E L E C T R I C A S A A N N U A L R E P O R T 2 0 1 6 | 1
ANNUAL REPORT 2016
Key Figures -Electrica
Group 2016
p. 5
Message from CEO
Electrica S.A.
p. 10
Consolidated Directors’
Report for the year 2016
p. 12
Consolidated Financial
Statements for the year
ended - 31 December
2016
p. 115
Separate Financial
Statements for the year
ended - 31 December
2016
p. 223
Independent Auditors’
Report (Consolidated)
p. 116
Independent Auditors’
Report (Individual)
p. 260
Directors’ Report for
2016 - Societatea
Energetica Electrica S.A.
p. 185
Declaration of the
Management
p. 267
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LUMINA SCRIE POVESTEA
VICTORIEI
ANNUAL REPORT 2016
ELECTRICA GROUP
GROUP KEy FIGURES
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Key Figures Electrica Group
DISTRIBUTION ACTIVITY
Operational results
2014
2015
2016
Distributed energy (Twh)
Number of users (mil.)
Supplied energy on retail (Twh)
Number of customers (mil.)
Number of employees at period end
Financial results
Revenues (mil. RON)
EBITDA (mil.RON)
EBIT (mil.RON)
Profit for the year attributable to the owners of the
company (mil. RON)
Net cash from operating activities (mil. RON)
Capital expenditures (mil. RON)
EPS (RON)
16.3
3.62
9.2
3.59
11,740
17.1
3.65
10.1
3.61
10,539
5.044
869
511
297
981
465
1.07
5.503
922
569
363
743
551
1.07
17.5
3.67
10.6
3.6
9,685
5.518
960
586
357
718
569
1.05
Electrica Significant Subsidiaries and Key Figures
Societatea de Distributie
a Energiei Electrice
Transilvania Nord S.A
1.25 mil users
Market share 11.6%
Revenues: RON 857 mil
EBITDA: RON 269 mil
Distributed volume: 5.1 TWh
Societatea de Distributie
a Energiei Electrice
Transilvania Sud S.A
1.12 mil users
Market share 13.3%
Revenues: RON 790 mil
EBITDA: RON 256 mil
Distributed Volume: 5.8 TWh
Societatea de Distributie a
Energiei Electrice Muntenia
Nord S.A
1.30 mil users
Market share 15.4%
Revenues: RON 801 mil
EBITDA: RON 227 mil
Distributed Volume: 6.6 TWh
SUPPLY ACTIVITY
ENERGY SERVICES ACTIVITY
Electrica Furnizare (EF)
3.60 mil consumers
Market share 22.6%
Revenues: RON 4,432 mil
EBITDA: RON 185 mil
Supplied volume on retail market: 10.6 TWh
Electrica Serv (ES)
Revenues: RON 365 mil
EBITDA: RON 17 mil
Summary Consolidated Financials
Consolidated Revenues
(RON mil)
Adjusted EBITDA (RON
mil) and Adjusted EBITDA
Margin (%)
Net Profit (RON mil)
Revenues from Green
Certificates
Revenues (ex-Green
Certificates)
EBITDA
EBITDA Margin
Group Net Profit
Net Profit Margin
Net Debt (Net Cash)
Capital Structure: Net Debt / (Net
Cash) Position (RON mil)
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Earnings and gross dividends per share (RON)
Distributed Volumes (TWh)
Supply market share (22.55% overall) – September 2016
Regulated market
Competitive market
Capital expenditures 2014 – 2016 (RON mil)
The structure of Electrica Group’s investments in 2016
Other
20,1
Studies
13,4
Quality of
Energy
38.1
Independent
Equipment
34
Energy Efficiency/CPT
145.1
Continuity of supply
247.7
Operational Efficiency
54.6
Volumes of electricity supplied on retail
market (TWh)
Regulated market
Competitive market
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2016 was a challenging year for the
entire energy market in Romania and
elsewhere. Now, we can conclude
that Electrica reacted very well to
these challenges, the results recorded
at Group level being noteworthy in
this context, on certain segments,
such as, for example, improvement of
operational performance.
Investments made in our distribution
networks, in improving the services
provided, and intensification of cost
optimization programs have allowed
us, on the one hand, to meet our
commitments to all stakeholders, and
on the other to maintain a sound
financial position.
Keeping these strategic lines, I am
convinced that Electrica has great
chances to perform as well in the
coming years, being advantaged by
the fact that it has a very important
tradition in a vital business area for
what the modern world means.
Moreover, Electrica has at least one
other important asset, an outstanding
investment availability. This is a great
advantage and we will try to use these
resources as well as possible. We
know that expectations are high from
shareholders, customers, employees,
probably also from authorities, and
therefore we have very ambitious plans.
First, as we have committed in the
company’s listing prospectus, we plan
to finance our own investment projects
and we have a plan providing for
approximately EUR 55-60 mln each year,
at least in the following two years, for
each distribution company of the Group.
It means around EUR 170-180 mln per
year, an extremely ambitious target,
which in turn comes with a number
of challenges. For example, we are in
full implementation of a project for
the reorganization of the investment
process, to be able to basically double
investments from one year to the next.
At the same time, I assure you that we
are carefully analyzing the opportunities
we have in the market because,
naturally, we are trying to get a better
use of the existing resources.
All these options should be prioritized
according to long-term added value they
can bring, while respecting a certain
financial discipline.
The terrible challenges in late 2016 and
early 2017, in the energy market, meant
lessons learned by both us, companies
activating in this business area, and also
authorities and even customers.
It is clear for everyone that, in the
supply segment, competition has reached
an unprecedented level. On the other
hand, it is clear that this competition
cannot go on forever solely on prices.
We must expand our horizons. That’s
also because people want more, and we
want to be able to provide customers
with integrated solutions, clearly at a
competitive price. This means developing
a new business, investments in
technology, by which to offer integrated
services, not only electricity.
Another aspect that concerns us with
priority is the operational and staff
safety and, in this regard, we have
taken measures to ensure the highest
standards in health and safety at work,
both for employees and for contractors.
Although I am convinced that 2017 will
not be an easy year, we maintain our
commitments to take all the necessary
measures to bring added value,
continuing to focus on what sustainable
performance means.
Catalin Stancu
CEO Electrica SA
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ELECTRICA GROUP
CONSOLIDATED DIRECTORS’
REPORT FOR ThE yEAR 2016
SUMMARy
Glossary
Identification details of the issuer
1 Results of Electrica Group in 2016
1.1 Key financial data
1.2 Key events in 2016
1.3 Key data by business
2 Electrica Group overview
2.1 General overview
2.2 Mission, vision, values
2.3 Key elements of the 2015 – 2018 Strategic Plan
2.4 Outlook
3 Operating activity
3.1 Operating segments
3.2 Procurement
3.3 Sales activity
3.4 Reorganization and disposal of assets
3.5 Personnel
3.6 Environmental considerations
3.7 Research and development activities
3.8 Risk management
4 Fixed assets
5 Capital market
6 Management of the Group
6.1 The Board of Directors of Electrica S.A.
6.2 The activity of the Board of Directors of Electrica S.A. and of its Consultative Committees
6.3 Boards of Directors of Electrica subsidiaries
6.4 Executive management of Electrica S.A.
6.5 Executive management of Electrica S.A. subsidiaries
6.6 Number of shares owned by the managers of the Electrica Group
7 Corporate governance
7.1 General Meeting of Shareholders
7.2 Corporate Governance Code
7.3 Implementing action plans undertaken by signing the framework agreement with EBRD
7.4 The action plan on corporate governance
7.5 The environmental and social responsibility plan
8 Financial overview
8.1 Consolidated statement of the financial position
8.2 Consolidated statement of profit and loss
8.3 Consolidated cash flow statement
9 Post balance sheet event
Appendix 1 – Litigations
14
15
16
16
18
23
26
26
28
29
30
32
32
35
35
40
40
43
44
45
50
54
58
58
62
69
71
71
73
74
74
75
75
76
78
81
81
86
92
94
95
Appendix 2 – Details of main investments in 2016 by the Electrica Group
Appendix 3 – Internal audit report for 2016
111
114
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GLOSSARy
ACER
ANRE
BPS
BoD
BRP
BSE
CAPEX
CCM
CEE
CGC
CIRED
Agency for the Cooperation of Energy
Regulators
Romanian Energy Regulatory Authority
Basis points
Board of Directors
Balancing Responsible Party
Bucharest Stock Exchange
Capital Expenditure
Component of the Competitive Market
Central-Eastern Europe
Corporate Governance Code
International Conference on Electricity
Distribution
Chief Information Security Officer
Centralised Market for Universal Service
The National Transmission System Operator
Chief Operating Officer
Corporate Social Responsibility
Own Technological Consumption
Distribution System Operator
Earnings before interest and tax
CISO
CMUS
CNTEE
COO
CSR
OTC
DSO
EBIT
EBITDA Earnings before interest, tax, depreciation and
amortization
Enel Distributie Banat
Enel Distributie Dobrogea
Enel Distributie Muntenia
Societatea de Distributie Muntenia Nord
Societatea de Distributie Transilvania Nord
Societatea de Distributie Transilvania Sud
Electrica S.A.
Extraordinary General Meeting of Shareholders
European Union
European monetary unit
The distribution subsidiaries in the Electrica
Group
Green Certificates
Gross Domestic Product
Global Depositary Receipts
General Meeting of Shareholders
Giga Watt hour
Government Decision
high Voltage
International Accounting Standards
International Financial Reporting Interpretations
Committee
International Financial Reporting Standards
Integrated Management System
EDB
EDD
EDM
SDMN
SDTN
SDTS
ELSA
EGMS
EU
EUR
FDEE
GC
GDP
GDR
GMS
GWh
G.D.
HV
IAS
IFRIC
IFRS
IMS
Initial Public Offering
Investor Relations
Key Performance Indicators
KiloVolt
Labour safety and health
Low Voltage
Medium Voltage
MegaWatt hour
National Agency for Fiscal Administration
Non-controlling Interests
National Electricity Network
Non-Governmental Organization
Nomination and Remuneration Committee
Ordinary General Meeting of Shareholders
IPO
IR
KPI
kV
LSH
LV
MV
MWh
NAFA
NCI
NEN
NGO
NRC
OGMS
OPCOM Romanian Gas and Electricity market operator
OTC
PCB
RAB
REMIT
Own Technological Consumption
Polychlorinated Biphenylsor
Regulated Asset Base
Regulation on Wholesale Energy Market
Integrity and Transparency
Return on Assets
Romanian monetary unit
Regulated Return Rate
ROA
RON
RRR
SCADA Supervisory Control And Data Acquisition
SDFEE
Societatea de Distributie si Furnizare a Energiei
Electrice
Shared Service Center
Tehnical, Economic and Socio-Administrative
TeraWatt hour
Unit of Measurement
United States Dollar
Value Added Tax
SSC
TESA
TWh
UM
USD
VAT
Identification details of the issuer
Report date: March 9th, 2017
Name of the Issuer: Societatea Energetica Electrica S.A.
Headquarter: no. 9, Grigore Alexandrescu Street, 1st District, Bucharest,
Romania
Telephone/fax number: +4021.208.5999; +4021.208.5998
Fiscal code: RO13267221
Trade Registry No: J40/7425/2000
Share capital: 3,459,399,290 RON subscribed and paid
Main characteristics 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 issues securities are traded: As at
December 31st, 2016 the Company shares are listed on the Bucharest
Stock Exchange and Global Depositary Receipts are listed on the London
Stock Exchange
ISIN
Bloomberg Symbol
Currency
Nominal Value
Stock Market
Ticker
Source: Electrica
Ordinary Shares
ROELECACNOR5
0QVZ
RON
10 RON
GDR
US83367y2072
ELSA:LI
USD
40 RON
Bursa de Valori Bucuresti REGS
London Stock Exchange MAINMARKET
EL
ELSA
Free translation, the Romanian version of the document will prevail in the event of discrepancies with the English version
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1 RESULTS OF ELECTRICA GROUP
IN 2016
1.1 Key financial data
In 2016, the financial results of Electrica recorded a
slight decrease compared to the previous year, mainly
driven by lower profitability of distribution segment
which was partially offset by a positive result of the
supply segment and of the services segment relating
to external distribution networks.
The Group’s income in 2016 and 2015 amounted
to RON 5,518 million and, respectively, RON 5,503
million. The increase in income by RON 15 million
or 0.3% in 2016 as compared to 2015 resulted from
gains after the deconsolidation of SE Moldova:
(RON mil.)
Income
Other income
Operational costs
Adjusted EBITDA2
EBIT
Profit before taxes
Net profit
Source: Electrica
2016
5,518
243
(5,175)
998
586
589
469
2015
5,503
211
(5,145)
925
569
589
482
20141
5,044
177
(4,710)
884
511
524
413
As presented in the charts below, the adjusted EBITDA
margin went up by 128 ppb in 2016 compared to
2015, while the net profit margin decreased with
3,0%.
On December 31st, 2016, the Company’s equity
structure presented a Net debt/(Cash) position3 of
minus RON 2,366 million, mainly influenced by the
funds obtained from the Company’s IPO on July 4th,
2014.
Figure 4
Net debt/ (Cash)
(RON mil.)
Figure 1
Consolidated income of
Electrica Group
(RON mil.)
Revenues from
Green Certificates
Revenues (ex-Green
Certificates)
Figure 2
Adjusted EBITDA
(RON mil.) and
adjusted EBITDA
margin (%)
EBITDA
EBITDA Margin
Figure 3
Net profit (RON mil.)
Group Net Profit
Net Profit Margin
Source: Electrica
Net Debt
(Net Cash)
LIqUIDITY
Cash and cash equivalents include cash balances,
demand deposits and deposits with maturity up to
three months from the acquisition date, which have
an insignificant exposure to the risk of change in fair
value and are used by the Group for the management
of short-term commitments.
December 31st
2016
2015
(RON mil.)
Bank current accounts
Call deposits
Cash in hand
Treasury bills and government bonds with original maturity
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
148
740
0.2
-
889
(143)
746
1,875
123
679
0.3
91
893
(66)
828
1,988
Deposits, treasury bills and government bonds include
treasury bills and government bonds amounting to
RON 1,758 mil, denominated in RON, with original
maturity of more than three months and average
interest rate of 0.63% (2015: 0.93%), as well as
deposits with a maturity of more than three months,
amounting to RON 117 mil within the following
banks: Citibank Europe PLC Dublin, Raiffeisen Bank,
BRD-GSG, Marfin Bank, ING Bank.
The decrease in value of deposits, treasury certificates
and government bonds by 6% compared to 2015 is
mainly determined by setting a collateral deposit of
RON 134 million to guarantee loans contracted by
distribution subsidiaries.
• Deposit, treasury bills and government bonds
have been presented as investments held until
maturity.
The Company strategy was to place IPO proceeds
in risk-free securities and short-term deposits.
•
1
3
Retreated due to the application of IFRIC 21 starting with 1 January 2015
2
The Company defines Group adjusted EBITDA as Group EBITDA adjusted for non-recurring events (i) consolidated impairment/
reversal of impairment of trade and other receivables, net and (ii) consolidated write down/reversal of write down of inventories,
net.
Net debt/(Cash) is defined as bank borrowings + bank overdrafts + financial leases + funding for concession agreements less cash
and cash equivalents, bank deposits and treasury bills and government bonds.
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1.2 Key events in 2016
THE MAIN EVENTS IN 2016:
CORPORATE GOVERNANCE RELATED:
f Starting July 4th, 2014 the Company’s shares
are listed on Bucharest Stock Exchange, and
the GDRs are listed on London Stock Exchange.
Following the admission to trading on the
regulated markets in Bucharest and London,
towards
Electrica has made major steps
aligning to the 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 ethics and professional conduct,
evaluating management through an external
party and
implementing a whistleblowing
policy.
f The most important decisions of the General
Meetings of Electrica’s Shareholders in 2016
(31st March 2016, 27th April 2016, 21st October
2016) refer to:
•
Approval of the budgets for Electrica and
its subsidiaries and of the consolidated
investment plan at the level of the Electrica
group (CAPEX plan) for the financial year
2016;
Approval of the financial statements and
profit distribution for Electrica and
its
subsidiaries for 2015;
Approval of the remuneration policy of
the members of the Board of Directors
of Electrica, valid for the entire period of
their mandates;
Approval of the framework management
agreement to be concluded by Electrica
with the BoD members;
Amendment of the Company name from
“Societatea de Distributie si Furnizare a
•
•
•
•
•
•
•
•
•
Energiei Electrice – “Electrica” S.A.” to
“Societatea Energetica Electrica S.A.“;
Re-appointment of KPMG Audit SRL as
auditor for 2016 and 2017 financial years;
Rejection of the sale of the automatic
meter reading system (AMR System) by
Electrica SA to its distribution subsidiaries;
Appointment of Mr. Willem Jan Antoon
henri Schoeber as an independent member
of the Board of Directors following the
vacancy of a position in the Board of
Directors of Electrica, with mandate valid
until December 14th, 2019;
Approval of
the consolidated annual
investment plan at Electrica group level
(CAPEX plan) corresponding to the 2016
financial exercise supplemented up to RON
844,619 thousands;
Approval of the proposals for amendment
of the Articles of Association of Societatea
Energetica Electrica S.A.
ELECTRICA’S NON-EXECUTIVE AND
EXECUTIVE MANAGEMENT RELATED:
f On January 13th, 2016 Electrica’s Board appointed
Mr. Cristian Busu as Chairman with a one-year
mandate and established three consultative
committees: Audit and Risk Committee,
Nomination and Remuneration Committee and
Strategy and Corporate Governance Committee.
f On February 10th 2016 Mr. Michael Boersma
renounced to his position of member of the
Board of Directors starting with May 1st 2016.
Following Mr. Michael Boersma resignation, on
April 26th 2016 the Board appointed Mr. Willem
Schoeber as temporary member of the Board
of Directors, starting with May 1st 2016. he was
confirmed as an independent member of the
Board of Directors by the General Meeting of
Shareholders held on October 21st, 2016.
f On February 26th, 2016 the Board of Directors
and Mr. Ioan Rosca reached a mutual agreement
to terminate his mandate as CEO of Electrica
no later than June 2016. On March 11th, 2016
the Board of Directors revoked Mr. Ioan Rosca
from the CEO position and appointed Ms.
Iuliana Andronache, current CFO, as interim
CEO of Electrica SA.
f On September 19th, 2016, the Board of
Directors of Electrica SA appointed Mr. Dan
Catalin Stancu as CEO of Electrica SA for a
mandate of four years starting with October
24th 2016.
f On October 4th, 2016 the Board revoked Ms.
Gabriela Marin from the position of executive
manager coordinating the Human Resources
Division of Electrica starting as of October 5th,
2016.
AMENDMENT OF ARTICLES OF
ASSOCIATION:
si
in
Electrica
Energetica
f Changing the name of the Company from
“Societatea
Furnizare
de Distributie
a Energiei Electrice – “Electrica S.A.” to
S.A.”,
“Societatea
mentioned
the Trade Registry under
no. 198016 from 28 April 2016. The name
changing was achieved following the request
ANRE to remove from the name “Distribution
and Supply Energy Company Electrica SA” the
words “distribution and supply” do not create
any confusion between the activity of Electrica
SA subsidiaries distribution on their separate
identities and the operator that provides
service delivery.
f Regarding the subsidiaries of Electrica Group,
on December 2016 were held the Extraordinary
General Meetings of Shareholders, which
amended the Articles of Association of these
Companies; moreover, were held Ordinary
General Meeting of Shareholders, which
amended the structure of BoD. For the supply
and distribution subsidiaries, the minority
shareholder challenged in court the above
mentioned resolutions decided in the General
Meeting of Shareholders.
for
the purpose of
regulatory authority,
compliance with the regulations in force (Law
No. 123/2012, the ANRE’s order No. 5/2015,
Directive 2009/72/EC). In this context, there
were adopted new visual identity elements
by the distribution companies within the
Group and were made arrangements for their
registration at OSIM.
f Changing the names of distribution subsidiaries
within
follows:
the Electrica Group as
“Societatea de Distributie a Energiei Electrice
Muntenia Nord”, “Societatea de Distributie
a Energiei Electrice Transilvania Nord” and
“Societatea de Distributie a Energiei Electrice
Transilvania Sud”.
f Specific tariffs for electricity distribution for
the year 2017 were approved by ANRE Orders
No. 112, 113 and 114/14.12.2016, smaller
ones than those from the year 2016. Lowering
the average tariff for distribution in 2016 and
2017 it is 3.44% to SDEE Transilvania Sud,
5.63% to SDEE Transilvania Nord and 7.54% to
SDEE Muntenia Nord.
f The regulatory authority has issued orders
that request from the distribution operators
further efforts with a view to compliance with
the new requirements: Order No. 8/23.03.2016
“procedure for elaboration and approval of
investment programs of economic operators
of the concessionaire electricity distribution”,
Order No.
“Performance
11/30.03.2016
Standard for electricity distribution”, Order
No. 26/22.06.2016 “Rule
for determining
the energy consumption technique proper
technological networks of public interest”.
f There have been prepared investment plans
for 2017 for the three distribution operators,
according to the Prospectus Offer and with the
new requirements stipulated by the regulatory
authority
in the ANRE Order No. 8/2016
“procedure for elaboration and approval of
investment programs of economic operators
of the concessionaire electricity distribution”).
The total value of investment plans accepted
by the National Regulatory Authority in the
field of energy (“ANRE”) for the current period
(2014-2018) is 3.2 billion lei (in nominal terms,
amount adjustable with inflation).
ETHICS AND qUALITY:
DISTRIBUTION ACTIVITY:
f In the second half of the year 2016, the
Group developed the process of rebranding
of the distribution operators within the group,
according to the timetable agreed with the
f Adopting policies regarding zero tolerance
of corruption, fraud and money laundering
and combating and avoidance of conflicts of
interest, gifts, protocol expenses and prohibition
of facilitation payments, transparency and
stakeholder engagement, in accordance with
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the Code of Ethics and Professional Conduct in
force at the Electrica level and its subsidiaries,
during 2016, as follows:
•
Electrica
S.A.,
Serv
Electrica
S.A,
Societatea de Distributie a Energiei
Electrice Transilvania Sud S.A. in January,
Electrica Furnizare S.A., Societatea de
Distributie a Energiei Electrice Muntenia
Nord S.A. Societatea de Distributie a
Energiei Electrice Transilvania Nord S.A. in
February, by decisions of the BoD;
Societatea Servicii Energetice Oltenia
S.A. in November, respectively Societatea
in
Servicii Energetice Muntenia S.A.
December,
administrator
decision.
special
by
•
THE C OMPLIANCE WITH STANDARDS
IN THE FIELD OF qUALITY-
ENVIRONMENTAL-HEALTH AND
OCCUPATIONAL SAFETY:
(IMS)
f In September 2016 at SE Electrica SA occurred
the certification of Integrated Management
System
for Quality-Environmental-
health and Occupational Safety according
international standards
to requirements of
“Quality management
ISO 9001:2015 –
systems. Requirements.”
ISO 14001:2015
– “Environmental management systems -
Requirements with guidance for use” and
OhSAS 18001:2007 – “Occupational health and
safety management systems. Requirements”
respectively;
the certification was made
certification organization DEKRA
the
by
CERTIFICATION, top global provider for audit
and certification services.
subsidiaries
implemented
f The
their own
(IMS)
System
Integrated Management
for
Quality-Environmental-health
and
Occupational Safety requirements according
to international standards ISO 9001:2008 –
“Quality management systems. Requirements”,
ISO 14001:2004 – “Environmental management
systems - Requirements with guidance for
use” and OhSAS 18001:2007 – “Occupational
systems.
health and
Requirements”. The certification was made
by SC SRAC CERT SRL, considering the core
activity of each subsidiary (distribution of
electric energy, electric energy supply and
energy maintenance services).
•
safety management
Continued operation and
continuous
improvement of Integrated Management
System effectiveness of SE Electrica SA
and subsidiaries was one of the main
objectives of the year 2016. In this regard,
elaborated/updated
every
subsidiary
•
to
records
core operational
documents (manuals, operational system
procedures,
system
procedures as well as work instructions)
Integrated
and
specific
Management System, according to
its
own organizational structure.
The management, by Policy Statement
in the fields of Quality, Environmental,
health and Occupational Safety, considers
that the Integrated Management System
is a top priority and a key factor for
maintaining SE Electrica SA and
its
subsidiaries as leaders in their respective
sustainable
domains of
development and in establishing policies,
strategies, programs and practices for the
management of processes and activities
for quality,
in a manner of respect
environment, health and occupational
safety.
activity,
in
SUPPLY A CTIVITY:
f During 2016 Electrica Furnizare
the
streamline
started,
and partially completed, a range of projects
to
internal
processes in order to increase the company
competitiveness,
for
the energy market that will be completely
liberalized.
therefore preparing
systems and
f The price liberalization calendar continued in
2016, the percentages of electricity purchased
on
for domestic
customers who have not used eligibility, were
as follows: 60% from 1st of January, 2016 and
70% from July 1st, 2016.
the competitive market
f On 1st of March 2016 came into force the
single model of electricity bill, approved by
ANRE Order no. 88/2015, which applies only
to the domestic and non-domestic customers
of the Suppliers of Last Resort.
f On 7th of April 2016 entered into force the
2nd phase of data collection of wholesale
energy market transactions by Agency for
the Cooperation of Energy Regulators (ACER),
according to the timetable for implementing
(EU) No 1227/2011 on
the Regulation
wholesale energy market
and
transparency (REMIT).
integrity
f In the second half of 2016, electricity regulated
tariffs applied by Suppliers of last Resort to
domestic customers that have not exercised their
eligibility, were maintained at the values in the
first half of 2016, while the competitive market
component tariffs (CPC), decreased on average
by 2.5% compared to period April to June 2016,
as approved by ANRE Notice 25/22.06.2016.
CORPORATE IMAGE:
f During 15th September
- 4th November, 2016,
Electrica carried out the
first integrated image
campaign in the history of
the company - “The story of
light”, with very good results,
in line with Management
expectations, it were being
involved: TV, online, national
and local press, outdoor,
transit, subway and PR.
f Electrica launched a new
corporate website, with a
fresh design and a user-
friendly structure and also
diversified and developed the
social media channels.
LUMINA SCRIE POVESTEA
SPECTACOLULUI
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f Transmission and system service tariffs were
reduced on average by 10.8% and 6.3%
respectively, compared to the first semester
of 2016, the ANRE Order 27/2016.
high
efficiency
for
cogeneration, was reduced by 12.7% compared
to the first semester of 2016, the ANRE order
24/2016.
contribution
f The
f On December 17th, 2014, European Commission
adopted the Regulation (EU) no. 1348/2014
regarding data reporting for the enforcement
of article 8th, paragraphs (2) and (6) of the
Regulation (EU) no. 1227/2011 of the European
Parliament and Council regarding the integrity
and transparency of energy wholesale market.
The regulation implies additional obligations
for the market players, among which the
obligation to report the details on wholesale
energy products sold on regulated markets,
including standard contracts and
trading
orders, correlated and uncorrelated by ACER.
The obligation to report the trading data
admitted on specialized platforms of regulated
markets came into force starting October 7th,
2015, while the obligation to report non-
standardized contracts on wholesale energy
market will come into force starting with April
7th, 2016.
in secondary
f Changes in primary legislation (adjustments to
Law no. 220/2008 through Law no. 122/2015)
legislation (ANRE Order
and
no. 101/2015) regarding the promotion of
electricity production from renewable energy
sources and the state aid scheme regarding
the exemption of some categories of final
consumers from the application of Law no.
220/2008.
f Retail sales of Electrica Furnizare decreased in
2016 by 2.2% compared to 2015.
f Electrica’s market share on the retail market
for January - September 2016 was 22.55%,
compared to 21.40% during the same period
of 2015.
f The
launch of the Centralized Market for
Universal Service
(“CMUS”): starting with
1st of April 2015, the electricity volumes
necessary for final clients eligible for universal
service were acquired based on the contracts
following simultaneous auctions
concluded
with decreasing bid on the Centralized Market
for Universal Service.
f B.R.P. Electrica client portfolio increase with
18% compared with the average number
of clients of 2015 as well as portfolio
diversification with suppliers, producers and
distributors.
EXPANDING BUSINESS PORTFOLIO:
f In October 2016, the first stop for fast loading
into operation,
electric vehicles was put
mounted
in a fuel distribution plant from
Romania (Bucharest - OMV Aerogarii), part of
a pilot project in the field of electro-mobility
initiated by Electrica and OMV Petrom, on the
basis of a Memorandum. In November it was
requested a funding from the Environmental
Fund Administration regarding the carry out of
the project “Infrastructure growing demands”
which involves installing the 6 fastchargers
outside of Bucharest.
1.3 Key data by business
DISTRIBUTION SEGMENT
Essential information
•
•
•
•
it
Electricity distribution in Romania
is controlled currently by eight
authorized electricity distribution
system operators (“DSOs”).
responsible
is
Each company
for
the exclusive distribution
of electricity in the region for
which
is authorized, under
a concession agreement with
the Romanian state through the
Ministry of Energy.
Electrica and Enel each own three
distribution companies, while CEZ
and Delgaz Grid (former E.ON)
own the remaining two.
Electrica is a key player in the
•
•
17.5 TWh of electricity distributed
in 2016, an increase of 2.6% as
compared to 2015.
40.3% market share
for
the
to
distribution of electricity
final users in 2015 (based on
distributed quantities according
to ANRE annual report of 2015).
electricity distribution
sector,
both in terms of areas covered
and number of users served.
The Regulated Assets Base (RAB)
in 2016 was RON 4,524 million.
195,760 km of electric
lines -
7,574 km for high Voltage (“hV”),
45,061 km for Medium Voltage
(“MV”) and 143,126 km for Low
Voltage (“LV”).
Total area covered: 97,196 km2,
40.7% of Romania’s territory.
3.67 million users in 2016 for the
distribution activity.
•
•
•
•
Figure 5: Romanian electricity
distribution map
three
The
electricity
distribution companies, part
of Electrica Group, delivered
electricity in 2016 to about
(or
3.67 million customers
a volume of more
than
17 TWh). Electrica’s DSOs
distributed about 40.3% of
the total electricity distributed
on a national level in 2015,
maintaining an average market
share of 39.5% during 2012-
2015, market share which is
expected to remain constant
in the following period.
Figure 6: Evolution in number of customers (thousands)
Source: Electrica
1925
1947
1953
Source: Electrica
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Figure 7: Quantity distributed (TWh)
Source: Electrica
KEY FINANCIAL INDICATORS
the
from
distribution
Revenues
segment decreased by RON 115
million, or 4.4%, to RON 2,498 million
in 2016, compared to RON 2,613
million in 2015. This was a direct
increase
consequence of decrease of
the
regulated distribution tariffs, in terms
in the distributed
of an
quantity with 2.6%.
The reduction of revenues and the
increase of costs of energy acquired
to cover network losses, have all led
to a decrease of RON 49 million or
6.1% of EBITDA for the distribution
segment.
The EBITDA margin decreased by 54
bps in 2016, from 30.96% in 2015 to
30.42% in 2016.
Figure 8: Revenues from distribution (RON mil.)
Figure 9: EBITDA – distribution segment (RON mil.)
Figure 10: Net Profit – distribution segment (RON mil.)
Source: Electrica
Figure 11: Net debt/(Cash) – distribution segment (RON mil.)
SUPPLY SEGMENT
Essential market data (ANRE Report
- September 2016)
•
•
•
The supply market is composed
of the regulated market and the
competitive market.
There are five last resort suppliers
on the regulated market.
The competitive market includes
108
the
last resort suppliers active on
the competitive segment of the
retail market) of which 101 are
relatively
(<4% market
share).
(including
suppliers
small
(ANRE
in 2016
the market
is
Electrica Furnizare
leader
in both the regulated and
competitive market, with a market
share of 38.87% and, respectively,
15.89%
report,
September 2016). As a comparison,
in 2015, Electrica Furnizare had a
regulated market share of 38.09% and
competitive market share of 14.72%
(ANRE report in December 2015). In
2016, the total electricity supplied by
Electrica increased by approximately
5.4% compared to 2015.
The company experienced a
13.4% increase in the quantity
of electricity sold on the
competitive market, as an effect
of attracting new customers
through advantageous price
offers and in line with market
conditions regarding customers
switching from the regulated to
the competitive market.
The net revenues (excluding revenues
from Green Certificates) from the
supply activity decreased by RON 110
million or 2.7% to 4,031 million RON
in 2016, from RON 4,141 million in
2015. This was caused by a deacrease
of 4.7% in the supply tariffs for 2016
due to increased competition on the
electricity supply market, given that
the supplied quantity went up by
5.7%.
From a financial point of view,
Electrica presented an EBITA increase
of 12.1% and a growth in cash of RON
127 milion in 2016 compared to 2015.
This evolution
is explained by an
increased profitability, resulting mainly
from the acquisition of electricity at a
lower price during the year (decrease
of 3% in average acquisition price of
2016 compared to 2015).
The supply segment has a strong
financial position, namely a cash
position of RON 465 million, influenced
by strong financial results in 2016.
Figure 12
Revenues for the supply segment (mil. RON)
Revenues
Revenues from Green Certificates
Source: Electrica
Figure 15
Net debt/ (Cash) for the supply
segment (mil. RON)
Figure 13
EBITDA for the supply segment
(mil. RON)
Figure 14
Net profit of the supply
segment (mil. RON)
EBITDA
EBITDA Margin
Group Net Profit
Net Profit Margin
Net Debt (Net Cash)
Source: Electrica
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2 ELECTRICA GROUP OVERVIEW
2.1 General overview
shareholder
the majority
Transilvania Nord
Societatea Energetica Electrica S.A.
(“Electrica S.A.” or “The Company”)
in
is
Societatea de Distributie a Energiei
Electrice
S.A.
(“SDTN”), Societatea de Distributie a
Energiei Electrice Transilvania Sud S.A.
(“SDTS”), Societatea de Distributie
a Energiei Electrice Muntenia Nord
S.A.
(“SDMN”), Electrica Furnizare
S.A. (“Electrica Furnizare”), Electrica
Serv S.A. (“Electrica Serv”), Servicii
Energetice Oltenia S.A. (“SE Oltenia”),
Servicii Energetice Muntenia S.A. (“SE
Muntenia”),
representing
together
“the Group” or “Electrica Group”.
On December 31st, 2015, the Company
held all the shares in Servicii Energetice
Moldova (“SE Moldova”), but starting
with January 2016 it has lost the
control over SE Moldova, as a result
of the company entering bankruptcy
proceedings and consequently, the
company was not consolidated in the
financial statements.
The registered office of the Company is
9 Grigore Alexandrescu Street, District
1, Bucharest, Romania. The Company
has the unique registration number
13267221 and the Trade Register
registration number J40/7425/2000.
In accordance with the Order no.
627/2000, the Romanian Government
of
approved
Societatea Energetica Electrica S.A.
establishment
the
As at December 31st, 2016, the biggest
shareholder of Electrica S.A. is the
Romanian State, represented by the
Ministry of Energy (48.78%), after its
ownership was diluted following the
initial public offer in 2014. The second
shareholder, based on the share of
ownership, is EBRD with 8.66%.
Figure 16: The Group’s subsidiaries at 31st December, 2016
SDTN
SDTS
Electrica
Serv
Electrica
Furnizare
Source: Electrica
SE
Oltenia
SUPPLy ACTIVITy
DISTRIBUTION ACTIVITy
ENERGy SERVICES ACTIVITy
SDMN
SE
Muntenia
The Group’s subsidiaries are presented below:
Subsidiary
Activity
Registration code
Headquarters
% stake as of
December 31st,
2016
Societatea de Distributie a
Energiei Electrice Muntenia
Nord S.A.
Electricity distribution
in North Muntenia
geographical area
Societatea de Distributie
a Energiei Electrice
Transilvania Nord S.A.
Societatea de Distributie
a Energiei Electrice
Transilvania Sud S.A.
Electricity distribution in
Northern Transylvania
geographical area
Electricity distribution
in Southern Transylvania
geographical area
Electrica Furnizare S.A.
Electricity supply
Electrica Serv S.A.
Servicii Energetice
Muntenia S.A. (in
restructuring)
Servicii Energetice Oltenia
S.A. (in restructuring)
Servicii Energetice Moldova
S.A. (in bankruptcy)
Servicii Energetice
Dobrogea S.A.* (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)
14506181
Ploiesti
78.0000021%
14476722
Cluj-Napoca
77.999999%
14493260
Brasov
78.0000019%
28909028
17329505
Bucharest
Bucharest
77.9999700%
100%
29384120
Bucharest
100%
29389861
Craiova
100%
29386768
Bacau
29388378
Constanta
n/a
n/a
*) Electrica S.A. has lost control over Servicii Energetice Dobrogea S.A. starting with January 2015, and over Servicii Energetice Moldova
S.A. starting with January 2016, due to the commencement of bankruptcy proceedings of the subsidiaries.
Source: Electrica
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
North Transylvania (Cluj, Maramures,
Satu Mare, Salaj, Bihor and Bistrita-
Nasaud counties), South Transylvania
(Brasov, Alba, Sibiu, Mures, harghita
and Covasna counties) and North
Muntenia (Prahova, Buzau, Dambovita,
Braila, Galati and Vrancea counties),
operating with transformation stations
and power lines ranging from 0.4 kV
to 110 kV.
invoice
the electricity distribution
service to electricity suppliers (mainly
to Electrica Furnizare subsidiary, the
in North
main electricity supplier
Muntenia, North Transylvania and
South Transylvania), which
further
invoice the electricity consumption to
final consumers.
last
resort
is the supplier
Electrica Furnizare
of
(“FUI” defined as
supplier designated by the regulatory
authority to deliver the universal
service of electricity supply under
specific regulated conditions) in North
Muntenia, North Transylvania and
South Transylvania areas.
the obligation to ensure the electricity
supply to the final customers which
have not exercised their eligibility right
(the right to choose their electricity
supplier).
The electricity supply for universal
service and last resort customers is
done based on regulated contracts,
with ANRE regulated prices, based
on regulated tariff for the last resort
customers and a “component of
(CCM)
the
substantiated by
resort
suppliers and endorsed by ANRE.
competitive market”
last
the
The
distribution
subsidiaries (SDTN, SDTS and SDMN)
Company’s
According to the regulations issued
by ANRE, suppliers of last resort have
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2.2 Mission, vision, values
2.3 Key elements of the 2015 – 2018 Strategic Plan
To continue succeeding over the long-term horizon, the Group has set its Vision, Mission and
Values, which represent the foundation for formulating and implementing its corporate goals,
objectives and business strategy.
leading position
VISION
The Group’s vision is to expand
the
its
electricity
and
supply market segments, both
nationally and regionally.
distribution
in
MISSION
The mission of the Group is to
deliver long term value to our
shareholders by distributing
and
electricity
exceptional
and
services to our customers, in
a safe, reliable, affordable and
sustainable manner.
supplying
providing
VALUES
The values exercised across
all structures of the Group
are presented
in the figure
below. The Group established
these values as guiding lines in
achieving its strategic objectives
and communicating them to
both
internal and external
interested parties. They reflect
the Group’s commitment to
create an internal environment
integrity and ethics
where
corporate
represent
culture’s
and
are based on an open and
transparent
communication
approach.
fundamentals
the
Figure 17: Electrica Group Corporate Values
The Strategic Plan for the period
2015-2018, reflecting the Board’s vision
concerning managing
the activities
in the stakeholders’ best interest at
the time, both on a long-term and a
short-term basis, had been formulated
following an analysis of the following
areas:
•
The external environment,
to
determine the main environmental
factors affecting this industry and
the key drivers that can shape the
future of the electricity market;
Industry analysis, in order to identify
future trends in the energy market,
assess the market attractiveness
and determine the critical success
factors for competing and surviving
in this market;
Internal analysis of the Group,
its past and current
to assess
performance
to other
market players).
(relative
•
•
•
•
committed
a
Ensuring
qualified workforce.
The
highest
corporate governance.
standards
and
in
The strategic action plans defined by
the Electrica Board:
• Overall financial performance of
•
the Group.
Excellence in financial processes
management.
• Overall operational performance
of the Group.
• Quality of services provided.
•
by
and
productivity
Employees’
support of their development.
Implementation
the
subsidiaries of the distribution
segment investment programme.
Corporate
and
enhancement of our sustainability
profile.
Governance
•
•
Based on the above analysis, the
Board has formulated the corporate
and business strategies of Electrica
with respect to the Group, and has
set out the strategic objectives and
the action plan with measures that
the Board intends to undertake.
Electrica’s
strategic
corporate
directions with respect to the
Group are the following:
•
and
enlarge
Preserve
the
distribution and supply segments
in Romania.
Explore potential opportunities
to expand the distribution and
supply segments in the region.
Enlarge
the
business, by developing “value-
to
added
distribution and supply activities,
which
to
be
customers.
the portfolio of
services”
offered
related
can
•
•
Source: Electrica
efficiency and quality.
• Divest the unprofitable business
segments and activities.
Electrica Group`s business strategy
addresses three key success factors
in its implementation:
• Operational
excellence
for
Under the action plan, Electrica
strives to:
•
by
and
a n d
and
all
transparency
with
Restructure its activities in all
Group companies with a view
to address all seven strategic
objectives
e n s u r e
S u p p o r t
the
implementation
subsidiaries of the distribution
investment plan.
Increase
communication
stakeholders.
implement
Identify
measures aimed
reduce
to
headcount to achieve peers’
performance.
Train
and
capitalise on their potential,
expertise and capabilities to
increase labor productivity
Reinforce
Group’s
capablities
management
by
and
training,
selective recruitment of new
managers, also from outside the
Group.
Continue the implementation of
the Corporate Governance Action
Plan agreed with EBRD.
personnel
coaching
the
the
•
•
•
•
•
•
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•
•
•
•
•
2.4 Outlook
The energy 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’ RRR
was reduced to 7.7% from 8.52%. Also,
ANRE Order no. 165/2015 has modified
art. 105 para. 1 from the Methodology
of establishing the electricity distribution
tariffs, eliminating the cap regarding the
maximum percentages by which the
distribution tariffs could be lowered,
keeping however the limits concerning
the maximum percentage increase in
these tariffs.
including
ANRE’s changes of the distribution tariff
setting methodology,
the
change in remuneration (i.e., the RRR)
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.
Other significant Romanian legislation
changes, relevant for the supply activity,
refer to:
Although these changes had the overall
aim of converging
the Romanian
legislation towards EU legislation, the
process has not been yet 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.
The Framework Strategy for a European
Energy Union, adopted on 25 February
2015 will highly influence the energy
markets in all countries. The Energy
Union
long-
is based on the three
established objectives of EU energy
policy and focuses on five mutually
supportive dimensions: energy security,
solidarity and trust; a fully integrated
internal energy market; energy efficiency
as a contribution to the moderation of
energy demand; decarburization of the
economy;
innovation and
competitiveness.
research,
Considering the EU energy policies which
have been developed, the following
trends are expected to characterize the
Romanian electricity market:
the universal
• Organising a centralized market
service –
for
according
to ANRE Order no.
65/2014, which, beginning with
the
second quarter of 2015
aimed to implement a transparent
and
competitive mechanism
for electricity acquisition by the
suppliers of last resort for covering
invoiced using
the consumption
the CPC tariff in the case of the
universal service beneficiaries.
Approval of the methodology for
establishing the tariffs applied by
the last resort suppliers to final
customers – ANRE Order no.
92/2015, which, starting with the
second semester of 2015, set
out the calculation stages and
principles of these tariffs.
•
•
•
•
increase
completion
the
liberalisation
of
Through
timetable,
the
competition will
at
national level amongst electricity
suppliers. Regulated
electricity
tariffs will continue to be relevant
for households until January 2018
in Romania when they will be
eliminated completely and
the
Universal Service will be available
for vulnerable consumers.
A trend in electricity distribution
is remuneration of the
activity
into
operator which also takes
of
quality
the
consideration
their service, together with the
operational costs and efficiencies.
the green energy
To
sustain
the objectives
production and
due
to be met after 2020,
further investments for upgrading
necessary
the
networks
are
development
(transmission
distribution
and
networks) for integrating the green
energy production.
Future
of
technologies will support energy
efficiency policies such as:
• Development of transmission
and distribution networks,
including smart grid and smart
metering.
efficiency
energy
End-use
(thermal integrity of buildings,
lighting, electric appliances,
motor drives, heat pumps,
etc.).
•
distribution
light
Full electric vehicles,
and
vehicles
commercial
electrification
railways
of
are expected to increase the
consumption of electricity in the
transport sector.
Development of the transmission
and
infrastructure
and long-distance interconnection
will become a necessity. The
Electricity Market Target Model,
which implies the development of
Europe’s internal electricity market,
will continue to evolve and be
in
line with future trends and
challenges in the energy industry.
Distributed generation technologies
will force the distribution operators
to adapt their practices and to
offer solutions
independent
producers, considering the new
prosumers, which
active
participants in the energy market.
Future development of
smart
meters will expose consumers to
time-of-use pricing, which will lead
to greater flexibility and reduce
peak demand. Therefore, citizens
will be more informed and engaged
in the decision-making process as
active participants.
are
to
The following table presents key drivers of changes in the electricity market:
Key driver
Description
GDP evolution and
industry structure
Changes in
regulations
Technological
development
Increase in
environmental
awareness
Source: Electrica
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 Romanian legislation that of the EU. Although
important steps have been taken, other major changes are
expected to occur in the next decade, particularly following
the new Framework Strategy for a European Energy Union
which highlights the need for integration and cooperation
amongst member states. Also, changes of the methodology
during the regulatory period, indicate a lack of predictability
and stability of regulatory environment, with a negative
impact on the distribution operators’ operational and
financial performance.
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 more efficient
use of information.
Romania has adopted the EU 20-20-20 targets, aiming to
reduce greenhouse gas emissions, improve energy efficiency
and raise the share of renewable energy. Moreover, the
2030 Framework increases these targets and therefore more
efforts are needed from governments and market players to
achieve them.
Impact on
Electricity consumption
Electricity prices
Electricity prices and
consumption
Electricity prices and
consumption, regulatory
framework
industry
is
Moreover, the energy
currently analyzing ways
in which
distributors will accomodate changes
in their business model as a result of
the advent of the prosumer, namely
distribution
connected
customers
to the grid that also own small
descentralized electricity production
capacities. The negative impact of the
prosumer on distribution operators
returns, as
revenues
of the prosumer will partially (or
even entirely) grid costs invoiced by
distributors, will have to be mitigated
by appropriate regulatory measures,
such as fixed grid access fees.
the energy
For elaborating its Strategic Plan for
2015 – 2018, Electrica considered
the above mentioned factors when
formulating
goals,
objectives and strategy. The most
important assumptions which Electrica
considered are as follows:
corporate
its
•
•
•
•
•
the
timetable
Romanian GDP will have a
positive trend in the future and
electricity
consequently
consumption will increase at a
moderate pace.
The
legal framework will not
change
the
significantly and
will
liberalization
continue to be implemented in
its current form.
Romania will maintain
its
commitment towards achieving
the 20-20-20 strategy for climate
change and implement the new
Framework for the period 2020-
2030.
The remuneration mechanism for
distribution companies will not
change
significantly. However,
the tariff type and regulated rate
of return could be subject to
changes.
There will
geopolitical
no major
turbulences which
be
•
the
significantly
will
affect
Romanian electricity market.
remain
Financial markets will
stable and the availability of
finance
support
sources will
companies’ investment programs.
Please note that other factors not
presented above and not considered
by the Group may occur and may
impact on the
have a significant
implementation and evolution of the
Group’s strategy. If these assumptions
change, Electrica S.A. may update its
strategy to reflect these changes.
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3 OPERATING ACTIVITy
3.1 Operating segments
The operations of each reportable segment are summarized below.
Segments
Electricity supply
Operations
Purchasing electricity and supplying electricity to final consumers (includes
Electrica Furnizare and the trading and representation activity on the Balancing
Market as Balance Responsible Party – BRP Electrica)
Electricity distribution
Electricity distribution service (includes SDTN, SDTS, SDMN, Electrica Serv and the
investments in the distribution activity done by Electrica)
External electricity network
services
Repairs, maintenance and other services for electricity networks owned by other
distributors (includes SE Oltenia and SE Muntenia)
headquarters
Includes corporate services at parent level
Source: Electrica
The figure below shows the areas covered by the Group subsidiaries and the number of clients they serve.
Figure 18: The geographical coverage of the companies in the Electrica Group
Societatea de Distributie a
Energiei Electrice Transilvania
Nord
1.25 mil. users
Societatea de Distributie
a Energiei Electrice
Transilvania Sud
1.12 mil. users
Societatea de Distributie
a Energiei Electrice
Muntenia Nord
1.3 mil. users
DISTRIBUTION SEGMENT
distribution
segment
Electrica’s
operates through
its subsidiaries
SDMN, SDTN, SDTS and Electrica
Serv, the latter aimed at maintenance
and repair of distribution networks.
segment
distribution
is
The
limited geographically and by the
services provided. Thus, Electrica
the operator of electricity
is
in Transilvania Nord
distribution
(Cluj, Maramures, Satu Mare, Salaj,
Bihor, Bistrita-Nasaud
counties),
Transilvania
(Brasov, Alba
Sibiu, Mures, harghita and Covasna
and Muntenia Nord
counties)
region (Prahova, Buzau, Dambovita,
Braila, Galati and Vrancea counties),
operating transformer stations and
transmission lines with voltages of
0.4 kV and 110 kV.
Sud
The Group has exclusive distribution
licenses for these regions valid for
the next 11 years with extension
its distribution
clause. Within
business,
provides
Electrica
equipment maintenance services,
repair and other services for
its
network and to a smaller extent for
third parties.
Distribution segment contributes
with
the
operational profitability of Electrica.
the highest share
to
Electricity distribution is a regulated
in Romania and specific
activity
tariffs applicable
to distribution
services must be approved by ANRE
based on a “tariff basket ceiling’’
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), amended and
completed by ANRE Order no.
146/2014, Order no.112/2014 and
Order no.165/2015.
“tariff
basket
The
ceiling ”
methodology 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)
recorded
of
by the distribution operator, the
Distributor’s main source of profit
being the rate of return on capital
invested in the distribution activity.
controllable
costs
of
the
volumes
technological cost
The tariffs are annually adjusted
considering
operating
performance reached, including
the
distributed
electricity, amounts and acquisition
price of electricity to cover the
(“OTC”),
own
uncontrollable costs, change of
revenues
reactive energy
compared to the forecasted ones,
depreciation and forecasted capital
expenses, change of
forecasted
gross profit from other activities,
as well as the difference between
the return on assets determined by
RRR cut down from 8.52% to 7.7%,
with effect since January 1st, 2015.
from
A N R E O r d e r n o . 1 6 5 / 2 0 1 5
the
modified Art.105 para.1 of
Methodology of tariffs set up for
electricity
service,
in the sense of eliminating the
distribution
maximum percentages by which
the distribution tariffs could have
keeping
been
the percentage
in case of
distribution tariffs increase.
reduced, while
limits
the Group
The current regulatory period (“the
regulatory period”) within
third
is operating
which
has started on January 1st, 2014
and will end on December 31st,
2018. Both the current regulatory
framework, and the rules related
to RAB determination and
to
distribution tariffs are expected to
remain unchanged, at
least until
the end of 2018. ANRE sets up the
annual level of distribution tariffs in
RON per MWh for each distribution
company and for each voltage level
(high, medium and low). The tariffs
invoiced to clients are cumulated
depending on their related voltage
level (i.e. the tariff for medium
voltage also includes the tariff for
high voltage, and the tariff for low
voltage also includes the tariff for
high and medium voltages).
ANRE sets up the annual regulated
income levels required for each year
during the regulatory period, based
on projections submitted by the
distribution operators, in line with
the methodology
requirements,
at the beginning of the regulated
period.
Electrica Furnizare (EF)
3.6 mil. clients
Note: The diagram relates to the number of company’s clients on December 31st, 2016.
Source: Electrica
Starting January 1st, 2017, electricity distribution tariffs approved by ANRE
are as follows (RON/MWh):
Tariff (RON/MWh)
SDTN
SDTS
SDMN
Source: ANRE
ANRE Order no.
113/December 14th, 2016
114/December 14th, 2016
112/December 14th, 2016
High voltage
Medium voltage
Low voltage
19.05
20.63
14.79
41.93
41.01
33.67
96.73
103.73
109.35
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SUPPLY SEGMENT
the
The electricity supply segment operates
through Electrica Furnizare subsidiary,
both on
regulated electricity
market (in geographical regions where
the Group distribution segment
is
operating), and on the competitive
market at national level. The Group
has two supply licenses covering the
whole of Romania’s territory valid
until 2021 and 2022, respectively, and
extendable afterwards.
The electricity market is divided in
regulated market and competitive
market. On both markets, electricity
and/or purchased
can be
wholesale or retail.
sold
Regulated market
The
liberalization of the electricity
market in Romania started on January
1st, 2007, after the implementation
of the Second Energy Package of the
EU. The tariffs of electricity supply to
non-households consumers have been
fully liberalized and only the tariffs of
electricity supply to households are
still partially regulated by ANRE. The
households are free to change their
electricity supplier, still having access
to regulated tariffs of electricity supply
until this market will be fully liberalized
in 2018. Starting January 1st, 2014,
the tariffs of electricity supply to non-
households consumers are determined
by the market and freely negotiated. It
is possible that increasing competition
on this market segment which is no
longer under regulated tariffs will
determine consumers to switch their
electricity suppliers and may result in
an increased consumer’s migration to
the Group’s competitors.
as
the
supply market
The electricity
in
Romania could also record migration
within the segment of household
liberalization
consumers,
is progressing. however,
process
considering the
insignificant savings
that could be obtained by household
consumers
their
electricity supplier, the Management
expects a relatively small liberalization
effect over the household segment.
When the households segment will be
changing
from
completely liberalized, Electrica should
be able to offer packages of tariffs and
competitive and innovating services to
household consumers.
resort”
“supplier of
Electrica
last
Furnizare
Currently,
is
for
approximately 3.6 million consumers.
A supplier of
is, under
Energy Law, a supplier designated by
the regulatory authority to provide the
universal service of electricity supply
under specific regulated conditions.
last resort
Until 2018, when the liberalization of
the household segment is planned to
be completed, tariffs for households
must be approved each year by ANRE
based on the reported cost categories
as well as on regulated profit margin.
Tariffs are calculated
in order to
cover the cost of electricity (including
transmision costs, network services,
distribution costs and a regulated
profit margin).
records
Electrica Furnizare
supply
costs including costs of contracting,
database
billing,
management and costs of
IT and
telecommunications infrastructure.
collection,
bill
The methodology (ANRE Order no.
92/2015) provides for a percentage
of the profit from supply worth 1.5%
of the total cost of electricity supply
includes acquisition,
activity (which
transmission,
system
distribution,
services, and market operation and
supply costs) and an operation supply
in amount of 4.7 RON/client/
cost
month
in 2016. According to the
new methodology, ANRE can increase
the supply activity cost by the quota
of the occasional costs recorded by
Electrica Furnizare as a result of special
circumstances (such as re-contracting
based on ANRE Order no. 88/2015,
adjustment of IT systems to comply
with the latest regulations, losses from
receivables, etc.).
In 2016, the households were billed,
according to the calendar of regulated
tariffs elimination, at a tariff that
consists of a mix of regulated tariff
component and a “component of
the competitive market” (CCM). Non-
household clients, beneficiaries of
the Universal Service, were invoiced
at CCM tariffs, while those which did
not benefit from the Universal Service
were invoiced at tariffs of last resort for
100% of their achieved consumption.
The electricity supplied at regulated
tariffs
is acquired by means of
regulated contracts, with amounts and
prices set up by ANRE.
The electricity supplied at CCM tariffs
is acquired by means of bilateral
result
contracts concluded as a
tenders conducted on CMUS
of
(centralized market
for universal
services), respectively, by means of
bilateral contracts concluded on the
competitive market
for electricity
supply at last resort tariffs.
Any difference between the achieved
revenues and the costs plus profit
from the supply at regulated/CCM/
LR tariffs for the periods before the
regulated tariffs elimination will be
corrected during the next period of
tariffs substantiation applied to the
clients on regulated market.
The cost categories of the supplier of
last resort, which contribute to the
tariffs applied to the final clients up
to the level regarded as admissible by
ANRE, are:
•
•
•
•
•
•
to
and
to electricity
the system
functional
Acquisition costs of electricity.
Costs associated
transmission service.
Costs
related
technological
services.
Costs related to services provided
by the operator of the centralized
electricity market.
Costs
to
distribution services.
Costs related to electricity supply
to final consumers who have not
used their eligibility right.
electricity
related
• Occasional costs incurred by force
majeure (if applicable).
Competitive market
on
the
competitive
Trading
is transparent,
wholesale market
public,
non-
discriminatory. Prices may be
centralized
and
on
the
freely negotiated by the parties
on the competitive market. Market
participants can trade electricity on
the basis of bilateral agreements
concluded
dedicated
centralized market. Starting with
19th of July 2012, the Energy Law
does not allow
the conclusion
of electricity contracts outside
centralized markets, except
of
contracts for import / export of
energy.
BRP Electrica - Balancing Responsible
Party
Representation activity in the Balancing
Market as Balance Responsible Party
(“BRP Electrica”) was performed
by Electrica S.A. since 2005, and is
based on electricity supply license no.
1091/2012. This activity is compliant
with market mechanisms detailed in
the Commercial Energy Wholesale
Code.
type of activity and in terms of size, it
provides balance for over 28% of the
total consumption in NES.
Balancing Market, a component of
is
the wholesale energy market,
mandatory and each license holder
must delegate
its responsibility for
balancing to a BRP.
By delegating the responsibility to a
Balance Responsible Party there
is
an advantage of the aggregation of
the imbalances, in order to reduce
costs on Balancing Market compared
to when the producer / supplier /
distributor would be in its own name
as Balance Responsible Party.
SDMN, SDTS, SDTN and Electrica
Furnizare delegated their balancing
responsibility to BRP Electrica, thus
establishing
strategic partnerships
within the Group.
Electrica is group binder helping to
establish beneficial partnerships and
brand promotion of Electrica in the
electricity market.
ENERGY SERVICES SEGMENT
The Group’s portfolio also includes the
energy services segment (equipment
other
repair
maintenance,
additional services related to the
network), performed almost entirely
to distribution subsidiaries outside
the Group.
and
In 2016, the energy services segment
consists of SE Oltenia, SE Muntenia,
and until the end of January it also
included SE Moldova which went
bankrupt.
In Electrica Group, Electrica S.A. is
the only company that carries this
relationships with
By establishing
over 150
in all
areas of the wholesale market, BRP
license holders
3.2 Procurement
Electrica S.A. will continue its process of centralizing procurement within the Group, a process which will delegate the
centralized procurement to Electrica S.A. The objective is to reduce costs, optimize procurement and ensure a uniform
policy within the Group. This process of centralizing procurement will enable standardization of assets procurement and,
equally, will increase the integrity level.
3.3 Sales activity
The main factors influencing Electrica’s revenues are represented
by the distribution and supply segments.
In 2016, the
contribution, on one hand, of SDMN, SDTS, SDTN and Electrica
Serv, and, on the other hand, of Electrica Furnizare to Electrica’s
total revenues were 38% and 56%, respectively. In comparison,
in 2015, the contribution of the electricity distribution segment
and electricity supply segment to total revenues was 40% and
55%, respectively.
The Group’s distribution operators are natural monopolies in
their respective markets and as such, they hold 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 share (based
on the amounts of distributed electricity) held by the Group’s
subsidiaries in the electricity distribution segment, according to
the most recent ANRE report available.
Figure 19: Market share of distribution
segment in 2015
Source: ANRE
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REGULATED
MARKET
2016
COMPETITIVE
MARKET
2016
Although it holds a strong position on the electricity
supply market, Electrica Furnizare is facing growing
competition on its market.
•
The competitive segment comprises 108 suppliers
(including the last resort ones operating on the
competitive segment of retail market), of which
101 are relatively small (<4% market share).
The supply market consists of the regulated and
competitive segments:
•
The regulated segment comprises five supply
companies, each being part of a group
comprising also the corresponding distribution
operators.
The figure below shows the market shares of
Electrica’s supply business on September 30th, 2016
(based on the supplied quantities):
Figure 20:
Regulated Market, 2016
Figure 21:
Competitive Market, 2016
Source: ANRE report,
September 2016
Source: ANRE report,
September 2016
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The total number of consumers supplied by Electrica Furnizare was 3.60 million in 2016, with 149 points
of sale.
Figure 22: Volume of electricity supplied
on retail market (TWh)
Figure 23: Evolution in number of
consumers (thousand)
Major client exposure
BRP Electrica - Balancing Responsible Party
Electrica Furnizare does not have a significant
exposure to a certain client or group of clients that
could significantly influence its activity.
In 2016, 108 Balance Responsible Parties were set up
with Transelectrica S.A., with a total of 1100 licensed
participants.
legislation,
However, under Romanian
certain
electricity consumers, such as hospitals, ambulance
stations, schools, nursing homes, air or naval traffic
services are deemed of special importance, and
cannot be disconnected by the electricity supplier.
Moreover, the clients subject to the insolvency law,
can benefit from protection against creditors and,
perhaps, against electricity suppliers. Thus, the
electricity must be supplied by Electrica Furnizare,
even if they are in payment default.
At the end of 2016, 150 licensed participants (19
suppliers, 124 producers and 7 distributors) delegated
their responsibility to BRP Electrica, as compared to
2015, when 145 licensed participants were registered
with BRP Electrica.
Figure 26: Number of BRP Electrica members
Regulated Market
Competitive Market
Competitive Market
Regulated Market
Source: Electrica
Source: Electrica
Regulated
non-households
Competitive
eligible
Regulated
households
The number of members increased as a result of
promoting BRP Electrica high quality services, aimed
at attracting new clients (producers and distributors)
and clients from the portfolios of competing BRPs
(suppliers and producers).
Figure 27: BRP Electrica share with regards to
electricity consumption in 2016
Source: BRP Electrica
Figure 24
Consumers by volume of
electricity supplied, 2016
Source: Electrica
Figure 25
Consumers by revenues, 2016
Competition BRPs
BRP Electrica
Source: BRP Electrica
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3.4 Reorganization and
disposal of assets
Regarding distressed subsidiaries, the process of
reducing their activity was continued.
and
In 2013, the Company approved the
liquidation
procedure for three subsidiaries: SE Banat, SE
Dobrogea and SE Moldova.
•
consequently,
SE Moldova – entered bankruptcy in January
Company
2016,
the
has derecognized this subsidiary
from the
consolidation, given that it no longer had control
over it, and tenders have been organised by the
liquidator to capitalize the assets;
SE Dobrogea – entered bankruptcy in January
2015 and during 2016 there have been organised
•
•
•
•
tenders by the liquidator to capitalize the assets;
SE Banat - entered bankruptcy in August 2014
and during 2016 there have been organised
tenders by the liquidator to capitalize the assets;
SE Oltenia –
insolvency with reorganization
since May 2014. The reorganization plan was
approved by the Creditors’ Assembly in May
2015, confirmed by the court in June 2015
and extended by one year in December 2016
by the Creditor’s Assembly; SE Oltenia had 215
employees at the end of 2016;
SE Muntenia – insolvency with reorganization
since November 2014. The reorganization plan
in
was approved by the Creditors’ Meeting
November 2015, and confirmed by the court
in November 2015; SE Muntenia had 309
employees at the end of 2016.
