment results that are reported to the Company’s
Board of Directors (the chief operating decision
maker) include items directly attributable to a
segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise
mainly deferred taxes.
(V) SUBSEqUEnT EVEnTS
Events occurring after the reporting date 31
December 2014, which provide additional
information about conditions prevailing at those
reporting dates (adjusting events) are reflected
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FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
in the consolidated financial statements. Events
occurring after the reporting date that provide
information on events that occurred after the
reporting dates (non-adjusting events), when
material, are disclosed in the notes to the
consolidated financial statements. When the going
concern assumption is no longer appropriate at or
after the reporting period, the financial statements
are not prepared on a going concern basis.
7 changes in accounting policies and changes
in classification and presentation
Except for the change below, the Group has
consistently applied the accounting policies set
out in Note 6to all periods presented in these
consolidated financial statements:
a. Application of IfrIC 12 as a result of changes in
circumstances (see Note 4)
B. New standards with a date of initial application
of 1 January 2014 under IFRS-EU
c. Changes in classification and presentation.
a. application of ifric 12 “ser Vice
concession arrangements”
Due to the initial public offering, the management
reassessed the accounting treatment used for
concession agreements and as a result adopted
IfrIC 12 (see Note 4). Consequently, the Group
ceased the application of IfrIC 18 “Transfers of
assets from customers”. The Group has applied the
change in accounting policy retrospectively and
restated the comparative periods.
The following tables summarise the impact on the Group’s consolidated financial statements.
Consolidated statement of financial position
1 january 2013
as previously reported
adjustment
as restated
Impact of changes in accounting policies
Property, plant and equipment
5,717,592
(4,869,152)
Intangible assets related to concession
arrangements
Other intangible assets
Others
Total assets
Deferred revenue
Deferred tax liabilities
Others
Total liabilities
retained earnings
Revaluation reserve
Non-controlling interests
Others
Total equity
848,440
3,318,332
7,781
4,132,657
8,307,210
(2,362)
(201,963)
(1,946,124)
(2,150,449)
-
3,318,332
(34,362)
-
(1,585,182)
1,309,336
60,791
-
1,370,127
42,143
4,132,657
9,892,392
(1,311,698)
(262,754)
(1,946,124)
(3,520,576)
(1,326,572)
(1,132,815)
(765,253)
(3,147,176)
(6,371,816)
(373,705)
(1,700,277)
543,864
47,312
(2,416)
215,055
(588,951)
(717,941)
(3,149,592)
(6,156,761)
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FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
31 December 2013
as previously reported
adjustment
as restated
Impact of changes in accounting policies
Property, plant and equipment
5,932,771
(5,057,056)
Intangible asset related to concession
arrangements
Other intangible assets
Others
Total assets
Deferred revenue
Deferred tax liabilities
Others
Total liabilities
retained earnings
Revaluation reserve
Non-controlling interests
Others
Total equity
875,715
3,340,103
4,912
4,202,260
8,422,990
(2,600)
(201,208)
(1,773,564)
(1,977,372)
-
3,340,103
(54,001)
(5,777)
(1,776,731)
1,508,219
54,760
-
1,562,979
58,913
4,208,037
10,199,721
(1,510,819)
(255,968)
(1,773,564)
(3,540,351)
(1,597,810)
(1,080,704)
(811,296)
(3,169,560)
(6,659,370)
(338,737)
(1,936,547)
507,879
47,026
(2,416)
213,752
(572,825)
(764,270)
(3,171,976)
(6,445,618)
Consolidated statement of profit and loss and other comprehensive income
for the year ended
31 December 2013
revenues
Other income
Impact of changes in accounting policies
as previously
reported
5,156,633
132,929
adjustment
as restated
226,185
(4,612)
5,382,818
128,317
Depreciation and amortization
(397,540)
84,313
(313,227)
Impairment of property, plant and
equipment, net
repairs, maintenance and
materials
Construction costs
Income tax expense
Others
Profit
Total comprehensive income
(13,222)
(102,121)
-
(75,178)
(4,387,157)
314,344
317,113
761
(12,461)
(8,908)
(290,405)
(6,031)
-
1,303
1,303
(111,029)
(290,405)
(81,209)
(4,387,157)
315,647
318,416
There is no material impact on the Group’s basic or
diluted earnings per share for the year ended 31
December 2013.
consequential amendments to other standards, with
a date of initial application of 1 January 2014 under
IFRS-EU:
B. new standards with a date of initial
application of 1 january 2014
UnDER IfRS-EU
The Group has adopted the following new standards
and amendments to standards, including any
IfRS 10 Consolidated financial Statements, IfRS 12
Disclosure of Interests in Other Entities (2011)
As a result of IfrS 10 (2011), the Group has changed
its accounting policy for determining whether it has
control over and consequently whether it consolidates
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NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
its investees. IfrS 10 (2011) introduces a new control
model that is applicable to all investees, by focusing
on whether the Group has power over an investee,
exposure or rights to variable returns from its
involvement with the investee and ability to use its
power to affect those returns. In particular, IFRS 10
(2011) requires the Group to consolidate investees
that it controls on the basis of de facto circumstances.
The Group reassessed the control conclusion for
its investees at 1 January 2014. The Group has not
changed its control conclusion in respect of any of its
investments in subsidiaries.
IfrS 12 brings together into a single standard all the
disclosure requirements about an entity’s interests
in subsidiaries, joint arrangements, associates and
unconsolidated structured entities. These disclosures
relate to an entity’s interests in subsidiaries, joint
arrangements, associates and structured entities. A
number of new disclosures were added, but there
was no impact on the Group’s financial position or
performance.
Offsetting financial assets and financial liabilities -
amendments to IaS 32
These amendments clarify the meaning of ’currently
has a legally enforceable right to set-off’ and the
criteria for non-simultaneous settlement mechanisms
of clearing houses to qualify for offsetting. These
amendments have no impact on the Group for 2014
and 2013.
Recoverable amount Disclosures for non-financial
assets – amendments to IaS 36
These amendments remove the unintended
consequences of IfrS 13 fair Value Measurement on
the disclosures required under IAS 36 Impairment
of Assets. In addition, these amendments require
disclosure of the recoverable amounts for the assets or
cash-generating units (CGUs) for which an impairment
loss has been recognized or reversed during the period.
c. changes in classification and
presentation
(i) Change in classification
The Group’s liabilities in respect of the obligations
related to acquisition of green certificates were
recorded in prior years as trade payables in the
consolidated statement of financial position.
Starting with 2014, the Group changed the
classification of these liabilities to other payables
in the consolidated statement of financial position.
Management believes that the classification of these
liabilities as other payables reflects better the non-
financial nature of these liabilities.
for the purpose of comparability, rON 46,097
thousands as at 31 December 2013 and rON 64,869
thousands as at 31 December 2012 previously
classified as trade payables have been reclassified
to other payables with no impact on total current
liabilities. This reclassification had no impact on the
Group financial position as at 31 December 2013 and
31 December 2012, respectively.
(ii) Change in presentation
In 2014 the Group changed the disclosure
of management compensation and included
compensation granted to the general directors of
the Group companies. In prior period management
compensation included the compensation also
directors of departments. The management of the
Company considers that the new presentation reflects
more accurately the persons having authority and
responsibility for planning, directing and controlling
the activities of the entity.
8 new standards and interpretations not yet adopted
A number of new standards, amendments to standards
and interpretations are effective for annual periods
beginning after 1 January 2014, and have not been applied
in preparing these consolidated financial statements. Those
which may be relevant to the Group are set out below. The
Group does not plan to adopt these standards early.
IfRIC 21 levies (effective for annual periods
beginning on or after 17 june 2014 under IfRS-EU)
IfrIC 21 was endorsed by EfrAG on 13 June 2014
and published in the Official Journal in 14 June 2014.
Regulations legally come into force 3 days after
publication in the Official Journal. Each company shall
therefore apply IfrIC 21, at the latest, as from the
commencement date of its first financial year starting
on or after 17 June 2014. Therefore the Group must
apply IfrIC 21 from 1 January 2015. The Group has
decided not to early adopt this standard.
IFRIC 21 is applied retrospectively. It is applicable to
all levies imposed by governments under legislation,
other than outflows that are within the scope of other
standards (e.g., IAS 12 Income Taxes) and fines or
other penalties for breaches of legislation.
The interpretation clarifies that an entity recognizes
a liability for a levy no earlier than when the activity
that triggers payment, as identified by the relevant
legislation, occurs. It also clarifies that a levy liability
is accrued progressively only if the activity that
triggers payment occurs over a period of time, in
accordance with the relevant legislation. For a levy
that is triggered upon reaching a minimum threshold,
no liability is recognized before the specified
minimum threshold is reached. The interpretation
requires the same principles to be applied in interim
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NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
financial statements. The Group estimates that IFRIC
21 will have an impact in respect with the timing of
recognition of taxes on special constructions.IFRIC 21
should be applied retrospectively from the year ended
31 December 2013.
The following new or amended standards are not
expected to have a significant impact of the Group’s
consolidated financial statements:
n Annual improvements to IfrSs 2011 – 2013 Cycle;
n Annual improvements to IfrSs 2010 – 2012 Cycle;
n Amendments to IAS 19 (Defined Benefit Plans,
Employee Contributions).
9 operating segments
(a) BaSIS fOR SEgmEnTaTIOn
The following summary describes the operations of each reportable segment.
Reportable segments
Operations
Electricity supply
Buying and supplying electricity to final consumers (includes Electrica
Furnizare SA and the supply activity of Electrica SA)
Electricity distribution
External electricity network
maintenance
Electricity distribution service (includes Electrica Distributie Muntenia Nord SA,
Electrica Distributie Transilvania Nord SA, Electrica Distributie Transilvania Sud SA,
Electrica Serv SA and the investments in distribution activity done by Electrica SA)
repairs, maintenance and other services for electricity networks owned by
other distributors (includes Servicii Energetice Banat SA, Servicii Energetice
Dobrogea SA, Servicii Energetice Moldova SA, Servicii Energetice Oltenia SA
and Servicii Energetice Muntenia SA)
Headquarter
Includes corporate services at parent level
The Board of Directorsof the Company reviews mana-
gement reports of each segment. Segment earnings
before interest, tax, depreciation and amorti sation
(EBITDA) is used to measure performance because
mana gement believes that such information is the most
relevant in evaluating the results of the segments.
annual report2014 102
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(B) InfORmaTIOn aBOUT REPORTaBlE SEgmEnTS
2014
annual
report
Electricity supply
Electricity distribution
External electricity
network maintenance
headquarter
Total for reportable
segments
Consolidation
eliminations and
adjustments
Consolidated total
year ended
31 December 2014
External revenues
Inter-segment revenue
Segment revenue
Segment profit (loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment,
net
EBITDa**
Segment net profit (loss)
Employee benefits
Segment assets
Trade and other receivables
Cash and cash equivalents
Deposits, treasury bills and government
bonds
Trade and other payables, and short term
employee benefits
Bank overdrafts
Financing for network construction related
to concession agreements and finance lease
4,029,654
103,438
4,133,092
229,531
3,553
(6,706)
232,684
179,782
(83,183)
1,286,522
724,938
403,486
826,140
-
-
-
Capital expenditure
15,073
955,470
1,519,452
2,474,922
369,738
(7,001)
(311,401)
688,140
305,722
(545,172)
4,980,388
661,105
144,481
182,100
371,151
48,132
250,844
508,821
58,604
58,604
(101,836)
39
(36,113)
(65,762)
(96,862)
(92,472)
222,100
23,841
6,220
309,771
-
-
-
-
-
-
-
-
-
-
-
5,043,728
1,622,890
6,666,618
748,628
251,687
(358,512)
855,453
639,837
(738,606)
8,691,603
1,409,884
1,629,508
1,220,521
251,195
255,096
(4,292)
391
251,195
(17,779)
2,202,593
-
1,075,321
1,038,421
7,274
1,514,336
48,132
250,844
523,894
-
(1,622,890)
(1,622,890)
(238,432)
(238,432)
(238,432)
-
(543,936)
(604,452)
-
-
-
-
-
-
(495,014)
1,019,322
48,132
250,844
519,881
(4,013)
5,043,728
-
5,043,728
510,196
13,255
(358,512)
855,453
401,405
(738,606)
8,147,667
805,432
1,629,508
1,220,521
103
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
The breakdown of the Electricity distribution reportable segment is as follows:
2014
annual
report
year ended
31 December 2014
External revenues
Inter-segment revenue
Segment revenue
Segment profit /(loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment,
net
EBITDa**
Net profit
Employee benefits
Segment assets
Trade and other receivables
Cash and cash equivalents
Deposits, treasury bills and government
bonds
Trade and other payables, and short term
employee benefits
Bank overdrafts
Financing for network construction related
to concession agreements and finance lease
Capital expenditure
Distribution
muntenia nord
Distribution
Transilvania nord
Distribution
Transilvania Sud
Electricity network
maintenance
Eliminations
Total
Electricity distribution
327,560
548,922
876,482
152,280
4,970
(85,001)
232,311
127,337
(133,790)
1,739,503
171,169
94,539
182,100
109,695
-
108,291
165,469
281,189
469,480
750,669
121,441
(4,010)
(99,319)
224,770
103,943
(120,984)
1,326,879
137,526
17,370
-
-
119,911
38,948
30,538
158,869
324,733
491,090
815,823
91,830
(5,899)
(113,433)
211,162
69,883
(116,511)
1,422,739
159,785
15,744
120,044
9,184
111,721
161,561
21,988
372,929
394,917
4,187
(2,062)
(13,648)
19,897
4,559
(173,887)
583,871
285,229
16,828
114,235
294
22,922
-
-
(362,969)
(362,969)
(92,604)
(92,604)
(92,734)
-
-
-
-
-
-
-
-
-
-
-
-
955,470
1,519,452
2,474,922
369,738
(7,001)
(311,401)
688,140
305,722
(545,172)
4,980,388
661,105
144,481
182,100
371,151
48,132
250,844
508,821
104
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
2014
annual
report
year ended
31 December 2013 (restated*)
External revenues
Inter-segment revenue
Segment revenue
Segment profit /(loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment,
net
EBITDa**
Segment net profit (loss)
Employee benefits
Share of profit (loss) of equity accounted
investees
Segment assets
Trade and other receivables
Cash and cash equivalents
Assets held for distribution
Trade and other payables, and short term
employee benefits
Bank overdrafts
Financing for network construction related
to concession agreements and finance lease
Capital expenditure
*See Note 7
Electricity supply
Electricity distribution
External electricity
network maintenance
headquarter
Total for reportable
segments
Consolidation
eliminations and
adjustments
Consolidated total
4,570,091
209,936
4,780,027
109,742
(176)
(7,183)
117,101
89,676
(84,570)
-
1,409,768
1,213,788
92,146
880,349
42,218
4,986
-
-
711,999
1,570,404
2,282,403
285,900
(15,448)
(301,629)
602,977
226,283
(573,735)
-
4,868,773
644,150
412,580
417,795
467
273,199
361,706
-
-
-
-
-
100,728
100,728
(45,102)
327
(3,382)
(42,047)
(46,628)
(84,922)
-
372,062
44,004
1,983
382,700
683
-
-
-
-
-
73,648
94,035
(13,494)
(6,893)
73,648
(22,705)
62,959
214,854
-
144,126
2,243,494
3,307
36,999
5,382,818
1,780,340
7,163,158
424,188
78,738
(325,688)
671,138
342,979
(765,932)
62,959
6,865,457
1,901,942
650,835
2,243,494
1,684,151
79,684
273,199
367,375
-
(1,780,340)
(1,780,340)
(27,332)
(90,291)
-
-
-
-
-
-
-
-
(27,332)
1,557,533
(757,187)
(588,007)
9,120
5,382,818
-
5,382,818
396,856
(11,553)
(325,688)
671,138
315,647
(765,932)
62,959
8,422,990
1,144,755
650,835
2,243,494
1,096,144
79,684
273,199
376,495
105
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
The breakdown of the Electricity distribution reportable segment is as follows:
2014
annual
report
year ended
31 December 2013 (restated*)
External revenues
Inter-segment revenue
Segment revenue
Segment profit (loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment,
net
EBITDa**
Net profit
Employee benefits
Segment assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables, and short term
employee benefits
Bank overdrafts
Financing for network construction related
to concession agreements and finance lease
Distribution
muntenia nord
Distribution
Transilvania
nord
Distribution
Transilvania
Sud
Electricity network
maintenance
Eliminations
Total
Electricity
distribution
225,020
579,871
804,891
133,905
6,546
(79,037)
206,396
106,431
(145,203)
1,706,178
158,157
324,565
133,435
-
78,722
245,258
468,568
713,826
80,167
(7,104)
(96,661)
183,932
55,242
(131,675)
1,283,917
134,001
31,621
138,852
467
53,891
230,783
511,430
742,213
70,507
(12,395)
(110,180)
193,082
52,735
(121,692)
1,405,514
156,058
47,062
134,802
-
139,798
10,938
385,119
396,057
1,321
(2,495)
(15,751)
19,567
11,875
(175,165)
600,505
323,275
9,332
138,047
-
788
-
(374,584)
(374,584)
-
-
-
-
-
-
(127,341)
(127,341)
-
(127,341)
-
-
711,999
1,570,404
2,282,403
285,900
(15,448)
(301,629)
602,977
226,283
(573,735)
4,868,773
644,150
412,580
417,795
467
273,199
Capital expenditure
*See Note 7
** EBITDA (Earnings before interest, tax, depreciation and amortisation) for operating segments is defined and calculated as segment profit (loss) before tax of a given operating segment adjusted for i) depreciation, amortization and impairment/ reversal of impairment of property,
plant and equipment and intangible assets in the operating segment, ii) net finance (cost)/income in the operating segment, iii) share of profit (loss) of equity-accounted investees in the operating segment (as disclosed in the income statements). EBITDA is not an IFRS measure and
should not be treated as an alternative to IFRS measures. Moreover, EBITDA is not uniformly defined. The method used to calculate EBITDA by other companies may differ significantly from that used by the Group. As a consequence, the EBITDA presented in this note cannot, as
such, be relied upon for the purpose of comparison to EBITDA of other companies.
100,594
112,596
146,446
2,070
-
361,706
106
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(C) RECOnCIlIa TIOn Of InfORmaTIOn On REPORTaBlE SEgmEnTS TO IfRS mE aSURES
2014
2013 restated*
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Consolidated revenue
Profit before tax
Total profit before tax for reportable segments
Elimination of inter-segment profit/(loss)
before tax
Share of profit of equity accounting investees
Consolidated profit before tax
net finance (cost)/income
Total net finance (cost)/income
Elimination of inter-segment net finance (cost)/
income
Consolidated total net finance (cost)/income
net profit
Total net profit for reportable segments
Elimination of inter-segment net profit/(loss)
Share of profit of equity accounting investees
Consolidated net profit
Total assets
Total assets for reportable segments
Elimination of inter-segment assets
Assets held for distribution
Unallocated amounts
Consolidated total assets
Trade and other receivables
Trade and other receivables for reportable
segments
Elimination of inter-segment trade and other
receivables
Unallocated amounts
Consolidated trade and other receivables
Trade and other payables and short term
employee benefits
Trade and other payables and short term
employee benefits for reportable segments
Elimination of inter-segment trade and other
payables and short term employee benefits
Unallocated amounts
Consolidated trade and other payables and short
term employee benefits
*See Note 7
6,666,618
(1,622,890)
5,043,728
7,163,158
(1,780,340)
5,382,818
748,628
(238,432)
-
510,196
251,687
(238,432)
13,255
639,837
(238,432)
-
401,405
8,691,603
(601,805)
-
57,869
8,147,667
1,409,884
(602,696)
(1,756)
805,432
1,514,336
(493,258)
(1,756)
1,019,322
424,188
(90,291)
62,959
396,856
78,738
(90,291)
(11,553)
342,979
(90,291)
62,959
315,647
6,865,457
(768,396)
2,243,494
82,435
8,422,990
1,901,942
(754,261)
(2,926)
1,144,755
1,684,151
(585,081)
(2,926)
1,096,144
annual report2014 107
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
10 reVenue
Supply and distribution of electricity
Construction revenue related to concession
agreements (Note 23)
repairs and maintenance and other services rendered
Re-connection fees
Sales of merchandise
Total
*See Note 7
11 income and expenses
(a) OThER InCOmE
rent income
Late payment penalties from customers
Commissions for the collection of radio and TV
taxes (Note 29)
Gain on loss of control over subsidiaries (Note 33)
Other
Total
*See Note 7
2014
2013 restated*
4,492,096
449,742
68,138
8,961
24,791
5,043,728
4,939,831
298,496
121,056
12,608
10,827
5,382,818
2014
2013 restated*
77,802
38,681
13,889
32,349
13,788
176,509
73,504
26,556
13,486
-
14,771
128,317
(B) ElECTRICITy PURChaSED
Electricity purchased include the cost of electricity
purchased for the purpose of supply to final
consumers or to other electricity suppliers, the cost
of transmission and system services (2014: RON
323,929 thousand; 2013: RON 303,632 thousand),
and the electricity acquired to cover the network
losses (2014: RON 425,814 thousand; 2013: RON
521,374 thousand).The Group purchases the
electricity and transmission and system services
mainly from state controlled companies – refer to
Note 32.
(C) REPaIRS, maInTEnanCE anD maTERIalS
repairs, maintenance and materials include materials
used for works performed by the service subsidiaries
of the Group for third party electricity distribution
infrastructure in amount of rON 18,478 thousand in
2014 (2013: RON 19,439 thousand).
annual report2014 108
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(D) OThER OPERaTIng ExPEnSES
rent
Meter readings
Printing and distribution of invoices
Cash collection services
IT services
Postage and telecommunication
Utilities
Security
Call centre
Penalties to the State for late payment
of taxes
Contractual penalties
Other taxes and duties
Movement in provisions, net (Note 30)
legal and consultancy fees
Cost of merchandise sold
Bank commissions
Other
Total
2014
2013
59,429
38,123
32,777
24,282
49,988
27,527
29,242
7,613
7,405
8,162
368
89,333
(413)
5,161
23,980
9,979
61,922
48,593
37,724
34,712
25,584
38,441
27,526
29,141
6,637
6,564
12,967
23,703
45,794
4,784
10,329
9,687
10,218
61,971
474,878
434,375
With effect from 1 January 2014, a tax on special
construction payable to the State Budget was
introduced, computed as 1.5% of the gross book
value of qualifying constructions as at 31 December
of the previous year. The expense recorded in 2014 in
respect of this tax was rON 47,535 thousand,recorded
in “Other taxes and duties” in the table above.
Contractual penalties refer to penalties paid mainly
to electricity producers for advance termination of
electricity acquisition contracts.
12 net finance cost
Interest income
Other finance income
Total finance income
Interest expense
Interest cost for employee benefits (Note 15)
foreign exchange losses
Other finance costs
Total finance costs
net finance income / (cost)
2014
2013
32,806
3,598
36,404
(11,250)
(9,576)
(1,797)
(526)
(23,149)
13,255
23,140
375
23,515
(20,168)
(11,916)
(2,061)
(923)
(35,068)
(11,553)
annual report2014 109
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
13 earnings per share
The calculation of basic and diluted earnings per share has been based on the following profit attributable to
ordinary shareholders and weighted-average number of ordinary shares outstanding:
Profit attributable to ordinary shareholders
Profit for the year attributable to the owners of
the Company
Profit attributable to ordinary shareholders
*See Note 7
2014
2013 restated*
287,837
287,837
244,412
244,412
Weighted-average number of ordinary shares (in number of shares)
2014
2013
Issued ordinary shares at 1 january (note 25)
Effect of shares issued in February
Effect of spin-off in April
Effect of shares issued in May
Effect of shares issued in June
Effect of underwritings from the IPO in June
Effect of shares re-purchased in July
Effect of shares issued in August
Effect of shares issued in October
207,839,904
172,575
(32,342,835)
2,564,531
-
103,360,101
(3,445,297)
-
-
206,229,044
142,963
-
-
13,630
-
-
402,463
36,708
Weighted-average number of ordinary shares at
31 December
278,148,979
206,824,808
Earnings per share
Basic and diluted earnings per share (rON)
1.03
1.18
14 ShORT-TERm EmPl OyEE BEnEfITS
31 December 2014
31 December 2013
Personnel payables
Current portion of defined benefit liability and
other long-term employee benefits
Social security charges
Tax on salaries
Other employees benefits
Termination benefits
Total
38,632
12,790
64,172
15,567
-
15,553
146,714
30,073
11,432
80,215
14,618
15,853
-
152,191
For details of the related employee benefit expenses,
see Note 16.
In romania, all employers and employees, as well as
other persons, are contributors to the state social
security system. The social security system covers
pensions, allocations for children, temporary inability
to work, risks of works and professional diseases
and other social assistance services, unemployment
benefits and incentives for employers creating new
workplaces.
Termination benefits refer to lay-off indemnities for
the employees of ServiciiEnergetice Moldova.
Other employee benefits at 31 December 2013
include mainly employee bonuses granted in
accordance with Order no. 144/2005.
The Group has overdue social security and other
salary taxes of rON 39,541 thousand at 31 December
2014 (2013: RON 58,476 thousand) whichrelatemainly
to the four subsidiaries with financial difficulties
described in Note 33.
annual report2014 110
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
15 POST-EmPl OymEnT anD OThER lOng-TERm
employee Benefits
In accordance with Government Decisions no.
1041/2003 and no. 1461/2003, the Group provides
benefits in kind in the form of free electricity to retired
employees of the Group.
The Group also provides cash benefits to employees
depending on seniority and years of service at
Defined benefit liability
Other long-term employee benefits
Total
- Current portion*
- Non-current portion
*included in Personnel payables in Note 14
retirement.
In 2014 and 2013, employee benefit obligations
were computed by independent actuaries using the
projected unit credit method with benefits calculated
proportionally to period of service.
31 December 2014
31 December 2013
141,988
91,184
233,172
12,790
220,382
143,911
80,708
224,619
11,432
213,187
(I) mOVEmEnT In ThE DEfInED BEnEfIT lIaBIlITy anD OThER lOng-TERm EmPl OyEE BEnEfITS
The following tables shows a reconciliation from the opening balances to the closing balances for the defined
benefit liability and other long-term employee benefits and its components. There are no plan assets.
Defined benefit liability
Balance at 1 january
Included in profit or loss
Current service cost
Interest (income) / cost
Included in other comprehensive income
Remeasurements loss (gain)
- Actuarial loss /(gain)
Other
Benefits paid
Balance at 31 December
2014
2013
143,911
3,694
(1,946)
3,922
(7,593)
141,988
Other long-term employee benefits
2014
2013
Balance at 1 january
Included in profit or loss
Current service cost
Actuarial gain
Interest cost
Benefits paid
Balance at 31 December
80,708
3,242
(565)
11,522
(3,723)
91,184
142,241
3,255
7,955
(3,297)
(6,243)
143,911
88,030
3,255
(11,129)
3,961
(3,409)
80,708
annual report2014 111
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(II) aCTUaRIal aSSUmPTIOnS
The following were the principal actuarial assumptions at the respective reporting date:
(a) Macroeconomic assumptions:
n inflation. The actuaries used the Consumer Price Index (CPI) published by the Economist Intelligence Unit:
year
2014
2015
2016
2017
2018+
Valuation date
31 December 2014
Valuation date
31 December 2013
-
2.1%
3.2%
2.7%
2.5%
2.3%
3.3%
3.2%
2.9%
2.7%
n the discount rate used was the yield for Romanian government bonds maturing in 10 years at the reporting
date of 4.5% for the year 2014 (2013: 5.2%);
n the electricity price per KWh used is 0.464 RON at 31 December 2014 (2013: 0.499RON/ KWh);
n the mortality rate published by the National Institute of Statistics was adjusted to allow for an anticipated
decrease in mortality rates;
n taxes and social charges are those in force as at the reporting date.
(b) Group specific assumptions:
n salaries increase in line with the estimated inflation rates in the future periods;
n employees’ turnover: turnover rates are based on statistical information regarding employees’ mobility during
2007-2014. Consideringhistorical retirement data, it is assumed that the personnel turnover rate decreases
with the employees’ age;
n jubilee and retirement bonuses based on seniority according to the collective labour contract, as follows:
Jubilee bonus based on years of service
Seniority
20 years
30 years
35 years
40 years
45 years
no of gross monthly base salaries
31 December 2014
31 December 2013
0.8
1.6
2.4
3.2
4
0.8
1.6
2.4
3.2
4
Retirement bonus based on years of service in the Group
Seniority
Between 8 and 10 years
Between 10 and 25 years
More than 25 years
no of gross monthly base salaries
31 December 2014
31 December 2013
1
2
3
1
2
3
The Group also offers 1,200 kWh of free electricity per year to retired employees for certain years of seniorirty.
Termination benefits
In accordance with the Collective labour contract concluded between the Group and the Unions, when
individual labour contract are terminated at the Group’s initiative, the Group will pay termination benefits to
the employees depending on their period of service, as follows:
Period of service
1 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
no of gross monthly base salaries
4
6
7
10
annual report2014 112
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
For collective lay-offs, according to the Collective labour contract, the Group will pay termination benefits to the
employees depending on their period of service, as follows:
Period of service
1 - 3 years
3 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
no of gross monthly base salaries
4
6
7
15
20
Collective lay-offs and termination benefits are only
applicable subject to approval of a rectification of
the budget, such that the approved salary fund for
the year will not be affectedby such measures.
The above mentioned stipulations do not apply
to employees with individual labour contract
concluded for a determined period. The
above stipulations do not apply to employees
that obtained other higher cumulative salary
compensation rights, provided by legal regulations
regarding the Group’s reorganization and
restructuring. Employees who are re-employed
within the Group after lay-off are not entitled to the
above mentioned benefits.
16 employee Benefit expenses
Average number of employees
Number of employees at 31 December
12,308
11,740
2014
2013
2014
2013
Wages and salaries
Social security contributions
Meal tickets
Termination benefits
Other employee benefits
Total
548,336
150,505
24,212
15,553
-
738,606
12,773
12,780
563,224
164,867
21,016
3,595
13,230
765,932
Termination benefits for the year 2014 refer to lay-off
indemnities for the employees of ServiciiEnergetice
Moldova (2013: for Electrica SA).
Other employee benefits for the year 2013 include
mainly employee bonuses granted in accordance with
Order no. 144/2005.
17 income taxes
In determining the amount of current and deferred
tax, the Group takes into account the impact of
uncertain tax positions and whether additional taxes
and interest may be due. This assessment relies on
estimates and assumptions and may involve a series of
judgments about future events. The Group considers
that the accounting records for taxes due are
adequate for all open tax years, based on assessment
(I) amOUnTS RECOgnISED In PROfIT OR lOSS
Current tax expense
Deferred tax expense
Total income tax
*See Note 7
made by management taking into account various
factors, including the interpretation of tax legislation
and previous experience. New information may
become available that causes the Group to change
its judgment regarding the adequacy of existing tax
liabilities; such changes to tax liabilities will impact
tax expense in the period that such a determination is
made.
2014
2013 restated*
88,836
19,955
108,791
61,748
19,461
81,209
annual report2014 113
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(II) amOUnTS RECOgnISED In OThER COmPREhEnSIVE InCOmE
Before tax
59
(3,922)
(3,863)
Revaluation of property,
plant and equipment
remeasurement of
defined benefit liability
Total
*See Note 7
2014
Tax
(expense)
benefit
net of tax
Before tax
2013 restated*
Tax
(expense)
benefit
net of
tax
-
628
628
59
(3,294)
(3,235)
-
3,297
3,297
-
(528)
(528)
-
2,769
2,769
(III) RECOnCIlIa TIOn Of EffECTIVE Tax RaTE
Profit before tax
Tax using Company’s domestic tax rate
Non-deductible expenses
Non-taxable income
Deduction of legal reserves
Other tax effects
Effect of share of profit of equity-accounted investees
Recognition of tax effect of previously unrecognised tax
losses
Current-year tax losses for which no deferred tax asset is
recognised
Change in recognised temporary differences
Income tax
*See Note 7
(IV) mOVEmEnT In DEfERRED Tax BalanCES
2014
2013 restated*
510,196
81,631
37,991
(8,961)
(4,782)
(3,413)
-
-
13,473
(7,148)
108,791
16%
7%
-2%
-1%
-1%
0%
0%
3%
-1%
21%
396,856
63,497
18,581
(15,006)
(2,122)
8,167
(10,073)
(10,736)
10,576
18,325
81,209
16%
5%
-5%
-1%
2%
-3%
-3%
3%
5%
20%
net
balance at
1 january
2014
Recognised
in profit or
loss
Recognised
in other
comprehensive
income
Effect of
loss of
control over
subsidiary
net
Deferred
tax
assets
Deferred
tax
liabilities
Balance at 31 December 2014
229,625
(6,122)
-
(5,631)
217,872
-
217,872
(17,490)
11
(628)
(74,466)
18,562
(26,269)
4,447
7,504
-
115,847
19,955
-
-
-
-
-
-
(18,107)
(18,107)
(55,904)
(55,904)
(18,765)
4,447
(18,765)
-
4,447
-
-
-
(5,631)
129,543
(92,776)
222,319
-
-
(5,631)
129,543
33,151
(59,625)
(33,151)
189,168
-
-
-
(628)
-
(628)
2014
Property, plant and
equipment and intangible
assets
Employee benefits
Impairment of trade
receivables
Tax loss carried forward
Other items
Tax liabilities (assets)
before set-off
Set off of tax
net tax liabilities (assets)
115,847
19,955
annual report2014 114
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
net
balance at
1 january
2013
Recognised
in profit or
loss
Recognised in
other
comprehensive
income
net
Deferred
tax
assets
Deferred
tax
liabilities
Balance at 31 December 2013
2013 restated*
Property, plant and
equipment and intangible
assets
Employee benefits
Impairment of trade
receivables
Tax loss carried forward
Other items
Tax liabilities (assets)
before set-off
219,103
10,522
(17,089)
(84,371)
(26,232)
4,447
(929)
9,905
(37)
-
95,858
19,461
Set off of tax
-
-
net tax liabilities (assets)
95,858
19,461
*See Note 7
-
528
-
-
-
528
-
528
229,625
(17,490)
(74,466)
(26,269)
4,447
-
229,625
(17,490)
(74,466)
(26,269)
-
-
-
-
4,447
115,847
(118,225)
234,072
-
32,864
115,847
(85,361)
(32,864)
201,208
(V) UnRECOgnISED DEfERRED Tax aSSETS
Deferred tax assets have not been recognised in respect of the following items, because it is not probable that
future taxable profit will be available against which the entity generating it can use the benefits therefrom.
Tax losses
2014
2013
293,972
262,721
Tax losses for which no deferred tax assets were recognised expire as follows:
year when the tax loss was generated:
2014
2013
Tax losses
2014 (expiring in 2021)
2013 (expiring in 2020)
2012 (expiring in 2019)
2011 (expiring in 2018)
2010 (expiring in 2016-2017)
2009 (expired in 2014)
Total
84,206
62,179
70,175
10,896
66,516
-
293,972
-
66,095
70,175
-
66,516
59,935
262,721
The Group has not recognized deferred tax
assets for tax losses related to the subsidiaries
with financial difficulties. The Group also has
not recognized deferred tax assets for tax losses
generated before 2011 (this was generated by one
company within the Group), as it is considered
unlikely that future taxable profit would be
sufficient to recover such assets.
annual report2014 115
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
31 December 2014
31 December 2013
1,928,476
(1,147,655)
780,821
2,253,069
(1,165,524)
1,087,545
31 December 2014
31 December 2013
18 trade receiVaBles
Trade receivables, gross
Bad debt allowance
Total trade receivables, net
Receivables from related parties are presented inNote 32.
Trade receivables gross comprise:
Electricity distribution and supply
Late payment penalties receivable
Electricity receivables from clients in litigation,
insolvency and bankruptcy
Late payment penalties from clients in litigation,
insolvency and bankruptcy
repairs, maintenance and other services
Other
Total trade receivables, gross
737,960
120,026
865,223
113,794
20,774
70,699
1,928,476
The movement in the bad debt allowance for trade receivables is as follows:
Bad debt allowance
Balance as at 1 january
Impairment recognized
Impairment reversed
Amounts written off
Balance as at 31 December
2014
2013
1,165,524
8,460
(9,449)
(16,880)
1,147,655
for the ageing of trade receivables refer to Note 31.
A significant part of the bad debt allowances refers
to clients in litigation, insolvency or bankruptcy
procedures, many of them being older than three
years. The Group will derecognize these receivables
together with the related allowances after the
finalization of the bankruptcy process.
On 25 April 2014 Electricafurnizare SA subsidiary
concluded an agreement with the National Railway
Company - CompaniaNationala de CaiFerate “CFR” SA
(“CFR”) (a state-owned company) on the settlement of
Cfr debts towards Electricafurnizare SA. On this basis,
on 13 May 2014 the Group collected rON 221,183
thousand.
19 deposits, treasury Bills and goVernment Bonds
Deposits, treasury bills and government bonds include
treasury bills and government bonds of rON 901,417
thousands denominated in rON with original maturity
of more than three months with an average interest
rate (yield) of 1.6% and deposits with maturity of
more than three months of rON 319,104 thousands.
The treasury bills and government bonds were
classified as investments held to maturity.
1,033,920
152,089
839,407
130,495
38,076
59,082
2,253,069
1,188,904
53,751
(75,456)
(1,675)
1,165,524
annual report2014 116
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
20 other receiVaBles
31 December 2014
31 December 2013
Good performance guarantees
VAT receivable
Interest receivable
Structural funds
Other receivables
Bad debt allowance
Total other receivables, net
8,553
3,850
4,212
7,234
37,889
(37,127)
24,611
The movement in the bad debt allowance for other receivables is as follows:
Bad debt allowance
Balance as at 1 january
Impairment recognized
Amounts written off
Balance as at 31 December
2014
2013
35,177
5,621
(3,671)
37,127
12,485
14,797
4,609
16,023
44,473
(35,177)
57,210
39,087
935
(4,845)
35,177
21 cash and cash equiValents
31 December 2014
31 December 2013
Bank current accounts
Call deposits
Cash in hand
Treasury bills and government bonds with original
maturities of less than 3 months
Total cash and cash equivalents in the
consolidated statement of financial position
Overdrafts used for cash management purposes
Total cash and cash equivalents in the
consolidated statement of cash flows
77,225
1,352,487
296
199,500
1,629,508
(48,132)
1,581,376
108,543
541,891
401
-
650,835
(79,684)
571,151
Cash and cash equivalents include treasury bills and
government bonds denominated in rON of rON
199,500 thousands with original maturities of 3
months or less. These bear anaverage interest rate
(yield) of 1.7% p.a.
The Group has overdrafts from ING and BRD, as follows:
Bank
Contract date
facility type
maturity
annual interest
Overdraft
limit
(th ROn)
Balance at
31 December
2014
ING Bank N.V.
and BrD Groupe
Societe Generale
ING Bank N.V.
and BrD Groupe
Societe Generale
Total
9-Dec-14
8-Dec-14
working capital financing
and issuance of potential
commitments
working capital financing
and issuance of potential
commitments
1 year for overdraft,
2 years for potential
commitments
1 year for overdraft,
2 years for potential
commitments
1M ROBOR - 1.3%
40,000
9,171
1M rOBOr + 0.49%
70,000
38,961
110,000
48,132
annual report2014
117
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Bank
Contract date
facility type
maturity
annual interest
Overdraft
limit
(th ROn)
Balance at
31 December
2013
ING
ING
Total
9-Oct-13
27-Sep-13
working capital financing
and issuance of potential
commitments
working capital financing
(80,000) and issuance of
potential commitments
(120,000)
1 year for overdraft,
2 years for potential
commitments
1 year for overdraft,
2 years for potential
commitments
1M ROBOR - 2.5%
190,000
37,466
1M ROBOR - 2.5%
80,000
42,218
270,000
79,684
The security for these overdrafts is presented in
Note 35 c).
The following information is relevant in the context of
the consolidated statement of cashflows:
Non-cash activity includes:
n purchases on suppliers’ credit related to property,
plant and equipment and concessionsof rON 96
million in 2014 (2013: RON 53 million);
n land contributed by the majority shareholder (2014:
nil; 2013: RON 9.1 million);
n set-off between trade receivables and trade
payables of RON 73 million in 2014 (2013: RON 54
million);
n effectof loss of control over subsidiaries under
financial distressin amount of RON 0.3 million in
2014 (see Note 33).
22 property, plant and equipment
The movements in property, plant and equipment in 2014 and 2013 were as follows:
land and land
improvements
Buildings
Equipment
Vehicles,
furniture and
office equipment
Construction in
progress
Total
389,361
284,558
91,440
110,852
128,548
1,004,759
gross carrying amount
Balance at 1 january 2013
restated*
Additions
Transfers from construction
in progress
Disposals
Balance at 31 December
2013 restated*
Additions
Transfer from construction
in progress
Disposals
Revaluation recognized
in other comprehensive
income, net
Revaluation recognized in
profit or loss, net
Gross book value netted off
against the accumulated
depreciation at revaluation
Valuation of land
contribution from the
shareholders, net
Effect of loss of control over
subsidiaries
Balance at 31 December
2014
10,162
-
(1,550)
397,973
6,224
-
(7,167)
(7,847)
270
3,382
(1,906)
286,304
5,664
2,681
7,906
(36,655)
(5,296)
-
(11,299)
(10,315)
-
1,493
61,593
(593)
1,210
4,940
(366)
61,653
(69,915)
(1,195)
74,788
-
(5,610)
153,933
116,636
119,091
1,073,937
2,474
1,077
3,679
1,235
44,275
(4,993)
(2,889)
(3,481)
(10,391)
62,316
-
(23,928)
59
(41,951)
(11,299)
(10,315)
-
-
-
-
-
-
-
-
-
-
-
-
-
(27,669)
(19,939)
(1,575)
(8,419)
(635)
(58,237)
314,544
263,132
152,428
102,740
157,738
990,582
annual report2014
118
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
land and land
improvements
Buildings
Equipment
Vehicles,
furniture and
office equipment
Construction in
progress
Total
accumulated depreciation
and impairment losses
Balance at 1 january 2013
restated*
Depreciation
Disposals
Impairment loss
reversal of impairment loss
Balance at 31 December
2013 restated*
Depreciation
Disposals
Impairment loss
reversal of impairment loss
Accumulated depreciation
netted off against gross
book value at revaluation
Effect of loss of control over
subsidiaries
Balance at 31 December
2014
net carrying amounts
at 1 january 2013
restated*
at 31 December 2013
restated*
at 31 December 2014
*See Note 7
-
-
-
-
-
-
-
-
-
-
-
-
-
18,321
13,212
(194)
-
(5)
31,334
11,557
(1,572)
-
(1,550)
(11,299)
36,439
11,608
(593)
-
-
47,454
14,958
(2,338)
-
(4,930)
-
5,696
(287)
-
-
90,353
6,769
(8,072)
20
(2,846)
-
84,944
16,615
156,319
-
-
12,466
-
29,081
-
-
169
-
-
-
30,516
(1,074)
12,466
(5)
198,222
33,284
(11,982)
189
(9,326)
(11,299)
(13,329)
(3,526)
(1,528)
(8,275)
24,944
53,616
77,949
29,250
185,759
389,361
266,237
55,001
25,908
111,933
848,440
397,973
314,544
254,970
238,188
106,479
98,812
26,283
24,791
90,010
128,488
875,715
804,823
Property, plant and equipment includes mainly land
and buildings. At 31 December 2014, the Group
performed a revaluation of land and buildings, except
for the land and buildings of subsidiaries in financial
distress, which are recognised on an alternate basis
due to going concern issues (see Note 33).
The restrictions on property, plant and equipment are
presented in Note 35c).
annual report2014 119
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
measurement of fair value
The following table shows the valuation techniques used in measuring fair values (Level 3) for the revaluation of
land and buildings as of 31 December 2014, as well as the significant unobservable inputs used.
Category
Valuation technique
Significant unobservable inputs
land
Market approach
n Adjustment for liquidity, location,
Buildings
size
n Occupancy rates (70-90%)
n Discount rates (10%on average)
n Costs not paid by tenants
(average 10%)
n Annual rent per sqm
n rental growth
n Adjustment for liquidity, location,
size
The fair value is estimated based
on selling price per square meter of
land of similar characteristics (i.e.
ownership, legal limitations, location,
physical properties, and best use).
The market price is mainly based on
recent transactions.
Market approach and discounted
cash-flows (DCF) method
The market approach is based on the
selling price per square meter for
buildings of similar characteristics,
adjusted for liquidity, location, size
etc.
The valuation model based on the
DCF method estimates the present
value of net cash flows to be
generated by a building taking into
account occupancy rate and costs not
paid by tenants. The discount rate
estimation considers, inter alia, the
quality of a building and its location.
Inter-relationship
between key
unobservable inputs and
fair value measurement
The estimated fair value would
increase (decrease) if:
n Adjustment for liquidity, location,
size was lower (higher)
The estimated fair value would
increase (decrease) if:
n Occupancy rates were higher
(lower)
n Discount rates were lower
(higher)
n Costs not paid were lower
(higher)
n Annual rent per sqm was higher
(lower)
n rental growth was higher (lower)
n Adjustment for liquidity, location,
size was lower (higher)
annual report2014 120
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
23 intangiBle assets
Intangible assets include mainly intangible assets related to distribution service concession agreements recorded
in accordance with IFRIC 12 “Service Concession Arrangements”, licenses and costs of implementation of SAP ERP,
customer management and billing system, and automation software, as follows:
Intangible assets
related to
concession
agreements
Software and
licenses
Intangible
assets in
progress
Total
gross book value
Balance at 1 january 2013 restated*
Additions
Transfers from intangibles in progress
Disposals
Balance at 31 December 2013 restated*
Additions
Transfers from intangibles in progress
Disposals
4,734,986
299,298
-
-
5,034,284
449,742
-
-
Balance at 31 December 2014
5,484,026
accumulated amortisation and impairment
losses
Balance at 1 january 2013 restated*
Amortisation
Disposals
Balance at 31 December 2013 restated*
Amortisation
Disposals
Balance at 31 December 2014
Carrying amounts
at 1 january 2013 restated*
at 31 December 2013 restated*
at 31 December 2014
*See Note 7
1,416,654
277,527
-
1,694,181
288,661
-
1,982,842
3,318,332
3,340,103
3,501,184
156,798
931
1,620
(1,411)
157,938
6,832
833
(2,489)
163,114
149,818
5,184
(1,317)
153,685
3,753
(2,319)
155,119
6,980
4,253
7,995
801
1,478
(1,620)
-
659
991
(833)
-
817
-
-
-
-
-
-
-
801
659
817
4,892,585
301,707
-
(1,411)
5,192,881
457,565
-
(2,489)
5,647,957
1,566,472
282,711
(1,317)
1,847,866
292,414
(2,319)
2,137,961
3,326,113
3,345,015
3,509,996
The European Union adopted IfrIC 12 “Service
Concession Arrangements” effective for financial
years starting on or after 1 April 2009. The distribution
subsidiaries (as operators) concluded concession
contracts with the Ministry of Economy and Commerce
(as grantor) in 2005, updated in 2009 by addenda. These
contracts concern the operation of electricity distribution
service in the established territory (Transilvania Nord,
Transilvania Sud, Muntenia Nord), on the risk and
responsibility of the operators and taking into account
the technical regulations applicable to the operation,
modernization, rehabilitation and development of energy
distribution networks specified in the Electricity Law,
the terms and conditions of the licenses for electricity
distribution and the regulations issued by ANRE. Before
entering into these service concessions, the distribution
infrastructure was held by the operators and accounted
as property, plant and equipment.
The concession contracts are concluded for a period
of 49 years and may be extended for a period equal
to no more than half of that period. As a price for the
concession, the companies pay an annual royalty fee
recognized in the distribution tariff of 1/1000 of the
revenues from electricity distribution. According to the
concession contracts, the companies use the assets
representing the distribution network owned by them
located in the above-mentioned territory for electricity
distribution. According to the concession contracts, the
grantor will buy at the end of the term of concession
contract the ownership right on the “relevant assets”,
that are mainly the electricity distribution networks, at
a price equal to the value of the regulated assets base
at the end of the concession.
annual report2014 121
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
for the year ended 31 December 2014, the Group
has recognized construction revenue related to the
concession agreements of RON 449,742 thousand (2013:
RON 298,496 thousand) and construction costs of RON
440,337 thousand (2013: RON 290,405 thousand).
concession agreements for impairment. The recoverable
amount was estimated based on value in use and is
higher than its carrying amount, therefore no impairment
was necessary. The key assumptions used in the
estimation of the recoverable amount are set out below:
Intangible assets in progress as at 31 December 2014
and 2013 include the cost of implementation for IT
applications that imply a certain implementation period.
The Group tested the intangible assets related to
n Discount rate: 9%
n Inflation rate: 2%
n EBITDA: amortization of the intangible assets related
to concession agreementsplus the regulated return
on RAB of 7.7% (see Note 1)
24 spin off
Based on the Extraordinary General Shareholders
decision dated 20 March 2014 and the resolution
of the Bucharest Court dated 10 April 2014, the
Group recognised the spin-off of the Company’s
shareholdings to a new company - „Societatea de
Administrare a Participatiilor in Energie SA” - wholly
owned by the Ministry of Energy, Small and Medium-
sized Enterprises and Business Environment. The
spin-off referred to the transfer of the shares held by
assets held for
Distribution
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Distributie
E.On Energie
Electrica Soluziona
Hidro Tarnita
BrM
Total assets held for distribution
The spin-off was recorded as follows:
Assets held for distribution
Share capital
Revaluation reserve related to equity accounted
investees
Other reserves (legal reserves)
retained earnings
Total
the Company in 10 entities (Enel Distributie Muntenia,
Enel Energie Muntenia, Enel Distributie Banat, Enel
Distributie Dobrogea, Enel Energie, E.On Moldova
Distributie, E.On Energie, Electrica Soluziona, Hidro
Tarnita and BrM). The investments included equity
accounted investees and other investments and
were classified as assets held for distribution as at 31
December 2013, as follows:
Carrying amount at
31 December 2013
Percentage ownership
interest
823,183
91,054
552,147
394,297
158,667
213,000
11,000
49
57
40
2,243,494
Carrying amount
23.57%
23.57%
24.87%
24.90%
36.99%
27.00%
3,78%
49.00%
50%
2,232,476
507,429
388,018
408,195
928,834
2,232,476
On 17 february 2014 the Company sold part of
the shares held in E.On Moldova Distributie and
E.OnEnergie romania to E.On following the exercise
of call options by E.On. E.On paid the exercise price of
rON 140,920 thousandto the Company.Cash received
from transaction with E.ON less the directly attributable
costs were transferred to Societatea de Administrare a
Participatiilor in Energie SA (RON 129,902 thousand).
annual report2014
122
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
The Group’s share of the profit or loss and other comprehensive income for 2013of its equity-accounted
investees wasas follows:
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
Total
2013
Share of profit or
loss
Share of other
comprehensive income
45,751
31,825
(14,617)
62,959
-
-
-
-
In order to record its share of the associates’ profit or
loss and changes in other comprehensive income, the
Group used information from the statutory financial
statements of its associates, as financial statements
prepared in accordance with IFRS/ IFRS-EU were not
available.
25 capital and reserVes
(a) ShaRE CaPITal anD ShaRE PREmIUm
The issued share capital in nominal terms consists of
345,939,929ordinary shares at 31 December 2014 (2013:
207,839,904) with a nominal value of rON 10 per share.
Number of shares at 1 January
Shared issued during the year
Decrease in the number of shares due spin-off
number of shares at 31 December
The Company recognizes changes in share capital
only after their approval in the General Shareholders
Meeting and their registration by the Trade Register.
The contributions made by the shareholders which are
not yet registered with the Trade register at year end
are recognized as pre-paid capital contributions from
shareholders.
On 25 february 2014 an increase of share capital of
188,264 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods.
On 10 April 2014 Bucharest Court approved the
spin-off by Electrica SA through transfer of part of
its assets (investments held by Electrica SA in other
entities – see Note 24) to a new company „Societatea
de Administrare a Participatiilor in Energie SA”, owned
by the romanian State, represented by the Ministry of
Economy – Department for Energy. As a consequence
of this transaction, share capital was decreased by
43,123,780 ordinary shares.
On 16 May 2014 an increase of share capital of 3,846,797
ordinary shares was registered in the Trade registry. The
shares were issued in respect of land contributed by the
shareholder in previous periods for shares.
All shares rank equally with regard to the Company’s
residual assets. The holders of ordinary shares are
entitled to receive dividends as declared, and are entitled
to one vote per share at meetings of the Company.
Ordinary shares
2014
2013
207,839,904
181,223,805
(43,123,780)
345,939,929
206,229,044
1,610,860
-
207,839,904
Between 11 and 27 June 2014 the Company
organised an IPO, which entailed to an offering of
142,007,744 shares and 8,795,250 GDrs, each GDr
representing four shares (see also Note 1). The
subscriptions amounted to RON 1,556,095 thousand
and USD 120,143,115. On 2 July 2014 the increase
of share capital by 177,188,744 ordinary shares
was recorded in the Trade register. Consequently,
the Group recognised an increase of share capital
of rON 1,771,887 thousand and a share premium
of RON 171,128 thousand. The transaction costs of
rON 68,079 thousand were deducted from the share
premium.
Until 31 December 2003, the statutory share capital
in nominal terms was restated according to IAS 29
“Financial Reporting in Hyperinflationary Economies”
with a corresponding adjustment to retained earnings.
(B) TREaSURy ShaRES
In July 2014 the Company purchased 5,206,593
ordinary shares and 421,000 Global Depositary
receipts, equivalent to 1,684,000 shares. The total
amount paid for acquiring the shares and Global
Depositary receipts was rON 75,372 thousand.
annual report2014 123
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(C) REzERVa DIn REEValUaRE
The reconciliation between opening and closing revaluation reserve is as follows:
2014
2013 restated*
Balance at 1 january
Revaluation of property, plant and equipment
attributable to the owners of the Company
Share of changes in revaluation reserve of equity
accounted investees
Release of revaluation reserve to retained earnings
corresponding to depreciation and disposals of
property, plant and equipment
Spin-off effect
loss of control over subsidiaries
Balance as at 31 December
*See Note 7
(D) OThER RESERVES
Other reserves include:
n legal reserves – set up as 5% of the gross profit
for the year in the statutory individual financial
statements of the companies within the Group,
until the total legal reserves reach 20% of the
paid-up nominal share capital of each company,
Balance at 1 january 2013
Set-up of legal reserves
Balance at 31 December 2013
Set-up of legal reserves
Spin-off effect
Balance at 31 December 2014
572,825
(835)
-
(15,202)
(388,018)
(12,752)
156,018
588,951
-
(1,558)
(14,568)
-
-
572,825
according to the legislation. These reserves are
deductible for income tax purposes and are not
distributable;
n other reserves set up in compliance with
legislation in force.
legal reserves
Other reserves
Total other
reserves
232,606
13,264
245,870
29,886
(39,159)
236,597
369,036
-
369,036
-
(369,036)
-
601,642
13,264
614,906
29,886
(408,195)
236,597
(E) DIVIDEnDS
romanian companies may distribute dividends from
statutory earnings only, as per separate financial
statements prepared in accordance with romanian
accounting regulations.
The dividends distributed by the Company in 2014
and 2013 (from the statutory profits of preceding
years) were as follows:
To the owners of the Company
To non-controlling interests
Total
Distribution of dividends
2014
2013
22,475
67,250
89,725
13,211
25,468
38,679
The dividends per share paid to the owners of the Company were: 2014: RON 0.108, 2013: RON 0.064 per share.
annual report2014 124
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
26 nOn-COnTROllIng InTERESTS
The following tables summarises the information related to each of the Group’s subsidiaries that has material
NCI, before any intra-group elimination.
31 December 2014
Electrica
Distributie
muntenia nord
Electrica
Distributie
Transilvania
nord
Electrica
Distributie
Transilvania Sud
Electrica
furnizare
Intra-group
eliminations
Total
nCI percentage
22%
22%
22%
22%
Non-current assets
Current assets
Non-current liabilities
Current liabilities
net assets
Carrying amount of nCI
revenues
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to NCI
Other comprehensive
income allocated to NCI
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities**
net increase/(decrease) in
cash and cash equivalents*
Dividends paid to NCI
during the year
1,232,023
448,692
(205,044)
(163,163)
1,312,508
288,752
876,482
133,197
(2,082)
1,109,674
155,693
(92,368)
(182,825)
990,174
217,838
750,669
127,948
625
131,115
128,573
29,303
(458)
28,149
138
1,160,070
178,432
(133,449)
(225,139)
979,914
215,581
815,823
74,292
(1,925)
72,367
16,344
(424)
129,534
1,064,741
(71,220)
(729,007)
394,048
86,691
3,994,524
180,786
3,070
183,856
39,772
676
181,225
162,827
181,781
443,936
(276,110)
(133,883)
(80,000)
(1,116)
(135,141)
(81,689)
(142,270)
(89,262)
(230,026)
(52,745)
(40,489)
353,558
1,658
810,520
113,568
(68)
23,212
11,666
12,734
19,638
67,250
*Amounts presented represent cash flows of the subsidiaries
**Cash flows from financing activities include dividends paid to NCI
annual report2014 125
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
31 December 2013
nCI percentage
Non-current assets
Current assets
Non-current liabilities
Current liabilities
net assets
Carrying amount of nCI
revenues
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to NCI
Other comprehensive
income allocated to NCI
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities**
net increase in cash and
cash equivalents*
Dividends paid to NCI
during the year
Electrica
Distributie
muntenia nord
Electrica
Distributie
Transilvania
nord
Electrica
Distributie
Transilvania Sud
Electrica
furnizare
Intra-group
eliminations
Total
22%
22%
22%
22%
1,163,400
487,055
(160,211)
(203,388)
1,286,856
283,108
804,891
119,969
25
119,994
26,393
6
1,058,720
166,371
(128,205)
(182,258)
914,628
201,218
713,826
60,805
(1,446)
59,359
13,377
(318)
1,120,981
203,496
(131,481)
(227,567)
965,429
212,394
742,213
58,132
637
58,769
12,789
140
134,762
1,077,618
(62,957)
(849,970)
299,453
65,880
4,692,686
84,890
3,335
88,225
18,676
734
174,345
152,104
155,652
61,031
(55,006)
(83,981)
(24,075)
(2,109)
(95,977)
(42,373)
(75,991)
(42,094)
23,362
25,750
55,586
16,828
1,670
764,270
71,235
562
16,206
-
-
9,262
25,468
*Amounts presented represent cash flows of the subsidiaries
**Cash flows from financing activities include dividends paid to NCI
annual report2014 126
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
27 financing for networK construction related
to concession agreements
Financing for network construction related to
concession agreementsis based on suppliers’ credit.
The amounts are denominated in EUr and are
backed by promissory notes issued by the Group
to its suppliers. Part of these promissory notes
are discounted by the suppliers at banks for early
settlement. Such financing is measured at amortized
cost, by using an average effective interest rate of
4.1%in 2014(2013: 5%).
The amounts are due as follows:
less than 1 year
Between 1 and 5 years
Total
28 trade payaBles
Electricity suppliers
Capital expenditure suppliers
Other suppliers
Total
31 December 2014
31 December 2013
99,064
151,486
250,550
142,584
129,827
272,411
31 December 2014
31 December 2013
318,549
93,283
143,424
555,256
345,597
73,357
162,568
581,522
Electricity suppliers are mainly state-owned power generators, as detailed in Note 32, but also other participants
on the electricity market. Other suppliers include suppliers of services, materials, consumables, etc.
29 other payaBles
VAT payable
Late payment penalties to the State budget
Liabilities related to radio and TV tax
Liabilities related to green certificates acquisition
obligation
Other liabilities
Total
31 December 2014
31 December 2013
Current
non-current
Current
non-current
136,831
70,720
12,424
42,396
14,590
276,961
-
167,114
11,238
-
-
41,943
53,181
69,300
11,563
46,097
13,413
307,487
-
22,423
-
-
43,953
66,376
Part of the late payment penalties to the State are
rescheduledfor payment based on a plan issued by
ANAf to Electrica Serv for a period of 48 months
starting August 2012. In relation to this ANAF instituted
a pledge on certain property, plant and equipment
of Electrica Serv (see Note 35c)).The late payment
penalties refer to services subsidiaries, including those
in financial distress presented in Note 33.
In accordance with law no. 533/2003, that amended
Law no. 41/1994 regardingthe organization and
functioning of Romanian Radio Company and
romanian Television Company, radio and TV taxes are
collected by Electricafurnizare SA on behalf of these
companies. The payable of the Group to the above
mentioned institutions represents radio and TV tax
collected and not paid by the year-end.
Other liabilities include mainly guarantees and
sundry creditors. Other non-current liabilities refer
to guarantees from customers related to electricity
supply.
annual report2014 127
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
30 proVisions
Balance at 1 january 2014
Provisions raised
Provisions used
Provisions reversed
Effect of loss of control over subsidiaries under financial distress
Balance at 31 December 2014
Provisions
84,735
40,491
(8,904)
(40,904)
(2,784)
72,634
As at 31 December 2014, provisions refer mainly to:
n RON 34,175 thousand representing potential fiscal
obligations of the Group (including interest and
penalties);
n RON 21,497 thousand representing claims of
individuals in respect of land of the Group.
The provisions raised in 2014 refer mainly to
potential fiscal obligations of the Group following
several controls by the Court of Accounts concluded
with certain findings and recommendations, some
with fiscal impact. The Group raised provisions for
the amount of the probable outflow of economic
resources.
reversals during 2014 mainly relate to a provision
for litigation with ANAF for a claim of RON 30,777
thousand, following aintermediaryfavorable court
decision for the Company.
31 fInanCIal InSTRUmEnTS - faIR ValUES anD RISK
management
(a) aCCOUnTIng ClaSSIfICa TIOnS anD faIR
Values
The following table shows the carrying amounts and fair
values of financial assets and financial liabilities, including
their levels in the fair value hierarchy. It does not include
fair value information for financial assets and financial
liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
loans and
receivables
Carrying amount
held to
maturity
financial
assets
Other
financial
liabilities
fair value
Total
level 1
level 2
level 3
Total
31 December 2014
Note
financial assets not
measured at fair value
Trade receivables
18
780,821
-
Deposits, treasury bills and
government bonds
-
1,220,521
Cash and cash equivalents
21
1,629,508
-
Total
2,410,329
1,220,521
-
-
-
-
780,821
1,220,521
1,629,508
3,630,850
financial liabilities not
measured at fair value
Bank overdrafts
financing for network
construction related to
concession agreements
finance lease
Trade payables
Total
21
27
28
-
-
-
-
-
-
-
-
-
-
48,132
48,132
250,550
250,550
256,130
256,130
294
555,256
854,232
294
555,256
854,232
256,130
256,130
annual report2014
128
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Carrying amount
fair value
31 December 2013
Note
loans and
receivables
Other
financial
liabilities
Total
level 1
level 2
level 3
Total
financial liabilities not
measured at fair value
Trade receivables
Cash and cash equivalents
Total
financial liabilities not
measured at fair value
Bank overdrafts
financing for network
construction related to
concession agreements
finance lease
Trade payables
Total
18
21
21
27
28
1,087,545
650,835
1,738,380
-
-
-
1,087,545
650,835
1,738,380
-
-
-
-
-
79,684
79,684
272,411
272,411
288,475
288,475
788
581,522
934,405
788
581,522
934,405
288,475
288,475
(B) mEaSUREmEnT Of faIR ValUES
The following table shows the valuation techniques used in measuring Level 2 fair values, as well as the
significant unobservable inputs used.