3.5 Personnel
On December 31st, 2016, the Group counted 9,685 employees.
The table below provides an overview of employment in the Group, by business segments, on the
specified dates.
Electricity distribution
SDMN
SDTN
SDTS
Electrica Serv
Supply segment
Electrica Furnizare
Services related to other DSOs
SE
Headquarters
Electrica
Total
Source: Electrica
2014
9,386
2,156
2,011
1,874
3,345
1,217
1,217
988
988
149
149
2015
8,767
1,949
1,880
1,795
3,143
1,110
1,110
526
526
136
136
11,740
10,539
2016
7,978
1,872
1,817
1,720
2,569
1,041
1,041
524
524
142
142
9,685
The reduction in the number of Group employees
leave
during 2016 was due to the voluntary
program, plus retirements at age limit, disability and
termination of individual labour agreements due to
other causes (resignation, mutual agreement), as
well as reduction in the number of employees of
insolvency and deconsolidation of
subsidiaries
former subsidiaries went bankrupt.
in
On December 31st, 2016, about 55% of the Group’s
employees were directly productive personnel and
45% were indirectly productive personnel, including
technical, economic,
social and administrative
personnel.
The table below presents the Group’s employment by age, as follows:
December 31st, 2015
December 31st, 2016
Below 18 years old
18-30
31-40
41-50
51-60
over 60 years old
Total
Source: Electrica
0%
5.96%
19.47%
40.98%
29.49%
4.10%
100%
0%
5.96%
19.34%
42.90%
29.26%
2.54%
100%
On December 31st, 2016, about 98% of the Group’s
employees were members of trade unions and
their employment conditions were governed by a
Collective Labor Agreement, which was extended
for a period of maximum 12 months starting 1st of
January 2017 and submitted to the relevant labor
authorities in Romania. The Electrica Group did not
face strikes or other forms of labor conflicts that
might have interfered with the Group’s business.
In 2016, the mutual voluntary leave program with
compensatory payments has been continued at
Group level and it is valid until the end of 2017.
its subsidiaries prepared
The Company and
to: employment,
related
internal
regulations
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 employees’ professional appraisal and final
provisions.
training programmes conducted at
Electrica’s
Electrica
into account the constant
professional upgrading and skills improvement for
the Group’s employees.
level took
the principle of
The management supports
training and
trough continuous
development
actively takes part in involving the employees
within these programs and supporting them to
efficiently approach professional challenges.
HEALTH AND SAFETY AT WORK
health and safety at work within the Electrica
Group is considered part of the organization and
conduct of work processes and includes all actions
and measures aimed to accidents prevention,
occupational illness and improving work conditions.
legislation and aware of dangers,
A particular focus in achieving this safety status is
training of workers according to the requirements
in order
of
to eliminate the risk of injury or occupational
disease, identified by assessing the level of risk
in all workplaces. A total of 408,422 hours were
allocated in 2016 to training employees in health
and safety at work, fire emergency exercises
(including additional training, special courses and
first aid training). Professional training performing
in safe conditions is added.
The analysis and unitary development of the
Regulation of endowment and key
technical
specifications for individual protection equipment
in relation to the risks identified was a priority in
2016. This resulted in the call for procurement
in order to equip electricians with
individual
protection devices.
health and safety at work, in the Electrica Group,
is developed under
the OHSAS 18001/2009
standard of the integrated management system
for quality, environment, occupational health
and safety, which was externally audited in 2016,
without resulting in nonconformities. This provides
a unified compliance with legislation requirements
through procedures implemented at the level of
the companies, and also a continuous improvement
of the integrated management system.
Work accidents across the Electrica Group
implemented. Nevertheless,
At the level of the Group, following last year’s
event a policy of “zero tolerance to accidents”
in the course
was
of 2016 there were seven accidents, two on
the route accidents, of which one ended with
an unfortunate death, and five injuries due to
involuntary causes causing temporary disability
(aggression, car crash and careless walking or fall
to the same level). Compared with 2015 both the
number of accidents ended with death and those
causing temporary disability decreased. Also, the
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indicator for 2016
Thus, conditional aptitude
amounts to 11.45% of the total number of
employees. Calendar days of sick leave for common
diseases totalled less than 2.8% of working time
in the year 2016, i.e. less than 7 days (6.2 days)
of leave per employee, representing the national
average.
The main causes of temporary incapacity in granting
medical leave in 2016 were injuries outside the
workplace (sprains, fractures, and contusions),
cardiovascular disorders (hypertension, ischemic
heart disease, and chronic venous insufficiency)
malignancies, muscle
(arthrosis),
respiratory diseases, pregnancy and confinement,
digestive disorders, psychiatric disorders.
disease
health at work prevention was done through
medical examinations by doctors of occupational
medicine; psychological examinations; laboratory
tests; flu jab; training employees in occupational
first aid; checking and
health problems and
maintaining hygienic conditions.
3.6 Environmental considerations
The Group promotes environmentally friendly policies part of its activity and implementation of business strategy.
SE Electrica SA and its subsidiaries have implemented an Integrated Quality, Environmental, Occupational Health&Safety
Management System, which effectively manages environmental aspects associated with its processes, to prevent pollution
and increase environmental performance.
Management commitment, guidelines and general objectives of environmental protection are undertaken in the
Statement on Integrated Quality, Environmental, Occupational Health & Safety Management System Policy.
Annual capex budgets of the Group’s subsidiaries include environmental expenditure. In 2016 the
environmental expenditure at Group level amounted to RON 5.195 thousand, 7% up from 2015.
In 2016 main environmental concerns were:
• Minimization of environmental impact by modernization of equipment and adoption of smart grid; energy equipment
with polychlorinated biphenyl impregnated dielectric represent the main environmental aspect; according to legal
requirements, plans have been prepared for their elimination and 148 equipments were withdrawn from service;
Improvement of waste management by responsible and safe disposal of generated waste including hazardous ones;
waste management indicator increasing from 93.5 % in 2015 to 97.3% in 2016;
Conservation of biodiversity and resources.
•
•
In accordance with specific legal requirements, Electrica Serv has all necessary environmental permits, respectively 26;
for electricity distribution and supply there are no environmental permits required.
No pollution incidents complaints exceeding the allowed specific limits were reported. No environmental grievances
were reported.
period of recovery from injury dropped to a total
of 99 days of inability to work, plus a period of
103 days for recovery for an accident recorded in
2015.
Prevention actions in the field of health and
safety at work
Following accidents produced in 2015, the top
required an objective analysis
management
materialized in an audit of health and safety at
work by an independent consultant for the entire
Electrica Group. The main goal was to define
actions needed to improve health and safety at
work management system on short and medium
term, based on the results of the risk analysis
performed on a sample of causes of accidents
within the last 10 years and compliance with the
specific legislation on health and safety.
The audit was performed in the three distribution
companies and the energy services subsidiary.
Additionally, an internal analysis was performed to
identify key risk factors and key specific indicators
compared to the national level, European and
other companies in the energy sector, focusing
on accidents in the past 6 years. The conclusions
of these analyses have identified the need to
develop a strategic plan for the medium and
long term on the awareness of employees about
the risks and dangers, with the participation of
authorized experts in the field of safety and health
at work, with the role of counselling and in stages
of management personnel and the entire staff.
Causes and favouring factors were analysed for
each accident recorded by the legally established
commissions, and the files were overviewed by
the Labour Inspection. It is worth mentioning that
the electrical risk was not the leading cause of
accidents at the workplace, but there have been
events in which contracted staff died and this
signalized a direction of prevention for the safety at
work policy so that in the future such unfortunate
events would be eliminated. Accidents at work
happen because of a conjunction of causes to
which subjective aspects specific to each individual
are added, such as attitude towards risk, reduced
attention and omissions in supervision of workers.
As in previous years, more unfortunate events
occurred in own electrical installations, due to
unauthorized acces without awareness of the
electrical risk and exposure to accidents, despite
the risk being properly marked with warning and
prohibition notices.
Throughout the year,
internal
controls were conducted on compliance with legal
inspections and
requirements and internal regulations with regards
to safety and health at work, fire protection.
All these materialized by offering assistance and
identifying deficiencies that required immediate
implementation of measures but also preventive/
corrective measures requiring long-term action. A
total of 3,382 inspections of safety and health at
work were carried out in 2016.
for
information and awareness
Other action
included organizing a presentation on work
equipment and hight safety systems; briefings on
legislative changes in order to ensure compliance;
additional information and materials for training
employees; participation
the
program.
in presenting
Prevention actions in the area of fire safety
of
fire
inspection
companies
intervention and evacuation
The prevention program in the area of defence
against fire and emergencies situations, in 2016,
included: control by own authorized staff of
compliance with specific rules; periodic training
for all staff
in accordance with the approved
annual periodic programs; conducting exercises
in emergency
for
and maintenance by
situations;
authorized
protection
installations, respectively the firefighting devices
at each location; keeping clear all way of access
and evacuation; hot and cold season specific
measures for fire prevention. All events of fire
in electrical
reported and
installations were
technically analysed in order to prevent similar
events. For 6 incidents (5 EDTS and 1 EDTN) the
Inspectorate for Emergency Situations intervened
with firefighting teams, and in other cases the
group’s employees
in accordance
with the training and competence, to eliminate
outbreaks of fire.
intervened
Analysis regarding the health on employees in
2016
the Electrica Group
there were no
Within
occupational
illnesses registered. Nevertheless,
there are some work-related diseases identified in
employee health surveillance carried out both by
Electriva Serv physicians, and by foreign medical
services employed by the group as well.
In analyzing the health of employees, key indicators
are represented by the conditiionalities for work,
i.e. medical and psychological chronic conditions
that limited work capacity (physical effort, working
at hight, working under voltage), and total days of
temporary incapacity of work (sick leave due to
acute and / or chronic medical conditions).
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3.7 Research and development
activities
In accordance with the “Elements of the S.E. Electrica’s Board
Strategic Plan for the period 2015-2018 Electrica Group
currently carries Pilot Project “Green Highway”. In March
2016 S.E. Electrica signed with OMV Petrom a Memorandum
of Understanding to initiate a partnership in electromobility
domain (MoU) for placement in four public filling stations of
high commercial interest (OMV Aerogarii, OMV Maniu, OMV
Titan Grigorescu, OMV Coposu), of fast charging stations, one
at the headquarters of Petrom City and one at S.E. Electrica
headquarter.
At the end of 2016, the first fast charger standard type of 50kW was
put into operation in fuel station OMV Aerogarii, and in January 12,
2017 S.E. Electrica and OMV Petrom inaugurated it.
By participating to these research, development and innovation
projects with financing / co-financing the grants, Electrica has
the following benefits:
•
• Making access to cutting-edge technologies in the field of
optimizing the operating modes of the electricity distribution
network (EDN) in terms of network connection of renewable
electricity production (distributed or concentrated);
Improving the safety and reliability of isolated electrical
systems, power quality provided through the provision of
rapid, low-cost reserves through flexible task;
The possibility of identifying criteria in working to promote
smart grids - smart grids and smart metering solutions
in terms of new measuring code requirements on data
protection and encryption methods;
•
• Use the opportunities to develop self-financing business
portfolio of Electrica;
• Developing new skills through transfer of know-how;
•
Compliance with the best practices of similar companies in
Europe by winning image;
Creating new opportunities for future participation of S.E.
ELECTRICA S.A. projects funded by the European Commission
•
Another important endeavour of S.E. Electrica S.A. in promoting
technological innovation is to disseminate the solutions for
updating its electric grid using a smart grids concept in the
international conferences/symposia that S.E.Electrica S.A. holds
every year in November and which propose as an alternative
topic the smart grids and smart metering solutions. We mention
that S.E. Electrica S.A. has supervised the organization of the
international symposium called “Smart Grids 2016”.
We emphasize the participation in the WEC conferences with
presentations concerning technological innovation and promotion
of new technologies that improve operational efficiency. Thus, in
June 2016, Electrica SA participated with three papers accepted
to FOREN 2016.
LUMINA SCRIE POVESTEA
TEhNICII
3.8
Risk management
To implement the risk management system as well
as an internal control/management system at group
level, the following provisions were considered:
• Order of the Ministry of Public Finance no.
946/2005 regarding the development of an internal
control/management system, with subsequent
amendments and completions.
• Government Order no. 119/1999 regarding internal
control and preventive financial control, with
subsequent amendments and completions.
Internal procedures adopted with this purpose.
International Standards on Risk Management
Systems.
Best practices and methodologies applied in listed
and non-listed companies.
•
•
•
A major concern for the management
is building
awareness of employees regarding the importance of
managing risks inside the organization and the necessity
of direct involvement in the risk management process,
as well as of alignment to the best practices at national
and international level by following legislation in place,
standards and the related norms.
In 2016, both within Electrica S.A. and its subsidiaries,
was conducted the risks identification process. Thus,
after identifying risks, were proposed adequate control
measures, aiming to avoid or mitigate such risks in the
future.
For 2017, the Company considers the development of
risk management system according to the provisions
of the international standard SR ISO 31000:2010 “Risk
Management – Principles and Guidelines” and
its
integration within Electrica S.A. and its subsidiaries.
The risks related to the activity and the sector in
which Electrica operates in, for the year 2016, can be
presented as follows:
• Group’s supply segment may be exposed to
the market
increasing competition due
liberalization and it could lose the last resort
supplier status;
The Supply Segment may face increased volatility
of markets in which it operates, both in terms of
volume and in terms of market price;
to
•
• Group’s financial performance may be negatively
influenced by changing tariffs on the regulated
market and by the energy acquisition prices.
• Group’s supply segment might lose its status of
supplier of last resort;
• Group’s financial performance may be negatively
•
•
influenced by changing prices for energy;
Romania’s electricity demand is linked to various
factors beyond control of the Group, such as
economic, political and climate-changing factors;
The Group has
regulatory
requirements and has to keep in place regulated
to comply with
•
•
•
•
•
•
approvals, being exposed to significant liabilities in
case of non-compliance;
Components of the Group’s distribution network
are subject to deterioration over time;
The Group’s assets and/or business could be
damaged by natural and man-made acts or
disasters;
The Group’s IT systems are outdated and are not
integrated;
The migration of the Group to a new integrated
ERP system may encounter difficulties and delays;
The Group may face risks associated with restitution
claims with regard to certain real estate properties;
from
Electrica Furnizare may be prohibited
suspending or interrupting the supply of electricity
to certain of the Group’s customers, even if such
customers are in payment default;
The Group’s position in electricity distribution and
supply markets may expose it to claims relating to
abuse of dominant position;
A strike or other labour disruption could adversely
affect the Group’s business;
Failure to execute management’s business strategy
may lead to cost savings and revenue forecasts
being lower than predicted for the Group;
The Group’s reputation, future prospects or results
of operations may be materially adversely affected
by claims or litigation;
• Not conforming to
legislation regarding public
purchases by members of the Group could lead to
fines and annulment of contracts;
•
•
•
•
•
•
•
•
•
• Ownership title over certain real estate properties
owned by members of the Group may be deemed
uncertain;
The Company may face additional claims from tax
authorities for budgetary debts due for previous
periods;
The Romanian taxation system is subject to change
and may issue inconsistent interpretations of tax
legislation;
After the Offering, the State will continue to have
significant influence over the Company;
After the Offering, the State will continue to have
significant influence over the Company;
Components of the Group’s distribution network
are subject to deterioration over time.
The distribution subsidiaries’ activity may be
negative
impacted by natural disasters or
unauthorized human interventions;
The existence of companies
in the
electricity distribution and network construction in
the area where the Group’s distribution subsidiaries
performed their activity;
Regulation risk generated by frequently changes and
without appropriate consulting sessions with the electricity
distribution operators negatively influence the budget
planning capabilities;
The risk generated by the regulations in the field of PRE
activity.
involved
•
•
•
•
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FINANCIAL RISK MANAGEMENT
The Group is exposed to the following risks resulting from the use of financial instruments:
•
•
• Market risk
Credit risk
Liquidity risk
Credit risk
The 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 mainly 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 with financial institutions, which are
regarded as having a high creditworthiness.
The accounting value of financial assets represents the maximum exposure to the credit risk.
Trade receivables
The Group’s credit risk related to receivables is concentrated on the state-controlled companies. The Group
registers a depreciation allowance which is the best estimation of losses recorded as related to trade
receivables.
The ageing statement of trade receivables was as follows:
December 31st, 2016
December 31st, 2015
RON thousand
Gross value
Not past due
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
603,467
209,205
16,616
14,087
30,872
21,618
1,010,228
1,906,093
Bad debt
allowance
-
(46,494)
(11,673)
(11,514)
(26,577)
(21,618)
(1,010,228)
(1,128,104)
Gross value
654,679
189,243
12,525
9,864
33,561
19,388
1,043,639
1,962,899
Bad debt
allowance
-
(15,916)
(3,605)
(9,008)
(33,561)
(19,388)
(1,043,639)
(1,125,117)
Net trade receivables
December 31st,2016
December 31st,2015
603,467
162,711
4,943
2,573
4,295
777,989
654,679
173,327
8,920
856
-
837,782
RON thousand
Not past due
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Total
Source: Electrica
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. Also, stariting with 2016, some subsidiaries have closed long-term loan agreements in
order to improve the financial position.
Exposure to liquidity risk
The following table shows the remaining contractual maturities of financial liabilities on the reporting date.
The gross amounts are undiscounted, and include estimated interest costs.
(RON thousand)
Contractual cash flows
Financial liabilities
Book value
Total
less than 1
year
1-2 years
2-5 years
more than
5 years
December 31st, 2016
Bank overdrafts
Financing for network
construction related to
concession agreements
Long term bank borrowings
Trade payables
Total
December 31st, 2015
Bank overdrafts
Financing for network
construction related to
concession agreements
Finance lease
Trade payables
Total
Source: Electrica
142,626
127,130
142,626
130,452
142,626
86,636
-
39,720
-
4,096
-
-
127,733
722,830
140,508
722,830
1,120,319
1,136,416
2,555
722,830
954,647
2,555
-
2,555
132,843
-
-
42,275
6,651
132,843
65,963
221,641
65,963
228,332
65,963
100,248
-
-
97,002
31,082
59,821
656,410
59,821
656,410
1,003,835
1,010,526
59,821
656,410
882,442
-
-
-
-
97,002
31,082
-
-
-
-
-
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, USD). 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.
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Exposure to currency risk
Interest rate risk
The summary of quantitative data about the Group’s exposure to currency risk is as follows:
The Group does not have significant long-term bank loans. The loans contracted in 2016 by the DSOs
have been entirely guaranteed with cash collateral by the holding company. Interest rate risk on the newly
contracted loans is minimal as the interest on these loans is fixed.
In thousand RON
December 31st, 2016
EUR
December 31st, 2016
USD
December 31st, 2015
EUR
Exposure to interest rate risk
Cash and cash equivalents
Deposits (deposits, treasury bills and
government bonds)
Financing for network construction
related to concession agreements
Net exposure of financial position
statement
Source: Electrica
2,533
-
(127,130)
4,699
-
-
(124,597)
4,699
10,241
139,581
(221,641)
(71,819)
The following significant exchange rates have been applied during the year:
Average rate
Year-end spot rate
2016
4.4908
4.0569
2015
4.4450
4.0057
2016
4.5411
4.3033
2015
4.5245
4,1477
EUR/ RON
USD/ RON
Source: Electrica
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 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.
A reasonably possible strengthening/ weakening of the USD against RON at 31 December would have affected
the measurement of financial instruments denominated in a foreign currency and profit before tax, and
affected equity, respectively, by the amounts shown below. The analysis assumes that all other variables, in
particular interest rates, remain constant and ignore any impact of forecasted sales and purchases.
Thousand RON
Effect
December 31st, 2016
EUR (change by 5%)
USD (change by 5%)
December 31st, 2015
EUR (change by 5%)
USD (change by 5%)
Source: Electrica
Profit before tax
Appreciation
Depreciation
(6,230)
233
(3,591)
-
6,230
(233)
3,591
-
The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
Thousand RON
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
Total
Variable-rate instruments
Financial liabilities (thousand RON)
Short-term borrowings
Overdrafts
Total
Source: Electrica
December 31st, 2016
December 31st, 2015
740,487
-
1,875,054
(127.130)
(127,130)
(127,733)
2,360,678
-
(142,626)
(142,626)
678,612
90,865
1,987,881
(221.641)
(221,641)
-
2,535,717
(59,821)
(65,963)
(125,784)
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 by the amounts shown below. This analysis assumes that all other variables, in
particular foreign currency exchange rates, remain constant.
Thousand RON
December 31st, 2016
Variable-rate instruments
December 31st, 2015
Variable-rate instruments
Source: Electrica
Profit before tax
50 bps increase
50 bps decrease
(713)
(629)
713
629
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4 FIXED ASSETS
The number of users and volume of installations at December 31st, 2016 at the level of the three distribution
subsidiaries (SDTN, SDTS and SDMN) and at Electrica’s overall level are quantified as follows:
Geographical coverage
Number of users, of which:
110 kV
medium voltage (MV)
low voltage (LV)
Overhead power lines length, of which:
110 kV
medium voltage (MV)
low voltage (LV)
Of which connections
Underground power lines length, of
which:
110 kV
medium voltage (MV)
low voltage (LV)
Of which connections
Cumulative power of transformers/
power AT
in power stations
(110 kV/MT + MT/MT)
in power stations 110 kV/MT
in power stations MT/MT
Switching stations/Transformer stations
No. of substations, of which:
power stations 110 kV/MT
power stations MT/MT
Number of switching stations and
transformer stations
Source: Electrica
UM
km²
-
-
-
-
km
km
km
km
km
km
km
km
km
km
MVA
MVA
MVA
MVA
pcs
pcs
-
-
TN
MN
TS
Total
34,162
28,962
34,072
97,196
1,245,989
1,305,139
1,123,012
3,674,140
34
4,042
39
3,453
42
2,905
115
10,400
1,241,913
1,301,647
1,120,065
3,663,625
52,432
2,179
11,759
38,495
18,033
15,761
27
3,658
12,076
6,959
6,008
3,660
3,617
43
2,348
121
92
29
58,712
2,146
12,527
44,040
23,845
11,780
15
3,345
8,420
2,138
8,554
5,544
5,191
353
3,009
212
124
88
45,567
3,166
10,411
31,990
17,260
11,507
41
3,361
8,105
2,512
6,683
4,145
4,135
10
2,538
106
101
5
156,711
7,491
34,697
114,525
59,137
39,048
83
10,364
28,601
11,608
21,245
13,349
12,943
406
7,895
439
317
122
pcs
8,736
10,188
8,867
27,791
The vast majority of the distribution equipment currently in the patrimony of electricity distribution
subsidiaries within Electrica were built in the last 60 years, following the successive development phases of
the National Electricity System. This led to a great variety of equipment currently in use. The vast majority of
installations were produced by the Romanian industry during 1960-1990, in which case a high rate of wear
and tear is noticed. A relatively small group, accounting for approx. 20% of total equipment, is represented
by new installations, put into force after 1990 and which meet current requirements.
Depending on voltage level, categories of installations, year of commissioning and specific operating
conditions, wear of installations can be assessed as follows:
high voltage power lines (110 kV)
Underground power lines
Overhead power lines
Medium voltage power lines
Underground power lines
Overhead power lines
Low voltage power lines
Underground power lines
Overhead power lines
Substations
Transformers
Source: Electrica
INVESTMENTS
Pole - Amount
Concrete enclosure
Pad-Mount
Underground
SDTN
25%
75%
48%
60%
52%
58%
75%
45%
51%
69%
16%
SDMN
45%
80%
80%
75%
75%
75%
75%
70%
75%
85%
95%
SDTS
50%
75%
65%
60%
75%
68%
60%
50%
75%
20%
85%
Investments at Electrica Group level were promoted
considering especially
the wear of assets of
Distribution Companies, in order to increase the
improvement of the distribution
efficiency, the
service quality and of the operating safety.
The Group will continue to modernize and to develop
the distribution network into a concept of smart
network by installing smart network infrastructure
systems, such as SCADA, SAD, energy measurement
improve operational
systems, etc.,
the network,
to
efficiency,
improvement of network flexibility, distribution
service quality, stability and reliability of the network.
in order to
reduce
losses
in
the
the
implementation of
investment
Within
program, Electrica ensures the compliance with the
Group’s Strategy and especially, with the following
criteria:
•
Inclusion in RAB of regulated investments;
• Non-regulated investments of the Group should
provide an IRR higher than weighted average
cost of capital.
The investment program will follow the Group
financial strategy to maintain a solid capital
structure.
•
Based on these criteria and in the context of Electrica
improve the operational
Group’s commitment to
performance and quality of the electricity distribution
service, as stated in the Prospectus, the proceeds
from IPO obtained by Electrica Group will be used to
improve the existing grid infrastructure, to develop
the network for connecting new users and for
investments in smart grid and smart metering.
According to the Strategy of Investment in Electrica’s
Power Grids, it is aimed to promote those categories of
capital expenditure contributing to the development
of a profitable distribution activity and to the creation
of conditions of access to the electricity distribution
network to energy consumers and producers, in line
with market requirements, especially based on:
•
Automation of distribution by integrating the
installation in SCADA, SAD etc.
the equipment
stations and in the medium voltage network.
Introducing equipment with
reduced own
losses, with higher operating efficiencies,
environmentally-friendly.
The expending of modern energy measurement
systems, transmission of power consumption
• Modernizing low voltage distribution network
• Modernizing
transformer
in
•
•
and connections.
At the same time, the Group plans
important
investments in the improvement and modernization
of the IT
infrastructure, IT systems, as well as
investments in cyber-security and business continuity,
aiming the improving data protection and implicitly
the quality of provided services.
The following table presents the investment program
approved by ANRE on Distribution Subsidiaries within
Electrica Group:
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Other
20,1
Studies
13,4
Commissioning program approved by ANRE for the period 2014 - 2018 (RON mil.)
2014
117.00
126.00
113.81
356,81
2015
180.00
184.00
171.33
535,33
2016
219.60
223.20
205.04
647,84
2017
250.00
259.20
252.41
761,61
2018
287.50
288.00
287.09
862,59
Total
1,054.10
1,080.40
1,029.68
3.164,18
SDTS
SDTN
SDMN
Total
Source: ANRE
Figure 28: The structure
of CAPEX achievements
for distribution operators
within the Group, in 2016
increase the volume of
Based on IPO proceeds, Electrica Group has decided
to
in the
distribution network in the third regulatory period
compared to the volume approved by ANRE at the
end of 2013.
investments
The consolidated investment plan, at Group level, for
2016, was RON 844.619 RON mil.
In 2016, the companies within Electrica Group made the following investments compared to those approved
by the General Meeting of Shareholders in March 2016:
Subsidiary Electrica Group (RON mil.)
Planned 2016
Achieved
SDTN
SDTS
SDMN
Electrica Furnizare
Electrica Serv
Electrica S.A.
Total
Source: Electrica
269.0
265.0
253.0
17.153
14.509
25.957
844.619
230.899
161.774
160.369
11.706
1.512
3.167
569.427
At the Electrica Group level, the plan was achieved at
a rate of 67.4%, with the mention that for distribution
subsidiaries a rate of 70.3% was recorded, compared
to the plan approved by the EGM.
The synthetic structure of the investments achieved
by distribution subsidiaries in 2016 is presented in
the table below (for details of the most important
investments see Appendix 2).
Category of works (RON mil.)
Efficiency of which:
Energy efficiency/CPT
Operational efficiency
quality of service of which:
Continuity of supply
Quality of energy
Other categories
Independent equipment
Studies and projects for the coming years
Total
Source: Electrica
Total
199.7
145.1
54.6
285.8
247.7
38.1
20.1
34
13.4
553
The main investments of Electrica Group were focused in 2016 on increasing the quality and efficiency of
the distribution service.
Quality of
Energy
38.1
Independent
Equipment
34
Energy Efficiency/CPT
145.1
CAPEX 2016
[MIL. RON]
Continuity of Supply
247.7
Operational Efficiency
54.6
Source: Electrica
The commissioning plan for 2016, approved by ANRE, was achieved at a rate of 82.5%.
Electrica Group (RON mil. in nominal terms)
Planned
Achieved
%
SDTN
SDTS
SDMN
Total
Source: Electrica
234,084
236,826
101.2
230,309
165,166
215,037
158,419
71.2
73.7
679,430
560,411
82.5
As a result of investments made during 2013-2016, the structure of the Regulatory Assets Base of the three
distribution operators in the portfolio of Electrica Group is presented in the table below:
RAB (RON mil.)
SDTN
SDTS
SDMN
Total
Source: Electrica
2013
1,292
1,332
1,434
4,058
2014
1,335
1,352
1,490
4,177
2015
1,423
1,391
1,561
4,375
2016*)
1,528
1,413
1,583
4,524
*) The values in 2016 may suffer corrections following ANRE's analysis process.
During 2013 - 2016 RAB evolution has been increasing for all the three distribution companies in the Group’s
portfolio, which is reflected in increased profitability across the Group.
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5 CAPITAL MARKET
Starting with July 4th, 2014, the Company’s shares are listed on Bucharest Stock Exchange (BSE) under the
ticker symbol EL, while the GDRs (Global Depositary Receipts) are listed on London Stock Exchange (LSE)
under the ticker symbol ELSA.
No.
1
2
3
4
5
6
7
8
Date Event description
4-January-16 External storm erased 12.2% from BET cap in the first two weeks of 2016, while Electrica’s
shares fell by 5.5%
13-January-16 Chairman of Board of Directors appointment and consultative committees establishment
18-January-16 Legal actions for annulment/suspension of certain ANRE orders Tariffs for 2016 approved
through ANRE orders for the distribution operators in Electrica Group
10-February-16 Decision of Mr. Michael A M Boersma to resign, starting with May 1st, 2016 from his
position of member of the Board of Directors of Electrica SA
15-February-16 Publication of preliminary standalone 2015 results
26-February-16 Mutual agreement on Mr. Ioan Rosca’s mandate termination as CEO of Electrica SA (until
June 2016)
28-March-16 Electrica and FP didn't reach a price agreement for a potential acquisition of minority
stakes owned by FP in the three distribution subsidiaries of Electrica SA and in the supply
subsidiary
31-March-16 GMS approved the Income and Expenses Budgets for 2016 for Electrica (consolidated and
individual) and its subsidiaries and the Remuneration Policy for BOD' members
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27-April-16 GMS approved Financial Statements and profit distribution (dividends) for the Group,
Electrica SA and its subsidiaries. The Board named Willem Schoeber as interim director
and chairman of the SRGC Committee
16-May-2016 Electrica published the Consolidated Financial Statements for Q1 2016
24-June-16 First day after Brexit vote
7-July-2016 Two days before ex-date (share price: RON 13.40)
8-July-2016 One day before ex-date (share price: RON 13.22)
16-August-16 Electrica published the Consolidated Financial Statements and Director's Report for h1
2016
2-September-16 Electrica convenes GMS on 21 Oct 2016 for appointing a new independent member of
the Board of Directors and approval 2016 CAPEX Plan supplemented up to RON 844.6 mn
7-September-16 highest closing price on BSE since IPO - RON 13.90 – no major event
20-September-16 Electrica announced the new CEO
4-October-16 Electrica announced the revocation of the HR Manager by the BoD
19-October-16 Electrica signed with BRD three block account pledge agreements related to the credits
granted to its distribution subsidiaries
21-October-16 GMS approved the appointing of Mr. Willem Schoeber as a member of the BoD, the
amendment of the Articles of Association and a new CAPEX level supplemented up the
value of RON 844.6 mn
15-November-16 Electrica published the Consolidated Financial Statements and a financial report for Q3
2016 (followed by results presentation webcast on 21 November 2016)
11-December-16 Parliamentary elections results
30-December-16 President Iohannis accepted the proposal for prime-minister
4-January-17 Appointment of the Grindeanu Cabinet
31-January-17 Re-appointment of the Chairman of the BoD and of the members of the BoD's Committees,
revocation of the Sales Manager, appointment of the Chief Distribution Officer
24-February-17 highest closing price on BSE since IPO - RON 14.24 – no major event
Source: BSE, LSE, Electrica
Figure 29: Share price history on BSE, together with the most important events
occurred from the beginning of 2016 until February 28th, 2017 (RON)
Figure 30: Global depositary receipts’ price history on LSE, together with the most important
events occurred from the beginning of 2016 until February 28th, 2017 (USD)
Source: LSE, Electrica
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Figure 31: Comparative performance of Electrica’s share price and BSE indices: BET, BETNG and BETFI (%, as
compared with the last day of trading in 2015)
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 for the statutory results obtained in the financial years 2012–2015 were as follows:
(RON mil.)
Dividends distributed
Dividends/share (RON)
Source: Electrica
Dividend policy
2012
13.2
0.064
2013
22.5
0.108
2014
245
0.7217
2015
291.6
0.8600
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.
The Company will pay any dividends in RON.
The Company will distribute dividends on the basis its annual financial statements which starting with 2014
are prepared in accordance with IFRS-EU.
Repurchase of treasury shares
In July 2014 the Company bought back 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. There were no changes in the value of the
treasury shares in 2015 and 2016.
Source: BSE, Electrica
Figure 32: Monthly trading volume and average monthly closing price of shares on BSE (in RON) and
GDRs on LSE (in USD)
Source: BSE, LSE, Electrica
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6 MANAGEMENT OF ThE GROUP
6.1
The Board of Directors of Electrica S.A.
During 2016, the Board of Directors has undergone
some changes. At the beginning of the year, the Board
of Directors consisted of 7 non-executive members,
appointed by the Ordinary General Meeting of
Shareholders on December 14th, 2015. Their term
of office, registered based on the decision of the
General Meeting of Shareholders, is four years. Four
of the seven directors fulfilled the independence
criteria provided by the Articles of Association,
according to statements presented on the occasion
of their nomination.
The Board of Directors is responsible for taking all
the necessary measures to carry out the activity of
the Company as well as to supervise its activity. Its
structure, organization, duties and responsibilities are
established under the Articles of Association and the
Regulation of the Board of Directors.
During December 14th, 2015 – May 1st, 2016, the
Board of Directors had the following members:
• Mr. Cristian Busu – non-executive director,
elected as Chairman of the Board of Directors
until January 2017
• Ms. Arielle Malard de Rothschild - non-
executive independent director
• Mr. Michael Boersma – non-executive
independent director
• Mr. Pedro Mielgo Alvarez – non-executive
independent director
• Mr. Bogdan George Iliescu – non-executive
independent director
• Ms. Corina Georgeta Popescu - non-executive
director
• Ms. Ioana Alina Dragan - non-executive
director.
Following Mr. Boersma’s renunciation to his position
of member of the Board of Directors of Electrica SA
starting with 1st of May 2016, on April 26th, 2016 the
Board of Directors appointed Mr. Willem Jan Antoon
henri Schoeber as interim member of the Board of
Directors, until the next Ordinary General Meeting
of Shareholders of the Company (i.e. October 21st,
2016).
On October 21st, 2016, the General Meeting of
Shareholders elected Mr. Willem Jan Antoon henri
Schoeber as non-executive
independent director
with a mandate period equal with the remaining
period until the expiration of the vacant mandate,
respectively until 14 December 2019. Four of the
seven directors fulfill the
independence criteria
provided by the Articles of Association, according
to statements presented on the occasion of their
nomination.
We present below the most relevant aspects regarding
the professional experience of the members of the
Board of Directors at the time of their appointment:
Cristian Busu
Mandate
4 years
Arielle Malard de
Rothschild
Mandate
4 years
Michael Adriaan
Boersma
Mandate
4 years
Pedro Mielgo
Alvarez
Mandate
4 years
Bogdan George
Iliescu
Mandate
4 years
Corina Georgeta
Popescu
Mandate
4 years
Ioana Alina
Dragan
Mandate
4 years
Willem Jan Antoon
Henri Schoeber
Mandate
4 years
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Ioana Alina
Dragan
Mandate
4 years
Professional experience
•
Expert, Department of
Administration of State Ownership
in Energy, Ministry of Energy.
• Member of Shareholders General
Assembly, OPCOM – Romanian Gas
and electricity market operator.
• Member of Board of Directors,
Bogdan
George
Iliescu
Mandate
4 years
Corina
Georgeta
Popescu
Mandate
4 years
Cristian
Busu
Mandate
4 years
Arielle
Malard de
Rothschild
Mandate
4 years
Professional experience
•
State Secretary, Ministry of Energy
(December 2015 – January 2017).
• Member of the Board of Directors
and of the Audit Committee at SIF
OLTENIA.
• Manager at the Central branch of
Marfin Bank in Bucharest.
• During 2009 – 2013, Financial
•
•
Manager of Fondul Proprietatea
and member of the Representatives
Committee.
Economic Adviser for the Economic
Department of the Romanian
Government.
Lecturer at the Bucharest Academy
of Economic Studies, in which
capacity he conducted various
teaching and research activities.
Professional experience
• has an extensive experience in
investment banking, spending over
25 years in companies such as
Lazard Frères & Cie and Rothschild.
She is the founder of the Emerging
Markets Division at the Rothschild
& Cie investment bank, part of the
Rothschild group.
Before joining Rothschild & CIE in
1999, she spent 10 years as an
investment banker at Lazard Frères
& Cie, as part of the Sovereign
Advisory team.
•
• her experience includes major
privatization projects in Romania,
Poland, Russia, hungary and
Morocco, coordinating the
privatization of companies such
as MOL, Nafta Polska, ZIL, BCR or
Dacia.
• Has experience in M&A projects,
working in over 40 such projects in
Eastern Europe and Africa.
• Member of the Board of Directors
of Imerys S.A. (SBF120) and of
Rothschild & Co, both listed on the
Paris Stock Exchange and of Groupe
Lucien Barrière.
Michael
Adriaan
Boersma
Mandate
4 years
•
Professional experience
•
Professor of corporate governance
at the TIAS School for Business and
Society, University of Tilburg in the
Netherlands
Senior adviser for First State
European Diversified Infrastructure
Fund, London, UK.
• Non-executive independent director
of Nynas AB, Stockholm, Sweden,
a company owned by PDVE and
Neste Oil Oyj, specializing in the
production and trade of oils and
bitumen.
Chairman of the Board of Directors
of Prometheus Energy, based in
houston (Texas, U.S.A.).
Chairman of the Supervisory Board
of TMG, a Dutch listed company,
Amsterdam.
•
•
•
•
• Member of the Supervisory Board
of PostNl, a Dutch listed company,
The hague, the Netherlands.
Chairman of the Supervisory Board
of the VieCuri Medical Center
for Noord-Limburg in Venlo, the
Netherlands.
Chairman/member of foundations/
institutions/advisory bodies (e.g.
Energy Fund Limburg, Jheronimus
Bosch 500, Protective preference
shares FUGRO).
From 2003 until the end of 2009 -
CEO and Chairman of the Executive
Board of Directors of Essent, the
largest Dutch utility.
•
Pedro Mielgo
Alvarez
Mandate
4 years
Professional experience
• Non-executive Chairman, Madrilena
•
Red de Gas, Madrid Spain.
Chairman and Managing Partner of
the Fund GP, Nereo GreenCapital,
Luxembourg.
• Non-executive Chairman, Ingenio
•
•
•
•
•
•
•
3000, Madrid, Spain.
Independent Director, Landis & Gyr
SAU, Sevilla, Spain.
From 2008 until 2011 - non-
executive Chairman, Centimetri,
Milan, Italy.
From 2008 until 2011 -
Independent Director, Landis & Gyr
AG, Zug, Switzerland.
From 1999 until 2004 - Director,
Redesur, Lima, Peru.
From 1997 until 2004 – Chairman
& CEO, Red Electrica de Espana,
Madrid, Spain.
From 1995 until 1997 – General
Manager, Iniexport, Madrid, Spain.
From 1991 until 1997 – Director,
Marketing & Sales, Intec, Madrid,
Spain.
Professional experience
•
Board member, Nominalization and
Remuneration Committee member,
Rating and Audit Committee
member, Strategy committee
member, SNTGN Transgaz SA,
Medias.
From May 2014 until May 2016
- Executive Manager, Corporate
Finance Department, BRD – Group
Societe Generale.
From 2007 – 2014 – General
Manager, BRD Corporate Finance.
From 2005 until 2009 – Board
member, SAI INVESTICA ASSET
MANAGEMENT SA, Bucharest.
From 2001 – 2007 – Project
Manager, BRD/SG Corporate
Finance.
From 1997 – 2001 – Analyst, BRD –
Group Societe Generale.
•
•
•
•
•
Professional experience
•
State Secretary, Ministry of Energy.
• head of Power Assets Department,
•
•
•
•
•
•
•
OMV Petrom SA.
From 2011 until 2015 – Bucharest
Branch Manager, OMV Trading
Gmbh Viena, Austria.
From 2008 until 2011 – Manager
of Energy Market Regulation and
Supervision, E-ON Romania.
From 2007 until 2008, Head of
Power Acquisition Department,
E-ON Moldova Furnizare.
From 2001 until 2006 – Head of
Distribution Service, Electrica SA
From 1998 until 2001 – Head of
Operation Service, Electrica SA –
Distribution & Supply Bucharest
Branch
From 1996 until 1998 – Chief
Deputy Division, North Network
Division, CONEL - Distribution &
Supply Bucharest Branch.
From 1991 until 1996 - North
Network Division, RENEL -
Distribution & Supply Bucharest
Branch
Willem
Jan
Antoon
Henri
Schoeber
Mandate
4 years
•
•
•
•
•
•
National Company of Uranium SA;
From 2013 until 2014, Member
of Board of Directors, SN
Nuclearelectrica SA.
2014, Adviser of Minister, Ministry
of Energy.
From 2012 – 2013, Country
Financial Specialist, Responsible
for Siemens Financial Services
Department, Siemens Romania.
From 2008 until 2012, Bonne
GAMME Relationship Manager, BRD
– Group Societe Generale – Beller
Agency.
From 2007 until 2008, Grand Public
Relationship Manager, BRD – Group
Societe Generale – Beller Agency.
From 2005 until 2007, Front Desk
Operator, BRD – Group Societe
Generale – ASE Agency.
Professional experience
•
Independent business consultant
(since 2013).
•
•
• Member of the board of directors
of Neste Oyj (helsinki, Finland), of
the supervisory board of Gasunie
NV (Groningen, the Netherlands)
and member of the audit
committees of these boards (since
2013).
From 2010-2015: Chair of the
Boards of Directors of EWE Turkey
Holding AŞ (Istanbul, Turkey),
Bursagaz (Bursa, Turkey), Kayserigaz
(Kayseri, Turkey)
From 2010-2013: Member of
the executive board of EWE AG
(Oldenburg, Germany), responsible
for power generation and for the
EWE utility businesses in Turkey
and Poland
From 2007-2011: Chair of the
executive board of swb AG
(Bremen, Germany)
From 1977-2007: Various positions
in the Royal Dutch Shell group
in the Netherlands, France,
Germany and the USA, with senior
management positions in refining,
i.a. refinery manager in Reichstett
(France) and Cologne (Germany)
•
•
Source: Electrica
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At the date of this report, the members of the Board of Directors are as follows:
No. Name
1.
Cristian Busu
2.
3.
4.
5.
Arielle Malard de Rothschild
Ioana Dragan
Corina Popescu
Bogdan Iliescu
Pedro Mielgo Alvarez
6.
7. Willem Jan Antoon henri
Schoeber
*starting with December 14th, 2015
Source: Electrica
Term of office*
Status
4 years
4 years
4 years
4 years
4 years
4 years
4 years
non-executive director,
President of BoD
non-executive, independent director
non-executive director
non-executive director
Date of first election
September 22nd, 2014
September 22nd, 2014
December 14th, 2015
December 14th, 2015
non-executive, independent director
December 14th, 2015
non-executive, independent director
December 14th, 2015
non-executive, independent director
April 26th, 2016
Consultative committees’ members are elected for a period
of one year. The organization, duties and responsibilities of
each committee are set under the Articles of Association
of Electrica S.A., respectively in the committee charters
- an integral part of the Corporate Governance Code of
the Company. In its meeting held in January 2017, the
Board decided to maintain the same composition of the
committees, for another year.
According to the information held, there is no agreement,
understanding or family relation between the directors
of the Company and another person who may have
contributed to their appointment as directors.
At 1st March 2017, no member of the Board of Directors
held any Electrica S.A. shares.
to
information,
the available
the Board
According
members were not involved in litigations or administrative
proceedings regarding their activity within the Company in
the last five years or regarding their capacity to fulfill their
duties within the Company.
More details on the Board members’ biographies can be
found on the company’s website.
Mr. Cristian Busu was elected Chairman of the Board of
Directors during the new Board’s first meeting, which took
place on January 13th, 2016, for a term of one year, and
reelected in January 2017 for another year.
In the its first meeting, held on January 13th, 2016, the new
Board of Directors decided the composition of committees,
as follows:
a)
b)
c)
The Nomination and Remuneration Committee
• Mr. Bogdan Iliescu - Chair of the committee
• Ms. Arielle Malard de Rothschild
• Ms. Corina Popescu
The Audit Committee
• Mr. Pedro Mielgo Alvarez - Chair of the
committee
• Ms. Arielle Malard de Rothschild
• Mr. Bogdan Iliescu
The Strategy and Corporate Governance
Committee
• Mr. Michael Boersma - Chair of
the
committee (until his resignation as of May
1st, 2016, when his place was taken by Mr.
Willem Schoeber)
• Ms. Ioana Dragan
• Mr. Cristian Busu.
6.2
The activity of the Board of Directors of Electrica S.A. and of its
Consultative Committees
In 2016, the Board of Directors met 30 times. Out
of the 30 meetings that took place in 2016, 16
meetings were organized with physical presence of
the members and 14 were held electronically, in
accordance with the provisions of art. 17 paragraph
22 (respectively art. 18 alin. 23 after October 21st,
2016) of the Articles of Association of the Company.
We present below the situation of Board members’
presence in the meetings of the Board of Directors
and its committees in 2016:
Name
The Board of
Directors
The Audit and Risk
Committee
(no. of meetings - 30)
(no. of meetings - 10)
The Nomination
and Remuneration
Committee
(no. of meetings - 15)
The Strategy and
Corporate Governance
Committee
(no. of meetings - 11)
Cristian Busu
Arielle Malard de
Rothschild*
Corina Popescu
Ioana Dragan
Bogdan Iliescu
Pedro Mielgo Alvarez
Willem Schoeber*
Michael Boersma*
30
29
30
30
30
29
19
8
-
9
-
-
10
10
-
-
-
14
15
-
15
-
-
-
10
-
-
11
-
-
8
3
*Note: in one meeting of the Board of Directors, Ms. Arielle Malard de Rothschild was represented by Mr. Cristian Busu, based on the
mandate given. The same, Mr. Willem Schoeber was represented in one meeting by Mr. Pedro Mielgo Alvarez, and Mr. Michael Boersma was
represented in two meetings of the Board of Directors by Ms. Arielle Malard de Rothschild, based on the mandates given.
Source: Electrica
The main areas of interest and decisions adopted
by the Board of Directors in 2016 refer to:
•
Election of the Chairman of the Board of
Directors and establishment of the consultative
committees and election of their chairman;
Continuing the project started in 2015 aiming
to review and align the Articles of Association
of Electrica and of its subsidiaries, considering
more clearly the scope of activity and the
level of management,
responsibilities by
controlled delegation of competence and
implementation of a new corporate governance
at group level, based on the new Corporate
Governance Code
issued by the Bucharest
Stock Exchange (BSE Code) and the key points
underlined by the Board’s evaluation process.
The EGMS approved the proposed revised
Articles of Association on October 21st, 2016.
Revision and endorsement of ELSA subsidiaries
Articles of Association.
The update of the charter of the Board of
Directors and of the charters of the committees
set up by the Board.
Electrica
Revision
endorsement
SA’s financial statements at
individual and
consolidated levels for the financial year of 2015.
Revision and endorsement of financial statements
of Company’s subsidiaries for the financial year
of 2015.
Revision and endorsement of Electrica SA’s
income and expenses budget at standalone and
consolidated levels for the financial year of 2016.
Revision and endorsement of
income and
expenses budgets of company’s subsidiaries for
the financial year of 2016.
Revision and endorsement of the consolidated
investment plan for the 2016 financial year.
Analysis,
of
approval
different proposals submitted by the executive
and
management
coordination
acquisitions
regarding
and
and
of
•
•
•
•
•
•
•
•
•
to
implement
investment opportunities (e.g.: supervising the
negotiations with Fondul Proprietatea regarding
the acquisition of the minority stakes within
distribution and supply operators).
Preparing and submitting for the GMS approval
the new Remuneration Policy and mandate
contracts, including revised KPIs for the members
of the Board of Directors.
reshaping Group’s
Reviewing proposals on
improved
aiming
activity,
processes flows and an
increased efficiency
for core business, but also to create the basis
for better operational and financial results, at
individual and consolidated level.
Setting the annual calendar of the Board
meetings and the key documents and reports
to be presented by the executive management.
Reviewing the BoD composition in subsidiaries,
to assure a consistent approach and to support
subsidiaries development and market
the
positioning, as well
the
governance across the group.
Approval of the Market Abuse Regulation.
Approval of the Treasury Policy.
Approval of the Delegation of Authority Policy.
Approval of the Internal Audit Charter and of
the Code of Ethics for the internal auditor.
Approval of the audit plan for 2017.
Approval of the Code of ethics of the internal
auditor.
Approval of the
Manual of Procedures.
Approval of the CSR Plan and Policies for
2016, aligned to the PR, Communication and
CSR Strategy.
The appointment of a new CEO starting with
October 24th, 2016.
Approval of the new organizational chart, to
enter into force starting with January 1st,
2017, having as objective to streamline the
Internal Audit Policies and
for strengthening
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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responsibilities
reporting lines in Electrica and at the Group
level and to use and combine the necessary
competencies and
in more
efficient way.
Revision and approval of
the executive
management KPIs achievement for 2015 and
the new ones for 2016 – at Electrica and Group
level.
•
In 2017, until the date of the Report, the Board of
Directors met seven times (out of which two meetings
were held electronically and one was telephonic) and
adopted important decisions for both its organization
and the development and operational orientation of
the Company.
•
•
the
consultative
The main decisions adopted by the Board of
Directors during meetings held 2017 refer to:
•
Election of the Chairman of the Board of
Directors.
Reviewing
committees’
composition and election of their chairpersons.
Analysis and endorsement of Electrica SA’s
budget, of the budgets of its subsidiaries and of
the consolidated budget at Group level for 2017.
• Decisions regarding the mandate agreements
subsidiaries
for
the General Managers of
of
(termination/ prolongation/ confirmation
specific period of time).
The termination of the mandate agreement of
the executive manager of the Sales Coordination
Division of Electrica SA.
The appointment of the Chief Distribution Officer
of Electrica SA.
The approval of Electrica Dividends Policy.
The approval of Policy on ethical career
management.
Electrica
Revision
endorsement
individual and
SA’s financial statements at
consolidated levels for the financial year of 2016.
Revision and endorsement of financial statements
of Company’s subsidiaries for the financial year
of 2016.
Revision and approval of the individual and
consolidated
investment plan for the 2016
financial year.
•
•
•
•
•
•
•
and
of
Based on the main conclusions and objectives set
following the evaluation process carried out in
2015, the Board of Directors has undergone several
important projects during 2016 and until the date
of the Report:
f Improving the corporate governance framework
at Group level, having 3 main pillars:
•
The revision of the Articles of Association
of Electrica and of its subsidiaries - project
started in late 2015, aiming to review and
align the corporate governance rules within
the Group, considering more clearly the
scope of activity and the responsibilities by
level of management, controlled delegation
of competence and the implementation of
a new corporate governance at group level.
The EGMS finally approved the new Electrica
Articles of Association on 21 October 2016;
Consequently, the charters of the Board and
of the committees were approached, as the
most important tools to address the main
areas of partial or non-compliance with
the new Bucharest Stock Exchange Code
provisions and the action plan related to
the improvement of the Board’s activity. The
new charters of Electrica were discussed
and finally approved during the meetings of
November and December;
The next step is to further roll out these
principles within subsidiaries and to define
and apply appropriate governance policies
at group level;
•
•
f Overseeing the activity at Group level:
•
•
receiving and analysing more
Asking,
information on the activity of subsidiaries;
Improving the communication with the
executive management and creating a
relevant tool for the periodic reporting of
Electrica and Group activity;
• Discussing during several meetings and
analysing
the materials and proposals
regarding the Strategy on natural gas
supply, Business Plan for gas supply and the
Marketing Strategy;
f Consolidating the executive management team:
•
•
•
•
•
Following the mutual agreement on the
termination of Mr. Ioan Rosca’s mandate
as CEO of Electrica, in March the Board
nominated Ms.
Iuliana Andronache as
interim CEO and in October appointed Mr.
Catalin Stancu as CEO of Electrica;
in the executive
Implementing changes
management team
(hR manager, Sales
Coordination Division manager, Chief
Distribution Officer) and redefining the
roles and competencies and reviewing the
split of responsibilities among the executive
management team members.
Approving a new organizational chart
and introducing positions of performance
managers middle level (MKP – Management
Key Positions);
Approving the 2017 KPIs structure for
Electrica SA’s managers and the way of
cascading from the general manager level to
managers and from ELSA to its subsidiaries;
Approving new remuneration (structure and
level) and KPIs for subsidiaries.
BOARD OF DIRECTORS EVALUATION
The Board of Directors, whose term started on
December 14, 2015, has carried out an evaluation
of its activity – at the end of 2015 with the
support of an external advisor, a well-established
international
comprehensive
company, with
experience in corporate governance. The results
of this analysis have been presented in the annual
report for 2015.
An
internal evaluation of the Board activities
was carried out in December 2016, based on a
questionnaire defined and thoroughly discussed
by the Board members.
The questionnaire served to establish a self-
assessment of the 2016 achievements of the
Board in the following areas:
•
The main objectives defined by the General
Meeting of Shareholders for the Board: Group
strategy, Corporate Governance, Placing
of
Investment
investments and
achievement in the distribution companies
Impact of the Board on the functioning of the
company
financial
•
• Quality of functioning of the Board and its
internal processes, including Board culture
Individual aspects of the Board work for each
Board member
Role and functioning of the Chair.
•
•
the
that
fact,
The results of the questionnaire were discussed
among the Board members in their meeting of
February 10th, 2017. The main conclusions and
observations were the following:
f The overall progress in the functioning of
the company was not at the desired level,
the Board
hampered by
decided in March 2016 not to extend the
mandate of the existing CEO and to start the
recruitment of a new CEO with the support
of an professional executive search agency.
The new CEO could only be contracted in
September 2016 and started his activities on
October 24th, 2016. The CEO selection has
been a top priority in the Board agenda 2016.
The same holds for further reinforcements of
the Company’s top management, that remain
a priority for the Board in 2017.
f The achievements on the Board’s own KPIs,
investments realised
most notably on the
and commissioned during 2016
the
distribution companies, that influence future
profitability, have been below the Board’s
ambitions and expectations. The Board has
taken organisational measures to
improve
this in the future and requested Management
to proceed with restructuring and business
in
process redesign, in particular (but not only)
in this area.
f The process
for a profitable deployment
of the funds available to the company has
continuous attention
in the Board. During
2016 several external growth projects were
thoroughly analyzed and negotiations
in
this respect were carried out and are still
underway.
f The governance and management of the
company have been reinforced by taking
the areas of management
measures
in
composition of boards of
composition,
revised board charters.
subsidiaries and
In doing so, the Board
is striving for a
consistent execution of company strategies
and operational excellence both
in parent
company and subsidiaries. The board focuses
on reaching a high standard of corporate
governance in the company.
f The identification of risks and their mitigation
has intensively been discussed in the Board
at several occasions, in particular in the wider
area of energy trading. Proprietary trading in
Electrica has been stopped in this context.
Further work is needed in the organisation
to bring the company to an
international
standard of risk management.
its time over
f The Board has identified the need to improve
the distribution of
formal
requirements and activities coming from the
organisation on the one hand and its own
agenda and key priorities on the other. It has
established an annual rolling agenda where
strategic items will get more attention and
it has reinforced the follow-up of its own
action items – also in reaction to previous
year’s evaluation. Attention remains needed
to follow this through.
f The Board’s own meeting quality and culture
are evaluated regularly with a
feedback
session planned after every meeting. All
board members participate actively and the
Board culture
is stimulating for deviating
opinions, that are taken for consideration by
other members. No conflicts of interests for
Board members have been observed in their
Board work.
f The Chair received positive feedback and has
been re-elected unanimously by the other
Board members.
THE NOMINATION AND
REMUNERATION COMMITTEE
The Nomination and Remuneration Committee
consists of
three non-executive Board of
Directors members, the majority of them
being independent members, while the chair
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The Committee has the following duties in the
field of remuneration:
• Making recommendations to the Board in
relation to the remuneration, incentive and
severance compensation policies of the
Company;
Advising the Board on the structure of
the
for Board
members;
remuneration
framework
•
•
•
of the committee is an independent director.
The role of the Committee
is to propose
candidates for the Board of Directors, to
develop and propose to the Board the selection
procedure of candidates for the positions of
managers and other management positions,
to recommend to the Board candidates for
the positions listed, to formulate proposals
on the remuneration of directors and other
management positions.
The Committee has the following responsibilities
concerning nomination matters:
•
recommendations
Recommending to the Board a nomination
policy,
including a target Board profile,
process and principles for shareholders to
consider when proposing candidates for
director positions at the Company, and
the Board
making
regarding
interim
directors in accordance with the policy;
Reviewing
the
nomination policy, preparing a report to the
Board on its implementation, and presenting
a summary of this report in the Directors’
Report;
the appointment of
implementation of
the
to
•
the
• Advising the Board on the appointment and
dismissal of the General Manager, making
recommendations on
appointment
and dismissal of the Company’s executive
management team after considering the
views of the General Manager, and making
proposals on the appointment and dismissal
of subsidiary board members in accordance
with the Group Governance Policy;
Recommending to the Board policies
in
the human resources field, including those
termination,
covering
talent management and development, and
succession planning across the Company
and its subsidiaries (the Group);
recruitment
and
•
• Overseeing
for
the process
the annual
evaluation of the effectiveness of the Board
and its consultative committees;
Periodically assessing the size, composition
and committee structure of the Board and
making recommendations to the Board with
regard to any changes;
•
• Making recommendations to the Board on
continuous skill development programmes for
Board members and executive management.
• Overseeing the nomination process of the
general managers and executive managers in
the subsidiaries according to the nomination
and remuneration Policy
• Making
to
recommendations
the Board
in relation to the remuneration of the
General Manager and other executive
managers, including the main remuneration
components, performance objectives and
appraisal methodology;
• Making
recommendations
the Board
on the remuneration of subsidiary board
limits of
the
members
remuneration for subsidiary management;
general
and
to
• Monitoring compensation
trends within
industries relevant to the Group;
• Overseeing the remuneration process of the
general managers and executive managers in
the subsidiaries according to the Nomination
and Remuneration Policy.
The Nomination and Remuneration Committee
met 19 times during January 1st, 2016 –
March 9th, 2017. During these meetings, the
following topics were discussed and referred
to the Board of Directors for approval:
•
the
the organizational
Recommendations on
remuneration
of Board members and their framework –
management agreement.
Recommendations on the structure and
remuneration of
the subsidiaries Board
members.
Recommendations on
the appointment
of executive directors and performance
criteria.
Recommendations on
structure of the Electrica SA.
Recommendation on the appointment of
the new CEO of Electrica SA.
Recommendation on the appointment of
the new CEO of Electrica Serv.
Recommendation as regards the mandate
agreements of the General Managers of
subsidiaries
prolongation/
(termination/
confirmation for specific period of time).
Recommendation on the appointment of the
Chief Distribution Officer of Electrica SA.
Reviewing the BoD composition in subsidiaries
for strengthening the governance across the
group.
Revision of the executive management KPIs
achievement for 2015 and the new ones for
2016 – at Electrica and Group level.
Recommendation on
implementing new
•
•
•
•
•
•
•
•
•
•
for
the
contracts
executive
in Electrica and
for other key
mandate
management positions
subsidiaries, as well as
positions.
Recommendation on the 2017 KPIs structure
for Electrica SA’s managers and the way of
cascading from the general manager level to
managers and from ELSA to its subsidiaries;
Recommendation on the new remuneration
(structure and level) and KPIs for subsidiaries
THE AUDIT AND RISK COMMITTEE
independent directors,
them
is a non-executive
The Committee is made up of three members,
the
most of
chairman
independent
director. This structure provided the necessary
finance and risk management,
expertise
according to legal requirements.
in
The main role of the Committee is to support
the Board in fulfilling its duties of verifying
the efficiency of Company’s financial reporting,
internal control and risk management. While
fulfilling this role, the Committee advises the
Board regarding the assessment of the Annual
Report
Statements,
whether the documents are accurate, balanced
and comprehensive and provide all the necessary
information for the shareholders’ evaluation of
the financial performance.
and Annual
Financial
•
•
•
The Committee has the following duties in
terms of financial reporting:
•
the
integrity of annual and
examining
interim financial statements or disclosures
for Electrica and its subsidiaries (the Group)
at standalone and consolidated levels;
regularly reviewing the adequacy of the
Group’s accounting policies;
reviewing and recommending the Company’s
financial forecast policy to the Board for
approval;
advising
the
content of the annual report, taken as
a whole, represents a fair, balanced and
for shareholders
understandable account
information
and provides them with the
necessary
Company’s
the
performance
the Board on whether
assess
to
Regarding the auditing and internal control
matters, the Committee has the following
responsibilities:
•
approving a Group-wide, annual risk-based
audit plan as well as any material changes
to the plan, and receiving regular reports
on activities, key findings, and follow up
regarding internal audit reports;
•
advising the Board on the appointment,
removal and remuneration of the head of
Internal Audit;
•
•
relevant
• monitoring the adequacy, effectiveness and
independence of the internal audit function;
• making recommendations to the Board on
the appointment, rotation or dismissal of
the Company’s external auditor;
reviewing the plan, work and findings of the
external auditor;
assessing the independence and objectivity
of the external auditor and monitoring
and
compliance with
the
professional
requirements on the rotation of audit partners
regularly
and
reviewing
implementation of
control
policies, including policies for detecting fraud
and the prevention of bribery;
reviewing related party transactions in line
with a policy developed by the Committee
and approved by the Board;
reviewing annually a report by the head of
Internal Audit assessing the effectiveness
of the system of internal control across the
Group
ethical
including
the
key
guidance,
adequacy
internal
•
•
•
The Committee has the following responsibilities
concerning risk management matters:
•
reviewing regularly the main risks facing the
Company and Group, recommending to the
Board relevant policies for their identification,
mapping, management and mitigation of risk;
reviewing annually a report from management
assessing the effectiveness of the system of
risk management across the Group;
advising the Board on equity and debt
financing, including proposals for contracting
any type of loans and securities associated
with these loans;
advising the Board on its recommendations
regarding major economic transactions within
the authority of the General Meeting of
Shareholders, assessing any associated risks
regarding such transactions.