Financial instruments not measured at fair value
Type
Valuation technique
Other financial liabilities
Discounted cash flows (DCF)
method
Significant unobservable
inputs
Not applicable
The discount rates used are the
average 12 M ROBID-ROBOR interest
rates of 1.67% as at 31 December
2014 (2013: 2.78%).
(C) fInanCIal RISK managEmEnT
The Group has exposure to the following risks arising
from financial instruments:
n credit risk
n liquidity risk
n market risk.
and treasury bills and government bonds.
Cash, bank deposits, treasury bills and government
bonds are placed in financial institutions, which are
considered to have minimal risk of default.
The carrying amount of financial assets represents the
maximum credit exposure.
(i) Credit risk
Credit risk is the risk of financial loss to the Group if
a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises
principally from the Group’s receivables from
customers, cash and cash equivalents, bank deposits
Trade receivables
The Group’s credit risk in respect of receivables is
concentrated around state-controlled companies.
The Group establishes an allowance for impairment
that represents its estimate of incurred losses in
respect of trade receivables..
annual report2014 129
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Impairment
The ageing of trade receivables was as follows:
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Past due 2-3 years
Past due more than 3 years
Total
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Total
31 December 2014
31 December 2013
gross value
Bad
debt
allowance
gross value
Bad
debt
allowance
501,052
240,421
23,542
29,463
52,801
-
-
-
(13,657)
(52,801)
105,710
(105,710)
686,315
201,939
64,846
121,536
180,802
244,905
-
-
(1,947)
(33,543)
(132,403)
(244,905)
975,487
1,928,476
(975,487)
(1,147,655)
752,726
2,253,069
(752,726)
(1,165,524)
net trade receivables
31 December 2014
31 December 2013
501,052
240,421
23,542
15,806
-
780,821
686,315
201,939
62,899
87,993
48,399
1,087,545
(ii) liquidity risk
liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering
cash or another financial asset. The Group’s approach
to managing liquidity is to ensure, as far as possible,
that it will have sufficient liquidity to meet its liabilities
when they are due, under both normal and stressed
conditions, without incurring unacceptable losses.
The Group aims to maintain the level of its cash and
cash equivalents at an amount in excess of expected
cash outflows on financial liabilities. The Group also
monitors the level of expected cash inflows on trade
receivables together with expected cash outflows
on trade and other payables. In addition, the Group
maintains overdrafts(refer to Note 21).
annual report2014 130
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts
are gross and undiscounted, and include estimated interest payments.
financial liabilities
31 December 2014
Bank overdrafts
financing for network
construction related to
concession agreements
finance lease
Trade payables
Total
31 December 2013
Bank overdraft
financing for network
construction related to
concession agreements
finance lease
Trade payables
Total
Carrying
amount
Total
less than
1 year
1-2 years
2-5 years
more than
5 years
Contractual cash flows
48,132
48,132
48,132
250,550
262,332
101,633
294
555,256
854,232
294
555,256
866,014
294
555,256
705,315
79,684
79,684
79,684
272,411
288,693
144,623
788
581,522
934,405
788
581,522
950,687
498
581,522
806,327
-
87,114
-
-
87,114
-
93,755
290
-
94,045
-
73,484
-
73,484
-
50,315
-
-
50,315
-
101
-
-
101
-
-
-
-
-
(iii) market risk
Market risk is the risk that changes in market prices
– such as foreign exchange rates, interest rates– will
affect the Group’s income or the value of its holdings
of financial instruments. The objective of market
risk management is to manage and control market
risk exposures within acceptable parameters, while
optimising the return.
Currency risk
The Group is exposed to currency risk to the extent
that there is a mismatch between the currencies
in which sales, purchases and borrowings are
denominated and the functional currency of the
Group. The functional currency of all entities
belonging to the Group is the romanian leu (rON).
The currencies in which these transactions are
primarily denominated are rON and EUr. Certain
liabilities are denominated in foreign currency (EUR).
The Group also has deposits and bank accounts
denominated in foreign currency (EUr). The Group’s
policy is to use the local currency in its transactions
as far as practically possible. The Group does not use
derivative or hedging instruments.
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk as follows:
in thousands of RON
Cash and cash equivalents
Deposits (deposits, treasury bills and government
bonds)
Financing for network construction related to
concession agreements
finance lease
net statement of financial position exposure
31 December 2014
31 December 2013
eur
eur
10,138
136,704
(250,550)
(294)
(104,002)
136,173
-
(272,411)
(788)
(137,026)
The following significant exchange rates have been applied during the year:
rON
1 EUr
average rate
year-end spot rate
2014
4.4446
2013
4.4190
2014
4.4821
2013
4.4847
annual report2014 131
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
Sensitivity analysis
A reasonably possible strengthening (weakening) of
the EUr against rON at 31 December would have
affected the measurement of financial instruments
denominated in a foreign currency and profit before
Effect
31 December 2014
EUr (5% movement)
31 December 2013
EUr (5% movement)
tax by the amounts shown below. The analysis
assumes that all other variables, in particular interest
rates, remain constant and ignores any impact of
forecast sales and purchases.
Profit before tax
Strengthening
Weakening
(5,200)
(6,851)
5,200
6,851
Interest rate risk
The Group’s policy is tomainly use supplier credit for financing its capital investments. The Group does not have
significant long-term bank loans.
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
31 December 2014
31 December 2013
fixed-rate instruments
Financial assets
Bank accounts (cash and cash equivalent)
Treasury bills and government bonds (cash and
cash equivalent)
Deposits, treasury bills and government bonds
Financial liabilities
Financing for network construction related to
concession agreements
finance lease
Variable-rate instruments
financial liabilities
Overdrafts
1,352,487
199,500
1,220,521
(250,550)
(294)
2,521,664
(48,132)
(48,132)
541,891
-
-
(272,411)
(788)
268,692
(79,684)
(79,684)
fair value sensitivity analysis for fixed-rate
instruments
Cash flow sensitivity analysis for variable-rate
instruments
The Group does not account for any fixed-rate
financial assets or financial liabilities at fair value
through profit or loss. Therefore, a change in interest
rates at the reporting date would not affect profit or
loss.
31 December 2014
Variable-rate instruments
31 December 2013
Variable-rate instruments
A reasonably possible change of 50 basis points
in interest rates at the reporting date would have
increased (decreased) profit before tax by the
amounts shown below. This analysis assumes that
all other variables, in particular foreign currency
exchange rates, remain constant.
Profit before tax
50 bp increase
50 bp decrease
(240)
(399)
240
399
annual report2014
132
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
32 related parties
(a) maIn ShaREhOlDERS
As at 31 December 2014, the main shareholder of
Electrica SA is the romanian State, represented by
the Ministry of Energy, Small and Medium-sized
Enterprises and Business Environment(48.78%), after
the ownership dilution following an initial public offer.
The next large shareholder is the European Bank for
Reconstruction and Development with 8.66%.
(B) managEmEnT anD aDmInISTRa TORS’ COmPEnS aTIOn
management compensation
4,030
3,556
Compensations granted to the members of the Board of Directors and representatives in the General Meeting of
Shareholders were as follows:
2014
2013
Members of Board of Directors
Representatives in the General Meeting of
Shareholders
Total
2014
2013
3,093
115
3,208
2,861
116
2,977
No loans were granted to managers or administrators in 2014 and 2013.
(C) TRanS aCTIOnS WITh aSSOCIaTES
(i) Balances receivables and payables from/ to associates as at 31 December 2013
Receivables from associates are as follows:
31 December 2013
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Moldova Distributie
Total
Trade
receivables
Bad debt
allowance
Total
receivables
17,631
496
821
773
912
5,537
26,170
-
-
-
-
-
(3,959)
(3,959)
17,631
496
821
773
912
1,578
22,211
Trade receivables from associates refer mainly to maintenance, repairs and other services rendered.
Payables to associates are as follows:
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Moldova Distributie
Electrica Soluziona
Total
31 December
2013
1,928
51
3,075
1,012
451
2,809
964
10,290
annual report2014 133
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(ii) Transactions with associates for 2013
Sales to:
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Moldova Distributie
Total
Purchases from:
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Moldova Distributie
Electrica Soluziona
Total
Sales of electricity and
electricity distribution
services
maintenance and repairs
and other services
2013
2013
48,302
-
5,243
3,600
6
10,136
67,287
2013
-
2,741
2
-
3,299
4
6,046
8,388
655
6,351
5,126
847
9,411
4,116
34,894
Purchases from associates refer mainly to electricity distribution services. Purchases from Electrica Soluziona
represent maintenance of the customer management system.
(D) TRanS aCTIOnS WITh COmPanIES In WhICh ThE STaTE haS COnTROl OR SIgnIfICanT
influence
The Group has transactions with companies in which the state has control or significant influencein the ordinary
course of its business, related mainly to the acquisition of electricity, transmission and system services and sale
of electricity. Significant purchases and balances are mainly with energy suppliers, as follows:
Supplier
Nuclearelectrica
Transelectrica
Complexul Energetic Oltenia
Hidroelectrica
OPCOM
Electrocentrale Bucuresti
Complexul Energetic Hunedoara
SNGN rOMGAZ
CN Posta romana SA
CET Govora
Electrocentrale Oradea
Electrocentrale Galati
Altii
Total
Purchases (without VaT)
Balance (including VaT)
2014
2013
31 December
2014
31 December
2013
391,517
504,776
2,892
553,509
391,742
4,565
-
19,296
7,442
-
618
2,495
30,676
563,884
444,903
388,039
379,811
315,146
143,657
95,677
126,872
30,960
24,849
15,923
5,351
8,835
1,909,528
2,543,907
35,619
156,759
6,000
55,065
2,449
1
-
-
324
-
-
-
5,540
261,757
18,608
182,354
27,050
10,381
140
-
3,283
-
5,511
-
85
426
-
247,838
annual report2014 134
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
The Group also makes sales to companies in which the state has control or significant influence representing
electricity supplied, of which the most important transactions are the following:
Client
Cfr
Electrificare CFR
SNGN rOMGAZ
OPCOM
Societatea Comerciala "Cupru Min"- S.A. Abrud
Transelectrica
CN romarm
Electrocentrale Oradea
CN remin SA
C.N.C.A.f. MINVEST S.A.
Oltchim
SNTGN Transgaz Medias
Hidroelectrica
Baita SA
Enel Distributie Muntenia
Altii
Total
Client
Oltchim
Cfr
SNGN rOMGAZ
OPCOM
Societatea Comerciala "Cupru Min"- S.A. Abrud
Transelectrica
Electrocentrale Oradea
CN romarm
Societatea Nationala a Sarii
CN remin SA
C.N.C.A.f. MINVEST S.A.
Altii
Total
Sales
(without VaT)
Balance, gross
(including
VaT)
allowance
(including
VaT)
Balance,
net
2014
126,868
4,328
23,032
13,722
31,399
17,167
9,412
1,991
349
-
-
2,668
3,996
2,143
33,918
13,359
31 December 2014
1,367
27,681
1,544
2,374
24,122
2,080
366
341
71,192
78,735
-
(19,711)
-
-
(24,122)
-
-
-
(71,192)
(78,735)
715,277
(715,277)
110
306
6,366
14,814
4,737
-
-
-
-
(75)
284,352
951,412
(909,112)
1,367
7,970
1,544
2,374
-
2,080
366
341
-
-
-
110
306
6,366
14,814
4,662
42,300
Sales
(without VaT)
Balance, gross
(including
VaT)
allowance
(including
VaT)
Balance, net
2013
467
162,963
78,785
54,223
33,100
18,264
5,208
7,899
5,582
-
-
12,008
31 December 2013
715,277
240,632
6,795
142
(715,277)
-
-
-
36,122
(36,122)
2,281
1,180
485
-
71,151
78,735
10,455
-
-
-
-
(71,151)
(78,735)
(7,742)
378,499
1,163,255
(909,027)
-
240,632
6,795
142
-
2,281
1,180
485
-
-
-
2,713
254,228
annual report2014 135
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
33 suBsidiaries in financial distress
In 2013 the Company approved the liquidation of ServiciiEnergetice Moldova, ServiciiEnergetice Banat and
Servicii Energetice Dobrogea.
Servicii Energetice Banat entered in bankruptcy in November 2014 and consequently the Company discontinued
consolidation at that date as it no longer has control over it.The individual assets and liabilities at that datewere
as follows:
Carrying amount
Property, plant and equipment
Trade receivables
Cash and cash equivalents
Total assets
Trade payables
Other payables
Employee benefits
Provisions
Deferred tax liabilities
Total liabilities
gain on loss of control
44,908
484
312
45,704
9,654
28,524
31,460
2,784
5,631
78,053
32,349
In January 2014 the Board of Directors of
ServiciiEnergeticeOltenia and in October 2014, the
Board of Directors of Servicii Energetice Muntenia
decided the commencement of the insolvency
procedure with a view to reorganization. The
insolvency processes were initiated in 2014.
Due to the above conditions that indicated the
existence of significant uncertainties that cast
significant doubt on the ability of these subsidiaries
to continue to operate as going concerns, the Group
has recognised the carrying amounts of the assets and
liabilities of these subsidiaries on an alternate basis as
at 31 December 2013 (for Servicii Energetice Moldova
SA, Servicii Energetice Dobrogea SA, Servicii Energetice
Banat and Servicii Energetice Oltenia SA) and 31
December 2014 (for Servicii Energetice Moldova SA,
Servicii Energetice Dobrogea SA, Servicii Energetice
Oltenia SA, and Servicii Energetice Muntenia).
As at 31 December 2013 and 31 December 2014 the carrying amount of the assets and liabilities of these
companies, included in the consolidated financial statements are as follows:
31 December 2014
Property, plant and equipment
Trade receivables
Cash and cash equivalents
Total assets
Trade payables
Payables to the State budget
Social security and other salary taxes
Provisions, employee benefits and deferred
taxes
Servicii
Energetice
moldova
Servicii
Energetice
Dobrogea
Servicii
Energetice
muntenia
Servicii
Energetice
Oltenia
Total
40,418
811
1,971
43,200
(2,900)
(47,735)
(38,192)
(26,387)
3,435
1,313
2,863
7,611
(2,098)
(22,006)
(17,130)
(5,228)
109,180
16,894
291
126,365
(5,976)
(1,887)
(2,471)
(27,762)
(38,096)
35,006
3,729
1,095
39,830
(2,865)
(4,297)
(6,120)
(13,914)
188.039
22.747
6.220
217.006
(13.839)
(75.925)
(63.913)
(73.291)
(27,196)
(226.968)
Total liabilities
(115,214)
(46,462)
annual report2014 136
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
31 December 2013
Property, plant and equipment
Trade receivables
Cash and cash equivalents
Total assets
Trade payables
Payables to the State budget
Social security and other salary taxes
Provisions, employee benefits and deferred
taxes
Servicii
Energetice
moldova
Servicii
Energetice
Dobrogea
Servicii
Energetice
Banat
Servicii
Energetice
Oltenia
Total
40,492
1,991
195
42,678
(4,361)
(38,161)
(24,960)
(9,512)
15,764
3,151
226
19,141
(1,682)
(20,691)
(14,560)
(4,191)
54,795
2,535
198
57,528
(7,358)
(27,257)
(23,864)
36,633
4,795
299
41,727
(2,452)
(2,541)
(3,035)
(9,536)
(13,366)
147,684
12,472
918
161,074
(15,853)
(88,650)
(66,419)
(36,605)
Total liabilities
(76,994)
(41,124)
(68,015)
(21,394)
(207,527)
The Group has not classified the assets and liabilities
of these subsidiaries as held for sale as at 31
December 2014, as the assets are not available for
immediate sale in their present condition, the assets
or disposal groups were not actively marketed for
sale, the Group is not committed to a plan to sell the
assets or disposal groups, and it has not initiated an
active programme to locate a buyer and complete
the disposal plan. Consequently, the Group has
not presented these subsidiaries as discontinued
operations in the income statement for the year
ended 31 December 2014.
Assumptions used for adjusting the carrying amount
of assets and liabilities of subsidiaries under financial
distress.
The carrying amount of assets and liabilities were
recognised on a liquidation basis as at the reporting
date when significant doubt on the ability of each
34 commitments
(a) lITIgaTIOn anD ClaImS
The Group is involved in various litigations; the most
significant are the followings:
n In 2012, the Group was sued by Orange Media,
claiming the payment of rON 18,819 thousand
representing damages requested by the
claimant as a result of the cancelation of a public
acquisition contract by the Group. By sentence
no. 4890/13.06.2013 issued by Bucharest Court,
Orange Media’s claim was dismissed. By sentence
no. 573/24.02.2014 the Bucharest Court of
Appeal upheld the appeal, voided the sentence
and referred the case back to Bucharest Court. By
sentence no. 5200/30.10.2014 issued by Bucharest
Court, the claim was dismissed again. An appeal
against this sentence was made by Orange Media.
The next term is set forMarch 2015. The Group
expects a favourable outcome for this case.
subsidiary to continue as going concern existed.
Property, plant and equipment (PP&E).
land and buildings were valued under a forced
sale assumption, where the Group recognized
impairment adjustments to carrying amounts based
on market experience for forced sale transactions.
The impairment losses recognized in 2014 were
rON 60 million, of which rON 26 million decreased
the revaluation reserve and RON 34 million was
recognised in profit or loss.
Provisions, employee benefits and payables to the
State budget.
The Group recognised provisions or liabilities for
the obligations as at 31 December 2014 and 2013.
In addition, all non-current liabilities, if any, were
reclassified as current liabilities.
n The Group was sued by Termoelectrica,
claiming the payment of rON 25,047 thousand
representing penalties related to certain
invoices,for the period 1 April 2007 – 31 March
2008. In the first sentence the claim was
dismissed. following the appeal this decision
was overruled. The Group expects a favourable
outcome for this case.
n During 2014, one company from the Group was
subject to controls performed by ANAf. As at the
date of the financial statements, ANAF report was
not finalised, but the subsidiary received only
minutes for its branches whereby the amount
of possible additional tax liabilities claimed by
ANAf are approx. rON 5.8 million (late payment
and interest were not calculated). The subsidiary
will contest these findings and considers likely a
favourable result.
annual report2014 137
NOTes TO THe CONsOLiDATeD fiNANCiAL sTATeMeNTs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in THOUSAND RON, if not otherwise stated)
(B) fISCal EnVIROnmEnT
Tax audits are frequent in Romania, consisting of
detailed verifications of the accounting records of tax
payers. Such audits sometimes take place after months,
even years, from the date liabilities are established.
Consequently, companies may be found liable for
significant taxes and fines. Moreover, tax legislation
is subject to frequent changes and the authorities
demonstrate inconsistency in interpretation of the law.
Income tax returns may be subject to revision and
corrections by tax authorities, generally for a five year
period after they are completed.
The management of the Group believes that adequate
provisions were recorded for all significant tax
obligations.
35 commitments
(a) COnTRa CTUal COmmITmEnTS
The Group has the following contractual commitments as at 31 December 2014:
Purchase of electricity
Purchase of property, plant and equipment and intangible assets
amount
781,588
214,885
996,473
(B) OPERaTIng lE aSES
The main operating leases refer to vehicles and equipment leased by ElectricaServ, as follows:
Supplier
Operational Autoleasing SRL
rCI finantare romania SA
Electrical Business Center Srl
Energopetroleum Top Service Srl
Total
Contractual amount
60,241
1,569
12,862
6,244
80,916
The future minimum lease payments related to the operating lease contracts mentioned above are as follows:
31 December 2014
31 December 2013
less than 1 year
Between 1 and 5 year
Total
18,094
52,484
70,578
(C) InVESTmEnT PROgRam
The investment program approved for the year 2015is as follows:
Distribution activity
Supply activity
Maintenance activity
Other/ shared
Total
8,577
23,257
31,834
595,000
19,731
14,949
44,433
674,113
2015
The amounts actually incurred may differ from the ones planned.
(D) gUaRanTEES anD PlEDgES
At 31 December 2014 and 2013, the Group has
guarantees on its bank accounts opened at ING and BrD
for the overdrafts contracted (please see Note 21).
At 31 December 2014 the Group has outstanding bank
letters of guarantee of RON 180,127 thousand (2013:
rON 90,078 thousand) issued in favour of its suppliers.
In 2012, ANAF instituted pledges on land and buildings
of ElectricaServin relation with outstanding taxes and
contributions. As at 31 December 2014 the pledges
amount to RON 73 million (2013: RON 77 million).
annual report2014 138
iNDePeNDeNT AuDiTOrs’ rePOrT fOr CONsOLiDATeD fiNANCiAL
sTATeMeNTs fOr THe yeAr eNDeD 31 DeCeMBer 2014
ABCD
KPMG Audit SRL
Victoria Business Park
DN1, Soseaua Bucuresti-Ploiesti nr. 69-71
Sector 1
Tel:
Fax:
+40 (21) 201 22 22
+40 (372) 377 800
+40 (21) 201 22 11
+40 (372) 377 700
www.kpmg.ro
P.O. Box 18-191
Bucharest 013685
Romania
Independent Auditors’ Report
(free translation1)
To the shareholders of
Electrica S.A.
Report on the Consolidated Financial Statements
1 We have audited the accompanying consolidated financial statements of Electrica S.A. (“the
Company”) and its subsidiaries (together “the Group”), which comprise the consolidated statement
of financial position as at 31 December 2014, the consolidated statements of income, profit or loss
and other comprehensive income, changes in equity and cash flows for the year then ended, and
notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
2 Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards as endorsed by the
European Union, 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.
Auditors’ Responsibility
3 Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with the standards on auditing as adopted by the
Romanian Chamber of Financial Auditors. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
4 An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider
internal control relevant to the Group’s preparation and fair presentation of the consolidated
financial statements 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.
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
1 TRANSLATOR’S EXPLANATORY NOTE: This translation of the auditors’ report is provided as a free translation from
Romanian which is the official and binding version.
© 2015 KPMG Audit SRL, a Romanian limited liability company and
a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved. PDC no. 15632
Fiscal registration code
RO12997279
Trade Registry
no.J40/4439/2000
Share Capital 2,000 RON
annual report2014
139
iNDePeNDeNT AuDiTOrs’ rePOrT fOr CONsOLiDATeD fiNANCiAL
sTATeMeNTs fOr THe yeAr eNDeD 31 DeCeMBer 2014
ABCD
5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our qualified audit opinion.
Basis for Qualified Opinion
6 Our audit opinion on the consolidated financial statements as at and for the year ended 31 December
2013 was modified because we did not obtain sufficient and appropriate audit evidence in relation
with the accounting treatment of the Company’s investments in other entities classified as assets
held for distribution as at that date, as described in Note 24 to the accompanying consolidated
financial statements. The Company disposed of these assets in 2014. Our opinion on the current
year’s consolidated financial statements is also modified because of the possible effects of this
matter on the corresponding figures for assets held for distribution, retained earnings and reserves
as at 31 December 2013, share of profit or loss of equity-accounted investees, profit or loss and
other comprehensive income for the year ended 31 December 2013.
Qualified Opinion
7
In our opinion, except for the possible effects on the corresponding figures as at and for the year
ended 31 December 2013 of the matter described in paragraph 6, the consolidated financial
statements give a true and fair view of the consolidated financial position of the Group as at 31
December 2014, and of its consolidated financial performance and its consolidated cash flows for
the year then ended in accordance with International Financial Reporting Standards as endorsed by
the European Union.
Emphasis of matter
8 Without further qualifying our opinion, we draw attention to Notes 4 and 7 to the accompanying
consolidated financial statements, which describe the fact that the Group elected to change its
accounting policy for the service concession agreements and made retrospective adjustments to the
comparative information in the consolidated accompanying financial statements. Consequently, the
comparative information in the accompanying consolidated financial statements has been restated.
Other Matter
9 This independent auditors’ report is made solely to the Company’s shareholders, as a body. Our
audit work has been undertaken so that we might state to the Company’s shareholders those matters
we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company’s shareholders, as a body, for our audit work, for the report on the consolidated
financial statements and the report on conformity, or for the opinion we have formed.
annual report2014 140
iNDePeNDeNT AuDiTOrs’ rePOrT fOr CONsOLiDATeD fiNANCiAL
sTATeMeNTs fOr THe yeAr eNDeD 31 DeCeMBer 2014
ABCD
Report on conformity of the consolidated Administrators’ Report with the consolidated financial
statements
ABCD
In accordance with the Order of the Minister of Public Finance no. 1286/2012 and related amendments,
article no. 30 of accounting regulations in accordance with International Financial Reporting Standards
ABCD
applicable to companies whose securities are traded on a regulated market, we have read the
consolidated Administrators’ Report attached to the consolidated financial statements. The consolidated
Raport asupra conformitatii raportului consolidat al administratorilor cu situatiile financiare
Administrators’ Report is not a part of the consolidated financial statements. In the consolidated
consolidate
Administrators’ Report we have not identified any financial information which is not in accordance, in
Raport asupra conformitatii raportului consolidat al administratorilor cu situatiile financiare
all material respects, with the information presented in the accompanying consolidated financial
consolidate
In concordanta cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 cu modificarile ulterioare,
statements.
articolul 30 din Reglementarile contabile conforme cu Standardele Internationale de Raportare
In concordanta cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 cu modificarile ulterioare,
Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la tranzactionare pe
articolul 30 din Reglementarile contabile conforme cu Standardele Internationale de Raportare
o piata reglementata, noi am citit raportul consolidat al administratorilor anexat situatiilor financiare
Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la tranzactionare pe
consolidate. Raportul consolidat al administratorilor nu face parte din situatiile financiare consolidate.
o piata reglementata, noi am citit raportul consolidat al administratorilor anexat situatiilor financiare
In raportul consolidat al administratorilor noi nu am identificat informatii financiare care sa fie in mod
consolidate. Raportul consolidat al administratorilor nu face parte din situatiile financiare consolidate.
semnificativ neconcordante cu informatiile prezentate in situatiile financiare consolidate anexate.
For and on behalf of KPMG Audit SRL:
In raportul consolidat al administratorilor noi nu am identificat informatii financiare care sa fie in mod
semnificativ neconcordante cu informatiile prezentate in situatiile financiare consolidate anexate.
Mikael Olsson
Pentru si in numele KPMG Audit SRL:
Refer to the original
signed Romanian version
KPMG Audit SRL
registered with the Chamber of Financial
Pentru si in numele KPMG Audit SRL:
Auditors of Romania under no 662/2001
Mikael Olsson
registered with the Chamber of Financial
Auditors of Romania under no 9/2001
KPMG Audit SRL
Bucharest, 26 March 2015
Mikael Olsson
KPMG Audit SRL
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 662/2001
inregistrat la Camera Auditorilor Financiari
Bucuresti, 26 martie 2015
din Romania cu numarul 662/2001
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 9/2001
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 9/2001
Bucuresti, 26 martie 2015
annual report2014 141
2014 director’s
REPORT (InDIVIDUal)
(based on the audited individual financial statements prepared in accordance with IfRS)
REgaRDIng ThE ECOnOmIC-fInanCIal aCTIVITy Of SDfEE ElECTRICa Sa
according to art. 227 from law 297/2004 and to
annex no. 32 to CnVm Reg. no. 1/2006, for the year ended December 31, 2014
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 142
identification details
on report and issuer
Report date: March 20, 2015
name of the Issuer: SDfEE ElECTrICA SA
headquarter: no. 9 Grigore Alexandrescu Street, 1st District, Bucharest, romania
Telephone/fax number: +4021.208.5002; +4021.208.5004
fiscal Code: rO13267221
Trade Registry no: J40/7425/2000
Share capital: rON 3,459,399,290 subscribed and paid (see Note 1)
main caracteristic of issued shares: 345,939,929 ordinary shares of 10 rON nominal value, issued in
dematerialized form and freely transferable, nominative, tradable and fully paid.
Regulated market where the issued securities are traded: As at December 31, 2014 the Company shares are
listed on the Bucharest Stock Exchange and Global Depositary receipts are listed on the london Stock Exchange.
(see Note 2)
note 1
Pursuant to the registration certificate no. 2340001 and the resolution no. 78473/ 02.07.2014 issued by the
National Trade Registry Office, the share capital was increased by 1,771,887,440 RON, following the successful
completion of the process of underwriting new shares issued by the Company in the initial public offering. As at
the date of the current report the subscribed and paid up capital of SC Electrica SA is 3,459,399,290 rON.
note 2
Following the completion of initial public offering, the Company’s securities were admitted to trading on the
Bucharest Stock Exchange (BSE) under the trading symbol El and on the london Stock Exchange (lSE) under the
trading symbol ElSA on July 3, 2014.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 143
highlights
SDFEE Electrica SA has the unique registration number
13267221, registered at the Trade registry under no.
J40/7425/2000, with core business “Consulting and
business management activities “ - CAEN code 7022,
has as it’s main goal coordinating and effective control
of stakes in subsidiaries that perform distribution
and supply of electricity as well as energy services
activities.
A summary of the main indicators is described below:
n In the period ended 31 December 2014 the
revenues from dividends received from its
subsidiaries increased by rON 148.1 million as
compared to 2013;
n The financial result increased in 2014 to RON 286.9,
by 192.9 million as compared to 2013, mainly
from the sale of shares held in in E.On Moldova
Distributie and E.On Energie Romania to E.On
following the exercise of call options by E.On
n In the period ended 31 December 2014 the net
profit reached RON 269 million, an 632% increase or
rON 233 million as compared to 2013.
organiZational structure
The Company is a holding company for the Group,
which comprises in its distribution segment three
subsidiaries for electricity distribution: Electrica
Distributie Muntenia Nord, Electrica Distributie
Transilvania Nord, Electrica Distributie Transilvania
Sud, and one for maintenance and repairs, Electrica
Serv, and one subsidiary, Electrica furnizare, in its
supply segment.
The Group also includes four service entities owned
by Electrica, i.e. Servicii Energetice Muntenia, Servicii
The Company’s subsidiaries are the following:
Energetice Dobrogea, Servicii Energetice Moldova and
Servicii Energetice Oltenia, and until November 2014
included Servicii Energetice Banat also.
Out of these Servicii Energetice Oltenia and
Servicii Energetice Muntenia are under insolvency
proceedings, Servicii Energetice Dobrogea and
Servicii Energetice Moldova are currently subject to
dissolution and liquidation and Servicii Energetice
Banat is in bankruptcy.
filiala
activitatea
Electrica Distributie Muntenia Nord
SA
Electricity distribution in
geographical area of Muntenia Nord
Electrica Distributie Transilvania Nord
SA
Electrica Distributie Transilvania Sud
SA
Electricity distribution in
geographical area of Transilvania
Nord
Electricity distribution in
geographical area of Transilvania
Sud
Cod
unic de
inregistrare
Sediu social
% participatie
la 31 decembrie
2014
% participatie
la 31 decembrie
2013
14506181
Ploiesti
78.0000021%
78.0000021%
14476722
Cluj-Napoca
77.99999%
77.99999%
14493260
Brasov
78.0000019%
78.0000019%
Electrica furnizare SA
Electrica Serv SA
Servicii Energetice Muntenia SA
Servicii Energetice Moldova SA
Servicii Energetice Banat SA*
Electricity
Supply
28909028
Bucuresti
77.99997%
77.99997%
Services in the energy sector
(maintenance, repairs, construction)
Services in the energy sector
(maintenance, repairs, construction)
Services in the energy sector
(maintenance, repairs, construction)
Services in the energy sector
(maintenance, repairs, construction)
17329505
Bucuresti
100%
100%
29384120
Bucuresti
100%
100%
29386768
Bacau
100%
100%
29388211
Timisoara
100%
100%
Servicii Energetice Dobrogea SA
Services in the energy sector
(maintenance, repairs, construction) 29388378
Constanta
100%
100%
Servicii Energetice Oltenia SA
Services in the energy sector
(maintenance, repairs, construction)
29389861
Craiova
100%
100%
* Electrica SA lost the control of Servicii Energetice Banat starting with November 2014
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 144
shareholder structure
The General Meeting of Shareholders (GMS) is
the main corporate governance body of Electrica,
deciding on the items as outlined in the Articles
of Association. The convening, functioning, voting
as well as other provisions regarding the GMS are
detailed in Electrica’s Articles of Association
Until July 2014, the Romanian State, acting
through the Ministry of Energy, Small and Medium
Enterprises and Business Environment, was the
sole shareholder of Electrica. Starting 4 July 2014
the Company’s shares are listed on Bucharest Stock
Exchange, and the GDrs are listed on london Stock
Exchange. The latest available information regarding
the shareholder structure has been provided by
Depozitarul Central on 21 November 2014 and is
presented in the table below:
Shareholder
Shares Percent of share capital
Ministry of Energy, Small and Medium Enterprises and
Business Environment, Bucharest, romania
EUrOPEAN BANK fOr rECONSTrUCTION AND
DEVElOPMENT, lONDON, UK
BNy MEllON DrS, NEW yOrK, USA
legal persons
Individual persons
total
Source: Central Depository, Electrica S.A.
168,751,185
29,944,090
27,442,180
100,506,060
19,296,414
345,939,929
48.7805 %
8.6559 %
7.9326 %
29.0530 %
5.5780 %
100 %
Following the stabilization process after the IPO, Electrica
SA owns 6,890,593 of its own shares, representing
1.9918% of the total share capital. These shares do not
entitle Electrica to voting rights, nor dividends.
Board of directors structure
The board of directors consists of five non-executive
directors appointed by the general meeting of
shareholders. One of the Directors was appointed on
the proposal of the romanian state, represented by
the Ministry of Energy, Small and Medium Enterprises
and Business Environment, three were appointed on
the proposal of the private shareholders and one was
named both on the proposal of the romanian state and
private shareholders. Four of the five directors meet
the criteria for independence provided by the Article of
Association of Electrica.
The Board is entrusted with fulfilling all the necessary
and useful acts for performing the Company’s business
object and for supervising the management’s activity,
save for the ones assigned to the General Meeting of
Shareholders. The composition, organisation, duties
and responsibilities of the Board of Directors are set out
in the Articles of Association and in the Charter of the
Board of Directors.
The current members of the Board of Directors were elected for four years, through the cumulative voting method, by
the General Meeting of Shareholders, during the first meeting after the IPO, on 22 September 2014. The composition
of the Board of Directors is the following:
n Mr. Victor Cionga – non-executive director, elected as Chairman of the Board of Directors until January 2016
n Ms. Arielle Malard de Rothschild – non-executive director
n Mr. Michael Boersma – non-executive director
n Mr. Cristian Busu – non-executive director
n Mr. Victor Vlad Grigorescu – non-executive director
During the first Board of Directors meeting on 14 October 2014, the Board has established three consultative
committees, with the following composition:
a) The nomination and Remuneration Committee
n Ms. Arielle Malard de Rothschild – Chair of the committee
n Mr. Michael Boersma
n Mr. Cristian Busu
b) The audit Committee
n Mr. Cristian Busu – Chair of the committee
n Mr. Victor Vlad Grigorescu
n Ms. Arielle Malard de rothschild
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 145
c) The Strategy, Restructuring and Corporate governance Committee
n Mr. Michael Boersma – Chair of the committee
n Mr. Victor Vlad Grigorescu
n Mr. Victor Cionga
The members of the committees are elected for a one-
year term. The organisation, duties and responsibilities
of each committee are laid down in Electrica’s Articles
of Association, respectively in the charters of each
committee.
The Board of Directors delegates Electrica’s
management to one or more managers, appointing
one of them as general manager. The duties and
responsibilities of the general manager are set out in
Electrica’s Articles of Association.
According to our information, there is no agreement,
understanding or family relationship between
the Company’s directors and another person that
contributed to their appointment as managers.
Details regarding the bios of the Board of Directors
members can be accessed on the company’s website.
The table below comprises the number of Electrica S.A. shares held by the Company’s directors as of March 2015:
no.
name
1. Mr. Victor Cionga
2. Ms. Arielle Malard de rothschild
3. Mr. Cristian Busu
4. Mr. Michael Boersma
5. Mr. Victor Vlad Grigorescu
number of shares
Stake held (as % of the
share capital)
5.000
0.00144534%
-
-
-
-
-
-
-
-
According to our information, the persons mentioned
aboved, have not been involved in litigations or
administrative proceedings related to their activity in the
Company in the last 5 years, nor in proceedings related to
their capacity of fulfilling the duties in the Company.
Until September 22, 2014 the Board of Directors
members were:
n Dl. Marius Eugen Untescu – non-executive
administrator, president of the board of directors
n Dl. Niculae Plesa – non-executive administrator
n Dl. Constantin Dinescu – non-executive administrator
n Dl. Rares Ion Popescu – non-executive administrator
n Dl. Ioan Rosca – non-executive administrator,
general manager
executiVe management
IOan ROSCa – gEnERal managER (CEO)
Pursuant to the decision of the Board of Directors
no. 24 dated 5th July 2013, the Board of Directors
has appointed Mr. Ioan Rosca to the position of
general manager of the Company and delegated
him responsibilities and duties related to internal
management and representation.
The table below shows the company’s managers who do
not have delegated powers from the Board of Directors:
name
Electrica headquarters
Position
Department
Angelescu ramiro robert Eduard
Deputy General Manager
Dumbrava Ioan
Petre Marin
Geanta Marian
Marin Emilia - Elena
Manager
Deputy Manager
Deputy Manager
Manager
Operations
Operations
Operations
Economic
Popescu Borislavschi Alexandra romana Augusta
Manager
Stan Corneliu
Crisan Mariana
Deputy Manager
Manager
Pindichi Valentin Cosmin
Deputy Manager
Corporate finance and
Governance
Corporate finance and
Governance
Human resources, Control and
Communication
Human resources, Control and
Communication
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 146
According to the Articles of Incorporation, the Board of
Directors appoints and revokes the General Manager
and the other managers with mandate agreements
–art.18, letter A, paragraph (f) and (k). The General
Manager performs his activity according to the
provisions of the mandate agreement concluded with
the Company.
The Managers with managing functions are employees of
the company, having an individual labor agreement and
they are appointed and revoked by the General Manager.
According to our information, there is no agreement,
understanding or family relationship between the
Company’s managers and another person that
contributed to their appointment as managers.
The table below shows the number of shares held by the Company’s managers as of March, 2015:
Item
no.
name
1.
2.
3.
Ioan rosca
Angelescu ramiro robert Eduard
Geanta Marian
number of shares
25,000
1,000
1,000
Share in the share
capital (%)
0.00722669%
0.00028907%
0.00028907%
According to information at hand the persons
mentioned above have not been involved in any
litigations or administrative proceedings related
to their activity within the Company in the last 5
years and their capacity to fulfil their work-related
attributes.
financial reporting
The financial statements for the year ended 31
December 2014 represent the first set of individual
financial statements prepared in accordance with
International Financial Reporting Standards, a
mandatory provision according to the Minister of
finance no. 881/2012 applicable to companies whose
securities are admitted to trading on a regulated
market.
Balance sheet highlights
SElECTED fInanCIal InfORmaTIOn fROm ThE COmPany BalanCE ShEET (ThOUS anDS ROn)
assets
non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Deferred tax assets
Total non-current assets
Current assets
Trade receivables
Other receivables
Cash and cash equivalents
Deposits, treasury bills and government bonds
Inventories
Prepayments
Income tax receivable
Assets held for distribution
Total current assets
31-Dec-14
31-Dec-13
Var.
291,259
678
1,427,361
7,206
1,726,502
302,373
798
1,405,190
13,932
1,722,293
87,696
15,391
1,075,620
1,038,420
166
337
23,134
-
2,240,763
95,660
32,500
144,126
-
135
328
22,795
507,266
802,810
-4%
-15%
2%
-48%
0%
-8%
-53%
646%
-
23%
3%
1%
-
179%
Total assets
3,967,265
2,525,104
-57%
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 147
equity and liaBilities
Equity
Share capital out of which:
Subscribed and paid in share capital
Inflation adjustment to share capital
Share premium
Treasury shares reserve
Pre-paid capital contributions in kind from shareholders
Revaluation reserve
legal reserves
retained earnings
Total equity
liabilities
non-current liabilities
Employee benefits
Other payables
Total non-current liabilities
Current liabilities
Bank overdrafts
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
31-Dec-14
31-Dec-13
Var.
3,814,242
3,459,399
354,843
103,049
(75,372)
3,277
829
127,897
(104,364)
2,509,306
2,078,399
430,907
-
-
47,493
-
114,093
(317,249)
3,869,557
2,353,644
31-Dec-14
31-Dec-13
2,991
-
2,991
-
83,400
8,663
384
2,270
-
94,718
97,709
2,759
5,498
8,256
36,999
86,799
4,190
410
4,027
30,777
163,204
171,460
-52%
66%
-18%
-
-
-93%
-
12%
-67%
64%
Var.
8%
-
-64%
-
-4%
107%
-6%
-44%
-
-42%
-43%
Total equity and liabilities
3,967,266
2,525,104
57%
nOn-CURREnT aSSETS
Electrica’s non-current assets increased by RON 4
million in the year ended 31 December, 2014 compared
with the year ended 31 December, 2013 to rON 1,726
million from RON 1,722 million, respectively.
Increase in non-current assets was generated by the
shares conversion of the loan granted to Electrica
trade receiVaBles
Trade receivables decreased by rON 8 million at the
end of 2014 as compared to yE 2013, to rON 88
million from RON 96 million, due to termination of
cash and equiValents
As at 31 December 2014 compared to 31 December
2013 cash and cash equivalents and deposits, treasury
bills and government bonds increased by rON 1,970
million, to rON 2,114 million from rON 144 million
Serv, to contribution in kind (land) to the Electrica
Serv share capital, adjustments for the participations
held by Electrica SA in Electrica Serv based on the
revaluation report made by an independent valuator
in view of estimating the recoverable amount of
shares held in Electrica Serv.
services and representation contracts concluded with
its subsidiaries.
at 31 December 2013 due to cashing related to the
transfer of the ownership of the new shares isued by
the company in July 2014.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014
148
assets held for distriBution
Based on the Extraordinary General Shareholders
decision dated 20 March 2014 and the resolution of
the Bucharest Court dated 10 April 2014, the Group
recognised the spin-off of the Company’s shareholdings
to a new company - „Societatea de Administrare a
Participatiilor in Energie SA” - wholly owned by the
Ministry of Energy, Small and Medium-sized Enterprises
and Business Environment. The spin-off referred to
share capital
The issued share capital in nominal terms consists of
345,939,929 ordinary shares at 31 December 2014,
with a nominal value of rON 10 per share. All shares
rank equally with regard to the Company’s residual
assets. The holders of ordinary shares are entitled to
receive dividends as declared, and are entitled to one
vote per share at meetings of the Company.
On 25 february 2014 an increase of share capital of
188,264 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods.
On 10 April 2014 Bucharest Court approved the spin-off
by Electrica SA through transfer of part of its assets
(investments held by Electrica SA in other entities)
to a new company „Societatea de Administrare a
Participatiilor in Energie SA”, owned by the Romanian
State, represented by the Ministry of Economy –
Department for Energy. Following this transaction, the
share capital decreased by 43,123,780 ordinary shares.
On 16 May 2014 an increase of share capital of
diVidends
Dividends for the year ended 31 December 2013,
in amount of 22,475,225 rON, were declared on
the basis of individual annual statutory financial
statements.
the transfer of the shares held by the Company in
10 entities (Enel Distributie Muntenia, Enel Energie
Muntenia, Enel Distributie Banat, Enel Distributie
Dobrogea, Enel Energie, E.On Moldova Distributie, E.On
Energie, Electrica Soluziona, Hidro Tarnita and BrM).
The investments included equity accounted investees
and other investments and were classified as assets
held for distribution as at 31 December 2013.
3,846,797 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods.
In June 2014 the Company organised an IPO, which
entailed to an offering of 142,007,744 shares and
8,795,250 GDRs, each GDR representing four shares.
The subscriptions amounted to RON 1,556,095
thousand and USD 120,143,115. On 2 July 2014
the increase of share capital by 177,188,744
ordinary shares was recorded in the Trade register.
Consequently, the Group recognised an increase
of share capital of rON 1,771,887,440 and a share
premium of RON 171,128,062. The transaction costs
of rON 68,079,885 were deducted from the share
premium.
In July 2014 the Company purchased 5,206,593
ordinary shares and 421,000 Global Depositary
receipts, equivalent to 1,684,000 shares. The total
amount paid for acquiring the shares and Global
Depositary receipts was rON 75,372,435.
The dividends in respect of the year ended 31
December 2013 were approved by OGMS of the
Company no. 29 on 28 May 2014 and were paid on 28
July 2014.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 149
results of operations
SElECTED fInanCIal InfORmaTIOn fROm ThE COmPany InCOmE STaTEmEnT (ThOUS anDS ROn)
Indicator
Revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
Impairment of property, plant and equipment, net
Impairment of investments in subsidiaries, net
reversal of impairment / (Impairment) of trade and other
receivables, net
Other operating expenses, net of variation in provisions
Operating loss
Finance income:
Dividends income
Interest income
finance costs
Gain from disposals of shares held in other entities
2014
244,517
4,462
2013
282,988
15,357
(224,176)
(227,939)
(16,699)
(13,252)
-
(4,675)
(2,469)
1,460
(10,832)
257,583
238,432
19,151
(2,486)
31,809
(22,737)
(9,378)
(12,466)
(48,398)
16,594
(49,962)
(55,940)
95,987
90,291
5,696
(2,044)
-
Var.
-14%
-71%
-2%
-27%
41%
-
-90%
-
-
-81%
168%
164%
236%
22%
-
net finance cost
286,907
93,942
205%
Profit before tax
Income tax expense
Profit for the year
276,075
(6,586)
269,490
38,002
(1,182)
36,819
626%
457%
632%
In 2014, Electrica posted revenues of rON 244
million as compared to rON 283 million in 2013.
The rON 39 million decrease in 2014 as compared
to 2013 is mainly due to termination of services
and representation contracts concluded with its
subsidiaries.
The income structure is as follows:
Th. ROn
2014
2013
Supply of electricity on the balancing market and day ahead market
230,731
232,817
Management and advisory services
Revenue from service contracts in relation to Automatic Meter Reading
System
Total
9,051
4,735
45,436
4,735
244,517
282,988
other income
Other income mainly include rental income and late payment penalties from customers.
electricity purchased
Electricity purchased include the cost of electricity purchased for settlements on the balancing market and the
day ahead market.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 150
Salaries and other employee benefits decreased by
rON 6 million, to rON 17 million from rON 23 million
in 2013, due to layoffs in the company’s reorganization
and restructuring program.
operational profit
In 2014, the company recorded a operating loss
decrease compared to 2013, from 56 million to 11
million, due to lower operating expenses.
reVenues from the diVidend distriButed B y suBsidiaries
The main part of Electrica’s income comes from
dividends distributed by its subsidiaries.
Income from dividends from subsidiaries in 2014
amount to rON 238 million compared to rON 90
million in 2013, their structure is as follows:
fDEE Electrica muntenia nord Sa
fDEE Electrica Transilvania nord Sa
fDEE Electrica Transilvania Sud Sa
ffEE Electrica furnizare Sa
total
mil. ROn
2014
82
41
45
70
238
2013
57
-
-
33
90
interest reVenues
In 2014, the company recorded an increase in interest
revenue to rON 19 million from rON 6 million in 2013.
The Company’s strategy was to place the IPO money
through the Underwriter banks, member of the
Syndicate, in risk-free titles and deposits, on short-term.
The increasing of financial performance is due to
interest income: RON 4,739,363 relating to investments
in deposits and rON 9,866,661 related investments in
treasury bills and government bonds, cash earned by the
company in July 2014 following the transfer of property
rights on new shares.
The Company obtained so far in 2015, interest income
related to investments in treasury bills and government
bonds of rON 5,421,770 and rON 825.236 from
deposits.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 151
profit Before tax
In 2014 the profit before tax increased by RON 238
million, to rON 276 million from rON 38 million in
2013, due to increasing of dividend revenues from its
subsidiaries and operating expenses reduction.
The profit before tax was impacted by an one-off
transaction, respectively on 17 February 2014 the
Company sold part of the shares held in E.On Moldova
Distributie and E.On Energie Romania to E.On following
the exercise of call options by E.On. E.On paid the
exercise price of rON 140,920 thousand to the
Company.
Cash received from transaction with E.ON less
the directly attributable costs were transferred to
Societatea de Administrare a Participatiilor in Energie SA
(rON 129 mill).
income tax
In 2014, income tax expense increased by rON 5.4
million to rON 6.6 million from rON 1.2 million in 2013.
The increase is mainly generated by its deferred tax
component related to Oltchim following restatements.
net profit for the period
As a result of the factors discussed above, net profit in
2014 recorded a significant increase compared to 2013,
to rON 269 million from rON 37 million.
The company’s main objective is to maximize Electrica’s
individual net profit, coordination and effective control
of participations in subsidiaries, so as to ensure the
possibility of fulfilling the intention of management,
declared in the Prospectus, to distribute dividends
in the amount representing 85% of consolidated net
profit.
cash flow
In 2014 the profit before tax was RON 276 million
compared to rON 38 million in 2013.
The key adjustments in 2014 were: (i) adding
depreciation and amortisation in the amount of RON 13
million, (ii) a net change in trade and other receivables
of RON 31 million, (iii) deducting a change in trade and
other payables of rON 14 million.
The key adjustments in 2013 were: (i) adding
depreciation and amortisation in the amount of
rON 9 million, (ii) change in adjustments related to
non-current assets depreciation, participations in its
subsidiaries, trade and other receivables in amount
of RON 44 million, (iii) deducting a change in trade
and other payables of rON 53 million. Income tax and
interest paid amounted to a total of rON 2.6 million.
personnel
The average number of employees decreased in 2014 as
compared to 2013 by 49 employees, to 139 employees
from 188 employees, as a result of the lay-offs in the
company’s reorganization and restructuring program,
while the actual staff number is constant 149.
At 31 December 2014, approximately 93% of the Group’s
employees are members of labour unions and their
employment conditions are governed by a collective
bargaining agreement that is renegotiated at least every
two years and filed with the relevant labour authorities
in romania.
Electrica has not experienced any strike or other form
of labour disturbances that have interfered with its
operations, and management considers its relationship
with employees to be good.
In compliance with law No. 319/2006 on labour safety
and health and its methodological norms the company
has established a committee for labour safety and health.
Electrica’s training programmes aim to upgrade the skills
of the employees so they can adapt to broader tasks to
better utilise its existing resources. Management believes
that its emphasis on training and development helps its
employees meet business challenges effectively.
The Company has in place internal regulations that
generally relate to general employment provisions,
non-discrimination, labour safety and health, rights
and obligations of the employer and of the employees,
employee complaint procedures, rules on labour
discipline, disciplinary sanctions and disciplinary
infringements, rules regarding disciplinary procedure, the
criteria and procedure for the professional evaluation of
employees and final provisions.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 152
risK management and internal c ontrol
risk management and Internal Control
Underlying legislation for implementing a risk
management system as well as a system for internal
control/management has been:
n Order of the Ministry of Public finance no.
946/2005 regarding development of a internal
control/management system with all subsequent
ammendments;
n Government Order no. 119/1999 regarding internal
control and preventive financial control with all
susbsequent ammendments.
In addition, the risk management together with the
internal control and management system at Electrica SA
level takes place in accordance with internal procedures
agreed.
A major concern for the management is building
awareness of employees regarding the importance of
managing risk inside the organization and the necessity
of direct involvement in unfolding the risk management
process, as well as aligning best practices on national
and international level by following legislation in place,
standards and related norms.
In June last year Executive management of Electrica
SA started with classifying the risks for the Company in
terms of probability of occurrence and impact on the
Company. Five impact levels and five probability levels
were identified, ranging from risks that are tolerable
and risks that have zero tolerance and risks that have
low probability and risks with high probability. One
risk, which has to do with loss of intellectual capital,
was quantified in the highest category, which means
that urgent managerial control measures are needed.
A further five risks were classified in the area of low
tolerance, for which short term managerial control
measures are required. Corrective actions have been
taken for these six risk areas. During 2015 the risk
management system will be further detailed, improved
and discussed with the board.
financial risK management
The Company has exposure to the following risks
arising from financial instruments:
n credit risk
n liquidity risk
n market risk.
(i) Credit risk
Credit risk is the risk of financial loss to the Company
if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises
principally from the Company’s receivables from
customers, cash and cash equivalents, bank deposits
and treasury bills and government bonds.
The company has a high credit risk mainly with the
state-owned companies. Until 2012, the Company
had a credit risk concentration with Oltchim SA, which
became insolvent. Currently, the Company considers
that the credit risk exposure significantly decreased.
Cash, bank deposits, treasury bills and government
bonds are placed in financial institutions, which are
considered to have minimal risk of default.
The carrying amount of financial assets represents the
maximum credit exposure.
Trade receivables
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade receivables.
Impairment
The ageing of trade receivables was as follows:
In RON
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Past due 2-3 years
Past due more than 3 years
Total
31 December 2014
31 December 2013
gross value
Bad debt
allowance
gross value
Bad debt
allowance
83,382,090
743,587
498,036
3,072,053
-
-
-
-
92,780,614
77,738
773,759
2,028,375
3,804,652
(3,804,652)
32,264,483
(32,264,483)
34,542,103
(34,542,103)
229,020,902
(229,020,902)
632,051,499
758,094,020
(632,051,499)
(670,398,254)
406,643,388
763,589,259
(406,643,388)
(667,928,773)
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 153
The allowance for impairment refers mainly to customer Oltchim SA.
In RON
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Total
net trade receivables
31 December 2014
31 December 2013
83,382,090
92,780,614
743,587
498,036
3,072,053
87,695,766
77,738
773,759
2,028,375
95,660,486
(ii) liquidity risk
liquidity risk is the risk that the Company will
encounter difficulty in meeting the obligations
associated with its financial liabilities that are
settled by delivering cash or another financial asset.
The Company’s approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due,
under both normal and stressed conditions, without
incurring unacceptable losses.
The Company aims to maintain the level of its cash
and cash equivalents at an amount in excess of
expected cash outflows on financial liabilities. The
Company also monitors the level of expected cash
inflows on trade receivables together with expected
cash outflows on trade and other payables.
Exposure to liquidity risk
The following are the remaining contractual maturities
of financial liabilities at the reporting date. The
amounts are gross and undiscounted, and include
estimated interest payments.
In RON
financial liabilities
31 December 2014
Trade payables
Total
Contractual cash flows
Carrying amount
Total
less than 1 year
83,400,334
83,400,334
83,400,334
83,400,334
83,400,334
83,400,334
(iii) market risk
Market risk is the risk that changes in market prices
– such as foreign exchange rates, interest rates– will
affect the Company’s income or the value of its
holdings of financial instruments. The objective of
Currency risk
The Company is exposed to currency risk to the extent
that there is a mismatch between the currencies in which
sales, purchases and borrowings are denominated and
the functional currency of the Company. The functional
currency of all entities belonging to the Company is the
romanian leu (rON).
market risk management is to manage and control
market risk exposures within acceptable parameters,
while optimising the return.
The currencies in which these transactions are primarily
denominated are rON and EUr. The Company also has
deposits and bank accounts denominated in foreign
currency (EUr). The Company’s policy is to use the local
currency in its transactions as far as practically possible.
The Company does not use derivative or hedging
instruments.
Exposure to currency risk
The summary quantitative data about the Company’s exposure to currency risk is as follows:
in thousands of RON
Cash and cash equivalents
Deposits (deposits, treasury bills and government bonds)
Expunere neta la nivelul situatiei pozitiei financiare
31 December 2014 31 December 2013
eur
10,137,641
136,704,050
146,841,691
eur
136,172,767
-
136,172,767
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 154
The following significant exchange rates have been applied during the year:
average rate
year-end spot rate
rON
EUr 1
2014
4.4446
2013
4.4190
2014
4.4821
2013
4.4847
2011
4,4287
Sensitivity analysis
A reasonably possible strengthening (weakening) of
the EUr against rON at 31 December would have
affected the measurement of financial instruments
denominated in a foreign currency and profit before
tax, and respectively the equity by the amounts shown
below. The analysis assumes that all other variables, in
particular interest rates, remain constant and ignores
any impact of forecast sales and purchases.
Effect
31 December 2014
EUr (5% movement)
31 December 2013
EUr (5% movement)
Profit before tax
Strengthening
Weakening
7,342,085
(7,342,085)
6,808,638
(6,808,638)
Interest rate risk
The company does not have long-term bank loans.
Exposure to interest rate risk
The interest rate profile of the Company’s interest-bearing financial instruments is as follows:
fixed-rate instruments
Financial assets
bank accounts (cash and cash equivalent)
Deposits, treasury bills and government bonds
Variable-rate instruments
Financial liabilities
Overdrafts
Short-term bank loans
31 December 2014 31 December 2013
874,243,283
1,038,419,841
1,912,663,124
140,619,441
-
140,619,441
-
-
-
(36,999,437)
-
(36,999,437)
Fair value sensitivity analysis for fixed-rate instruments
The Company does not account for any fixed-rate
financial assets or financial liabilities at fair value through
profit or loss. Therefore, a change in interest rates at the
reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable-rate instruments
A reasonably possible change of 50 basis points
in interest rates at the reporting date would have
increased (decreased) profit before tax by the
amounts shown below. This analysis assumes that
all other variables, in particular foreign currency
exchange rates, remain constant.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014
155
31 December 2014
Variable-rate instruments
31 December 2013
Variable-rate instruments
Profit before tax
50 bp increase
50 bp decrease
-
-
(184,997)
184,997
enVironmental aspects
The company has implemented management system in
relation to environmental and health and operational
safety matters. The annual capital investment budget
include expenditure for environmental matters.
As at the date of this report, the company holds all
material permits required for it to conduct its business,
and the company’s business is conducted in compliance
with all specific environmental regulations. Integrated
Quality, Environment, Occupational Health and Safety
management systems certified in accordance with ISO
9001:2008, ISO 14001:2014 and EN OHSAS 18001:2007
have been implemented by the company.
r&d actiVity
An important endeavour in promoting technological
innovation constitutes the dissemination of
improvement solutions for electricity networks
related to smart grid concepts. As such, Electrica is
organizing every year in November conferences with
international attendance which have as an alternative
theme smart grid solutions in one year and smart
metering solutions in the next year. Best practices in
the field for each investment category are presented.
Moreover, we can emphazise the participation at
international conferences organized by the World
Energy Council, CIGRE and CIRED international
conferences which aim at tackling technological
innovation and promoting new technologies which
improve operational efficiency.
concluded contracts
Contracts concluded during 2014 reported according to art. 225 of Law 297/2004:
n SC Filiala de Intretinere si Servicii Energetice
„Electrica Serv” SA – C54/28-02-2014 - Auto
transport services - value: 2,996 th RON
SA – C60/28-02-2014 – Management and advisory
services - value: 953 th. RON
n SC FDEE Electrica Distributie Transilvania Nord
n SC FDEE Electrica Distributie Muntenia Nord S
A – C59/28-02-2014 – Management and advisory
services – value: 953 th. RON
n SC FDEE Electrica Distributie Transilvania Sud SA
– C61/28-02-2014 – Management and advisory
services - value: 953 th. RON
suBsequent eVents
From 1 January 2015 until the date of this report,
the company did not record subsequent events with
significant impact on the financial situation such as
new significant commitments or contingent liabilities
(e.g. issuing significant guarantees or getting
significant loans, etc), capital increases, significant
Company’s shares transactions, controls from various
state institutions, major acquisitions or disposals of
assets, etc.
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014
156
Key factors, driVers and significant marKet
trends affecting the results of electrica’s
operations
Directors distinguishes between key factors, drivers
and significant market trends it cannot control
and those that it can (albeit often only to a limited
degree) control. Key factors, drivers and significant
market trends that Directors cannot control include:
(i) the cost of electricity purchased;
(ii) macroeconomic trends in the romanian
economy;
(iii) demand for electricity;
(iv) the general regulatory and legal framework
under which the company operates, including
ANrE’s policies;
Key factors and drivers that Directors can at least
partially control include the company’s capital
expenditures and operating expenses.
Key factors and directions that you can control
Board of Directors at least partially, include the
company’s capital investment and operating
expenses.
Directors believe that in the mid- to long-term
the continued growth of Romania’s real GDP, and
of the romanian economy generally, will have
some positive impact on electricity consumption in
Romania, which, in turn, will have a positive effect on
Electrica’s business) and its results of its operations.
In particular, Directors believe that as long as
romanian economic growth continues to outpace
that of the EU, per capita electricity consumption
in romania is likely to continue to rise. Conversely,
a significant slowdown in the growth of romania’s
GDP and of the romanian economy in general
could have some negative effect on energy
consumption in romania and, in turn, on Electrica’s
business and its results of operations.
statements
During the year ended 31 December 2014, DfEE
ELECTRICA SA complied with all its financial
obligation. Also, there are no factors of uncertainty
that could affect the company’s liquidity.