•
•
•
The Audit and Risk Committee met 12 times
during January 1st, 2016 – March 9th, 2017. During
these meetings, the following were discussed
and referred to the Board of Directors for debate
and, when applicable, approval/endorsement:
•
•
•
The Audit Committee Charter.
The audit plan for 2016.
The internal audit policies and procedures
manual.
The internal audit charter.
The internal Auditor’s Ethical Code.
The financial statements of Electrica S.A. at
standalone and consolidated levels for the
•
•
•
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financial year of 2015 and 2016, as well as
financial statements of Company’s subsidiaries
for the financial year of 2015 and 2016.
The income and expenses of Electrica S.A. at
standalone and consolidated levels for the
financial years of 2016 and the revenue and
expenditure budgets of Company’s subsidiaries
for the financial years of 2016.
Various reports submitted by the
internal
auditor on missions carried out within
Electrica SA and its subsidiaries.
Annual report on the internal audit activity
for 2016.
Annual report on integrity warnings for 2016.
2016 Individual preliminary unaudited results
of Electrica SA.
Annual report on risk management activity for
2016.
Report on the internal control effectiveness.
•
•
•
•
•
•
•
The internal audit activity is carried out by a
from a structural point of
separate division
view
Internal Audit Department), within
(the
the Company. In order to ensure the fulfilment
of its main functions, it reports to the Board of
Directors through the Audit and Risk Committee
and administratively - to the CEO.
THE STRATEGY AND CORPORATE
GOVERNANCE COMMITTEE
The Committee was made up of three non-
executive directors, the chairman being a non-
executive independent director.
The Committee has the following duties in terms
of strategy:
• making proposals
the Board on
to
recommendations on
the
development of the medium-term strategic
plan, making
the
strategic direction, priorities and long term
objectives of Electrica and its subsidiaries (the
Group);
reviewing management proposals on
the
Group’s consolidated annual budget, subsidiary
annual budgets, and CAPEX plans for the
Group, and making relevant recommendations
to the Board;
supporting the Board
in monitoring and
assessing the Group’s performance in light of
the approved strategic plan, budgets, industry
trends,
local and regional market trends,
competiveness and advances in technology;
periodically reviewing the overall strategic
planning process, including the process for
developing a medium-term strategic plan;
advising the Board on proposed acquisitions,
joint-
divestments,
projects,
ventures,
cooperation
investment
projects,
and
•
•
•
•
•
particularly assessing their alignment with the
Group’s strategy;
performing
or
responsibilities on strategy matters as may
be delegated to the Committee, from time to
time, by the Board.
activities
other
any
Regarding the tasks of the Committee on
restructuring, they mainly related to:
•
reviewing and making recommendations to
the Board with respect to, the development
and implementation of the Group’s overall
restructuring plans and objectives, including
any determination regarding the disposition
or rationalization of core businesses;
regularly
organisational
structure and chart of the Company, and
making recommendations to the Board;
performing
or
activities
responsibilities on restructuring matters as
may be delegated to the Committee, from
time to time, by the Board.
reviewing
other
any
the
•
•
At the same time, the Committee has duties in
terms of corporate governance:
•
to
the
reviewing
recommendations
overseeing and monitoring the Company’s
compliance with
legal and contractual
obligations on corporate governance, as well
as other applicable corporate governance
principles, and making recommendations to
the Board ;
regularly
Company’s
Corporate Governance Code, Board Charter
and the Company’s Articles of Association,
the
and making
Board on relevant amendments to the
Company’s corporate governance policy and
documentation;
recommending the Group Governance Policy to
the Board for approval and regularly reviewing
it thereafter;
reviewing the chart of authorities for the
Company in order to ensure that the delegation
of authorities
for
effective and efficient decision-making process,
and making recommendations to the Board;
reviewing the Company’s policy for corporate
social
stakeholder
engagement, and making recommendations to
the Board;
to management allows
responsibility
and
•
•
•
•
• making recommendations to the Board on
improving the quality of information flows to the
Board including the adequacy of reports to the
Board, key performance indicators presented to
the Board, and guidelines for Board papers and
presentations;
preparing other
reports or materials on
corporate governance as may be requested by
the Board.
•
•
•
•
•
•
The income and expenses of Electrica S.A. at
standalone and consolidated levels for 2017
financial year and the revenue and expenditure
budgets of Company’s subsidiaries for 2017
financial year.
Recommendation on different
opportunities on the market.
Recommendation on
Regulation.
Recommendation on
Authority Policy.
reviews
recommendations
Several
regarding
the Capex and Commissioning
plans for 2016 and 2017 – quantitative and
qualitative analysis.
the Market Abuse
the Delegation of
investment
and
On June 30th, 2016, the Committee changed
his name
from The Strategy, Restructuring
and Corporate Governance Committee to the
Strategy and Corporate Governance Committee).
During January 1st, 2016 – March 9th, 2017,
the Committee met 15 times and discussed and
referred to the Board of Directors for approval/
endorsement:
•
Revision of the Articles of Association of
Electrica and of its subsidiaries, as well as of
Electrica’s Board and its committees’ charters
– this project required several
iterations
(overall 9 meetings of the Committee);
Electrica Furnizare Strategy on the natural
gas supply activity and the completion of the
Electrica Furnizare object of activity; Electrica
Furnizare Business Plan for gas supply.
CSR Policies.
ELSA Foundation.
The rebranding of the subsidiaries.
Risk Policy and Acquisition and Sales Strategy
for gas and energy at Group level.
Process for the improvement of the Board
(BoD) functioning.
•
•
•
•
•
•
6.3
Boards of Directors of Electrica subsidiaries
During 2016 the Board of Directors of Electrica’
subsidiaries were composed
from non-executive
directors. Regarding the distribution subsidiaries, they
suffered composing changes in March and October,
respectively structure changes
in the middle of
December, 2016, when the number of BoD members
was diminished from five to three according with
the provisions of the new Articles of Association
and they have been appointed for 4 years mandate,
starting with December, 13th 2016 until December
12th 2020. The Resolutions of the General Meeting
of Shareholders in distribution subsidiaries which
appointed the new three directors, as well as the
Resolutions changing the Articles of Association were
contested in court by the minority shareholder.
Structure of the Board of Directors of Electrica’s Distribution and Services Subsidiaries
between January 1st and December 12th 2016
Subsidiary
SDMN
SDTS
SDTN
Source: Electrica
January 1st – March 17th
2016
March 18th – October 5th
2016
November – December 12th
20116
Ioan Rosca-chairman
Aurel Gubandru
Oana Truta
Costin Mihai Paun
Alexandra Borislavschi
Iuliana Andronache-chairman
Gabriela Marin
Oana Truta
Costin Mihai Paun
Alexandra Borislavschi
Marian Geanta-chairman
Simona Fatu
Carmen Pirnea
Mihai Lazar
Alexandra Borislavschi
Iuliana Andronache-chairman
Simona Fatu
Gabriela Marin
Mihai Lazar
Alexandra Borislavschi
Ioan Dumbrava-chairman
Costica Vlad
Ciprian Gheorghe Diaconu
Oana Truta
Ioan Rosca
Iuliana Andronache-chairman
Gabriela Marin
Ciprian Gheorghe Diaconu
Oana Truta
Alexandra Borislavschi
Iuliana Andronache-chairman
Dan Catalin Stancu, starting with
November 3rd 2016
Oana Truta
Costin Mihai Paun
Alexandra Borislavschi
Iuliana Andronache-chairman
Simona Fatu
Dan Catalin Stancu, starting with
November 10th 2016
Mihai Lazar
Alexandra Borislavschi
Iuliana Andronache-
chairman
Dan Catalin Stancu, starting with 11th
November 2016
Ciprian Gheorghe Diaconu
Oana Truta
Alexandra Borislavschi
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Regarding the services subsidiary, the Board of
Directors suffered composing changes in March and
in July, respectively structure changes in the middle
of December, when the number of BoD members
was diminished from five to three according with the
provisions of the new Articles of Association and they
have been appointed for 4 years mandate, starting
with December, 13th 2016 until December 12th 2020
Structure of the Board of Directors of Electrica’s Services Subsidiary between January 1st and December 12th 2016
Subsidiary
March 18th – June 30th
2016
July 1st – December 12th
2016
December 13th – 21st December
2016
January 1st – March 17th
2016
ES
Marin Adrian Gheorghe
chairman
Ramiro Angelescu
chairman
Ramiro Angelescu
chairman
Iuliana Andronache
chairman
Catalin Leonte
Gabriela Sandu
Gabriela Marin
Razvan Badan
Catalin Leonte
Mirela Dimbean Creta
Marin Adrian Gheorghe
Raluca Bulumacu
Catalin Leonte
Mirela Dimbean Creta
Marin Adrian Gheorghe
Madalina Rusu
Ramiro Angelescu
Vlad Gheorghe
Source: Electrica
Structure of the Board of Directors of Electrica’s Distribution and Services Subsidiaries as of December 31st, 2016
SDMN
Dan Catalin Stancu
chairman
ES
Iuliana Andronache
chairman
SDTN
Dan Catalin Stancu
chairman
SDTS
Dan Catalin Stancu
chairman
Alexandra Borislavschi
Oana Truta
Alexandra Borislavschi
Oana Truta
Alexandra Borislavschi
Simona Fatu
Vlad Gheorghe
Bogdan Popa
Source: Electrica
Regarding the situation of Electrica Furnizare’s Board
of Directors, during 2016 the following directors were
in force, the reduction from five to three members
of the Board being implemented at the beginning of
2017 when the directors had been appointed for four
years mandate, starting with January 12th 2017 until
January 11th 2021.
Structure of the Board of Directors of Electrica’ Supply Subsidiary during 2016
Subsidiary
January 1st –March 17th
2016
March 18th–June 30th
2016
July 1st – July 31st
2016
August 1st – October 24th
2016
EF
Oana Truta
Ioan Rosca-chairman
Marcel Ionescu
Victoria Lupu
Ramiro Angelescu
Ramiro Angelescu-
chairman
Oana Truta
Alina Calugareanu
Marcel Ionescu
Victoria Lupu
Vlad Gheorghe-
chairman
Oana Truta
Raluca Bulumacu
Marcel Ionescu
Victoria Lupu
Vlad Gheorghe-chairman
Dan Gheorghe
Raluca Bulumacu
Marcel Ionescu
Victoria Lupu
Source: Electrica
Structure of the Board of Directors of Electrica’ Supply
Subsidiary as of December 31st, 2016
EF
Source: Electrica
Dan Gheorghe
Marcel Ionescu
Vlad Gheorghe
Dragos Magui-chairman
Mirela Dimbean Creta
the General Meeting
The Resolutions of
of Shareholders
in supply subsidiary which
appointed the new three directors, as well
as the Resolution changing the Articles of
Association were contested in court by the
minority shareholder.
6.4
Executive management of Electrica S.A.
In accordance with the Articles of Association of the
Company (approved by GMS on 21 October 2016),
the Board of Directors appoints and revokes the CEO,
as well as the other executives with mandates and
also approves their empowerments. The CEO carries
out the activity according to the provisions of the
mandate contract concluded with the Company.
On 26 February 2016, the Board of Directors and Mr.
Ioan Rosca, CEO at that time, announced that they
had reached a mutual agreement on terminating
his mandate as CEO of Electrica S.A. no
later
than June 2016. On 11 March 2016, the Board of
Directors revoked Mr. Rosca from the CEO position
and appointed Ms.
Iuliana Andronache, current
CFO, as interim CEO. During the meeting held on 19
September 2016, the Board of Directors appointed
Mr. Dan Catalin Stancu as CEO for a mandate of four
years starting with October 24 2016.
During the meeting held on 4 October 2016, the
Board of Directors revoked Ms. Gabriela Marin from
the position of executive manager coordinating the
Human Resources Division starting as of 5 October
2016.
At the end of 2016, the executive managers are:
• Mr. Dan Catalin Stancu – CEO with a mandate of
four years starting with 24 October 2016;
• Ms. Iuliana Andronache – CFO, with a mandate
of four years starting with 27 October 2015;
• Ms. Alexandra Romana Augusta Popescu
Borislavschi – Executive Manager of Strategy and
Corporate Governance Division, with a mandate
of four years starting with 4 August 2015;
• Mr. Ramiro-Robert-Eduard Angelescu – Executive
Manager of Sales Coordination Division with a
mandate of four years starting with 4 August
2015.
regarding
international markets,
According to the best practices applied by companies
the
listed on
implementation of a succession plan
for key-
positions,
the Nomination and Remuneration
Committee coordinates the process of selection
suitable applicants for the vacant Director positions
of Electrica SA. The Nomination and Remuneration
Committee is supported in this approach by an
international consulting firm specialized in recruiting
top management, in order to complete the selection
process as soon as possible.
According to information held by the Company, there
is no contract, understanding or family relationship
the Company and
between
another person who may have contributed to their
appointment as directors.
the directors of
information the persons
According to available
mentioned in sections 6.33 – 6.4 have not been
involved
administrative
proceedings related to their activity within the
Company in the last five years and to their capacity
to fulfil their work-related.
litigations or
any
in
6.5
Executive management of Electrica S.A. subsidiaries
The table below shows the company’s managers who have delegated powers from the Board of
Directors:
Name
Darius Dumitru Mesca
Ion Dobre
Emil Merdan
Mircea Patrascoiu
Eugen Davidoiu, until April 26th 2016
Viorel Vasiu, until July 5th 2016
Vasile Ionel Bujorel Oprean
Source: Electrica
Position
Subsidiary
General Manager
SDMN
General Manager
General Manager
SDTS
SDTN
General Manager
Electrica Furnizare
General Manager
Electrica Serv
General Manager
Electrica Serv
General Manager
Electrica Serv
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The table below shows the company’s managers who do not have delegated powers from the Board of
Directors:
6.6 Number of shares owned by the managers of the Electrica Group
The table below shows the number of Electrica SA’s shares held by the Group’s managers
as of February 15th, 2017:
Nr.
Crt
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Nume
Number of shares
Share in the share
capital (%)
Dan Catalin Stancu
Ioan Rosca4
Iuliana Andronache
Alexandra Borislavschi
Livioara Sujdea5
Ramiro Robert Eduard Angelescu6
Gabriela Marin7
Oana Pirvulete
Ion Dobre
Emil Merdan
Eugen Davidoiu8
Radu holom
Dora Fataceanu
Vasile Filip
-
-
-
-
-
1,000
-
1,208
1,660
7,277
2,478
1,000
1,000
8,745
-
-
-
-
-
0.0003%
-
0.0003%
0.0005%
0.0021%
0.0007%
0.0003%
0.0003%
0.0025%
Source: Electrica
Name
SDMN
Gabriela Blagoi
Constantin Coman
Valentin Branescu
Gabriel Gheorghe
Ion Preda
SDTS
Monica Radulescu
Radu holom
Position
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Ioan Toma, pana in 31.08.2016
Deputy Manager
Nicu Constandache
Catalin Grama
Ioan Dumbrava
SDTN
Dora Fataceanu
Vasile Filip
Constantin Buda
Ladislau Reider
Electrica Furnizare
Cristina Pana
Mihai Beu
Oana Pirvulete
Petre Marin
Roxana Gheorghe
Electrica Serv
Ana Iuliana Dinu
Cristian Andruhovici
Alexandru Ivan
Manager
Manager
Deputy Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Division
Finance
Distribution
Technical 110 kV
Development
Control, Regulation and Communication
Finance
Distribution
Distribution
Technical 110 kV
Development
Development
Finance
Distribution
Technical 110 kV
Development
Finance
Commercial
Legal
Development
Commercial Operations
Finance
Human Resources and Administration
Commercial
Monica Felicia Dumitrascu
Deputy Manager
Human Resources and Administration
Viorel Vasiu
Gheorghe Batir
Viorel Beleuzu
Sursa: Electrica
Manager
Deputy Manager
Manager
Production
Production
Legal and Assets
4
5
6
7
8
CEO Electrica SA until 11 March 2016
Chief Distribution Officer Electrica SA from 1 February 2017
Executive Sales Manager Electrica SA until 27 January 2017
HR Executive Manager Electrica SA until 5 October 2016
General Manager Electrica Serv until 26 April 2016
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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 July 4th, 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 Central Depository on February 15th, 2017 and is presented in the table
below:
Shareholder
Ministry of Energy, 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
Shares
Percent of share capital
168,751,185
29,944,090
16,610,424
113,679,866
16,954,364
345,939,929
48.7805%
8.6559%
4.8015%
32.8612%
4.9010%
100%
Figure 33: Shareholders’ structure at February 15th, 2017
7.2
Corporate Governance Code
Electrica S.A. adhered to the Corporate
Governance Code issued by Bucharest
Stock Exchange and has been willfully
applying its provisions since the fiscal
year 2014. Electrica had officially
adopted the Corporate Governance
in February
Code
2015 and made it available on the
Company’s website for all interested
parties’ benefit.
(“CGC ELSA”)
This Corporate Governance Code
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 ELSA CGC comprises also ELSA’s
Articles of Association, the charters
of the Board of Directors and those
these
of
documents
the
terms of reference and responsibilities
of the administrative and executive
management of the company.
its committees, and all
together
contain
has
S.A.
in order
continuously
Electrica
developed and updated its corporate
governance principles
to
meet the capital market requirements
and to apply the best practices in
corporate governance as well as to
develop opportunities and
increase
competitiveness. Therefore, in October
2016
company’s Articles of
following
Association was updated,
the approval of the General Meeting
of Shareholders held on October 21st,
the
that
In compliance with Company’s policies
and with the Code of Ethics and
professional conduct, the Audit and
Risk Committee ensures
the
Company`s activity is carried on with
honesty and
including the
integrity,
approval of the whistleblower policy.
The main purpose of the whistleblower
policy is to protect the Company from
ethical deviations, frauds and any other
aspects of non-compliance that would
otherwise harm Electrica’s image or
even
legal sanctions, thus
damaging the prestige and profitability
of the Company. This procedure can be
found on Electrica’s website.
involve
Whereas the shares of the Company
are allowed for trading both on the
regulated market administered by
Bucharest Stock Exchange, and on the
market managed by the London Stock
Exchange (LSE), Electrica SA is subject
to the imperative rules imposed by the
national and European laws on market
the arrangements
abuse
inside
applicable
information
to
insider dealing and
Therefore, the
market manipulation guidelines are
presented in Schedule 6 of the CGC.
regarding
2016. Later,
in January 2017, the
charter of the Board of Directors and
the charters of the committees had
also been updated.
In September 2015 the BSE issued a
new Corporate Governance Code (“the
BSE Code”), which entered into force
as of January 4th, 2016. The provisions
of the new Code are being carefully
examined and Company’s compliance
therewith is being thoroughly assessed.
The “Comply or Explain” Statement
presents the compliance level of the
Company with the new provisions
of BSE’s CGC code. Electrica S.A. it
is and has been in full compliance
with most of these requirements.
Regarding the aspects in which the
company is not in full compliance, we
mention that concrete actions will be
taken in order to improve the degree
of compliance in the shortest time.
Further consideration will be applied
with regards to these provisions and
any subsequent progress made by the
Company in achieving compliance will
be reported to the capital market.
the
conduct
business
The CGC
is also a guide for the
management and the employees of
Electrica S.A. and other stakeholders
on
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).
7.3
Implementing action plans undertaken by signing the framework agreement
with EBRD
Source: Central Depository, Electrica
The preparation of the Initial Public
Offering and dual listing of Electrica
involved the signing of a Framework
Agreement with the European Bank
for Reconstruction and Development,
which provides action plans agreed
with the overall objective to adopt
to ensure
new values, essential
sustainable development.
for the
implementation of
action
organizational
necessary
change
in the context of the status as a
listed dual company: developing a
culture of
integrity of the entire
group, adoption of best practices in
corporate governance and subsuming
the
the development strategy of
principles of sustainability.
Following the stabilization process after the June 2014 IPO, Electrica S.A. owns 6,890,593 of its treasury shares,
representing 1.99% of the total share capital. These shares entitle Electrica neither to voting rights nor to dividends.
Under this bilateral document, there
important directions of
are three
ACTIONS TO PREVENT FRAUD
AND CORRUPTION
In order to develop a culture of
integrity at Electrica group, accordingly
to the standards of the bank, first
action was the adoption in 2015 of a
new code of ethics and professional
the entire
conduct applicable
Electrica Group, which
integrates
EBRD guidelines. After its adoption,
Electrica has developed a system of
to
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for managing
relevant processes
ethics and compliance framework and
defining the operational procedure in
the field.
The third dimension involved in 2016,
carrying out sweeps, preparing and
providing the information necessary to
the staff and management in making
decisions, updating information of the
management and personnel through
dedicated
messages
accordingly
specific activities or
with
external
the
developments
environment, analysis of
reported
cases of violation of the Code and
/ or policies, risk identification and
analysis, monitoring compliance with
the dedicated staff of the subsidiaries.
their
of
two
ethics and compliance management,
structured on
fundamental
elements: dedicated organizational
structures and mechanisms / tools
needed
in ethics and compliance
management.
In the first quarter of 2016 the two
basic elements of the system became
operational by clearly defining the
powers of departments
/ ethics
counselors in the Rules of organization
and functioning of each subsidiary
and by adopting policies aiming for
zero tolerance of corruption, fraud
and money laundering, avoidance and
combating conflicts of interest, gifts,
protocol expenses and prohibition of
facilitation payments, transparency
stakeholder engagement, as
and
required by the Code of ethics and
professional conduct at art. 3.7 across
all Group companies.
the
implementation program
Based on this, Electrica defined
implementation
and started
program of the system of ethics
compliance management.
and
The
is
structured in three dimensions:
f A dimension that aims to inform
the
the
staff, disseminating
values and principles of
the
Code and subsequent policies,
their awareness throughout the
organization;
f A dimension
that aims
to
develop dedicated organizational
professional
structures
and
training
dedicated
staff who ranks the positions
the
of counselor or within
departments
and
Ethics
Compliance;
the
for
of
f A dimension aimed at providing
advice to the management and
personnel to generate compliant
behaviors
compliance
and
monitoring.
of
first
The
the
dimension
implementation program materialized
in 2016 through information to all
staff about the Code and policies
consequential as a whole, but also
specific provisions, developed at
Group level and through an awareness
program to middle-management on
values, principles and provisions of
the Code and policies by organizing
dedicated workshops quarterly, at
group level.
A second dimension of the program
implementation during 2016 aimed
both at increasing cohesion at the
dedicated staff and encourage the
exchange of
ideas and solutions
through a program of quarterly
workshops and training by participating
in a training program with external
trainer. Also the mapping of the
7.4
The action plan on corporate governance
The action plan on corporate governance assumed as part of the Framework Agreement with the European Bank
for Reconstruction and Development was considered running ever since IPO and listing of the company on the stock
exchange. Standards and measures it envisaged have been implemented and monitored continuously.
1.
SELECTING INDEPENDENT
DIRECTORS
force until
EBRD guidelines were taken in the
Articles of Association of Electrica
adopted on July 4th, 2014 Electrica
the Extraordinary
in
General Meeting of Shareholders
dated November 10th, 2015 whose
decision
the members
of the Board of Directors of the
company,
from 5
to 7 directors, from which 4 are
independent.
increasing
changed
it
Cristian Rusu as president of the
BoD, having a mandate of one year.
the
The current composition of
Board is available here http://www.
electrica.ro/grupul/despre/consiliul-
de-administratie/.
On December 14th, 2015 Ordinary
General Meeting of Shareholders has
appointed new directors of Electrica.
Following the cancellation of Mr.
Michael Adriaan Maria Boersma
as director of the company with
effect from May 1st, 2016, the Board
independent non-
appointed as
executive temporary director Mr.
Jan Willem Antoon henri Schoeber
and this is confirmed by the General
Meeting of Shareholders dated
October 21st, 2016.
Also, the Board of Directors decided
on January 27th to reelect Mr.
2.
NOMINATION AND
REMUNERATION POLICIES
Electrica developed the Nomination
and Remuneration policies with the
support of a reputable
international
consultant in human resources and it
received a positive opinion of the BoD
and was approved by decision of the
General Meeting of Shareholders, on
March 31st, 2016. But it is necessary to
implement these policies at Group level.
3.
ADVISORY COMMITTEES OF
THE BOARD OF DIRECTORS
At the Electrica’s Board of Directors level
operates three advisory committees:
•
(Bogdan
Audit and Risk Committee (Pedro
Mielgo Alvarez - President, Arielle
Malard de Rothschild - member,
Bogdan George Iliescu - member);
Nomination and Remuneration
George
Committee
Iliescu - President, Arielle Malard
de Rothschild – Member, Corina
Popescu Georgeta - Member);
Strategy and Corporate Governance
Schoeber
(Willem
Committee
- President, Dragan Alina Ioana -
Member, Cristian Busu - Member).
•
•
Rules of organization and functioning of
these advisory committees have been
updated with the Rules of organization
and
functioning of the Board, by
decision of the Board on December
16th, 2016.
The Board of Directors scheduled
the
January 2017 establishing
for
composition of the three advisory
committees for 2017.
4.
THE FRAMEWORK FOR
INTERNAL CONTROL
its
Internal audit procedure and
associated documents were updated
in a version approved by the Board of
Directors since the beginning of 2015.
In October 2016 was developed Code
Internal
of Ethical Conduct of the
Auditor to set standards of ethics
unit applicable to all auditors own
or contracted, at group level, Code,
adopted by the Decision of the Board of
Directors on 15 November 2016: http://
www.electrica.ro/grupul/audit-intern/
codul-etic-al-auditorului-intern/.
internal audit plan
for 2016,
The
prepared by specialized department
was also approved, by decision of the
Board of Directors and implemented as
approved.
5.
ARTICLES OF ASSOCIATION OF
ELECTRICA
the
EBRD guidelines were taken in the
Articles of Association of Electrica
adopted on July 04th, 2014. During
2016
company’s Articles of
Association has been updated by
decisions of the Extraordinary General
Meeting of Shareholders dated April
27th, and October 21st, focusing mainly
on changes alignment with ANRE
regulations. All variants of the Articles
of Association adopted at the time
of
listing Electrica are available on
its website: http://www.electrica.ro/
grupul/despre/act-constitutiv/.
6.
CLEAR LINES OF
RESPONSIBILITY AND
COMPETENCE
from external advice
In order to establish tasks and powers,
as well as clearly defining the reporting
system in the company, Electrica has
developed projects to map processes,
benefiting
in
this regard. The first of these projects
the
completed by defining
was
procedures applied in the company
audited for certification according to
ISO 9001/2015 and ISO 14001/2015
standards. Following the external audit
conducted by Dekra Romania, Electrica
has certified its integrated management
system quality - environment - hSS.
A new organizational structure and
delegation of authority
regarding
policy were approved by the Board of
Directors for Electrica in the meeting
on December 2016, implementation
being accomplished in early 2017. By
the end of 2017 the project will be
expanded at the level of the Group by
aligning organizational structures of all
subsidiaries to the extent that specific
activity subject allows.
7.
CODE OF CONDUCT
EBRD requirements are partly covered
by the Code of Ethics and Professional
Conduct and the other part by the
Code of Corporate Governance. Code
of Ethics and Professional Conduct
has been developed with the support
of Transparency
International, and
the Code of Corporate Governance
and Policy of the integrity warnings
included in cooperation with external
legal consultant of the company. The
two codes have been aligned during
January 2015 approved on February
2nd, 2015 and published on
the
website Electrica http://www.electrica.
ro/grupul/etica-sustenabilitate-si-
conformitate/valori-si-principii/.
During 2016 there were steps for
implementing the provisions of both
codes, along with monitoring and
ensuring
in
relation to them
compliance
functions
8.
COMPLIANCE WITH THE CODE
OF CORPORATE GOVERNANCE
OF BSE
On January 4th, 2016 came into force
the new Code of Corporate Governance
of the Bucharest Stock Exchange, while
Electrica published on this occasion the
statement “Apply or Explain” according
to the new provisions, on January 8th,
2016. In the latest statement “Apply
or Explain” which appears
in the
Annex and presented the Company’s
compliance with the new provisions
of the Code of Corporate Governance
of the Bucharest Stock Exchange. On
areas where the company is not fully
compliant, clear actions are taken
into account so that the degree of
compliance to be
in the
shortest time.
improved
Given the changing BSE Code of
Electrica
Governance,
Corporate
has made the changes necessary in
their Corporate Governance Code,
in cooperation with its external legal
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was aproved by GSM on October 21st,
2016.
In the period June to September 2016,
Electrica developed the Market Abuse
Regulation, in compliance with national
and European provisions in this field. It
was adopted in September 2016 and
is being implemented across the whole
Group.
consultant, the update is available on
the company website: http://www.
electrica.ro/investitori/guvernanta-
corporativa/codul-de-guvernanta-
corporativa/. Last updated Code of
Corporate Governance was published
on the website on January 19th 2017.
Regarding the Company’s subsidiaries,
it was done revising and updating the
Articles of Association and governance
principles for the whole Group. The
new Articles of Association were
approved by the Extraordinary General
Meeting of each Electrica subsidiary,
during December 2016, being aligned
with the principles from the Article
of Association of Electrica S.A., which
7.5
The environmental and social responsibility plan
Implementation of the Social and
Environmental Action Plan, Annex of
the Framework Agreement signed by
Electrica S.A. with the European Bank
for Reconstruction and Development
started at the end of 2014, continuing
in 2015 and 2016 and covering the
following actions to complain the
requirements of the bank.
In the period May - August 2016
level was carried
at the company
out a comprehensive project
for
of
and mapping
identification
processes at Electrica, which benefit
from external advice in this regard.
It was completed by redefining the
procedural framework applicable to
the company and certification of
integrated management system quality
- environment - hSS, in accordance
ISO
with the
14001:2015, OhSAS
18001:2007
following the external audit conducted
by Dekra Romania.
ISO 9001:2015 and
In November 2016 Electrica started a
program to streamline the promotion
and monitoring of investment projects
at group level and it will be fully
implemented in the first quarter of
2017. The program seeks to establish
integrated procedural
a group-wide
framework
conduct
to
Electrica
investment activity. This will include
the settings of operational procedures
in force concerning
and provisions
environmental impact assessment of
investment projects of the Group and
stakeholder consultation on projects
with significant impact and targeting
contractors on the requirements of
environmental issues.
At the same time, in 2016 Electrica
has followed the necessary steps to
change the statutory documents of its
subsidiaries, providing the necessary
conditions for the integration of quality
- environment - hSS management
systems at the group level, the new
Articles of Association being approved
by the Extraordinary General Meeting
of subsidiaries during December 2016.
Implementation of the international
standard energy management
ISO
50001:2011 was
scheduled after
the completion of the process of
the
the
redefining
Electrica group.
structure of
Management of complaints are made
at group level based on conventional
procedures in force at the level of
each company, involving departments
Communication and Public Relations
for collection and for verification and
analysis, the departments of audit
and control, as well as experts from
other departments, if the situation
requires. Since April 2015 Electrica is
functional at group level the reporting
ethical misconduct,
system
of
violations
or
irregularities
any
law by professional alert
of the
devices (whistleblowing). It includes
hotline, postal address (physical and
electronic) and an online platform for
taking whistle blows, accessible on
the websites of all companies in the
group. Receiving and anonymization
services of whistleblows alerts are
outsourced and the provider for these
for 2016 is Transparency International
Romania.
LUMINA SCRIE POVESTEA
CUNOASTERII
staff,
their
2016
Corporate
Regarding
Social
Responsibility Program of Electrica,
during
approved
Electrica
and
implemented both stakeholder
engagement policy, available here
http://www.electrica.ro/wp-content/
uploads/2016/01/Politica-privind-
implicarea-partilor-interesate.pdf, also
involvement and social responsibility
strategy including community actions
involving
providing
sponsorships and donations to non-
profit organizations and social causes,
along with initiating a grant program
called “Electrica put Romania in a
different
funding
light” aimed at
projects with long-term impact on the
communities in which the company
develops. In general, the strategy was
addressed by the company to identify
and
causes, actions or
relevant projects, sustainable, positive
long-term impact, all presented here:
http://www.electrica.ro/wp-content/
uploads/2017/01/brosura-net.pdf.
support
At the same time, Electrica managed
to make
in
important
developing an organizational culture
oriented towards business ethics and
compliance.
strides
Identify and assess environmental
and social risks by an independent
consultant was not done in isolation,
but as a part of the project to
improve and develop the system of
risk management to be implemented
in Electrica group during 2017.
The documentation for this project
was completed in the first quarter
of 2016 but regarding subsequent
organizational
require
revision of this one.
Regarding
of
corporate policies on actions of
restructuring
reorganization
/
the
level,
undertaken at Group
Collective Labour Agreement signed
with the social partners and applicable
during 2016 provides clear principles
in this regard and establishes measures
development
changes
the
group
in accordance with
to reduce the social impact of these
actions,
labor
legislation. In parallel, the companies
of
developed,
Electrica
approved and
implemented Annual
Training Programs. These programs
target both professional development
and retraining and are used to avoid,
where possible, staff reductions.
if all group companies have
Even
implemented procedures
for waste
management, Electrica developed at the
end of 2015 a procedural framework for
the implementation of a unified system
at Group level, the implementation of
which shall be made after completion of
the process of redefining the structure of
the group Electrica. Waste management
in 2016 was conducted independently by
each company in the group, through the
selective collection of waste generated to
recovery or disposal, according to legal
requirements and compiling all reports
required by the environmental authorities.
For 2016, spills of insulating oil from
transformers from the stations of
distribution subsidiaries within the
group Electrica were monitored and
recorded in the registers of faults.
locations (repair
For a number of
shops, warehouses) of
Electrica
Serv agencies were conducted soil
analysis and water, as is required by
environmental permits. Practically all
incidents were treated by operative
intervention measures, having a
significant environmental impact and
did not require decontamination of
soil and groundwater.
group
Electrica
companies have
developed a program to eliminate
asbestos in facilities owned, pursuing
the goal in all investment projects
initiated.
Reducing noise pollution in residential
areas and associated health risks is
achieved by the inclusion of specific
provisions in contracts for works and
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services, where applicable. To provide
but a unified approach at group level,
Electrica
initiated the development
of a framework procedure applicable
across
on
and
environmental
health and safety to be respected by
the providers of works, also including
noise pollution issues.
requirements
subsidiaries
its
all
in
this
Electrica has conducted studies on
influence of electromagnetic
the
installations and has
fields of
its
regard, all
measurements
falling within the accepted standards,
according to legal provisions in force.
For all the modernization work and
intended
future
measurements of electromagnetic
fields during commissioning of facilities
and the provision of relevant data as
required by law, measurements made
by the contractors.
investments are
involved
In 2016, Electrica was
responsibility
social
in numerous
activities and in financing projects with
positive impact on the community. The
documents necessary for the proper
development of
the CSR activity
implemented,
were completed and
including the “Policy on Sponsorships
and Donations” and the “Policy on
Grant awarding”. Moreover, Electrica
adhered to the 10 principles of the
Global Compact of the United Nations
and to the local program, through
Global Compact Network Romania,
largest corporate sustainability
the
initiative in the world.
results. Within
The company became a partner of
famous NGOs, which managed to
develop sustainable projects, with
the social
visible
responsibility
the
company, over 200 employees were
involved
volunteering
various
activities.
initiatives
of
in
f health projects:
•
services
Counseling
Save The Children Romania
-
and
educational
for 100
support
children with mental health
disorders integrated in school;
• Help Autism (the program “Parent
for Parent”) - Support for families
of 50 children diagnosed with
in
the
following areas:
financing
education, social and health services,
environment, and culture. Over 180
projects entered the competition, six
of which were selected for a total
funding of EUR 50,000.
All
the projects mentioned were
included in the first CSR brochure of
the company: “The story of light - A
vision on Electrica’s social involvement
in the community”.
autism spectrum disorder, who
cannot afford to pay the therapy
needed for their recovery;
• hOSPICE Casa Sperantei (hospices
of hope) - Electrica supported
and participated along with its
employees to a charity marathon.
The amount raised covered the
costs of operation for 52 days of
the dedicated palliative care unit
for stationary patients cared for
by the NGO;
• hOSPICE Casa Sperantei (hospices
of Hope) - Supporting one of the
mobile team of the organization.
The donation covered 100 home
visits, 78 days of hospitalization
in units with beds and 200
participations in day care centers.
f Environmental projects:
•
Let`s Do It, Romania! (“National
Cleaning Day”) - Support with
both financial
resources and
involvement of employees in the
cleaning action organized on 24
September, one of the biggest
social movement
in Romania
(over 1.1 million volunteers in six
years of activity).
f Social/education projects:
•
•
•
It, Romania!
Save The Children Romania (the
program “School after school”)
- Provision of complementary
services, both educational and
social, to children and families
who come from disadvantaged
communities;
Let`s Do
(„Let`s
Do It, Corporate!”) – With help
from Electrica
volunteers, a
contribution was brought to the
renovation,
rehabilitation and
rearrangement of the Placement
Centre in Plopeni, which hosts 60
children and young people with
special educational requirements;
SERA Romania – To celebrate 20
years of activity, the foundation
organized a charity concert at
the Romanian Athenaeum, where
Electrica was the main partner.
The funds collected were directed
to activities and programs aiming
child protection.
Also, in 2016, the company launched
the first edition of the grant program
“Electrica puts Romania in a different
it offered
light”, during which
8 FINANCIAL OVERVIEW
The financial overview of the company is based on the consolidated financial statements that have been
prepared in accordance with the International Financial Reporting Standards (“IFRS”) adopted by the European
Union (“IFRS-EU”). These Consolidated financial statements are presented in RON, which is the functional
currency of all companies within the Group.
8.1
Consolidated statement of the financial position
The following table presents the consolidated statement of the financial position:
RON mil.
ASSETS
Non-current assets
Intangible assets related to concession agreements
Other intangible assets
Tangible assets
Restricted cash
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 gov. bonds
Inventories
Prepayments
Green Certificates
Income tax receivables
Total current assets
Total assets
Total active circulante
Total active
EqUITY AND LIABILITIES
Equity
Share capital
Share premium
Treasury share reserves
Pre-paid capital contributions in kind from shareholders
Revaluation reserve
Other reserves
Retained earnings
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity
December 31st,
2016
December 31st,
2015
Variation
2016/2015
3,910
17
702
134
40
2
4,805
778
20
889
1,875
23
6
0
2
3,593
8,398
3.593
8.398
3,814
103
(75)
5
105
302
1,430
5,684
837
6,520
3,700
14
779
-
51
4
4,548
838
37
893
1,988
23
9
31
23
3,843
8,148
3.843
8.391
3,814
103
(75)
3
140
274
1,355
5,614
829
6,443
5.7%
20.4%
-9.9%
-
-21.6%
-54.2%
5.7%
-7.1%
-45.6%
-0.5%
-5.7%
-2.2%
-40.4%
-
-89.7%
-6.5%
0.1%
-6,5%
0,1%
0.0%
0.0%
0.0%
79.7%
-25.4%
10.3%
5.6%
1.3%
0.9%
1.2%
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RON mil.
Liabilities
Non-current liabilities
Long-term bank borrowings
Financing for network construction related to concession
agreements
Deferred tax liabilities
Employee benefits
Other payables
Total non-current liabilities
Current liabilities
Financing for network construction related to concession
agreements
Short-term bank borrowings
Bank overdrafts
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Current income tax liability
Total current liabilities
Total liabilities
Total equity and liabilities
Source: Electrica
NON-CURRENT ASSETS
December 31st,
2016
December 31st,
2015
Variation
2016/2015
128
42
196
193
45
603
86
-
143
723
161
4
84
62
12
1,275
1,878
8,398
-
122
181
194
43
540
100
60
66
656
249
4
135
128
11
1,408
1,949
8,391
-
-65.9%
8.0%
-0.5%
4.3%
11.6%
-14.1%
-
116.2%
10.1%
-35.5%
4.3%
-37.6%
-51.1%
11.5%
-9.5%
-3.6%
0.1%
The application model of IFRIC 12, being to a large extent correlated to the recognition and depreciation of the asset
components of RAB, reflects the principle of generating revenues.
Non-current assets increased by 5.7% in 2016 compared to 2015, from RON 4,548 mil. to RON 4,805 mil., primarily
as a result of an increase in the assets related to concession agreements (investments made in the network, for the
most important ones please refer to Appendix 2).
CURRENT ASSETS
Current assets decreased by 6.5% in 2016 as compared to 2015, from RON 3,843 mil. to RON 3,593 mil., mainly
driven by the decrease in the value of deposits, treasury bills and government bonds, as well as by decrease of
receivables and green certificates.
TRADE RECEIVABLES
Trade receivables decreased by RON 60 mil, representing 7.1%, from RON 838 mil. in 2015 to RON 778 mil. in 2016.
This variation was mainly caused by the decrease in amounts receivable by Electrica Furnizare in line with revenue
reduction.
CASH AND CASH EqUIVALENTS
Cash and cash equivalents decreased by 0,5% in 2016 compared to 2015, from RON 893 mil.to RON 889 mil.
DEPOSITS, TREASURY BILLS AND GOVERNMENT BONDS
Deposits, treasury bills and government bonds decreased by RON 113 mil. compared to 2015, as a result of setting
a collateral deposit to guarantee loans contracted by distribution subsidiaries.
SHARE CAPITAL AND SHARE PREMIUM
The subscribed share capital in nominal terms consists of 345,939,929 ordinary shares on December 31st, 2016
(345,939,929 ordinary shares on December 31st, 2015) with a face value of RON 10 per share. All shares rank
equally with regard to the Company’s residual assets. Holders of ordinary shares are entitled to dividends and have
the right to one vote per share in the general meetings of shareholders of the Company, except for 6,890,593 shares
repurchased by the Company in July 2014 for stabilization.
Number of shares at 1 January
Shares issued during the year
Number of shares at December 31st
Source: Electrica
Number of ordinary shares
2016
345,939,929
-
345,939,929
2015
345,939,929
-
345,939,929
The company recognizes the changes in its share capital only after their approval in the General Meeting of
Shareholders and their registration with the Trade Register. Contributions made by the shareholder which are not
registered yet with the Trade Register at the end of the year are recognized as “Pre-paid capital contributions in
kind from shareholders”.
In 2014 there were several changes to the share capital: a share capital increase of 188,264 ordinary shares in February
and an increase of 3,846,797 ordinary shares in May, the shares being issued in respect of land contributed by the
shareholder in the previous periods; the partial division of Electrica S.A. by separation of a part of the patrimony
(investments held by Electrica S.A. in other entities) and its transfer to the newly established company - Societatea
de Administrare a Participatiilor in Energie S.A.) which lead to a share capital decrease of 43,123,780 ordinary
shares; the share capital increase on July 2nd, 2014 of 177,188,744 ordinary shares, as a result of organizing an IPO,
which referred to an offering of 142,007,744 shares and 8,795,250 GDRs, each GDR representing the equivalent
of four shares. The underwritings amounted to RON 1,556,095 thousand and USD 120,143,115. Consequently, the
Group recognized an increase of share capital amounting to 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.
In 2016 there were no changes to the share capital.
Until December 31st, 2003, the statutory share capital in nominal terms was restated according to IAS 29 “Financial
Reporting in Hyperinflationary Economies”, with the corresponding adjustments being reflected in the retained
earnings.
TREASURY SHARES
In July 2014 the Company bought-back 5,206,593 shares and 421,000 GDRs, representing the equivalent of 1,684,000
shares. The total amount paid for these shares and GDRs was RON 75,372 thousand.
DIVIDENDS
Dividends for 2015, worth RON 292 mil., were declared on the basis of individual annual statutory financial
statements prepared in accordance with the Romanian accounting regulations. Dividends for 2015 were approved
by the Ordinary General Meeting of Shareholders of April 27th, 2015 and were paid first on July 18th, 2016.
REVALUATION RESERVES
The reconciliation between opening and closing revaluation reserve is as follows:
RON mil.
Balance at 1 January
Revaluation of tangible assets attributable to shareholders of the Company
Release of revaluation reserve to retained earnings due to
depreciation and disposals of tangible assets
Spin-off effect
Loss of control over subsidiaries
Balance at December 31st
Source: Electrica
2016
140
-
(29)
-
(6)
105
2015
156
-
(14)
-
(2)
140
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OTHER RESERVES
NON-CURRENT LIABILITIES
Other reserves include:
f Legal reserves – established as 5% of the profit before tax according to the individual statutory financial
statements of companies within the Group, until the total legal reserves reach 20% of the paid-up
nominal share capital of each company, according to legal provisions. These reserves are deductible for
income tax purposes and are not distributable.
f Other reserves established in compliance with the legislation in force.
RON mil.
Balance on 1 January 2014
Set-up of legal reserves
Effect of division
Balance on December 31st, 2014
Set-up of legal reserves
Balance on December 31st, 2015
Set-up of legal reserves
Balance on December 31st, 2016
Source: Electrica
Legal reserves
246
30
(39)
237
37
274
28
302
Other reserves
369
-
(369)
-
-
-
-
-
Total other reserves
615
30
(408)
237
37
274
28
302
NON-CONTROLLING INTERESTS (“NCI”)
The following tables summarise the information related to each of the Group’s subsidiaries that has material non-
controlling interest, before any intra-group elimination.
December 31st, 2015 (RON mil.)
EDMN
EDTN
EDTS
EF
Intra-group
adjustments
Total
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 investment activities
Cash flows from financing activities*
Net increase/(decrease) in cash and cash
equivalents**
Dividends paid to NCI during the year
22%
1,354
279
(139)
(174)
1,319
290
801
107
1
109
24
0.3
214
(56)
(154)
4
22%
1,333
154
(176)
(270)
1,041
229
857
116
1
117
25
0.3
219
(213)
(95)
(89)
22%
1,224
195
(123)
(268)
1,028
226
790
115
3
117
25
0.6
238
(150)
(135)
(47)
22%
131
1,066
(71)
(720)
406
89
4,141
173
(1)
172
38
(0.1)
258
(20)
(111)
127
27
28
26
25
-
-
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
837
-
-
-
-
112
1
-
-
-
-
106
*Cash flows from financing activities include dividends paid to NCI.
**The amounts presented represent the cash flows of subsidiaries
Source: Electrica S.A.
Non-current liabilities increased by 11.6% in 2016 compared to 2015, from RON 540 mil. to RON 603 mil, as
a result of contracted bank loans by the distribution subsidiaries.
CURRENT LIABILITIES
Current liabilities decreased by 9.5% in 2016 compared to 2015, to RON 1,275 mil from RON 1,408 mil., as a
result of changes in the following categories (representing 81% of total current liabilities):
Trade payables
Trade payables increased by 10.1% in 2016 compared to 2015, to RON 723 mil. from RON 656 mil. The main
categories included in trade payables are: payables to electricity suppliers, fixed assets suppliers and other
suppliers (suppliers of services, materials and consumables etc.).
Provisions
RON mil.
Balance on 1 January 2015
Provisions recognized
Provisions used
Provisions reversed
Balance on December 31st, 2015
Source: Electrica
Provisions
128
44
(70)
(39)
62
As of December 31st, 2016, provisions refer mainly to:
•
•
•
RON 35.5 mil. for group potential fiscal obligations (including interest and penalties);
RON 12.7 mil. for restructuring provision recorded by Electrica Serv;
RON 3 mil. for customer claim which requests the reimbursement of connection fee
Short-term employee benefits
Short-term employee benefits have decreased by 37.6% in 2016 as compared to 2015.
RON mil.
Personnel payables
Current portion of defined benefit liability and other
long-term employee benefits
Social security charges
Tax on salaries
Termination benefits
Total
Source: Electrica
December 31st, 2016
37
10
December 31st,2015
32
12
28
9
0
84
52
15
22
135
In Romania, all employers and employees, as well as other persons, are contributors to the state social
security system. The social insurance system covers pensions, allocations for children, temporary inability to
work, risks of works and occupational diseases and other social assistance services, unemployment benefits
and incentives for employers creating new jobs.
At December 31st, 2015, termination benefits in amount of 22.5 mil. RON refers to benefits for voluntary
leaves of employees related to 2015, while in 2016 short-term employee benefits in amount of RON 53 mil.
where deconsolidated, as a result of deconsolidation of Servicii Energetice Moldova.
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Other current liabilities
Other payables decreased by 35.5% in 2016 compared to 2015.
RON mil.
VAT payable
Other liabilities to the State
Liabilities related to radio and TV tax
Other liabilities
Liabilities related to Green Certificates
Total
Source: Electrica
December 31st, 2016
85
30
10
22
14
161
December 31st, 2015
119
91
13
25
-
249
The decreased debt towards state budget is mainly a result of deconsolidation of Servicii Energetice Moldova.
In accordance with Law 533/2003, which amended Law no. 41/1994 on the organization and functioning of
the Romanian Radio Broadcasting Company and of the Romanian Television Company, radio and TV taxes
are collected by Electrica Furnizare on behalf of these companies. The payable of the Group to the above
mentioned institutions is represented by the radio and TV tax collected and not paid by year end.
Other liabilities refer mainly to guarantees, various creditors, connection fee, habitat fee and contribution for
cogeneration. Other non-current liabilities refer to guarantees from customers related to electricity supply.
8.2
Consolidated statement of profit and loss
The following table presents the Consolidated Income Statement of Electrica Group, for years 2016 and
2015.
THE CONSOLIDATED FINANCIAL STATEMENT
Electrica’s revenues in 2016 and 2015 amounted to RON 5,518 mil. and RON 5,503 mil, respectively.
The increase in revenues by RON 15 mil., or 0.3%, in 2016 as compared to 2015, resulted from the deconsolidation of
Servicii Energetice Moldova.
Electricity purchased
The expense for electricity purchased by the Group increased by RON 37 mil. or 1.4%, reaching RON 2,756 mil. in 2015,
from RON 2,719 mil. in 2015. This is mainly a consequence of an increase in quantities supplied.
As percentage of the revenue, the cost of electricity purchased was the main cost element of the Group, accounting for
49.9% in 2016 and 49.4% in 2015.
Green certificates
Electricity suppliers have a legal obligation to purchase/supply a certain share of the electricity produced from renewable
sources, through the acquisition of green certificates, based on annual targets or quotas set by law, regarding the share
of gross production from renewable sources.
The cost with the acquisition of Green Certificates is a pass through cost.
As a percentage of revenues, the cost with the acquisition of Green Certificates represented, at Group level, 7.3% in 2016
compared to 6.3% in 2015.
Construction costs
In 2016, the costs related to the construction of power grids increased by RON 38 mil. or 7.8%, to RON 528 mil in 2016
from RON 490 mil. in 2015. This increase is mainly due to RAB increase in 2016, resulting from undertaken investments.
Employee benefits
RON mil.
Revenues
Other operating income
Electricity purchased
Green Certificates
Construction costs related to concession agreements
Employee benefits
Repair, maintenance and equipment
Depreciation and amortisation
Impairment of property, plant and equipment, net
Impairment of trade and other receivables, net
Other operating expenses
Change in provisions, net
Operating profit
Financial income
Financial costs
Net finance (income)/cost
Profit before tax
Income tax expense
Profit for the year
Source: Electrica
2016
5,518
243
(2,756)
(401)
(528)
(654)
(44)
(373)
(1)
(41)
(442)
65
586
20
(17)
3
589
(120)
469
2015
5,503
211
(2,719)
(347)
(490)
(663)
(59)
(351)
(2)
(4)
(455)
(55)
569
38
(17)
20
589
(107)
482
Variation 2016/2015
0.3%
15.3%
Expenses for salaries and employee benefits decreased by RON 9 mil. or 1.3%, to RON 654 mil. in 2016 from RON 663 mil.
in 2015. This decrease was attributable to lower benefits for employees of SDMN and SEM. As percentage in revenues,
the expense for salaries and employee benefits accounted for 11.9% in 2016 compared to 12% in 2015.
1.4%
15.8%
7.8%
-1.3%
-25.3%
6.4%
-70.7%
823.0%
-2.9%
-218.6%
3.0%
-47.1%
-2.9%
-84.5%
-0.0%
12.3%
-2.8%
Repair, maintenance and equipment
Repair, maintenance and equipment expenses decreased by RON 15 mil. or 25.3%, to RON 44 mil. in 2016 from RON
59 mil. in 2015. This was mainly attributable to a decrease in expenses with maintenance and repair of the distribution
companies. Expenses with repairs, maintenance and equipment accounted for 0.8% of revenues recorded in 2016,
respectively 1.1% of revenues recorded in 2015.
Other operating expenses
Other operating expenses remained decreased by RON 13 mil. or 2.9%, %, from RON 455 mil. in 2015 to RON 442 mil.
in 2016, as a result of exclusion of SEMO expenses. Other operating expenses accounted for 8% of revenues in 2016,
respectively 8.3% of revenues in 2015.
Change in provisions, net
This expense category recorded a favorable evolution at the Group level, with a variation of RON 120 mil in 2016 compared
to 2015, from a negative position of RON 55 mil to a positive one of RON 65 mil RON, generated by the reversal of a
provision from ELSA related to late payment penalties claimed by NAFA and a restructuring provision recorded by Electrica
Serv, as achieving the reduction of staff.
Operating profit
As a result of the cumulative impact of the above mentioned factors, the operating profit increased by RON 17 mil, or
3%, to RON 586 mil. in 2016 from RON 569 mil. in 2015, driven by improved efficiency in the energy services segment.
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Net finance income/cost
The Group recorded a positive financial result in 2016, decreasing by RON 17 mil., as compared to 2015, from RON 20
mil. in 2015 to RON 3 mil. in 2016, due to lower investments made in 2016 and due to unfavorable evolution on the
local capital market.
Profit before tax
The profit before tax remained at the same level as in 2015 to RON 589 mil.
Income tax expense
The income tax increased by RON 13 mil, or 12.3%, to RON 120 mil. in 2016 from RON 107 mil. in 2015.
Net profit for the period
Taking into account the above mentioned, the net profit for 2016 decreased by RON 13 mil, or 2.8%, to RON 469 mil. in
2016 from RON 482 mil. in 2015.
SEGMENT REPORTING - DISTRIBUTION
Key indicators - The distribution segment
Figure 34: Distribution segment revenues w/o
conso adjustments (mil. RON)
Figure 35: Distribution segment EBITDA w/o
conso adjustments (mil. RON)
Source: Electrica
Source: Electrica
The following table presents the Income Statement of the Group’s distribution segment, for the period 2014
–2015.
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) of the segment
Source: Electrica
Revenues
December 31st, 2016
December 31st, 2015
1,142
1,356
2,498
398
(12)
(350)
760
312
1,103
1,509
2,613
464
(10)
(335)
809
377
Revenues from the distribution segment decreased by RON 115 mil., or 4.4%, to RON 2,498 mil. in 2016,
compared to RON 2,613 mil. in 2015. This was mainly attributable to a decrease in regulated distribution
tariffs, in the context of 2.6% increase in distributed electricity.
Electricity purchased
The cost of electricity purchased to cover the network losses increased by RON 10 mil., or 2%, to RON 501
mil. in 2016 from RON 491 mil. in 2015. The increase was mainly caused by the upward trend in the volumes
of electricity needed to cover network losses and of energy acquisition price.
Employee benefits
Employee benefits decreased by RON 4 mil, or 1%, to RON 531 mil. in 2016 from RON 535 mil. in 2015,
driven mainly by the undertaken reorganization and efficiency improvement measures, with SDMN recording
the most significant decrease.
Repair, maintenance and equipment
Repairs, maintenance and equipment expenses decreased by RON 44 mil., or 16%, to RON 259 mil. in 2016
from RON 303 mil. in 2015. These amounts do not include the consolidation adjustments between Electrica
Serv and distribution subsidiaries. This decrease was caused especially by the diminished level of expenses
with network maintenance, as a consequence of investments made by the distribution subsidiaries, and also
by the capitalization, starting with 2014, of certain maintenance and repair expenses.
EBITDA
Figure 37: Distribution segment net debt/ (cash)
(mil. RON)
The decrease in revenues together with the increase in costs of purchased electricity to cover network losses,
led to a decrease of RON 49 mil., or 6.1%, in EBITDA of the distribution segment.
The EBITDA margin decreased by 54 bps in 2016, from 30.97% in 2015 to 30.43% in 2016
Net profit of the segment
The net profit followed a similar trend with EBITDA, decreasing by RON 65 mil., or 17.4%. The net profit
margin decreased to 12.48% in 2016 from 14.43% in 2015.
Source: Electrica
Figure 36: Distribution segment net profit
(mil. RON)
Source: Electrica
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SEGMENT REPORTING – SUPPLY
Key indicators - the supply segment
Figure 38: Revenues
for the supply
segment (mil. RON)
Revenues (ex-Green Certificates)
Revenues from Green Certificates
Source: Electrica
The following table presents the Income Statement of the Group`s supply segment for 2015 and 2016.
RON mil.
External revenues
Inter-segment revenues
Segment revenue
Segment profit (loss) before tax
Net finance (cost)/income
Depreciation, amortization and impairment, net
EBITDA
Net Profit (loss) of the segment
Source: Electrica
Revenues
December 31st,
2016
December 31st,
2015
4,347
85
4,432
174
(1)
(10)
185
139
4,375
114
4,488
160
3
(7)
165
136
Net revenues (excluding revenues from Green Certificates) from the supply segment decreased by RON 110
mil. or 2.7%, to RON 4,031 mil. in 2016 from RON 4,141 mil. in 2015. This can be explained by the net result
coming from a 4.7% decrease in supply tariff for 2016, correlated with an increase in competition on the
electricity supply market, and an 5.4% increase in supplied quantities.
Electricity purchased
The expense with electricity purchased decreased by RON 148 mil., or 3.8%, to RON 3,742 mil. in 2016 from
RON 3,891 mil. in 2015.
This decrease was mainly attributable by the decrease of 2.7% of average electricity acquisition price
compensated by the increase with 5% in purchased quantity.
EBITDA
EBITDA Margin
Group Net Profit
Net Profit Margin
Figure 39: EBITDA for the
supply segment (mil. RON)
Figura 40: Net profit of the
supply segment (mil. RON)
Source: Electrica
Source: Electrica
Figure 41: Net debt/ (Cash) for
the supply segment (mil. RON)
Green certificates
The 17% increase in the value of Green Certificates included in the invoice to final consumers from RON 35.90/
MWh in 2015 to RON 41.90/MWh in 2016, in accordance with ANRE regulations, generated an increase in
revenues from green certificates, without affecting the profitability, taking into account that Green Certificates
are re-invoiced to consumers at their cost.
The cost with acquisition of Green Certificates increased by RON 54 mil., or 16%, to RON 401 mil. in 2016
from RON 347 mil. in 2015. This was mainly due to an increase in the regulated quota of Green Certificates
imposed to electricity suppliers by ANRE, from 0.278 Green Certificates for 1 MWh supplied in 2015 to 0.317
Green Certificates for 1 MWh supplied in 2016.
Salaries and employee benefits
In 2016, salaries and employee benefits remained constant as compared to 2015, amounting to RON 82 mil
(RON 1 mil. decrease as compared with 2015).
EBITDA
Decreased expense with energy acquisition by RON 148 mil. in 2016 as compared to 2015 resulted in an
increase in EBITDA by RON 20 mil., or 12%, which, correlated with a decrease in revenues, led to an increase
of 51 bps in EBITDA margin, from 3.7% in 2015 to 4.2% in 2016.
Segment net profit
The net profit increased by RON 3 mil., or 2.4%, as a result of a decrease in expenses with electricity
acquisition at a higher rate than the selling price decrease.
Net Debt
(Net Cash)
Source: Electrica
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8.3
Consolidated cash flow statement
RON mil.
RON mil.
Cash flows from the operating activities
Profit
Adjustments for:
Depreciation
Amortisation
Impairment of tangible assets, net
Loss on disposal of tangible assets
Impairment loss on trade and other receivables, net
Change in provisions, net
Net finance cost
Gain on loss of control over subsidiaries in financial distress
Income tax expense
Total adjustments
Changes in:
Trade receivables
Other receivables
Deposits, treasury bills and government bonds
Restricted cash
Prepayments
Green Certificates
Inventories
Trade payables
Other payables
Employee benefits
Cash generated from operating activities
Interest paid
Income tax paid
2016
2015
Variation
2016/2015
468.9
482.2
-2.8%
40.9
332.2
0.7
(8.0)
40.6
(65.2)
(3.2)
(73.7)
120.1
853.3
(88.3)
34.0
(4.9)
(134.5)
3.8
31.3
0.5
150.7
(34.9)
5.3
816.3
(4.6)
(93.7)
44.1
306.7
2.4
4.7
4.4
55.0
(20.5)
(38.5)
107.0
947.4
(126.4)
(5.9)
(2.6)
-
(0.8)
22.4
1.0
81.8
(62.1)
(2.3)
852.5
(8.0)
(101.3)
-7.3%
8.3%
-70.7%
-
823.0%
-
-84.5%
91.4%
12.3%
-9.9%
-30.1%
-
89.8%
-
-
39.7%
-51.5%
84.2%
-43.9%
-
-4.2%
-43.0%
-7.4%
Net cash from operating activities
718.0
743.2
-3.4%
Cash flows from the investment activity
Payments for purchases of tangible assets
Payments for network construction related to concession agreements
Payments for purchases of other intangible assets
Proceeds from the sale of tangible assets
Payments for purchases of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Increase in deposits with maturity of 3 months or longer
Proceeds from deposits with maturity of 3 months or longer
Interest received
Effect on loss on control over subsidiaries on cash
Net cash used in investing activities
(32.1)
(500.3)
(7.5)
27.8
(2,437.5)
2,436.4
(300.9)
419.8
18.4
(1.6)
-
(377.6)
(31.8)
(353.3)
(8.8)
14.8
(4,094.0)
3,240.5
(350.2)
439.0
41.3
(2.9)
-
(1,105.4)
1.2%
41.6%
-14.0%
88.4%
-40.5%
-24.8%
-14.1%
-4.4%
-55.5%
-43.8%
-65.8%
Cash flows from financing activities
Proceeds from long term bank loans
Proceeds from short term bank loans
Repayment of long term bank loans
Repayment of short-term bank loans
Dividends paid
Repayment of financing for network construction related to concession
agreements
Payment of finance lease liabilities
Net cash from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at December 31st
Source: Electrica
Cash flow
In 2016, net cash from operating activities amounted to RON 718 mil.
2016
2015
Variation
2016/2015
127.7
-
(9.9)
(50.0)
(396.9)
(92.7)
-
(421.7)
(81.3)
827.5
746.2
18.0
51.8
(8.1)
(1.9)
(341.3)
(109.9)
(0.3)
(391.7)
(753.8)
1,581.4
827.5
609.6%
-
22.2%
2521.9%
16.3%
-15.7%
-
7.7%
-89.2%
-47.7%
-9.8%
The profit before tax for the period was RON 589 mil. The main adjustments were: (i) adding the depreciation
and amortization amounting to RON 373 mil., a change in impairment and loss on disposal of tangible assets
worth RON 7 mil., a net change in trade and other receivables of RON 40.6 million (mainly as a result of
Transenergo receivables impairment in amount of MRON 32), deducting a net finance cost of RON 3.2 mil., a
gain from losing control over subsidiaries of RON 73.7 mil., a change in provisions, net in amount of MRON
60 mainly due to reversal of tax provisions made in previous years (ii) a variation of trade receivables and
other receivables worth RON 54.3 mil., of trade payables and other accounts payable worth RON 116 mil.
and a variation regarding Green Certificates of RON 31 mil.