Attached hereto are the individual audited financial
statements for the year ended on 31 December,
2014, prepared in accordance with the International
Financial Reporting Standards, approved through the
Board of Directors Decision no. 9 on 26 March 2015
Chairman of the Board of Directors,
Victor CIOnga
2014 DIRECTOR’S REPORT (INDIVIDUAL)annual report2014 157
iNDiViDuAL fiNANCiAL sTATeMeNTs As AT AND fOr THe yeAr eNDeD 31
DeCeMBer 2014
PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF FINANCE NO.1286/2012, AS FURTHER AMENDED
indiVidual financial
statements
for the year ended
31 December 2014
annual report2014 158
iNDiViDuAL fiNANCiAL sTATeMeNTs As AT AND fOr THe yeAr eNDeD 31
DeCeMBer 2014
PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF FINANCE NO.1286/2012, AS FURTHER AMENDED
CONTENTS
Individual statement of financial position ____________________________________________________ 160
Individual income statement ______________________________________________________________ 162
Individual statement of profit or loss and other comprehensive income ___________________________ 163
Individual statement of changes in equity ____________________________________________________ 164
Individual statement of cash-flows __________________________________________________________ 166
notes to the individual financial statements
Basis of preparation
1 Reporting entity and general information ____________________________________________________ 168
2 Basis of accounting ______________________________________________________________________ 169
3 Functional and presentation currency ______________________________________________________ 1169
4 Use of judgements and estimates __________________________________________________________ 170
accounting policies
5 Basis of measurement ___________________________________________________________________ 170
6 Significant accounting policies _____________________________________________________________ 171
7 New standards and interpretations not yet addopted ___________________________________________ 177
Performace for the year
8 revenue ______________________________________________________________________________ 177
9 Other operating revenue and expenses ______________________________________________________ 177
10 Net finance income ____________________________________________________________________ 178
11 Earning per share ______________________________________________________________________ 178
Employee benefits
12 Short-term employee benefits ____________________________________________________________ 179
13 Post-employment and other long-term employee benefits ______________________________________ 179
14 Employee benefits expenses _____________________________________________________________ 181
Income taxes
15 Income taxes _________________________________________________________________________ 181
active
16 Trade receivables ______________________________________________________________________ 183
17 Deposits, treasury bills and government bonds _______________________________________________ 183
18 Other receivables ______________________________________________________________________ 183
19 Cash and cash equivalents _______________________________________________________________ 184
20 Property, plant and equipment ___________________________________________________________ 184
21 Intangible assets _______________________________________________________________________ 186
22 Investments in subsidiaries ______________________________________________________________ 187
23 Spin-Off______________________________________________________________________________ 188
Equity and liabilities
24 Capital and reserves ____________________________________________________________________ 189
25 Trade payables ________________________________________________________________________ 190
26 Other payables ________________________________________________________________________ 190
27 Provisions ____________________________________________________________________________ 190
financial instruments
28 Financial instruments - fair values and risk management ________________________________________ 191
annual report2014
159
iNDiViDuAL fiNANCiAL sTATeMeNTs As AT AND fOr THe yeAr eNDeD 31
DeCeMBer 2014
PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF FINANCE NO.1286/2012, AS FURTHER AMENDED
Other information
29 Related parties ________________________________________________________________________ 195
30 Conditionalities________________________________________________________________________ 197
31 Commitments _________________________________________________________________________ 198
32 Foundation of accounting restatements ____________________________________________________ 198
annual report2014 160
iNDiViDuAL sTATeMeNT Of fiNANCiAL POsiTiON
AS AT 31 DECEMBER 2014
(All amounts are in RON)
assets
non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associated entities
Deferred tax assets
Total non-current assets
Current assets
Cash and cash equivalents
Deposits, treasury bills and government bonds
Trade receivables
Other receivables
Inventories
Prepayments
Income tax receivable
Assets held for distribution
Total current assets
Total assets
equity and liaBilities
Equity
Share capital out of which:
Subscribed share capital
Inflation adjustment to share capital
Share premium
Treasury shares reserve
Pre-paid capital contributions in kind from
shareholders
Revaluation reserve
legal reserves
retained earnings
Total equity
(Continued on next page)
note
31 December
2014
31 December
2013
1 january
2013
20
21
22
23
15
19
17
16
18
23
24
24
30
24
24
24
24
291.258.568
302.373.419
257.387.192
677.666
797.803
318.000
1.427.360.547
1.405.189.737
1.453.587.987
-
-
507.266.152
7.205.689
1.726.502.470
13.932.473
1.722.293.432
15.156.826
2.233.716.157
1.075.619.774
144.125.683
185.208.969
1.038.419.841
-
-
87.695.766
95.660.486
86.841.490
15.390.676
32.500.435
38.665.771
166.347
336.573
134.502
328.120
217.965
443.126
23.134.100
22.794.808
5.878.858
-
507.266.152
-
2.240.763.077
802.810.186
317.256.179
3.967.265.547
2.525.103.618
2.550.972.336
3.814.242.000
2.509.306.102
2.493.197.502
3.459.399.290
2.078.399.040
2.062.290.440
354.842.710
430.907.062
430.907.062
103.049.177
(75.372.435)
-
-
-
-
3.277.268
47.492.961
54.481.291
828.548
-
-
127.896.823
114.093.070
114.093.070
(104.364.433)
(317.248.563)
(341.076.784)
3.869.556.948
2.353.643.570
2.320.695.079
annual report2014
161
iNDiViDuAL sTATeMeNT Of fiNANCiAL POsiTiON
AS AT 31 DECEMBER 2014
(All amounts are in RON)
liabilities
non-current liabilities
Employee benefits
Other payables
Total non-current liabilities
Current liabilities
Bank loans
Bank overdrafts
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
note
31 December
2014
31 December
2013
1 january
2013
13
26
28
19
25
26
12,13
27
2.990.743
-
2.990.743
2.758.753
5.497.560
8.256.313
2.828.309
10.625.446
13.453.755
-
-
-
10.333.911
36.999.437
55.732.038
83.400.334
86.798.928
94.529.169
8.663.437
4.190.377
34.541.668
384.428
410.264
361.339
2.269.657
4.027.375
3.825.288
-
94.717.856
30.777.354
163.203.735
17.500.089
216.823.502
97.708.599
171.460.048
230.277.257
Total equity and liabilities
3.967.265.547
2.525.103.618
2.550.972.336
general manager
Ioan rosca
Economic manager
Emilia Elena Marin
annual report2014
162
iNDiViDuAL iNCOMe sTATeMeNT
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
note
2014
2013
8
9
9
14
20,21
244.517.469
4.462.492
(224.176.045)
(16.699.072)
(13.252.249)
282.988.139
15.356.685
(227.938.870)
(22.737.116)
(9.377.572)
Impairment of property, plant and equipment, net
20
-
(12.465.531)
Impairment of investments in subsidiaries, net
(4.674.871)
(48.398.250)
reversal of impairment / (Impairment) of trade
and other receivables, net
Other operating expenses, net of variation in
provisions
Operating loss
finance income
finance costs
Gain from disposals of shares held in other entities
net finance cost
Profit before tax
Income tax expense
Profit for the year
Earnings per share
Basic and diluted earnings per share
general manager
Ioan rosca
16,18
(2.469.481)
16.594.284
9
10
10
10
15
11
1.459.641
(49.962.140)
(10.832.116)
(55.940.371)
257.583.262
(2.485.569)
31.809.478
286.907.171
276.075.055
(6.585.537)
269.489.518
95.986.764
(2.044.364)
-
93.942.400
38.002.029
(1.182.446)
36.819.583
0,97
0,18
Economic manager
Emilia Elena Marin
annual report2014
163
iNDiViDuAL sTATeMeNT Of PrOfiT Or LOss AND OTHer COMPreHeNsiVe iNCOMe
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
Profit for the year
269.489.518
36.819.583
note
2014
2013
Other comprehensive income
Items that will never be reclassified to profit or
loss
Revaluation of property, plant and equipment
Tax related to revaluation of property, plant and
equipment
Remeasurements of the defined benefit liability
Tax related to remeasurements of the defined
benefit liability
20
15
13
15
986.367
(157.819)
(103.574)
16.572
-
-
261.921
(41.907)
Other comprehensive income, net of tax
741.546
220.014
Total comprehensive income
270.231.064
37.039.597
general manager
Ioan rosca
Economic manager
Emilia Elena Marin
annual report2014
164
iNDiViDuAL sTATeMeNT Of CHANges iN eQuiTy
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
note
Subscribed share
capital
Inflation
adjustment to
share capital
Share premium Treasury shares
Balance at 31 December 2013
2.078.399.040
430.907.062
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Contributions and distributions
Underwritings from the IPO, net
Treasury shares acquired
Issue of ordinary shares in respect of land
contributed by the shareholders
Dividends
Spin-off effect
Total transactions with owners of the
Company
24
24
24
24
23
Other changes in equity
Set up of legal reserves
-
-
-
-
-
(75.372.435)
Pre-paid capital
contributions
in kind from
shareholders
47.492.961
-
-
-
-
-
-
-
-
(44.215.693)
-
-
-
-
-
-
103.049.177
-
-
-
-
-
-
-
1.771.887.440
-
40.350.610
-
-
-
-
-
-
-
-
(431.237.800)
(76.064.352)
1.381.000.250
(76.064.352)
103.049.177
(75.372.435)
(44.215.693)
-
-
-
-
2014
annual
report
Revaluation
reserve
Revaluation
reserve
Retained
earnings
Total
-
-
828.548
828.548
-
-
-
-
-
-
-
114.093.070
(317.248.563)
2.353.643.570
-
-
-
-
-
-
-
-
-
269.489.518
269.489.518
(87.002)
741.546
269.402.516
270.231.064
-
-
-
1.874.936.617
(75.372.435)
(3.865.083)
(22.475.225)
(22.475.225)
(20.239.408)
(527.541.560)
(42.714.633)
1.245.682.314
13.803.753
(13.803.753)
-
Balance at 31 December 2014
3.459.399.290
354.842.710
103.049.177
(75.372.435)
3.277.268
828.548
127.896.823
(104.364.433)
3.869.556.948
(Continued on next page)
165
iNDiViDuAL sTATeMeNT Of CHANges iN eQuiTy
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
note
Subscribed share
capital
Inflation
adjustment to
share capital
2.062.290.440
430.907.062
Balance at 1 january 2013
Comprehensive income
Profit
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Contributions and distributions
Issue of ordinary shares in respect of land
contributed by the shareholders
land for which ownership rights were
obtained
Dividends
Total transactions with owners of the
Company
24
24
24
-
-
-
16.108.600
-
-
16.108.600
-
-
-
-
-
-
-
Balance at 31 December 2013
2.078.399.040
430.907.062
The accompanying notes are an integral part of these individual financial statements.
Share premium Treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Pre-paid capital
contributions
in kind from
shareholders
54.481.291
-
-
-
(16.108.600)
9.120.270
-
(6.988.330)
47.492.961
2014
annual
report
Revaluation
reserve
Revaluation
reserve
Retained
earnings
Total
1
6
5
-
-
-
-
-
-
-
-
-
114.093.070
(341.076.784)
2.320.695.079
-
-
-
-
-
-
-
36.819.583
220.014
37.039.597
36.819.583
220.014
37.039.597
-
-
-
9.120.270
(13.211.376)
(13.211.376)
(13.211.376)
(4.091.106)
114.093.070
(317.248.563)
2.353.643.570
166
iNDiViDuAL sTATeMeNT Of CAsH fLOWs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
note
2014
2013
20
21
20
22
18,20
10
15
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Impairment loss on property, plant and
equipment, net
Impairment of investments in subsidiaries, net
Impairment / (reversal of impairment) of trade
and other receivables, net
Net finance income
Income tax expense
Changes in :
Trade receivables
Other receivables
Trade payables
Other payables
Employee benefits and provisions
Cash used in operating activities
269.489.518
36.819.583
12.806.965
445.284
9.291.239
86.333
-
12.465.531
4.674.871
48.398.250
2.469.481
(16.594.284)
(286.907.171)
6.585.537
9.564.485
(48.019.061)
17.040.412
52.585.186
(38.536.239)
(1.629.302)
(8.994.519)
(93.942.400)
1.182.446
(2.293.302)
(91.696.728)
(6.730.352)
73.669.223
(20.720.113)
394.452
(47.376.820)
Interest paid
(34.807)
(2.615.320)
net cash used in operating activities
(9.029.326)
(49.992.140)
(Continued on next page)
annual report2014
167
iNDiViDuAL sTATeMeNT Of CAsH fLOWs
FOR THE YEAR ENDED 31 DECEMBER 2014
(All amounts are in RON)
note
2014
2013
Cash flows from investing activities
Payments for purchases of property, plant and
equipment
Payments for purchase of intangible assets
Proceeds from sale of other investments
23
Payments for purchase of treasury bills and
government bonds
Proceeds from maturity of treasury bills and
government bonds
Payments in deposits with maturity of 3 months
or longer
Proceeds from borrowings granted to subsidiaries
Payments for share acquisition in associates
Interest received
Dividends received
net cash from / (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of transaction
costs
Re-purchase of treasury shares
Dividends paid
repayment of bank borrowings
Cash transferred at spin off
net cash from / (used in) financing activities
net increase / (decrease) in cash and cash
equivalents
Cash and cash equivalents at 1 January
Effect of movements in exchange rates on cash
held
Cash and cash equivalents at 31 December
22
24
24
24
23
19
19
(31.416.511)
(57.622.727)
(325.147)
140.920.000
(1.194.250.628)
295.598.291
(137.004.050)
-
-
17.866.153
238.431.719
(670.180.173)
1.874.936.617
(75.372.435)
(22.475.225)
-
(129.385.930)
1.647.703.027
(566.136)
-
-
-
-
10.271.379
(57.500)
7.390.381
90.293.077
49.708.474
-
-
(13.211.376)
(10.333.911)
-
(23.545.287)
968.493.528
(23.828.953)
107.126.246
129.476.931
-
1.478.268
1.075.619.774
107.126.246
The accompanying notes are an integral part of these individual financial statements.
general manager
Ioan rosca
Economic manager
Emilia Elena Marin
annual report2014
168
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
1 reporting entity
These financial statements are the individual financial
statements of Societatea de Distributie si Furnizare a
Energiei Electrice Electrica S.A. (“the Company”).
Electrica was originally incorporated as a company
in 1998 by Government Decision no. 365/1998,
following the restructuring of the former National
Electricity Kings (rENEl). On 1 August 2000, following
the restructuring of the former National Electricity
Company (Electrical Company) under the Government
Decision no. 627/2000, the Company was allocated
a new tax registration number, without changing the
object of activity (distribution and supply of electricity
in Romania). The registered office of the Company is
9 Grigore Alexandrescu Street, Sector 1, Bucharest,
Romania. The Company has unique registration
number 13267221 and Trade Register registration
number J40/7425/2000.
As at 31 December 2014 the major shareholder of
Electrica SA is the romanian State, represented by
the Ministry of Energy, Small and Medium-sized
Enterprises and Business Environment (48.78%),
after the ownership dilution following an initial public
offer. The second shareholder based on the share of
ownership is EBrD with 8.66%.
As at 31 December 2014 and 2013, the Company has the following shareholdings:
Subsidiary
activity
Tax code
head Office
% shareholding as at
31 Dec 2014
% shareholding as at
31 Dec 2013
Electrica Distributie
Muntenia Nord SA
Electrica Distributie
Transilvania Nord SA
Electrica Distributie
Transilvania Sud SA
Electricity distribution
in geographical area of
Muntenia Nord
Electricity distribution
in geographical area of
Transilvania Nord
Electricity distribution
in geographical area of
Transilvania Sud
Electrica furnizare SA
Electricity
Supply
Electrica Serv SA
Servicii Energetice
Muntenia SA (societate
in reorganizare)
Servicii Energetice
Moldova SA (societate in
insolventa)
Servicii Energetice
Banat SA* (societate in
faliment)
Servicii Energetice
Dobrogea SA (societate
in insolventa)
Servicii Energetice
Oltenia SA (societate in
reorganizare)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
Services in the energy
sector (maintenance,
repairs, construction)
14506181
Ploiesti
78.0000021%
78.0000021%
14476722
Cluj-Napoca
77.99999%
77.99999%
14493260
Brasov
78.0000019%
78.0000019%
28909028
Bucuresti
77.99997%
77.99997%
17329505
Bucuresti
29384120
Bucuresti
29386768
Bacau
29388211
Timisoara
29388378
Constanta
29389861
Craiova
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
* Electrica SA lost the control of Servicii Energetice Banat starting with November 2014 (see Note 22).
the main actiVities of the c ompany
Currently, the core business of the Company,
according to the Statute, annex to Government
Decision no. 627/2000, consolidated, amended and
supplemented, is the “Activities of business and
management consulting.” The Company also covers
services on the balancing electricity market, trading
and import-export.
According to the Commercial Code of the wholesale
electricity market, balancing market was introduced
and began operating in Romania in July 2005. The
purpose of this market is to allow the balance of
the production and consumption of power in real
time, using resources provided in a competitive
system. Each participant at the wholesale market
(producer, supplier, operator, eligible consumer)
has the obligation to register at the Operator of the
balancing market of CN Transelectrica SA as a Balance
responsible Party (“BrP”) or to transfer his balancing
responsibility to another licence holder registered as
BrP. The Company operates as Balance responsible
Party for 110 license holders.
annual report2014 169
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
initial puBlic offering
The Government Decision no. 85/2013, amended and
completed by Government Decision no. 477/2014
approved the privatization strategy of Electrica SA by
initial public offer (“IPO”). The privatization strategy
included the offer for sale of a 51% stake by issuance
of new shares representing 105% of the existing share
capital as at the date of the IPO. The shares were
offered to both individual and institutional investors
on the Romanian market, as well as to qualified
investors on the US market and outside USA, and Global
Depository receipts (“GDrs”) on the UK market.
The IPO was organised between 11 and 27 June
2014 and entailed to an offering by the Company of
177,188,744 ordinary shares in the form of shares
2 Basis of accounting
These individual financial statements have been
prepared in accordance with the Minister of
Public finance Order no. 1286/2012 for approving
the Accounting Regulations in accordance with
International Financial Reporting Standards (“IFRS”),
applicable to companies whose securities are
admitted to trading on a regulated market, and related
amendments (“OMPf 1286/2012”). In acceptance of
OMPF 1286/2012, International Financial Reporting
Standards are standards adopted under the procedure
provided by the European Commission Regulation no.
1606/2002 of the European Parliament and of the
Council of 19 July 2002 regarding the application of
the international accounting standards.
These financial statements are the first set of
individual financial statements prepared in accordance
with OMPF 1286/2012 and IFRS 1 “First-time Adoption
of the International Financial Reporting Standards”
(“IfrS 1”) was applied. According to the Minister of
Public Finance Order no. 881/2012, starting with
financial year 2014, the company has the obligation to
apply the International Financial Reporting Standards
for the annual individual financial statements.
Explanations on how the transition to IFRS has
affected the reported financial position and financial
performance of the Company are presented in note
and in the form of GDRs, each GDR representing
four shares. following the IPO, the Company sold
142,007,744 shares and 8,795,250 GDRs, at the offer
prices of rON 11 per share and 13.66 USD per GDr.
The allocation of shares and GDRs and the offering
prices were concluded on 27 June 2014. The transfer
of ownership rights to new shares and the collection
of cash by the Company took place on 2 July 2014.
At the same date the increase in share capital was
recorded in the Trade register.
Starting 4 July 2014 the Company’s shares are listed
on the Bucharest Stock Exchange, and the GDrs are
listed on the london Stock Exchange.
30. Date of transition to the International Financial
Reporting Standards was 1 January 2013.
Starting with financial year 2012, companies whose
securities are admitted to trading on a regulated
market are required to apply IfrS for the annual
individual financial statements.
The individual financial statements for the year 2014
compliant with the OMPf 1286/2012 have been
prepared by restating the accounting information
organized under the accounting regulations
compliant with Directive IV of the European
Economic Community, approved by the Minister of
Public finance Order no. 3055/2009 approving the
accounting regulations compliant with European
Directives, and related amendments (“OMPF
3055/2009”).
The most significant changes brought to financial
statements prepared in accordance with accounting
regulations compliant with Directive IV of the
European Economic Community to align them
with International Financial Reporting Standards
requirements (“IfrS”) are presented in Note 32.
The individual financial statements were authorized
for issue by the Board of Directors on 25 March
2015. The financial statements will be submitted for
shareholders’ approval in the meeting scheduled on
27 April 2015.
3 functional and presentation currency
These individual financial statements are presented in Lei (RON), which is the functional currency of the
Company. All amounts are presented in rON, unless otherwise indicated.
annual report2014 170
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
4 use of judgements and estimates
In preparing these individual financial statements,
management has made judgements, estimates
and assumptions that affect the application of the
Company’s accounting policies and the reported
amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to estimates are
recognised prospectively.
(a) jUDgEmEnTS
Information about judgements made in applying
accounting policies that have the most significant
effects on the amounts recognised in the individual
financial statements is included below:
Commissions
Company assesses its revenue arrangements against
specific criteria to determine if it is acting as principal
or agent. The Company has concluded that it is acting
as a principal in all of its revenue arrangements. If
the Company acts in the capacity of an agent rather
than as the principal in a transaction, then the income
recognised is the net amount of commission earned
by the Company.
(B) aSSUmPTIOnS anD ESTImaTIOn
uncertainties
Information about assumptions and estimation
uncertainties that may result in a material adjustment
in the subsequent twelve month period is included in
the following notes:
n Note 6 h) and i) – assumptions regarding the useful life
of the tangible and intangible assets;
n Notes 16 and 28 – assumptions and estimates about
the recoverability of trade receivables;
n Note 20 - assumptions regarding the revalued amount
of the intangible assets;
n Note 22 – assumptions and estimates regarding the
evaluation of shares in subsidiaries;
5 Basis of measurement
n Note 15 – recognition of deferred tax assets:
availability of future taxable profit against which tax
loss carried forward can be used;
n Notes 27 and 30 – recognition and measurement of
provisions and contingencies;
n Note 13 – measurement of defined benefit obligations
and other long-term employee benefits: key actuarial
assumptions;
n Note 20 – determining whether a contract contains a
lease.
measurement of fair values
A number of the Company’s accounting policies and
disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability,
the Company uses market observable data as far as
possible. Fair values are categorised into different
levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows.
n Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities;
n Level 2: inputs other than quoted prices included in
level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices);
n Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable
inputs).
If the inputs used to measure the fair value of an
asset or a liability might be categorised in different
levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same
level of the fair value hierarchy as the lowest level
input that is significant to the entire measurement.
The Company recognises transfers between levels of
the fair value hierarchy at the end of the reporting
period during which the change has occurred.
Further information about the assumptions made
in measuring fair values is included in Note 20 -
Intangible assets.
The individual financial statements have been prepared on the historical cost basis except for the intangible
assets which are measured based on revaluation model.
annual report2014 171
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
6 significant accounting policies
The Company has consistently applied the following
accounting policies to all periods presented in these
individual financial statements:
(a) REVEnUE
revenue is recognized when it is probable that the
economic benefits associated with the transaction will
flow to the Company, and the amount of the revenue
can be measured reliably. revenue is recognized at the
fair value of the services rendered or goods delivered,
net of VAT, excises or other taxes related to the sale.
Rendering of services
revenues related to services rendered are recognised in
the period in which the services were rendered based
on statements of work performed, regardless of when
paid or received, in accordance with the accrual basis.
Sales of goods
revenue from sale of goods is recognized when the
goods are delivered and significant risks and rewards
of ownership of the goods have passed to the buyer.
(B) COmmISSIOnS
Company assesses its revenue arrangements against
specific criteria to determine if it is acting as principal
or agent. The Company has concluded that it is acting
as a principal in all of its revenue arrangements except
for collection of radio and TV taxes. If the Company acts
in the capacity of an agent rather than as the principal
in a transaction, then the income recognised is the net
amount of commission earned by the Company.
(C) fInanCE InCOmE anD fInanCE COSTS
The Company’s finance income and finance costs
include:
n interest income;
n interest expense;
n the foreign currency gain or loss on financial assets
and financial liabilities;
n impairment losses recognised on financial assets
(other than trade receivables).
Interest income or expense is recognised using the
effective interest method.
(D) fOREIgn CURREnCy TRanS aCTIOnS
Transactions in foreign currencies are translated to the
functional currency at the exchange rates at the dates
of the transactions.
Monetary assets and liabilities denominated in
foreign currencies are translated to the functional
currency at the exchange rate at the reporting date,
as communicated by the National Bank of Romania.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated to the
functional currency at the exchange rate when the fair
value was determined. Foreign currency differences
are recognised in profit or loss. Non-monetary items
that are measured based on historical cost in a foreign
currency are not translated.
(E) EmPlOyEE BEnEfITS
(i) Short-term employee benefits
Short-term employee benefits are measured on an
undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the
amount expected to be paid if the Company has a
present legal or constructive obligation to pay this
amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
(ii) Defined contribution plans
Obligations for contributions to defined contribution
plans are expensed as the related service is provided.
Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in future
payments is available.
(iii) Defined benefit plans
The Company’s net obligation in respect of defined
benefit plans is calculated separately for each plan
by estimating the amount of future benefit that
employees have earned in the current and prior
periods, discounting that amount.
The calculation of defined benefit obligations is
performed annually by a qualified actuary using the
projected unit credit method.
Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, are
recognised immediately in other comprehensive
income. The Company determines the net interest
expense (income) on the net defined benefit liability
for the period by applying the discount rate used to
measure the defined benefit obligation at the beginning
of the annual period to the then-net defined benefit
liability, taking into account any changes in the net
defined benefit liability during the period as a result
of contributions and benefit payments. Net interest
expense and other expenses related to defined benefit
plans are recognised in profit or loss.
When the benefits of a plan are changed or when
a plan is curtailed, the resulting change in benefit
that relates to past service or the gain or loss on
curtailment is recognised immediately in profit or
loss. The Company recognises gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
(iv) Other long-term employee benefits
The Company’s net obligation in respect of long-
annual report2014 172
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
term employee benefits is the amount of future
benefit that employees have earned in return for
their service in the current and prior periods. That
benefit is discounted to determine its present value.
Remeasurements are recognised in profit or loss in the
period in which they arise.
Termination benefits
(v)
Termination benefits are expensed at the earlier of
when the Company can no longer withdraw the offer
of those benefits and when the Company recognises
costs for a restructuring. If benefits are not expected
to be settled wholly within 12 months of the end of
the reporting period, then they are discounted.
(f) InCOmE Tax
Income tax expense comprises current and deferred
tax. It is recognised in profit or loss except to the
extent that it relates to a business combination
or items recognised directly in equity or in other
comprehensive income.
(i) Current tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year
and any adjustment to tax payable or receivable
in respect of previous years. It is measured using
tax rates enacted or substantively enacted at the
reporting date. Current tax also includes any tax
arising from dividends.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is
not recognised for:
n temporary differences on the initial recognition
of assets or liabilities in a transaction that is not
a business combination and that affects neither
accounting nor taxable profit or loss;
n temporary differences related to investments in
subsidiaries, associates and joint arrangements to the
extent that the Company is able to control the timing
of the reversal of the temporary differences and it is
probable that they will not reverse in the foreseeable
future.
Deferred tax assets are recognised for unused tax
losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future
taxable profits will be available against which they
can be used. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is
no longer probable that the related tax benefit will be
realised.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date.
The measurement of deferred tax 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 only if
certain criteria are met.
Unrecognized deferred tax assets are reassessed at
each reporting date and recognized to the extent that
it has become probable that the future taxable profits
will be available against which they can be used.
(g) InVEnTORIES
Inventories consist mainly of consumables, goods for
resale and other inventories.
Inventories are measured at the lower of cost and net
realizable value. Net realizable value is the estimated
selling price in the ordinary course of the business,
minus the estimated costs of completion and the
estimated costs necessary to make the sale.
The cost of inventories is based on the weighted
average cost method. The cost of inventories includes
all the acquisition costs and other expenses related
to bringing the inventories to their current place and
condition.
(h) PROPERTy, PlanT anD EqUIPmEnT
(i) Recognition and measurement
Property, plant and equipment are stated initially at
cost, which includes purchase price and other costs
directly attributable to acquisition and bringing the
asset to the location and condition necessary for their
intended use.
After initial recognition, land and buildings are
measured at revalued amounts less any accumulated
depreciation and any accumulated impairment losses
since the most recent valuation.
The Company used the fair value as deemed cost for
the tangible assets for the opening of the financial
position.
Revaluations are made with sufficient regularity to
ensure that the carrying amount does not differ
materially from that which would be determined using
the fair value at the end of the reporting period.
When a building is revalued, the accumulated
depreciation is eliminated against the gross carrying
amount of that item, and the net amount is restated
to the revalued amount of the asset.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment.
Spare parts, stand-by and servicing equipment are
classified as property, plant and equipment if they
are expected to be used during more than one period
annual report2014 173
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
or can be used only in connection with an item of
property, plant and equipment.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.
(iii) Depreciation
Depreciation is calculated to write off the cost of items
of property, plant and equipment less their estimated
residual values using the straight-line method over
their estimated useful lives, and is recognised in
profit or loss. Leased assets are depreciated over the
shorter of the lease term and their useful lives unless
it is reasonably certain that the Company will obtain
ownership by the end of the lease term. land and
construction in progress are not depreciated.
The estimated useful lives of property, plant and equipment are as follows:
Category
Buildings
Equipment
Office equipment
Useful lives
60-70 (average 67 years)
4-12 (average 7 years)
3-10 (average 7 years)
Depreciation methods, useful lives and residual values
are reviewed at each reporting date and adjusted if
appropriate.
(I) InTangIBlE aSSETS
(i) Recognition and measurement
Other intangible assets that are acquired by the
Company and have finite useful lives are measured
at cost less accumulated amortisation and any
accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit
or loss as incurred.
(iii) amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
using the straight-line method over their estimated
useful lives, and is generally recognised in profit or
loss.
The estimated useful lives of software and licenses are
3-5 years.
Amortisation methods, useful lives and residual values
are reviewed at each reporting date and adjusted if
appropriate.
(j) aSSETS hElD fOR DISTRIBUTIOn
Non-current assets, or disposal groups comprising
assets and liabilities, are classified as held-for-
distribution if it is highly probable that they will be
recovered primarily through distribution rather than
through continuing use.
Such assets, or disposal groups, are measured at the
lower of their carrying amount and fair value less
costs of distribution. Impairment losses on initial
classification as held-for-distribution and subsequent
gains and losses on remeasurement are recognised in
profit or loss.
(K) fInanCIal InSTRUmEnTS
The Company classifies non-derivative financial assets
into the following categories: loans and receivables,
held to maturity investments and financial assets
available for sale.
The Company classifies non-derivative financial
liabilities into the other financial liabilities category.
(i) non-derivative financial assets and financial
liabilities – recognition and derecognition
The Company initially recognises loans and receivables
on the date when they are originated. financial
liabilities are initially recognised on the trade date,
which is the date the Company becomes a party to the
contractual provisions of the instrument.
The Company derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in
which substantially all of the risks and rewards of
ownership of the financial asset are transferred,
or it neither transfers nor retains substantially all
of the risks and rewards of ownership and does
not retain control over the transferred asset. Any
interest in such derecognised financial assets that
is created or retained by the Company is recognised
as a separate asset or liability.
The Company derecognises a financial liability when
its contractual obligations are discharged or cancelled,
or expire.
Financial assets and financial liabilities are offset
and the net amount presented in the statement of
annual report2014 174
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
financial position when, and only when, the Company
has a legal right to offset the amounts and intends
either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
(ii) non-derivative financial assets – measurement
loans and receivables
These assets are initially recognised at fair value plus
any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at amortised
cost using the effective interest method.
loans and receivables comprise trade receivables,
cash and cash equivalents and deposits, treasury bills
and government bond.
Trade receivables
Trade receivables include mainly unsettled invoices
issued until reporting date for settlements on the
balancing market, late payment penalties and accrued
revenue for settlements on the balancing market until
the end of the year, but invoiced after the end of the
year. Also trade receivables include issued invoices or
issued by the subsidiaries for their rendered services.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances
and call deposits and deposits with maturities of
three months or less from the acquisition date that
are subject to an insignificant risk of changes in
their fair value, and are used by the Company in the
management of its short-term commitments.
Held-to-maturity investments
Held-to-maturity financial assets are initially
recognized at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition,
they are measured at amortized cost using the
effective interest method.
Financial assets available for sale
Available for sale financial assets are non-derivative
financial assets that are designated as available for
sale. Financial assets available for sale are initially
recognized at fair value plus any directly attributable
transaction costs.
After the initial recognition, they are measured at cost
minus any impairment losses.
financial assets available for sale for which there
isn’t an active market and it is not possible to reliably
determine the fair value, are measured at cost and
periodically tested for impairment.
financial assets available for sale include investments
in subsidiaries and investments in associates.
(iii) non-derivative financial liabilities –
measurement
Non-derivative financial liabilities are initially
recognised at fair value less any directly attributable
transaction costs. Subsequent to initial recognition,
these liabilities are measured at amortised cost using
the effective interest method.
Other financial liabilities include bank borrowings,
bank overdrafts, and trade payables.
Bank overdrafts that are repayable on demand
and form an integral part of the Company’s cash
management are included as a component of cash
and cash equivalents in the statement of cash flows.
(iv) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary
shares, net of any tax effects, are recognised as a
deduction from equity.
Repurchase and reissue of ordinary shares
(treasury shares)
When shares recognised as equity are repurchased,
the amount of the consideration paid, which includes
directly attributable costs, net of any tax effects, is
recognised as a deduction from equity. Repurchased
shares are classified as treasury shares and are
presented in the treasury share reserve. When
shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity and
the resulting surplus or deficit on the transaction is
presented within share premium.
(l) ImPaIRmEnT
(i) non-derivative financial assets
Financial assets are assessed at each reporting date
to determine whether there is objective evidence of
impairment.
Objective evidence that financial assets are impaired
includes:
n default or delinquency by a debtor;
n restructuring of an amount due to the Company
on terms that the Company would not consider
otherwise;
n indications that a debtor or issuer will enter
bankruptcy;
n adverse changes in the payment status of borrowers
or issuers;
n the disappearance of an active market for a security;
or
n observable data indicating that there is measurable
decrease in expected cash flows from a group of
financial assets.
Financial assets measured at amortised cost
The Company considers evidence of impairment
for these assets at both an individual asset and a
collective level. All individually significant assets are
individually assessed for impairment. Those found
annual report2014
175
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
not to be impaired are then collectively assessed for
any impairment that has been incurred but not yet
individually identified. Assets that are not individually
significant are collectively assessed for impairment.
Collective assessment is carried out by grouping
together assets with similar risk characteristics.
In assessing collective impairment, the Company uses
historical information on the timing of recoveries and
the amount of loss incurred, and makes an adjustment
if current economic and credit conditions are such
that the actual losses are likely to be greater or lesser
than suggested by historical trends.
An impairment loss is calculated as the difference
between an asset’s carrying amount and the present
value of the estimated future cash flows discounted
at the asset’s original effective interest rate. Losses
are recognised in profit or loss and are reflected in
an allowance account. If the amount of impairment
loss subsequently decreases and the decrease can
be related objectively to an event occurring after
the impairment was recognised, then the previously
recognised impairment loss is reversed through profit
or loss.
(ii) non-financial assets
At each reporting date, the Company reviews the
carrying amounts of its non-financial assets (other
than inventories and deferred tax assets) to determine
whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable
amount is estimated.
For impairment testing, assets are grouped together
into the smallest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
cash generating units (“CGUs”).
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less costs
to sell. Value in use is based on the estimated future
cash flows, discounted to their present value using
a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its recoverable
amount.
Impairment losses are recognised in profit or loss,
except for the property, plant and equipment
measured at the revalued amount, in which case the
impairment loss is recognised in other comprehensive
income and decreases the revaluation reserve within
equity to the extent that it reverses a previous
revaluation surplus related to the same asset.
An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment
loss had been recognised.
A reversal of an impairment loss other than on
revalued assets is recognised in profit or loss. A
reversal of an impairment loss on a revalued asset
is recognised in profit or loss to the extent that it
reverses an impairment loss on the same asset that
was previously recognised as an expense in profit or
loss. Any additional increase in the carrying amount of
the asset is treated as a revaluation increase.
(m) REValUaTIOn RESERVE
The difference between the revalued amount and the
net carrying amount of property, plant and equipment
is recognised as revaluation reserve included in equity.
If an asset’s carrying amount is increased as a
result of a revaluation, the increase is recognised
and accumulated in equity under the heading
of revaluation reserve. However, the increase is
recognised in profit and loss to the extent that it
reverses a revaluation decrease of the same amount
of the asset previously recognised in profit and loss.
If an asset’s carrying amount is decreased as a result
of a revaluation, the decrease is recognised in profit
or loss. However, the decrease is recognized in equity
in revaluation reserves if there is any credit balance
existing in the revaluation reserve in respect of that
asset.
The revaluation reserve is transferred to retained
earnings in an amount corresponding to the use of the
asset (as the asset is depreciated) and upon disposal
of the asset.
(n) DIVIDEnDS
Dividends are recognized as a deduction from equity
in the period in which their distribution is approved
and recognised as a liability to the extent it is unpaid
at the reporting date. Dividends are disclosed in
the notes to the financial statements when their
distribution is proposed after the reporting date
and before the date of the issuance of the financial
statements.
(O) PRE-PaID CaPITal COnTRIBUTIOnS In KInD
from shareholders
These contributions from a shareholder (the
Romanian State) represent pre-paid contributions of
land for which the Company obtained title deeds in
respect of future issuance of shares. The amounts
recorded are based on the fair value of the land.
(P) PROVISIOnS
A provision is recognised if, as a result of a past event,
the Company has a present legal or constructive
obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will
annual report2014
176
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
be required to settle the obligation. Provisions are
determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount
is recognised as finance cost.
A provision for restructuring is recognised when
the Company has approved a detailed and formal
restructuring plan, and the restructuring either has
commenced or has been announced publicly. future
operating losses are not provided for.
(q) lEaSES
(i) Determining whether an arrangement contains a
lease
At inception of an arrangement, the Company
determines whether the arrangement is or contains a
lease.
At inception or on reassessment of an arrangement
that contains a lease, the Company separates
payments and other consideration required by the
arrangement into those for the lease and those for
other elements on the basis of their relative fair
values. If the Company concludes that, for a finance
lease, it is impracticable to separate the payments
reliably, then an asset and a liability are recognised at
an amount equal to the fair value of the underlying
asset; subsequently, the liability is reduced as
payments are made and an imputed finance cost
on the liability is recognised using the Company’s
incremental borrowing rate.
(ii) leased assets
Assets held by the Company under leases that
transfer to the Company substantially all of the risks
and rewards of ownership are classified as finance
leases. The leased assets and finance lease liability are
measured initially at an amount equal to the lower of
their fair value and the present value of the minimum
lease payments. Subsequent to initial recognition,
the assets are accounted for in accordance with the
accounting policy applicable to that asset.
Assets held under other leases are classified as
operating leases and are not recognised in the
Company’s individual statement of financial position.
(iii) lease payments
Payments made under operating leases are recognised
in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognised
as an integral part of the total lease expense, over the
term of the lease.
Minimum lease payments made under finance leases
are apportioned between the finance expense and
the reduction of the outstanding liability. The finance
expense is allocated to each period during the lease
term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
(iv) Rental income
rental income from property other than investment
property is recognised as other income. rental income
is recognised on a straight-line basis over the term of
the lease.
(R) SUBSEqUEnT EVEnTS
Events occurring after the reporting date 31
December 2014, which provide additional information
about conditions prevailing at those reporting dates
(adjusting events) are reflected in the individual
financial statements. Events occurring after the
reporting date that provide information on events
that occurred after the reporting dates (non-adjusting
events) are disclosed in the notes to the individual
financial statements when they are significant. When
the going concern assumption is no longer appropriate
at or after the reporting period, the financial
statements are not prepared on a going concern basis.
7 new standards and interpretations
not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statements.
Any of new standards are not expected to have a significant impact of the Company’s individual financial
statements.
annual report2014 177
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
8 reVenue
Supply energy in balancing market and a-day-
ahead-market
Management and consultancy services
Revenues from services contracts on Automatic
Meter reading System (Note 20)
Total
2014
2013
230.730.695
232.816.597
9.051.202
4.735.572
45.435.970
4.735.572
244.517.469
282.988.139
9 other operating reVenue and expenses
(a) OThER OPERaTIng InCOmE
Other income mainly include rent income and late
payment penalties from customers.
(B) ElECTRICITy PURChaSED
Electricity purchased include the cost of electricity
purchased for settlements on balancing market and
a-day-ahead-market.
(C) OThER OPERaTIng ExPEnSES
rent
repairs and maintenance expenses
IT Services
Postage and telecommunication
Penalties to the State for late payment of taxes
Other taxes and duties
Movement in provisions (Note 27)
legal and consultancy fees
Bank commissions
Others
Total
2014
2013
65.564
1.770.137
1.009.657
5.761.386
669.980
1.590.988
(30.777.354)
5.155.146
1.932.248
11.362.607
(1.459.641)
48.364
655.589
914.760
4.038.840
17.414
6.947.942
13.277.265
10.328.226
1.774.384
11.959.356
49.962.140
annual report2014 178
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
10 net finance income
Interest income
Dividends
Other finance income
Total finance income
Interest expense
Interest cost for employee benefits (Note 15)
foreign exchange loss
Other finance costs
Total finance costs
Gain from disposals of shares held in other entities
net finance income
net finance Income
2013
19.090.471
238.431.719
61.072
257.583.262
(34.807)
(147.286)
(1.801.036)
(502.440)
(2.485.569)
31.809.478
286.907.171
5.661.232
90.293.077
32.455
95.986.764
(2.411.652)
(193.563)
1.445.813
(884.962)
(2.044.364)
-
93.942.400
On 17 February 2014 the Company sold part of the shares held in E.On Moldova Distributie and E.On Energie
Romania to E.On following the exercise of call options by E.On. (see Note 23). The Company recognize this
transaction as follows:
Sale price of share held in other entities
Carrying amount of share held in other entities
Gain from disposals of shares held in other entities
Carrying amount
140,920,000
(109,110,522)
31,809,478
11 earnings per share
The calculation of basic and diluted earnings per share has been based on the following profit attributable to
ordinary shareholders and weighted-average number of ordinary shares outstanding:
Profit attributable to ordinary shareholders
Profit for the year attributable to the owners of
the Company
Profit attributable to ordinary shareholders
2014
2013
269.489.518
269.489.518
36.819.583
36.819.583
Weighted-average number of ordinary shares (in number of shares)
2014
2013
Issued ordinary shares at 1 january
Effect of shares issued in February
Effect of spin-off in April
Effect of shares issued in May
Effect of shares issued in June
Effect of underwritings from the IPO in June
Effect of shares re-purchased in July
Effect of shares issued in August
Effect of shares issued in October
Weighted-average number of ordinary shares at
31 December
Earnings per share
207.839.904
172.575
(32.342.835)
2.564.531
-
103.360.101
(3.445.297)
-
-
206.229.044
142.963
-
-
13.630
-
-
402.463
36.708
278.148.979
206.824.808
Basic and diluted earnings per share (rON)
0,97
0,18
annual report2014 179
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
12 ShORT-TERm EmPl OyEE BEnEfITS
Personnel payables
1.164.359
1.869.401
2.319.447
31 December 2014 31 December 2013
1 january 2013
Current portion of defined benefit liability and
other long-term employee benefits
Social security charges
Tax on salaries
Total
252.613
169.156
429.432
663.931
188.754
2.269.657
1.288.539
700.279
4.027.375
760.022
316.387
3.825.288
For details of the related employee benefits expenses,
see Note 14.
In romania, all employers and employees, as well as
other persons, are contributors to the state social
security system. The social security system covers
pensions, allocations for children, temporary inability
to work, risks of works and professional diseases
and other social assistance services, unemployment
benefits and incentives for employers creating new
workplaces.
13 POST-EmPl OymEnT anD OThER lOng-TERm
employee Benefits
In accordance with Government Decisions no.
1041/2003 and no. 1461/2003, the Company provides
benefits in kind in the form of free electricity to retired
employees of the Company.
The Company also provides cash benefits to employees
depending on seniority and years of service at
retirement.
In 2014 and 2013, employee benefit obligations
were computed by independent actuaries using the
projected unit credit method with benefits calculated
proportionally to period of service.
Defined benefit liability
Other long-term employee benefits
Total
- Current portion*
- Non-current portion
* included in Personnel payables in Note 12
31 December 2014 31 December 2013
1 january 2013
1.731.636
1.511.720
3.243.356
252.613
2.990.743
1.512.070
1.415.839
2.927.909
169.156
2.758.753
1.551.022
1.706.719
3.257.741
429.432
2.828.309
(I) mOVEmEnT In ThE DEfInED BEnEfIT lIaBIlITy anD OThER lOng-TERm EmPl OyEE BEnEfITS
The following tables shows a reconciliation from the opening balances to the closing balances for the defined
benefit liability and other long-term employee benefits and its components. There are no plan assets.
Defined benefit liability
Balance at 1 january
Included in profit or loss
Current service cost
Interest (income) / cost
Included in other comprehensive income
Remeasurements loss (gain)
- Actuarial loss /(gain)
Other
Benefits paid
Balance at 31 December
2014
2013
1.512.070
1.667.720
70.506
76.064
146.570
75.435
99.222
174.657
103.574
(261.921)
(30.578)
1.731.636
(68.386)
1.512.070
annual report2014 180
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
Other long-term employee benefits
2014
2013
Balance at 1 january
Included in profit or loss
Current service cost
Actuarial gain/(loss)
Interest cost
Benefits paid
Balance at 31 December
1.415.839
1.590.021
64.922
18.684
71.222
(58.947)
1.511.720
72.963
(273.127)
94.341
(68.359)
1.415.839
(II) aCTUaRIal aSSUmPTIOnS
The following were the principal actuarial assumptions
at the respective reporting date:
(a) Macroeconomic assumptions:
n Inflation. The actuaries used the Consumer Price Index
(CPI) published by the Economist Intelligence Unit:
year
2014
2015
2016
2017
2018+
Valuation date
31 December 2014
Valuation date
31 December 2013
-
2,1%
3,2%
2,7%
2,5%
2,3%
3,3%
3,2%
2,9%
2,7%
n the discount rate used was the yield for romanian
government bonds maturing in 10 years at the
reporting date of 4.5% for the year 2014 (2013: 5.2%);
n the electricity price per KWh used is 0.464 rON at 31
n the mortality rate published by the National Institute
of Statistics was adjusted to allow for an anticipated
decrease in mortality rates;
n taxes and social charges are those in force as at the
December 2014 (2013: 0.499 RON/ KWh);
reporting date.
(b) Company specific assumptions:
n salaries increase in line with the estimated inflation rates in the future periods;
n employees’ turnover: turnover rates are based on statistical information regarding employees’ mobility during
2006-2013. Considering historical retirement data, it is assumed that the personnel turnover rate decreases with
the employees’ age;
n jubilee and retirement bonuses based on seniority according to the collective labour contract, as follows:
jubilee bonus based on years of service
Seniority
20 ani
30 ani
35 ani
40 ani
45 ani
no of gross monthly base salaries
31 December 2014
31 December 2013
0,8
1,6
2,4
3,2
4
0,8
1,6
2,4
3,2
4
Retirement bonus based on years of service in the Company
Seniority
Between 8 and 10 years
Between 10 and 25 years
More than 25 years
no of gross monthly base salaries
31 December 2014
31 December 2013
1
2
3
1
2
3
annual report2014 181
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
The Company also offers 1,200 kWh of free electricity per year to retired employees for certain years of seniority. In
the event of pensioner’s death, husband/wife is entitled to receive the same benefit until he/she will marries again.
Termination benefits
In accordance with the Collective labour contract concluded between the Company and the Unions, when
individual labour contract are terminated at the Company’s initiative, the Company will pay termination benefits
to the employees depending on their period of service, as follows:
Period of service
1 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
no of gross monthly base salaries
4
6
7
10
For collective lay-offs, according to the Collective labour contract, the Company will pay termination benefits to
the employees depending on their period of service, as follows:
Period of service
1 - 3 years
3 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
no of gross monthly base salaries
4
6
7
15
20
Collective lay-offs and termination benefits are only
applicable subject to approval of a rectification of the
budget, such that the approved salary fund for the
year will not be affected by such measures.
The above mentioned stipulations do not apply to
employees with individual labour contract concluded
for a determined period. The above stipulations do
not apply to employees that obtained other higher
cumulative salary compensation rights, provided by
legal regulations regarding the Group’s reorganization
and restructuring. Employees who are re-employed
within the Group after lay-off are not entitled to the
above mentioned benefits.
The financial statements do not include any provision
for liabilities relating to compensation payments
because there isn’t a present obligation in this regard.
14 employee Benefits expenses
Average number of employees
Number of employees at 31 December
Wages and salaries
Social security contributions
Meal tickets
Total
2014
2014
139
149
13.288.226
3.140.154
270.692
16.699.072
2013
2013
188
149
18.074.979
4.326.566
335.571
22.737.116
15 income taxes
In determining the amount of current and deferred
tax, the Company takes into account the impact of
uncertain tax positions and whether additional taxes
and interest may be due. This assessment relies on
estimates and assumptions and may involve a series
of judgments about future events. The Company
considers that the accounting records for taxes
due are adequate for all open tax years, based on
assessment made by management taking into account
various factors, including the interpretation of tax
legislation and previous experience. New information
may become available that causes the Company
to change its judgment regarding the adequacy of
existing tax liabilities; such changes to tax liabilities
will impact tax expense in the period that such a
determination is made.
annual report2014 182
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(I) amOUnTS RECOgnISED In PROfIT OR lOSS
Deferred tax expense
Total income tax
2014
2013
6.585.537
6.585.537
1.182.446
1.182.446
(II) amOUnTS RECOgnISED In OThER COmPREhEnSIVE InCOmE
Before tax
2014
Tax
(expense)
benefit
net of tax
Before tax
2013
Tax
(expense)
benefit
net of tax
986.367
(157.819)
828.548
-
-
-
(103.574)
16.572
(87.002)
261.921
(41.907)
220.014
Revaluation of property,
plant and equipment
remeasurement of
defined benefit liability
Total
882.793
(141.247)
741.546
261.921
(41.907)
220.014
(III) RECOnCIlIa TIOn Of EffECTIVE Tax RaTE
Profit before tax
Tax using Company’s domestic tax rate
Non-deductible expenses
Non-taxable income
Deduction of legal reserves
Other tax effects
Income tax
2014
2013
276.075.055
38.002.029
16%
44.172.009
1%
2.783.994
16%
25%
6.080.325
9.566.690
-14% (38.149.075)
-38% (14.446.892)
-1%
0%
2%
(2.208.600)
(12.791)
6.585.537
0%
0%
3%
-
(17.677)
1.182.446
Non-taxable income represents dividend income in the amount of RON 238,431,719 (2013: RON 90,293,077).
(IV) mOVEmEnT In DEfERRED Tax BalanCES
2014
Intangible assets
Employee benefits
net balance at 1
january 2014
Recognised in
profit or loss
Recognised
in other
comprehensive
income
Deferred tax
assets,
net
2.812.489
(359.163)
(17.218)
(10.773)
157.819
(16.572)
2.953.090
(386.508)
Balance at 31 December 2014
Deferred
Tax
assets
Deferred tax
liabilities
-
2.953.090
(386.508)
Tax loss carried forward
(16.385.799)
6.613.528
-
(9.772.271)
(9.772.271)
Tax liabilities (assets)
before set-off
(13.932.473)
6.585.537
141.247
(7.205.689)
(10.158.779)
2.953.090
net balance at 1
january 2013
Recognised in
profit or loss
Recognised
in other
comprehensive
income
Deferred
tax assets,
net
Deferred
Tax
assets
Deferred tax
liabilities
Balance at 31 December 2013
2.829.707
(408.476)
(17.218)
7.406
-
41.907
2.812.489
(359.163)
(359.163)
-
2.812.489
2013
Intangible assets
Employee benefits
Tax loss carried forward
(17.578.057)
1.192.258
-
(16.385.799)
(16.385.799)
Tax liabilities (assets)
before set-off
(15.156.826)
1.182.446
41.907
(13.932.473)
(16.744.962)
2.812.489
-
-
-
-
annual report2014 183
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
16 trade receiV aBles
Trade receivables, gross
Bad debt allowance
Total trade receivables, net
31 December 2014 31 December 2013
1 january 2013
758.094.020
763.589.259
754.448.597
(670.398.254)
87.695.766
(667.928.773)
95.660.486
(667.607.107)
86.841.490
Receivables from related parties are presented in Note 29.
Trade receivables gross comprise:
31 December 2014 31 December 2013
1 january 2013
Electricity distribution and supply
94.359.475
100.083.722
92.298.877
Electricity receivables from clients in litigation,
insolvency and bankruptcy (Oltchim SA)
Late payment penalties from clients in litigation,
insolvency and bankruptcy (Oltchim SA)
Other
Total trade receivables, gross
569.811.232
569.811.231
569.811.232
88.968.313
88.968.313
88.968.313
4.955.000
758.094.020
4.725.993
763.589.259
3.370.175
754.448.597
A significant customer of the Company, until January
2012, was Oltchim SA (a state-controlled company),
when the Company has transferred the contract with
Oltchim to Electrica furnizare SA. In January 2013
Oltchim became insolvent. Due to uncertainties
regarding the recoverability of amounts owed by
this customer, the Company recognized bad debt
allowances to the total amount of receivables.
The movement in the bad debt allowance for trade
receivables is as follows:
Bad debt allowance
Balance as at 1 January
Impairment recognized
Impairment reversed
Sold la 31 December
2014
2013
667.928.773
2.546.823
(77.342)
670.398.254
667.607.107
336.600
(14.934)
667.928.773
for the ageing of trade receivables refer to Note 28.
17 deposits, treasury Bills and goVernment Bonds
Deposits, treasury bills and government bonds
include treasury bills and government bonds of rON
901,415,791, denominated in rON with original
maturity of more than three months with an average
interest rate (yield) of 1.6% and deposits with maturity
of more than three months of rON 137,004,050.
The treasury bills and government bonds were
classified as investments held to maturity.
18 other receiVaBles
VAT receivable
Interest receivable
Other receivables
Bad debt allowance
Total other receivables, net
31 December 2014 31 December 2013
1 january 2013
-
3.175.177
26.676.226
17.763.510
1.950.918
27.246.734
8.445.598
3.680.067
57.916.783
(14.460.727)
(14.460.727)
(31.376.677)
15.390.676
32.500.435
38.665.771
Other receivables, net include loans granted by the Company to Electrica Serv (see Note 29).
annual report2014 184
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
The movement in the bad debt allowance for other receivables is as follows:
Bad debt allowance
Balance as at 1 january
Impairment recognized
Balance as at 31 December
2014
2013
14.460.727
-
14.460.727
31.376.677
(16.915.950)
14.460.727
19 cash and cash equiV alents
31 December 2014 31 December 2013
1 january 2013
Bank current accounts
1.544.632
3.473.158
22.885.283
Deposits with original maturities of less than 3 months
874.243.283
140.619.441
162.318.391
Cash in hand
Treasury bills and government bonds with original
maturities of less than 3 months
Total cash and cash equivalents in the individual
statement of financial position
19.508
33.084
199.812.351
-
5.295
-
1.075.619.774
144.125.683
185.208.969
Overdrafts used for cash management purposes
-
(36.999.437)
(55.732.038)
Total cash and cash equivalents in the individual
statement of cash flows
1.075.619.774
107.126.246
129.476.931
Cash and cash equivalents include treasury bills and
government bonds denominated in rON of rON
199,812,351 and an average interest rate (yield) of
1.7% p.a.
The following information is relevant in the context of
the statement of cash flows:
Non-cash activity includes:
n land contributed by the shareholder of rON 0 IN 2014
(2013: RON 9,120,270);
n set-off between trade receivables and trade payables
of RON 55,983,780 in 2014 (2013: RON 82,877,732);
20 property, plant and equipment
The movements in property, plant and equipment in 2014 and 2013 were as follows:
land and land
improvements
Buildings
Equipment
Vehicles,
furniture and
office equipment
Construction in
progress
Total
gross carrying amount
Balance at 1 January 2013
104.249.525
16.884.919
61.920.038
753.032
91.076.704
274.884.218
Additions
8.063.400
-
-
1.056.870
-
-
-
-
59.816
60.352.193
-
-
57.562.911
65.686.127
(60.352.193)
-
(12.263)
(1.351)
-
-
-
-
(13.614)
1.056.870
113.369.795
16.884.919
122.319.784
751.681
88.287.422
341.613.601
9.265.658
(33.638.211)
-
-
449.420
536.947
-
(663.294)
(10.314.815)
-
396.256
-
34.996.860
44.658.774
-
-
-
-
(8.127)
-
-
-
-
-
-
-
(33.646.338)
986.367
(663.294)
(10.314.815)
79.131.847
16.758.572
122.716.040
743.554
123.284.282
342.634.295
Transfers from construction
in progress
Disposals
Revaluation of land
contribution from the
shareholders, net
Balance at 31 December
2013
Additions
Disposals
Revaluation recognized
in other comprehensive
income, net
Gross book value netted off
against the accumulated
depreciation at revaluation
Revaluation of land
contribution from the
shareholders, net
Balance at 31 December
2014
annual report2014 185
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
land and land
improvements
Buildings
Equipment
Vehicles,
furniture and
office equipment
Construction in
progress
Total
accumulated depreciation
and impairment losses
Balance at 1 January 2013
Depreciation
Disposals
reversal of impairment loss
Balance at 31 December
2013
Depreciation
Disposals
Accumulated depreciation
netted off against gross
book value at revaluation
Balance at 31 December
2014
net carrying amounts
at 1 january 2013
at 31 December 2013
at 31 December 2014
-
-
-
-
-
-
-
-
-
236.158
222.854
-
-
16.623.018
9.030.032
(12.263)
-
637.850
38.353
(1.351)
-
-
-
17.497.026
9.291.239
(13.614)
-
12.465.531
12.465.531
459.012
25.640.787
674.852
12.465.531
39.240.182
222.854
12.554.869
(663.294)
-
-
29.242
(8.126)
-
-
-
-
12.806.965
(8.126)
(663.294)
18.572
38.195.658
695.967
12.465.531
51.375.727
104.249.525
113.369.795
79.131.847
16.648.761
16.425.907
16.740.000
45.297.020
96.678.997
84.520.382
115.182
91.076.704
257.387.192
76.829
47.587
75.821.891
302.373.419
110.818.751
291.258.568
On 31 December 2014, the buildings and lands include
the administrative offices of the Company over which
the Company has obtained title deeds and to be
contributed to the share capital of the subsidiaries.
The building is the administrative headquarters is of
rON 16,603,977 of net book value and related land is
worth rON 13,410,443 of net book.
On 31 December 2014, the buildings and land were
revalued by an independent authorized. The results of
revaluation were recognized in other comprehensive
income.
The Company has signed four contracts for the
implementation and extension of AMR system
(Automatic Meter Reading) for measurement and
consumption dispatch activities at the Group level.
In 2013 the Company put into operation a part of
this investment, amounting to RON 59,920,097.
Another part of the investment, amounting to
rON 110,133,543, is in the current assets as at 31
December 2014, from which the amount of rON
34,768,016 was conducted during the year.
related to the AMr system the Company has
concluded services agreements with the distribution
subsidiaries. The main services provided relates to the
direct data acquisition of subsidiaries by the personnel
of the distribution subsidiaries using remote reading
systems from electricity metering points, owned by
the Company. The Company assessed whether the
arrangement contains a lease and determined that
does not contain a lease as distribution subsidiaries
have no right to use specific assets.
During 2013, adjustments for impairment losses of
the tangible assets in progress were recorded in the
amount of RON 12,456,531, representing ongoing
investments in two wind farms, whose activity were
interrupted.
annual report2014 186
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
measurement of fair value
The following table shows the valuation techniques used in measuring fair values (Level 3) for the revaluation of
land and buildings, as well as the significant unobservable inputs used.
Category
Valuation technique
Significant unobservable inputs
land
Market approach
n Adjustment for liquidity, location,
size
The fair value is estimated based on
selling price per square meter of land of
similar characteristics (i.e. ownership, legal
limitations, location, physical properties, and
best use). The market price is mainly based
on recent transactions.
Buildings
Market approach and discounted cash-flows
(DCF) method
The market approach is based on the selling
price per square meter for buildings of
similar characteristics, adjusted for liquidity,
location, size etc.
The valuation model based on the DCF
method estimates the present value of net
cash flows to be generated by a building
taking into account occupancy rate and
costs not paid by tenants. The discount rate
estimation considers, inter alia, the quality
of a building and its location.
n Occupancy rates (80-90%)
n Discount rates (9,5% on average)
n Costs not paid by tenants (average
10%)
n Annual rent per sqm
n rental growth
n Adjustment for liquidity, location,
size
Inter-relationship between key
unobservable inputs and fair
value measurement
The estimated fair value would
increase (decrease) if:
n Adjustment for liquidity, location,
size was lower (higher)
The estimated fair value would
increase (decrease) if:
n Occupancy rates were higher
(lower)
n Discount rates were lower
(higher)
n Costs not paid were lower
(higher)
n Annual rent per sqm was higher
(lower)
n rental growth was higher (lower)
n Adjustment for liquidity, location,
size was lower (higher)
21 intangiBle assets
Intangible assets include mainly intangible assets related licenses and costs of implementation of SAP ERP, as follows:
Software and licenses
Intangible assets in progress
Total
gross book value
Balance at 1 January 2013
Additions
Transfers from intangibles in progress
Balance at 31 December 2013
Disposals
Transfers from intangibles in progress
Balance at 31 December 2014
accumulated amortisation and impairment
losses
Balance at 1 January 2013
Amortisation
Balance at 31 December 2013
Amortisation
Balance at 31 December 2014
Carrying amounts
At 1 January 2013
at 31 December 2013
at 31 December 2014
2.240.058
-
299.700
2.539.758
-
282.600
2.822.358
1.981.058
86.333
2.067.391
445.284
2.512.675
259.000
472.367
309.683
59.000
566.136
(299.700)
325.436
325.147
(282.600)
367.983
-
-
-
-
-
59.000
325.436
367.983
2.299.058
566.136
-
2.865.194
325.147
-
3.190.341
1.981.058
86.333
2.067.391
445.284
2.512.675
318.000
797.803
677.666
annual report2014 187
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
22 inVestments in suBsidiaries
The situation regarding the investments in subsidiaries is presented as follows:
31 December 2014
31 December 2013
1 january 2013
gross value
Bad debt
allowance
gross value
Bad debt
allowance
gross value
Bad debt
allowance
Electrica Distributie
Muntenia Nord SA
Electrica Distributie
Transilvania Nord SA
Electrica Distributie
Transilvania Sud SA
322.729.680
336.460.800
383.398.860
Electrica furnizare SA
57.695.820
-
-
-
-
322.729.680
336.460.800
383.398.860
57.695.820
-
-
-
-
322.729.680
336.460.800
383.398.860
57.695.820
-
-
-
-
Electrica Serv SA
442.284.000
(144.849.043)
415.437.909
(140.173.762)
415.437.909
(173.808.732)
Servicii Energetice Banat SA
43.761.094
(43.761.094)
43.761.094
(43.761.094)
43.761.094
(43.761.094)
Servicii Energetice
Dobrogea SA
Servicii Energetice
Muntenia SA
Servicii Energetice
Moldova SA
Servicii Energetice
Oltenia SA
Total
Electrica Distributie
Muntenia Nord SA
Electrica Distributie
Transilvania Nord SA
Electrica Distributie
Transilvania Sud SA
Electrica furnizare SA
Electrica Serv SA
Servicii Energetice
Muntenia SA
Servicii Energetice
Oltenia SA
Total investments in
subsidiaries
23.822.124
(23.822.124)
23.822.124
(23.822.124)
23.822.124
(23.822.124)
29.640.430
-
29.640.430
-
29.640.430
-
106.162.492
(106.162.492)
106.162.492
(106.162.492)
106.162.492
(106.162.492)
82.033.220
(82.033.220)
82.033.220
(82.033.220)
82.033.220
-
1.827.988.520
(400.627.973)
1.801.142.429
(395.952.692)
1.801.142.429
(347.554.442)
Investments in subsidiaries, net value
31 December 2014
31 December 2013
1 january 2013
322.729.680
336.460.800
383.398.860
57.695.820
297.434.957
29.640.430
-
322.729.680
336.460.800
383.398.860
57.695.820
275.264.147
29.640.430
-
322.729.680
336.460.800
383.398.860
57.695.820
241.629.177
29.640.430
82.033.220
1.427.360.547
1.405.189.737
1.453.587.987
Based on the GD nr. 760/21.07.2010, at the beginning
of year 2012 Electrica Serv subsidiary war reorganized
through a partial spin-off, in order to separate the
unprofitable branches, being established five new
companies, held 100% by Electrica SA: SC Servicii
Energetice Banat SA, SC Servicii Energetice Dobrogea
SA, SC Servicii Energetice Moldova SA, SC Servicii
Energetice Oltenia SA and SC Servicii Energetice
Muntenia SA.