The income tax and interest paid totaled RON 98 mil. in 2016.
In 2015, net cash from operating activities amounted to RON 743 mil.
The profit before tax for the period was RON 589 mil. The main adjustments were: (i) adding the depreciation
and amortization amounting to RON 351 mil., a change in impairment and loss on disposal of tangible assets
worth RON 7 mil., a net change in trade and other receivables of RON 4.4 million (mainly as a result of a
decrease in trade receivables collected in 2015 compared to 2014), deducting a net finance cost of RON 20.5
mil., a gain from losing control over subsidiaries of RON 38.5 mil., adjusting employee benefits and provisions
worth RON 52.6 mil., (ii) a variation of trade receivables and other receivables worth RON 132 mil., of trade
payables and other accounts payable worth RON 36 mil., of inventories worth RON 1 mil. and a variation
regarding Green Certificates of RON 22.4 mil.
The income tax and interest paid totaled RON 109 mil. in 2015.
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9 POST BALANCE ShEET EVENT
During the period between the 2016 financial year closing and the date of the present report, the following
relevant events took place at Electrica S.A. level:
f On January 4th, 2017, the Company informed its shareholders and investors about the conclusion in the
second semester of 2016 of a legal act with a value greater than EUR 50,000 with Filiala de Intretinere
si Servicii Energetice „Electrica Serv” S.A., affiliate, where Electrica is the sole shareholder. The auditor
report of factual findings according to art. 225 of Law no. 297/2004 regarding the transactions reported
in the second semester of 2016 was published on January 31st, 2017.
f On January 27th, 2017, the Board of Directors took note of the cases disputed by Electrica S.A. in
contradiction with ANRE and approved the following:
• withdrawal of legal actions in cases on the suspension of applicability of ANRE orders by which the
•
distribution tariffs were determined for 2015 and 2016;
formulating motions of judgement suspension in cases on the annulment of ANRE orders by which
the distribution tariffs were determined for 2015 and 2016, until the settlement of the case on the
annulment of ANRE Order no. 146/2014, by which the regulatory rate (RRR) was changed.
f On January 27th, 2017, the Board of Directors decided to reappoint Mr. Cristian Busu as BoD chair for a
mandate of one year. Also, the Board of Directors decided the same composition of the BoD’s committees
and re-elected their chairs for one year mandate. Detailed information is provided under chapter 6.1 and
6.2 of the present report.
f Also, during the same meeting, the Board of Directors decided:
•
•
To revoke Mr. Ramiro Robert Eduard Angelescu from the position of Executive Manager of the Sales
Coordination Division of SE Electrica S.A., starting as of January 27th, 2017.
To appoint Ms. Livioara Sujdea, as Executive Manager - Chief Distribution Officer, starting with
February 1st, 2017.
f On January 30th, 2017, the shareholders and the investors were informed that as of January 27th, 2017,
in its Balancing Responsible Party business line, Electrica S.A. had a RON 36.3 million exposure on one
of its clients, Transenergo. As the client filed for its insolvency, with ELSA and another market player
also filing separate insolvency requests, management expects low recoverability of the total exposure.
The Company has sent current reports to the market to inform the investors and all the other stakeholders
on the events presented above.
Regarding the supply subsidiary, on January 2017 was held the Ordinary General Meeting of Shareholders
which implemented the provisions of the new Articles of Association approved in December 2016 namely,
the number of BoD members was diminished from five to three. The Resolutions of the General Meeting of
Shareholders through which were adopted the decisions mentioned were contested in court by the minority
shareholder.
APPENDIX 1 – LITIGATIONS
Electrica Group litigations in 2016 year – status as of January 31st 2017
1.
LITIGATION WITH FONDUL PROPRIETATEA
Crt.
no.
1
2
3
4
5
6
7
Parties/Case file number
Subject matter
Court
Case status
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Distributie Nord
Transilvania
532/1285/2014
Plaintiff: Fondul
Proprietatea
Defendant: SDEE
Transilvania Sud S.A.
6208/62/2016
Plaintiff: Fondul
Proprietatea
Defendant: SDEE
Transilvania Sud S.A.
6207/62/2016
Plaintiff: Electrica
Furnizare
Intervener: Fondul
Proprietatea
Electrica S.A.
46356/3/2016
Plaintiff: Electrica
Furnizare
Intervener: Fondul
Proprietatea
46358/3/2016
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Furnizare
47011/3/2016
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Furnizare
Intervener: Electrica SA
47014/3/2016
Cancellation of the AGA
decision through which
the Corporate Governance
Strategy was approved
Presidential Ordinance for
suspending the effects
of the EGM Decision
9/2016 and OGM Decision
10/2016
Cancellation of the EGM
Decision 9/2016 regarding
the ammendament of
the AoA and of the OGM
Decision nr. 10/2016
regardind the members of
the BoD.
Claims based on EGD
116/2009 intervention
claim -ORC-*TB-
Regarding the non-
registration to the CRO of
the AGA decision
Claims based on EGD
116/2009 intervention
claim -ORC-*TB Regarding
the non-registration to the
CRO of the AGA decision
no. 5 on 15.12.2016
Action for the anullament
of the EGM Decision no
5/15.12.2016 regargding
the increase of the share
capital and of the Decision
6/15.12.2016 regarding the
ammendament of the AoA
(process on merits)
Presiding judge’s order for
suspension of the effects
of AGEA Decision no. 5
and no. 6/2016
Cluj Commercial
Court
The court admits to a civil
lawsuit. The decision is final.
Brasov Court
In course of settlement.
Brasov Court
Settled on 02.02.2017
Bucharest Court
In course of settlement.
Bucharest Court
In course of settlement.
Bucharest Court
In course of settlement.
Bucharest Court
In course of settlement.
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Rejection of the decision
for AGEA registration claim
no. 9/ December 13, 2016
Cluj Specialized
Court
In course of settlement.
2.
DISPUTES WITH ANRE
C r t .
no.
Parties/Case file
number
Subject matter
Court
Case status
8
9
10
11
Intervener: Fondul
Proprietatea
Defendant: Electrica
Distributie Nord
Transilvania
1148/1285/2016
Intervener: Fondul
Proprietatea
Defendant: Electrica
Distributie Nord
Transilvania
1149/1285/2016
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Distributie Nord
Transilvania
1160/1285/2016
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Distributie Nord
Transilvania
1159/1285/2016
Rejection of the decision
for AGOA registration
claim no. 10/ December
13, 2016
Cluj Specialized
Court
In course of settlement.
Claim for annulment of
the AGEA decision no. 9/
December 13, 2016
Cluj Specialized
Court
Case file in the filtering
proceedings
Cluj Specialized
Court
Issuing presiding judge’s
order for suspension of
the enforcement of the
AGEA decision no. 9/
December 13, 2016 and
of AGA Decision no. 10/
December 13, 2016.
Reject the exception of the
prematurity claim, exception
raised by the defendant.
Accepts the application for
issuing of a presiding judge’s
order claimed by the Plaintiff
FONDUL PROPRIETATEA S.A. in
contradiction with the defendant
ELECTRICA DISTRIBUTIE NORD
TRANSILVANIA and consequently:
Order the suspension of the
enforcement of the Decision of
the Ordinary General Meeting
of the Shareholders no. 10,
dated on December 13, 2016
and of the Decision of the
Extraordinary General Meeting
of the Shareholders no. 9, on
December 13, 2016, issued
by the defendant company,
until the final solution of the
Cluj Specialized Court on the
case file no. 1160/1285/2016.
Enforceable. EDTN appealed.
12
Plaintiff: Fondul
Proprietatea
Defendant: Electrica
Distributie Muntenia Nord
Intervener: Electrica SA
7622/105/2016
Rejection of the decision
for AGOA registration claim
on December 13, 2016
Prahova Court
In course of settlement.
1
2
3
4
5
6
7
Plaintiff: Electrica S.A.
Defendant: ANRE
192/2/2015
Plaintiff: Electrica
S.A.; Enel Distributie
Muntenia S.A.
Defendant: ANRE
7968/2/2015
Plaintiff: Electrica S.A
Defendant: ANRE
361/2/2015
Cancellation of the Order
of the president of the
Regulation National
Authority in the Energy
Field (ANRE) no. 146/2014
Cancellation of the Order
of the ANRE president no.
165/2015
high Court of
Cassation and Justice
Appeal – under pre-filtering
proceedings.
high Court of
Cassation and Justice
Appeal – under pre-filtering
proceedings.
Cancellation of the Order
of the ANRE president no.
155/2014
high Court of
Cassation and Justice
Plaintiff: Electrica S.A.
Defendant: ANRE
360/2/2015
Cancellation of the Order
of the ANRE president no.
156/2014
high Court of
Cassation and Justice
Plaintiff: Electrica S.A.
Defendant: ANRE
134/2/2016
Action for suspension
of the administrative
act – ANRE Order no. –
165/2015
high Court of
Cassation and Justice
Plaintiff: Electrica S.A.
Defendant: ANRE
340/2/2016
Action for partial
annulment (regarding
the special tariffs) of the
administrative act – ANRE
Order 171/2015
high Court of
Cassation and Justice
Plaintiff: Electrica S.A.
Defendant: ANRE
342/2/2016
Action for partial
annulment (regarding
the special tariffs) of the
administrative act – ANRE
Order. no. 172/2015
high Court of
Cassation and Justice
Appeal. On the term on
December 6, 2016, the
court admits in principle,
the Appeal, establishing the
term for the lawsuit trial of
the Appeal. According to the
decision of the Company
Management Board, on the
lawsuit, the suspension of the
case trial will be claimed until
the settlement of the case file
no. 192/2/2015.
Appeal – under preliminary
filtering proceedings.
According to the decision of
the Company Management
Board, in the case lawsuit,
the suspension of the case
trial will be claimed until the
settlement of the case file no.
192/2/2015.
Appeal – under preliminary
filtering proceedings.
According to the decision of
the Company Management
Board, in the case lawsuit, the
cancellation of the case trial
will be claimed.
Appeal – under preliminary
filtering proceedings.
According to the decision of
the Company Management
Board, in the case lawsuit,
the suspension of the case
trial will be claimed until the
settlement of the case file
192/2/2015.
Appeal – under the
preliminary filtering
proceedings According to
the decision of the Company
Management Board, on the
case the suspension of the
case judgment will be claimed
until settlement of the case
file 192/2/2015.
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8
9
Plaintiff: Electrica S.A.
Defendant: ANRE
343/2/2016
Action for partial
annulment (regarding
the special tariffs) of the
administrative act – ANRE
Order. no. 171/2015
high Court of
Cassation and Justice
Plaintiff: Electrica S.A.
Defendant: ANRE
345/2/2016
Action for partial
annulment (regarding
the special tariffs) of the
administrative act – ANRE
Order. no. 172/2015
high Court of
Cassation and Justice
10
Plaintiff: FDEE Electrica
Muntenia Nord S.A.
Defendant: ANRE
184/2/2015
Contentious administrative
matters – Cancellation of
the ANRE President Order
No. 146/2014
high Court of
Cassation and Justice
11
12
13
Plaintiff: FDEE Electrica
Muntenia Nord S.A.
Defendant: ANRE
164/2/2016
Cancellation of Order
no. 165/2014, of the
President of National
Authority for Regulation in
the Energy Field (ANRE)
Bucharest Court of
Appeals
Plaintiff: FDEE Electrica
Muntenia Nord S.A.
Defendant: ANRE
165/2/2016
Suspension of the
enforcement of the ANRE
President Order no.
165/2015
high Court of
Cassation and Justice
Plaintiff: FDEE Electrica
Muntenia Nord S.A.
Defendant: ANRE
41/42/2016
Cancellation of the ANRE
President Order No.
172/2015
Bucharest Court of
Appeals
Appeal – under the
preliminary filtering
proceedings According to
the decision of the Company
Management Board, on
the case the cancelation of
the case judgment will be
claimed.
Appeal – under the
preliminary filtering
proceedings According to
the decision of the Company
Management Board, on
the case the cancelation of
the case judgment will be
claimed.
Suspended case file until
the final settlement of the
case file 7341/2/2014 by the
Bucharest Court of Appeals,
against the suspension of an
affidavit Appeal was stated.
Through the Affidavit on May
18, 2016, the communication
to the parties of the report
on the admissibility of the
Appeal is ordered. The case
file no. 7341/2/2014 is in
course of settlement.
The case file no 1574/July
17, 2016 was interlinked to
this case file. Through the
Decision no. 2409/July 17,
2016 the claims were rejected
as ungrounded. An appeal is
going to be filed.
Through the Decision no.
1086/April 01, 2016, the
Bucharest Court of Appeals
rejected the claim on
suspension of as ungrounded.
Appeal was stated, which is in
the regulating proceedings in
the High Court of Cassation
and Justice (ICCJ).
In course of settlement.
14
15
16
17
18
19
20
21
22
23
Plaintiff: FDEE Electrica
Muntenia Nord S.A.
Defendant: ANRE
42/42/2016
Suspension of the
enforcement of the ANRE
President Order no.
172/2015
high Court of
Cassation and Justice
Plaintiff: Electrica
Distribuţie Transilvania
Nord (EDTN)
Defendant: ANRE
213/2/2015
Cancellation of Order
no. of the President of
National Authority for
Regulation in the Energy
Field (ANRE) 146/2014
high Court of
Cassation and Justice
Through the Decision no.
1272/2016 of the Bucharest
Court of Appeals, the claim
for suspension of was
rejected, as ungrounded.
Appeal was stated - regulating
proceedings.
Appeal – under the
preliminary filtering
proceedings
Plaintiff: Electrica
Distribuţie Transilvania
Nord (EDTN)
Defendant: ANRE
353/2/2015
Plaintiff: FDEE Electrica
Distribuţie Transilvania
Nord
Defendant: ANRE
18/33/2016
Plaintiff: FDEE Electrica
Distribuţie Transilvania
Nord
Defendant: ANRE
17/33/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
87/64/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
18/64/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
88/64/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
41/64/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
371/2/2015
Cancellation of the ANRE
President Order No.
155/2014
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
Action for annulment of
administrative act – ANRE
Order no. 165/2015
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
Action for suspension of
the administrative act–
ANRE Order no. 165/2015
high Court of
Cassation and Justice
Appeal in course of
settlement.
Contentious administrative
matters – Claim
for suspension of
administrative act – The
ANRE President Order no.
165/2015
Cancellation of the Order
no. 165/2015 of the
President of National
Authority for Regulation in
the Energy Field (ANRE)
Cancellation of the Order
no. 171/2015 of the
President of National
Authority for Regulation in
the Energy Field (ANRE)
Cancellation of the Order
no. 171/2015 of the
President of National
Authority for Regulation in
the Energy Field (ANRE)
Cancellation of the ANRE
President Order no.
156/2014
Bucharest Court of
Appeals
Suspended until the
settlement of 18/64/2016
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
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Cancellation of the ANRE
President Order no.
146/2014
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
2
Plaintiff: Electrica
S.A.
Defendant: ANAF
5433/2/2013
Claim on the fiscal administrative
act, cancelling the Decision 24/
January 31, 2013, on the ancillary
payment obligations. Value of lei
9,805,319.
high Court of
Cassation and
Justice
24
25
26
27
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
208/2/2015
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
17/64/2016
Plaintiff: SDEE Electrica
Distribuţie Transilvania
Sud S.A.
Defendant: ANRE
40/64/2016
Plaintiff: Electrica
Furnizare S.A.
Defendant: ANRE
26210/3/2013
28
Plaintiff: Electrica
Furnizare S.A.
Defendant: ANRE
8201/2/2015
Claim for suspension of
administrative act – The
ANRE President Order no.
165/2015
Claim for suspension of
administrative act – The
ANRE President Order no.
171/2015
Judicial action having
as object the right
recognition provided in
art. 79 para. (6) in the
Law no. 123/2012, the
order for the defendant to
change the tariff regulated
by the ANRE Order no.
40/2013, the order for
the defendant to pay
the counter value of the
prejudice that can not be
covered by changing the
regulated tariff mentioned
above.
Judicial action having
as object an order for
the defendant to solve
a dispute related to the
procedure for changing
the supplier.
Bucharest Court of
Appeals
Rejects the claim. Decision
no. 1388/April 22, 2016,
remained final.
Bucharest Court of
Appeals
Rejects the claim. Decision
no. 1048/March 20, 2016,
remained final.
high Court of
Cassation and Justice
Appeal – under the
preliminary filtering
proceedings
high Court of
Cassation and Justice
Bucharest Court of Appeals
has admitted the judicial
action stated by Electrica
Furnizare S.A., coercing ANRE
to solve the dispute. ANRE
stated an appeal that is
under the preliminary filtering
proceedings.
3. FISCAL MATTER DISPUTES
Crt.
no.
1
Plaintiff: Electrica
S.A.
Defendant: ANAF
7614/2/2013
Object
Court
Case status
high Court of
Cassation and
Justice
Complaint related to the Decision
no.147/May 22, 2013. Value of
lei 2,387,992 (action for cancel
against the Decision no. 147/May
22, 2013, issued by ANAF within
the proceedings for administrative
claims’ settlement stated against
the promissory note throughout the
ancillary payment obligations for
delayed payments of the current
budgetary duties were established,
by the decision no. 214/2012 in
amount of lei 2,387,992).
On the date of March 06, 2015,
the court has admitted the claim
in part and partially cancelled
the Decisions no. 147/May 22,
2013 and no. 214/October 30,
2012, issued by the defendant
for the amount of lei 2,383,070,
representing fiscal ancillary
obligations. It keeps the claimed
fiscal-administrative acts for the
amount of lei 4,922 lei. It coerces
the Defendant to the payment
of the amount of lei 30,961.35
lei, to the Plaintiff, as court
charges. ANAF has stated Appeal
– under the preliminary filtering
proceedings
On the merits, the court has
admitted in part the action stated
by the Plaintiff SC Electrica SA
and:
-cancels the decision no. 24/2013,
issued by ANAF-DGSC;
- cancels in part the decisions on
the ancillary payment obligations
no. 1270/2012 (on the amount
of lei 5,705,115) and no.
1271/2012 (on the amount of
lei 3,747,331), issued by ANAF,
and also of ANAF notices of
assessment no, 2143501.5/2012,
2143501.6/2012, 2143501.7/2012,
2143501.11/2012(on regard to the
amount of lei 352,873). Rejects
the action as for the rest. Coerces
ANAF to pay lei 20,500 court
charges to the Plaintiff. ANAF
has stated Appeal – preliminary
filtering proceedings.
The court on the merits rejected
the claim. Electrica has stated
appeal, rejected as ungrounded.
Sector 1 Court
Bucharest Court
The Court rejects irrevocably
the appeal for annulment as
ungrounded.
Sector 1 Court
Sector 1 Court
high Court of
Cassation and
Justice
Admits the exception of remaining
without object of the claim
regarding the suspension of the
enforcement until the settlement
of the appeal against the
enforcements.
The file is under regulation
proceedings.
Through the Decision no. 32/
February 10, 2016, Ploiesti Court
of Appeals Ploiesti has rejected
the claim, as ungrounded. FDEE
has stated Appeal – within the
regulating proceedings.
3
4
5
6
7
Plaintiff: Electrica
S.A.
Defendant: ANAF
103614/299/2015
Plaintiff: Electrica
S.A.
Defendant: ANAF
6480/3/2016
Plaintiff: Electrica
S.A.
Defendant: ANAF
29213/299/2016
Plaintiff: Electrica
S.A.
Defendant: ANAF
51817/299/2016*
Plaintiff: FDEE
North Muntenia
S.A.
Defendant:
Ploiesti Public
Service for local
Finances
309/42/2015
Challenge on enforcement of
the enforceable title no. 28/June
23, 2015 for the amount of lei
16,915,950 stated in the Decision
no. 3/2008. Enforcement files
13267221/61/90/2015/179599.
Challenge on annulment against
the decision no. 1029 within the
file no. 55166/299/2010 on the
merits of the BC, in the file no.
55166/299/2010 of BC TB S5, for
the amount of lei 31,250,651 lei –
accessories regarding the income
tax.
Disputes with professionals-
suspension of enforcement of the
art. 484; 507; 512; 700; 718 NCPC
on the enforceable title no. 28/June
255, 2015 for the amount of lei
16,915,950.
Challenge on enforcement,
cancellation of the foreclosure for
the amount of lei 41,209,736 – title
151/2016.
Cancellation of administrative
act – Notice of assessment no.
124814/November 28, 2014.
The amount under litigation: lei
11,963,955, representing additional
differences resulting from the
report on the fiscal audit, out of
which lei 8,528,896 additional tax
on the buildings for the period of
January 2009- September 2014 and
lei 3,439,085 lei accessory fiscal
obligations calculated until the date
of November 11, 2014
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Cancelation administrative act –
Decision no. 462/November 23,
2015 –amount of lei 7,731,693
(lei 4,689,686 lei income tax + lei
3,042,007 VAT) and for the amount
of lei 6,154,799 (lei 3,991,503
interests/increases and late fees
related to the income tax + lei
2,163,296 interests/penalties and
delay fees related to the VAT)
Cancellation of administrative act
Decision no. 375/October 01, 2014
– amount of lei 2,351,034
8
9
Plaintiff: FDEE
Nord S.A.
Defendant: ANAF
1018/2/2016
Plaintiff: FISE
Electrica Serv S.A.
Defendant:
Ploiesti Public
Service for local
Finances
6358/2/2014
Bucharest Court of
Appeals
In course of settlement.
high Court of
Cassation and
Justice
In course of settlement.
4.
OTHER SIGNIFICANT DISPUTES (WHOSE VALUE IS MORE THAN EURO 500
THOUSANDS)
Crt.
no.
Parties/Case file
number
1 Plaintiff:
Termoelectrica S.A.
Defendant: Electrica
S.A.
5651/2/2014 (on
merits the case
file had the no.
15350/3/2010)
Object
Court
Case status
Claims: amount of lei 25,047,353.32
representing delay fees of the invoices
for electric power in the period of April
1, 2007 – March 31, 2008
high Court
of Cassation
and Justice
Admits the appeal declared by
the Plaintiff SC TERMOELECTRICA
SA ThROUGh ThE JUDICIAL
LIQUIDATOR CONSORTIUM MUSAT
& ASOCIAŢII RESTRUCTURING &
INSOLVENCy SPRL AND MUSAT
& ASOCIAŢII SPARL in opposition
to the Respondent-defendant
SOCIETATEA ENERGETICA
ELECTRICA SA, against the Civil
Sentence no. 6576/November 13,
2013 delivered by the Bucharest
Court – Section VIth Civil, within
the case file no. 15350/3/2010.
Cancels the appealed sentence and
re-judging: Rejects the exception
of prescription of the rights to
actions, as ungrounded. Admits
the claim stated by the Plaintiff SC
TERMOELECTRICA SA in opposition
to the defendant SOCIETATEA
ENERGETICA ELECTRICA SA (former
SC ELECTRICA SA). Coerces the
defendant to the payment of
the amount of lei 25,047,458.32,
representing contractual penalties
related to the main debt
amounting lei 68,453,678.47
lei, related to the interval April
01, 2007-March 31. Coerces the
Respondent-defendant SOCIETATEA
ENERGETICA ELECTRICA SA to the
payment of the court charges
amounting lei 761,576.79 lei. The
decision is enforceable. Electrica
has stated Appeal.
Bucharest
Court
In course of settlement.
Coerces Electrica to the payment to
SPEEh hidroelectrica SA of the amount
of lei 5,444,761 (loss due to the electric
power sale to an average prices per
MWH under the production cost for 1
MWH); coerces to partial payment of the
benefit not obtained by Hidroelectrica
through the sale of the total amount of
MWh 398.300, calculated, according to
the ANRE regulations; coercion of the
defendant to the payment of the legal
interest from the date of the decision
delivery and until the effective payment,
court charges.
Declaratory action (discharge of
by right of the obligation of CEZ
Distributie to Electrica of an amount
of lei 4,425,068.55, of Electrica to
Termoelectrica of the same amount and
of Termoelectrica to the Risk Fund for
internal and foreign loans guaranteed
by the state of the same amount of lei
4,425,068.55).
2 Plaintiff: SPEEH
hidroelectrica S.A.
Defendant: Electrica
S.A. 13268/3/2015
3 Appellant –
Defendant: Electrica
S.A.
Respondent –
Plaintiff: Cez
Distributie S.A.
Respondent–
Defendants:
Termoelectrica S.A.,
Ministry of Public
Finance, Romanian
State
35866/3/2014
high Court
of Cassation
and Justice
Exchange the sentence in the
whole, in the way that admits the
claim and considers discharged,
by right, the obligations of Cez
Distributie to Electrica in amount of
lei 4,425,068.55 lei, of Electrica to
Termoelectrica in the same amount
and of Termoelectrica to the Risk
Fund for internal and foreign loans
guaranteed by the state of the same
amount of lei 4,425,068.55. Coerces
the Defendants to the joint payment
of the amount of lei 48,361 stamp fee
and judicial fee in the first procedural
cycle and in the first instance in the
second procedural cycle and also of
the amount of lei 33,459 lawyer fees.
Coerces the summoned parties, to
jointly pay the amount of lei 24,281
stamp fee and judicial stamp in appeal
and of lei 9605 lei as lawyer fees.
Electrica has stated Appeal. In Appeal:
Admits the appeals stated by the
appellants-defendants SOCIETATEA
ENERGETICA ELECTRICA SA, S.C.
TERMOELECTRICA S.A. through
judicial liquidator MUŞAT & ASOCIAŢII
RESTRUCTURING & INSOLVENCY SPRL
and MINISTRy OF PUBLIC FINANCE
against the civil decision no. 801 A
on May 14, 2015 of the Bucharest
Court of Appeals – Section VIth Civil.
Changes the contested decision, in the
way that rejects the stated appeal by
the Plaintiff SC CEZ DISTRIBUŢIE SA
against the civil sentence no. 6135 on
December 8 , 2014 of the Bucharest
Court – Section VIth Civil. Coerces
the Respondent-Plaintiff SC CEZ
DISTRIBUŢIE SA to the payment of the
amount of lei 24,181 to the appellant-
defendant SOCIETATEA ENERGETICA
ELECTRICA SA representing court
charges.
Admits the action. Cez Distributie
has stated appeal, but rejected by
the court. With Appeal.
4 Plaintiff: Electrica
Claim action in value of lei 4,425,068.55 Craiova Court
of Appeals
S.A.
Defendant: Cez
Distributie S.A.
11601/63/2009
5 Creditor: Electrica
S.A.
Debtor: Petprod S.A.
47478/3/2012*/a1
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 2,591,163.01
Bucharest
Court
Ongoing proceedings.
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6 Creditor: Electrica
S.A.
Debtor: CET Braila
S.A.
2712/113/2013
7 Creditor: Electrica
S.A., AAAS, BCR SA
and others
Debtor: Oltchim S.A.
887/90/2013
8 Creditor: Electrica
S.A.
Debtor: Romenergy
Industry SRL
2088/107/2016
9 Plaintiff: Electrica
S.A.
Defendant: Authority
for the Management
of the State Assets
(AAAS former AVAS)
8260/3/2013
10 Appellant: Electrica
S.A.
Respondent: AAAS
38859/299/2015
11 Appellant: Electrica
Respondent: AAAS
39803/299/2015
Insolvency proceedings. Enter a claim to
the statement of affairs for the amount
of lei 3,826,034.8.
Braila Court Ongoing proceedings.
12 Appellant: AAAS
Respondent:
Electrica S.A.
78584/299/2015
Insolvency proceedings. Enter a claim to
the statement of affairs in amount of lei
658,535,805.38. lei.
Valcea Court Ongoing proceedings.
Insolvency proceedings. Enter a claim to
the statement of affairs in amount of lei
2,917,265.89.
Alba Court
Ongoing proceedings.
Bucharest
Court
Challenge on enforcement – AAAS stated
Challenge on enforcement against the
foreclosure acts performed by BEJA
Dorina Gont, Lucian Gont, Marian Panait,
consisting in:
-summons (foreclosure file) no. 1914/
June 16, 2015, through which AAAS is
demanded to pay within 15 days, the
total amount of lei 11,426,867.65 lei
(debt and foreclosure fees);
-Affidavit on June 15, 2015 regarding the
writ of execution;
-Affidavit on June 16, 2015 regarding the
settlement of the foreclosure fees.
(The Civil Sentence no. 6440/2013 in the
file no. 8260/3/2013 is the enforceable
title.)
Action in claims for the amount of lei
11.173.143.
high Court
of Cassation
and Justice
Sector 1
Court
The Instance on the merits has
admitted the claim, coercing AAAS
to pay to the Plaintiff the amount
of lei 11,173,143. Coerces the
defendant to pay to the Plaintiff
the amount of lei 105,847.43,
as court charges title. AAAS
has stated appeal, rejected as
ungrounded.
The instance admits the claim
for suspension of the foreclosure
stated by the Plaintiff Electrica;
Suspension of the foreclosure
performed based on the
foreclosure file no .8/2015 of BEJ
Oprescu Mihai until the settlement
of the challenge of enforcements;
Based on art. 413 alin. 1 item 1
CPC suspended the judgment of
the case regarding the Plaintiff
Electrica, until the final settlement
of the file no. 2155/2/2015 of
CAB (currently this file is under
the Appeal phase to ICCJ, in the
filtering procedure).
Sector 1
Court
Admits the claim for provisory
suspension of the foreclosure.
Provisory suspension of the
foreclosure that is executed in the
foreclosure file no. 8/2015 on the
merits of BEJ Oprescu Mihai until
the settlement of the suspension
of claim stated within challenge of
enforcements.
Electrica SA has stated Challenge on
enforcement against the foreclosure of the
Administrative Decision no. P/14/27055/
December 16, 2014 16.12.2014 and
of all the subsequent foreclosure acts.
(administrative decision issued by the
Respondent AAAS against the subscribed
for the amount of lei 7,505,637.00, as
recovery title for the illegal state aid that
would have been granted to S Electrica SA,
in the context of privatization of S Electrica
Banat SA and of S CSR Resita SA)-claim
cancelling of this act.
-Canceling demand for payment issued by
the BEJ-Oprescu Mihai in the foreclosure
file no. 8/2015 (where it is stated that
“the interest is added, that is going to
be calculated beginning with the date of
providing the amount to the beneficiary
disposal and until the effective date of the
debt plus lei 99,687.50 lei counter-value
of foreclosure and of all the subsequent
acts.”);
-cancelling of all the foreclosure acts issued
in the file no. 8/2015;
-suspension of the foreclosure begun
by the Respondent until the irrevocable
settlement of the current litigation;
-provisory suspension of until the
settlement of the claim for suspension of
requested by the present sue petition.
provisory suspension of the
administrative decision invested
with foreclosure title and of all the
subsequent foreclosure acts – the
suspension being necessary to clarify
the foreclosure character of the title
enforced by Respondent that is not a
judicial decision but is issued by AAAS
13 Appellant: AAAS
Respondent:
Electrica S.A.
Garnishee: IOR S.A.
96099/299/2015
14 Appellant: AAAS
Respondent:
Electrica S.A.
86175/299/2015
Claim to foreclosure – AAAS has stated
a claim to foreclosure against the
foreclosure acts performed by the BEJA
Dorina Gont, Lucian Gont, Marian Panait,
consisting of:
- garnishment (setting up) notice on the
date of August 25, 2015, developed in
accordance with art. 783 NCPC until
the completion of the amount of lei
10,342,891.72 (rest of debt and court
charges)
-Affidavit on June 15, 2015 regarding the
writ of execution;
-Affidavit on June 16, 2015 regarding the
settlement of the foreclosure fees.
(The Civil sentence no. 6440/2013 is the
Enforceable title.)
Claim to foreclosure
Suspension of the Foreclosure file
1914/2015 (throughout AAAS is ordered
to pay, within 15 day, the total amount
of lei 11,426,867.65 - debt and collection
fees)
Sector 1
Court
Sector 1
Court
15 Appellant: AAAS
Respondent:
Electrica S.A.
27873/299/2016
Claim to foreclosure. Referring to the
foreclosure case file no. 1914/2015
in the Office of the Associated Legal
Executors Dorina Gont, Lucian Panait and
Marian Panait
Sector 1
Court
The instance on the merits
admitted, in part, the challenge
on enforcement. It cancels, in
part, the Affidavit for stating the
foreclosure expenses on the date
of June 16, 2015 developed in
the foreclosure file no. 1914/2015
constituted to B.E.J.A. Dorina Gonţ,
Lucian Gonţ and Marian Panait,
regarding the keeping of the
amount of lei 1,445.74 as title for
expenses needed to accomplish
the foreclosure. Cancels in part,
the foreclosure performed in
the foreclosure file 1914/2015
constituted to B.E.J.A. Dorina Gonţ,
Lucian Gonţ and Marian Panait
for the amount of lei 1.445,74
lei, representing foreclosure
charges establish illegally. Rejects
the claim for suspension of the
foreclosure, as it remains without
object. Rejects the claim for return
the foreclosure, as ungrounded.
Coerce the Plaintiff to pay to
B.E.J.A. Dorina Gonţ, Lucian Gonţ
and Marian Panait the amount of
lei 161.20, representing expenses
incurred by photocopying of the
foreclosure file. Both AAAS, and
Electrica have stated appeal. The
appeal instance admits the stated
appeal by AAAS. Changes in part
the appealed sentence in the way
that regarding the executor fee it
will be reduced to the amount of
lei 59365 plus VAT. Keeps the rest
of dispositions. Rejects the appeal
stated by Electrica as ungrounded.
The instance accepts the exception
of the authority of the judged
matter; rejects the challenge on
enforcement under all the claim
heads for the authority of the
judged matter. With appeal.
Admits in part the exception of
authority of the judged matter.
Rejects the head of claim having
as object the cancellation of the
affidavit on the date of June 16,
2015 regarding the collection fees
as inacceptable. Rejects the other
heads of the claim as ungrounded.
Reject the suspension of claim of
the foreclosure as being without
object. With appeal rights.
In course of settlement.
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Insolvency proceedings. Debt with
calculated penalties until January 25,
2017. Lei 36,797,429.55 lei.
Bucharest
Court
Insolvency proceedings. Main debt: lei
4,941,420.03.
Bucharest
Court
Claims: debt lei 8,306,493.06 – tariff for
distribution
Sector 5
Court
On the date of February 1, 2017,
the opening of the insolvency
proceedings was ordered. Electrica
is going to develop the statement
of claims. Until the moment of
opening the proceedings, the
foreclosure against the debtor was
initiated.
Against the debtor, a claim for
opening the insolvency proceeding
was stated, that will have the
term on February 24, 2017. In
the situation of opening of the
proceedings, we are going to
subscribe to the statement of
affairs. Presently we are under
foreclosure proceedings.
Regulation proceedings. The
insolvency proceedings of the
Debtor were ordered.
Bankruptcy - debt: lei 5,439,537.09 lei
Alba Court
Ongoing proceedings.
Bankruptcy - debt: lei 3,987,508.14 lei
Alba Court
Ongoing proceedings.
Writ of payment - debt: lei 2,806,317.75 Brasov Court Suspended case file until the
settlement of the case file
regarding the bankruptcy of
Romenergy Industry S.A.
Claims – EUR 1,177,221.50 EUR,
equivalent of lei 5,298,203,.8 lei,
calculated on the exchange rate
respectively of 4.5006 lei/euro on
January 30
Bucharest
Court
Suspended according to the
insolvency Law no. 85/2006
Insolvency – amount to be recovered: lei
3,938,810.56
Bucharest
Court
Ongoing proceedings.
Insolvency – amount to be recovered: lei
53,023,201.08
Bucharest
Court
Ongoing proceedings.
16 Creditor: Electrica
S.A.
Debtor: Transenergo
Com S.A.
1372/3/2017
17 Creditor: Electrica
S.A.
Debtor: Electra
Management &
Suppy SRL
41095/3/2016
18 Plaintiff: FDEE
Electrica Muntenia
Nord S.A.
Defendant:
Transenergo Com
S.A.
47088/3/2016
19 Plaintiff: FDEE
Transilvania Nord SA
Defendant:
Romenergy Industry
S.A.
2088/107/2016
20 Plaintiff: SDEE
Transilvania Sud SA
Defendant:
Romenergy Industry
S.A.
2088/107/2016
21 Plaintiff: SDEE
Transilvania Sud SA
Defendant:
Romenergy Industry
S.A.
3086/62/2016
22 Plaintiff: FISE
Electrica Serv S.A.
Defendant: National
Leasing IFN SA
39542/3/2009
23 Plaintiff: FISE
Electrica Serv S.A.
Defendant: Best
Recuperare Creante
SRL
2253/3/2011 (former
58348/3/2010)
24 Plaintiff: FISE
Electrica Serv S.A.
Defendant: National
Leasing IFN S.A.
18711/3/2010
Summons for payment – lei 3,938,810.56
lei
Bucharest
Court
Suspended according to the
insolvency Law no. 85/2006
Corruption criminal offence – lei
4,128,969.65 (according to the sentence
on the merits court)
Cluj Court of
Appeals
In course of settlement.
25 Plaintiff: FISE
Electrica Serv S.A.
Defendant: Best
Recuperare Creante
SRL
54060/3/2011
26 Plaintiff: FISE
Electrica Serv S.A.
(civil party)
Defendant: Ruga
Gabriel, Stoica Ioan
Constantin, s.a.
1436/33/2015
(former
4228/117/2009)
27 Plaintiff: FISE
Banckrupt - debt lei 73,453,299.30
Timis Court Ongoing proceedings.
Electrica Serv S.A.
Defendant: Servicii
Energetice Banat S.A.
8776/30/2013
(joint with cu
2982/30/2014)
28 Plaintiff: FISE
Electrica Serv S.A.
Defendant: Servicii
Energetice Oltenia
SA
2570/63/2014
29 Plaintiff: FISE
Electrica Serv S.A.
Defendant: Servicii
Energetice Muntenia
S.A.
40081/3/2014
30 laintiff: FISE
Electrica Serv S.A.
Defendant: Servicii
Energetice Dobrogea
S.A.
8785/118/2014
31 Plaintiff: FISE
Electrica Serv S.A.
Defendant: CNAS,
CASMB
43602/3/2015
32 Plaintiff: FISE
Electrica Serv S.A.
Defendant: Servicii
Energetice Moldova
4435/110/2015
33 Plaintiff: FISE
Electrica Serv S.A.
Defendant: New
Koppel Romania
20376/3/2016
Insolvency - debt lei 26,448,133.90
Dolj Court
Ongoing proceedings.
Insolvency - debt lei 15,343,942.68
Bucharest
Court
Ongoing proceedings.
Insolvency proceedings - banckruptcy -
debt lei 18,168,842.73 lei
Constanta
Court
Rejected on 17.02.2016.
Recovery amounts of social insurance –
FNUASS – lei 1,384,652 + interest
Bucharest
Court
Admits the action in part.
Insolvency proceedings - banckruptcy –
debt: lei 73,708,082.90
Bacau Court Ongoing proceedings.
Claims – Euro 655,164.44 – equivalent lei
of 2,948,239.98
Bucharest
Court
Ongoing proceedings.
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Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 21,634,926.27.
Galati Court Ongoing proceedings.
5.
DISPUTES AGAINST THE ROMANIAN COURT OF ACCOUNTS
Object
Court
Case status
Crt.
no.
1
Parties/Case file
number
Plaintiff: Electrica
S.A.
Defendant:
Romanian Court
of Auditors;
2268/2/2014
high Court of
Cassation and
Justice
Suspension of
and cancelling the
administrative act on
those ordered by the
Decision no.3/January 14,
2014 and the Resolution
no.23/March 17, 2014.
34 Creditor: Electrica
Furnizare S.A.
Debtor: Metal S.A.
Galati
2181/121/2013
35 Creditor: Electrica
Furnizare S.A.
Debtor: Apaterm S.A.
Galati
4783/121/2011
36 Creditor: Electrica
Furnizare S.A.
Debtor: Vegetal
Trading SRL Braila
1653/113/2014
37 Plaintiff:
Carpatcement
holding S.A.
Defendant: Ministry
of Economy,
Romanian
Government,
Electrica Furnizare
S.A.
1665/2/2014
38 Creditor: Electrica
Furnizare S.A.
Debtor: Balan S.A.
2139/96/2007
39 Creditor: Electrica
Furnizare S.A.
Debtor: Ariesmin
S.A. Branch
7375/107/2008
40 Creditor: Electrica
Furnizare S.A.
Debtor: Zlatmin S.A.
Branch
6/107/2003
41 Creditor: Electrica
Furnizare S.A.
Debtor:
hidromecanica S.A.
3836/62/2009
42 Creditor: Electrica
Furnizare S.A.
Debtor: Nitrarmonia
S.A.
261/F/2004
43 Creditor: Electrica
Furnizare S.A.
Debtor: European
Drinks S.A.
4058/111/2016
44 Creditor: Electrica
Furnizare S.A.
Debtor: Remin S.A.
32/100/2009
45 Creditor: Electrica
Furnizare S.A.
Debtor: Oltchim S.A.
887/90/2013
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 2,742,115.08.
Galati Court Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 2,252,570.18.
Braila Court Ongoing proceedings.
Compliance obligation
Canceling penalties in amount of lei
2,440,785 – Based EGD 57/2002.
high Court
of Cassation
and Justice
On the merits, the Plaintiff action
was rejected, the Plaintiff stating
Appeal.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 48,856,788.69.
harghita
Court
Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 20,711,587.76.
Alba Court
Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei lei 9,314,175.96.
Alba Court
Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 4,792,025.80.
Brasov Court Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 2,285,997.22.
Brasov Court Ongoing proceedings.
Writ of payment. Debt: lei 5,535,461.37. Bihor Court
Settled by transaction.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 71,443,401.67.
Timisoara
Court
Ongoing proceedings.
Insolvency proceedings
Enter a claim to the statement of affairs
for the amount of lei 56,533,826.02.
Valcea Court Ongoing proceedings.
Court on the merits: Admits in part the claim.
Cancels partially the Resolution no. 23 on March
17, 2014 regarding the items 1 and 5 and the
Decision no. 3/January 14, 2014 regarding the
items 4 and 8. Rejects, as ungrounded the claim
regarding items 2, 3 and 4 in the Resolution
no. 23/March 17, 2014, 17.03.2014 and items
5, 6 and 7 in the Decision no 3/January 14,
2014. Rejects the claim for suspension of the
enforcement of the Decision no. 3/January 14,
2014, as ungrounded. With Appeal in term of
15 day from the notice regarding the solution
on the merits and 5 days from the notice
regarding the suspension of. Admits in part
the claim stated by S Electrica SA. Cancels in
part the Resolution no. 23 on March 17, 2014
regarding items 1 and 5 and the Decision no. 3/
January 14 regarding the items 4 and 8. Rejects,
as ungrounded the claim regarding the items
2, 3 and 4 in the Resolution no. 23/March 17,
2014 and the items 5, 6 and 7 in the Decision
no. 3/January 1, 2014. Rejects the claim for
suspension of the enforcement of the Decision
no. 3/January 14, 2014, as ungrounded. With
Appeal in term of 15 day from the notice
regarding the solution on the merits and 5 days
from the notice regarding the suspension of.
Electrica and CCR have stated Appeal. Currently,
the case file is to ICCJ, in filtering proceedings.
The Company of Administration of the shares
in Energy, founded by division of Electrica, was
approach in the case file, and Electrica claimed
to be EXTRACTED FROM ThE CASE. The Supreme
Court of Cassation and Justice has ascertained,
on the term of January 21, 2016, that Electrica
S.A. is not standing to bring active proceedings
in the case.
Reject the Appeal stated by the Plaintiff S.C.
Filiala de Întreţinere şi Servicii Energetice Serv
S.A. against the civil decision no. 1306 on April
24, 2014 of the Bucharest Court of Appeal –
Section VIIIrd Contentious administrative and
fiscal matters, as ungrounded. Admits the
Appeal stated by the defendant Romania Court
of Accounts against the same decision. Quash
in part the decision under appeal in that it
dismisses the action stated by the Plaintiff
S.C. Filiala de Întreţinere şi Servicii Energetice
Serv S.A. and on the measure ordered in item
12 in the Decision no. 32/2013 of the Court
of Accounts. Keep the other decisions of the
sentence under appeal. Final.
Appeal- In course of settlement.
2
3
4
Plaintiff: Electrica
S.A.
Defendant:
Romanian Court
of Auditors;
8335/2/2012
Suspension of
and cancelling the
administrative and fiscal
act Litigations Court
of Accounts Law no.
94/1992.
high Court of
Cassation and
Justice
Disputes Law no.
94/1992
high Court of
Cassation and
Justice
Plaintiff: FISE
Electrica Serv S.A.
Defendant:
Romanian Court
of Auditors
368/2/2014
Plaintiff: Electrica
Furnizare S.A.
Defendant:
Romanian Court
of Auditors;
5755/2/2013
Disputes Court of
Accounts (Law no.
94/1992), action on
cancellation of the Audit
Report no. 2835/2013,
of the Decisions no.
20/2013 and of the
Affidavit no. 82/2013.
high Court of
Cassation and
Justice
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6.
OTHER DISPUTES WITH POSSIBLE SIGNIFICANT IMPACT
Parti/Nr. dosar
Object
Court
Case status
Crt.
no.
1
2
3
4
5
6
7
Plaintiff: Niculescu Vladimir
Defendant: FDEE Electrica
Muntenia Nord S.A., City
hall Valenii de Munte town
1580/105/2008
Plaintiff: FDEE Transilvania
Nord SA
Defendant: Local Council of
Oradea City
Intervener: RCS&RDS
2527/111/2015
Plaintiff: FDEE Transilvania
Nord SA
Defendant: Local Council of
Oradea City
Intervener: RCS&RDS
2526/111/2015
Plaintiff: FDEE Transilvania
Nord SA
Defendant: Local Council of
Oradea City, RCS&RDS
3340/111/2015
Claim based on the Law no.
10/2001 – for a land of 1558
sqm and built area of 202 sqm,
located in Valenii de Munte, str.
N. Iorga, no. 129 and being used
by the Exploitation Center Valeni.
Cancellation of the Oradea LCD
no /April, 28 2015 regarding
the association between Oradea
City, SC RDS&RCS SA and SC
Delalina SRL in order to develop
an electric power distribution
network.
Cancellation of the Oradea
LCD no 284/April 28, 2015 on
the Regulation regarding the
settlement of the conditions for
exercising the right to access on
the public or private property
of the Oradea City, in order to
install electronic communication
networks.
Cancellation of the Oradea LCD
no 108/February 02, 2014 on the
public bidding for concession of
the land of 100,000 sqm area, in
order to develop an underground
channel for installing the
electronic and electric
communication networks.
Prahova Court
Presently, the case is on the merits
of Prahova Court Prahova.
Oradea Court
of Appeals
The court on the merits rejects
the EDTN action as premature.
The ETDN Appeal was admitted
and the case was sent to be re-
trialed to Bihor Court. In course of
settlement.
Oradea Court
of Appeals
On the merits the claim was
rejected. Appeal was settled,
the case file being in course of
regulating procedures.
Bihor Court
On the claim of the Defendant
RCS-RDS the suspension of
the case was ordered until
the settlement of the case file
2414/2/2016 with Delalina SRL,
case file on the lawsuit of the
Bucharest Appeal Court. RCS-RDS
settled a claim for reexamination
of the stamp duty; therefore, the
case file 3340/111/2015/a1 was
developed, within the application
to challenge the constitutionality
of the provisions of art. 39 par.
1 and par. 3 in the EGD 80/2013
was invoked. The application to
challenge the constitutionality was
admitted in principle, and the case
was suspended until the settling by
the Constitutionality Court.
The case file was suspended until
the settlement of the case file no.
2414/2/2016 with Delalina SRL,
case file on the lawsuit of the
Bucharest Court of Appeals.
In course of settlement.
The obligation to issue technical
permit for connection in the
favor of SC Delalina SRL
Bihor Court
Cancellation of administrative
acts (Order 73/2014, Concession
agreements)
Bucharest Court
of Appeals
Plaintiff: Delalina S.R.L.
Defendant: FDEE
Transilvania Nord SA
910/111/2016
Plaintiff: Delalina S.R.L.,
Foto Distributie S.R.L.
Defendant: FDEE
Transilvania Nord
SA, ANRE, Romanian
Government, Ministry of
Economy, Commerce and
Relationships with the
Business Environment,
Ministry of Energy, Banat
Enel Distribution, Muntenia
Enel Distribution, Dobrogea
Enel Distribution
2414/2/2016
Plaintiff: Delalina S.R.L.,
Foto Distributie S.R.L.
Defendant: ANRE
Intervener: FDEE
Transilvania North SA
4013/2/2016
The case file has as object the
cancellation of the ANRE decision
on refusal to give licenses for
electric power distribution.
Court of
Appeals
Bucharest
In course of settlement.
APPENDIX 2 – DETAILS OF MAIN INVESTMENTS
IN 2016 By ThE ELECTRICA GROUP
In 2016, the most significant investments made by the Group are the following:
DESCRIPTION
value
(mln RON)
MUNTENIA NORD
Modernization and SCADA integration of transformer station 110 kV Cuza Voda, Braila County
Modernization of FDCP-AMR with GSM Stage V/C Micro XIV Buzau Neighborhood
Modernization of 110/20 kV transformer station Maraşeşti
Modernization and SCADA integration of transformer station 110kV Adjud, Vrancea County
Modernization of OHL 110 kV Tecuci - Cudalbi and 110 kV cell in the Station 110/20 kV Cudalbi, Galati
County
Modernization and SCADA integration of transformer station 110kV Laminorul, Galati County
Modernization and SCADA integration of transformer station 110kV Pastarnacu, Prahova County
Modernization 110kV Columbia station (replacement transformer 2*25 MVA with 2*40MVA)
Modernization and amplification groups neutral treatment with BSRC in 110/MT Station Doftana, Campina,
Busteni, Sinaia, Southern District Ploiesti, Urlati, Northern District Ploiesti, Prahova County
Providing the technical conditions of operation of the 110 kV equipments of the transformer station
110/20kv Romanu, Braila County
Providing the technical conditions of operation of the 110 kV equipments of the transformer station
110/20kv Dudesti, Braila County
Modernization of OHL 110 kV Schela Tudor Vladimirescu (panel 94 - 104; 104 - 113; 113 - 123), Galati
County
Acquisition and installation of meters
Modernization and SCADA integration transformer stations VOL I Ploiesti Vest, Ploiesti Sud, Doftana, Pleasa,
Urlati
Improvement of technical operating conditions of failure signaling system in UPL 20 kV and introduction in
DAS Dambovita, the city of Targoviste
Integration in SCADA system of transformer stations EDMN VOL I
TRANSILVANIA NORD
Modernization of 110/20kV Dej (Cuzdrioara) station
Replacement of wire guard with OPGW on: OhL 110 kV Lapus-Tocila; OhL 110 kV Viseu -Pietrosul; OhL
110 kV Pietrosul - Baia Borsa; OHL 110 kV BM3 - Nistru; OHL 110 kV Nistru - Negresti
Increasing the distribution capacity to 20 kV of the Station 110/20/10 kV CAMPULUI
Modernization of grud 20 kV Station 110/20/10 kV Cluj Sud
Switch to 20 kV distribution in transformation Station 110/6 kV Turda
SCADA stage III - SCADA integration of 15 stations
SCADA stage IV - preparation works for SCADA integration of 14 stations
SCADA stage IV - SCADA integration of 14 stations
Optimization of central points Cluj and Oradea, implementation and installation EMS application with DMS
Cluj update and DMS Oradea implementation
Automation of distribution - all Distribution Subsidiaries
Switch to 20 kV distribution Velenta station
Automation of distribution - modernization TP
Modernization and systematization transformer station 110/20 kV CET 2 - stage I
Replacement of 110/MT power transformers with low losses FDEE EDTN
Reconstruction/Retrofitting OHL 110 kV Cluj Sud - Iernut, DC with OHL 110 kV Iernut - Campia Turzii, in the
panel stretching between poles 5-16, near the village of Cuci, Mures County
Reconstruction/Retrofitting OHL 110 kV Iernut - CFR Calarasi, DC with OHL 110 kV Iernut - Ludus, in the
panel stretching between poles 8-23, near the village of Cuci, Mures County
Switch to 20 kV distribution CET 1 station
Automation of distribution - modernization TP - SCADA integration
Switch to 20 kV distribution Iosia, Oradea
3.9
3.9
2.8
3.1
6.9
2.2
2.5
4.2
2.3
2.1
2.2
2.3
8.4
2.2
5.6
2.6
2.5
3.7
3.1
2.4
2.2
2.8
3.3
2.5
5.3
7.4
3.0
4.8
2.7
2.4
3.0
3.7
2.5
4.2
2.1
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TRANSILVANIA SUD
Modernization of 110/20/6 kV Predeal station and switch to 20 kV RED Predeal, Braşov County - Objective
1 and Objective 3, Braşov County
Integration of transformer stations belonging to CEM 110 kV Braşov in SCADA DMS system of S.C. FDEE
Electrica Distributie Transilvania Sud S.A.
Modernization and improving safety Station 110/20/10 kV Baraj, Mures County
Modernization of 110/20/6 kV Predeal station and switch to 20 kV RED Predeal, Braşov County - Objective
2: Switch to 20 kV EDN Predeal, Braşov County
Improvement voltage level OhL j.t. Barcani, Covasna County
Improvement voltage level OhL j.t. Bretcu, Covasna County
Modernization of electricity supply installations in blocks of flats within SDEE Harghita
Modernization of electricity supply installations in blocks of flats within SDEE Mures
Improvement voltage level and modernization OHL j.t. Târgu Mureș area str. Viile Dealului Mic, Viile 1 Mai,
Piata Republicii, Eden, Mures County
Modernization of electricity supply installations in the city of Medias (Gura Campului neighborhood), Sibiu
County
Improvement voltage level area PTa 1, PTa 2, Valea Crisului, Covasna County
Switch to 20 kV of the Distributor Vinalcool area PA 9, Mures County
Improvement voltage level OhL j.t. Sita Buzaului, area PTa 2, Covasna County
5.6
2.2
2.4
2.8
4.5
2.2
6.1
4.9
3.5
6.7
3.3
3.7
2.3
In 2016, the largest transfers of tangible assets in progress to tangible assets are represented mainly by
the commissioning of the investment objectives, as follows:
DESCRIPTION
value
(mln RON)
MUNTENIA NORD
Modernization and SCADA integration of transformer station 100kV Cuza Voda, Braila County
Modernization and SCADA implementation Sahateni Station
Modernization of FDCP-AMR with GSM Stage V/C Micro XIV Buzau Neighborhood
Modernization of 110/20 kV transformer station Maraşeşti
Modernization and SCADA integration of transformer station 110 kV Adjud, Vrancea County
Modernization of OHL 110 kV Tecuci - Cudalbi and 110 kV cell in the Station 110/20 kV Cudalbi, Galati
Modernization 110kV Columbia station (replacement transformer 2*25 MVA with 2*40MVA)
Modernization and amplification groups neutral treatment with BSRC in 110/MT Station Doftana, Campina,
Busteni, Sinaia, Southern District Ploiesti, Urlati, Northern District Ploiesti, Prahova County
Acquisition and installation of meters
Improvement of technical operating conditions of failure signaling system in UPL 20 kV and introduction in
DAS Dambovita, the city of Targoviste
Integration in SCADA system of transformer stations EDMN VOL I
Providing the technical conditions of operation of the 110 kV equipments of the transformer station
110/20kv Romanu, Braila County
Providing the technical conditions of operation of the 110 kV equipments of the transformer station
110/20kv Dudesti, Braila County
Modernization and SCADA integration of transformer stations 110kV Ploiesti Vest, Ploiesti Sud,Doftana, Pleasa,
Urlati
TRANSILVANIA SUD
Modernization of 110/20/6 kV Predeal station and switch to 20 kV RED Predeal, Braşov County - Objective 1
and Objective 3, Braşov County
Integration of transformer stations belonging to CEM 110 kV Braşov in SCADA DMS system of S.C. FDEE
Electrica Distributie Transilvania Sud S.A.
Modernization of electricity supply installations in Medias (Gura Campului neighborhood) Sibiu County
Modernization of electricity supply installations in blocks of flats within SDEE Harghita
Modernization of electricity supply installations in blocks of flats within SDEE Mures
Switch to 20 kV of the Distributor Vinalcool area PA 9, Mures County
Improvement voltage level OhL j.t. Valea Crisului, Covasna County
4.1
2.8
3.9
4.1
2.8
7.1
4.6
5.0
12.7
5.7
2.6
2.2
2.1
2.2
4.6
11.4
6.2
5.0
4.9
3,7
3.3
Modernization and improving safety in supply installation switching to underground supply cable 20 kV, Tg
Mures-Cristesti, Mures County
Improvement voltage level OhL j.t. Sita Buzaului, PTA 2_ Ciumenic, Covasna County
Improvement voltage level OhL j.t. Bretcu, Covasna County
Modernization of 110/20/6 kV Predeal station and switch to 20 kV RED Predeal, Braşov County - Objective 2:
Switch to 20 kV EDN Predeal, Braşov County
Improvement voltage level OhL j.t. Barcani, Covasna County
Improvement voltage level and modernization OHL j.t. Târgu Mureș area str. Viile Dealului Mic, Viile 1 Mai,
Piata Republicii, Eden, Mures County
TRANSILVANIA NORD
Creation of grud 20 kV Station 110/20/6 kV Clujana
Increasing safety in supply to consumers in Valea lui Mihai
Modernization of 110/20/10KV Baia Mare 5 station
Modernization of 110/20/6 KV Carei 1 transformer station
Modernization of 110/20 kV Dej - Cuzdrioara station
Modernization of busbar 20 kV Station 110/20/10 kV Cluj Sud
Modernization of Crisul Oradea Station
Modernization of 110/20/6 KV Satu Mare 1 station
Modernization of 110/20 kV Negresti station
Reconstruction of OHL 110 kV Cluj Sud - Iernut
Reconstruction of OHL 110 kV Iernut - CFR Calarasi
Retrofitting of MT equipment in 110 Palota Station
Modernization of power transformers 110 kV/MT (3 works)
SCADA stage III - preparation works for SCADA integration - 15 stations
SCADA stage IV - preparation works for SCADA integration of 14 stations Aghires, Sacuieni, Voievozi, Suplac,
Tileagd, Baia Borsa, Tocila, Pietrosul, Tasnad, Lechinta, Rodna, Prundu Bargaului, Sarmasag, Cehu Silvaniei
SCADA stage III + IV - SCADA integration in 29 stations
Modernization of metering points (all SD)
Optimization of central points Cluj and Oradea, implementation and installation EMS application with DMS
Cluj update and DMS Oradea implementation
Automation of distribution - modernization TP and SCADA integration SD Zalau
Automation of distribution - modernization TP at SD Bistrita
Replacement of existing MT/JT transformers with transformers with low losses
Replacement of wire guard with OPGW on: OhL 110 kV Lapus-Tocila; OhL 110 kV Viseu -Pietrosul; OhL 110
kV Pietrosul - Baia Borsa; OHL 110 kV BM3 - Nistru; OHL 110 kV Nistru - Negresti
Distribution automation system for 2015-2016 DAS Baia Mare- automatic reclosers 20 kV and remote
controlled separators
Distribution automation system for 2015-2016 DAS Bistrita- automatic reclosers 20 kV and remote controlled
separators
Distribution automation system for 2015-2016 DAS Cluj- automatic reclosers 20 kV and remote controlled
separators
Distribution automation system for 2015-2016 DAS Satu Mare- automatic reclosers 20 kV and remote
controlled separators
Distribution automation system for 2015-2016 DAS Zalau- automatic reclosers 20 kV and remote controlled
separators
Modernization of electricity supply installations in Oradea - zona PTZ Ortopedie, PTZ Decebal 2; PTZ Moara;
PTS Decebal 1; PTZ Centrocoop; PTZ Engels; PTZ Centrul de Calcul
Switch to 20 kV distribution Velenta station - Oradea
2.7
2.3
2.2
2.2
4.7
3.5
2.0
3.6
6.4
4.6
6.7
2.5
2.6
4.7
3.8
3.3
3.9
2.8
2.2
3.2
4.8
2.1
3.7
5.6
4.5
3.5
3.6
7.6
2.5
2.4
5.1
3.1
4.5
4.3
3.6
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APPENDIX 3
INTERNAL AUDIT REPORT FOR 2016
The Annual Audit Plan for 2016, endorsed by the Audit Committee and approved by the Board of Directors
by the Decision no.39/08.12.2015, provided for seven missions planned for 2016 in the following auditable
areas: human resources, technical, procurement, transportation, risk management, BRP activity (Balance
Responsible Part). This plan was drawn up in view of identifying the efficiency of internal controls within
ELSA. On the date of audit missions planning, the Audit & Compliance Office team was made of two internal
auditors, but after April the internal audit missions were conducted by five internal auditors.
In 2016, upon the request of the Board of Directors, were conducted two ad-hoc missions on human
resources and procurement auditable areas.
During the first half year 2016, 5 audit missions were conducted in the company, 3 from Annual Internal
Audit Plan and 2 ad-hoc missions. Seven audit reports were developed, containing 36 recommendations
of witch 20 with high risk impact in case of non-implementing. The missions developed in first half of
year:
•
•
• Human resources activity - ad-hoc mission;
Transportation activity – planned mission;
•
EDN access ( Electric Distribution Network) - planned mission.
•
Procurement of services – ad-hoc mission;
Enterprise risk management – planned mission;
In the second half of 2016 were conducted 3 audit missions, planned and were developed 11 internal audit
reports, containing 45 recommendations of which 18 with high risk impact in case of non-implementing.
The missions developed in second half of year :
•
•
•
Administrative activity;
BRP activity;
Procurement evaluation.
These missions were performed by teams made of two internal auditors supervised by the chief of internal
audit department.
The internal audit report concluded as a result of the missions were acknowledged by the management of
audited entities, endorsed by the Audit Committee and the implementation of their recommendations is
consistently monitored by their follow up sheets. As a result of the audit missions and the acceptance of
their recommendations by the audited entities and persons, the audited structures make up their own plans
of measure to meet the recommendations.
During 2016 have been uptated Charta of internal audit and Code of ethic behaviour for internal auditors.
Were developed Manual of politicies and procedures for internal audit, based on CAFR (Chamber of financial
auditors) model, organization which appropriated entirely International Standards for the Professional Practice
of Internal Auditor. All these procedures were endorsed by Audit Committee and approved by Board of
Directors.
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED FINANCIAL
STATEMENTS FOR ThE yEAR ENDED
31 DECEMBER 2016
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CONTENTS
Consolidated statement of financial position
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Basis of measurement
Significant accounting policies
New standards and interpretations not yet adopted
Reporting entity and general information
Basis of accounting
Functional and presentation currency
Use of judgments and estimates
Notes to the consolidated financial statements
Basis of preparation
1
2
3
4
Accounting policies
5
6
7
Performance for the year
8
9
10
11
12
Employee benefits
13
14
15
Income taxes
16
Operating Segments
Revenue
Income and expenses
Net finance income
Earnings per share
Income taxes
Short-term employee benefits
Post-employment and other long-term employee benefits
Employee benefit expenses
Trade receivables
Deposits, treasury bills and government bonds
Other receivables
Cash and cash equivalents
Property, plant and equipment
Intangible assets
Capital and reserves
Non-controlling interests
Financing for network construction related to concession agreements
Trade payables
Other payables
Provisions
Long-term bank borrowings
Financial instruments - Fair values and risk management
Assets
17
18
19
20
21
22
Equity and liabilities
23
24
25
26
27
28
29
Financial instruments
30
Other information
31
32
33
34
Related parties
Subsidiaries in financial distress
Contingencies
Commitments
118
120
121
122
124
126
130
130
130
132
132
141
142
147
147
148
148
149
149
152
152
154
155
156
156
158
160
161
162
163
164
164
164
165
166
171
173
174
175
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SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
(All amounts are in ThOUSAND RON, if not otherwise stated)
Note
31 December
2016
31 December
2015
Note
31 December
2016
31 December
2015
3,910,388
3,700,211
Financing for network construction related to concession agreements
Liabilities
Non-current liabilities
ASSETS
Non-current assets
Intangible assets related to concession arrangements
Other intangible assets
Property, plant and equipment
Restricted cash
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
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
Legal reserves
Retained earnings
Total equity attributable to the owners of the Company
Non-controlling interests
Total equity
22
22
21
20
16
17
19
20
18
16
23
23
23
23
24
17,218
701,962
134,492
39,668
1,741
14,295
779,264
-
50,597
3,802
4,805,469
4,548,169
777,989
20,030
888,841
837,782
36,804
893,492
1,875,054
1,987,881
22,750
5,635
-
2,385
23,258
9,460
31,304
23,135
3,592,684
3,843,116
8,398,153
8,391,285
3,814,242
3,814,242
103,049
(75,372)
5,144
104,681
302,236
1,429,908
5,683,888
836,599
6,520,487
103,049
(75,372)
2,862
140,358
273,899
1,354,595
5,613,633
828,957
6,442,590
Deferred tax liabilities
Employee benefits
Other payables
Long-term bank borrowings
Total non-current liabilities
Current liabilities
Financing for network construction related to concession agreements
Short term bank borrowings
Bank overdrafts
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Current income tax liability
Total current liabilities
Total liabilities
Total equity and liabilities
The accompanying notes are an integral part of these consolidated financial
statements.
25
16
14
27
29
25
30
20
26
27
13,14
28
41,617
195,689
192,965
44,921
127,733
602,925
85,513
-
142,626
722,830
160,890
4,415
83,972
62,407
12,088
122,065
181,253
193,915
43,068
-
540,301
99,576
59,821
65,963
656,410
249,306
4,235
134,625
127,613
10,845
1,274,741
1,877,666
1,408,394
1,948,695
8,398,153
8,391,285
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
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SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in ThOUSAND RON, except per share data)
SOCIETATEA ENERGETICA ELECTRICA SA
CONSOLIDATED STATEMENT OF COMPREhENSIVE INCOME
FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in ThOUSAND RON, if not otherwise stated)
Note
2016
2015
Note
2016
2015
Profit for the year
468,897
482,160
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
14
16
4,792
(768)
16,707
(2,674)
Other comprehensive income, net of tax
4,024
14,033
Total comprehensive income
472,921
496,193
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.
359,555
113,366
472,921
374,294
121,899
496,193
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
Revenues
Other income
Electricity purchased
Green certificates
Construction costs related to concession agreements
Employee benefits
Repairs, maintenance and materials
Depreciation and amortization
Impairment of property, plant and equipment, net
Impairment of trade and other receivables, net
Change in provisions, net
Other operating expenses
Operating profit
Finance income
Finance costs
Net finance income
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
9
10
22
15
21,22
21,22
17,19
28
10
11
11
16
24
5,517,802
5,502,795
243,454
211,161
(2,756,032)
(2,718,682)
(401,382)
(528,372)
(654,383)
(44,077)
(373,096)
(695)
(40,614)
65,206
(441,959)
585,852
20,037
(16,856)
3,181
589,033
(120,136)
468,897
(346,754)
(490,023)
(662,963)
(59,015)
(350,813)
(2,368)
(4,400)
(54,979)
(455,319)
568,640
37,851
(17,368)
20,483
589,123
(106,963)
482,160
356,566
112,331
468,897
362,675
119,485
482,160
Basic and diluted earnings per share (RON)
12
1.05
1.07
The accompanying notes are an integral part of these consolidated financial statements.
Director General
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
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SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF ChANGES IN EQUITy
FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in ThOUSAND RON, if not otherwise stated)
Balance at 1 January 2016
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Contributions and distributions
Land for which ownership rights were obtained
Dividends to the owners of the Company
Total transactions with owners of the Company
Other changes in equity
Dividends to non-controlling interests
Set up of legal reserves
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
Loss of control over subsidiaries in financial distress
Balance at 31 December 2016
Balance at 1 January 2015
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Contributions and distributions
Land for which ownership rights were obtained
Dividends to the owners of the Company
Total transactions with owners of the Company
Other changes in equity
Dividends to non-controlling interests
Set up of legal reserves
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
Loss of control over subsidiaries in financial distress
Balance at 31 December 2015
The accompanying notes are an integral part of these consolidated financial statements.
Attributable to the owners of the Company
Note
Share
capital
Share
premium
Treasury
shares
Pre-paid
capital con-
tributions in
kind from
sharehold-
ers
Revaluation
reserve
Legal
reserves
Retained
earnings
Total
Non-
controlling
interests
Total
equity
3,814,242
103,049
(75,372)
2,862
140,358
273,899
1,354,595
5,613,633
828,957
6,442,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,282
-
2,282
-
-
-
-
-
-
-
-
-
-
-
-
(29,251)
(6,426)
356,566
356,566
112,331
468,897
2,989
2,989
1,035
4,024
359,555
359,555
113,366
472,921
-
2,282
(291,582)
(291,582)
(291,582)
(289,300)
-
-
-
2,282
(291,582)
(289,300)
28,337
(28,337)
-
-
29,251
6,426
-
-
-
-
(105,724)
(105,724)
-
-
-
-
-
-
3,814,242
103,049
(75,372)
5,144
104,681
302,236
1,429,908
5,683,888
836,599
6,520,487
3,814,242
103,049
(75,372)
3,273
156,018
236,597
1,246,635
5,484,442
804,266
6,288,708
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(411)
-
(411)
-
-
-
-
-
-
-
-
-
-
-
-
(14,217)
(1,443)
362,675
362,675
119,485
482,160
11,619
11,619
2,414
14,033
374,294
374,294
121,899
496,193
-
(411)
(244,692)
(244,692)
(244,692)
(245,103)
-
-
-
(411)
(244,692)
(245,103)
37,302
(37,302)
-
-
14,217
1,443
-
-
-
-
(97,208)
(97,208)
-
-
-
-
-
-
3,814,242
103,049
(75,372)
2,862
140,358
273,899
1,354,595
5,613,633
828,957
6,442,590
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23
23
23
23
32
23
23
23
23
32
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SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASh FLOWS
FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in ThOUSAND RON, if not otherwise stated)
Cash flows from operating activities
Cash flows from investing activities
Note
2016
2015
Profit for the year
Adjustments for:
Depreciation
Amortisation
Impairment loss of property, plant and equipment, net
Loss/(Gain) on disposal of property, plant and equipment
Impairment of trade and other receivables, net
Change in provisions, net
Net finance income
Gain on loss of control over subsidiaries in financial distress
Income tax expense
Changes in :
Trade receivables
Other receivables
Deposits, treasury bills and government bonds
Prepayments
Green certificates
Restricted cash
Inventories
Trade payables
Other payables
Employee benefits
Cash generated from operating activities
Interest paid
Income tax paid
Net cash from operating activities
468,897
482,160
Payments for purchases of property, plant and equipment
21
22
21
17,19
28
11
10,32
16
40,886
332,210
695
(8,015)
40,614
(65,206)
(3,181)
(73,693)
120,136
853,343
44,084
306,729
2,368
4,676
4,400
54,979
(20,483)
(38,501)
106,963
947,375
(88,336)
(126,401)
33,954
(4,943)
3,825
31,304
(134,492)
508
150,682
(34,854)
5,323
816,314
(5,855)
(2,605)
(816)
22,404
-
1,047
81,784
(45,171)
(2,309)
869,453
(4,575)
(8,030)
(93,722)
(118,177)
718,017
743,246
Payments for network construction related to concession agreements
Payments for purchase of other intangible assets
Proceeds from sale of property, plant and equipment
Payments for purchase of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Increase in deposits with maturity of 3 months or longer
Proceeds from deposits with maturity of 3 months or longer
Interest received
Effect on loss on control over subsidiaries on cash
Net cash used in investing activities
Cash flows from financing activities
Proceeds from long term bank loans
Proceeds from short term bank loans
Repayment of long term bank loans
Repayment of short term bank loans
Dividends paid
Repayment of financing for network construction related to concession
agreements
Payment of finance lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
The accompanying notes are an integral part of these consolidated financial statements
The non-cash transactions are disclosed in Note 20.
Note
2016
2015
18
18
(32,140)
(31,759)
(500,262)
(353,302)
(7,530)
27,829
(8,755)
14,771
(2,437,538)
(4,093,998)
2,436,404
3,240,481
(300,895)
(350,228)
419,799
438,990
18,358
(1,609)
41,286
(2,863)
(377,584)
(1,105,377)
127,733
-
(9,900)
(50,000)
18,000
51,753
(8,100)
(1,907)
23
25
(396,922)
(341,293)
(92,658)
(109,875)
-
(294)
(421,747)
(391,716)
(81,314)
(753,847)
827,529
1,581,376
746,215
827,529
20
20
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
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SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO ThE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR ThE yEAR ENDED 31 DECEMBER 2016
(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 Energetica Electrica S.A. (“the
Company” or “Electrica SA”) and its subsidiaries (together “the Group”). During 2016 the Company changed its name
from Societatea de Distributie si Furnizare a Energiei Electrice Electrica S.A. to Societatea Energetica Electrica S.A.
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 2016 and 2015 the major shareholder of Societatea Energetica Electrica SA is the Romanian State,
represented by the Ministry of Energy (48.78%), after the ownership dilution following an initial public offer. The second
largest 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
2016
%
shareholding
as at 31 Dec
2015
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 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 (Societatea de Distributie a Energiei Electrice Transilvania Sud, Societatea
de Distributie a Energiei Electrice Muntenia Nord and Societatea de Distributie a Energiei Electrice Transilvania Nord)
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 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 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 32.
14506181
Ploiesti
78.0000021% 78.0000021%
Initial public offering
Electrica Furnizare SA
Electricity Supply
28909028
Bucuresti
77.99997%
77.99997%
Societatea de Distributie a
Energiei Electrice Muntenia Nord
SA
Electricity distribution
in geographical area of
Muntenia Nord
Societatea de Distributie a
Energiei Electrice Transilvania
Nord SA
Electricity distribution
in geographical area of
Transilvania Nord
Societatea de Distributie a
Energiei Electrice Transilvania Sud
SA
Electricity distribution
in geographical area of
Transilvania Sud
Electrica Serv SA
Servicii Energetice Muntenia SA
(in reorganization)
Servicii Energetice Oltenia SA (in
reorganization)
Servicii Energetice Moldova SA*
Servicii Energetice Dobrogea 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)
14476722
Cluj-Napoca
77.99999%
77.99999%
14493260
Brasov
78.0000019% 78.0000019%
17329505
Bucuresti
100%
100%
29384120
Bucuresti
100%
100%
29389861
Craiova
100%
100%
29386768
Bacau
n/a*
100%
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)
REGULATIONS REGARDING THE ENERGY SECTOR
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.
* Societatea Energetica Electrica SA lost the control of Servicii Energetice Dobrogea starting January 2015 and of Servicii Energetice Moldova starting
January 2016 when the bankruptcy proceedings of the subsidiaries began (see Note 32). As of these dates the Group ceased to consolidate these
companies.
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. 72/2013, no. 112/2014 no. 146/2014 and no. 165/2015.
The specific distribution tariffs applicable for the years 2016 and 2015 for the three voltage levels (high, medium and
29388378
Constanta
n/a*
n/a*
Electricity distribution
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
low) by regions were approved by ANRE orders as follows (RON/MWh, presented cumulatively for medium and low
voltage):
Order 171, 172, 173/14.12.2015
Order 155, 156, 154/15.12.2014
1 January-31 December 2016
1 January-31 December 2015
High voltage Medium
voltage
19.93
21.22
15.93
64.20
63.58
52.60
Low
voltage
167.74
172.02
171.38
High voltage Medium
voltage
Low voltage
21.10
23.41
18.47
68.44
70.26
61.31
180.59
192.65
199.92
Transilvania Nord
Transilvania Sud
Muntenia Nord
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”); working capital requirements and revenues from reactive energy.
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 generated by the use of distribution networks
of other operators; extraordinary costs produced by force majeure; costs generated by the impossibility of shutting down
the electricity supply for certain consumers, according to the legislation; damages paid by the main distribution operator
to third parties for maintenance works established in court.
The regulated rate of return on the RAB starting with 2015 is 7.7%, in accordance with the ANRE Order no. 146/2014.
The distribution tariffs applicable for 2017 for the three voltage levels (high, medium and low) by regions were approved
by ANRE orders as follows (RON/MWh), presented cumulatively for medium and low voltage:
Order 113, 114, 112/14.12.2016
1 January-31 December 2017
High voltage
Medium voltage
Low voltage
Transilvania Nord
Transilvania Sud
Muntenia Nord
19.05
20.63
14.79
60.98
61.64
48.46
157.71
165.37
157.81
Regulatory asset base (RAB)
In accordance with ANRE Orders no. 72/2013, 112/2014, 146/2014 and 165/2015, the determination of the distribution
tariffs is based on, inter alia, the regulated asset base (“RAB”). The RAB calculation is based on 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 methodology, in the reference year of the regulatory period, the distribution operator
may request the regulator the recognition of the revaluation of asset commissioned after 1 January 2005, based on the
revaluations studies 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 value of the assets commissioned after 1 January 2005
updated using the cumulative inflation rate over that period.
Starting with the fourth regulatory period, the value of RAB at 31 December of the reference year of a regulatory period
is no longer updated with the inflation rate.
Tariff adjustments
Annually, ANRE makes revenue corrections 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; changes
in revenues from reactive energy compared to the forecast; under-/overruns of the approved investments programme; and
revenues generated from other operations made by the distribution operator.
The differences in revenue arising in relation to the above mentioned stipulations are used to modify the regulated tariffs for
the subsequent year.
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 2016 the Group is in an over-recovery position of approximately RON 332
million (2015: RON 322 million), which will be deducted from the tariffs for subsequent periods.
Tariffs increase limitations
Starting with the third regulatory period (2014-2018) the distribution tariffs shall not increase year on year by more than 7%
for the weighted average tariff and 10% for each specific distribution tariff.
According to ANRE Order no. 165/2015, starting 2015 the tariff variation limitation applies only to tariff increases, and not
to tariff decreases.
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
Regulated market
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 and amended by Order no. 92/2015 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, costs related to technical and operational services, 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.
Until 2018 when the market for the household consumers will be competitive, the tariffs applicable to the households
consumers shall be annual approved by ANRE based on the reported costs and regulated profit margin. The tariffs are
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AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
established in order to cover the costs of electricity (including transports costs, network services, distribution costs and the
regulated profit margin). The previous ANRE 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 current methodology (ANRE Order 92/2015) establish the regulated profit as a percentage of 1.5% of the total supply costs
(that includes energy acquisition, transport and distribution costs, costs related to the system services and costs related market
operations and supply) and the operating supply costs of 4.5 RON/client/month in 2015 and 4.7 RON/client/month in 2016.
recognised in the consolidated financial statements is included below.
Service Concession Arrangements
The distribution subsidiaries (as operators) concluded concession contracts with the Ministry of Economy (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
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.
IFRIC 12 “Service Concession Arrangements” deals with public-to-private service concession arrangements.
The tariffs for electricity supplied under regulated regime in 2016 and 2015 are those established by ANRE Orders no. 115/2016,
no. 176/2015, no.157/2014 and no. 57/2014.
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, and the quantities acquired are established by
ANRE.
IFRIC 12 applies to public-to-private service concession arrangements if:
(a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide
them, and at what price; and
(b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant residual interest in the
infrastructure at the end of the term of the arrangement.
Competitive market
Transactions on the competitive en-gross market are transparent, public, centralised and non-discriminatory. Participants on the
en-gross market can trade electricity based on the bilateral contracts concluded on the related centralised market.
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.
ANRE establishes by order, until 1 March of each year, the compulsory annual quota for the acquisition of green certificates
related to the previous year, based on the quantities of electricity from renewable sources and the final consumption of
electricity of the previous year.
2
Basis of accounting
These consolidated financial statements have been prepared in accordance with International Reporting Standards (“IFRS”) as
adopted by the European Union (“IFRS-EU”). They were authorized for issue by the Board of Directors on 9 March 2017. The
financial statements will be submitted for shareholders’ approval in the meeting scheduled on 27 April 2017.
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.
The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a regulator). The
activities of the electricity distribution operators, including distribution tariffs, are regulated by ANRE.
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 operators 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 operators 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 of
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.
Within the arrangements, the Group incurs significant expenditure in relation to the development and maintenance of the
infrastructure. The construction works are either outsourced by the Group to sub-contractors, or performed internally. Significant
management judgment is involved in accounting for the concession arrangements under IFRIC 12, including those in respect of
the recognition of revenue based on the stage of completion of the services and separation of construction or upgrade services
from operation services.
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.
Details of the Group’s accounting policies are included in Note 6. The Group has consistently applied the accounting policies to
all periods presented in these consolidated financial statements.
(B)
ASSUMPTIONS AND ESTIMATION UNCERTAINTIES
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 assumptions and estimation uncertainties that may result in a material adjustment in the subsequent twelve
month period is included in the following notes:
• Note 6 k), l) – assumptions regarding the useful life of the intangible assets related to concession arrangements and other
intangible assets;
• Notes 17 and 30 – assumptions and estimates about the recoverability of trade receivables;
• Note 6 j) – estimates regarding the useful lives of property, plant and equipment;
• Note 21 - assumptions regarding the revalued amount of property, plant and equipment;
• Note 32 – assumptions and estimates regarding the measurement of assets of the subsidiaries under financial distress;
• Note 16 – recognition of deferred tax assets: availability of future taxable profit against which tax loss carried forward can be used;
• Notes 28 and 33 – recognition and measurement of provisions and contingencies;
• 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.
Information about judgements made in applying accounting policies that have the most significant effects on the amounts
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair
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AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques
as follows.
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
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);
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.
equity-accounted investees, from the date that significant influence commences until the date that significant influence
ceases.
Transactions eliminated on consolidation
(v)
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
Further information about the assumptions made in measuring fair values is included in the following notes:
• Note 30 – financial instruments;
• Note 21 – property, plant and equipment.
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.
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 subsidiaries in financial distress are
not recognised on a going concern basis but on an alternate basis, as disclosed in Note 32.
6
Significant accounting policies
Supply and distribution of electricity
The revenue from supply and distribution of electricity to consumers is recognized when electricity is delivered to
consumers (consumed by 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 Group has consistently applied the following accounting policies to all periods presented in these consolidated
financial statements.
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)).
(A)
BASIS OF CONSOLIDATION
Subsidiaries
(i)
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.
Loss of control
(ii)
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.
Non-controlling interests
(iii)
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.
Investments in equity-accounted investees
(iv)
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 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
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.
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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
(D)
FINANCE INCOME AND FINANCE COSTS
(G)
INCOME TAX
The Group’s finance income and finance costs include:
•
•
•
•
Interest income or expense is recognised using the effective interest method.
interest income;
interest expense;
the foreign currency gain or loss on financial assets and financial liabilities;
impairment losses recognised on financial assets (other than trade receivables).
(E)
FOREIGN CURRENCY TRANSACTIONS
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.
•
•
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.
Current tax
(i)
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.
Deferred tax
(ii)
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:
•
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;
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 differences and it is probable that they will
not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
(F)
EMPLOYEE BENEFITS
Short-term employee benefits
(i)
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.
Defined contribution plans
(ii)
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.
Defined benefit plans
(iii)
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.
Re-measurements 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.
Other long-term employee benefits
(iv)
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. Re-measurements 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 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.
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 CERTIFICATES
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. The obligation for covering the annual acquisition quota is
accrued in profit or loss.
(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
Recognition and measurement
(i)
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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
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 other items of property, plant and equipment
are measures at cost less any accumulated depreciation and any accumulated impairment losses.
(L)
OTHER INTANGIBLE ASSETS
(i)
Recognition and measurement
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.
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.
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.
Subsequent expenditure
(ii)
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Group.
Depreciation
(iii)
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 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
Useful lives
Buildings
Equipment
Motor vehicles
Office equipment
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
Recognition and measurement
(i)
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.
Amortisation
(ii)
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 assets related to the concession arrangements is 10 years at 31 December
2016 (useful life 25 years).
Subsequent expenditure
(ii)
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.
Amortisation
(iii)
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 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 re-
measurement are recognised in profit or loss.
Once classified as held-for-distribution, equity-accounted investee is no longer equity accounted.
(N)
FINANCIAL INSTRUMENTS
The Group classifies non-derivative financial assets into the following categories: loans and receivables and held to
maturity investments.
The Group classifies non-derivative financial liabilities into the other financial liabilities category.
Non-derivative financial assets and financial liabilities – recognition and derecognition
(i)
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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
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 agreements and 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
Non-derivative financial assets
(i)
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:
•
•
•
•
•
•
default or delinquency by a debtor;
restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
indications that a debtor or issuer will enter bankruptcy;
adverse changes in the payment status of borrowers or issuers;
the disappearance of an active market for a security; or
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.
Non-financial assets
(ii)
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 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.
(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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
(S)
PROVISIONS
(V)
SEGMENT REPORTING
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)
CONTINGENT ASSETS AND LIABILITIES
A contingent liability is:
a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
i.
b) a present obligation that arises from past events but is not recognized because:
it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
or
ii. the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognized in the Group’s financial statements, but disclosed unless the possibility of an
outflow of resources embodying economic benefits is remote.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
A contingent asset is not recognized in the Group’s financial statements but disclosed when an inflow of economic
benefits is probable.
(U)
LEASES
Determining whether an arrangement contains a lease
(i)
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.
Leased assets
(ii)
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.
Lease payments
(iii)
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.
Rental income
(iv)
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.
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.
(W)
SUBSEqUENT EVENTS
Events occurring after the reporting date 31 December 2016, which provide additional information about conditions
prevailing at those reporting dates (adjusting events) are reflected 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.
New standards and interpretations not yet adopted or adopted by the EU
7
and not yet effective
A number of standards were adopted by the EU but are not yet mandatorily effective for the year ending 31 December
2016 and have not been applied in preparing these consolidated financial statements:
•
IFRS 9 “Financial Instruments”. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with
early adoption permitted. The Group currently plans to apply IFRS 9 initially on 1 January 2018. The actual impact
of adopting IFRS 9 on the Group’s consolidated financial statements in 2018 is not known and cannot be reliably
estimated because it will be dependent on the financial instruments that the Group holds and economic conditions
at that time as well as accounting elections and judgements that it will make in the future. The Group has performed
a preliminary assessment of the potential impact of adoption of IFRS 9 based on its position at 31 December 2016
and does not believe that the new requirements, if applied at 31 December 2016, would have had a material impact
on its financial statements.
IFRS 15 “Revenue from Contracts with Customers”. IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including
IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for
annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group has performed an
initial assessment of the potential impact of the adoption of IFRS 15 on its consolidated financial statements.
•
Rendering of services
The Group does not expect significant differences in the timing of revenue recognition or the net impact on the result
for the financial period.
Transition
The Group plans to adopt IFRS 15 in its consolidated financial statements for the year ending 31 December 2018, using
the retrospective approach. As a result, the Group will apply all of the requirements of IFRS 15 to each comparative
period presented and adjust its consolidated financial statements.
The Group is currently performing a detailed assessment of the impact resulting from the application of IFRS 15.
A number of standards were not yet adopted by the EU:
•
IFRS 16 “Leases”. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. IFRS 16 supersedes IAS
17 Leases and related interpretations. The Standard eliminates the current dual accounting model for lessees and
instead requires companies to bring most leases on-balance sheet under a single model, eliminating the distinction
between operating and finance leases. Under IFRS 16, a contract is, or contains, a lease if it conveys the right to
control the use of an identified asset for a period of time in exchange for consideration. For such contracts, the new
model requires a lessee to recognise a right-of-use asset and a lease liability. The right-of-use asset is depreciated
and the liability accrues interest. This will result in a front-loaded pattern of expense for most leases, even when
the lessee pays constant annual rentals. Lessor accounting shall remain largely unaffected by the introduction of the
new Standard and the distinction between operating and finance leases will be retained. The Group has significant
operating leases. For future lease payment please refer to Note 34b). The Group is currently performing the detailed
assessment of the impact resulting from the application of IFRS 16.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
8
Operating segments
(A)
BASIS FOR SEGMENTATION
The following summary describes the operations of each reportable segment.
Reportable segments
Electricity supply
Electricity distribution
External electricity network maintenance
Operations
Buying and supplying electricity to final consumers (includes
Electrica Furnizare SA and the supply activity of Electrica SA)
Electricity distribution service (includes Societatea de Distributie
a Energiei Electrice Transilvania Sud SA, Societatea de Distributie
a Energiei Electrice Transilvania Nord SA, Societatea de Distributie
a Energiei Electrice Muntenia Nord SA, Electrica Serv SA and the
investments in distribution activity done by Societatea Energetica
Electrica SA)
Repairs, maintenance and other services for electricity networks
owned by other distributors (includes Servicii Energetice Oltenia
SA and Servicii Energetice Muntenia SA). For the year ended 31
December 2015 the segment included also the operations of
Servicii Energetice Moldova, which was deconsolidated starting with
January 2016, as a result of loss of control.
headquarter
Includes corporate services at parent level
The Board of Directors of the Company reviews management reports of each segment. Segment earnings before interest,
tax, depreciation and amortisation (EBITDA) is used to measure performance because management believes that such
information is the most relevant in evaluating the results of the segments.
(B)
INFORMATION ABOUT REPORTABLE SEGMENTS
Year ended
31 December 2016
Electricity
supply
Electricity
distribution
External revenues
4,346,816
1,141,823
Inter-segment
revenue
84,922
1,355,800
Segment revenue
4,431,738
2,497,623
173,781
397,660
External
electricity
network
maintenance
Headquar-
ter
Total for
reportable
segments
Consolidation
eliminations
and adjust-
ments
Con-
solidated
total
29,163
13,079
42,242
70,491
-
-
-
5,517,802
-
5,517,802
1,453,801
(1,453,801)
-
6,971,603
(1,453,801)
5,517,802
318,439
960,371
(371,338)
589,033
(1,346)
(12,093)
14
387,944
374,519
(371,338)
3,181
(10,197)
(350,352)
(7,622)
(5,620)
(373,791)
-
-
73,693
-
73,693
185,324
139,174
760,105
311,612
(63,885)
318,439
959,643
840,236
-
-
-
(371,339)
(373,791)
73,693
959,643
468,897
78,099
71,011
(22,634)
154,704
24,080
Employee benefits
(81,864)
(529,382)
Segment assets
1,225,799
5,128,477
669,372
544,644
(20,503)
(654,383)
-
(654,383)
2,224,487
8,733,467
(335,314)
8,398,153
-
1,238,096
(440,077)
798,019
464,551
214,105
13,142
197,043
888,841
-
-
-
7,939
-
-
134,492
134,492
1,867,115
1,875,054
-
-
-
888,841
134,492
1,875,054
802,107
455,444
80,578
13,821
1,351,950
(349,597)
1,002,353
Segment profit
before tax
Net finance (cost)/
income
Depreciation,
amortization and
impairment, net
Gain on control loss
over subsidiaries
EBITDA*
Segment net profit
(loss)
Trade and other
receivables
Cash and cash
equivalents
Restricted cash
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 bank
borrowings
-
-
142,626
254,863
-
-
-
-
-
-
142,626
254,863
556,623
-
-
-
142,626
254,863
556,623
Capital expenditure
10,143
546,480
* 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. 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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
The breakdown of the Electricity distribution reportable segment is as follows:
Year ended
31 December 2016
Distribution
Muntenia
Nord
Distribution
Transilvania
Nord
Distribution
Transilvania
Sud
Electricity
network
mainte-
nance
Eliminations
Total
Electricity
distribu-
tion
External revenues
339,275
423,131
350,164
29,253
-
1,141,823
Inter-segment
revenue
461,592
434,348
439,666
335,657
(315,463)
1,355,800
Segment revenue
800,867
857,479
789,830
364,910
(315,463)
2,497,623
Segment profit /
(loss) before tax
Net finance (cost)/
income
Depreciation,
amortization and
impairment, net
EBITDA*
Net profit
118,606
144,913
130,208
3,933
(6,110)
(896)
(4,739)
(348)
-
-
397,660
(12,093)
(102,308)
(123,030)
(121,510)
(13,179)
9,675
(350,352)
227,024
268,839
97,538
108,609
256,457
107,728
17,460
(2,263)
(9,675)
760,105
-
311,612
Year ended
31 December 2015
Electricity
supply
Electricity
distribution
External revenues
4,374,524
1,103,356
Inter-segment revenue
113,939
1,509,144
Segment revenue
4,488,463
2,612,500
Segment profit (loss)
before tax
160,169
464,202
External
electricity
network
maintenance
Head-
quarter
Total for
reportable
segments
Con-
solidated
total
Consolida-
tion elimi-
nations and
adjust-
ments
24,915
14,590
39,505
12,006
-
-
-
5,502,795
-
5,502,795
1,637,673
(1,637,673)
-
7,140,468
(1,637,673)
5,502,795
297,394
933,771
(344,648)
589,123
Net finance (cost)/income
2,759
(10,381)
16
372,737
365,131
(344,648)
20,483
Depreciation, amortization
and impairment, net
Gain on control loss over
subsidiaries
(7,437)
(334,574)
(6,695)
(4,475)
(353,181)
-
-
38,501
-
38,501
EBITDA*
164,847
809,157
Segment net profit (loss)
135,870
377,114
18,685
16,430
(70,868)
297,394
921,821
826,808
-
-
-
(353,181)
38,501
921,821
(344,648)
482,160
Employee benefits
(82,899)
(535,443)
(27,984)
(16,637)
(662,963)
-
(662,963)
Employee benefits
(124,314)
(123,078)
(118,655)
(168,535)
5,200
(529,382)
Segment assets
1,179,588
5,137,881
193,747
2,244,312
8,755,528
(364,243)
8,391,285
Segment assets
1,687,859
1,543,364
1,493,920
484,109
(80,775)
5,128,477
Trade and other
receivables
Cash and cash
equivalents
Deposits, treasury
bills and government
bonds
Trade and other
payables, and short
term employee
benefits
136,248
134,422
138,631
216,118
(80,775)
544,644
127,658
16,691
56,454
13,302
7,939
-
-
-
-
-
214,105
7,939
133,472
154,223
148,129
100,395
(80,775)
455,444
Bank overdrafts
-
100,474
50,611
107,364
Financing for
network construction
related to concession
agreements and
bank borrowings
42,152
96,888
-
-
Capital expenditure
162,395
234,244
148,104
1,737
-
-
-
142,626
254,863
546,480
Trade and other
receivables
719,529
611,531
25,084
-
1,356,144
(481,558)
874,586
Cash and cash equivalents
337,912
268,262
4,253
283,065
893,492
-
87,486
-
1,900,395
1,987,881
-
-
893,492
1,987,881
787,518
477,295
260,019
9,692
1,534,524
(463,312)
1,071,212
-
-
65,963
281,462
-
-
-
-
-
-
65,963
281,462
555,171
-
-
-
65,963
281,462
555,171
Capital expenditure
19,187
535,984
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 bank borrowings
* 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. 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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
The breakdown of the Electricity distribution reportable segment is as follows:
(C)
RECONCILIATION OF INFORMATION ON REPORTABLE SEGMENTS TO IFRS MEASURES
Year ended
31 December 2015
Distribution
Muntenia
Nord
Distribution
Transilvania
Nord
Distribution
Transilvania
Sud
Electricity
network
maintenance
Eliminations
Total
Electricity
distribution
External revenues
338,764
381,813
Inter-segment
revenue
532,897
475,776
349,941
490,301
32,838
-
1,103,356
362,661
(352,491)
1,509,144
Segment revenue
871,661
857,589
840,242
395,499
(352,491)
2,612,500
Segment profit
(loss) before tax
Net finance (cost)/
income
Depreciation,
amortization and
impairment, net
EBITDA*
Net profit
168,886
160,089
158,407
(23,180)
(1,908)
(3,558)
(2,388)
(2,527)
(91,895)
(112,003)
(115,482)
(15,194)
262,689
275,650
276,277
(5,459)
134,646
136,621
132,189
(26,342)
Employee benefits
(131,147)
(122,030)
(117,700)
(164,566)
-
-
-
-
-
-
464,202
(10,381)
(334,574)
809,157
377,114
(535,443)
Segment assets
1,746,442
1,440,592
1,526,887
537,146
(113,186)
5,137,881
183,566
140,218
153,593
247,340
(113,186)
611,531
123,985
18,551
104,132
21,594
87,486
-
-
-
-
-
268,262
87,486
134,883
165,742
174,050
115,806
(113,186)
477,295
-
90,680
12,836
70,038
43,127
110,844
10,000
9,900
-
-
-
65,963
281,462
535,984
Capital expenditure
152,345
223,102
157,204
3,333
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
bank borrowings
* 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. 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.
31 December 2016
31 December 2015
Total assets
Total assets for reportable segments
Elimination of inter-segment assets
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
9
Revenue
Electricity distribution and supply
Construction revenue related to concession agreements (Note 22)
Repairs and maintenance and other services rendered
Re-connection fees
Sales of merchandise
Total
10
Income and expenses
(A) OTHER INCOME
Rent income
Late payment penalties from customers
Commissions for the collection of radio and TV taxes (Note 27)
Gain on loss of control over subsidiaries (Note 32)
Other
Total
8,733,467
(373,733)
38,419
8,398,153
1,238,096
(438,828)
(1,249)
798,019
8,755,528
(413,016)
48,773
8,391,285
1,356,144
(479,734)
(1,824)
874,586
1,351,950
1,534,524
(348,348)
(461,488)
(1,249)
1,002,353
(1,824)
1,071,212
2016
4,892,158
537,872
69,544
9,454
8,774
2015
4,915,539
502,641
61,082
9,083
14,450
5,517,802
5,502,795
2016
87,985
24,443
14,312
73,693
43,021
2015
83,586
54,900
13,956
38,501
20,218
243,454
211,161
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
(B) OTHER OPERATING EXPENSES
Rent
Meter readings
Printing and distribution of invoices
Cash collection services
IT services
Postage and telecommunication
Utilities
Security
Call centre
Penalties for late payment and other payments to the State
Other taxes and duties
Legal and consultancy fees
Cost of merchandise sold
Bank commissions
Other
Total
2016
67,332
34,855
33,041
30,964
32,258
18,984
27,115
9,921
7,747
63,140
48,262
3,819
4,791
2,271
57,459
441,959
2015
60,866
37,172
31,407
25,951
44,181
18,280
28,541
8,767
7,512
3,177
91,774
8,093
10,830
3,309
75,459
455,319
In 2015, following an adverse court decision, the Group made a provision of RON 31,252 thousand representing penalties
disputed by Electrica SA with Agentia Nationala de Administrare Fiscala („ANAF”). Also, during 2016 the Group made
additional provisions of RON 23,648 thousand, following the solution of the court to reject the appeal from execution.
In December 2016, the Group made payments of RON 41,211 thousand as a result of the enforcement received in
connection with these litigations and reversed the provisions (refer to Note 28) and the tax assets previously recorded
in relation with these matters. All these amounts (RON 58,126 thousand) are included in the line “Penalties for late
payment and other payments to the State” in the table above.
Weighted-average number of ordinary shares (in number of shares)
2016
2015
Issued ordinary shares at 1 January (Note 23)
339,049,336
339,049,336
Weighted-average number of ordinary shares at 31 December
339,049,336
339,049,336
For the calculation of basic and diluted earnings per share, treasury share (6,890,593 shares) were not treated as
outstanding ordinary shares and were deducted from the number of issued ordinary shares
Earnings per share
Basic and diluted earnings per share (RON)
2016
1.05
2015
1.07
13 Short-term employee benefits
Personnel payables
Current portion of defined benefit liability and other long-term
employee benefits
Social security charges
Tax on salaries
Termination benefits payable
Total
31 December 2016
31 December 2015
36,743
10,260
27,859
9,059
51
83,972
32,465
12,197
52,278
15,187
22,498
134,625
For details of the related employee benefit expenses, see Note 15.
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.
As a result of these litigations and enforcements the tax record of Electrica SA is in the process of settlement with ANAF.
The management of the Group estimates that there will be no additional significant amounts.
As at 31 December 2015 the termination benefit of RON 22,498 thousand referred to compensation indemnities for the
employees, based on the voluntary redundancies during 2015.
11 Net finance income
Interest income
Other finance income
Total finance income
Interest expense
Interest cost for employee benefits (Note 14)
Foreign exchange losses
Other finance costs
Total finance costs
Net finance income
12 Earnings per share
2016
17,935
2,102
20,037
(4,439)
(10,728)
(1,689)
-
(16,856)
3,181
2015
34,513
3,338
37,851
(8,166)
(8,050)
(857)
(295)
(17,368)
20,483
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
2016
356,566
356,566
2015
362,675
362,675
In January 2016 the Group ceased the consolidation of Servicii Energetice Moldova (refer to Note 32). As a result, short-
term employee benefits of RON 52,902 thousand were deconsolidated.
14 Post-employment 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 retirement.
In 2016 and 2015, 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 13
31 December 2016
31 December 2015
124,445
78,780
203,225
10,260
192,965
126,322
79,790
206,112
12,197
193,915
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
Movement in the defined benefit liability and other long-term employee benefits
(i)
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
Other long-term employee benefits
Balance at 1 January
Included in profit or loss
Current service cost
Actuarial gain
Interest cost
Benefits paid
Balance at 31 December
2016
126,322
2,383
8,003
2015
141,988
2,697
5,636
(4,792)
(16,707)
(7,471)
124,445
2016
79,790
2,331
(3,432)
2,725
(2,634)
78,780
(7,292)
126,322
2015
91,184
2,067
(12,037)
2,414
(3,838)
79,790
Actuarial assumptions
(ii)
The following were the main actuarial assumptions at each reporting date:
(a) Macroeconomic assumptions:
•
inflation. The actuaries used the Consumer Price Index (CPI) published by the Economist Intelligence Unit:
Year
2016
2017
2018
2019
2020+
Valuation date
31 December 2016
Valuation date
31 December 2015
-
2.3%
2.3%
2.2%
2%
1.8%
2.5%
2.3%
2.2%
2.2%
•
•
•
•
(b)
•
•
•
the discount rate used was the yield for Romanian government bonds maturing in 10 years at the reporting date of
3.63% for the year 2016 (2015: 4.75%);
the electricity price per KWh used is 0.4576 RON at 31 December 2016 (2015: 0.4847 RON/ KWh);
the mortality rate published by the National Institute of Statistics was adjusted to allow for an anticipated decrease
in mortality rates;
taxes and social charges are those in force as at the reporting date.
Group specific assumptions:
salaries increase mainly in line with the estimated inflation rates in the future periods;
employees’ turnover: turnover rates are based on statistical information regarding employees’ mobility during 2003-
2015. Considering historical retirement data, it is assumed that the personnel turnover rate decreases with the
employees’ age;
jubilee and retirement bonuses based on seniority according to the collective labour contract, as follows:
Jubilee bonus based on years of service
No of gross monthly base salaries
Seniority
20 years
30 years
35 years
40 years
45 years
31 December 2016
31 December 2015
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
No of gross monthly base salaries
Seniority
Between 8 and 10 years
Between 10 and 25 years
More than 25 years
31 December 2016
31 December 2015
1
2
3
1
2
3
The Group also offers 1,200 kWh of free electricity per year to retired employees based on years of seniority.
Termination benefits
Termination benefits for individual lay-off at the Group’s initiative
(a)
In accordance with the Collective labour contract concluded between the Group and the Unions, when individual labour contracts
are terminated at the Group’s initiative, the Group pays 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
Termination benefits for collective lay-offs at the Group’s initiative
(b)
For collective lay-offs, according to the Collective labour contract, the Group pays termination benefits to the employees depending
on their period of service, as follows:
Period of service
No of gross monthly base salaries
1 - 3 years
3 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
4
6
7
15
20
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.
Termination benefits for voluntary redundancies
(c)
In accordance with the Agreement dated 13 August 2015 signed between the Group and the Unions and the Addendums to
Collective Labour Contract, in case the individual labour contracts are terminated as voluntary redundancy from the employee, the
Group pays termination benefits depending on the period to reach the standard retirement age, the period of service in the Group
and the seniority. The number of gross monthly base salaries paid as termination benefits vary between 4 and 18.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
15 Employee benefit expenses
Average number of employees
Number of employees at 31 December
Wages and salaries*
Social security contributions
Meal tickets
Termination benefits
Total employees benefits for the year
Capitalised employee benefit expenses
Total employees benefits in the statement of profit or loss
2016
10,000
9,685
481,867
118,865
19,433
39,418
659,583
(5,200)
654,383
2015
11,029
10,539
498,286
115,711
20,878
28,088
662,963
-
662,963
*Wages and salaries includes also current service cost, defined benefits and other long-term employee benefits
The overall decrease of wages and salaries is due mainly to:
•
•
deconsolidation in January 2016 of Servicii Energetice Moldova;
decrease in the number of employees.
Termination benefits for the year 2016 refer to compensations for voluntary redundancies in each of the companies. Out
of the total amount for 2016, RON 24,762 thousand are related to the implementation of the restructuring programme
of Electrica Serv approved in December 2015 (also refer to note 28).
Management remuneration is disclosed in Note 31 b).
16
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 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.
(i)
Amounts recognised in profit or loss
Current tax expense
Deferred tax expense
Adjustments for prior years’ current tax
Total income tax expense
(ii)
Amounts recognised in other comprehensive income
2016
85,473
26,117
8,546
2015
95,726
3,998
7,239
120,136
106,963
Before tax
2016
Tax
(expense)
benefit
Net of tax
Before tax
2015
Tax
(expense)
benefit
Net of tax
Remeasurement of defined benefit
liability
4,792
(768)
4,024
16,707
(2,674)
14,033
Total
4,792
(768)
4,024
16,707
(2,674)
14,033
(iii)
Reconciliation 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
Adjustment for prior years
Current-year tax losses for which no deferred tax asset is
recognised
Deferred tax asset derecognized
Change in recognised temporary differences
Income tax
(iv) Movement in deferred tax balances
16%
1%
-1%
-1%
-2%
1%
1%
1%
3%
20%
Net
balance
at 1
January
2016
Recognised
in profit or
loss
Recognised
in other
comprehen-
sive income
2016
Property, plant and equipment
60,438
Intangible assets related to
concession agreements
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)
154,608
(14,916)
(48,360)
(14,001)
(7,113)
130,656
(2,004)
4,538
1,347
4,236
11,457
6,543
26,117
Net
balance
at 1
January
2015
Recognised
in profit or
loss
Recognised
in other
comprehen-
sive income
2015
Property, plant and equipment
61,991
Intangible assets related to
concession agreements
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)
155,881
(18,107)
(55,906)
(18,765)
(966)
124,128
(1,409)
(1,273)
517
7,546
4,764
(6,147)
3,998
-
-
768
-
-
-
-
-
2,674
-
-
-
2016
589,033
2015
589,123
94,245
3,892
(7,397)
(3,285)
(9,226)
8,546
8,614
7,089
17,658
120,136
Effect of
loss of
control
over
subsidiary
(1,520)
-
-
-
-
-
16%
2%
-1%
-1%
-1%
1%
1%
0%
1%
18%
94,260
12,044
(6,475)
(4,481)
(8,337)
7,239
8,230
290
4,193
106,963
Balance at 31 December 2016
Net
Deferred
tax
assets
Deferred
tax
liabilities
56,914
159,146
-
-
56,914
159,146
(12,801)
(12,801)
(44,124)
(44,124)
(2,544)
(2,544)
(570)
(570)
-
-
-
-
20,371
(20,371)
(39,668)
195,689
Balance at 31 December 2015
Net
Deferred
tax
assets
Deferred
tax
liabilities
60,438
154,608
-
-
60,438
154,608
(14,916)
(14,916)
(48,360)
(48,360)
(14,001)
(14,001)
(7,113)
(7,113)
-
-
-
-
Effect of
loss of
control
over
subsidiary
(144)
-
-
-
-
-
2,674
(144)
130,656
(84,390)
215,046
33,793
(33,793)
(50,597)
181,253
768
(1,520)
156,021
(60,039)
216,060
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
(v) Unrecognised deferred tax assets
The movement in the bad debt allowance for trade receivables is as follows:
Deferred tax assets have not been recognised in respect of the certain tax losses generated by several Companies within
the Group, 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
2016
2015
349,362
345,411
Tax losses for which no deferred tax assets were recognised expire as follows:
Year when the tax loss was generated:
2016 (expiring in 2023)
2015 (expiring in 2022)
2014 (expiring in 2021)
2013 (expiring in 2020)
2012 (expiring in 2019)
2011 (expiring in 2018)
2010 (expiring in 2017)
Total
(vi) Income tax receivable
Tax losses
2016
53,838
51,439
84,206
62,179
70,175
10,896
16,629
2015
-
51,439
84,206
62,179
70,175
10,896
66,516
349,362
345,411
As at 31 December 2015, the income tax receivable include RON 16,916 thousand which were under litigation with
Autoritatea Nationala de Administrare Fiscala (“ANAF”). During 2016, the Group derecognized the income tax receivable,
due to the fact that the solution was not favourable (please see Note 10).
17 Trade receivables
Trade receivables, gross
Bad debt allowance
Total trade receivables, net
31 December
2016
31 December
2015
1,906,093
1,962,899
(1,128,104)
(1,125,117)
777,989
837,782
Trade receivables from related parties are presented in Note 31.
Trade receivables gross comprise:
31 December
2016
31 December
2015
Electricity distribution and supply
Late payment penalties receivable
Electricity receivables and late payment
penalties from clients in litigation,
insolvency and bankruptcy
Repairs, maintenance and other services
Other
755,151
113,781
926,148
26,936
84,077
786,609
142,681
945,482
24,249
63,878
Total trade receivables, gross
1,906,093
1,962,899
Bad debt allowance
2016
2015
Balance as at 1 January
1,125,117
1,147,655
Impairment recognized
Impairment reversed
Amounts written off
74,145
16,880
(28,918)
(12,565)
(42,240)
(22,320)
Effect of loss of control over subsidiaries
-
(4,533)
Balance as at 31 December
1,128,104
1,125,117
For the ageing of trade receivables refer to Note 30.
A significant part of the bad debt allowances refers to clients in litigation, insolvency or bankruptcy procedures, many
of them being older than four years. The Group will derecognize these receivables together with the related allowances
after the finalization of the bankruptcy process.
Amounts written off refer mainly to RON 35,483 thousand from Tractorul UTB Brasov, client of Electrica Furnizare, for
which the bankruptcy procedure was closed.
Impairment recognized during the year refers mainly to doubtful receivables from Transenergo Com S.A., a trader of
electricity whose financial situation deteriorated given the recent adverse changes in prices on the electricity spot market.
The Group has initiated foreclosure proceedings against this client due to non-payment of invoices starting September
2016. On 1 February 2017 Transenergo Com S.A. entered into the insolvency procedure. The gross outstanding amount
receivable from Transenergo Com S.A as at 31 December 2016 is RON 44,426 thousand, out of which Electrica SA
benefits from an insurance policy for RON 4,000 thousand. The management estimates that the recoverability of the
uninsured amount is reduced and therefore recorded an impairment loss of RON 40,426 thousand.
18 Deposits, treasury bills and government bonds
31 December 2016
31 December 2015
Treasury bills and government bonds denominated in RON
with original maturity of more than three months
1,757,746
1,756,339
Deposits with maturity of more than three months
117,308
231,542
Total deposits, treasury bills and government bonds
1,875,054
1,987,881
Treasury bills and government bonds with original maturity of more than three months have an average interest rate
(yield) of 0.63% (2015: 0.93%) at the following banks: Citibank Europe PLC Dublin, Raiffeisen Bank, BRD, Marfin Bank,
ING Bank.
Treasury bills and government bonds were classified as held to maturity investments.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
31 December 2016
31 December 2015
The Group has overdrafts from ING and BCR, as follows:
19 Other receivables
Good performance guarantees
VAT receivable
Interest receivable
Structural funds
Other receivables
Bad debt allowance
Total other receivables, net
7,127
2,301
43
72
39,152
(28,665)
20,030
7,454
5,095
443
1,509
58,165
(35,862)
36,804
2015
37,127
1,051
-
(966)
(1,350)
35,862
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
Impairment reversed
Effect of loss of control over subsidiaries
Balance as at 31 December
20 Cash and cash equivalents
2016
35,862
-
(2,584)
(4,613)
-
28,665
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
31 December 2016
31 December 2015
148,111
740,487
243
-
123,713
678,612
302
90,865
888,841
893,492
(142,626)
746,215
(65,963)
827,529
As at 31 December 2015 cash and cash equivalents include treasury bills and government bonds denominated in RON
of RON 90,865 thousands with original maturities of 3 months or less at the following banks Citibank Europe PLC Dublin,
Raiffeisen Bank, BRD-CSG, Marfin Bank, ING Bank. These bear an average interest rate (yield) of 0.56% p.a. (2014: 1.7%
p.a).
Bank
BCR
ING Bank N.V. and
BRD Groupe Societe
Generale
Total
Bank
ING Bank N.V. and
BRD Groupe Societe
Generale
Contract
date
28-Jan-16
8-Dec-16
Contract
date
8-Dec-14
Facility type
Maturity
overdraft facility for
financing current
activity
until 31 March
2017
working capital
financing and
issuance of potential
commitments
1 year for
overdraft, 2 years
for potential
commitments
Overdraft
limit (th RON)
Balance at
31 December
2016
150,000
100,474
80,000
42,152
230,000
142,626
Facility type
Maturity
working capital
financing and
issuance of potential
commitments
until February
2016 for
overdraft, 2 years
for potential
commitments
Overdraft
limit (th RON)
Balance at
31 December
2015
70,000
12,836
OTP Bank Romania
7-Sep-15
working capital
financing
1 year
ING Bank N.V. and
BRD Groupe Societe
Generale
9-Dec-15
working capital
financing and
issuance of potential
commitments
1 year for
overdraft, 2 years
for potential
commitments
20,000
10,000
60,000
43,127
Total
150,000
65,963
The security for these overdrafts is presented in Note 34 d).
As at 31 December 2016, Electrica SA has guarantees in the form of collateral deposits at BRD - Groupe Societe Generale
on the withdrawals account made by Societatea de Distributie a Energiei Electrice Transilvania Sud and Societatea de
Distributie a Energiei Electrice Transilvania Nord. The amount of the collateral deposits is RON 134,492 thousands. Refer
also to Note 29.
The following information is relevant in the context of the consolidated statement of cash flows:
Non-cash activity includes:
•
•
set-off between trade receivables and trade payables of RON 101 million in 2016 (2015: RON 64 million);
effect of loss of control over subsidiaries under financial distress (see Note 32).
During 2016, the Group made payments related to property, plant and equipment acquired in the prior years, in amount
of RON 200 million.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
21 Property, plant and equipment
The movements in property, plant and equipment in 2016 and 2015 were as follows:
Land
and land
improve-
ments
314,544
18
-
(14,498)
(394)
299,670
2,283
-
(7,695)
(16,158)
Gross carrying amount
Balance at 1 January 2015
Additions
Transfer from construction in progress
Disposals
Effect of loss of control over
subsidiaries (Note 32)
Balance at 31 December 2015
Additions
Transfer from construction in progress
Disposals
Effect of loss of control over
subsidiaries (Note 32)
Buildings
Equipment
Total
Construc-
tion in
progress
Vehicles,
furniture
and office
equip-
ment
263,132
2,926
6,508
(5,701)
(5,170)
261,695
-
2,164
(16,038)
(22,436)
152,428
5,350
114,060
(1,074)
(1,445)
269,319
5,515
12,096
(867)
-
102,740
684
157,738
34,797
73
(120,641)
990,582
43,775
-
(22,371)
(11,085)
-
-
71,894
3,196
1,000,901
11,221
-
(14,260)
(1,078)
(5,653)
-
-
-
(25,948)
(44,247)
(1,098)
(4,076)
98,323
227
Balance at 31 December 2016
277,830
225,385
286,063
91,189
60,830
941,927
Accumulated depreciation and
impairment losses
Balance at 1 January 2015
Depreciation
Accumulated depreciation of
disposals
Impairment loss
Reversal of impairment loss
Effect of loss of control over
subsidiaries (Note 32)
Balance at 31 December 2015
Depreciation
Accumulated depreciation of
disposals
Impairment loss
Effect of loss of control over
subsidiaries (Note 32)
-
-
-
2,500
-
-
2,500
-
-
-
24,944
13,845
(1,424)
-
-
(2,857)
34,508
8,010
(4,189)
695
(2,500)
(8,966)
53,616
23,558
(674)
-
(132)
(717)
75,651
27,957
(867)
-
-
77,949
6,681
(826)
-
-
(4,076)
79,728
4,919
(1,078)
-
(5,653)
29,250
-
-
-
-
-
29,250
-
-
-
-
185,759
44,084
(2,924)
2,500
(132)
(7,650)
221,637
40,886
(6,134)
695
(17,119)
Balance at 31 December 2016
(2,500)
30,058
102,741
77,916
29,250
239,965
Net carrying amounts
At 1 January 2015
At 31 December 2015
At 31 December 2016
314,544
297,170
277,830
238,188
227,187
195,327
98,812
193,668
183,322
24,791
18,595
13,903
128,488
42,644
31,580
804,823
779,264
701,962
Equipment and construction in progress include mainly costs for the implementation of the AMR system (Automatic
Meter Reading).
The restrictions on property, plant and equipment are presented in Note 34 d).
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 2016, as well as the significant unobservable inputs used.
Category
Valuation technique
Significant unobservable
inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
Land
Market approach
f Adjustment for liquidity,
location, size
The estimated fair value would
increase (decrease) if:
f Adjustment for liquidity,
location, size was lower
(higher)
f Occupancy rates (70-
90%)
f Discount rates (10% on
average)
f Costs not paid by
The estimated fair value would
increase (decrease) if:
f Occupancy rates were
higher (lower)
tenants (average 10%)
f Discount rates were lower
f Annual rent per sqm
f Rental growth
f Adjustment for liquidity,
(higher)
f Costs not paid were lower
(higher)
location, size
f Annual rent per sqm was
higher (lower)
f Rental growth was higher
(lower)
f Adjustment for liquidity,
location, size was lower
(higher)
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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
22 Intangible assets
23 Capital and reserves
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:
Gross book value
Balance at 1 January 2015
Additions
Transfers from intangibles in progress
Disposals
Effect of loss on control on subsidiaries
Balance at 31 December 2015
Additions
Disposals
Intangible assets
related to concession
agreements
Software and
licenses
Intangible
assets in
progress
Total
5,484,026
502,641
-
-
-
5,986,667
537,872
-
163,114
6,267
1,701
(1,305)
(373)
169,404
7,530
(359)
817
2,488
(1,701)
-
-
5,647,957
511,396
-
(1,305)
(373)
1,604
6,157,675
-
-
545,402
(359)
Balance at 31 December 2016
6,524,539
176,575
1,604
6,702,718
Accumulated amortisation and impairment
losses
Balance at 1 January 2015
Amortisation
Accumulated amortisation of disposals
Effect of loss on control on subsidiaries
Balance at 31 December 2015
Amortisation
Accumulated amortisation of disposals
Balance at 31 December 2016
At 1 January 2015
At 31 December 2015
At 31 December 2016
1,982,842
303,614
-
-
2,286,456
327,695
-
2,614,151
3,501,184
3,700,211
3,910,388
155,119
3,115
(1,148)
(373)
156,713
4,515
(267)
160,961
7,995
12,691
15,614
-
-
-
-
-
-
-
-
817
1,604
1,604
2,137,961
306,729
(1,148)
(373)
2,443,169
332,210
(267)
2,775,112
3,509,996
3,714,506
3,927,606
The distribution subsidiaries (as operators) concluded concession contracts with the Ministry of Economy concerning
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.
The Group applies IFRIC 12 for the accounting of the transactions under these concession contracts. (See further details
in Notes 4 (a), 6(b) and 6(k)).
For the year ended 31 December 2016, the Group has recognized construction revenue related to the concession
agreements of RON 537,872 thousand (2015: RON 502,641 thousand) and construction costs of RON 528,372 thousand
(2015: RON 490,023 thousand).
Intangible assets in progress as at 31 December 2016 and 2015 include the cost of implementation for IT applications
that imply a certain implementation period.
(A) SHARE CAPITAL AND SHARE PREMIUM
The issued share capital in nominal terms consists of 345,939,929 ordinary shares at 31 December 2016 (2015:
345,939,929) with a nominal value of RON 10 per share. 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, except for the 6,890,593 treasury
shares purchased by the Group in July 2014, for the prices stabilization. All shares rank equally with regard to the
Company’s residual assets, except for treasury shares.
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.
The share premium resulted at IPO was RON 103,049 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 (totalling 6,890,593 shares). The total amount paid for acquiring the shares and Global Depositary
Receipts was RON 75,372 thousand.
(C) REVALUATION RESERVE
The reconciliation between opening and closing revaluation reserve is as follows:
Balance at 1 January
Release of revaluation reserve to retained earnings corresponding to depreciation and
disposals of property, plant and equipment
Loss of control over subsidiaries
Balance as at 31 December
2016
140,358
(29,251)
2015
156,018
(14,217)
(6,426)
(1,443)
104,681
140,358
(D) LEGAL RESERVES
Legal reserves are 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;
Balance at 1 January 2015
Set-up of legal reserves
Balance at 31 December 2015
Set-up of legal reserves
Balance at 31 December 2016
Legal reserves
236,597
37,302
273,899
28,337
302,236
(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 declared by the Company in 2016 and 2015 (from the statutory profits of preceding years) were as
follows:
To the owners of the Company
To non-controlling interests
Total
Distribution of dividends
2016
291,582
105,724
397,306
2015
244,692
97,208
341,900
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
The dividends per share were: 2016: RON 0.8600, 2015: RON 0.7217, per share.
31 December 2015
For the calculation of dividends shares to be paid to the owners of the Company, treasury share (6,890,593 shares) were
not treated as outstanding ordinary shares and were deducted from the number of issued ordinary shares.
Out of the dividends declared by the Company of RON 291,582 thousands, the dividends paid were RON 291,198
thousands, the remaining differences represents dividends unclaimed by the shareholders from the Depository.
24 Non-controlling interests
The following tables summarises the information related to each of the Group’s subsidiaries that has material non-
controlling interest (“NCI”), before any intra-group elimination.
31 December 2016
Electrica
Distributie
Muntenia
Nord
Electrica
Distributie
Transilvania
Nord
Electrica
Distributie
Transilvania
Sud
Electrica
Furnizare
Intra-
group
elimina-
tions
Total
NCI percentage
22%
22%
22%
22%
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
1,353,880
1,333,005
1,224,097
131,081
278,756
(139,224)
(174,077)
154,189
(175,814)
(269,906)
195,248
1,066,256
(123,059)
(71,462)
(267,963)
(719,819)
1,319,335
1,041,474
1,028,323
406,056
Carrying amount of NCI
290,254
229,124
226,231
89,332
1,658
836,599
Revenues
Net profit
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
Other comprehensive income
allocated to NCI
Cash flows from operating
activities
Cash flows used in investing
activities
Cash flows used in financing
activities**
Net increase/(decrease) in cash
and cash equivalents*
Dividends paid to NCI during
the year
800,867
107,122
1,445
108,567
23,587
318
857,479
115,760
1,287
117,047
25,476
283
789,830
114,885
2,597
117,482
25,295
571
4,140,730
172,520
(626)
171,894
37,973
(137)
112,331
1,035
213,603
(55,516)
218,964
(213,423)
237,674
257,786
(149,812)
(19,667)
(154,414)
(95,039)
(134,565)
(111,480)
3,673
(89,498)
(46,703)
126,639
26,896
27,960
26,345
24,523
105,724
*Amounts presented represent cash flows of the subsidiaries
**Cash flows from financing activities include dividends paid to NCI
Electrica
Distributie
Muntenia
Nord
Electrica
Distributie
Transilvania
Nord
Electrica
Distributie
Transilvania
Sud
Electrica
Furnizare
Intra-
group
elimina-
tions
Total
NCI percentage
22%
22%
22%
22%
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
1,288,375
1,217,033
1,195,298
133,944
399,710
(164,332)
(190,731)
161,166
(80,112)
262,649
1,005,095
(136,294)
(67,293)
(246,573)
(291,064)
(726,104)
1,333,022
1,051,514
1,030,589
345,642
Carrying amount of NCI
293,265
231,332
226,730
76,041
1,589
828,957
Revenues
Net profit
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
Other comprehensive income
allocated to NCI
Cash flows from operating activities
Cash flows used in investing
activities
Cash flows used in financing
activities**
Net increase/(decrease) in cash and
cash equivalents*
Dividends paid to NCI during the
year
871,661
140,085
2,575
142,660
30,819
567
857,589
143,033
3,171
146,204
31,467
698
840,242
137,335
2,273
4,159,740
122,665
2,953
139,608
125,618
30,214
26,985
500
649
119,485
2,414
179,668
(14,980)
242,102
(160,123)
270,443
(78,064)
124,725
(16,275)
(135,242)
(54,673)
(137,947)
(174,024)
29,446
27,306
54,432
(65,574)
24,653
16,702
17,568
38,285
97,208
*Amounts presented represent cash flows of the subsidiaries
**Cash flows from financing activities include dividends paid to NCI
25 Financing for network construction related to concession agreements
Financing for network construction related to concession agreements is 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 1.93% in 2016 (2015: 2.64%).
The amounts are due as follows:
Less than 1 year
Between 1 and 5 years
Total
31 December 2016
85,513
41,617
127,130
31 December 2015
99,576
122,065
221,641
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
26 Trade payables
Electricity suppliers
Capital expenditure suppliers
Other suppliers
Total
31 December 2016
31 December 2015
308,056
214,749
200,025
722,830
302,267
181,945
172,198
656,410
Electricity suppliers are mainly state-owned power generators, as detailed in Note 31, but also other participants on the
electricity market.