In year 2013 the Company approved the liquidation
of Servicii Energetice Moldova, Servicii Energetice
Banat and Servicii Energetice Dobrogea. For Servicii
Energetice Banat, Timis Court has decided the
opening of the simplified insolvency procedure. The
bankruptcy of Servicii Energetice Banat was declared
and the Company concluded that, starting with the
beginning of November 2014, the conditions for
establishing the control over the subsidiary were
no longer fulfilled. Therefore, the Company has
derecognized the investments in Servicii Energetice
Banat. On January the 22nd 2015, Constanţa Court
decided the opening of the simplified insolvency
procedure for Servicii Energetice Dobrogea. The
Board of Administration of Servicii Energetice Oltenia
annual report2014 188
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(in January 2014) and the Board of Administration
of Servicii Energetice Muntenia have decided both
the opening of the insolvency procedure for the
reorganizing purpose.
Having in view the above-mentioned, during year 2012
the Company recognized Impairment of investments
(amount to RON 173,745,710) representing the
investments value in the following subsidiaries Servicii
Energetice Moldova, Servicii Energetice Banat and
Servicii Energetice Dobrogea. During year 2013 the
Company increased the Impairment of investments
with RON 82,033,220, representing the value of
investments in Servicii Energetice Oltenia. The
Company did not adjusted the carrying amount of the
investments in Servicii Energetice Muntenia as long
this amount is deemed to be recoverable, taking into
account the significant asset base of this company and
the fact that its net assets have positive value.
As regarding Electrica Serv, the Company recognized
Impairments, based on the valuation report prepared
by an independent valuator and having as purpose the
assessment of the recoverable value of the shares in
Electrica Serv SA. The valuator used the discounted
cash flows (DCF) method. The model envisages both
the asset exploitation potential, based on the current
activity and the assets outside exploitation.
23 SPIn-Off
Based on the Extraordinary General Shareholders
decision dated 20 March 2014 and the resolution
of the Bucharest Court dated 10 April 2014, the
Company recognized the spin-off of the Company’s
shareholdings to a new company - „Societatea de
Administrare a Participatiilor in Energie SA” - wholly
owned by the Ministry of Energy, Small and Medium-
sized Enterprises and Business Environment. The
spin-off referred to the transfer of the shares held by
assets held for
Distribution
Enel Distributie Muntenia
Enel Energie Muntenia
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Energie
E.On Distributie
E.On Energie
Electrica Soluziona
Hidro Tarnita
BrM
Total assets held for distribution
The asset transferred through spin-off was recorded as follows:
Assets held for distribution
Cash and cash equivalents
Total
Share capital
retained earnings
Total
the Company in 10 entities (Enel Distributie Muntenia,
Enel Energie Muntenia, Enel Distributie Banat, Enel
Distributie Dobrogea, Enel Energie, E.On Moldova
Distributie, E.On Energie, Electrica Soluziona, Hidro
Tarnita and BrM). The investments included equity
accounted investees and other investments and
were classified as assets held for distribution as at 31
December 2013, as follows:
Carrying amount at 31
December 2013
Percentage ownership
interest
77.139.794
10.519.062
100.527.111
85.763.375
58.498.737
166.080.960
8.590.613
49.000
57.500
40.000
507.266.152
23,57%
23,57%
24,87%
24,90%
36,99%
27,00%
3,78%
49,00%
50%
Carrying amount
398.155.630
129.385.930
527.541.560
507.302.152
20.239.408
527.541.560
On 17 february 2014 the Company sold part of the
shares held in E.On Moldova Distributie and E.On
Energie romania to E.On following the exercise of call
options by E.On. E.On paid the exercise price of RON
140,920,000 to the Company.
Cash received from transaction with E.ON less
the directly attributable costs were transferred to
Societatea de Administrare a Participatiilor in Energie
SA (rON 129,385,930).
annual report2014
189
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
24 capital and reserVes
(a) ShaRE CaPITal anD ShaRE PREmIUm
The issued share capital in nominal terms consists of
345,939,929 ordinary shares at 31 December 2014
(2013: 207,839,904) with a nominal value of RON 10
per share. All shares rank equally with regard to the
Number of shares at 1 January
Shared issued during the year
Decrease in the number of shares due spin-off
number of shares at 31 December
The Company recognizes changes in share capital
only after their approval in the General Shareholders
Meeting and their registration by the Trade Register.
The contributions made by the shareholders which are
not yet registered with the Trade register at year end
are recognized as pre-paid capital contributions from
shareholders.
On 25 february 2014 an increase of share capital of
188,264 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods.
On 10 April 2014 Bucharest Court approved the
spin-off by Electrica SA through transfer of part of its
assets to a new company „Societatea de Administrare
a Participatiilor in Energie SA” (see Note 23). As a
consequence of this transaction, share capital was
decreased by 43,123,780 ordinary shares.
On 16 May 2014 an increase of share capital of
3,846,797 ordinary shares was registered in the Trade
registry. The shares were issued in respect of land
contributed by the shareholder in previous periods for
shares.
Between 11 and 27 June 2014 the Company organized
an IPO, which entailed to an offering of 142,007,744
shares and 8,795,250 GDRs, each GDR representing
Balance at 1 January
Revaluation of property, plant and equipment
Tax related to the defined benefit
Balance as at 31 December
Company’s residual assets. The holders of ordinary
shares are entitled to receive dividends as declared,
and are entitled to one vote per share at shareholder
meetings of the Company.
2014
2013
207.839.904
181.223.805
(43.123.780)
345.939.929
206.229.044
1.610.860
-
207.839.904
four shares (see Note 1). The subscriptions amounted
to rON 1,556,094,600 and USD 120,143,115. On 2
July 2014 the increase of share capital by 177,188,744
ordinary shares was recorded in the Trade register.
Consequently, the Company recognized an increase
of share capital of rON 1,771,887,440 and a share
premium of RON 171,128,062. The transaction costs
of rON 68,078,885 were deducted from the share
premium.
Until 31 December 2003, the statutory share capital
in nominal terms was restated according to IAS 29
“Financial Reporting in Hyperinflationary Economies”
with a corresponding adjustment to retained earnings.
(B) TREaSURy ShaRES
In July 2014 the Company purchased 5,206,593
ordinary shares and 421,000 Global Depositary
receipts, equivalent to 1,684,000 shares. The total
amount paid for acquiring the shares and Global
Depositary receipts was rON 75,372,435.
(C) REValUaTIOn RESERVE
The reconciliation between opening and closing
revaluation reserve is as follows:
2014
-
986.367
(157.819)
828.548
Starting with the date of IFRS implementation,
the Company has choose to apply the presumed
cost exception, according to IFRS 1, therefore the
difference resulting from the revaluations recorded
prior to January 1st 2013 was transferred to retained
earnings (see Note 30).
(D) lEgal RESERVES
The Legal reserves are set up as 5% of the gross profit,
until the total legal reserves reach 20% of the paid-up
nominal share capital of the Company, according
to the legislation. These reserves are deductible for
income tax purposes and are not distributable.
annual report2014 190
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(E) DIVIDEnDS
The dividends distributed by the Company in 2014 and 2013 (from the statutory profits of preceding years) were as
follows:
2014
2013
Distributed dividends
22.475.225
13.211.376
The dividends per share paid to the owners of the Company were: 2014: RON 0.108, 2013: RON 0.064 per share.
25 trade payaBles
Electricity suppliers
Capital expenditure suppliers
Other suppliers
Total
31 December 2014 31 December 2013
1 january 2013
73,665,026
3,547,546
6,187,762
83,400,334
76,709,422
1,953,737
8,135,769
86,798,928
77,844,660
9,025,568
7,658,941
94,529,169
Electricity suppliers are mainly state-owned power generators, as detailed in Note 29. Other suppliers include
suppliers of services, materials, consumables, etc.
26 other payaBles
31 December 2014
31 December 2013
1 january 2013
Current
non-current
Current
non-current
Current
non-current
Payables to the State
budget
Other liabilities
Total
8,386,846
276,591
8,663,437
-
-
-
5,577
4,184,800
4,190,377
-
13,283,732
-
5,497,560
5,497,560
21,257,936
34,541,668
10,625,446
10,625,446
Other liabilities include mainly guarantees and sundry creditors. Other non-current liabilities refer mainly to an
instalment transaction for a liability representing late payment of the invoices for electricity supply.
27 proVisions
Balance at 1 january 2013
Provisions raised
Balance at 31 December 2013
Provisions reversed
Balance at 31 December 2014
litigations and other risks
17,500,089
13,277,265
30,777,354
(30,777,354)
-
As at 31 December 2013, provisions refer mainly to litigations with the National Agency for Fiscal Administration
(ANAF), referring to late payment penalties claimed by ANAF. Following the partial favourable solution for the
Company, these provisions were reversed during year 2014.
annual report2014 191
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
28 fInanCIal InSTRUmEnTS - faIR ValUES anD RISK
management
(a) aCCOUnTIng ClaSSIfICa TIOnS anD faIR ValUES
The following table shows the carrying amounts and it does not include fair value information for financial assets
and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair
value.
31 December 2014
Note
loans and
receivables
held to maturity
financial assets
Other financial
liabilities
Total
Carrying amount
financial assets not
measured at fair value
Trade receivables
Other receivables
Deposits, treasury bills and
government bonds
16
18
17
87,695,766
12,209,901
-
-
-
1,038,419,841
Cash and cash equivalents
19
1,075,619,774
-
Total
1,175,525,441
1,038,419,841
financial liabilities not
measured at fair value
-
-
-
-
-
87,695,766
12,209,901
1,038,419,841
1,075,619,774
2,213,945,282
Trade payables
Total
25
-
-
-
-
83,400,334
83,400,334
83,400,334
83,400,334
31 December 2013
Note
loans and receivables
Carrying amount
Other financial
liabilities
Total
financial assets not
measured at fair value
Trade receivables
Other receivables
Cash and cash equivalents
Total
financial liabilities not
measured at fair value
Bank overdrafts
Trade payables
Total
16
18
19
25
95,660,486
11,995,000
144,125,683
251,781,169
-
-
-
-
95,660,486
11,995,000
144,125,683
251,781,169
-
-
-
36,999,437
86,798,928
123,798,365
36,999,437
86,798,928
123,798,365
annual report2014
192
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
1 january 2013
Note
loans and receivables
Carrying amount
Other financial
liabilities
Total
financial assets not
measured at fair value
Trade receivables
Other receivables
Cash and cash equivalents
Total
financial liabilities not
measured at fair value
Bank loans
Bank overdrafts
Trade payables
Total
16
18
19
26
(B) fInanCIal RISK managEmEnT
The Company has exposure to the following risks
arising from financial instruments:
n credit risk
n liquidity risk
n market risk.
(i) Credit risk
Credit risk is the risk of financial loss to the Company
if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises
principally from the Company’s receivables from
customers, cash and cash equivalents, bank deposits
and treasury bills and government bonds.
The Company has a high credit risk mainly from State-
Impairment
The ageing of trade receivables was as follows:
86,841,490
23,702,977
185,208,969
295,753,436
-
-
-
-
86,841,490
23,702,977
185,208,969
295,753,436
-
-
-
-
10,333,911
55,732,038
94,529,169
160,595,118
10,333,911
55,732,038
94,529,169
160,595,118
owned companies. Until 2012, the Company had a
concentration of credit risk with Oltchim SA, company
that became insolvent (see Note 16). Currently, the
Company consider that credit risk exposure has
significantly diminished.
Cash, bank deposits, treasury bills and government
bonds are placed in financial institutions, which are
considered to have minimal risk of default.
The carrying amount of financial assets represents the
maximum credit exposure..
Trade receivable
The Company establishes an allowance for impairment
that represents its estimate of incurred losses in
respect of trade receivables.
31 December 2014
31 December 2013
1 january 2013
gross Value
Bad debt
allowance
gross Value
Bad debt
allowance
gross Value
Bad debt
allowance
Neither past due nor
impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Past due 2-3 years
83,382,090
743,587
498,036
3,072,053
3,804,652
-
-
-
-
92,780,614
77,738
773,759
2,028,375
65,782,210
8,002,656
-
37,655,377
(24,598,753)
(3,804,652)
32,264,483
(32,264,483)
245,781,874
(245,781,874)
34,542,103
(34,542,103)
229,020,902
(229,020,902)
254,096,454
(254,096,454)
Past due more than 3 years
632,051,499
(632,051,499)
406,643,388
(406,643,388)
143,130,026
(143,130,026)
Total
758,094,020
(670,398,254)
763,589,259
(667,928,773)
754,448,597
(667,607,107)
Bad debt allowance related to Oltchim SA.
annual report2014 193
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
net trade receivable
31 December 2014 31 December 2013
1 january 2013
Neither past due nor impaired
83,382,090
92,780,614
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Total
743,587
498,036
3,072,053
87,695,766
77,738
773,759
2,028,375
95,660,486
65,782,210
8,002,656
-
13,056,624
86,841,490
(ii) liquidity risk
liquidity risk is the risk that the Company will
encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled
by delivering cash or another financial asset. The
Company’s approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due,
under both normal and stressed conditions, without
incurring unacceptable losses.
The Company aims to maintain the level of its cash
and cash equivalents at an amount in excess of
expected cash outflows on financial liabilities. The
Company also monitors the level of expected cash
inflows on trade receivables together with expected
cash outflows on trade and other payables.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts
are gross and undiscounted, and include estimated interest payments.
financial liabilities
31 December 2014
Trade payables
Total
31 December 2013
Bank overdraft
Trade payables
Total
1 january 2013
Bank loans
Bank overdraft
Trade payables
Total
The bank loan existing in balance at 1 January
2013 represents a long-term loan from BCR (Banca
Comerciala romana – romanian Commercial Bank),
contracted in 15 October 2004, for investments on the
basis of GD 702/2003. The interest rate was rOBOr
6M + 1%. repayment of bank loan was made in 15
equal semestrial tranches, in the period 15 November
2006 – 15 November 2013.
(iii) market risk
Market risk is the risk that changes in market prices
– such as foreign exchange rates, interest rates– will
affect the Company’s profit or the value of its holdings
of financial instruments. The objective of market
risk management is to manage and control market
risk exposures within acceptable parameters, while
optimising the return.
Carrying
amount
Contractual cash flows
Total
less than 1 year
83,400,334
83,400,334
83,400,334
83,400,334
83,400,334
83,400,334
36,999,437
86,798,928
123,798,365
36,999,437
86,798,928
123,798,365
36,999,437
86,798,928
123,798,365
10,333,911
55,732,038
94,529,169
160,595,118
10,333,911
55,732,038
94,529,169
160,595,118
10,333,911
55,732,038
94,529,169
160,595,118
Current risk
The Company is exposed to currency risk to the
extent that there is a mismatch between the
currencies in which sales, purchases and borrowings
are denominated and the functional currency of the
Company. The functional currency of the Company is
the romanian leu (rON).
The currencies in which these transactions are
primarily denominated are rON and EUr. Certain
liabilities are denominated in foreign currency
(EUr). The Company also has deposits and bank
accounts denominated in foreign currency (EUr).
The Company’s policy is to use the local currency
in its transactions as far as practically possible.
The Company does not use derivative or hedging
instruments.
annual report2014
194
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
Exposure to currency risk
The summary quantitative data about the Company’s exposure to currency risk is as follows:
In ROn
31 December 2014 31 December 2013
1 january 2013
eur
eur
eur
Cash and cash equivalents
10,137,641
136,172,767
162,037,151
Deposits (deposits, treasury bills and government
bonds)
136,704,050
-
-
net statement of financial position exposure
146,841,691
136,172,767
162,037,151
The following significant exchange rates have been applied during the year:
ron
1 EUr
average rate
year-end spot rate
2014
4.4446
2013
4.4190
2013
4.4821
2012
4.4847
2011
4.4287
Sensitivity analysis
A reasonably possible strengthening (weakening) of the EUR against RON at 31 December would have affected
the measurement of financial instruments denominated in a foreign currency and profit before tax and,
respectively, equity by the amounts shown below. The analysis assumes that all other variables, in particular
interest rates, remain constant and ignores any impact of forecast sales and purchases.
Effect
31 December 2014
EUr (5% movement)
31 December 2013
EUr (5% movement)
1 january 2013
EUr (5% movement)
Profit before tax
Strengthening
Weakening
7,342,085
(7,342,085)
6,808,638
(6,808,638)
8,101,858
(8,101,858)
Interest rate risk
The Company does not have significant long-term bank loans.
Exposure to interest rate risk
The interest rate profile of the Company’s interest-bearing financial instruments is as follows:
fixed-rate instruments
Financial assets
31 December 2014 31 December 2013
1 january 2013
Bank accounts (cash and cash equivalent)
874.243.283
140.619.441
162.318.391
Deposits, treasury bills and government bonds
1.038.419.841
-
-
1.912.663.124
140.619.441
162.318.391
Variable-rate instruments
Financial liabilities
Overdrafts
Short term bank borrowings
-
-
-
(36,999,437)
(55,732,038)
-
(36,999,437)
(10,333,911)
(66,065,949)
annual report2014
195
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
fair value sensitivity analysis for fixed-rate
instruments
The Company does not account for any fixed-rate
financial assets or financial liabilities at fair value
through profit or loss. Therefore, a change in interest
rates at the reporting date would not affect profit or
loss.
31 December 2014
Variable-rate instruments
31 December 2013
Variable-rate instruments
31 December 2012
Variable-rate instruments
Cash flow sensitivity analysis for variable-rate
instruments
A reasonably possible change of 50 basis points
in interest rates at the reporting date would have
increased (decreased) profit before tax by the
amounts shown below. This analysis assumes that
all other variables, in particular foreign currency
exchange rates, remain constant.
Profit before tax
50 bp increase
50 bp increase
-
-
(184,997)
184,997
(330,330)
330,330
29 related parties
(a) maIn ShaREhOlDERS
As at 31 December 2014, Romanian State, represented by the Ministry of Energy, Small and Medium-sized
Enterprises and Business Environment holds 48.78% of the Company’s share capital. The next large shareholder
is the European Bank for Reconstruction and Development with 8.66%.
(B) managEmEnT anD aDmInISTRa TORS’ COmPEnS aTIOn
management compensation
2014
821,012
2013
188,431
Compensations granted to the members of the Board of Directors and representatives in the General Meeting of
Shareholders were as follows:
Members of Board of Directors
Representatives in the General Meeting of Shareholders
Total
915,885
8,389
924,274
273,705
14,620
288,325
No loans were granted to managers or administrators in 2014 and 2013.
2014
2013
annual report2014
196
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(C) TRanS aCTIOnS WITh aSSOCIaTES
(i) Balances receivables and payables from/ to associates:
Receivables balance
Payables Balance
31 December
2014
31 December
2013
1 january
2013
31 December
2014
31 December
2013
1 january
2013
Electrica furnizare
14,177,389
52,286,762
27,520,714
1,624,698
1,885,180
1,696,840
Electrica Muntenia Nord Distributie
13,807,379
4,144,291
5,377,628
Electrica Transilvania Nord Distributie
7,428,076
8,038,921
8,305,074
Electrica Transilvania Sud Distributie
6,860,197
4,084,511
7,785,697
201,646
940,609
200,318
55,917
-
-
26,177
19,334
22,153
Electrica Serv
Servicii Energetice Muntenia
Servicii Energetice Moldova
Servicii Energetice Banat
Servicii Energetice Dobrogea
Servicii Energetice Oltenia
Electrica Soluziona*
Total
10,962,160
12,827,683
14,571,768
1,307,532
301,589
396,040
214,006
147,305
105,426
-
214,006
147,305
105,426
-
320,026
320,026
215,655
153,984
107,030
6,685
322,453
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
54,021,962
-
82,168,931
-
64,366,688
n/a
4,274,803
371.628
2,614,314
326.339
2,486,883
*Transferred at (d) Transactions with other companies in which the State holds control or significant influence as a result of the disposal of this investment.
Receivables and payables from/to electricity distribution and supply companies mainly include, receivables/
payables from electricity supply, mainly from disbursements on balancing market.
receivables from Electrica Serv are mainly represented by loans granted by the company to Electrica Serv, being
at maturity and which were not received. The Company estimates that in the following period this amounts will
be received, taking into account the improvement of Electrica Serv financial position.
(ii) Transactions with other affiliates
Sales
in 2014
Sales
in 2013
Purchases
in 2014
Purchases
in 2013
Electrica furnizare
71,166,230
132,577,209
21,029,810
17,346,013
Electrica Muntenia Nord
Distributie
Electrica Transilvania Nord
Distributie
Electrica Transilvania Sud
Distributie
Electrica Serv
Electrica Soluziona*
28,736,574
15,335,807
1,916,777
953,547
20,380,439
15,011,090
1,062,056
15,177,388
15,058,599
3,928,571
n/a
6,428
-
1,738,183
2,970,456
n/a
10,200
5,400
2,365,754
299,700
Total
*Transferred at (d) Transactions with other companies in which the State holds control or significant influence as a result of the
disposal of this investment.
177,989,133
139,389,203
28,717,283
20,980,614
annual report2014 197
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(D) TRanS aCTIOnS WITh COmPanIES In WhICh ThE STaTE haS COnTROl OR SIgnIfICanT InflUEnCE
In 2014 the Company had sale and purchase transactions mainly with the following companies:
net Receivables balance
at 31 December 2014
Payables balance at
31 December 2014
Sales 2014
Purchase 2014
Transelectrica
OPCOM
Complexul Energetic Oltenia
Electrocentrale Oradea
CET Govora
total
669,015
18.900.021
12.530.551
162.058.079
-
-
-
12.524
5.802.674
117.127
-
-
552.615
30.650
-
617.797
382,917
1,051.932
28.742
24.743.961
911.047
14.111.340
1.006.441
163.712.967
In 2013 the Company had sale and purchase transactions mainly with the following companies controlled by state:
net Receivables balance
at 31 December 2013
Payables balance at
31 December 2013
Sales 2013
Purchase 2013
Transelectrica
OPCOM
Complexul Energetic Oltenia
Electrocentrale Oradea
CET Govora
total
2,038,175
59,863,273
17,120,958
141,270,942
2,356
-
681,872
-
4,748,531
40,369,180
11,300,234
-
85,156
1,121,436
-
184,351
-
708,896
496,576
2,722,403
71,248,663
23,175,276
182,845,594
At 1 January 2013, the main balances with the companies in which the state has control or significant influence
are as the following:
Transelectrica
OPCOM
Complexul Energetic Oltenia
Electrocentrale Oradea
CET Govora
total
net Receivables balance
at 1 january 2013
Payables balance at
1 january 2013
1,039,126
-
-
1,305,617
774,113
3,118,856
49,311,741
1,194,930
17,915,272
135,302
502,866
69,060,111
Transactions refer mainly to purchase and sales on the balancing market as well as on the Day Ahead Market.
30 conditionalities
(a) lITIgaTIOn anD ClaImS
The Company is involved in various litigations; the most
significant are the followings:
n The Group was sued by Orange Media, claiming the
payment of RON 17,008,850 RON representing late
payment penalties requested by the claimant as a
result of the cancelation of a public acquisition contract
by the Company. By sentence no. 4890/13.06.2013
issued by Bucharest Court, Orange Media’s claim
was dismissed. By sentence no. 573/24.02.2014 the
Bucharest Court of Appeal upheld the appeal, voided
the sentence and referred the case back to Bucharest
Court. By sentence no. 5200/30.10.2014 issued by
Bucharest Court, the claim was dismissed. An appeal
against this sentence can be made. The Company
expects a favourable outcome for this case and in
consequence, no provisions were registered.
n The Company was sued by Termoelectrica, claiming the
payment of RON 25,047,353 representing penalties
related to certain invoices, for the period 1 April 2007
– 31 March 2008. In the first sentence the claim was
dismissed. The Company expects a favourable outcome
for this case and in consequence, no provisions were
registered.
n The activity of the company was subject to many
controls performed by ANAf. As at the date of the
financial statements, the company is in litigation with
ANAF for late payment penalties claimed by ANAF in
amount of 30,777,354 rON.
annual report2014 198
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(B) fISCal EnVIROnmEnT
Tax audits are frequent in Romania, consisting of
detailed verifications of the accounting records
of tax payers. Such audits sometimes take place
after months, even years, from the date liabilities
are established. Consequently, companies may be
found liable for significant taxes and fines. Moreover,
tax legislation is subject to frequent changes and
the authorities demonstrate inconsistency in
interpretation of the law. Income tax returns may be
subject to revision and corrections by tax authorities,
generally for a five year period after they are
completed.
The management of the company believes that
adequate provisions were recorded for all significant
tax obligations.
31 commitments
(C) TRanSfER PRICES
According to the fiscal legislation, the fiscal
assessment for a transaction with affiliates is based on
the market price concept for that transaction. Based
on this concept, the transfer prices must be adjusted
in order to reflect the market prices established
between the entities having no affiliation relation and
which act independently, based on “normal market
conditions”.
Likely, verifications of the transfer prices may be done
in the future by the fiscal authorities, in order to
establish if these prices are respecting the principle of
the “normal market conditions” and that the tax base
for romanian taxpayer is not distorted.
guarantees and pledges
At 31 December 2014 the company has an outstanding bank letter of guarantee as it follows:
Bank
ING B.V.
Beneficiary
amount
Currency
Issue Date
Expiry Date
Transelectrica
20,000,000
rON
10.10.2013
09.10.2015
contractual commitments
The Group has the following contractual commitments as at 31 December 2014:
Purchase of property, plant and equipment and intangible assets
amount
8,034,000
32 foundation of accounting restatements
Base of preparation
These financial statements have been prepared in
accordance with OMFP 1268/2012 as it is mentioned
in note 2.
The accounting policies presented in note 6 were
applied for the preparation of the financial statements
for the year ended at 31 December 2014, for
the comparative information presented in these
financial statements for the financial year ended at
31 December 2013 and for the preparation of the
opening of the For the preparation of the opening IFRS
statement of financial position, the company adjusted
the previous reported amounts from the financial
statements prepared according to OMfP 3055/2009.
An explanation of the IFRS restatement method, as
well as accounting errors corrections affected the
financial position of the company and the financial
performance is presented in the following tables and
the corresponding notes.
annual report2014 199
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
(i) Reconciliation of financial position of the Company
2014
annual
report
note
omfp
3055/2009 – 1
january 2013
The adjustments
impact for the
transition to
IfRS – 1 january
2013
The impact
of accounting
errors related to
prior periods -1
january 2013
IfRS – 1 january
2013
omfp
3055/2009 – 31
December 2013
The adjustments
impact for
the transition
to IfRS -31
December 2013
The impact
of accounting
errors related
to prior periods
– 31 December
2013
IfRS -31
December 2013
assets
non-current assets
Property, plant and equipment
265,509,512
(858,365)
(7,263,955)
257,387,192
322,961,270
(858,365)
(19,729,486)
302,373,419
Intangible assets
Investments in subsidiaries
Investments in associates
Deferred tax assets
Total non-current assets
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Inventories
Prepayments
Income tax receivable
Assets held for distribution
Total current assets
b,f
b
d
e
b
318,000
-
-
318,000
797,803
-
-
797,803
1,527,855,544
209,895,099
(284,162,656)
1,453,587,987
1,494,219,179
231,740,044
(320,769,486)
1,405,189,737
431,410,493
-
75,855,659
15,156,826
-
-
507,266,152
431,410,493
(431,410,493)
15,156,826
-
13,932,473
-
-
-
13,932,473
2,225,093,549
300,049,219
(291,426,611)
2,233,716,157
2,249,388,745
(186,596,341)
(340,498,972)
1,722,293,432
185,208,969
-
-
185,208,969
144,125,683
-
-
144,125,683
483,838,569
(3,612,794)
(393,384,285)
86,841,490
417,949,814
(3,612,794)
(318,676,534)
74,682,812
(36,017,041)
217,965
443,126
5,878,858
-
-
-
-
-
-
-
-
-
-
38,665,771
94,017,710
(61,517,275)
217,965
443,126
134,502
328,120
5,878,858
22,794,808
-
-
-
-
-
507,266,152
-
-
-
-
-
95,660,486
32,500,435
134,502
328,120
22,794,808
507,266,152
750,270,299
(39,629,835)
(393,384,285)
317,256,179
679,350,637
442,136,083
(318,676,534)
802,810,186
Total assets
2,975,363,848
260,419,384
(684,810,896)
2,550,972,336
2,928,739,382
255,539,742
(659,175,506)
2,525,103,618
200
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
2014
annual
report
equity and liaBilities
Equity
Share capital, of which:
Subscribed share capital
Inflation adjustment of share capital
Contributions of shareholders in nature
Revaluation reserve
legal reserves
retained earnings
Total equity
liabilities
Total non-current liabilities
Employee benefits
Other payables
Total non-current liabilities
Current liabilities
Short term bank borrowings
Bank overdrafts
Trade payables
Other payables
Income in advance
Employee benefits
Provisions
Total current liabilities
Total liabilities
note
omfp
3055/2009 – 1
january 2013
The adjustments
impact for the
transition to
IfRS – 1 january
2013
The impact
of accounting
errors related to
prior periods -1
january 2013
IfRS – 1 january
2013
omfp
3055/2009 – 31
December 2013
The adjustments
impact for
the transition
to IfRS -31
December 2013
The impact
of accounting
errors related
to prior periods
– 31 December
2013
IfRS -31
December 2013
a
a
c
a,b,c,
d,e.f
2,062,290,440
430,907,062
2,062,290,440
-
-
430,907,062
54,481,291
-
27,100,218
(27,100,218)
114,093,070
-
-
-
-
-
-
-
2,493,197,502
2,078,399,040
430,907,062
2,062,290,440
2,078,399,040
-
430,907,062
-
430,907,062
54,481,291
47,492,961
-
-
27,046,818
(27,046,818)
114,093,070
114,093,070
-
-
-
-
-
-
-
2,509,306,102
2,078,399,040
430,907,062
47,492,961
-
114,093,070
478,577,149
(134,843,037)
(684,810,896)
(341,076,784)
483,508,335
(141,581,392)
(659,175,506)
(317,248,563)
2,736,542,168
268,963,807
(684,810,896)
2,320,695,079
2,750,540,224
262,278,852
(659,175,506)
2,353,643,570
3,257,741
13,500,000
16,757,741
(429,432)
(2,874,554)
(3,303,986)
10,333,911
55,732,038
93,239,343
41,862,702
-
2,295,856
18,600,089
222,063,939
-
-
1,289,826
(7,321,034)
361,339
1,529,432
(1,100,000)
(5,240,437)
238,821,680
(8,544,423)
-
-
-
-
-
-
-
-
-
-
-
-
2,828,309
10,625,446
13,453,755
2,927,909
6,000,000
8,927,909
(169,156)
(502,440)
(671,596)
10,333,911
55,732,038
94,529,169
34,541,668
361,339
3,825,288
-
36,999,437
86,996,438
10,229,537
410,264
2,643,336
17,500,089
31,992,237
216,823,502
169,271,249
-
-
(197,510)
(6,039,160)
-
1,384,039
(1,214,883)
(6,067,514)
230,277,257
178,199,158
(6,739,110)
-
-
-
-
-
-
-
-
-
-
-
-
2,758,753
5,497,560
8,256,313
-
36,999,437
86,798,928
4,190,377
410,264
4,027,375
30,777,354
163,203,735
171,460,048
Total equity and liabilities
2,975,363,848
260,419,384
(684,810,896)
2,550,972,336
2,928,739,382
255,539,742
(659,175,506)
2,525,103,618
201
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
ii) Reconciliation of profit or loss account
note
omfp
3055/2009
–2013
The
adjustments
impact for the
transition to
IfRS -2013
The impact
of accounting
errors related to
prior periods -
2013
revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
Impairment of property, plant and equipment, net
Value adjustments on investments in subsidiaries
Resumption of impairment of trade and other receivables, net
Other operating expenses , net movement in provisions
Profit / (loss) from operating
f
e
283,256,214
15,088,609
(227,938,870)
(21,925,367)
(9,377,572)
-
-
(75,029,417)
(33,732,081)
(69,658,484)
(268,075)
268,076
-
(811,749)
-
-
(11,791,420)
-
685,891
(11,917,277)
-
-
-
-
-
(12,465,531)
(36,606,830)
91,623,701
(16,915,950)
25,635,390
finance income
finance costs
Income / (Expenses) net financial
Profit before tax
Income tax expense
Profit for the year
104,936,477
(9,915,552)
95,020,925
(8,949,713)
7,871,188
(1,078,525)
-
-
-
25,362,441
(12,995,802)
-
25,362,441
(1,182,446)
(14,178,248)
25,635,390
-
25,635,390
IfRS - 2013
282,988,139
15,356,685
(227,938,870)
(22,737,116)
(9,377,572)
(12,465,531)
(48,398,250)
16,594,284
(49,962,140)
(55,940,371)
95,986,764
(2,044,364)
93,942,400
38,002,029
(1,182,446)
36,819,583
a) Restatement of share capital under IaS 29
Romanian economy was a hyperinflationary economy
until December 31, 2003, According to IAS 29 “Financial
Reporting in Hyperinflationary Economies”, components
of equity, except retained earnings and revaluation
reserves are restated by applying a general price index of
the dates the components were contributed, Thus the
Company’s share capital was adjusted with the effects of
hyperinflation period up to 31,12,2003
The modification impact resulting from the application of IAS 29 is summarized as follows:
Statement of financial position
Adjustments of share capital
The effect on retained earnings due to the
adoption of IAS 29 for the first time (loss)
1 january 2013
31 December 2013
430,907,062
430,907,062
(430,907,062)
(430,907,062)
b) Restatement of investments in subsidiaries and associates under IaS 29 Investments in associates and
classification of assets held for distribution in accordance with IfRS 5
Investments in subsidiaries and other companies
have been restated with the inflation effect until 31
December 2003 (the date of which the romanian
economy stop to be hyperinflationary), the differences
in restatement is recorded in retained earnings.