Other suppliers include suppliers of services, materials, consumables, etc.
27 Other payables
VAT payable
Liabilities to the State
Payables related to radio and TV tax
Liabilities related to green certificates
acquisition obligation
Other liabilities
Total
31 December 2016
31 December 2015
Current
Non-current
85,346
29,837
9,981
13,980
21,746
160,890
-
-
-
-
44,921
44,921
Current
119,262
91,269
13,428
-
25,347
249,306
Non-current
-
-
-
-
43,068
43,068
The decrease in liabilities to the State is mainly due to the deconsolidation of Servicii Energetice Moldova.
In accordance with Law no. 533/2003, that amended 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 that should be paid according to the contract in the month following the reporting month.
Other liabilities include mainly guarantees and sundry creditors. Other non-current liabilities refer to guarantees from
customers related to electricity supply.
28 Provisions
Balance at 1 January 2016
Provisions made
Provisions used
Provisions reversed
Balance at 31 December 2016
Fiscal risks
Restructuring
80,106
27,697
(44,706)
(27,564)
35,533
28,989
8,488
(24,762)
-
12,715
Other
18,518
7,657
(417)
(11,599)
14,159
Total
127,613
43,842
(69,885)
(39,163)
62,407
As at 31 December 2016, provisions refer mainly to:
•
•
•
RON 35,533 thousand representing potential tax charges of the Group (including interest and penalties);
RON 12,715 thousand representing restructuring provision in respect of Electrica Serv;
RON 3,043 thousand representing claims with a customer who claims reimbursement of connection fees.
The provisions made in 2016 refer mainly to:
•
provision for restructuring of RON 8,488 thousand as a result of an additional restructuring plan approved by the
Board of Directors of Electrica Serv in December 2016, representing the lay-off of an additional number of 234
employees.
•
•
provision of RON 27,697 thousand representing additional potential taxes and penalties out of which RON 23,648
thousand refer to Electrica SA (see Note 10 for further details);
Provision of RON 3,043 thousand for a litigation with a customer who claims reimbursement of connection fees.
The provisions used in 2016 refer mainly to:
•
payment of compensatory indemnities of RON 24,762 thousand in respect of the restructuring plan of Electrica Serv
approved in December 2015, for the lay-off of 500 employees of Electrica Serv;
payment of RON 3,496 thousand by Distributie Muntenia Nord to tax authorities.
Payment of RON 41,210 thousand representing amounts disputed with ANAF in court, paid by Electrica SA in
December 2016 based on an enforcement title received from ANAF (see Note 10 for further details).
Provisions reversed in 2016 refer mainly to:
•
reassessment of potential tax charges of Distributie Muntenia Nord by RON 6,940 thousand following an ANAF
decision;
reassessment of potential tax charges of Electrica SA by RON 13,691 thousand following the enforcement title
received from ANAF mentioned above;
reassessment of potential tax charges of Distributie Transilvania Sud by RON 6,933 thousand;
the reversal of the provision representing claims of individuals in respect of land of the Group of RON 2,388 as a
result of a favourable court decision.
•
•
•
•
•
As at 31 December 2015, provisions refer mainly to:
•
•
•
RON 80,106 thousand representing potential tax charges of the Group (including interest and penalties);
RON 28,989 thousand representing restructuring provision in respect of Electrica Serv;
RON 2,388 thousand representing claims of individuals in respect of land of the Group.
29 Long-term bank borrowings
Long-term bank borrowings
Total
127,733
127,733
-
-
31 December 2016
31 December 2015
On 17 October 2016 the Company’s distribution subsidiaries (Societatea de Distribuție a Energiei Electrice Transilvania
Sud, Societatea de Distribuție a Energiei Electrice Muntenia Nord and Societatea de Distribuție a Energiei Electrice
Transilvania Nord) concluded loan contracts with BRD – Groupe Societe Generale, in which Electrica SA has the quality
of guarantor.
The Group has long-term bank borrowings from BRD as follows:
Beneficiary
Facility type
Maturity
Societatea de Distributie a
Energiei Electrice Muntenia
Nord
Societatea de Distributie
a Energiei Electrice
Transilvania Nord
Societatea de Distributie
a Energiei Electrice
Transilvania Sud
Total
term loan, non-revolving facility,
financing the treasury deficit
generated by the investment
activity
term loan, non-revolving facility,
financing the treasury deficit
generated by the investment
activity
term loan, non-revolving facility,
financing the treasury deficit
generated by the investment
activity
Loan amount (th
RON)
Balance at 31
December 2016
80,000
-
until 16 October
2021
until 16 October
2021
114,000
95,502
until 16 October
2021
126,000
32,231
320,000
127,733
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
30 Financial instruments - fair values and risk management
(B) MEASUREMENT OF FAIR VALUES
(A) ACCOUNTING CLASSIFICATIONS AND FAIR VALUES
The following table shows the valuation techniques used in measuring Level 2 fair values, as well as the significant
unobservable inputs used.
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.
Financial instruments not measured at fair value
Note
Loans
and re-
ceivables
Carrying amount
Held to
maturity
financial
assets
Other
financial
liabilities
Fair value justa
Total
Level
Total
1
2
3
31 December 2016
Financial assets not measured at
fair value
Trade receivables
17
777,989
Deposits, treasury bills and
government bonds
1,875,054
Cash and cash equivalents
20
888,841
Restricted cash
Total
134,492
1,801,322
1,875,054
777,989
1,875,054
888,841
134,492
3,676,376
Financial liabilities not measured at
fair value
Bank overdrafts
Financing for network construction
related to concession agreements
Long-term bank borrowings
Trade payables
Total
20
25
26
31 December 2015
Financial assets not measured at
fair value
142,626
142,626
127,130
127,130
129,383
129,383
127,733
127,733
722,830
722,830
1,120,319
1,120,319
Trade receivables
17
837,782
Deposits, treasury bills and
government bonds
1,987,881
Cash and cash equivalents
20
893,492
Total
1,731,274
1,987,881
837,782
1,987,881
893,492
3,719,155
Financial liabilities not measured at
fair value
Bank overdrafts
Financing for network construction
related to concession agreements
Short-term bank borrowings
Trade payables
Total
20
25
26
65,963
65,963
221,641
221,641
224,124
224,124
59,821
59,821
656,410
656,410
1,003,835
1,003,835
Type
Valuation technique
Significant unobservable inputs
Other financial liabilities
Discounted cash flows (DCF) method
Not applicable
The discount rates used are the average 12 M
ROBID-ROBOR interest rates of 0.98% as
at 31 December 2016 (2015: 1.43%).
(C) FINANCIAL RISK MANAGEMENT
The Group has exposure to the following risks arising from financial instruments:
credit risk
•
•
liquidity risk
• 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,
restricted cash, 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 was concentrated in the past around state-controlled companies and
in the recent years refers to clients that are facing financial difficulties in their industries due to specific changes in
circumstances in their industry sector. The Group is in process of setting up a policy regarding insurance of the trade
receivables. Also the electricity supply contracts include termination clauses in certain circumstances.
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:
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 2016
31 December 2015
Gross value
603,467
209,205
16,616
14,087
30,872
21,618
1,010,228
1,906,093
Bad debt
allowance
-
(46,494)
(11,673)
(11,514)
(26,577)
(21,618)
(1,010,228)
(1,128,104)
Gross value
Bad debt allowance
654,679
189,243
12,525
9,864
33,561
19,388
1,043,639
1,962,899
-
(15,916)
(3,605)
(9,008)
(33,561)
(19,388)
(1,043,639)
(1,125,117)
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
Net trade receivables
As at 31 December 2015 the Group has loan contracts from OTP and BCR as follows:
31 December 2016
31 December 2015
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
603,467
162,711
4,943
2,573
4,295
777,989
654,679
173,327
8,920
856
-
837,782
Details of the main movements in the allowances for doubtful debts are disclosed in Note 17.
(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 20).
Also starting 2016, certain subsidiaries contracted also long-term loans in order to improve their liquidity position.
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 2016
Bank overdrafts
Financing for network construction related to
concession agreements
Long term bank borrowings
Trade payables
Total
31 December 2015
Bank overdrafts
Financing for network construction related to
concession agreements
Trade payables
Total
Carrying
amount
Contractual cash flows
Total
less than
1 year
1-2
years
2-5
years
More than
5 years
142,626
127,130
142,626
130,452
142,626
-
-
86,636
39,720
4,096
127,733
722,830
140,508
722,830
2,555
2,555
135,398
722,830
-
-
1,120,319
1,136,416
954,647
42,275
139,494
65,963
65,963
65,963
-
-
221,641
228,332
100,248
97,002
31,082
656,410
656,410
656,410
1,003,835
1,010,526
882,442
97,002
31,082
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term bank borrowings
59,821
59,821
59,821
Bank
Contract
date
Facility type
Maturity
Credit limit
(thousand
RON)
Balance at 31
December 2015
OTP Bank Romania
13-Mar-15
financing of liabilities
to Fiscal Authorities
until November
2017
18,000
9,900
BCR
7-Sep-15
4 months
working capital
financing and
refinancing of other
loans
Total
50,000
49,921
68,000
59,821
In March 2015 Electrica Serv contracted a loan from OTP Bank Romania of RON 18,000 thousand in order to finance
the subsidiary’s payables to tax authorities. The loan bears an interest rate of ROBOR 3M plus a margin of 3.25% p.a.
The loan is payable in equal monthly tranches until 11 November 2016. The loan is secured by pledges over part of the
subsidiary’s assets (bank accounts, trade receivables from the contracts concluded with related parties and buildings).
In September 2015 Electrica Distributie Transilvania Nord contracted a revolving credit facility from Banca Comerciala
Romana in order to finance the operational activity and to refinance credit facilities contracted by the subsidiary from
other banks. The credit has a maximum limit of RON 50,000 thousand.
These loans were paid in full during 2016.
(iii) Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates and 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 and
USD). 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 is 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
31 December 2016
31 December 2016
31 December 2015
EUR
2,533
-
(127,130)
USD
4,669
-
-
EUR
10,241
139,581
(221,641)
Net statement of financial position exposure
(124,597)
4,669
(71,819)
The following significant exchange rates have been applied during the year:
RON
EUR 1
USD 1
Average rate
Year-end spot rate
2016
4.4900
4.0569
2015
4.4450
4.0057
2016
4.5411
4.3033
2015
4.4821
4.1477
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (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 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.
Effect
31 December 2016
EUR (5% movement)
31 December 2015
EUR (5% movement)
Profit before tax
Strengthening
Weakening
(6,230)
6,230
(3,591)
3,591
A reasonably possible strengthening (weakening) of the USD against RON at 31 December would have affected the
measurement of financial instruments denominated in a foreign currency and profit before 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.
Effect
31 December 2016
USD (5% movement)
31 December 2015
USD (5% movement)
Profit before tax
Strengthening
233
Weakening
(233)
-
-
Interest rate risk
Until 2016 the Group’s policy was to mainly use supplier credit for financing its capital investments. Starting 2016 the
Group started to use medium term bank loans (please see Note 20).
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
31 December 2016
31 December 2015
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
740,487
-
1,875,054
678,612
90,865
1,987,881
Financial liabilities
Financing for network construction related to concession
agreements
(127,130)
(221,641)
Long-term bank borrowings
Variable-rate instruments
Financial liabilities
Short term bank borrowings
Overdrafts
(127,733)
2,360,678
-
(142,626)
(142,626)
-
2,535,717
(59,821)
(65,963)
(125,784)
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 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
(713)
(629)
713
629
31 December 2016
Variable-rate instruments
31 December 2015
Variable-rate instruments
31 Related parties
(A) MAIN SHAREHOLDERS
As at 31 December 2016, the main shareholder of Electrica SA is the Romanian State, represented by the Ministry of
Energy (48.78%), after the ownership dilution following an initial public offer. The second largest shareholder is the
European Bank for Reconstruction and Development with 8.66%.
(B) MANAGEMENT AND ADMINISTRATORS’ COMPENSATION
Executive Management compensation
2016
4,573
2015
5,540
Executive management compensation refers to the managers with mandate contract, which are the General Managers
of each subsidiary and the managers of Electrica SA.
The changes in 2016 refers to the following: at the beginning of 2016, Electrica SA management included five managers
remunerated based on mandate contract. A mandate contract ceased in March 2016 and another one in October, while
in October 2016 one new manager was hired based on the same type of contract. As at 31 December 2016 Electrica
SA has four managers with mandate contracts.
Compensations granted to the members of the Board of Directors were as follows:
Members of Board of Directors
2016
3,322
2015
5,362
Until 14 December 2015 the Board of Directors of Electrica SA comprised 5 members and afterwards 7 members. The
amount of fixed monthly remuneration was also increased and an attendance fee was established for the Board of
Directors and its committees’ meetings. The annual number of meetings to be remunerated is limited to 12 for the
Board of Directors and to 6 for each committee, according to the remuneration policy approved by the General Meeting
of Shareholders on 31 March 2016.
In 2016 the composition of the Board of Directors of the subsidiaries was modified by the increase in the number of
administrators from Electrica SA, who are not remunerated for this activity; therefore there was a significant decrease in
the administrators’ remuneration at subsidiaries level. Also in December 2016 the number of the members of the Board
of Directors of distribution subsidiaries and of Electrica Serv was changed from 5 to 3.
No loans were granted to directors or administrators in 2016 and 2015.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
(C) TRANSACTIONS 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 influence in 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:
Furnizor
Purchases (without VAT)
Balance (including VAT)
2016
2015
31 December 2016
31 December 2015
Nuclearelectrica
Transelectrica
Complexul Energetic Oltenia
hidroelectrica
OPCOM
Electrocentrale Bucuresti
SNGN ROMGAZ
Societatea Comerciala "Cupru Min"
CN Posta Romana SA
E-Distributie Muntenia
E-Distributie Banat
E-Distributie Dobrogea
Others
Total
305,597
614,439
57,166
550,038
302,239
24,998
56,331
1,887
348
25,460
9,286
7,473
12,453
304,412
30,893
651,045
141,474
242,181
8,395
482,448
52,297
326,655
3,889
32,487
-
-
-
-
1,887
5,654
6
32,190
4,230
9,517
1,731
11,664
19,558
2,041
2,544
249,387
1,967,715
2,117,811
19,682
119,065
39,622
34,889
3,604
-
-
-
437
6,908
2,106
1,469
5,802
233,584
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:
Sales (without
VAT)
Balance, gross
(including VAT)
Allowance
(including VAT)
Balance, net
Client
CFR Telecomunicatii
Electrificare CFR
SNGN ROMGAZ
OPCOM
Societatea Comerciala "Cupru
Min"
Transelectrica
CN Romarm
CN Remin SA
C.N.C.A.F. MINVEST S.A.
Oltchim
Baita SA
E-Distributie Muntenia
Others
Total
2016
44,861
10,839
14,151
28,285
26,627
14,734
9,635
343
-
-
1,541
18,034
32,723
201,773
31 December 2016
(53)
-
-
-
-
-
-
(71,148)
(78,735)
(715,259)
(4,334)
-
(6,713)
(876,242)
4,474
1,203
1,256
2,590
-
1,361
62
71,180
78,735
715,259
5,002
9,101
10,103
900,326
4,421
1,203
1,256
2,590
-
1,361
62
32
-
-
668
9,101
3,390
24,084
Sales (without
VAT)
Balance, gross
(including VAT)
Allowance
(including VAT)
Balance, net
Client
CFR Telecomunicatii
Electrificare CFR
SNGN ROMGAZ
OPCOM
Societatea Comerciala "Cupru
Min"- S.A. Abrud
Transelectrica
CN Romarm
CN Remin SA
C.N.C.A.F. MINVEST S.A.
Oltchim
Baita SA
E-Distributie Muntenia
Others
Total
2015
52,332
12,660
20,145
28,316
31,295
5,536
8,592
314
-
-
1,845
15,576
56,784
233.395
32 Subsidiaries in financial distress
31 December 2015
-
-
-
-
(10,122)
-
-
(71,173)
(78,735)
(715,277)
(4,770)
-
(6,790)
(886.867)
7,040
1,139
1,497
3,537
10,122
1,403
33
71,173
78,735
715,277
5,349
4,933
15,253
915.491
7,040
1,139
1,497
3,537
-
1,403
33
-
-
-
579
4,933
8,463
28.624
The Company’s subsidiaries Servicii Energetice Moldova and Servicii Energetice Dobrogea entered in bankruptcy in
January 2016 and in January 2015, respectively, and consequently the Company discontinued their consolidation as of
these dates as it no longer has control over these entities.
The individual assets and liabilities of Servicii Energetice Moldova and Servicii Energetice Dobrogea at the date the
Company ceased their consolidation (31 January 2016 and 31 January 2015, respectively) were as follows:
Property, plant and equipment
Trade receivables
Cash and cash equivalents
Total assets
Trade payables
Other payables
Employee benefits
Deferred tax liabilities
Total liabilities
Gain on loss of control (Note 10)
Carrying amount
Carrying amount
Servicii Energetice
Moldova as of 31
January 2016
Servicii Energetice
Dobrogea as of 31
January 2015
21,709
2,027
1,609
25,345
2,685
41,931
52,902
1,520
99,038
73,693
3,435
1,367
2,863
7,665
1,802
22,006
22,214
144
46,166
38,501
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 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 measured the carrying amounts
of the assets and liabilities of these subsidiaries on a liquidation basis starting the commencement of their insolvency
procedures.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in THOUSAND RON, if not otherwise stated)
As at 31 December 2016 and at 31 December 2015, the carrying amount of the assets and liabilities of these companies
included in the consolidated financial information are as follows:
B) FISCAL ENVIRONMENT
Servicii Energetice
Muntenia
Servicii Energetice
Oltenia
93,894
8,251
10,154
112,299
(21,615)
(183)
(434)
(24,412)
23,588
8,406
2,988
34,982
(4,232)
(8,859)
(5,916)
(12,572)
Total
117,482
16,657
13,142
147,281
(25,847)
(9,042)
(6,350)
(36,984)
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.
As disclosed in Notes 10 (b) and 28, the Group incurred significant expense related to previous years’ tax adjustments as a result
of controls and litigations with tax authorities. The management of the Group believes that adequate provisions were recorded
in the consolidated financial statements for all significant tax obligations; however a risk persists that the tax authorities might
have different positions.
34 Commitments
(46,644)
(31,579)
(78,223)
(A) CONTRACTUAL COMMITMENTS
31 December 2016
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
Total liabilities
31 December 2015
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
Total liabilities
Servicii Energetice
Moldova
Servicii Energetice
Muntenia
Servicii Energetice
Oltenia
21,709
2,027
1,609
25,345
(2,854)
(41,931)
(34,610)
(19,412)
106,389
7,878
2,252
116,519
(26,144)
(333)
(447)
(24,752)
32,312
6,780
392
39,484
(3,059)
(8,715)
(7,798)
(14,329)
Total
160,410
16,685
4,253
181,348
(32,057)
(50,979)
(42,855)
(58,493)
(98,807)
(51,676)
(33,901)
(184,384)
The Group has not classified the assets and liabilities of these subsidiaries as held for sale as at 31 December 2016, as 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 2016.
The reorganization programs for Servicii Energetice Muntenia and Servicii Energetice Oltenia, which are due to finalize in 2018
and in 2019 respectively, will result either in their liquidation or in the continuation of their activities.
33 Contingencies
A) LITIGATION AND CLAIMS
The Group is involved in many litigations and claims (ie. with Property Fund – holder of minority interests in the Company’s
subsidiaries, ANRE, ANAF, Court of Accounts, claims for damages, claims over land titles, labour related litigations etc.).
As summarised in Note 28, the Group set-up provisions for the litigations or claims for which the management assessed as
probable the outflow of resources embodying economic benefits due to low chances of favourable outcomes of those litigations
or disputes. The Group does not present information in the financial statements and did not set-up provisions for items for
which the management assessed as remote the possibility of outflow of economic benefits.
The Group discloses below information on the most significant items of litigations or claims for which the Group did not set-
up provisions as they relate to possible obligations that arise from past events whose existence will be confirmed only by the
occurrence or non-occurrence of uncertain future events not wholly within the control of the Group (ie. litigations for which
different inconsistent sentences were issued by the Courts, or litigations which are in early stages and no preliminary ruling
were issued so far):
•
In 2010 Electrica SA was sued by Termoelectrica S.A., which claimed the payment of RON 25,047 thousand representing
penalties related to certain electricity invoices, for the period 1 April 2007 – 31 March 2008. The first sentence in this case
was favourable to Electrica SA. In November 2016, the Court of Appeal admitted Termoelectrica S.A.’s appeal, cancelled the
first court ruling and pronounced a decision in favour of Termoelectrica S.A. In 2017 Electrica SA made an appeal against
the civil decision execution.
In 2015 Electrica SA was sued by hidroelectrica S.A., which claimed the payment of RON 5,445 thousand and other
damages, representing claims related to acquisition of electricity by the Company from Hidroelectrica S.A. at a price alleged
to be unfair. There was no preliminary ruling in this case as of the date of these financial statements.
•
The Group has the following contractual commitments as at 31 December 2016:
Amount
1,223,717
410,208
1,633,925
Purchase of electricity
Purchase of property, plant and equipment and intangible assets
(B) OPERATING LEASES
The main operating leases refer to vehicles and equipment leased by Electrica Serv, as follows:
Supplier
Operational Autoleasing SRL
Electrical Business Center SRL
RCI Finantare Romania
Energopetroleum Top Service SRL
Center TEA & Co SRL
Total
Contractual amount
60,241
77,467
1,327
7,578
12,179
158,791
The future lease payments related to the operating lease contracts mentioned above are as follows:
Less than 1 year
Between 1 and 5 year
Total
31 December 2016
25,544
33,163
58,707
31 December 2015
24,438
57,383
81,821
(C) INVESTMENT PROGRAM
The investment program approved for the year 2017 is as follows:
Distribution activity
Supply activity
Maintenance activity
Other/ shared
Total
2016
874,000
12,775
12,237
5,000
904,012
The amounts actually incurred may differ from the ones planned.
(D) GUARANTEES AND PLEDGES
At 31 December 2016 and 2015, the Group has guarantees on its bank accounts opened at ING, BRD and BCR for the overdrafts
contracted (please see Note 20).
At 31 December 2016 the Group has outstanding bank letters of guarantee of RON 459,421 thousand (2015: RON 188,084
thousand) issued in favour of its suppliers.
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KPMG Audit SRL
Victoria Business Park
DN1, Soseaua Bucuresti-Ploiesti nr. 69-71
Sector 1
P.O. Box 18-191
Bucharest 013685
Romania
Tel:
Fax:
+40 (21) 201 22 22
+40 (372) 377 800
+40 (21) 201 22 11
+40 (372) 377 700
www.kpmg.ro
Independent Auditors’ Report
(free translation1)
TO THE SHAREHOLDERS OF
SOCIETATEA ENERGETICA ELECTRICA S.A.
Opinion
We have audited the consolidated financial statements of Societatea Energetica Electrica S.A. (“the
Company”) and its subsidiaries (together “the Group”), which comprise the consolidated statement of
financial position as at 31 December 2016, the consolidated statements of profit or loss, comprehensive
income, changes in equity and cash flows for the year then ended, and notes, comprising significant
accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2016, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Romania, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
©2017 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
1TRANSLATOR’S EXPLANATORY NOTE: The above translation of the auditors’ report is provided as a free translation from
Romanian, which is the official and binding version.
SOCIETATEA ENERGETICA ELECTRICA S.A.
INDEPENDENT AUDITORS’ REPORT
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Revenue recognition – electricity distribution and supply
Capitalized expenditure related to the concession agreements
Revenue - Electricity distribution and supply (RON 4,892,158 thousand – Note 9)
Refer to Notes 6(b) (accounting policy) and 9 (financial disclosures) to the consolidated financial
statements.
Key audit matter
How the matter was addressed in
our audit
Electricity distribution and supply is the Group’s
main revenue stream. This revenue is recognised
when electricity is consumed by the customers,
as described in Note 6(b) to the consolidated
financial statements.
Our audit procedures included, among others:
•
using our own IT specialists, testing of general
and IT application controls over accounting
and billing systems related to capturing and
recording of revenue transactions;
Revenue recognition is a key matter in our audit
due to the following factors:
•
•
•
•
•
in a
locations
large number
The Group operates
of
throughout Romania, and
the process of capturing, processing and
transferring to the accounting system of the
data relevant for revenue recognition is not
centralized;
In the reporting period, significant changes
were made to the accounting system used
by the Group’s supply subsidiary, including
changes
the
the
accounting and the billing system;
interface between
to
A significant amount of revenue refers to
the accrual for electricity delivered and not
yet billed by the year end. The computation
of this amount is based on historical data
and assumptions
regarding consumption
patterns;
are
significant
transactions,
There
revenue-related
intra-
intra-group
including
group services, sales of goods, capital
expenditure and agent transactions. These
transactions are reconciled and eliminated
on consolidation, a process which involves
significant manual input, and therefore more
prone to misstatement.
•
•
•
•
•
the
testing of
controls over manual
reconciliations between the billing and the
accounting system of the data relevant for
revenue recognition;
developing an independent expectation of
the electricity revenue for the year based on
our industry and entity knowledge;
obtaining external confirmation for a sample of
trade receivables and performing procedures
on other revenue related accounts, such as
obtaining external confirmations for bank
accounts;
the
reasonableness of
assessing
the
methodology used to compute unbilled
revenue balances at year end, and of the
related assumptions, such as, primarily, the
estimated pattern of electricity consumption;
testing the accuracy of unbilled revenue
reports by comparing a sample of items with
the level of subsequent amounts invoiced;
testing the consolidation adjustments
in
respect of intra-group revenue transactions.
Intangible assets related to concession agreements (RON 3,910,388 thousand – Note 22)
Construction revenue related to concession agreements (RON 537,872 thousand – Note 9)
Construction costs related to concession agreements (RON 528,372 thousand – Consolidated
Statement of Profit or Loss)
Amortization of intangible assets related to concession agreements (RON 327,695 thousand – Note
22)
Deferred tax liability from temporary differences related to Intangible assets related to concession
agreements (RON 159,146 thousand – Note 16(iv))
Refer to Notes 4 (judgments), 6(b), 6(k) (accounting policy), 9, 16(iv) and 22 (financial disclosures) to
the consolidated financial statements.
Key audit matter
How the matter was addressed in
our audit
Our audit procedures included, among others:
•
•
•
assessing the Group’s model used for the
service concession accounting for compliance
with relevant financial reporting standards;
understanding and assessing the separation
of construction or upgrade services from
operation services;
for
obtaining supporting documentation
items capitalised, assessing
a sample of
whether
for
capitalization, and assessing their accuracy
by tracing to supporting documents (i.e.
contracts, invoices, work statements);
they meet
criteria
the
•
assessing the adequacy of related disclosures
in the consolidated financial statements.
The electricity distribution is a regulated activity.
The Group’s distribution subsidiaries, as operators,
have in place service concession agreements with
the Ministry of Economy, as grantor, to provide
the electricity distribution service. According
to these agreements, the Group builds the
electricity distribution infrastructure which is used
to provide the power distribution service, which
shall ultimately be transferred to the grantor or a
third party appointed by the grantor at the end
of the concession period.
incurs significant expenditure
The Group
in
relation to the development and maintenance
infrastructure. The construction and
of the
maintenance works
are either performed
internally, or outsourced to sub-contractors.
We considered this area a key audit matter due
to the magnitude of the amounts involved, as
well as due to the complexities of the application
of relevant financial reporting standards and
of the management judgment, including those
in respect of recognition of revenue based on
the stage of completion of the services and
separation of construction or upgrade services
from operation services.
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Taxation
Penalties to the State and other payments to the State budget (RON 63,140 thousand – Note 10(b))
Income tax expense (RON 120,136 thousand – Note 16)
Provisions for tax risks (RON 35,533 thousand – Note 28)
Change in provisions for tax risks during the year, net (RON 44,573 thousand – Note 28)
Refer to Notes 6(g), 6(s), 6(t) (accounting policy), 10(b), 16 and 28 (financial disclosures) to the
consolidated financial statements.
Key audit matter
How the matter was addressed in our
audit
The Group has been
to various
adjustments related to corporate income tax and
value added tax imposed by tax authorities as a
result of their tax audits from prior periods.
subject
Certain Group entities are in litigation or disputes
with tax authorities regarding findings of tax
audits from prior years.
Our audit procedures included, among others:
•
using our own tax specialists, assessing
the Group’s interpretation and application
of relevant tax
law, and evaluating the
appropriateness of key assumptions used
and the reasonableness of estimates
in
relation to uncertain tax positions and the
level of tax liabilities or provisions;
Key judgments are made by management in
estimating tax exposures and quantifying related
liabilities, provisions and/or contingent liabilities.
•
obtaining and evaluating responses to our
audit inquiry letters from the Group’s in-
house and external lawyers in relation to
existing or potential tax proceedings and
assessing the Group’s position in relation to
specific matters disputed;
•
•
inspecting the Group’s correspondence with
tax authorities during the reporting period
and subsequently, until the date of our
report;
the adequacy of disclosures
assessing
related to taxation
in the consolidated
financial statements, with particular focus
on uncertain tax positions and tax-related
contingencies.
Litigations and claims - provisions and contingent liabilities
Refer to Notes 6(s), 6(t) (accounting policy), 28 and 33 (financial disclosures) to the consolidated
financial statements.
Key audit matter
How the matter was addressed in our
audit
In the normal course of the Group’s business,
potential exposures arise from administrative or
court proceedings. As disclosed in Notes 28 and
33 to the consolidated financial statements, the
Group entities are involved in litigations with
different authorities, business partners or other
parties.
Whether a liability is recognized or disclosed as
a contingent liability in the financial statements
judgmental and dependent on
is
inherently
a number of
significant assumptions and
assessments.
Our audit procedures included, among others:
•
•
inspecting minutes of the shareholders’ and
board of directors’ meetings;
obtaining and evaluating lawyers’ responses
to our audit inquiry letters and discussing
the nature and status of the litigations and
potential legal exposures with the Group’s
management and in-house legal counsels,
with particular focus on the open litigation
with Termoelectrica S.A.
(RON 25,047
thousand);
The amounts involved are potentially significant
and determining the amount,
if any, to be
recognised or disclosed in the financial statements,
is inherently subjective.
•
critically assessing the Group’s assumptions
and estimates in respect of litigations and
claims, including the liabilities or provisions
recognized or contingent liabilities disclosed
in the consolidated financial statements.
This involved assessing the probability of an
unfavourable outcome of a given proceeding
and the reliability of estimates of related
amount;
•
assessing whether the disclosures detailing
legal proceedings adequately
significant
disclose the Group’s potential liabilities.
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Other information - Consolidated Administrators’ Report
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
The other information comprises the consolidated Administrators’ Report. The Administrators are
responsible for the preparation and presentation of the consolidated Administrators’ Report in
accordance with Order of Minister of Public Finance no. 2844/2016, articles 26-27 of the accounting
regulations in accordance with International Financial Reporting Standards, and for such internal control
as Administrators determine is necessary to enable the preparation and presentation of consolidated
Administrators’ Report that is free from material misstatement, whether due to fraud or error.
The consolidated Administrators’ Report presented from page 1 to 142 is not part of the consolidated
financial statements.
Our opinion on the consolidated financial statements does not cover the consolidated Administrators’
Report.
In connection with our audit of the consolidated financial statements as at and for the year ended
31 December 2016, our responsibility is to read the consolidated Administrators’ Report and, in
doing so, consider whether there is a material inconsistency between the Administrators’ Report and
the financial statements, whether the Administrators’ Report includes, in all material respects, the
information required by Order of Minister of Public Finance no. 2844/2016, articles 26-27 of the
accounting regulations in accordance with International Financial Reporting Standards, and whether,
based on our knowledge and understanding of the entity and its environment obtained during our audit
of the consolidated financial statements, the information included in the consolidated Administrators’
Report is materially misstated. We are required to report in respect of these matters. Based on the
work performed we report that:
a)
b)
in the consolidated Administrators’ Report we have not identified information which is not
in accordance, in all material respects, with the information presented in the accompanying
consolidated financial statements;
the consolidated Administrators’ Report identified above includes, in all material respects, the
information required by Order of Minister of Public Finance no. 2844/2016, articles 26-27 of
the accounting regulations in accordance with International Financial Reporting Standards.
In addition, based on our knowledge and understanding of the entity and its environment acquired
during our audit of the consolidated financial statements as at and for the year ended 31 December
2016, we have not identified information included in the consolidated Administrators’ Report that is
materially misstated.
Responsibilities of Management and Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the preparation of the consolidated financial statements that give a
true and fair view in accordance with International Financial Reporting Standards as adopted 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.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors’ report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditors’ report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Other matter
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 this report, or for the opinion we have
formed.
The engagement partner on the audit resulting in this independent auditors’ report is Razvan Mihai.
REFER TO THE ORIGINAL SIGNED
ROMANIAN VERSION
For and on behalf of KPMG Audit S.R.L.:
Razvan Mihai
KPMG AUDIT S.R.L.
registered with the Chamber of Financial Auditors
of Romania under no. 2561/2008
registered with the Chamber of Financial
Auditors of Romania under no. 9/2001
Bucharest
9 March 2017
ChAIRMAN OF ThE BOARD OF DIRECTORS,
CRISTIAN BUSU
SOCIETATEA ENERGETICA ELECTRICA S.A.
DIRECTORS’ REPORT FOR 2016
GENERAL MANAGER
DAN CATALIN STANCU
ChIEF FINANCIAL OFFICER
IULIANA ANDRONAChE
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SUMMARy
Identification details of the report and issuer
1 Highlights
2 Organisational structure
3 Key events in 2016
4 Declaration on Corporate Governance
4.1 Ownership Structure
4.2 Electrica S.A General Meeting of Shareholders
4.3 Electrica S.A. Board of Directors
4.4 The activity of the Board of Directors of Electrica S.A. and of its Consultative
Committees
4.5 Executive Management
4.6 The Corporate Governance Code
4.7 The remuneration of Managers and Directors with mandate agreements
4.8 Description of the main features of internal control and risk management
systems in relation to the financial reporting process
5 Financial Reporting
5.1 Balance Sheet Items
5.2 Operational Results
6 Other information
6.1 Personnel
6.2 The predictable development of the Company
6.3 Main risk and uncertainties
6.4 Financial Risk Management
6.5 Environmental aspects
6.6 Research and development activity
6.7 Legal documents reported
6.8 Subsequent events
6.9 Key factors, important market directions and trends influencing Electrica’s
operational results
Appendix 1 Current report - status of compliance with the new Bucharest
Stock Exchange Corporate Governance Code as of 9 March 2017
Appendix 2 – Internal audit report for 2016
187
188
188
189
190
190
191
193
197
204
204
205
205
206
207
209
211
211
211
211
212
215
215
216
216
216
217
222
Identification details of the
report and issuer
Report date: 9 March 2017
Issuer name: Societatea Energetica Electrica S.A.
Registered Office: no. 9 Grigore Alexandrescu Street, 1st District, Bucharest,
Romania
Telephone/fax: +4021.208.5999; +4021.208.5998
Fiscal code: RO13267221
Registered with the Trade Register under no.: J40/7425/2000
Share Capital: RON 3,459,399,290 subscribed and paid up
The main characteristics 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 securities issued are traded: As at December
31st, 2016, the company’s shares are listed on the Bucharest Stock Exchange
and Global Depository Receipts are listed on the London Stock Exchange.
ISIN
Bloomberg Symbol
Currency
Face value
Ordinary Shares
ROELECACNOR5
0QVZ
RON
RON 10
Trading market
Bursa de Valori Bucuresti REGS
Market symbol
EL
GDRs
US83367y2072
ELSA: LI
USD
RON 40
London Stock Exchange
MAINMARKET
ELSA
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1 hIGhLIGhTS
3 KEy EVENTS IN 2016
Societatea Energetica Electrica S.A., herein after refer to as “Electrica SA” or ”the Company”, registered with
the National Trade Registry Office under no. J40/7425/2000, with unique registration code 13267221 and
having as main activity “Consulting activities and business management” - NACE Code 7022, aims at the
coordination and efficient control of investments in subsidiaries carrying out electricity distribution and supply
activities, as well as energy services.
Also, the Company carries out services in the electricity balancing market, import-export and trading.
A summary of the key indicators is presented below:
•
In the period ended December 31, 2016, revenues collected by the Company from dividends distributed
by its subsidiaries increased by RON 30 million compared to 2015;
In the period ended December 31, 2016, the net profit amounted to RON 265 million, increasing by RON
36 million or 12% as compared to 2015.
•
2 ORGANISATIONAL STRUCTURE
•
The Company’s subsidiaries as at December 31st 2016 are the following:
Subsidiary
Activity
Societatea de Distributie a Energiei
Electrice Muntenia Nord S.A.
Electricity distribution in North
Muntenia geographical area
Societatea de Distributie a Energiei
Electrice Transilvania Nord S.A.
Electricity distribution in Northern
Transylvania geographical area
Societatea de Distributie a Energiei
Electrice Transilvania Sud S.A.
Electricity distribution in Southern
Transylvania geographical area
Registration
code
Headquar-
ters
% stake as
of December
31st, 2015
14506181
Ploiesti
78.0000021%
14476722
Cluj-Napoca
77.999999%
14493260
Brasov
78.0000019%
Electrica Furnizare S.A.
Electricity supply
28909028
Bucharest
77.9999700%
Electrica Serv S.A.
Servicii Energetice Muntenia S.A.
(in reorganization)
Servicii Energetice Oltenia S.A. (in
reorganization)
Servicii Energetice Moldova S.A.*
(in bankruptcy)
Servicii Energetice Dobrogea S.A.*
(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)
17329505
Bucharest
100%
29384120
Bucharest
100%
29389861
Craiova
100%
29386768
Bacau
n/a
29388378
Constanta
n/a
*) Electrica S.A. lost control over Servicii Energetice Banat S.A. in November 2014 and over Servicii Energetice Dobrogea S.A. in January
2015. Also Electrica S.A. lost control of Moldova Energy Services since January 2016 due to the commencement of bankruptcy proceedings
of subsidiary
Source: Electrica
Electrica’s subsidiaries do not hold any shares issued by the parent company.
•
•
•
•
•
•
•
Electrica, valid for the entire period of their
mandates;
Approval of the framework management
agreement to be concluded by Electrica
with the BoD members;
Amendment of the Company name from
“Societatea de Distributie si Furnizare
a Energiei Electrice – “Electrica” SA” to
“Societatea Energetică Electrica S.A.“;
Re-appointment of KPMG Audit SRL as
auditor for 2016 and 2017 financial years
Rejection of the sale of the automatic meter
reading system (AMR System) by Electrica
SA to its distribution subsidiaries;
Appointment of Mr. Willem Jan Antoon
henri Schoeber as an independent member
of the Board of Directors following the
vacancy of a position
in the Board of
Directors of Electrica, with mandate valid
until December 14th, 2019;
Approval of
consolidated annual
the
investment plan at Electrica group
level
(CAPEX plan) corresponding to the 2016
financial exercise supplemented up to RON
844,619 th.;
Approval of the proposals for amendment
of the Articles of Association of Societatea
Energetică Electrica S.A.
the Board of Directors revoked Mr. Ioan Rosca
from the CEO position and appointed Ms. Iuliana
Andronache, current CFO, as interim CEO of
Electrica SA;
• On September 19th, 2016, the Board of Directors
of Electrica SA appointed Mr. Dan Catalin Stancu
as CEO of Electrica SA for a mandate of four
years starting with October 24th 2016;
• On October 4th, 2016 the Board revoked Ms.
Gabriela Marin from the position of executive
manager coordinating the Human Resources
Division of Electrica starting as of October 5th,
2016.
THE MAIN EVENTS OF 2016:
f Regarding corporate governance
•
Starting with July 4, 2014, the Company’s shares
were listed on the Bucharest Stock Exchange,
and Global Depository Receipts were listed on
London Stock Exchange. After admission to
trading on regulated markets in Bucharest and
London, Electrica has taken major steps to align
to the best practices of listed companies, by
defining and introducing an action plan regarding
corporate governance, defining clear
lines of
responsibility and accountability, implementing a
code of conduct, assessing the management by
a third party consultant, implementing a whistle-
blower policy and drawing up the insider dealing
and market manipulation guidelines.
The most important decisions of the General
Meeting of Electrica’s Shareholders in 2016 (31
March 2016, 27 April 2016, 21 October 2016)
refer to:
•
Approval of the budgets for Electrica and
its subsidiaries and of the consolidated
investment plan at the level of the Electrica
group (CAPEX plan) for the financial year
2016;
Approval of the financial statements and
profit distribution
its
subsidiaries for 2015 ;
Approval of the remuneration policy of
the members of the Board of Directors of
for Electrica and
•
•
f Regarding the non-executive and executive
management
• On January 13th, 2016 Electrica’s Board appointed
Mr. Cristian Busu as Chairman with a one-year
mandate and established three consultative
committees: Audit
and Risk Committee,
Nomination and Remuneration Committee and
Strategy and Corporate Governance Committee;
• On February 10th 2016 Mr. Michael Boersma
renounced to his position of member of the
Board of Directors starting with May 1st 2016.
Following Mr. Michael Boersma resignation,
on April 26th 2016 the Board appointed Mr.
Willem Jan Antoon henri Schoeber as temporary
member of the Board of Directors, starting
with May 1st 2016; He was confirmed as an
independent member of the Board of Directors
by the General Meeting of Shareholders held on
October 21st 2016 ;
• On February 26th, 2016 the Board of Directors
and Mr. Ioan Rosca reached a mutual agreement
to terminate his mandate as CEO of Electrica
no later than June 2016. On March 11th, 2016
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f Other relevant events:
• On January 8th, 2016 Electrica issued a report on
its status of compliance with the new Bucharest
Stock Exchange Corporate Governance Code;
In h1 2016, Electrica set-up a project team
dedicated to develop a network of fast chargers,
in collaboration with OMV Petrom;
•
•
• Ongoing internal procedures streamlining, with
a focus on Lean Six Sigma implementation at
HQ level. Further to the implementation at HQ
level, the LSS project will be gradually rolled-out
at subsidiaries level;
tolerance
regarding zero
Adopting policies
of corruption, fraud and money
laundering
and combating and avoidance of conflicts of
interest, gifts, protocol expenses and prohibition
transparency and
of
stakeholder engagement,
in accordance with
the Code of Ethics and Professional Conduct in
force at the Electrica level and its subsidiaries,
during 2016;
The group-wide voluntary leave plan deployed is
on track;
facilitation payments,
•
• Ongoing projects
to
the
supply
related
segment: development of key IT and marketing
infrastructure ongoing. Major projects started
during h1 with some already implemented and
the remaining being in the roll-out phase;
FP negotiations: discussions ongoing throughout
Q1, finalized with no-go decision due to material
•
Figure 1: Ownership structure on 15 February 2017
difference between buyer-seller price. Results of
the negotiation process were made public on
March 28th 2016;
• Media Campaign: kick-off of the first brand
•
campaign in Electrica’s history;
Loans: Electrica signed three blocked account
pledge agreements, with a total value of RON
320 million, related to the credits granted to
its distribution subsidiaries to finance the cash
shortage;
international standards
• During the month of september 2016 occurred the
certification of Integrated Management System
for Quality-Environmental-health and
(IMS)
Occupational Safety according to requirements
of
ISO 9001:2015 –
“Quality management systems. Requirements.”,
ISO 14001:2015 – “ Environmental management
systems - Requirements with guidance for use”
and OHSAS 18001:2007 – “Occupational health
and safety management systems. Requirements”;
Certification was realized by the certification
organization DEKRA CERTIFICATION, top global
provider for audit and certification services;
In the second semester of 2016, together with
the external consultant ENVISO, the mapping of
all processes associated to current organisational
structure was realized.
•
•
4 DECLARATION ON CORPORATE
GOVERNANCE
4.1 Ownership Structure
The General Meeting of Shareholders
(“GMS”)
is the main corporate forum of Electrica S.A.,
with responsibilities of decision regarding matters
mentioned in the Articles of Association. Convening,
operating, voting process and other provisions
regarding GMS are detailed
in the Articles of
Association of Electrica S.A.
Until July 2014, the Romanian state, through the
Ministry of Energy, was the sole shareholder of
Electrica S.A. As of July 4, 2014, the Company’s
shares are listed on the Bucharest Stock Exchange,
and Global Depository Receipts are listed on London
Stock Exchange.
The latest information on ownership structure was
made available by the Central Depository on 15
February 2017 and is presented in the following
table:
Shareholder
The Ministry of Energy, Bucharest, Romania
The European Bank for Reconstruction and Development,
London, UK
BNy MELLON DRS, New york, USA
Legal entities
Individuals
TOTAL
Source: Central Depository, Electrica S.A.
Number of
shares
168,751,185
29,944,090
16,610,424
113,679,866
16,954,364
345,939,929
Stake held (% of the
share capital)
48.7805%
8.6559%
4.8015%
32.8612%
4.9010%
100%
Electrica S.A General Meeting
4.2
of Shareholders
According to the Articles of Association updated on
21 October 2016:
DUTIES OF THE GENERAL MEETING OF
SHAREHOLDERS
1.
The general meeting of the shareholders is the
governing body of the Company.
The general meetings of the shareholders are
ordinary and extraordinary.
The ordinary
the
shareholders shall have the following main
duties:
general meeting of
to appoint and revoke the members of the Board
and establish the level of their remuneration and
other rights according to the legal provisions;
to establish the income and expenses budget, to
set out the activity schedule;
to establish the income and expenses budget
consolidated at the group level;
to discuss, approve or amend the annual financial
statements according to the reports submitted
by the Board and the financial auditors;
to approve the profit distribution according to
2.
3.
•
•
•
•
•
Following the
stabilization process
after the June 2014
IPO, Electrica S.A.
owns 6,890,593 of
its treasury shares,
representing 1.99% of
the total share capital.
These shares entitle
Electrica neither to
voting rights nor to
dividends.
Source: Central Depository, Electrica
•
•
•
•
•
4.
the law and to establish the dividend;
to decide on the management activity of the
directors and on the discharge of liability, in
accordance with the law;
to decide to file
legal actions against the
directors, managers as well as financial auditors
for damages they caused to the Company by
breaching their obligations towards the Company;
to decide on mortgaging or leasing or closing of
one or more units of the company;
to appoint and revokes the financial auditor and
to set the minimum term of the financial audit
contract;
to carry out any other duties set out by the law.
The extraordinary general meeting of the
shareholders shall decide on the following:
• withdrawal of
the preference
right of
shareholders upon subscription of new shares
issued by the Company;
contracting any type of loans, debts or obligations
representing a loan, as well as creating real or
personal security related to these loans, in each
case in accordance with the competence limits
provided in Annex 1 to Articles of Association;
operations regarding the acquisition, alienation,
exchange or creation of encumbrances over
fixed assets of the Company whose value
•
•
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approving
investment projects
the main or secondary business
exceeds, individually or cumulated, during any
financial year, 20% of the total fixed assets, less
receivables, and leases of tangible assets for
periods longer than one year, whose individual
or cumulated value towards the same co-
contractor or involved persons or with whom it
acts in concert exceeds 20% of the fixed assets
value, less receivables at the time of entering in
the relevant operation, as well as joint ventures
in excess of the same value and with a duration
of over one year;
approving
in which the
Company will be involved in accordance with
the competence limits provided in Annex 1 to
these Articles of Association, other than the
ones provided in the annual investment plan of
the Company;
approving the issuance and admission to trading
on a regulated market or on an alternative
trading system of shares, depositary certificates,
rights or other similar financial
allotment
competencies
the
instruments;
delegated to the Board;
changing the legal form;
relocation of the registered office;
changing
objects;
increasing the share capital, as well as decreasing
or the replenishment of the share capital by
issuing new shares, according to the law;
the merger and the spin-off;
the dissolution of the Company;
carrying out any bond issuance, as per the
provisions of art. 10 of the Articles of Association,
or conversion of a category of bonds in a
different category or in shares;
approving the conversion of preferential and
nominative shares from one category to another,
according to the law;
any other amendment
Association;
the establishment or dissolution of secondary
representative
offices: branches,
offices, working points or other similar units
without
legal
provisions;
participation in the establishment of new legal
persons;
approval of the eligibility and
criteria with respect to the Board members;
approval of the corporate governance strategy
of
the corporate
the Company,
governance action plan;
donations within the limits of the competence
provided in Appendix 1 to these Articles of
Association; and
approves granting of intragroup loans with a
value of more than EUR 50 million per operation;
any other decision that requires the approval
of the extraordinary general meeting of the
shareholders.
legal status, according to the
the Articles of
independence
agencies,
including
to
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
RIGHTS AND OBLIGATIONS DERIVING FROM
THE SHARES
1.
2.
3.
Each share subscribed and fully paid in by the
shareholders, in accordance with the law, grants
the shareholders (i) the right to one vote in the
general meeting of the shareholders, (ii) the right
to elect the management bodies, (iii) the right
to participate to the profit distribution, as well
as (iv) other rights provided by these Articles of
Association and by the legal provisions.
The acquisition of the property right over a share
by a person, directly or indirectly, has as effect the
obtainment of the capacity of shareholder of the
Company together with all rights and obligations
deriving from this capacity, in accordance with the
law and these Articles of Association.
The rights and obligations deriving from the shares
are transferred to the new acquirers together with
the shares.
5.
4. When a nominative share is owned by several
persons, the transfer shall be registered only if
they appoint a sole representative for exercising
the rights derived from the shares.
The obligations of the Company are secured
by its social patrimony, and the liability of the
shareholders is limited to the subscribed share
capital.
The shareholder that has, in a certain operation,
either personally or as representative of another
person, an interest contrary to the interest of
the Company, must refrain from deliberations
regarding the respective operation.
6.
THE EXERCISE OF THE RIGHTS BY THE
HOLDERS OF THE DEPOSITARY CERTIFICATES
1.
2.
3.
The rights and obligations related to the underlying
shares based on which the depositary certificates
were issued are exercised by the holders of the
depositary certificates, proportionally to their
holdings of depositary certificates and taking into
account the conversion rate between underlying
shares and the depositary certificates.
The issuer of the depositary certificates in the name
of whom the underlying shares are registered, is
the shareholder within the meaning and for the
application of the Regulation no. 6/2009 regarding
the exercise of certain rights of the shareholders
in the general meetings of the companies. In this
sense, the issuer of the depositary certificates is
fully responsible for informing the holders of the
depositary certificates in a correct, complete and
timely manner, observing the provisions of the
issuance documents of the depositary certificates,
informative
about
materials related to a general meeting of
shareholders, as made available by the Company
to the shareholders.
In order to exercise its rights and obligations
related to a general meeting of shareholders,
the documents and
the
a holder of depositary certificates will send to
the entity where it has opened its account for
depositary certificates the voting instructions for
the topics on the agenda of the general meeting
of the shareholders, so that the respective
information is sent to the issuer of the depositary
certificates.
The issuer of the depositary certificates votes in
the general meeting of the shareholders of the
Company in accordance with and within the limits
of the instructions of the holders of the depositary
certificate which have this quality at the reference
date.
The issuer of the depositary certificates may cast
different votes for certain underlying shares in the
general meeting of the shareholders than those
expressed for other underlying shares.
The issuer of the depositary certificates is fully
responsible for taking all necessary measures,
so that the entity which keeps the records of
the holders of the depositary certificates, the
intermediaries involved in the custody services for
holders of the depositary certificates on the market
where the depositary certificates are traded and/
or any other entities involved in recording the
holders of the depositary certificates, to send the
voting instructions of the holders of the depositary
certificates related to the topics on the agenda of
the general meeting of the shareholders.
Any reference date for the
identification of
the shareholders which have the right to take
part and to vote in the general meeting of the
4.
5.
6.
7.
shareholders of the Company and any registration
date for the identification of the shareholders
which have rights deriving from
its shares,
as well as any other similar date set by the
Company related to any corporate events of the
Company will be established in accordance with
the applicable legal provisions and with a prior
notice sent with at least 15 free calendar days (in
Romanian, zile calendaristice libere), to the issuer
of the depositary certificates, in the name of
which the underlying shares are registered based
on which the depositary certificates mentioned
above are issued. The reference date will be prior
with at least 15 working days to the deadline for
submitting the power of attorney related to the
vote.
TRANSFER OF SHARES
1.
2.
The shares are indivisible. The Company shall
recognize a sole owner per each share, subject
to the provisions of article 11 paragraph (4) from
Articles of Association.
The partial or total transfer of shares between the
shareholders or to third parties shall be carried out
according to the terms and procedure provided
by the applicable legal provisions, including the
capital markets legislation.
Useful updated information is available for shareholders
at the following website address: http://www.electrica.
ro/en/investors/.
4.3
Electrica S.A. Board of Directors
During 2016, the Board of Directors has undergone some changes. At the beginning of the year, the Board
of Directors consisted of seven non-executive members, appointed by the Ordinary General Meeting of
Shareholders on December 14th, 2015. Their term of office, registered based on the decision of the General
Meeting of Shareholders, is four years. Four of the seven directors fulfilled the independence criteria provided
by the Articles of Association, according to statements presented on the occasion of their nomination.
The Board of Directors is responsible for taking all the necessary measures to carry out the activity of
the Company as well as to supervise its activity. Its structure, organization, duties and responsibilities are
established under the Articles of Association and the Regulation of the Board of Directors.
During December 14th, 2015 – May 1st, 2016, the Board of Directors had the following members:
• Mr. Cristian Busu – non-executive director, elected as Chairman of the Board of Directors until January
2017;
• Ms. Arielle Malard de Rothschild - non-executive independent director;
• Mr. Michael Boersma – non-executive independent director;
• Mr. Pedro Mielgo Alvarez – non-executive independent director;
• Mr. Bogdan Iliescu – non-executive independent director;
• Ms. Corina Georgeta Popescu - non-executive director;
• Ms. Ioana Alina Dragan - non-executive director.
Following Mr. Boersma’s renunciation to his position of member of the Board of Directors of Electrica SA
starting with 1st of May 2016, on April 26th, 2016 the Board of Directors appointed Mr. Willem Jan Antoon
Henri Schoeber as interim member of the Board of Directors, until the next Ordinary General Meeting of
Shareholders of the Company (i.e. October 21st, 2016).
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On October 21st, 2016, the General Meeting of Shareholders elected Mr. Willem Jan Antoon Henri Schoeber
as non-executive independent director with a mandate period equal with the remaining period until the
expiration of the vacant mandate, respectively until 14 December 2019. Four of the seven directors fulfill
the independence criteria provided by the Articles of Association, according to statements presented on the
occasion of their nomination.
We present below the most relevant aspects regarding the professional experience of the members of the
Board of Directors at the time of their appointment:
Name
Cristian Busu
Mandate
4 years
Professional experience
•
State Secretary, Ministry of Energy (December 2015 – January 2017).
• Member of the Board of Directors and of the Audit Committee at SIF
Arielle Malard de
Rothschild
4 years
Michael Adriaan
Boersma
4 years
OLTENIA.
• Manager at the Central branch of Marfin Bank in Bucharest.
• During 2009 – 2013, Financial Manager of Fondul Proprietatea and
•
•
member of the Representatives Committee.
Economic Adviser for the Economic Department of the Romanian
Government.
Lecturer at the Bucharest Academy of Economic Studies, in which capacity
he conducted various teaching and research activities.
• has an extensive experience in investment banking, spending over
25 years in companies such as Lazard Frères & Cie and Rothschild. She
is the founder of the Emerging Markets Division at the Rothschild & Cie
investment bank, part of the Rothschild group.
Before joining Rothschild & CIE in 1999, she spent 10 years as an
investment banker at Lazard Frères & Cie, as part of the Sovereign
Advisory team.
•
• Her experience includes major privatization projects in Romania, Poland,
Russia, Hungary and Morocco, coordinating the privatization of companies
such as MOL, Nafta Polska, ZIL, BCR or Dacia.
• Has experience in M&A projects, working in over 40 such projects in
Eastern Europe and Africa.
• Member of the Board of Directors of Imerys S.A. (SBF120) and of
Rothschild & Co, both listed on the Paris Stock Exchange and of Groupe
Lucien Barrière.
•
•
Professor of corporate governance at the TIAS School for Business and
Society, University of Tilburg in the Netherlands
Senior adviser for First State European Diversified Infrastructure Fund,
London, UK.
• Non-executive independent director of Nynas AB, Stockholm, Sweden, a
company owned by PDVE and Neste Oil Oyj, specializing in the production
and trade of oils and bitumen.
Chairman of the Board of Directors of Prometheus Energy, based in
houston (Texas, U.S.A.).
Chairman of the Supervisory Board of TMG, a Dutch listed company,
Amsterdam.
•
•
• Member of the Supervisory Board of PostNl, a Dutch listed company, The
•
•
•
hague, the Netherlands.
Chairman of the Supervisory Board of the VieCuri Medical Center for
Noord-Limburg in Venlo, the Netherlands.
Chairman/member of foundations/institutions/advisory bodies (e.g. Energy
Fund Limburg, Jheronimus Bosch 500, Protective preference shares
FUGRO).
From 2003 until the end of 2009 - CEO and Chairman of the Executive
Board of Directors of Essent, the largest Dutch utility.
Pedro Mielgo
Alvarez
4 years
• Non-executive Chairman, Madrilena Red de Gas, Madrid Spain.
•
Chairman and Managing Partner of the Fund GP, Nereo GreenCapital,
Luxembourg.
• Non-executive Chairman, Ingenio 3000, Madrid, Spain.
Independent Director, Landis & Gyr SAU, Sevilla, Spain.
•
From 2008 until 2011 - non-executive Chairman, Centimetri, Milan, Italy.
•
From 2008 until 2011 - Independent Director, Landis & Gyr AG, Zug,
•
Switzerland.
From 1999 until 2004 - Director, Redesur, Lima, Peru.
From 1997 until 2004 – Chairman & CEO, Red Electrica de Espana, Madrid,
Spain.
From 1995 until 1997 – General Manager, Iniexport, Madrid, Spain.
From 1991 until 1997 – Director, Marketing & Sales, Intec, Madrid, Spain.
•
•
•
•
Bogdan George
Iliescu
4 years
•
•
•
•
•
•
Board member, Nominalization and Remuneration Committee member,
Rating and Audit Committee member, Strategy committee member, SNTGN
Transgaz SA, Medias.
Executive Manager, Corporate Finance Department, BRD – Group Societe
Generale.
From 2007 – 2014 – General Manager, BRD Corporate Finance.
From 2005 until 2009 – Board member, SAI INVESTICA ASSET
MANAGEMENT SA, Bucharest.
From 2001 – 2007 – Project Manager, BRD/SG Corporate Finance.
From 1997 – 2001 – Analyst, BRD – Group Societe Generale.
Corina Georgeta
Popescu
4 years
State Secretary, Ministry of Energy.
•
• head of Power Assets Department, OMV Petrom SA.
•
From 2011 until 2015 – Bucharest Branch Manager, OMV Trading GmbH
Viena, Austria.
From 2008 until 2011 – Manager of Energy Market Regulation and
Supervision, E-ON Romania.
From 2007 until 2008, Head of Power Acquisition Department, E-ON
Moldova Furnizare.
From 2001 until 2006 – Head of Distribution Service, Electrica SA
From 1998 until 2001 – Head of Operation Service, Electrica SA –
Distribution & Supply Bucharest Branch
From 1996 until 1998 – Chief Deputy Division, North Network Division,
CONEL - Distribution & Supply Bucharest Branch.
From 1991 until 1996 - North Network Division, RENEL - Distribution &
Supply Bucharest Branch
•
•
•
•
•
•
Ioana Alina Dragan
4 years
•
Expert, Department of Administration of State Ownership in Energy,
Ministry of Energy.
• Member of Shareholders General Assembly, OPCOM – Romanian Gas and
electricity market operator.
• Member of Board of Directors, National Company of Uranium SA;
•
From 2013 until 2014, Member of Board of Directors, SN Nuclearelectrica
SA.
2014, Adviser of Minister, Ministry of Energy.
From 2012 – 2013, Country Financial Specialist, Responsible for Siemens
Financial Services Department, Siemens Romania.
From 2008 until 2012, Bonne GAMME Relationship Manager, BRD – Group
Societe Generale – Beller Agency.
From 2007 until 2008, Grand Public Relationship Manager, BRD – Group
Societe Generale – Beller Agency.
From 2005 until 2007, Front Desk Operator, BRD – Group Societe Generale
– ASE Agency.
•
•
•
•
•
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Willem Jan Antoon
Henri Schoeber
4 years
Independent business consultant (since 2013).
•
• Member of the board of directors of Neste Oyj (helsinki, Finland), of
•
•
•
•
the supervisory board of Gasunie NV (Groningen, the Netherlands) and
member of the audit committees of these boards (since 2013).
From 2010-2015: Chair of the Boards of Directors of EWE Turkey holding
AŞ (Istanbul, Turkey), Bursagaz (Bursa, Turkey), Kayserigaz (Kayseri, Turkey)
From 2010-2013: Member of the executive board of EWE AG (Oldenburg,
Germany), responsible for power generation and for the EWE utility
businesses in Turkey and Poland
From 2007-2011: Chair of the executive board of swb AG (Bremen,
Germany)
From 1977-2007: Various positions in the Royal Dutch Shell group in the
Netherlands, France, Germany and the USA, with senior management
positions in refining, i.a. refinery manager in Reichstett (France) and
Cologne (Germany)
Source: Electrica
At the date of this report, the members of the Board of Directors are as follows:
No. Name
Status
Date of first
election
Term of office
(starting with
December 14th,
2015)
4 years
1.
2.
3.
4.
5.
6.
7.
Cristian Busu
Arielle Malard de
Rothschild
Ioana Dragan
non-executive director, chairman
4 years
4 years
non-executive, independent
director
non-executive director
Corina Popescu
4 years
non-executive director
Bogdan Iliescu
Pedro Mielgo
Alvarez
Willem Jan Antoon
henri Schoeber
4 years
4 years
4 years
non-executive, independent
director
non-executive, independent
director
non-executive, independent
director
September 22nd,
2014
September 22nd,
2014
December 14th,
2015
December 14th,
2015
December 14th,
2015
December 14th,
2015
April 26th, 2016
Source: Electrica
More details on the Board members’ biographies can be found on the company’s website.
Mr. Cristian Busu was elected Chairman of the Board of Directors during the new Board’s first meeting, which
took place on January 13th, 2016, for a term of one year, and reelected in January 2017 for another year.
In its first meeting, held on January 13th, 2016, the new Board of Directors decided the composition of
committees, as follows:
a)
The Nomination and Remuneration Committee
Mr. Bogdan Iliescu - Chair of the committee
Ms. Arielle Malard de Rothschild
Ms. Corina Popescu
•
•
•
b)
The Audit Committee
•
•
•
Mr. Pedro Mielgo Alvarez - Chair of the committee
Ms. Arielle Malard de Rothschild
Mr. Bogdan Iliescu
c)
The Strategy and Corporate Governance Committee
•
•
•
Mr. Michael Boersma - Chair of the committee (until his resignation as of May 1st, 2016, when
his place was taken by Mr. Willem Schoeber)
Ms. Ioana Dragan
Mr. Cristian Busu.