The impact of the changes resulting from the application of IAS 29 is summarized as follows:
Statement of financial position
Investments in subsidiaries
Investments in associates entities
The effect on retained earnings due to the adoption
of IAS 29 for the first time (profit / credit)
1 january 2013
31 December 2013
184,440,554
75,855,659
260,296,213
172,649,135
75,855,659
258,761,358
annual report2014 202
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
On 31 December 2013, the Company has reclassified
investments in associates division of the project approved
in March 20, 2014 (see Note 23) and presented them as
assets held for distribution in accordance with IFRS 5.
c) application of deemed cost exception
The Company applies the revaluation tangible model,
the Company chose the date of transition to IFRS to
apply the exception of deemed cost under IFRS 1 as
the difference revaluation registered until January 1,
2013 was transferred to retained earnings, After the
transition date of revaluation reserves arising from
revaluation are recognized as such in the financial
statements,
The impact of the exception deemed cost is summarized as follows:
Statement of financial position
Revaluation reserve
retained earnings (credit)
1 December 2013
31 December 2013
(27,100,218)
27,100,218
(27,046,818)
27,046,818
d) Deferred tax
Deferred tax concept is not adopted as OMPf
3055/2009, As a result of applying IAS 12 “Income
Taxes”, the Company recorded deferred tax for taxable
and deductible temporary differences in the levels of
its assets and liabilities during the translation subject
to IfrS.
Impact of deferred tax application is summarized as follows:
Statement of financial position
Deferred tax assets
retained earnings (credit)
Deferred income tax liability recognized in equity
Profit and loss account
Income tax income
1 january 2013
31 December 2013
15,156,826
15,156,826
83,154
13,932,473
13,932,473
41,907
2013
1,182,446
e) Value adjustments related to customer Oltchim
receivables from Oltchim insolvent company were
evaluated in OMPF 3055/2009 financial statements
net of 318, 676, 535 rON to 31 December 2013 (393,
384, 285 rON to 31 December 2012),
In January 30, 2013 was granted the application filed
by the debtor Oltchim general opening insolvency
proceedings,
The Company recorded impairment adjustments
in the IFRS financial statements for the entire debt
of Oltchim, as error correction for the year 2012.
Accordingly, the Company cancelled subsequent
adjustments made in profit or loss on the value of the
receivables Oltchim.
Impact correction value adjustments for Oltchim is summarized as follows:
Statement of financial position
Trade receivables
retained earnings (loss)
Profit and loss account
Impairment of trade receivables and other
receivables, net
1 january 2013
31 December 2013
(393,384,285)
(393,384,285)
(318,676,534)
(318,676,534)
2013
(74,707,751)
annual report2014 203
NOTes TO THe iNDiViDuAL fiNANCiAL sTATeMeNTs
AS AT 31 DECEMBER 2014
(All amounts are in RON, unless otherwise indicated)
f) Value adjustments relating to investments in subsidiaries
Adjustment relates to the carrying amount of the
shares held by Electrica SA in Servicii Energetice
Banat, Servicii Energetice Dobrogea, Servicii
Energetice Moldova, Servicii Energetice Oltenia and
Electrica Serv, adjusted retrospectively as indicators
of impairment value existed since the end of 2012:
the energy services companies entered in 2013 into
liquidation / insolvency and adjusted net assets
or net assets of these companies are negative,
regarding Electrica Serv, its net assets, corrected
flow results in relation with the Servicii Energetice
Banat, Servicii Energetice Dobrogea, Servicii
Energetice Moldova and Servicii Energetice Oltenia
whose recoverability is unlikely, is significantly lower
than the carrying value of shares held by Electrica
in Electrica Serv.
In the OMPF 3055/2009 financial statements were not
recorded value adjustments relating to the recoverability
of investments in these subsidiaries,
In IFRS Electrica financial statements retrospectively
adjusted entirely investments in Servicii Energetice
Banat, Servicii Energetice Dobrogea, Servicii Energetice
Moldova (since 2012) and Servicii Energetice Oltenia
(in 2013), and hired an independent assessor to
perform valuation of investments in Electrica Serv to 31
December 2014, 2013 and 2012, These results were
recorded in the IFRS financial statements as correction of
errors related to previous years.
Impact correction value adjustments to investments in subsidiaries is summarized as follows:
Statement of financial position
Investments in subsidiaries
retained earnings (loss)
Profit and loss account
Value adjustments on the equity interests in
subsidiaries
1 january 2013
31 December 2013
(284,162,656)
(284,162,656)
(320,769,486)
(320,769,486)
2013
36,606,830
annual report2014 204
iNDePeNDeNT AuDiTOrs’ rePOrT fOr iNDiViDuAL fiNANCiAL
sTATeMeNTs fOr THe yeAr eNDeD 31 DeCeMBer 2014
ABCD
KPMG Audit SRL
Victoria Business Park
DN1, Soseaua Bucuresti-Ploiesti nr. 69-71
Sector 1
Tel:
Fax:
+40 (21) 201 22 22
+40 (372) 377 800
+40 (21) 201 22 11
+40 (372) 377 700
www.kpmg.ro
P.O. Box 18-191
Bucharest 013685
Romania
Independent Auditors’ Report
(free translation1)
To the shareholders of
Electrica S.A.
Report on the Individual Financial Statements
1 We have audited the accompanying individual financial statements of Electrica S.A. (“the
Company”), which comprise the individual statement of financial position as at 31 December 2014,
the individual statements of profit or loss, other comprehensive income, changes in equity and cash
flows for the year then ended, and notes, comprising a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Individual Financial Statements
2 Management is responsible for the preparation and fair presentation of these individual financial
statements in accordance with the Order of the Minister of Public Finance no. 1286/2012 and related
amendments for the approval of accounting regulations conforming to International Financial
Reporting Standards applicable to companies whose securities are traded on a regulated market,
and for such internal control as management determines is necessary to enable the preparation of
individual financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
3 Our responsibility is to express an opinion on these individual financial statements based on our
audit. We conducted our audit in accordance with the standards on auditing as adopted by the
Romanian Chamber of Financial Auditors. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance whether the individual
financial statements are free from material misstatement.
4 An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the individual financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the individual financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the individual financial
statements 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 entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the
individual financial statements.
1 TRANSLATOR’S EXPLANATORY NOTE: This translation of the auditors’ report is provided as a free translation from
Romanian which is the official and binding version.
© 2015 KPMG Audit SRL, a Romanian limited liability company and
a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved. PDC no. 15632
Fiscal registration code
RO12997279
Trade Registry
no.J40/4439/2000
Share Capital 2,000 RON
annual report2014
205
iNDePeNDeNT AuDiTOrs’ rePOrT fOr iNDiViDuAL fiNANCiAL
sTATeMeNTs fOr THe yeAr eNDeD 31 DeCeMBer 2014
ABCD
5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
ABCD
Opinia
6
6
Opinia
6
ABCD
In our opinion, the individual financial statements give a true and fair view of the individual
financial position of the Company as at 31 December 2014, and of its individual financial
performance and its individual cash flows for the year then ended in accordance with the Order of
the Minister of Public Finance no. 1286/2012 and related amendments for the approval of
accounting regulations conforming to International Financial Reporting Standards applicable to
companies whose securities are traded on a regulated market.
In opinia noastra, situatiile financiare individuale ofera o imagine fidela a pozitiei financiare
individuale a Societatii la data de 31 decembrie 2014, precum si a rezultatului individual al
operatiunilor sale si a fluxurilor de numerar individuale pentru exercitiul financiar incheiat la
aceasta data, in conformitate cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 pentru
7 This independent auditors’ report is made solely to the Company's shareholders, as a body. Our
aprobarea Reglementarilor contabile conforme cu Standardele Internationale de Raportare
audit work has been undertaken so that we might state to the Company's shareholders those matters
Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la
we are required to state to them in an auditor's report and for no other purpose. To the fullest extent
tranzactionare pe o piata reglementata, cu modificarile ulterioare.
permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company's shareholders as a body, for our audit work, for the report on the individual financial
statements and the report on conformity, or for the opinion we have formed.
In opinia noastra, situatiile financiare individuale ofera o imagine fidela a pozitiei financiare
individuale a Societatii la data de 31 decembrie 2014, precum si a rezultatului individual al
operatiunilor sale si a fluxurilor de numerar individuale pentru exercitiul financiar incheiat la
aceasta data, in conformitate cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 pentru
aprobarea Reglementarilor contabile conforme cu Standardele Internationale de Raportare
Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la
tranzactionare pe o piata reglementata, cu modificarile ulterioare.
Other Matters
Alte aspecte
Alte aspecte
7 Acest raport al auditorului independent este adresat exclusiv actionarilor Societatii, in
7 Acest raport al auditorului independent este adresat exclusiv actionarilor Societatii, in
8 As disclosed in Note 2 to the accompanying individual financial statements, in accordance with the
ansamblu. Auditul nostru a fost efectuat pentru a putea raporta actionarilor Societatii acele
ansamblu. Auditul nostru a fost efectuat pentru a putea raporta actionarilor Societatii acele
Order of Minister of Public Finance no. 881/2012, starting with 2014 the Company has the
aspecte pe care trebuie sa le raportam intr-un raport de audit financiar, si nu in alte scopuri. In
aspecte pe care trebuie sa le raportam intr-un raport de audit financiar, si nu in alte scopuri. In
obligation to apply International Financial Reporting Standards in the preparation of the individual
masura permisa de lege, nu acceptam si nu ne asumam responsabilitatea decat fata de Societate
masura permisa de lege, nu acceptam si nu ne asumam responsabilitatea decat fata de Societate
financial statements. Therefore, this is the first set of individual financial statements prepared in
si de actionarii acesteia, in ansamblu, pentru auditul nostru, pentru raportul asupra situatiilor
si de actionarii acesteia, in ansamblu, pentru auditul nostru, pentru raportul asupra situatiilor
accordance with the Order of the Minister of Public Finance no. 1286/2012 and related amendments
financiare individuale si raportul asupra conformitatii sau pentru opinia formata.
financiare individuale si raportul asupra conformitatii sau pentru opinia formata.
for the approval of accounting regulations conforming to International Financial Reporting
Standards applicable to companies whose securities are traded on a regulated market, and we have
8 Dupa cum este prezentat in Nota 2 la situatiile financiare individuale anexate, in conformitate
8 Dupa cum este prezentat in Nota 2 la situatiile financiare individuale anexate, in conformitate
not expressed an opinion or issued a separate audit report on the individual statements of financial
cu Ordinul Ministrului Finantelor Publice nr. 881/2012, incepand cu exercitiul financiar al
cu Ordinul Ministrului Finantelor Publice nr. 881/2012, incepand cu exercitiul financiar al
position as of 31 December 2013 and 1 January 2013, and on the individual statements of profit or
anului 2014 Societatea are obligatia de a aplica Standardele Internationale de Raportare
anului 2014 Societatea are obligatia de a aplica Standardele Internationale de Raportare
loss, other comprehensive income, changes in equity and cash flows for the year ended
Financiara la intocmirea situatiilor financiare anuale individuale. In consecinta, acesta este
Financiara la intocmirea situatiilor financiare anuale individuale. In consecinta, acesta este
31 December 2013, or any of the related notes included in the accompanying individual financial
primul set de situatii financiare individuale intocmite in conformitate cu Ordinul Ministrului
primul set de situatii financiare individuale intocmite in conformitate cu Ordinul Ministrului
statements.
Finantelor Publice nr. 1286/2012 pentru aprobarea Reglementarilor contabile conforme cu
Finantelor Publice nr. 1286/2012 pentru aprobarea Reglementarilor contabile conforme cu
Standardele Internationale de Raportare Financiara aplicabile societatilor comerciale ale caror
Standardele Internationale de Raportare Financiara aplicabile societatilor comerciale ale caror
Report on conformity of the Administrators’ Report with the individual financial statements
valori mobiliare sunt admise la tranzactionare pe o piata reglementata, cu modificarile
valori mobiliare sunt admise la tranzactionare pe o piata reglementata, cu modificarile
ulterioare, si noi nu am exprimat o opinie si nu am emis un raport de audit separat asupra
ulterioare, si noi nu am exprimat o opinie si nu am emis un raport de audit separat asupra
In accordance with the Order of the Minister of Public Finance no. 1286/2012 and related amendments,
situatiilor individuale ale pozitiei financiare la 31 decembrie 2013 si 1 ianuarie 2013, ale
situatiilor individuale ale pozitiei financiare la 31 decembrie 2013 si 1 ianuarie 2013, ale
article no. 16 point 1 of accounting regulations in accordance with International Financial Reporting
profitului sau pierderii, altor elemente ale rezultatului global, modificarilor capitalurilor proprii
profitului sau pierderii, altor elemente ale rezultatului global, modificarilor capitalurilor proprii
Standards applicable to companies whose securities are traded on a regulated market, we have read the
si fluxurilor de numerar pentru exercitiul financiar incheiat la 31 decembrie 2013, si notelor
si fluxurilor de numerar pentru exercitiul financiar incheiat la 31 decembrie 2013, si notelor
Administrators’ Report attached to the individual financial statements. The Administrators’ Report is
aferente acestora incluse in situatiile financiare individuale anexate.
aferente acestora incluse in situatiile financiare individuale anexate.
not a part of the individual financial statements. In the Administrators’ Report we have not identified
any financial information which is not in accordance, in all material respects, with the information
Raport asupra conformitatii raportului administratorilor cu situatiile financiare individuale
presented in the accompanying individual financial statements.
Raport asupra conformitatii raportului administratorilor cu situatiile financiare individuale
Refer to the original
signed Romanian version
In concordanta cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 cu modificarile ulterioare,
In concordanta cu Ordinul Ministrului Finantelor Publice nr. 1286/2012 cu modificarile ulterioare,
articolul 16, punctul 1 din Reglementarile contabile conforme cu Standardele Internationale de
articolul 16, punctul 1 din Reglementarile contabile conforme cu Standardele Internationale de
Raportare Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la
Raportare Financiara aplicabile societatilor comerciale ale caror valori mobiliare sunt admise la
tranzactionare pe o piata reglementata, noi am citit raportul administratorilor anexat situatiilor
tranzactionare pe o piata reglementata, noi am citit raportul administratorilor anexat situatiilor
For and on behalf of KPMG Audit SRL:
financiare individuale. Raportul administratorilor nu face parte din situatiile financiare individuale.
financiare individuale. Raportul administratorilor nu face parte din situatiile financiare individuale.
In raportul administratorilor noi nu am identificat informatii financiare care sa fie in mod
In raportul administratorilor noi nu am identificat informatii financiare care sa fie in mod
semnificativ neconcordante cu informatiile prezentate in situatiile financiare individuale anexate.
semnificativ neconcordante cu informatiile prezentate in situatiile financiare individuale anexate.
Mikael Olsson
KPMG Audit SRL
registered with the Chamber of Financial
Pentru si in numele KPMG Audit SRL:
Pentru si in numele KPMG Audit SRL:
Auditors of Romania under no 662/2001
registered with the Chamber of Financial
Auditors of Romania under no 9/2001
Mikael Olsson
Bucharest, 26 March 2015
Mikael Olsson
KPMG Audit SRL
KPMG Audit SRL
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 662/2001
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 662/2001
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 9/2001
inregistrat la Camera Auditorilor Financiari
din Romania cu numarul 9/2001
Bucuresti, 26 martie 2015
Bucuresti, 26 martie 2015
annual report2014 206
”COMPLy Or exPLAiN” sTATeMeNT
PrOViDeD By THe COrPOrATe gOVerNANCe CODe Of BuCHAresT sTOCk exCHANge 27 APriL 2015
2014
annual
report
Principle/
Recommendation
question
yes
no
If nOT, please explain
P19
P1
r1
r2
r3
Is the Company managed under a dualist system?
Has the Company drawn up the By-laws/Corporate Governance Rules to
describe the main aspects of corporate governance?
The By-laws/Corporate Governance Rules are posted on the Company’s
website, indicating the date of the last update?
Are there in the By-laws/Corporate Governance Rules definitions
of corporate governance structures, positions, competencies and
responsibilities of the Board of Directors and of the executive management?
Does the Company’s Annual report provide for a chapter on corporate
governance describing all relevant events related to corporate governance
recorded during the previous financial year?
Does the Company post on its own website the information regarding the
following aspects on its corporate governance policy:
a) description of its corporate governance structures?
b) the updated articles of incorporation?
c) internal functioning rules/its essential aspects for each speciality
commission/committee?
d) “Comply or Explain” statement?
e) list with the members of Board of Directors mentioning the
independent and/or non-executive members, the members of
the executive management and the members of the speciality
commissions/committees?
f) a brief description of the CV for each member of the Board of
Directors and each member of the executive management?
P2
Does the Company abide by the rights of financial instruments holders,
providing them with equal treatment and submitting to approval any
modification of the rights in the special meetings of such holders?
X
X
X
X
X
X
X
X
X
X
X
According to the Articles of Incorporation, the Company is managed under a one-tier
system.
http://www.electrica.ro/en/wp-content/uploads/2015/03/ELSA_EN_Corporate_
Governance_Code_feb2015.pdf
On 2 february 2015 the Board of Directors of the Company has approved the Corporate
Governance Code, which has not undergone any changes.
Functiile si competentele Consiliului de Administratie sunt prevazute in Actul Constitutiv
(postat pe website-ul Societatii) si in regulamentul Consiliului de Administratie, ambele
fiind anexate Codului de guvernanta corporativa al Societatii (http://www.electrica.ro/
wp-content/uploads/2015/03/ELSA_RO_Corporate_Governance_Code_Feb2015.pdf)
http://www.electrica.ro/en/wp-content/uploads/2015/03/ELSA_EN_Corporate_
Governance_Code_feb2015.pdf
http://www.electrica.ro/en/wp-content/uploads/2014/07/EN_Electrica-Articles-of-
Incorporation-updated-18-December-2014.pdf
http://www.electrica.ro/en/wp-content/uploads/2015/03/ELSA_EN_Corporate_
Governance_Code_feb2015.pdf
http://www.electrica.ro/en/electrica-s-a-administration/
X
The information relating to the biographies of the Board members and of the executive
management may be accessed in the documents presented to the General Meeting of
Shareholders dated 22 September 2014. Nevertheless, there is no section dedicated
to this requirement yet. The Company’s website is constantly being updated, and the
Company will endeavour to fulfil this requirement.
The Company has not issued several classes of shares nor bonds.
207
”COMPLy Or exPLAiN” sTATeMeNT
PrOViDeD By THe COrPOrATe gOVerNANCe CODe Of BuCHAresT sTOCk exCHANge 27 APriL 2015
2014
annual
report
Principle/
Recommendation
question
yes
no
If nOT, please explain
P3
r4
Does the Company publish on the website details of the General Meeting of
Shareholders:
a) the General Meeting of Shareholders convening notice?
b) materials/documents related to the agenda, as well as any
information on the agenda?
c) special power of attorney forms?
Has the Company prepared and proposed to the General Meeting of
Shareholders procedures for a proper and efficient performance of the
General Meeting of Shareholders meetings without any damage to the right
of any shareholder to express its free opinion on the debated topics?
r6
r8
Does the Company publish on its website details of the shareholders’ rights
as well as rules and procedures for attendance at the General Meeting of
Shareholders?
Does the Company inform in due time (immediately after the General
Meeting of Shareholders meetings) all shareholders by means of the special
section of its own website:
a) on the resolutions made within the General Meeting of Shareholders?
b) on the detailed result of the vote?
Does the Company publish in a special section of its own website, that is
easy identifiable and accessible:
a) current reports/announcements?
b) the financial calendar, annual reports, half year and quarter reports?
r9
Is there within the Company a special department/person dedicated to
investor relations?
X
X
X
X
X
X
X
X
http://www.electrica.ro/en/investor-relations/general-meeting-of-shareholders/
http://www.electrica.ro/en/investor-relations/general-meeting-of-shareholders/
http://www.electrica.ro/en/investor-relations/general-meeting-of-shareholders/
X
X
Although the Company has yet to prepare procedures for the proper and efficient
performance of the General Meeting of Shareholders meetings, they are performed in
accordance with the applicable laws, the Articles of Incorporation and the provisions of
the convening notice, granting to any shareholder the right to express its free opinion
on the debated topics.
The shareholders’ rights are provided both by the law and by the Articles of
Incorporation published on the Company’s website separately and attached to the
Corporate Governance Code. Nevertheless, the Company’s website does not have a
separate section dedicated to the shareholders’ rights.
Although the Company has yet to prepare procedures and rules for attendance at the
General Meeting of Shareholders, the shareholders’ attendance is made in accordance
with the applicable legal provisions, the Articles of Incorporation and the provisions of
the convening notice, observing the shareholders’ rights.
http://www.electrica.ro/en/investor-relations/press-releases/
http://www.electrica.ro/en/investor-relations/press-releases/
http://www.electrica.ro/en/investor-relations/financial-calendar/
http://www.electrica.ro/en/investor-relations/investor-relations-contact/
208
”COMPLy Or exPLAiN” sTATeMeNT
PrOViDeD By THe COrPOrATe gOVerNANCe CODe Of BuCHAresT sTOCk exCHANge 27 APriL 2015
Principle/
Recommendation
question
P4, P5
r10
Does the Board of Directors meet at least once every quarter in order to
monitor the Company’s activity?
r12
Does the Company have a set of rules referring to the reporting conduct
and obligations of transactions with shares or other financial instruments
issued by the company (“company’s securities”) made on own account by
directors or by related parties?
If a member of the Board of Directors or a member of the executive
management or any other related party carries out on its own a transaction
with the Company’s shares, is such transaction shared on its website,
according to the applicable rules?
Does the organization of the Company’s Board of Directors provide a balance
between executive and non-executive members (and especially non-executive
independent directors) so that no person or group of persons may generally
dominate the decision-making process of the Board of Directors?
Does the organization of the Board of Directors provide a sufficient number
of independent members?
In its activity, does the Board of Directors have the support of the advisory
commissions/committees for analysing and providing advice on specific
subjects chosen by the Board of Directors?
Do the advisory commissions/committees forward activity reports to the
Board of Directors on their specific subjects?
Does the Board of Directors use the evaluation criteria listed in
Recommendation 16 for the independence assessment of its non-executive
members?
Do the members of the Board of Directors permanently improve their
knowledge through training/formation in corporate governance?
Are the members of the Board of Directors selected subject to a transparent
procedure (objective criteria regarding the personal/professional
qualification etc.)?
Does the Company have a Nomination Committee?
P6
P7
P8
r15
r16
r17
P9
P10
X
X
X
X
X
X
X
X
X
2014
annual
report
yes
no
If nOT, please explain
As per the Articles of Incorporation the Board of Directors meets at “Electrica’s”
headquarters once a month or whenever required, upon being convened by the
president of the board of directors, by at least two members of the Board of Directors
or by the General Manager.
The Company’s Corporate Governance Code contains a set of general rules referring to
the obligations to report transactions and also referring to the restrictions relating the
regime of privileged information.
The Company will take the necessary measures to implement a set of specific rules for
this type of transactions.
The Company’s website is constantly being updated, and the Company will endeavour
to fulfil this requirement.
X
X
All members of the Board of Directors are non-executive.
As per Article 17(1) of the Articles of Incorporation: “Electrica” is managed by a board
of directors having 5 directors elected by the General Meeting of Shareholders of the
Company out of which at least 3 directors need to be independent and non-executive. […]
http://www.electrica.ro/en/wp-content/uploads/2015/03/ELSA_EN_Corporate_
Governance_Code_feb2015.pdf
As per the Charter of each committee.
Members of the Board of Directors have been appointed as per the independence
requirements provided by the Articles of Incorporation transposing Recommendation
16 of the Corporate Governance Code of the BSE.
As per Article 3 of the Charter of the Board of Directors.
Members of the Board of Directors have been appointed in accordance with the
requirements of the Articles of Incorporation which imposes a transparent procedure
and eligibility criteria.
209
”COMPLy Or exPLAiN” sTATeMeNT
PrOViDeD By THe COrPOrATe gOVerNANCe CODe Of BuCHAresT sTOCk exCHANge 27 APriL 2015
2014
annual
report
Principle/
Recommendation
question
yes
no
If nOT, please explain
P11
r21
Does the Board of Directors review at least once a year the need to set up a
Remuneration/Remuneration Policy Committee for the directors and for the
members of the executive management?
Is the remuneration policy approved by the General Meeting of
Shareholders?
r22
r24
Does the Remuneration Committee consist exclusively of non-executive
directors?
Is the company remuneration policy provided in the By-laws /Corporate
Governance rules?
P12, P13 r25
Does the Company supply information, in the English language, which are
provided by the reporting requirements as:
a) periodic information (periodical information supply)?
b) continuous information (continuous information supply)?
Does the Company prepare and provide financial reporting according to
IfrS as well?
Does the Company facilitate, at least once a year, meetings with financial
analysts, brokers, rating agents and other market specialists, with the view
of presenting financial elements that are relevant for making investment
decisions?
Is there an Audit Committee within the Company?
Does the Board of Directors or the Audit Committee, as the case may
be, investigate on a regular basis the efficiency of the financial reporting,
internal control and risk management system as adopted by the Company?
Does the Audit Committee comprise strictly non-executive directors and is
there a sufficient number of independent directors?
Does the Audit Committee meet at least twice a year; are these meetings
dedicated to drafting and providing to the shareholders and to the public
the half-year and annual results?
Does the Audit Committee make recommendations on the selection,
appointment, re-appointment and replacement of the financial auditor, as
well as on its remuneration terms and conditions?
r26
r27
r28
r29
r30
r32
X
X
X
X
X
X
X
X
X
X
X
X
X
There already exists a Nomination and Remuneration Committee incorporated
under the Company’s Articles of Incorporation (Article 18 item C of the Articles of
Incorporation).
The nomination and remuneration policies are approved by the Board of Directors
at the suggestion of the Nomination and Remuneration Committee however the
remuneration of the Board of Directors is established by the General Meeting of
Shareholders.
Electrica is currently preparing the nomination and remuneration policy and this policy
will be included in the Corporate Governance Code immediately after being completed.
The Company organizes quarterly presentations for financial analysts, brokers, rating
agencies and other market specialists, with the view of presenting the financial
elements relevant for making investment decisions.
All directors of the Company are non-executive and the majority of the members of the
Board of Directors are independent.
It was not the case so far but these meetings will to take place in 2015.
It was not the case so far; external financial auditor was appointed by the Board of
Directors for a period of two years in the first meeting of the Board of Directors of 14
October 2014 in which it was established the Audit Committee as well.
210
”COMPLy Or exPLAiN” sTATeMeNT
PrOViDeD By THe COrPOrATe gOVerNANCe CODe Of BuCHAresT sTOCk exCHANge 27 APriL 2015
2014
annual
report
Principle/
Recommendation
question
yes
no
If nOT, please explain
P14
P15
r33
P16
r34/ r35
P17
r36
Has the Board of Directors adopted a procedure with the view of identifying
and proper settlement of the conflicts of interest?
Do the directors inform the Board of Directors on the conflicts of interest
as they occur and do they refrain from the debates and the vote on those
matters, according to the relevant legal provisions?
Has the Board of Directors adopted the specific procedures in order
to secure fair procedures (criteria for identifying material transactions,
transparency criteria, objectivity criteria, non-competition criteria etc.) for
the scope of identifying related parties transactions?
Has the Board of Directors adopted a procedure on the internal flow
and disclosure to third parties of information related to the Company,
with emphasis on information that can influence the market price of the
securities issued by it?
P18
r37/ r38 Does the Company perform activities related to Social and Environment
responsibility?
X
X
X
X
http://www.electrica.ro/en/code-of-ethics-and-professional-conduct/
http://www.electrica.ro/en/code-of-ethics-and-professional-conduct/
X
At the level of the Company there are general principles with respect to approving
certain transactions, however at the present time no such specific set of procedures has
been prepared.
The Company will take the required measures in order to implement a set of specific
procedures in view of the above.
There are two sets of guidelines referring to the flow of information and documents
(one set is concerned with the regime of privileged information and abuse on the
market and the procedure regarding integrity) both attached to the Corporate
Governance Code (http://www.electrica.ro/en/wp-content/uploads/2015/03/ELSA_EN_
Corporate_Governance_Code_feb2015.pdf).
Since the Company’s website is constantly being updated, some of the links listed above may become inoperable in the near future. Also the Company does not
assume any obligation to update this statement following the changes to the website.
211
declaration of the management
We confirm to the best of our knowledge that the consolidated financial statements, prepared in accordance
with the applicable accounting standards, give a true and fair view of the financial position of the Group, its
financial performance and cash flows for the year ended December 31, 2014, and that the Directors‘ report
gives a true and fair view of the development and performance of the business of the Group, together with a
description of the main risks and uncertainties associated with the expected development of the Group.
Victor cionga
non-executive director,
Chairman of the Board of Directors
michael Boersma
non-executive director
arielle malard de r othschild
non-executive director
cristian Busu
non-executive director
Victor Vlad grigorescu
non-executive director
ioan r osca
General Manager
annual report2014