Consultative committees’ members are elected for a period of one year. The organization, duties and
responsibilities of each committee are set under the Articles of Association of Electrica S.A., respectively in
the committee charters - an integral part of the Corporate Governance Code of the Company. In its meeting
held in January 2017, the Board decided to maintain the same composition of the committees, for another
year.
According to the information held, there is no agreement, understanding or family relation between the
directors of the Company and another person who may have contributed to their appointment as directors.
At 1st March 2017, no member of the Board of Directors held any Electrica S.A. shares.
According to the available information, the Board members were not involved in litigations or administrative
proceedings regarding their activity within the Company in the last five years or regarding their capacity to
fulfill their duties within the Company.
The activity of the Board of Directors of Electrica S.A. and of its
4.4
Consultative Committees
In 2016, the Board of Directors met 30 times. Out of the 30 meetings that took place in 2016, 16 meetings
were organized with physical presence of the members and 14 were held electronically, in accordance with
the provisions of art. 17 paragraph 22 (respectively art. 18 alin. 23 after October 21st, 2016) of the Articles
of Association of the Company.
We present below the situation of Board members’ presence in the meetings of the Board of Directors and
its committees in 2016:
Name
The Board of
Directors
The Audit and
Risk Committee
The Nomination
and
Remuneration
Committee
(no. of meetings
- 30)
(no. of meetings
- 10)
(no. of meetings
- 15)
The Strategy
and Corporate
Governance
Committee
(no. of meetings
- 11)
Cristian Busu
Arielle Malard de
Rothschild*
Corina Popescu
Ioana Dragan
Bogdan Iliescu
Pedro Mielgo Alvarez
Willem Schoeber*
Michael Boersma*
30
29
30
30
30
29
19
8
-
9
-
-
10
10
-
-
-
14
15
-
15
-
-
-
10
-
-
11
-
-
8
3
*Note: in one meeting of the Board of Directors, Ms. Arielle Malard de Rothschild was represented by Mr. Cristian Busu, based
on the mandate given. The same, Mr. Willem Schoeber was represented in one meeting by Mr. Pedro Mielgo Alvarez, and Mr.
Michael Boersma was represented in two meetings of the Board of Directors by Ms. Arielle Malard de Rothschild, based on the
mandates given.
Source: Electrica
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The main areas of interest and decisions adopted
by the Board of Directors in 2016 refer to:
•
of
of
and
and
Election of the Chairman of the Board of
Directors and establishment of the consultative
committees and election of their chairman;
Continuing the project started in 2015 aiming
to review and align the Articles of Association
of Electrica and of its subsidiaries, considering
more clearly the scope of activity and the
level of management,
responsibilities by
controlled delegation of competence and
implementation of a new corporate governance
at group level, based on the new Corporate
issued by the Bucharest
Governance Code
Stock Exchange (BSE Code) and the key points
underlined by the Board’s evaluation process.
The EGMS approved the proposed revised
Articles of Association on October 21st, 2016.
Revision and endorsement of ELSA subsidiaries
Articles of Association;
The update of the charter of the Board of
Directors and of the charters of the committees
set up by the Board;
Electrica
Revision
endorsement
SA’s financial statements at
individual and
consolidated levels for the financial year of
2015;
Revision
financial
endorsement
statements of Company’s subsidiaries for the
financial year of 2015;
Revision and endorsement of Electrica SA’s
income and expenses budget at standalone
and consolidated levels for the financial year of
2016;
Revision and endorsement of
income and
expenses budgets of company’s subsidiaries for
the financial year of 2016;
Revision and endorsement of the consolidated
investment plan for the 2016 financial year;
Analysis,
of
approval
different proposals submitted by the executive
and
management
investment opportunities (e.g.: supervising the
negotiations with Fondul Proprietatea regarding
the acquisition of the minority stakes within
distribution and supply operators);
Preparing and submitting for the GMS approval
the new Remuneration Policy and mandate
contracts,
the
including
members of the Board of Directors.
Reviewing proposals on
reshaping Group’s
improved
activity,
aiming
processes flows and an
increased efficiency
for core business, but also to create the basis
for better operational and financial results, at
individual and consolidated level.
Setting the annual calendar of the Board
meetings and the key documents and reports
to be presented by the executive management;
revised KPIs
coordination
acquisitions
implement
regarding
and
for
to
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
for strengthening
Reviewing the BoD composition in subsidiaries,
to assure a consistent approach and to support
subsidiaries development and market
the
positioning, as well
the
governance across the group;
Approval of the Market Abuse Regulation.
Approval of the Treasury Policy;
Approval of the Delegation of Authority Policy;
Approval of the Internal Audit Charter and of
the Code of Ethics for the internal auditor.
Approval of the audit plan for 2017;
Approval of the Code of ethics of the internal
auditor;
Approval of the Internal Audit Policies and
Manual of Procedures;
Approval of the CSR Plan and Policies for 2016,
aligned to the PR, Communication and CSR
Strategy;
The appointment of a new CEO starting with
October 24th, 2016;
Approval of the new organisational chart, to
enter into force starting with January 1st, 2017,
having as objective to streamline the reporting
lines in Electrica and at the Group level and to
use and combine the necessary competencies
and responsibilities in more efficient way;
Revision and approval of
the executive
management KPIs achievement for 2015 and
the new ones for 2016 – at Electrica and Group
level.
In 2017, until the date of the Report, the Board
of Directors met seven times (out of which two
meetings were held electronically) and adopted
important decisions for both its organization and
the development and operational orientation of the
Company.
The main decisions adopted by the Board of
Directors during meetings held in 2017 refer to:
•
consultative
Election of the Chairman of the Board of
Directors.
Reviewing
committees’
composition and election of their chairpersons.
Analysis and endorsement of Electrica SA’s
budget, of the budgets of its subsidiaries and
of the consolidated budget at Group level for
2017.
•
•
the
• Decisions regarding the mandate agreements
the General Managers of subsidiaries
for
of
(termination/ prolongation/ confirmation
specific period of time).
The termination of the mandate agreement of
the executive manager of the Sales Coordination
Division of Electrica SA.
The appointment of the Chief Distribution
Officer of Electrica SA.
The approval of Electrica Dividends Policy.
The approval of Policy on ethical career
•
•
•
•
•
•
•
of
and
management.
Electrica
Revision
endorsement
SA’s financial statements at
individual and
consolidated levels for the financial year of
2016.
financial
endorsement
Revision
statements of Company’s subsidiaries for the
financial year of 2016.
Revision and approval of the individual and
investment plan for the 2016
consolidated
financial year.
and
of
Based on the main conclusions and objectives set
following the evaluation process carried out in
2015, the Board of Directors has undergone several
important projects during 2016 and until the date
of the Report:
f Improving the corporate governance framework
at Group level, having 2 main pillars:
1. The revision of the Articles of Association of
Electrica and of its subsidiaries - project started
in late 2015, aiming to review and align the
corporate governance rules within the Group,
considering more clearly the scope of activity
and the responsibilities by level of management,
controlled delegation of competence and the
implementation of a new corporate governance
at group level. The EGMS finally approved the
new Electrica Articles of Association on 21
October 2016;
2. Consequently, the charters of the Board and
of the committees were approached, as the
most important tools to address the main areas
of partial or non-compliance with the new
Bucharest Stock Exchange Code provisions and
the action plan related to the improvement of
the Board’s activity. The new charters of Electrica
were discussed an finally approved during the
meetings of November and December;
3. The next step is to implement these principles
within subsidiaries and to define and apply
appropriate governance policies at group level;
f Overseeing the activity at Group level:
1. Asking, receiving and analysing more information
2.
on the activity of subsidiaries;
Improving the communication with the executive
management and creating a relevant tool for
the periodic reporting of Electrica and Group
activity;
3. Discussing during several meetings and analysing
the materials and proposals regarding the
Strategy on natural gas supply, Business Plan for
gas supply and the Marketing Strategy;
f Consolidating the executive management team:
the
1. Following
termination of Mr. Ioan Rosca’s mandate as
the mutual agreement on
2.
in
the
(hR manager,
changes
team
Division
CEO of Electrica, in March the Board nominated
Ms. Iuliana Andronache as interim CEO and in
October appointed Mr. Catalin Stancu as CEO of
Electrica;
executive
Implementing
Sales
management
Chief
Coordination
Distribution Officer)
the
roles and competencies and reviewing the
split of responsibilities among the executive
management team members. In this context,
a process of recruiting executive managers for
the positions of director of operations, IT and
human resources and for defined key positions
people was carried out;
redefining
manager,
and
3. Approving the new organizational chart and
introducing positions of performance managers
middle level (MKP – Management Key Positions);
4. Approving the 2017 KPIs structure for Electrica
SA’s managers and the way of cascading from
the general manager level to managers and
from ELSA to its subsidiaries;
5. Approving new remuneration (structure and
level) and KPIs for subsidiaries.
BOARD OF DIRECTORS EVALUATION
The Board of Directors, whose term started on
December 14, 2015, has carried out an evaluation of
its activity – at the end of 2015 with the support of
an external advisor, a well-established international
company, with
in
corporate governance. The results of this analysis
have been reported in the annual report for 2015.
comprehensive experience
An
internal evaluation of the Board activities
was carried out in December 2016, based on a
questionnaire defined and thoroughly discussed by
the Board members.
The questionnaire served to establish a self-
assessment of the 2016 achievements of the Board
in the following areas:
•
The main objectives defined by the General
Meeting of Shareholders for the Board: Group
Placing
Corporate Governance,
strategy,
Investment
investments and
of financial
achievement in the distribution companies
Impact of the Board on the functioning of the
company
•
• Quality of functioning of the Board and its
internal processes, including Board culture
Individual aspects of the Board work for each
Board member
Role and functioning of the Chair.
•
•
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The results of the questionnaire were discussed
among the Board members in their meeting of
February 10th, 2017. The main conclusions and
observations were the following:
1. The overall progress in the functioning of the
company was not at the desired level, hampered
by the fact, that the Board decided in March 2016
not to extend the mandate of the existing CEO
and to start the recruitment of a new CEO with
the support of an professional executive search
agency. The new CEO could only be contracted
in September 2016 and started his activities
on October 24th, 2016. The CEO selection has
been a top priority in the Board agenda 2016.
The same holds for further reinforcements of
the Company’s top management that remain a
priority for the Board in 2017.
2. The achievements on the Board’s own KPIs,
most notably on the investments realised and
commissioned during 2016 in the distribution
companies, that
influence future profitability,
have been below the Board’s ambitions and
expectations. The Board has taken organisational
measures to improve this in the future and
requested Management
to proceed with
restructuring and business process redesign, in
particular (but not only) in this area.
3. The process for a profitable deployment of the
funds available to the company has continuous
in the Board. During 2016 several
attention
external growth projects were
thoroughly
analysed and negotiations in this respect were
carried out and are still under way.
4. The governance and management of the company
have been reinforced by taking measures in the
areas of management composition, composition
of boards of subsidiaries and revised board
charters. In doing so, the Board is striving for a
consistent execution of company strategies and
operational excellence both in parent company
and subsidiaries. The board focuses on reaching
a high standard of corporate governance in the
company.
5. The identification of risks and their mitigation
has intensively been discussed in the Board at
several occasions, in particular in the wider area
of energy trading. Proprietary trading in Electrica
has been stopped in this context. Further work is
needed in the organisation to bring the company
to an international standard of risk management.
6. The Board has identified the need to improve the
distribution of its time over formal requirements
and activities coming from the organisation on the
one hand and its own agenda and key priorities
on the other. It has established an annual rolling
agenda where strategic
items will get more
attention and it has reinforced the follow-up of
its own action items – also in reaction to previous
year’s evaluation. Attention remains needed to
follow this through.
7. The Board’s own meeting quality and culture
are evaluated regularly with a feedback session
planned after every meeting. All board members
participate actively and the Board culture
is
stimulating for deviating opinions that are taken
for consideration by other members. No conflicts
of
interests for Board members have been
observed in their Board work.
8. The Chair received positive feedback and has
been re-elected unanimously by the other Board
members.
THE NOMINATION AND REMUNERATION
COMMITTEE
The Nomination and Remuneration Committee
consists of three non-executive Board of Directors
members, the majority of them being independent
members, while the chairman of the committee is an
independent director.
The role of the Committee is to propose candidates
for the Board of Directors, to develop and propose to
the Board the selection procedure of candidates for
the positions of managers and other management
positions, to recommend to the Board candidates for
the positions listed, to formulate proposals on the
remuneration of directors and other management
positions.
The Committee has the following responsibilities
concerning nomination matters:
•
recommending to the Board a nomination policy,
including a target Board profile, process and
principles for shareholders to consider when
proposing candidates for director positions at
the Company, and making recommendations to
the Board regarding the appointment of interim
directors in accordance with the policy;
reviewing the implementation of the nomination
policy, preparing a report to the Board on its
implementation, and presenting a summary of
this report in the Directors’ Report;
advising the Board on the appointment and
the General Manager, making
dismissal of
on
recommendations
appointment
the Company’s executive
and dismissal of
management team after considering the views
of the General Manager, and making proposals
on the appointment and dismissal of subsidiary
board members in accordance with the Group
Governance Policy;
recommending to the Board policies
in the
human resources field, including those covering
recruitment and termination, talent management
and development, and succession planning across
the Company and its subsidiaries (the Group);
overseeing the process for the annual evaluation
of the effectiveness of the Board and
its
consultative committees;
the
•
•
•
•
•
periodically assessing the size, composition and
committee structure of the Board and making
recommendations to the Board with regard to
any changes;
• making recommendations to the Board on
continuous skill development programmes for
Board members and executive management;
overseeing
the
the nomination process of
general managers and executive managers in
the subsidiaries according to the nomination and
remuneration Policy.
•
•
The Committee has the following duties in the field
of remuneration:
• making recommendations to the Board in relation
incentive and severance
to the remuneration,
compensation policies of the Company;
advising the Board on the structure of the
remuneration framework for Board members;
• making recommendations to the Board in relation
to the remuneration of the General Manager and
including the main
other executive managers,
remuneration components, performance objectives
and appraisal methodology;
• making recommendations to the Board on the
remuneration of subsidiary board members and
the general limits of remuneration for subsidiary
management;
• monitoring compensation trends within industries
•
relevant to the Group;
overseeing the remuneration process of the
general managers and executive managers in the
subsidiaries according to the Nomination and
Remuneration Policy.
•
•
•
•
strengthening the governance across the group.
Revision of the executive management KPIs
achievement for 2015 and the new ones for 2016
– at Electrica and Group level.
Recommendation on implementing new mandate
contracts for the executive management positions
in Electrica and subsidiaries, as well as for other
key positions.
Recommendation on the 2017 KPIs structure for
Electrica SA’s managers and the way of cascading
from the general manager level to managers and
from ELSA to its subsidiaries;
Recommendation on
(structure and level) and KPIs for subsidiaries.
remuneration
the new
THE AUDIT AND RISK COMMITTEE
The Committee is made up of three members, most
of them independent directors, the chairman is a
non-executive independent director. This structure
provided the necessary expertise in finance and risk
management, according to legal requirements.
The main role of the Committee is to support
the Board in fulfilling its duties of verifying the
efficiency of Company’s financial reporting, internal
control and risk management. While fulfilling this
role, the Committee advises the Board regarding
the assessment of the Annual Report and Annual
Financial Statements, whether the documents are
accurate, balanced and comprehensive and provide
all the necessary information for the shareholders’
evaluation of the financial performance.
The Nomination and Remuneration Committee met
19 during January 1st, 2016 – March 9th, 2017. During
these meetings, the following topics were discussed
and referred to the Board of Directors for approval:
•
on
the
structure
Recommendations on the remuneration of Board
members and their framework – management
agreement.
Recommendations
and
remuneration of the subsidiaries Board members.
Recommendations on
the appointment of
executive directors and performance criteria.
Recommendations on the organizational structure
of the Electrica SA.
Recommendation on the appointment of the new
CEO of Electrica SA.
Recommendation on the appointment of the new
CEO of Electrica Serv.
Recommendation as
the mandate
agreements of the General Managers of subsidiaries
(termination/ prolongation/
for
specific period of time).
Recommendation on the appointment of the Chief
Distribution Officer of Electrica SA.
Reviewing the BoD composition in subsidiaries for
confirmation
regards
•
•
•
•
•
•
•
•
The Committee has the following duties in terms
of financial reporting:
•
examining the integrity of annual and interim
financial statements or disclosures for Electrica
and its subsidiaries (the Group) at standalone
and consolidated levels;
regularly reviewing the adequacy of the Group’s
accounting policies;
reviewing and recommending the Company’s
financial forecast policy to the Board for
approval;
advising the Board on whether the content of
the annual report, taken as a whole, represents
a fair, balanced and understandable account
for shareholders and provides them with the
information necessary to assess the Company’s
performance.
•
•
•
Regarding the auditing and internal control matters,
the Committee has the following responsibilities:
•
approving a Group-wide, annual risk-based
audit plan as well as any material changes
to the plan, and receiving regular reports on
activities, key findings, and follow up regarding
internal audit reports;
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•
the Board on
the appointment,
advising
removal and remuneration of the Head of
Internal Audit;
•
•
• monitoring the adequacy, effectiveness and
independence of the internal audit function;
• making recommendations to the Board on
the appointment, rotation or dismissal of the
Company’s external auditor;
reviewing the plan, work and findings of the
external auditor;
assessing the independence and objectivity of
the external auditor and monitoring compliance
with relevant ethical and professional guidance,
including the requirements on the rotation of
audit partners
regularly
and
implementation of key internal control policies,
including policies for detecting fraud and the
prevention of bribery;
reviewing related party transactions
line
with a policy developed by the Committee and
approved by the Board;
reviewing annually a report by the head of
Internal Audit assessing the effectiveness of the
system of internal control across the Group.
reviewing
adequacy
the
in
•
•
•
The Committee has the following responsibilities
concerning risk management matters:
•
reviewing regularly the main risks facing the
Company and Group, recommending to the
Board relevant policies for their identification,
mapping, management and mitigation of risk;
reviewing annually a report from management
assessing the effectiveness of the system of risk
management across the Group;
advising
the Board on equity and debt
financing, including proposals for contracting
any type of loans and securities associated with
these loans;
advising the Board on its recommendations
regarding major economic transactions within
the authority of the General Meeting of
Shareholders, assessing any associated risks
regarding such transactions.
•
•
•
The Audit and Risk Committee met 13 times during
January 1st, 2016 – March 9th, 2017. During
these meetings, the following were discussed and
referred to the Board of Directors for debate and,
when applicable, approval/endorsement:
•
•
•
The Audit Committee Charter.
The audit plan for 2016.
The
manual.
The internal audit charter.
The financial statements of Electrica S.A. at
standalone and consolidated
levels for the
financial year of 2015 and 2016, as well as
financial statements of Company’s subsidiaries
internal audit policies and procedures
•
•
for the financial year of 2015 and 2016.
The income and expenses of Electrica S.A. at
standalone and consolidated
levels for the
financial years of 2016 and the revenue and
expenditure budgets of Company’s subsidiaries
for the financial years of 2016.
Various reports submitted by the
internal
auditor on missions carried out within Electrica
SA and its subsidiaries and as whistle blower
reports.
Annual report on the internal audit activity for
2016.
Annual report on integrity warnings for 2016.
2016 Individual preliminary unaudited results
of Electrica SA.
Annual report on risk management activity for
2016.
Report on the internal control effectiveness.
•
•
•
•
•
•
•
The internal audit activity is carried out by a separate
division from a structural point of view (the Internal
Audit Department), within the Company. In order
to ensure the fulfilment of its main functions, it
reports to the Board of Directors through the Audit
and Risk Committee and administratively - to the
CEO.
THE STRATEGY AND CORPORATE
GOVERNANCE COMMITTEE
The Committee was made up of three non-executive
directors, the chairman being a non-executive
independent director.
The Committee has the following duties in terms
of strategy:
• making proposals
to
the Board
the Board on
the
development of the medium-term strategic
plan, making recommendations on the strategic
direction, priorities and long term objectives of
Electrica and its subsidiaries (the Group);
reviewing management proposals on
the
Group’s consolidated annual budget, subsidiary
annual budgets, and CAPEX plans for the
Group, and making relevant recommendations
to the Board;
in monitoring and
supporting
assessing the Group’s performance in light of
the approved strategic plan, budgets, industry
trends,
local and regional market trends,
competiveness and advances in technology;
periodically reviewing the overall strategic
planning process,
including the process for
developing a medium-term strategic plan;
advising the Board on proposed acquisitions,
joint-
divestments,
ventures, and cooperation projects, particularly
assessing their alignment with the Group’s
strategy;
investment
projects,
•
•
•
•
•
performing any other activities or responsibilities
on strategy matters as may be delegated to the
Committee, from time to time, by the Board.
the
Regarding
restructuring, they mainly relate to:
•
tasks of
the Committee on
reviewing and making recommendations to
the Board with respect to, the development
and
implementation of the Group’s overall
including
restructuring plans and objectives,
any determination regarding the disposition or
rationalization of core businesses;
regularly reviewing the organisational structure
the Company, and making
and chart of
recommendations to the Board;
performing any other activities or responsibilities
on restructuring matters as may be delegated
to the Committee, from time to time, by the
Board.
At the same time, the Committee has duties in
terms of corporate governance:
•
to
and
overseeing and monitoring the Company’s
compliance with
contractual
legal
obligations on corporate governance, as well
as other applicable corporate governance
principles, and making recommendations to
the Board;
regularly reviewing the Company’s Corporate
Governance Code, Board Charter and the
Company’s Articles of Association, and making
recommendations to the Board on relevant
amendments
the Company’s corporate
governance policy and documentation;
recommending the Group Governance Policy to
the Board for approval and regularly reviewing
it thereafter;
reviewing the chart of authorities for the
Company in order to ensure that the delegation
of authorities
for
effective and efficient decision-making process,
and making recommendations to the Board;
reviewing the Company’s policy for corporate
social
stakeholder
engagement, and making recommendations to
the Board;
to management allows
responsibility
and
•
•
•
•
•
•
• making recommendations to the Board on
improving the quality of information flows to
the Board including the adequacy of reports
to the Board, key performance
indicators
presented to the Board, and guidelines for
Board papers and presentations;
preparing other
reports or materials on
corporate governance as may be requested by
the Board.
•
On June 30th, 2016, the Committee changed
his name from The Strategy, Restructuring and
Corporate Governance Committee to the Strategy
and Corporate Governance Committee). During
January 1st, 2016 – March 9th, 2017, the Committee
met 16 times and discussed and referred to the
Board of Directors for approval/endorsement:
•
Revision of the Articles of Association of
Electrica and of its subsidiaries, as well as of
Electrica’s Board and its committees’ charters –
this project required several iterations (overall 9
meetings of the Committee);
Electrica Furnizare Strategy on the natural
gas supply activity and the completion of the
Electrica Furnizare object of activity; Electrica
Furnizare Business Plan for gas supply.
CSR Policies.
ELSA Foundation.
The rebranding of the subsidiaries.
Risk Policy and Acquisition and Sales Strategy
for gas and energy at Group level.
Process for the
(BoD) functioning.
The income and expenses budget of Electrica
levels
S.A. at standalone and consolidated
for 2017 financial year and the revenue and
expenditure budgets of Company’s subsidiaries
for 2017 financial year.
Recommendation on different
opportunities on the market.
Recommendation on
Regulation.
Recommendation on the Delegation of Authority
Policy.
Several reviews and recommendations regarding
the Capex and Commissioning plans for 2016
and 2017 – quantitative and qualitative analysis.
improvement of the Board
the Market Abuse
investment
•
•
•
•
•
•
•
•
•
•
•
4.5
Executive Management
In accordance with provisions of the Articles of
Association of the Company (approved by GMS on 21
October 2016), the Board of Directors appoints and
revokes the CEO, as well as the other executives with
mandates and also approves their empowerments.
The CEO carries out the activity according to the
provisions of the mandate contract concluded with
the Company.
On 26 February 2016, the Board of Directors and Mr.
Ioan Rosca, CEO at that time, announced that they
had reached a mutual agreement on terminating
his mandate as CEO of Electrica S.A. no
later
than June 2016. On 11 March 2016, the Board of
Directors revoked Mr. Rosca from the CEO position
and appointed Ms. Iuliana Andronache, current CFO,
as interim CEO of Electrica SA. During the meeting
held on 19 September 2016, the Board of Directors
appointed Mr. Dan Catalin Stancu as CEO of Electrica
SA for a mandate of four years starting with October
24, 2016.
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During the meeting held on 4 October 2016, the
Board revoked Ms. Gabriela Marin from the position
of executive manager coordinating the Human
Resources Division of Electrica starting as of October
5th, 2016.
At the end of 2016, the executive managers are:
• Mr. Dan Catalin Stancu – CEO with a mandate of
four years starting with 24 October 2016;
• Ms. Iuliana Andronache – CFO, with a mandate
of four years starting with 27 October 2015;
• Ms. Alexandra Romana Augusta Popescu
Borislavschi – Executive Manager of Strategy
and Corporate Governance Division, with a
mandate of four years starting with 4 August
2015;
to
• Mr. Ramiro-Robert-Eduard Angelescu – Executive
Manager of Sales Coordination Division with a
mandate of four years starting with 4 August
2015
According
the best practices applied by
companies listed on international markets, regarding
the implementation of a succession plan for key-
positions,
the Nomination and Remuneration
Committee coordinates the process of selection
suitable applicants for the vacant Director positions
of Electrica SA. The Nomination and Remuneration
Committee is supported in this approach by an
international consulting firm specialized in recruiting
top management, in order to complete the selection
process as soon as possible.
According to information held by the Company,
family
is no contract, understanding or
there
relationship between the directors of the Company
and another person who may have contributed to
their appointment as directors.
The Corporate Governance
4.6
Code
executive management of the company.
its corporate governance principles
Electrica S.A. has continuously developed and
updated
in
order to meet the capital market requirements and
to apply the best practices in corporate governance
as well as to develop opportunities and increase
competitiveness. Therefore, in October 2016 the
company’s Articles of Association was updated,
following the approval of the General Meeting of
Shareholders held on October 21st, 2016. Later, in
January 2017, the charter of the Board of Directors
and the charters of the committees had also been
updated.
In September 2015 the BSE issued a new Corporate
Governance Code (“the BSE’s Code” or “BSE’s CGC),
which entered into force as of January 4th, 2016.
The provisions of the new Code are being carefully
examined and Company’s compliance therewith is
being thoroughly assessed.
The “Comply or Explain” Statement presents the
compliance level of the Company with the new
provisions of BSE’s CGC code. Electrica S.A. has been
in full compliance with most of these requirements.
Regarding the aspects in which the company is
not in full compliance, we mention that concrete
actions will be taken in order to improve the degree
of compliance in the shortest time (more details can
be found in Appendix 1). Further consideration will
be applied to Code’s provisions and any subsequent
progress made by the Company
in achieving
compliance will be reported to the capital market.
The CGC is also a guide for the management and the
employees of Electrica S.A. and other stakeholders
regarding 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, Appendix 7 of the CGC.
Electrica adhered to and has been willfully applying
the provisions of the Corporate Governance Code
since the fiscal year 2014. Electrica had officially
adopted the Corporate Governance Code (“CGC
ELSA”) since February 2015 and made it available
on the Company’s website for all interested parties’
benefit.
This Corporate Governance Code embeds Electrica’s
general principles and conduct rules which set forth
the corporate values, the responsibilities, obligations
and business conduct of the Company.
The ELSA CGC comprises also Electrica’s Articles
of Association, the charters of the Board of
Directors and those of its committees, and all these
documents together contain the terms of reference
the administrative and
and responsibilities of
In compliance with Company’s policies and with the
procedures of the Code of Ethics and Professional
Conduct, the Audit and Risk Committee ensures
that the Company`s activity
is carried on with
honesty and integrity, including the approval of
the whistleblower policy. The main purpose of the
whistleblower policy is to protect the Company from
ethical deviations, frauds and any other aspects of
non-compliance that would otherwise could cause
image and/or commercial prejudice or even involve
legal sanctions, thus damaging the prestige and
profitability of the Company. This procedure can be
found on Electrica’s website.
Whereas the shares of the Company are allowed for
trading both on the regulated market administered
by Bucharest Stock Exchange (BSE), and on the
market managed by the London Stock Exchange
(LSE), Electrica SA is subject to the imperative rules
imposed by the national and European laws on
market abuse regarding the arrangements applicable
to inside information. Therefore, the inside trading
and market manipulation guidelines are presented
in Appendix 6 of the CGC.
The internal control represents all measures ordered
by the ELSA management and their implementation
by all personnel members regarding the organizational
structure,
procedures, methods,
the
applied
instruments, for the purpose of
techniques and
achieving the organizational goals, including all control
forms performed at company level.
The remuneration of
4.7
Managers and Directors with
mandate agreements
2016
1,039,030
2015
1,483,880
Management
remuneration
Source: Electrica
At the beginning of 2016, Electrica SA`s management
consisted
in five managers remunerated based
on mandate agreement. For two out of the five
managers, the mandate agreements ended
in
March 2016, respectively in October 2016, and in
October 2016 a new manager was designated based
on same mandate agreement type. As of December
31st 2016 the Company had four managers with
mandate agreement.
The remuneration granted to the Board of Directors
members and
in General
to
Shareholders Meeting were, as follows:
representatives
Board of Directors
members
Total
Source: Electrica
2016
2,136,888
2015
863,361
2,136,888
863,361
Until 14 December 2015, the Board of Directors was
composed of five members and of seven members
after this date. Also, the fixed monthly remuneration
increased and remunerations were established for
participations to the meetings of the Board of Directors
and its committees. According to the remuneration
policy approved by the General Shareholders Meeting
from 31 March 2016, the maximum annual paid
meetings is capped at 12 for Board of Directors and
at six for each of the committees.
During 2016 and 2015 there were no loans granted to
managers and directors.
The internal control and the risk management
systems have the following main goals:
•
protecting organizational resources against waste,
negligence, abuses, fraud etc.;
compliance with the legislation and with the
internal regulations;
the reliability of financial reporting (accuracy,
completeness and correct presentation);
ensuring an environment based on identifying,
understanding and controlling risks, environment
which will
the
organizational goals;
efficient and effective business operations.
contribute
achieving
to
•
•
•
•
The achievement of these goals is supported by
means of:
•
recruitment of personnel with an adequate level
of competency, in accordance with the company’s
needs, and the existence of a plan of continuous
training which would allow for an updating of
specific knowledge or a supplementation of
internal resources with external consultants,
whenever necessary;
clear definition of
responsibilities of each
person involved in the organizational process;
segregation of duties regarding the carrying out
of operations among the personnel, so that the
approval, control and registration duties are
adequately assigned to different persons (as per
the Company’s organizational chart);
elaboration and implementation of regulations,
policies, procedures, forms etc.;
the existence of a Guide for Accounting Policies,
elaborated in accordance with the requirements
of the legislation in force, approved by the Board
of Directors;
the existence of a schedule and a well-defined
process regarding the elaboration of accounting
and financial information in accordance with the
reporting requirements (financial and accounting,
of the capital market) and their appropriate
verification and approval by the Board of
Directors, for the purpose of publishing them.
•
•
•
•
4.8 Description of the main
features of internal control and risk
management systems in relation to
the financial reporting process
The framework of ELSA’s internal control system
consists of the following elements:
•
Control environment – The existence of a
control environment represents the basis of an
efficient internal control system. It consists of
the commitment towards integrity and ethical
values (for this purpose, a series of policies on
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The internal audit missions evaluate the internal
control system, the risks and the implemented control
strategies, and present initiatives, proposals, solutions
and recommendations for mitigating the risks of fraud
and for improving control strategies (refer to Appendix
2 attached to this report).
The internal audit includes, but is not limited to, the
examination and evaluation of the adequate nature
and the efficiency of the organization’s corporate
governance, of risk management, as well as of internal
controls and of quality performance in carrying out
the assigned responsibilities, in order to achieve the
declared purposes and goals of the organization.
The Guide for Accounting Policies is consistently
applied
in all companies within the Group, for
the purpose of ensuring an accounting treatment
equally applied for the same business situations. This
guide is revised based on the changes made to the
International Financial Reporting Standards.
•
•
•
to
reduce
zero tolerance towards corruption, fraud and
money-laundering, avoiding and fighting against
conflicts of interest, gifts, protocol expenses, and
forbidding facilitating payments, transparency
and the involvement of stakeholders), as well
as organizational measures (policies on the
delegation of powers and responsibilities);
Evaluation of risks – Generally, all processes are
found within the scope of the internal control
system. An identification is carried our regarding
major or critical risks, related to particular
activities for stimulating internal control methods;
Control activities meant
the
risks – Control activities have different forms
(managerial control, general control, preventive
financial control, etc.) and they are implemented
and carried out for the purpose of reducing
significant operational and compliance risks;
Information and communication – Information
helps all other components of the
internal
control system by means of communication
to employees their responsibilities regarding
the control and the provision of information
in an adequate and timely form, so that all
employees may carry out their duties. Internal
is performed by means of
communication
disseminating information to all levels (high, low
and same levels), while the external one implies
the dissemination of
information to external
parties, in accordance with the requirements and
expectations;
• Monitoring activities – the Audit and Risk
Committee and the Internal Audit Department
assess
effective
implementation of the internal control system.
efficiency
and
the
the
The management monitors the functioning of internal
controls by means of periodical analyses; for instance,
the execution of the budget, the monitoring of
security incidents, internal and external audit reports
and internal control reports.
Deficiencies in the implementation or functioning of
internal controls are noted in the internal control
and internal audit reports and are presented to the
operational management, for the purpose of issuing
of corrective actions.
5 FINANCIAL REPORTING
These individual financial statements have been prepared in accordance with the Minister of Public Finance
Order no. 2844/2016 for approving the Accounting Regulations in accordance with International Financial
Reporting Standards (“IFRS”). In acception of OMPF 2844/2016, 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.
5.1
Balance Sheet Items
Financial information selected from Company’s balance sheet (thousands RON)
31 decembrie
2016
31 decembrie
2015
Var.
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Restricted cash
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 receivables
Total current assets
275,008
1,837
1,430,819
134,492
-
1,842,156
197,644
1,867,115
64,075
12,598
161
49
2,384
2,144,027
293,375
1,499
1,430,819
-
7,250
1,732,943
283,366
1,900,395
77,531
13,056
117
56
23,134
2,297,656
Total assets
3,986,183
4,030,599
EqUITY AND LIABILITIES
Equity
Share capital out of which:
Subscribed and paid in share capital
Inflation adjustment to share capital
Share premium
Treasury shares
Pre-paid capital contributions in kind from
shareholders
Revaluation reserves
Legal reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Current liabilities
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
Source: Electrica
3,459,399
3,459,399
-
103,049
-75,372
5,144
710
156,545
252,240
3,901,715
1,581
1,581
67,591
11,717
541
3,038
-
82,887
84,467
3,459,399
3,459,399
-
103,049
-75,372
2,862
769
142,932
292,266
3,925,905
1,796
1,796
60,634
7,632
497
2,885
31,251
102,898
104,694
3,986,183
4,030,599
-6%
23%
0%
100%
-100%
6%
-30%
-2%
-17%
-4%
38%
-13%
-90%
-7%
-1%
0%
0%
-
0%
0%
80%
-8%
10%
-14%
-1%
-12%
-12%
11%
54%
9%
5%
-100%
-19%
-19%
-1%
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NON-CURRENT ASSETS
On December 31, 2016 compared to December 31st,
2015, fixed assets increased by RON 109,213 thousand or
6.3%, to RON 1,842,156 thousands from RON 1,732,943
thousands.
Group, using remote reading systems, property of the
Company located in the consumption points, respectively
in distribution subsidiaries grid within Electrica Group. The
Company assessed whether the arrangement contains a
lease and concluded that it does not contain any lease due
to the fact that the distribution subsidiaries do not have
the right of usage of the assets.
in progress
tangible assets
Equipment and
include
mainly the costs of implementation of the AMR system
(Automatic Meter Reading), for measuring activities and
consumption dispatcher at Electrica Group
level. The
capitalized net book value related to this system is in
amount of RON 176,159,847 as of December 31st, 2016
(2015: RON 197,238,723), out of which a part in amount
of RON 21,942,902 as of December 31st, 2016 are
assets in progress (2015: RON 21,524,137). During 2017,
an evaluation of the entire AMR system will be made
by a third party independent evaluator in order for the
distribution subsidiaries to take over the AMR system.
Starting with this sale, the company estimates that it will
commission during 2017 the assets in progress related to
the AMR system implementation costs.
TRADE RECEIVABLES
On December 31st, 2016, the Company’s receivables
dropped by RON 13,456 thousands or 17.36%, to RON
64,075 thousands,
from RON 77,531 thousands on
December 31st, 2015.
As regards the corporate tax receivable, due to the fact
the company was the subject of enforcement procedure
in December 2016, it dropped by RON 2,384 following the
unfavourable Court decision no. 1029/17.04.2015.
RESTRICTED
INVESTMENTS
CASH
AND
SHORT-TERM
In connection with the AMR system, the Company concluded
service agreements with the distribution subsidiaries. The
main services provided refers to obtaining in real time
from measuring groups by the distribution subsidiaries of
accurate data with increased frequency within Electrica
On December 31st, 2016, the category including cash and
cash equivalents, restricted cash and deposits, treasury
bills and government bonds increased by RON 15,490
thousands or 0,71%, to RON 2,199,251 thousands, from
RON 2,183,761 thousands on December 31st, 2015.
Deposits, treasury bills and government bonds
Deposits, treasury bills and RON government bonds with a maturity greater
than three months
Deposits with a maturity greater than three months
Restricted cash
Total deposits, treasury bills and government bonds
Source: Electrica
31 December
2016
1,757,746
31 December
2015
1,756,339
109,369
134,492
2,001,607
144,056
-
1,900,395
Deposits, treasury bills and government bonds with an
initial maturity over three months have an average interest
rate (average yield) of 0.63% from the following financial
institutions: Citibank Europe PLC Dublin, Raiffeisen Bank,
BRD-CSG, Marfin Bank,
ING Bank. Treasury bills and
government bonds are presented as investments hold until
maturity.
PROVISIONS
During the year 2015, the Company has recognized a
provision for the amount of RON 31,250,650 for disputes
with National Agency for Fiscal Administration “NAFA” having
as object, penalties for delay in the payment claimed by the
NAFA following the unfavorable decision 1029/17.04.2015.
Also, during the year 2016 the Company has created
additional provisions in the amount of 23,648,000 RON as a
result of the court decision to reject the appeal made to the
enforcement procedure. In December 2016, the Company
made payments in the amount of RON 41,210,654 RON as
a result of the forced execution received in connection with
these litigations and reversed the provisions constituted.
SHARE CAPITAL
The subscribed share capital in nominal terms consists
of 345,939,929 ordinary shares on December 31st, 2016
(345,939,929 ordinary shares on December 31st, 2015)
with a nominal value of RON 10/share. Holders of ordinary
shares are entitled to dividends and have the right to one
vote per share in the General Meetings of Shareholders of
the Company, with the exception of the 6,890,593 shares
repurchased by the Company in July 2014 with the scope
to stabilize the price. All shares give equal rights to the net
assets of the Company, with the exception of the 6,890,593
shares repurchased by the Company in July 2014 with the
scope to stabilize the price.
The Company recognizes the changes in share capital only
after their approval in the General Meeting of Shareholders
and their registration with the Trade Register.
During 2016 there were no changes in the share capital.
At December 31st, 2016 the Company meet the requirements
of share capital as per the legislation in force.
DIVIDENDS
The Company can distribute dividends from the statutory
individual statutory financial
profit, according to the
statements prepared in accordance with the Romanian
accounting regulation.
Dividends distributed by the Company in past 3 years
(from previous year’s statutory profits) were as follows:
2016
RON
Distributed 291,582,429
dividends
Source: Electrica
2015
244,691,906
2014
22,475,225
Dividends related to the year ended 31 December 2015,
amounting to RON 291,582,429, were declared based on
the standalone annual statutory financial statements of the
Company.
•
The distribution of dividends was approved in the gross
amount of RON 0.86 RON/share, related to 2015 financial
5.2 Operational Results
year, under the Decision of the Ordinary General Meeting
of Shareholders of April 27, 2016 and their payment
started on July 18, 2016.
At 31 December 2016 the Company recorded dividends
liabilities amounting to RON 992 thousands representing
the dividends uncollected by the shareholders from the
Depository, thus:
•
the dividends uncollected for the year 2014 in the
amount of RON 364 thousands;
the dividends uncollected for the year 2015 in the
amount of RON 646 thousands;
•
DESCRIPTION OF PURCHASE AND/OR LENDING
OF ASSETS
The main purchases of assets done by the Company during
2016 are the following:
•
Tangible assets in progress amounting to RON 1,314
thousands for the implementation of the AMR (Automatic
Meter Reading) system, building rehabilitation and pilot
project e-mobility (6 fast-charger stations);
Treasury bills and government bonds purchase - please
see “Cash and short term investments” for further
details.
Financial data selected from the profit and loss account of the Company (th. RON)
31 December 2016
31 December 2015
Var.
Revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
Impairment of trade and other receivables, net
Other operating expenses
Movement in provisions, net
Operating profit
Finance revenues
Finance expenses
Net finance income
Profit before tax
Income tax expense
Profit for the year
Earnings per share
Basic and diluted earnings per share
Profit for the year
362,388
1,710
(347,593)
(20,504)
(23,507)
(38,392)
(81,037)
31,251
(115,684)
389,683
(1,739)
387,944
272,260
(7,234)
265,026
0,78
265,026
383,708
1,533
(368,684)
(16,637)
(20,242)
2,832
(23,289)
(31,251)
(72,029)
373,026
(289)
372,737
300,708
157
300,864
-6%
11%
-6%
23%
16%
-1456%
248%
-200%
61%
4%
502%
4%
-9,46%
-4.708%
-12%
0,89
300,864
-12%
-12%
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Other comprehensive income
Items that will never be reclassified to profit or loss
Re-measurements of the defined benefit liability
Tax related to re-measurements of the defined benefit
liability
Other comprehensive income, net of tax
Total comprehensive income
Source: Electrica
INCOME
31 December 2016
31 December 2015
Var.
100
(16)
84
265,110
704
(113)
591
301,456
-86%
-86%
-86%
-12%
In the year 2016, Electrica reported revenues of RON 362 million against RON 384 million reported in the year 2015.
The variation is mainly caused by the unfavourable evolution of the activity carried out by Electrica SA as being balancing
responsible party on the energy market, reporting a decrease of RON 22 million, respectively 5.82%.
The breakdown structure of the income is as follows:
Th. RON
Energy supply on balancing energy market
and day ahead market
Management and consultancy services
Electricity sale - Trading
Revenue from services related to AMR system
Total
Source: Electrica
Absolute
values
2016
356,982
Revenue
structure
2016
98.50%
Absolute
values
2015
379,039
Revenue
structure
2015
98.78%
Absolute
values
2014
230,731
Revenue
structure
2014
94.36%
-
723
4,683
362,388
-
0.20%
1.30%
100%
-
-
4,669
383,708
-
-
1.22%
100%
9,051
-
4,735
244,517
3.7%
-
1.94%
100%
Other income
Other income mainly include income from rent and penalties
applied to clients for delayed payments.
Electricity purchased
The purchased electricity includes the cost of the electricity
purchased for the settlements on the balancing market
and the Day-Ahead Market, and it reached RON 347,593
thousands in 2016 dropped by RON 21,091 thousands in
2015.
Amortisation of tangible and intangible assets
The amortisation expense
increased by RON 3,265
thousands, reaching the amount of RON 23,507 thousands
in 2016, from RON 20,242 thousands in 2015, due to the
commissioning made in previous period.
Salaries and other benefits of the employees
In the year 2016, the expenses related to salaries and
other benefits of the employees increased by RON 3.867
thousands, reaching RON 20,504 thousands from RON
16,637 thousands in 2015.
Adjustments on impairment of trade receivables and
other receivables
In the year 2016, due to the fact that some clients (Romenergy
Industries, Elektra Management and Transenergo Com) were
subject to insolvency procedures, the Company accounted
adjustments on impairment of trade receivable and other
receivables in the amount of RON 38.392 thousands.
Change in provisions, net value
During the year 2015, the Company has recognized a
provision for the amount of RON 31,250,650 for disputes with
National Agency for Fiscal Administration “NAFA” having as
object the penalties for delay in the payment claimed by the
NAFA following the unfavourable decision 1029/17.04.2015.
Also, during the year 2016 the Company has created
additional provisions in the amount of 23,648,000 RON as a
result of the court decision to reject the appeal made to the
enforcement procedure. In December 2016, the Company
made payments in the amount of RON 41,210,654 RON as
a result of the forced execution received in connection with
these litigations and reversed the provisions constituted.
Operational Profit
As a result of the above mentioned factors for the year
2016, the Company reported a loss resulting from the
operating activity in amount of RON 115,684 thousands
increased compared with RON 72,029 thousands in 2015.
Financial revenues
The major financial revenues of Electrica SA consist of the
dividends distributed by its subsidiaries.
The income from the dividends distributed by subsidiaries
in the year 2016 are in amount of RON 374,838 thousands
compared to RON 344,648 thousands in the year 2015, its
structure being as follows:
RON
Societatea de Distributie a Energiei Electrice Muntenia Nord SA
Societatea de Distributie a Energiei Electrice Transilvania Nord SA
Societatea de Distributie a Energiei Electrice Transilvania Sud SA
Societatea de furnizare a energiei electrice Electrica Furnizare SA
TOTAL
Source: Electrica
2016
95,357,840
99,130,118
93,404,755
86,945,796
374,838,509
2015
87,406,431
59,214,482
62,288,316
135,738,720
344,647,949
Another category of financial revenues is represented by interests,
which decreased to RON 14,784 thousands in 2016 compared to
the amount of RON 26,380 thousands in 2015.
The Company’s strategy was focused on placing the funds from
IPO through the banks that have subscribed, as part of the
Consortium, in risk-free bonds and short-term deposits.
Profit before tax
In 2016, the profit before tax decreased by RON 28,448
thousands or 9.46%, to RON 272,260 thousands, from RON
300,708 thousands in 2015, due to an increase of operating
expenses following the enforcement procedures conducted by
fiscal authority.
Income tax expense
In the year 2016, the Company reversed the deferred tax expense
in the amount of RON 7,230 thousands because in the future it is
not expected to obtain a taxable profit to offset this tax.
Net Profit for the year
Due to the above mentioned factors, the net profit for the year
2016 decreased by 12% against the year 2015, to RON 265,026
thousands from RON 300,864 thousands.
The main objective of the Company
is to maximize the
net individual profit of Electrica SA, by efficient control and
coordination of the investments in subsidiaries.
6 OThER INFORMATION
6.1
Personnel
The average number of employees decreased in 2016 as
compared to 2015 by eight employees, to 130 employees from
138 employees, as a result of the lay-offs made under the
Company’s reorganization and restructuring program, while the
effective number of employees was 142 in 2016, respectively 136
in 2015.
On 31 December 2016, approximately 95% of the Company’s
employees were Union members, and their employment
conditions are governed by the Collective Labor Contract, which
was extended for a period of maximum 12 months starting
with 1st of January 2017 and submitted to the Territorial Labor
Inspectorate of Bucharest. Electrica did not faced strikes or other
forms of labour disturbances that might have interfered with the
Company’s activity, and the Company’s Management trusts that
the relations with the employees are good. n 2016 the program
of mutual voluntary leave with compensatory payments has been
continued.
The Company issued internal regulations that mainly accommodate
the provisions related to the general dispositions on employment,
non-discrimination, complaint handling procedure, safety and
health at work, rights and obligations of the employer and
employees, rules concerning the discipline at work, disciplinary
sanctions and disciplinary misconduct, rules concerning the
disciplinary procedure, criteria and procedures concerning the
professional evaluation of the employees and finale dispositions.
The Company focuses on training programs
in order to
continuously employees’ improvement as well as specialization
whenever applicable, ensuring employees providing professional
development and processes optimization through optimal use of
the existing resources.
The Company’s Management believes that this approach on
training and development helps the employees in efficiently cope
with the professional challenges.
The predictable development of
6.2
the Company
The Company estimates that for 2017 the income from
dividends received from the subsidiaries will be higher than
in 2016. The Company expects that the 2017 profit will be
slightly higher than in 2016.
The company estimates a reduction of revenues and expenses
from the electricity transactions on the balancing market,
although with a higher margin than in 2016.
6.3 Main risk and uncertainties
•
•
•
Fondul Proprietatea, as a minoritary shareholder of the
distribution and supply subsidiaries of the Group, may try
to block the decision making process;
Romania’s electricity demand is linked to various factors
beyond control of the subsidiaries, such as economic,
political and climate-changing instances;
The supply segment may be exposed to increasing
competition due to the liberalization of the market;
• Group’s supply segment might lose its status of supplier of
last resort; The regulation in place regarding the electricity
supply envisages the liberalization calendar and the fact
that costumers can chose the supplier. By eliminating the
regulated prices according to the liberalization calendar
new opportunities rise for the number of households’
customers exercising their eligibility right to increase.
Thus, supplier switching experienced by the households
customers can influence the supply’s subsidiaries client
base in a negative way.
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6.4
Financial Risk Management
To implement the risk management system as well as an
internal control/management system at group
level, the
following provisions were considered:
• Order of the Ministry of Public Finance no. 946/2005
regarding the development of an
internal control/
management system, with subsequent amendments and
completions;
•
•
experience difficulties and delays;
The Group may face risks associated with restitution
claims with regard to certain real estate properties;
Electrica Furnizare may be prohibited by the legislation
in place from suspending or interrupting the supply of
electricity to certain customers, even if such customers
are in payment default;
• Group position on supply and distribution markets could
expose to actions related to dominant position abuse;
• Work strikes or other forms of activity interruption could
• Government Order no. 119/1999 regarding
internal
control and preventive financial control, with subsequent
amendments and completions;
Internal procedures adopted with this purpose;
International Standards on Risk Management Systems;
Best practices and methodologies applied in listed and
non-listed companies.
•
•
•
A major concern for the management is building awareness of
employees regarding the importance of managing risks inside
the organization and the necessity of direct involvement in
the risk management process, as well as of alignment to the
best practices at national and international level by following
legislation in place, standards and the related norms.
In 2016, within Electrica Group, it was carried out the
identification of risks and it has been proposed and adopted
appropriate control measures, aiming to avoid or reduce such
risks in the future.
For 2017, the Company considers the development of risk
management system according to the provisions of the
international standard SR ISO 31000:2010 “Risk Management
– Principles and Guidelines” and its integration within Electrica
Group.
From the risks regarding the activity and the section of
Electrica Group identified in 2016 it could be named:
•
Supply activity can confront with the risk of increased
competition due to electricity market liberalization and
could lose the title of supplier of last resort;
Supply segment can confront with increased market
volatility, from quantities and prices point of view;
The financial performance may be negatively influenced
by changing tariffs on the regulated market and by the
electricity prices;
Romania’s electricity demand is linked to various factors
beyond control of the subsidiaries, such as economic,
political and climate-changing instances;
The group has to comply with regulatory requirements
and to maintain active the regulatory approvals, being
exposed to significant liabilities in case of non-compliance;
Components of the distribution subsidiaries’ network are
subject to deterioration over time;
The assets or group activity may be negative impacted by
natural disasters or unauthorized human interventions;
The groups’ IT systems are outdated and are not
integrated;
The implementation of a new integrated ERP system may
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
have a negative effect on the Group activity;
Failure to execute management’s goals from the business
strategy may lead to cost savings and revenue forecasts
being lower than predicted;
Reputation, future prospects or results of operations may
be materially adversely affected by claims or litigation;
Failure to execute public procurement legislation by the
Group member s may lead to fines and voided contracts;
Property rights related to certain real estate owned by
the Group members could be considered uncertain;
The Company may face additional claims from tax
authorities for budgetary debts due for previous periods;
The Romanian taxation system is subject to change and
may issue inconsistent interpretations of tax legislation;
After the Offering, the State will continue to have
significant influence over the Company;
Fondul Proprietatea, as a minoritary shareholder of the
distribution and supply subsidiaries of the Group, may try
to block the decision making process;
The existence of companies involved in the electricity
distribution and network construction in the area where
the Group’s distribution subsidiaries performed their
activity;
Regulation risk generated by frequently changes and
without appropriate consulting sessions with
the
electricity distribution operators negatively influence the
budget planning capabilities;
The risk generated by regulation
responsible with stability on energy market.
in area of part
FINANCIAL RISK MANAGEMENT
The Company has exposure to the following risks arising
from financial instruments:
•
•
• market risk.
credit risk;
liquidity 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-
owned companies. Until 2012, the Company had a
concentration of credit risk with Oltchim SA, company
that became insolvent. The Company is in progress of
implementation of a policy regarding the insurance
of receivables.
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.
Cash, bank deposits, treasury bills and government
Impairment
The ageing of trade receivables was as follows:
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
December 31, 2016
December 31, 2015
Gross value
50,863,472
42,817,162
1,940,414
507,346
7,623,813
299,311
Bad debt
allowance
Gross value
Bad debt
allowance
-
41,487,637
(32,097,026)
27,556,241
(1,543,044)
8,088,743
-
-
-
(507,346)
(5,530,018)
(299,311)
399,034
474,206
104,441
(194)
(474,206)
(104,441)
Past due more than 3 years
670,503,816
(670,503,816)
667,158,074
(667,158,074)
Total
Source: Electrica
774,555,334
(710,480,561)
745,268,376
(667,736,915)
Bad debt allowance related to Oltchim SA (RON 667,735,915) and to Transenergo (RON 31,561,656).
RON
December 31, 2016
December 31, 2016
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
(II)
LIqUIDITY RISK
50,863,472
10,720,136
397,370
-
2,093,795
64,074,773
41,487,637
27,556,241
8,088,743
398,840
-
77,531,461
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.
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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,
thousands RON
Financial liabilities
December 31, 2016
Trade payables
Total
December 31, 2015
Trade payables
Total
Source: Electrica
(III) MARKET RISK
Carrying value
Contractual cash flows
67,591
67,591
60,634
60,634
Total
67,591
67,591
60,634
60,634
less than 1 year
67,591
67,591
60,634
60,634
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 market risk management
is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
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 the Company is the Romanian Leu (RON).
The currencies in which these transactions are primarily
denominated are RON, EUR and USD. The Company also
has deposits and bank accounts denominated in foreign
currency (EUR and USD). 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:
thousands RON
Cash and cash equivalents
Deposits (deposits, treasury bills and
government bonds)
Net statement of financial position
exposure
Source: Electrica
31 decembrie 2016
USD
4,669
-
31 decembrie 2016
EUR
2,533
-
31 decembrie 2015
EUR
10,241
139,581
4,669
2,533
149,822
The following significant exchange rates have been applied during the year:
Average rate
2016
4.4908
4.0569
2015
4.4450
4.0057
RON
1 EUR
1 USD
Source: Electrica
RON
1 EUR
1 USD
Year-end spot rate
2016
4.5411
4.3033
2015
4.5245
4.1477
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 affected equity,
Profit before tax
Effect (Ron)
December 31, 2016
EUR (5% movement)
USD (5% movement)
126,650
233.454
Strengthening
respectively, 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,
December 31, 2015
EUR (5% movement)
USD (5% movement)
Source: Electrica
7,491,092
-
Impairment
(126,650)
(233.454)
(7,491,092)
-
A reasonably possible strengthening (weakening) of the
USD against RON at 31 December would have affected the
measurement of financial instruments denominated in a
foreign currency and profit before tax, and affected equity,
respectively, 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.
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:
thousands RON
Fixed-rate instruments
Financial assets
Bank deposits (cash and cash equivalent)
Deposits, treasury bills and government bonds
Restricted cash
Total
Source: Electrica
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.
6.5
Environmental aspects
The company has
Integrated Quality,
implemented an
Environmental, Occupational Health & Safety Management
System which aims to
improve the performances of
environmental pollution, prevention and responsible waste
management.
In 2016 have been identified and evaluated all environmental
aspects associated processes developed
in normal and
emergency conditions that have an environmental impact.
For efficient management of their own procedures have been
elaborated in accordance with the specific legislation and
requirements of the reference standard ISO 14001.
Periodic evaluation of compliance was achieved by: audits,
periodic environmental reports.
6.6
Research and development activity
In accordance with the “Elements of the S.E. Electrica’s Board
Strategic Plan for the period 2015-2018 Electrica Group currently
carries Pilot Project “Green highway” by introducing in investment
program for 2016 of a pilot project with 6 stations standardized
-fast chargers for electric vehicles - investment approved by the
Board of Administration decision no.3 in February 10, 2016 and
approved by the General Meeting of Shareholders decision no.1
from March 31, 2016 and no 3 from October 21, 2016.
In 2016 S.E. Electrica signed with OMV Petrom a Memorandum
of Understanding to initiate a partnership in electromobility
domain (MoU) for placement in public filling stations with
commercial high interest of fast charging stations [fast chargers
type tristandard].
31 decembrie 2016
31 decembrie 2015
193,788
1,867,115
134,492
2,195,395
181,248
1,900,395
-
2,081,643
Strategic Plan for the period 2015-2018 Electrica” fulfilling the
requirements as benefits, promoting the pilot project “Green
Highway” has a strong innovative character and enables the
development of new business for S.E.Electrica , management of
fast chargers impact on electricity networks.
Electrica is promoting technological innovation by participating in
research and development co-financed / financed by European
funds, having the possibility to test new technologies to manage
and optimize energy efficiency and operational electrical networks
distribution electricity are integrated a high level of distributed
generation sources.
•
By participating in these research, development and innovation
projects with financing / co-financing the grants Electrica has
the following benefits:
• making access to cutting-edge technologies in the field of
optimizing the operating modes of the electricity distribution
network (EDN) in terms of network connection of renewable
electricity production (distributed or concentrated)
improving the safety and reliability of isolated electrical
systems, power quality provided through the provision of
rapid, low-cost reserves through flexible task;
the possibility of identifying criteria in working to promote
smart grids - smart grids and smart metering solutions;
use the opportunities to develop self-financing business
portfolio of Electrica;
developing new skills through transfer of know-how;
compliance with the best practices of similar companies in
Europe by winning image;
creating new opportunities for future participation of
S.E. ELECTRICA S.A. projects funded by the European
Commission.
•
•
•
•
•
in the
important endeavour of S.E. Electrica S.A.
in
Another
promoting technological innovation is to disseminate the
solutions for updating its electric grid using a smart grids
concept
international conferences/symposia that
S.E.Electrica S.A. holds every year in November and which
propose as an alternative topic the smart grids and smart
metering solutions. We mention that S.E. Electrica S.A. has
supervised the organization of the international symposium
called “Smart Grids 2016”.
In addition to integration with the “Elements of the Board
We emphasize the participation in the WEC conferences
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with presentations concerning technological innovation and
promotion of new technologies that improve operational
efficiency. Thus, in June 2016, Electrica SA participated with
three papers accepted to FOREN2016.
6.7
Legal documents reported
Legal documents reported in 2016, according to art. 225 of
Law 297/ 2004:
f Filiala de Intretinere si Servicii Energetice „Electrica Serv”
SA – C241/28.12.2016 - valid until 30.06.2017 - Complex
road transport services- value: RON 780 thousand.
The Company has sent current reports to the market to
inform the investors and all the other stakeholders on the
events presented above.
Regarding energy supply subsidiary, in January 2017 took place
Ordinary General Shareholders Meeting through which were
implemented the stipulations of the new Article of Association
approved in December 2016 namely the reduction of Board
of Directors members from 5 members to 3 members. The
Shareholders meeting decisions through which were adopted
the mentioned decisions were appealed in court by the
minority shareholder.
Key
factors,
6.9
important market
directions and trends influencing Electrica’s
operational results
The Board of Directors acknowledges between key factors,
important market directions and trends that it cannot control
and those that it can control (although frequently to a limited
extent).
The key factors, important market directions and trends that
the Board of Directors cannot control are:
•
the cost of electricity purchased,
•
the macroeconomic trends of Romania
the demand of electricity
•
•
the domestic general regulatory and legal framework in
which the Company operates, including ANRE policies.
The key factors and the directions that the Board of Directors
can control, at least partially, include the Company’s capital
investments and the operational costs.
The Board of Directors considers that on the medium and
long term the growth of Romania’s real GDP and the overall
economy will have to a certain extend a positive impact on
the electricity consumption in Romania, which will positively
affect Electrica’s activity.
In particular, the Board of Directors considers that, as long as
Romania’s economic growth will continue to exceed EU one,
electricity consumption per capita in Romania is expected to
continue to grow. On the other hand, a significant slowdown
in the growth of GDP and that of the Romanian economy
in general could have some negative effect on electricity
consumption in Romania and, respectively, on Electrica activity.
6.8
Subsequent events
During the period between the 2016 financial year closing
and the date of the present report, the following relevant
events took place at Electrica SA level:
f On January 4th, 2017, the Company
informed
its
shareholders and investors about the conclusion in the
second semester of 2016 of a legal act with a value
greater than EUR 50,000 with Filiala de Intretinere si
Servicii Energetice „Electrica Serv” SA, affiliate, where
Electrica is the sole shareholder. The auditor report
of factual findings according to art. 225 of Law no.
297/2004 regarding the transactions reported in the
second semester of 2016 was published on January 31st,
2017;
f On January 27th, 2017, the Board of Directors took note
of the cases disputed by Electrica SA in contradiction with
ANRE and approved the following:
•
legal actions
• Withdrawal of
in cases on the
suspension of applicability of ANRE orders by
which the distribution tariffs were determined for
2015 and 2016;
Formulating motions of judgement suspension in
cases on the annulment of ANRE orders by which
the distribution tariffs were determined for 2015
and 2016, until the settlement of the case on the
annulment of ANRE Order no. 146/2014, by which
the regulatory rate (RRR) was changed.
f On January 27th, 2017, the Board of Directors decided to
reappoint Mr. Cristian Busu as BoD chair for a mandate of
one year. Also, the Board of Directors decided the same
composition of the BoD’s committees and re-elected
their chairs for one year mandate. Detailed information
is provided under chapter 4.4 of the present report;
f Also, during the same meeting, the Board of Directors
decided:
•
•
To revoke Mr. Ramiro Robert Eduard Angelescu
from the position of Executive Manager of the
Sales Coordination Division of SE Electrica SA,
starting as of January 27th 2017.
To appoint Ms. Livioara Sujdea, as Executive
Manager - Chief Distribution Officer, starting with
February 1st 2017.
f On January 30th, 2017, the shareholders and the
investors were informed that as of January 27th, 2017,
in its Balancing Responsible Party business line, Electrica
SA had a 36.3 MRON exposure on one of its clients,
Transenergo. As the client filed for its insolvency, with ELSA
and another market player also filing separate insolvency
requests, management expects low recoverability of the
total exposure.
ANNEX 1
Current report - status of compliance with the new Bucharest Stock Exchange Corporate Governance Code as of 9 March 2017
Nr.
Provisions of BSE Corporate Governance Code
Section A
A.1.
Responsibilities
All companies should have internal regulation of
the Board which
includes terms of reference/
responsibilities for Board and key management
functions of the company, applying, among others,
the General Principles of this Section.
Y
L
L
A
I
T
R
A
P
/
O
N
/
S
E
Y
-
n
o
n
r
o
f
n
o
s
a
e
R
e
c
n
a
i
l
p
m
o
C
yES
e
c
n
a
i
l
p
m
o
c
Additional information
the
terms of
ELSA CGC, adopted in February 2015 and published
on the company’s website, includes the Articles of
Association of ELSA, the Charter of the BoD and of
its committees. All the above mentioned documents
encompass
reference/the BoD’s
responsibilities, as well as those of the company’s
key management.
In 2016, the Board conducted an extensive project
to review the
Articles of Association and the
above mentioned Charters in order to detail the
responsibilities of the Board, of its committees and
of the management team, taking into consideration
the recomendations retained in the Board activity
evaluation report of the prevoius year.
The last version of ELSA CGC was published on
company’s website on 19th of January 2017.
Such provisions are mentioned in ELSA’s CGC, in the
Articles of Association, in the Code of Ethics, as well
as in the revised BoD Charter
ELSA’s BoD comprises 7 members since 14 December
2015.
All the members of ELSA’s BoD are non-executive.
Four out of seven are independent members.All
the independent members submitted a declaration
of independence, when they were nominated as
candidates by the shareholders. The declaration was
made in accordance with the criteria included in the
company’s Articles of Association, which are similar
with those detailed by the Code.
A.2.
A.3.
A.4.
Provisions for the management of conflict of interest
should be included in Board regulation.
yES
yES
yES
The Board of Directors should have at least five
members.
The majority of the members of the Board of Directors
should be non-executive. At least one member of the Board
of Directors or Supervisory Board should be independent,
in the case of Standard Tier companies. Not less than
two non-executive members of the Board of Directors
or Supervisory Board should be independent, in the case
of Premium Tier Companies. Each member of the Board
of Directors or Supervisory Board, as the case may be,
should submit a declaration that he/she is independent
at the moment of his/her nomination for election or
re-election as well as when any change in his/her status
arises, by demonstrating the ground on which he/she
is considered independent in character and judgement
in practice and according to the following criteria:A.4.1.
Not to be the CEO/executive officer of the company
or of a company controlled by it and not have been in
such position for the previous 5 years;A.4.2. Not to be
an employee of the company or of a company controlled
by it and not have been in such position for the previous
five (5) years;A.4.3. Not to receive and not have received
additional remuneration or other advantages from the
company or from a company controlled by it, apart from
those corresponding to the quality of non-executive
director;A.4.4. Is not or has not been an employee of, or
has not or had not any contractual relationship, during
the previous year, with a significant shareholder of the
company, controlling more than 10% of voting rights or
with a company controlled by it;A.4.5. Not to have and
not have had during the previous year a business or
professional relationship with the company or with a
company controlled byit, either directly or as a customer,
partner, shareholder, member of the Board/ Director, CEO/
executive officer or employee of a company having such a
relationship if, by its substantial character, this relationship
could affect his/her objectivity;A.4.6. Not to be and not
have been in the last three years the external or internal
auditor or a partner or salaried associate of the current
external financial or internal auditor of the company or a
company controlled by it;A.4.7. Not to be a CEO/executive
officer in another company where another CEO/executive
officer of the company is a non-executive director;A.4.8.
Not to have been a non-executive director of the company
for more than twelve years;A.4.9. Not to have family ties
with a person in the situations referred to at points A.4.1.
and A.4.4.
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The professional biography of each Board member is
published on ELSA’s website in the IR section>2015
AGA >GMS from 14th of December 2015.
B.3.
its responsibilities, the audit committee
Among
should undertake an annual assessment of the
system of internal control.
yES
A.5.
A.6.
A.7.
A.8.
and
commitments
A Board member’s other relatively permanent
professional
engagements,
including executive and non- executive Board
positions in companies and not-for-profit institutions,
should be disclosed to shareholders and to potential
investors before appointment and during his/her
mandate.
Any member of the Board should submit to the
Board,
information on any relationship with a
shareholder who holds directly or indirectly, shares
representing more than 5% of all voting rights.
The company should appoint a Board secretary
responsible for supporting the work of the Board.
The corporate governance statement should inform
on whether an evaluation of the Board has taken
place under the leadership of the chairman or the
nomination committee and, if it has, summarize key
action points and changes resulting from it. The
company should have a policy/guidance regarding
the evaluation of the Board containing the purpose,
criteria and frequency of the evaluation process.
A.9.
The corporate governance statement should contain
information on the number of meetings of the
Board and the committees during the past year,
attendance by directors (in person and in absentia)
and a report of the Board and committees on their
activities.
A.10. The
corporate governance
should
contain information on the precise number of the
independent members of the Board of Directors or
of the Supervisory Board.
statement
A.11. The Board of Premium Tier companies should set up
a nomination committee formed of non-executives,
which will lead the process for Board appointments
and make recommendations to the Board. The
majority of
the nomination
committee should be independent.
the members of
yES
yES
yES
yES
yES
yES
yES
Section B
B.1.
Risk management and internal control system
the
relevant
The Board should set up an audit committee, and
at least one member should be an independent
non-executive. The majority of members, including
the chairman, should have proven an adequate
functions and
qualification
to
least one
responsibilities of the committee. At
member
of the audit committee should have proven and
adequate auditing or accounting experience.
In
the case of Premium Tier companies, the audit
committee should be composed of at least three
members and the majority of the audit committee
should be independent.
The audit committee should be chaired by an
independent non-executive member.
yES
yES
B.2.
When a member of the Board has entered into a
relation with a shareholder who directly or indirectly
holds shares representing more than 5% of all voting
rights, he/she informed operatively the entire Board.
The company has a General Secretariat, which
functionally reports to the BoD.
The A.8 provision was observed both in 2015 and in
2016 - the Board has carried out an annual review
process of its activity - with the support of an
external consultant in 2015, respectively by using a
self-assessment questionnaire in 2016 (alternate).
Additionally, the Board has decided to conduct that
at the end of each meeting a brief analysis based on
key aspects of its activity and to track the evolution
of the recorded results.
More details are provided in the Annual Reports
2015 and 2016 - cap 6.1 and 6.2.
Details regarding the observance of this provision are
presented in the Annual Reports 2015 and 2016- cap
6.1 and 6.2.
Four out of seven members of the BoD are
independent.
followed during
The A.11 provision was
the
previous BoD’s mandate. Additionally, the Articles of
Association and ELSA’s CGC highlight the existence
of this committee (Nomination and Remuneration
its structure and responsibilities.The
Committee),
committee and
in
its structure were established
the first meeting of the new BoD (elected on 14
December 2015), meeting which took place on 13
January 2016 and revised in 2017 according to the
provisions of the Charter. The committee composition
is: Mr. Bogdan Iliescu (chair), Ms. Arielle Malard de
Rothschild, Ms. Corina Popescu. Two members are
independent.
The B.1 provision was followed during the previous
BoD’s mandate. Additionally,
the Articles of
Association and ELSA’s CGC highlight the existence
of this committee (Audit and Risk Committee) , its
structure and responsibilities.
The committee and its structure were established
in the first meeting of the new BoD (elected on 14
December 2015), meeting which took place on 13
January 2016and revised in 2017 according to the
provisions of the Charter. The committee composition
is: Mr. Pedro Mielgo Alvarez (chair), Ms. Arielle
Malard de Rothschild and Mr. Bogdan Iliescu. All
members are independent.
In 2016, the BoD has elected Mr. Pedro Mielgo Alvarez
as chairman of the Audit Committee, independent
non-executive board member, re-elected in 2017.
the
regularly
adequacy
reviewing
for detecting
and
internal control policies,
fraud and the
According to the revised Charter, the Audit and Risk
Committee (ARC) has the following responsabilities
with regards to internal control matters:
(i)
implementation of key
including policies
prevention of bribery;
(ii) reviewing related party transactions in line with
a policy developed by the Committee and approved
by the Board;
(iii) reviewing annually a report by the head of
Internal Audit assessing the effectiveness of the
system of internal control across the Group.
The evaluation report for 2016 provided by the CGC
was prepared and discussed by ARC in its meeting of
8 March 2017.
The evaluation report for 2016 provided by the CGC
was prepared and discussed by ARC in its meeting of
8 March 2017.
The ARC has at least the following responsibilities
with regards to risk management matters:
(i) reviewing regularly the main risks facing the
Company and Group, recommending to the Board
relevant policies for their identification, mapping,
management and mitigation of risk;
(ii) reviewing annually a report from management
assessing the effectiveness of the system of risk
management across the Group;
Based on the new provisions introduced in the ARC
Charter, the evaluation report for year 2016 was
prepared and discussed by ARC in its meeting of 8
March 2017.
The ARC has the following responsibilities with
regards to auditing matters:
(i) approving a Group-wide, annual risk-based audit
plan as well as any material changes to the plan, and
receiving regular reports on activities, key findings,
and follow up regarding internal audit reports;
(ii) advising the Board on the appointment, removal
and remuneration of the Head of Internal Audit;
(iii) monitoring the adequacy, effectiveness and
independence of the internal audit function;
B.4.
B.5.
B.6.
The assessment should consider the effectiveness
and scope of the
internal audit function, the
adequacy of risk management and internal control
reports to the audit committee of the Board,
management’s responsiveness and effectiveness in
dealing with identified internal control failings or
weaknesses and their submission of relevant reports
to the Board.
The audit committee should review conflicts of
interests in transactions of the company and its
subsidiaries with related parties.
The audit committee should evaluate the efficiency
of the internal control system and risk management
system.
yES
yES
yES
B.7.
The audit committee should monitor the application
of statutory and generally accepted standards of
internal auditing. The audit committee should
receive and evaluate the reports of the internal
audit team.
yES
B.8. Whenever the Code mentions reviews or analysis to
be exercised by the Audit Committee, these should
be followed by cyclical
(at least annual), or ad-hoc reports to be submitted
to the Board afterwards.
yES
B.9. No shareholder may be given undue preference over
other shareholders with regard to transactions and
agreements made by the company with shareholders
and their related parties.
B.10. The Board should adopt a policy ensuring that
any transaction of the company with any of the
companies with which it has close relations, that is
equal to or more than 5% of the net assets of the
company (as stated in the latest financial report),
should be approved by the Board following an
obligatory opinion of the audit committee.
B.11. The
separate
internal audits should be carried out by
(internal audit
a
department) within the company or by retaining an
independent third-party entity.
structural division
internal audit department,
B.12. To ensure the fulfillment of the core functions of
the
it should report
functionally to the Board via the audit committee.
For administrative purposes and in the scope related
to the obligations of the management to monitor
and mitigate risks, it should report directly to the
chief executive officer.
yES
Provisions on this matter are included in ELSA’s CGC.
yES
yES
yES
Within the revised ARC Charter, it was included the
committee responsability regading the review of
related party transactions, according with a policy
developed by the Committee and approved by the
Board.The Board has initiated several discussions and
analysis on the matter and set as objective to fynalize
the policy by the end of the current year.
The internal audit is conducted by the Internal Audit
Department.
The Internal Audit Department reports functionally
to the BoD through the ARC, while administratively
reports to the CEO.
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The remuneration limits of the General Manger and
of the other mandate managers were approved by
the General Meeting of Shareholders (GMS) on July
9th 2015. In March 2016 te GMS approved the new
Directors Remuneration Policy.
the
During
remuneration structure of the mandate managers
within the company and the group.
The remuneration Policy was discussed and approved
by the Board in its meeting of 9 March 2017.
the year 2016,
the BoD
revised
Section C
C.1.
Fair rewards and motivation
The company should publish a remuneration policy
on its website and include in its annual report a
remuneration statement on the implementation of
this policy during the annual period under review
yES
that allows stakeholders
The remuneration policy should be formulated
in such a way
to
understand the principles and rationale behind
the remuneration of the members of the Board
and the CEO, as well as of the members of the
Management Board in two-tier board systems. It
should describe the remuneration governance and
decision-making process, detail the components
of executive remuneration (i.e. salaries, annual
bonus, long term stock-linked incentives, benefits
in kind, pensions, and others) and describe each
component’s purpose, principles and assumptions
(including the general performance criteria related
to any form of variable remuneration). In addition,
the remuneration policy should disclose the duration
of the executive’s contract and their notice period
and eventual compensation for revocation without
cause.
remuneration
The
the
implementation of the remuneration policy vis-à-vis
the persons identified in the remuneration policy
during the annual period under review.
report should present
Any essential change of the remuneration policy
should be published on the corporate website in a
timely fashion.
yES
The company has both an Investor Relations function
and a dedicated Investor Relation section on its
website (both
in Romanian and English). In the
Investors section on Electrica’s website are published
all the relevant information for investors.
Section D
D.1.
Building value through investors’ relations
Investor Relations section, both
The company should have an Investor Relations
function - indicated, by person (s) responsible or an
organizational unit, to the general public. In addition
to information required by legal provisions, the
company should include on its corporate website
a dedicated
in
Romanian and English, with all relevant information
of interest for investors, including:
D.1.1. Principal corporate regulations: the articles
shareholders’ meeting
of association, general
procedures.
D.1.2. Professional CVs of the members of
its
governing bodies, a Board member’s other
professional commitments, including executive and
non-executive Board positions in companies and
not-for-profit institutions;
D.1.3. Current reports and periodic reports (quarterly,
semi-annual and annual reports);
D.1.4.
Information related to general meetings
of shareholders; D.1.5. Information on corporate
events;
D.1.6. The name and contact data of a person who
should be able to provide knowledgeable information
on request;
D.1.7. Corporate presentations (e.g. IR presentations,
results presentations, etc.), financial
quarterly
statements (quarterly, semi- annual, annual), auditor
reports and annual reports.
D.2.
A company should have an annual cash distribution
or dividend policy, proposed by the CEO or the
Management Board and adopted by the Board, as
a set of directions the company intends to follow
regarding the distribution of net profit. The annual
cash distribution or dividend policy principles should
be published on the corporate website.
yES
The BoD approved the Dividends Policy in its meeting
of 27 January 2017.
D.3.
D.4.
D.5.
D.6.
D.7.
D.8.
D.9.
D.10.
from
A company should have adopted a policy with
respect to forecasts, whether they are distributed
or not. Forecasts means the quantified conclusions
of studies aimed at determining the total impact
of a list of factors related to a future period (so
called assumptions): by nature such a task is based
level of uncertainty, with results
upon a high
sometimes significantly differing
forecasts
initially presented. The policy should provide for
the frequency, period envisaged, and content of
forecasts. Forecasts, if published, may only be part
of annual, semi-annual or quarterly reports. The
forecast policy should be published on the corporate
website.
The rules of general meetings of shareholders
should not restrict the participation of shareholders
in general meetings and the exercising of their
rights. Amendments of the rules should take effect,
at the earliest, as of the next general meeting of
shareholders.
The external auditors should attend the shareholders’
meetings when their reports are presented there.
The Board should present to the annual general
meeting of shareholders a brief assessment of the
internal controls and significant risk management
system, as well as opinions on issues subject to
resolution at the general meeting.
Any professional, consultant, expert or financial
analyst may participate in the shareholders’ meeting
upon prior invitation from the Chairman of the
Board. Accredited journalists may also participate
in the general meeting of shareholders, unless the
Chairman of the Board decides otherwise.
The quarterly and semi-annual financial reports
should include information in both Romanian and
English regarding the key drivers influencing the
change in sales, operating profit, net profit and
other relevant financial indicators, both on quarter-
on- quarter and year-on-year terms.
A company should organize at least two meetings/
conference calls with analysts and investors each
year. The information presented on these occasions
should be published in the IR section of the company
website at the time of the meetings/conference
calls.
If a company supports various forms of artistic and
cultural expression, sport activities, educational
or scientific activities, and considers the resulting
impact on the innovativeness and competitiveness
of the company part of its business mission and
development strategy, it should publish the policy
guiding its activity in this area.
NO
initiated several discussions and
The Board has
analysis on the matter and set as objective to fynalize
the policy by the end of the current year.
yES
yES
yES
yES
yES
yES
yES
The rules of general meetings of shareholders are
included within each convening notice, published
in
requirements,
the
approximately 45 days prior to the meeting.
accordance with
legal
The annual directors’ report, presented to the annual
general meeting of shareholders, contains the BoD’s
comments on the internal controls and significant risk
management system.
In practice, all the documents submitted for the
approval of the GMS are endorsed by the BoD; this
is clearly stated in the documents presented to the
shareholders.
On this aspect, shareholders’ agreement present to
the General Meetings was requested each time it
was needed.
Electrica holds quarterly teleconferences with analysts
and investors.
In 2016, the BoD analyzed and approved the Corporate
Social Responsibility Policy,
including programs
supporting the areas of activity / actions, grants
and principles of granting sponsorships / donations.
The most relevant information was published on the
company website.
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ANNEX 2 – INTERNAL AUDIT REPORT
FOR 2016
The Annual Audit Plan for 2016, endorsed by the Audit Committee and approved by the Board of Directors by the
Decision no.39/08.12.2015, provided for seven missions planned for 2016 in the following auditable areas: human
resources, technical, acquisitions, transportation, risk management, BRP activity (Balance Responsible Part). This plan
was drawn up in view of identifying the efficiency of internal controls within ELSA. On the date of audit missions
planning, the Audit & Compliance Office team was made of two internal auditors, but after April the internal audit
missions were conducted by five internal auditors.
In 2016, upon the request of the Board of Directors, were conducted two ad-hoc missions on human resources and
acquisitions auditable areas.
During the first half year 2016, 5 audit missions were conducted in the company, 3 from Annual Internal Audit Plan
and 2 ad-hoc missions. Seven audit reports were developed, containing 36 recommendations of witch 20 with high risk
impact in case of non-implementing. The missions developed in first half of year:
•
•
• Human resources activity - ad-hoc mission;
•
•
Transportation activity – planned mission;
EDN access (Electric Distribution Network) - planned mission.
Acquisitions of services – ad-hoc mission;
Enterprise risk management – planned mission;
In the second half of 2016 were conducted 3 audit missions, planned and were developed 11 internal audit reports,
containing 45 recommendations of which 18 with high risk impact in case of non-implementing. The missions developed
in second half of year:
•
•
•
Administrative activity;
BRP activity;
Acquisitions evaluation.
These missions were performed by teams made of two internal auditors supervised by the chief of internal audit
department.
The internal audit report concluded as a result of the missions were acknowledged by the management of audited
entities, endorsed by the Audit Committee and the implementation of their recommendations is consistently monitored
by their follow up sheets. As a result of the audit missions and the acceptance of their recommendations by the audited
entities and persons, the audited structures make up their own plans of measure to meet the recommendations.
During 2016 have been uptated Charta of internal audit and Code of ethic behaviour for internal auditors. Were
developed Manual of politicies and procedures for internal audit, based on CAFR (Chamber of financial auditors) model,
organization which appropriated entirely International Standards for the Professional Practice of Internal Auditor. All
these procedures were endorsed by Audit Committee and approved by Board of Directors.
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE FINANCIAL STATEMENTS
FOR ThE yEAR ENDED
31 DECEMBER 2016
Free translation from Romanian, which is the official and binding version
224 | A N N U A L R E P O R T 2 0 1 6 E L E C T R I C A S A
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CONTENTS
Separate statement of financial position
Separate statement of profit or loss
Separate statement of comprehensive income
Separate statement of changes in equity
Separate statement of cash flows
Notes to the separate financial statements
Basis of preparation
1. Reporting entity
2. Basis of preparation
3. Functional and presentation currency
4. Use of judgments and estimates
Accounting policies
5. Basis of measurement
6. Significant accounting policies
7. New standards and interpretations not yet adopted
Performance for the year
8. Revenue
9. Other operating revenue and expenses
10. Net finance cost
11. Earnings per share
Employee benefits
12. Short-term employee benefits
13. Post-employment and other long-term employee benefits
14. Employee benefit expenses
Income tax
15.
Income taxes
Assets
16. Trade receivables
17. Deposits, treasury bills and government bonds
18. Other receivables
19. Cash and cash equivalents
20. Property, plant and equipment
21.
22.
Intangible assets
Investments in subsidiaries
Equity and liabilities
23. Capital and reserves
24. Trade payables
25. Other payables
26. Provisions
Financial instruments
27. Financial instruments - fair values and risk management
Other information
28. Related parties
29. Contingencies
30. Commitments
226
227
227
228
229
230
231
231
231
232
232
240
240
240
241
241
242
242
245
245
247
247
248
248
249
250
251
251
252
253
253
253
257
258
259
226 | A N N U A L R E P O R T 2 0 1 6 E L E C T R I C A S A
SOCIETATEA ENERGETICA ELECTRICA SA
SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016
(All amounts are in RON)
Note
31 December 2016
31 December 2015
SOCIETATEA ENERGETICA ELECTRICA SA
SEPARATE STATEMENT OF PROFIT OR LOSS FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in RON)
E L E C T R I C A S A A N N U A L R E P O R T 2 0 1 6 | 227
ASSETS
Non-current assets
Property, plant and equipment
Other intangible assets
Investments in subsidiaries
Restricted cash
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
Total current assets
Total assets
EqUITY AND LIABILITIES
Equity
Share capital out of which:
Subscribed and paid in share capital
Inflation adjustment to share capital
Share premium
Treasury shares
Pre-paid capital contributions in kind from shareholders
Revaluation reserves
Legal reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Current liabilities
Trade payables
Other payables
Deferred revenue
Employee benefits
Provisions
Total current liabilities
Total liabilities
20
21
22
19
15
19
17
16
18
15
23
23
23
23
23
23
23
13
24
25
12,13
26
275,008,415
1,836,710
1,430,819,457
134,491,752
-
1,842,156,334
197,644,018
1,867,115,360
64,074,773
12,597,869
161,205
48,926
2,384,366
2,144,026,517
293,375,460
1,498,663
1,430,819,457
-
7,249,634
1,732,943,214
283,366,031
1,900,395,387
77,531,461
13,056,225
116,597
56,033
23,134,100
2,297,655,834
Revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
Impairment of trade and other receivables, net
Change in provisions, net
Other operating expenses
Operating profit
Finance income
Finance costs
Net finance income
Profit before tax
Income tax expense
Profit for the year
3,986,182,851
4,030,599,048
Earnings per share
Basic and diluted earnings per share (RON)
Note
8
9
9
14
20,21
16,18
26
9
10
10
15
11
2016
2015
362,388,192
1,709,529
(347,592,754)
(20,503,839)
(23,506,827)
(38,391,976)
31,250,650
(81,037,171)
(115,684,196)
383,708,120
1,533,233
(368,683,747)
(16,636,893)
(20,241,737)
2,832,061
(31,250,650)
(23,289,218)
(72,028,831)
389,682,646
(1,738,725)
387,943,921
373,026,201
(289,466)
372,736,735
272,259,725
(7,233,616)
265,026,109
300,707,904
156,580
300,864,484
0,78
0,89
3,459,399,290
3,459,399,290
-
103,049,177
(75,372,435)
5,144,025
709,974
156,545,204
252,240,158
3,901,715,393
1,580,589
1,580,589
67,591,033
11,716,925
540,944
3,037,967
-
82,886,869
84,467,458
3,459,399,290
3,459,399,290
-
103,049,177
(75,372,435)
2,861,525
769,261
142,932,218
292,266,081
3,925,905,117
1,795,588
1,795,588
60,633,718
7,632,190
497,084
2,884,701
31,250,650
102,898,343
104,693,931
The accompanying notes are an integral part of these separate financial statements.
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
SOCIETATEA ENERGETICA ELECTRICA SA
SEPARATE STATEMENT OF COMPREhENSIVE INCOME FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in RON, if not otherwise stated)
Note
2016
2015
Profit for the year
265,026,109
300,864,484
Other comprehensive income
Items that will never be reclassified to profit or loss
Re-measurements of the defined benefit liability
Tax related to re-measurements of the defined benefit liability
13
15
100,114
(16,018)
703,969
(112,635)
Other comprehensive income, net of tax
84,096
591,334
Total comprehensive income
265,110,205
301,455,818
The accompanying notes are an integral part of these separate financial statements.
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
Total equity and liabilities
3,986,182,851
4,030,599,048
The accompanying notes are an integral part of these separate financial statements.
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
228 | A N N U A L R E P O R T 2 0 1 6 E L E C T R I C A S A
E L E C T R I C A S A A N N U A L R E P O R T 2 0 1 6 | 229
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T
SOCIETATEA ENERGETICA ELECTRICA SA
SEPARATE STATEMENT OF CASh FLOWS FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in RON)
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Impairment of trade and other receivables, net
Net finance income
Changes in provisions, net
Income tax expense
Changes in:
Trade receivables
Other receivables
Restricted cash
Trade payables
Other payables
Employee benefits
Note
2016
2015
265,026,109
300,864,484
20
21
16,18
10
26
15
23,087,773
419,054
38,391,976
(387,943,921)
(31,250,650)
7,233,616
20,028,254
213,483
(2,832,061)
(372,736,735)
31,250,650
(156,580)
(85,036,043)
(23,368,505)
(57,437,525)
18,856,898
(134,491,752)
49,579,305
3,745,961
22,363
(23,028,726)
(631,077)
-
10,426,415
(1,369,714)
123,858
Cash generated from operating activities
(204,760,793)
(37,847,749)
Interest paid
(1,677)
(38)
Net cash from operating activities
(204,762,470)
(37,847,787)
Cash flows from investing activities
Payments for purchases of property, plant and equipment
Payments for purchase of other intangible assets
Payments for purchase of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Increase in deposits with maturity of 3 months or longer
Proceeds from deposits with maturity of 3 months or longer
Interest received
Dividends received
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
The accompanying notes are an integral part of these separate financial statements
Non-monetary transactions are presented in Note 19.
General Manager
Dan Catalin Stancu
Finance Manager
Iuliana Andronache
(16,909,651)
(757,101)
(2,437,538,086)
2,436,403,791
(109,087,392)
148,443,585
14,844,919
374,838,510
(22,560,889)
(1,034,480)
(4,093,998,000)
3,240,481,000
(144,056,000)
136,704,000
29,494,629
344,647,949
410,238,575
(510,321,791)
10
23
(291,198,118)
(244,084,165)
(291,198,118)
(244,084,165)
19
19
(85,722,013)
283,366,031
197,644,018
(792,253,743)
1,075,619,774
283,366,031
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230 | A N N U A L R E P O R T 2 0 1 6 E L E C T R I C A S A
SOCIETATEA ENERGETICA ELECTRICA SA
NOTES TO ThE SEPARATE FINANCIAL STATEMENTS FOR ThE yEAR ENDED 31 DECEMBER 2016
(All amounts are in RON, if not otherwise stated)
1 Reporting entity
These financial statements are the separate financial statements of Societatea Energetica Electrica S.A. (“Company”
or “Electrica SA”). During 2016 the Company changed its name from Societatea de Distributie si Furnizare a Energiei
Electrice Electrica S.A. to Societatea Energetica Electrica S.A.
Electrica was originally incorporated as a company in 1998 by Government Decision no. 365/1998, following the
restructuring of the former National Electricity Company (RENEL). On 1 August 2000, following the restructuring of the
former National Electricity Company (CONEL) 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, District 1, Bucharest, Romania. The Company has
unique registration number 13267221 and Trade Register number J40/7425/2000.
As at 31 December 2016 the major shareholder of Electrica SA is the Romanian State, represented by the Ministry
of Energy (48.78%), after the ownership dilution following an initial public offer. The next largest shareholder is the
European Bank for Reconstruction and Development with 8.66%.
As at 31 December 2016 and 2015, Electrica SA has the following investments in subsidiaries:
Subsidiary
Activity
Tax code
Societatea de Distributie
a Energiei Electrice
Muntenia Nord SA
Societatea de Distributie
a Energiei Electrice
Transilvania Nord SA
Societatea de Distributie
a Energiei Electrice
Transilvania Sud SA
Electrica Furnizare SA
Electrica Serv SA
Servicii Energetice
Muntenia (In
reorganization)
Servicii Energetice
Oltenia SA (In
reorganization)
Servicii Energetice
Moldova SA (In
bankruptcy)*
Servicii Energetice
Dobrogea SA (In
bankruptcy)*
Electricity distribution
in geographical area of
Muntenia Nord
Electricity distribution
in geographical area of
Transilvania Nord
Electricity distribution
in geographical area of
Transilvania Sud
Electricity Supply
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)
Head Office % shareholding
as at 31 Dec
2016
78.0000021%
Ploiesti
% shareholding
as at 31 Dec
2015
78.0000021%
14506181
14476722
Cluj-Napoca
77.99999%
77.99999%
14493260
Brasov
78.0000019%
78.0000019%
28909028
17329505
Bucuresti
Bucuresti
77.99997%
100%
77.99997%
100%
29384120
Bucuresti
100%
100%
29389861
Craiova
100%
100%
29386768
Bacau
100%
100%
29388378
Constanta
100%
100%
*Electrica SA lost control over Servicii Energetice Dobrogea in January 2015 and over Servicii Energetice Moldova in January 2016 as a
consequence of starting the subsidiary’s bankruptcy procedure (see Note 22).
THE COMPANY’S MAIN ACTIVITIES
Currently, the core business of the Company, per the Statute, annex to Government Decision no, 627/2000, consolidated,
amended and supplemented, is “Activities of business and management consulting”. The Company also covers services
on the balancing electricity market and trading.
According to the Commercial Code of the wholesale electricity market, the 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
E L E C T R I C A S A A N N U A L R E P O R T 2 0 1 6 | 231
market (producer, supplier, operator, eligible consumer) has the obligation to register at the Operator of the balancing
market part 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.
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 through 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 as Global Depository Receipts (“GDRs”) on the UK market.
The IPO was organised between 11 and 27 June 2014 and referred to an offering by the Company of 177,188,744
ordinary shares in the form of shares and GDRs, each GDR representing four shares. Following the IPO, the Company
sold 142,007,744 shares and 8,795,250 GDRs, at the offer price of RON 11 per share and USD 13.66 per GDR. The
allocation of shares and GDRs was 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 at 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.
2 Basis of preparation
These separate financial statements have been prepared in accordance with the Ministry of Public Finance Order no.
2844/2016 for approving the Accounting Regulations in accordance with International Financial Reporting Standards
(“OMFP 2844/2016”). In acceptance of OMFP 2844/2016, 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 separate financial statements were authorized for issue by the Board of Directors on 9 March 2017. The financial
statements will be submitted for shareholders’ approval in the meeting scheduled on 27 April 2017.
3 Functional and presentation currency
These separate financial statements are presented in Lei (RON), which is the functional currency of the Company. All
amounts are in RON, if not otherwise stated.
4 Use of judgements and estimates
In preparing these separate 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, revenues and
expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are prospectively
recognised.
(a) Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts
recognised in the separate financial statements is included below:
Commissions
Company assesses its revenue arrangements based on 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 recognised revenue is the net amount
of commission earned by the Company.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(b) Assumptions and estimation uncertainties
(B) COMMISSIONS
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:
• Note 6 h) and i) – estimates regarding the useful lives of property, plant and equipment and of intangible assets;
• Notes 16 and 27 – assumptions and estimates about the recoverability of trade receivables;
• Note 20 - assumptions regarding the revalued amount of property, plant and equipment;
• Note 22 – assumptions and estimates regarding the valuation of shareholdings in the subsidiaries;
• Note 15 – recognition of deferred tax assets: availability of future taxable profit against which tax loss carried forward can be used;
• Notes 26 and 29 – recognition and measurement of provisions and contingencies;
• Note 13 – measurement of defined benefit obligations and other long-term employee benefits: key actuarial assumptions;
• Note 20 – determining whether an agreement 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 observable market data as far as possible. Fair values are
categorised into different levels in the fair value hierarchy based on the inputs used in the valuation techniques as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
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);
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 are categorised into different levels of the fair value hierarchy, then
the fair value measurement is entirety categorised on the level of 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 used in measuring fair values is included in Note 20: Property, plant and equipment.
5 Basis of measurement
The separate financial statements have been prepared on the historical cost basis, except for the land and buildings which are
measured based on revaluation model.
6 Significant accounting policies
The Company has consistently applied the following accounting policies to all periods presented in these separate 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 reliably measured. 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 the statements
of work performed, regardless of when paid or received, in accordance with the accrual accounting principle.
Sales of goods
Revenues from sale of goods are recognized when the significant risks and rewards of ownership of the goods have passed to
the buyer.
Company assesses its revenue arrangements based on specific criteria to determine if it is acting as principal or agent. If the
Company acts in the capacity of an agent rather than as the principal in a transaction, then the recognised revenue 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:
•
•
•
•
•
interest income;
interest expense;
dividend income;
the foreign currency gain or loss on financial assets and financial liabilities;
impairment losses recognised on financial assets (other than trade receivables),
Interest income or expense is recognised using the effective interest method.
(D) FOREIGN CURRENCY TRANSACTIONS
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 to the functional currency.
(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 services provided by the employee and the obligation can be reliably estimated.
(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, updating that amount at the present value.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit
method.
Re-measurements 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, considering 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.
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FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(iv) Other long-term employee benefits
The Company’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.
Re-measurements 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 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 for the items recognised directly
in equity or in other comprehensive income, case in which it will be recognized 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:
•
temporary differences arising from the initial recognition of assets and liabilities resulting from transactions that are not
business combinations and that affect neither accounting nor taxable profit or loss;
temporary differences resulting from investments in subsidiaries, associates and jointly controlled entities, to the extent
that the Company can exercise control over the reversal period of the temporary differences and it is probable that they
will not be reversed in the foreseeable future.
•
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences only to the
extent that it is probable that future taxable profits will be available to be used for covering them. 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 based on the tax rates that are expected to be applicable to temporary differences when they are
reversed, using tax rates enacted or substantively enacted at the reporting date.
The measurement of the deferred tax reflects the tax consequences that would follow from the manner in which the Company
expects to recover or settle the carrying amount of its assets and liabilities at the reporting date.
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 is probable that
the future taxable profits will be available against which they can be used.
(G) INVENTORIES
Inventories consist mainly of consumables and other materials.
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 perform 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.
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 performed with sufficient regularity to ensure that the carrying amount does not materially differ from the
one 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 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 other non-current assets in progress are not depreciated.
The estimated useful lives of property, plant and equipment are as follows:
Category
Buildings
Equipment
Vehicles, furniture and office equipment
Useful lives
60-70 (average 67 years)
4-12 (average 7 years)
3-10 (average 7 years)
The depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(I) INTANGIBLE ASSETS
(i) Recognition and measurement
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 recognised in profit or loss.
The estimated useful lives of software and licenses are 3-5 years.
The amortisation method, the useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(H) PROPERTY, PLANT AND EqUIPMENT
(J) ASSETS HELD FOR DISTRIBUTION
(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
Non-current assets, or groups to be disposed 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 groups to be disposed, are measured at the lower of their carrying amount and fair value less costs of distribution.
Impairment losses and subsequent gains and losses on re-measurement are recognised in profit or loss in case they refer to an
asset that is initially classified as held-for-distribution.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(K) FINANCIAL INSTRUMENTS
(iii) Non-derivative financial liabilities – measurement
The Company classifies non-derivative financial assets into the following categories: loans and receivables, held to maturity
investments and available-for-sale financial assets.
The Company classifies non-derivative financial liabilities into the other financial liabilities category.
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 loans, bank overdrafts and trade payables.
(i) Non-derivative financial assets and financial liabilities – recognition and derecognition
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.
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.
(iv) Share capital
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 expired.
Financial assets and financial liabilities are offset and the net amount presented in the statement of 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 the reporting date for the balancing electricity market
settlements, late payment penalties and accrued revenue for the balancing electricity market settlements until the
end of the year, but invoiced after the end of the year. Trade receivables include also invoices issued or to be issued
to the subsidiaries for the 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, that 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, held-to-maturity financial assets are measured at amortized cost using the effective
interest method.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale. Available-
for-sale financial assets 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.
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
and 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.
(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:
•
•
•
•
•
•
default or delinquency by a debtor;
restructuring of an amount due to the Company on terms that the Company would not otherwise accept;
indications that a debtor or issuer will enter bankruptcy;
adverse changes in the payment status of borrowers or issuers;
the disappearance of an active market for a security; or
observable data indicating that there is a measurable decrease in expected cash flows for 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
the assets that are individually significant 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 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. 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 objectively related to an event occurring after the impairment was recognised, then the
previously recognised impairment loss is reversed through profit or loss.
Financial assets available-for-sale for which there is not an active market and it is not possible to reliably determine
the fair value, are measured at cost and periodically tested for impairment.
(ii) Non-financial assets
Financial assets available-for-sale include investments in subsidiaries and investments in associates.
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.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
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 RESERVES
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
financial statements when their distribution is proposed after the reporting date and before the date of the issuance
of the financial statements.
(O) 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 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. No provisions are provided for future
operating losses.
(q) CONTINGENT ASSETS AND LIABILITIES
A contingent liability is:
(a) a potential obligation arising as a result of previous events and whose existence will be confirmed only by
the occurrence or the non-occurrence of one or more uncertain future events, which are not fully controlled
by the Company; or
(b) a current obligation arising as a result of previous events, but which is not recognized because:
i. it is unlikely that outputs of resources incorporating economic benefits to be required for the
settlement of the obligation; or
ii. the value of the obligation may not be evaluated credibly enough.
Contingent liabilities are not recognized in the financial statements of the Company. They are presented in case the
output of resources incorporating economic benefits is possible and not probable.
A contingent asset is a potential asset that appears as a result of previous events and whose existence will be
confirmed only by the occurrence or the non-occurrence of one or more uncertain future events, which are not fully
controlled by the Company.
A contingent asset is not recognized in the financial statements of the Company, but it is shown when an input of
economic benefits is likely to arise.
(R) 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 substantially all the risks and rewards of ownership to the
Company are classified as finance leases. The leased assets and finance lease liability are initially measured 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) Rent income
Rental income from property, plant and equipment other than property investment is recognised as other income.
Rental income is recognised on a straight-line basis over the term of the lease.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(S) SUBSEqUENT EVENTS
(c) Other operating expenses
Events occurring after the reporting date which provide additional information about conditions prevailing at those
reporting dates (adjusting events) are reflected in the separate financial statements. Events occurring after the
reporting dates that provide information on events that occurred after the reporting dates (non-adjusting events),
when material, are disclosed in the notes to the separate 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
New standards and interpretations not yet adopted
The European Union has adopted a series of standards whose application is not yet mandatory for the year ended on 31
December 2016 and which have not been applied for the present individual financial situations:
f IFRS 9 ”Financial Instruments”. IFRS 9 is applicable for annual periods that begin on or after 1 January 2018,
early adoption being permitted. The company intends to apply IFRS 9 the first time on 1 January 2018. IFRS 9
implementation impact on the 2018 individual financial statements of the Company is not known and cannot
be reasonably estimated, as it will depend on the financial instruments that will be held by the Company and of
the economic situation at that date, as well as of the future chosen accounting treatments and judgements. The
company has carried out a preliminary analysis of the impact of the application of IFRS 9 in view of the situation
at 31 December 2016, and it does not consider that the new requirements would have had a significant impact on
the financial statements, if applied at 31 December 2016.
f IFRS 15 “Revenues from contracts with customers”. IFRS 15 introduces a common model for revenues’ recognition
and measurement. The standard replaces the criteria for the recognition of revenues, replacing the standards IAS
18 Revenue, IAS 11 Building contracts and IFRIC 13 Loyalty programs for customers. IFRS 15 shall apply for the
annual periods that start on or after 1 January 2018, early adoption being permitted. The company has carried out
a preliminary analysis of the impact of the application of IFRS 15 on the financial statements.
THE SERVICES RENDERING
The Company does not anticipate significant differences on the moment of recognition of revenues or the net impact on
the outcome of the financial year.
TRANSITION
The company intends to adopt IFRS 15 in the financial statements for the year ending on 31 December 2018 using the
retrospective approach. Therefore, the Company will apply all the requirements of the IFRS 15 for each comparative period
presented and will adjust the financial statements.
The company has started a detailed analysis of the impact resulting from the application of IFRS 15.
8 Revenue
Supply energy in balancing market and day-
ahead-market
Revenues from services contracts with the
subsidiaries related to the Automatic Meter
Reading System (Note 20)
Total
2016
357,705,156
2015
379,038,959
4,683,036
4,669,161
362,388,192
383,708,120
9 Other operating revenues and expenses
(a) Other operating revenues
Other income mainly includes rent revenue and late payment penalties from customers.
(b) Purchased electricity
Purchased electricity includes the cost of electricity purchased for settlements on balancing market and day-ahead-market.
Rent
Repair and maintenance expenses
IT services
Postage and telecommunication
Penalties for late payment and other payments to the State
Other taxes and duties
Legal and consultancy fees
Bank commissions
Other
Total
2016
17,088
1,466,533
494,340
3,354,655
62,417,320
626,058
3,818,706
254,051
8,588,420
2015
76,424
2,305,640
1,409,652
3,105,028
299,467
495,698
8,104,919
501,554
6,990,836
81,037,171 23,289,218
During 2015, the Company has recognized a provision for the amount of RON 31,250,650 for disputes with National
Agency for Fiscal Administration “NAFA” having as its object the penalties for delay in the payment claimed by the NAFA.
Also, during 2016 the Company has created additional provisions in the amount of RON 23,648,000 as a result of the
court of first instance’s decision of rejecting the appeal against enforcement. In December 2016, the company made
payments in amount of RON 41,210,654 as a result of the forced execution received in connection with these litigations
and reversed the provisions constituted (see Note 26) and the claims to the tax previously recognized. The above line:
“Penalties for delay in the payment of taxes and fees and other payments to the State” includes the amount of RON
58,126,604 in connection with these disputes.
10 Net finance income
Interest income
Dividends income
Foreign exchange gains
Other finance income
Total finance income
Interest expense
Interest cost for employee benefits (Note 13)
Foreign exchange losses
Other financial costs
Total finance costs
Net finance income
2016
14,784,494
374,838,510
-
59,642
389,682,646
(1,677)
(56,739)
(1,680,309)
-
(1,738,725)
387,943,921
2015
26,379,877
344,647,949
1,932,933
65,442
373,026,201
(38)
(93,404)
-
(196,024)
(289,466)
372,736,735
In 2016, the Company received a total amount of RON 374,838,510 as dividends from its subsidiaries (2015: RON
344,647,949).
The average interest rate for deposits, treasury bills and government bonds with original maturity of three months
increased from 0.93% in 2015 to 0.63% in 2016.
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
265,026,109
300,864,484
Profit attributable to ordinary shareholders
265,026,109
300,864,484
2016
2015
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
Weighted-average number of ordinary shares (in number of shares)
Issued ordinary shares at 1 January
2016
2015
339,049,336
339,049,336
Weighted-average number of ordinary shares at 31 December
339,049,336
339,049,336
For the calculation of basic and diluted earnings per share, the own shares repurchased by the Company (6,890,593
shares) were not treated as outstanding shares and are deducted from the total number of issued ordinary shares.
Earnings per share
Basic and diluted earnings per share (RON)
2016
0.78
2015
0.89
12 Short-term employee benefits
Personnel payables
Current portion of defined benefit liability and other long-term
employee benefits
Social security charges
Tax on salaries
Termination benefits payable
Total
31 December
2016
1,891,629
178,350
31 December
2015
1,509,846
344,582
680,514
287,474
-
3,037,967
629,642
285,750
114,881
2,884,701
Defined benefit liability
Balance at 1 January
Included in profit or loss
Current service cost
Interest (income) / cost
Included in other comprehensive income
Re-measurements loss (gain)
- Actuarial loss / (gain)
Other
Benefits paid
Balance at 31 December
Other long-term employee benefits
Balance at 1 January
Included in profit or loss
Current service cost
Actuarial gain
Interest cost
Benefits paid
Balance at 31 December
(II) ACTUARIAL ASSUMPTIONS
Details related to employee benefit expenses are presented in Note 13.
The following are the main actuarial assumptions at the respective reporting date:
2016
2015
1,043,453
1,731,636
32,481
30,491
62,972
38,417
45,575
83,992
(100,114)
(703,969)
(29,549)
976,762
(68,206)
1,043,453
2016
1,096,717
2015
1,511,720
33,852
(279,897)
26,248
(94,743)
782,177
41,971
(414,894)
47,829
(89,909)
1,096,717
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, child benefit, temporary incapacity for work situations, risks of work
accidents and professional diseases and other social assistance services, redundancy payments and incentives granted
to employers to creating new jobs.
13 Post-employment 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 2016 and 2015, employee benefit obligations were computed by independent actuary using the projected unit credit
method with benefits calculated proportionally to the 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
2016
31 December
2015
976,762
782,177
1,758,939
178,350
1,580,589
1,043,453
1,096,717
2,140,170
344,582
1,795,588
(I) MOVEMENT IN THE DEFINED BENEFIT LIABILITY AND OTHER LONG-TERM EMPLOYEE BENEFITS
The following tables shows a reconciliation between the opening balances and the closing balances of the defined
benefit liability and other long-term employee benefits and their components. There are no plan assets.
(a) Macroeconomic assumptions:
f Inflation. The actuary used the Consumer Price Index (CPI) published by the Economist Intelligence Unit:
Year
2016
2017
2018
2019
2020+
Valuation date
31 December 2016
-
2.3%
2.3%
2.2%
2%
Valuation date
31 December 2015
1.8%
2.5%
2.3%
2.2%
2.2%
f the discount rate used was the yield for Romanian government bonds maturing in 10 years at the reporting date,
3.63% for the year 2016 (2015: 4.75%);
f the electricity price per KWh used in the actuarial computation is 0.4576 RON at 31 December 2016 (2015: 0.4847
RON/ KWh);
f the mortality rate published by the National Institute of Statistics was adjusted to allow for an anticipated decrease
in mortality rates;
f taxes and social charges are those in force as at the reporting date.
(b) Company specific assumptions:
f Salaries’ growth rate was correlated mainly with the estimated inflation rates in the future periods;
f employees’ turnover: turnover rates are based on statistical information regarding employees’ mobility during
2003-2015. Considering historical leaving data, it is assumed that the personnel turnover rate decreases with the
employees’ age;
f jubilee and retirement bonuses granted based on seniority per the collective labour contract, as follows:
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
Jubilee bonuses based on years of service
Retirement bonuses based on years of service in the
Company
No. of gross monthly base
salaries
Seniority
31 December
2016
31 December
2015
Seniority
No. of gross monthly base
salaries
31 December
2016
31 December
2015
20 years
30 years
35 years
40 years
45 years
0.8
1.6
2.4
3.2
4
0.8
1.6
2.4
3.2
4
Between 8 and 10 years
Between 10 and 25 years
More than 25 years
1
2
3
1
2
3
In case the conditions related to years of service are met, the Company offers as benefit free electricity in quantity of
1,200 kWh per year to retired employees of the Company. In the event of pensioner’s death, husband/wife is entitled
to receive the same benefit until he/she will marry again.
Termination benefits
a. Termination benefits for individual lay-offs at the Company’s initiative
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:
Seniority
1 - 5 years
5 - 10 years
10 - 20 years
More than 20 years
No. of gross monthly
base salaries
4
6
7
10
b. Termination benefits for collective lay-offs at the Company’s initiative
For collective lay-offs, per the Collective labour contract, the Company will pay termination benefits to the employees
depending on their period of service, as follows:
Seniority
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
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 Company’s reorganization and restructuring. Employees who are re-
employed within the Company after layoff are not entitled to the above-mentioned benefits.
The financial statements do not include any provision for liabilities relating to compensation payments because there
does not exist a present obligation in this regard.
c. Termination benefits for voluntary redundancies
According to the Collective labour contract from 13 August 2015 and to the Addendum on 1 October 2015, signed
by the Company and the Union, in case the individual labour contract is terminated as voluntary redundancy of the
employee, the Company will make severance payment depending on the employee’s remaining period to reach the
standard retirement age, his period of service in the Company and his seniority. The number of gross monthly base
salaries paid as termination benefits vary between 4 and 18.
14 Employee benefit expenses
Average number of employees
Number of employees at 31 December
Wages and salaries
Social security contributions
Meal tickets
Termination benefits
Total
2016
130
142
16,631,440
3,605,695
266,704
-
20,503,839
2015
138
136
12,819,916
2,598,117
269,909
948,951
16,636,893
The termination benefits represent compensation payments in case of employees’ voluntary departure (see Note 13 c).
Management remuneration is presented within Note 28 – Related parties.
15 Income tax
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 fiscal 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 the income tax expense in the period that such a determination is made.
(i) Amounts recognised in profit or loss
Deferred tax expense / (gains)
Total expense/ (gain) related to income tax
2016
7,233,616
7,233,616
2015
(156,580)
(156,580)
(ii) Amounts recognised in other comprehensive income
Before
tax
100,114
2016
Fiscal
benefit
(expense)
(16,018)
Net of tax
Before
tax
84,096
703,969
2015
Fiscal
benefit
(expense)
(112,635)
Net of tax
591,334
100,114
(16,018)
84,096
703,969
(112,635)
591,334
Re-measurement of defined
benefit liability
Total
(iii) Reconciliation of effective tax rate
Profit before tax
Tax using Company’s domestic tax rate
Non-deductible expenses
Non-taxable income
Current-year tax losses for which no deferred tax asset is recognised
Deferred tax asset derecognised
Other tax effects
Income tax – expense/(income)
2016
2015
272,259,725
300,707,904
16% 43,561,556
8,639,798
3%
16%
2%
48,113,265
4,655,583
-20% (59,974,162)
-18% (55,143,672)
3%
2%
0%
2%
7,718,132
7,229,222
59,070
7,233,616
1%
0%
0%
0%
2,232,507
-
(14,263)
(156,580)
Non-taxable income represents dividend income in amount of RON 374,838,510 (2015: RON 344,647,949).
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(iv) Movement in deferred tax balances
Net balance
at 1 January
2016
Recognised in
profit or loss
Recognised
in other
comprehensive
income
Deferred tax
assets,
net
Deferred tax
assets
Deferred tax
liabilities
Balance at 31 December 2016
2,783,522
(40,288)
-
2,743,234
-
2,743,234
2016
Property, plant and
equipment
Employee benefits
(260,885)
44,682
16,018
(200,185)
(200,185)
-
Tax loss carried forward
(9,772,271)
7,229,222
-
(2,543,049)
(2,543,049)
Tax liabilities (assets)
before set-off
Set off of tax
Net tax liabilities
(assets)
(7,249,634)
7,233,616
16,018
-
-
-
(7,249,634)
7,233,616
16,018
-
-
-
(2,743,234)
2,743,234
2,743,234
(2,743,234)
-
-
Net balance
at 1 January
2015
Recognised in
profit or loss
2,953,090
(169,568)
Recognised
in other
comprehensive
income
-
Balance at 31 December 2015
Deferred tax
assets,
net
Deferred tax
assets
Deferred tax
liabilities
2,783,522
-
2,783,522
2015
Property, plant and
equipment
Employee benefits
(386,508)
12,988
112,635
(260,885)
(260,885)
-
Tax loss carried forward
(9,772,271)
-
-
(9,772,271)
(9,772,271)
Tax liabilities (assets)
before set-off
Set off of tax
Net tax liabilities
(assets)
(7,205,689)
(156,580)
112,635
(7,249,634)
2,783,522
-
-
-
-
(10,033,156)
2,783,522
(2,783,522)
(7,205,689)
(156,580)
112,635
(7,249,634)
(7,249,634)
-
(v) Unrecognised deferred tax assets
The Company had not recognized deferred tax assets in respect of the 2016 and 2015 tax losses as it is not probable
that future taxable profit will be available against which the Company can use the benefits therefrom.
Tax losses for which no deferred tax assets were recognised expire as follows:
Year when the tax loss was generated:
2016 (expiring in 2023)
2015 (expiring in 2022)
Total
(vi) Receivables regarding current income tax
Tax losses
2016
48,238,325
-
48,238,325
2015
-
13,953,169
13,953,169
As at 31 December 2015, current income tax receivables include the amount of RON 16,915,950 which is under litigation
with National Agency for Fiscal Administration (“NAFA”). During 2016, the Company has derecognized these receivables
as the dispute resolution was not favourable (see also Note 9).
16 Trade receivables
Trade receivables, gross
Bad debt allowance
Total trade receivables, net
31 Decembrer 2016
774,555,334
(710,480,561)
64,074,773
31 December 2015
745,268,376
(667,736,915)
77,531,461
Receivables from related parties are presented in Note 28.
Trade receivables, gross, comprise:
Electricity supply on the balancing market
Electricity receivables from clients in litigation, insolvency
and bankruptcy (mainly Oltchim SA, Transenergo)
Late payment penalties from clients in litigation, insolvency
and bankruptcy (Oltchim SA)
Other
Total trade receivables, gross
31 December 2016
80,757,358
31 December 2015
83,032,806
601,372,888
569,811,232
88,968,313
88,968,313
3,456,775
774,555,334
3,456,025
745,268,376
The reconciliation between the opening balances and the closing balances of the impairment for trade receivables is
follows:
as
Bad debt allowance
Balance as at 1 January
2016
667,736,915
2015
670,398,254
Impairment recognized
Impairment reversed
Balance as at 31 December
42,847,186
(103,540)
710,480,561
-
(2,661,339)
667,736,915
The ageing of trade receivables is presented in Note 27.
Oltchim SA (a state-controlled company) was a significant customer of the Company until January 2012, 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 impairment
for trade receivables to the total amount of receivables. The procedure is ongoing, the Company being registered in
the creditors’ body.
The adjustments recognized during 2016 comprise the amount of RON 31,561,656 refering to receivables from
Transenergo Com S.A., trader of energy whose financial situation has deteriorated as a result of the recent changes
in prices on the spot market of electrical energy. Electrica SA has initiated the procedure of enforcement against
Transenergo Com S.A. due to non-collection of bills starting from September. On 1 February 2017, the procedure of
insolvency of Transenergo Com S.A. has been opened. The balance of the debt at the gross value from Transenergo
Com S.A. at 31 December 2016 is RON 35,561,656. Electrica SA is the beneficiary of an insurance policy for an amount
of RON 4,000,000. The management estimates that the degree of recovery of the uninsured debt is reduced and
consequently impairments were recorded.
17 Deposits, treasury bills and government bonds
Treasury bills and government bonds denominated in RON with original
maturity of more than three months
Deposits with maturity of more than three months
Total deposits, treasury bills and government bonds
31 December
2016
1,757,746,279
31 December
2015
1,756,339,194
109,369,081
1,867,115,360
144,056,193
1,900,395,387
Deposits, treasury bills and government bonds with original maturity of more than three months have an average
interest rate (yield) of 0.63% (2015: 0.93%) at the following banks: Citibank Europe PLC Dublin, Raiffeisen Bank, BRD-
GSG, Marfin Bank, ING Bank. The treasury bills and government bonds are classified as investments held-to-maturity.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
18 Other receivables
Interest receivable
Other receivables
Bad debt allowance
Total other receivables, net
31 December
2016
-
22,536,204
(9,938,335)
12,597,869
31 December
2015
60,425
27,285,805
(14,290,005)
13,056,225
Other receivables, net, include loans granted by the Company to Electrica Serv (see Note 28).
The reconciliation between the opening balances and the closing balances of the impairment for other receivables is
as follows:
Bad debt allowance
2016
2015
Balance as at 1 January
Impairment recognized
Impairment reversed
Balance as at 31 December
14,290,005
14,460,727
-
(4,351,670)
9,938,335
795,686
(966,408)
14,290,005
19 Cash and cash equivalents
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 individual statement of financial
position and in the individual statement of cash flow
31 December 2016
31 December 2015
3,825,171
193,787,807
31,040
-
11,205,203
181,248,010
47,403
90,865,415
197,644,018
283,366,031
In 2015, cash and cash equivalents included treasury bills and government bonds denominated in RON of RON 90,865,415
and an average interest rate (yield) of 0.56% p.a., at the following banks: Citibank Europe PLC Dublin, Raiffeisen Bank,
BRD-CSG, Marfin Bank, ING Bank.
The following information is relevant in the context of the statement of cash-flows:
Non-cash activity includes:
•
Compensations between trade receivables and trade payables, especially related to the Company’s subsidiaries of
RON 33,193,031 in 2015 (2014: RON 55,983,780)
Also, during 2016, the Company made payments for tangible assets in amount of RON 14,471,423 (2015: RON 0).
On 17 October 2016, Societatea de Distributie a Energiei Electrice Muntenia Nord SA, Societatea de Distributie a Energiei
Electrice Transilvania Nord SA and Societatea de Distributie a Energiei Electrice Transilvania Sud SA have concluded credit
agreements with BRD – Groupe Societe Generale, in which the Company is guarantor. The contracts relate to facilities
for non-revolving term loans, with maturity on 15 October 2021. The total amount of the loan is RON 320 million.
On 31 December 2016, the Company has guarantees as collateral deposits at BRD – Groupe Societe Generale for the
withdrawals made by the Societatea de Distributie a Energiei Electrice Transilvania Sud SA and Societatea de Distributie
a Energiei Electrice Transilvania Nord SA.
The amount of such collateral deposits at 31 December 2016 is RON 134,491,752. The company has classified these
deposits as restricted cash.
20 Property, plant and equipment
The movements in property, plant and equipment in 2016 and 2015 were as follows:
Buildings
Equipment
Land and
land im-
provements
Vehicles,
furniture
and office
equipment
Construction
in progress
Total
79,131,847
-
-
(3,874,652)
75,257,195
2,282,500
77,539,695
16,758,572
-
-
-
16,758,572
-
16,758,572
122,716,040
892,742
112,858,356
(15,680)
236,451,458
966,948
237,418,406
743,554
-
-
(10,877)
732,677
157,526
890,203
123,284,282 342,634,295
26,022,890
25,130,148
-
(112,858,356)
(3,901,209)
-
364,755,976
35,556,074
4,720,728
1,313,754
369,476,704
36,869,828
-
-
-
-
-
-
18,572
230,237
-
248,809
230,240
479,049
38,195,658
19,775,652
(12,589)
57,958,721
22,847,888
80,806,609
695,967
22,365
(10,876)
12,465,531
-
-
707,456
9,645
717,101
12,465,531
-
12,465,531
51,375,727
20,028,254
(23,465)
71,380,516
23,087,773
94,468,289
79,131,847
75,257,195
77,539,695
16,740,000
16,509,763
16,279,523
84,520,382
178,492,737
156,611,797
47,587
25,221
173,102
110,818,751 291,258,568
293,375,460
23,090,543
275,008,415
24,404,297
Gross carrying amount
Balance at 1 January 2015
Additions
Transfers from assets in progress
Disposals
Balance at 31 December 2015
Additions
Balance at 31 December 2016
Accumulated depreciation and
impairment losses
Balance at 1 January 2015
Depreciation
Accumulated depreciation of
disposals
Balance at 31 December 2015
Depreciation
Balance at 31 December 2016
Net carrying amounts
At 1 January 2015
At 31 December 2015
At 31 December 2016
On 31 December 2016, the buildings and lands include the administrative office of the Company and the corresponding
land and the lands over which the Company has obtained title deeds which will be used as capital injection for
subsidiaries. The administrative headquarter has a net book value of RON 16,134,462 (2015: RON 16,360,119) while
the related land is worth RON 13,410,443 of net book value at 31 December 2016 (2015: RON 13,410,443).
Equipment and tangible assets in progress mainly include costs related to the implementation of the AMR system
(Automatic Meter Reading) for electricity measuring and dispatch activity of the entire Group. On 31 December
2016, the net capitalized amount regarding the system is RON 176,159,847 (2015: RON 197,238,723), out of which
a part is recognized as tangible asset in progress amounting to RON 21,942,902 as at 31 December 2016 (2015: RON
21,524,137). During 2017, there will be an evaluation by an independent evaluator of the entire AMR system in order
to be taken order by the distribution operators from the Electrica Group. It is estimated that, during 2017, the company
will commission the assets in progress related to the implementation costs of the AMR system.
Related to the AMR system, the Company has concluded service agreements with the distribution subsidiaries. The
main services provided relate to retrieve direct data from measurement group in real time with accuracy and increased
frequency by the distribution subsidiaries, by using remote reading systems from electricity metering points from the
measurement electricity points, property of the Company located at consumption points, respectively in the networks of
the distribution operators from Electrica Group. 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 the specific assets, according
to the contractual provisions.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in 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 well as the significant unobservable inputs used.
Category
Valuation technique
Land
Market approach
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 the most 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 rented
building taking into account occupancy
rate and costs to be paid by the tenants.
The discount rate estimation considers,
inter alia, the quality of a building and its
location
Significant unobservable
inputs
•
Adjustments for
liquidity, location, size
Inter-relationship between
key unobservable inputs and
fair value measurement
The estimated fair value would
increase (decrease) if:
•
Adjustments for liquidity,
location, size were lower
(higher)
• Occupancy rates (80-
90%)
• Discount rates (9.5%
•
•
•
•
on average)
Costs to be paid by
tenants (average 10%)
Annual rent per sqm
Rental growth
Adjustments for
liquidity, location, size
The estimated fair value would
increase (decrease) if:
• Occupancy rates were
higher (lower)
• Discount rates were lower
•
•
•
•
(higher)
Costs to be paid by
tenants were lower
(higher)
Annual rent per sqm was
higher (lower)
Rental growth was higher
(lower)
Adjustments for liquidity,
location, size were lower
(higher)
21 Intangible assets
Intangible assets include mainly licenses and costs of implementation of SAP ERP, as follows:
Gross carrying amount
Balance at 1 January 2015
Additions
Transfers from intangibles in progress
Balance at 31 December 2015
Additions
Balance at 31 December 2016
Accumulated depreciation and impairment losses
Balance at 1 January 2015
Amortisation
Balance at 31 December 2015
Amortisation
Balance at 31 December 2016
Net carrying amounts
At 1 January 2015
At 31 December 2015
At 31 December 2016
Software and licenses
Intangible assets in
progress
Total
2,822,358
112,004
1,290,459
4,224,821
757,101
4,981,922
2,512,675
213,483
2,726,158
419,054
3,145,212
309,683
1,498,663
1,836,710
367,983
922,476
(1,290,459)
-
-
-
-
-
-
-
-
367,983
-
-
3,190,341
1,034,480
-
4,224,821
757,101
4,981,922
2,512,675
213,483
2,726,158
419,054
3,145,212
677,666
1,498,663
1,836,710
22 Investments in subsidiaries
The situation regarding the investments in subsidiaries is presented as follows:
Societatea de Distributie a Energiei
Electrice Muntenia Nord
Societatea de Distributie a Energiei
Electrice Transilvania Nord
Societatea de Distributie a Energiei
Electrice Transilvania Sud
Electrica Furnizare SA
Electrica Serv SA
31 December 2016
31 December 2015
Gross value
322,729,680
336,460,800
383,398,860
57,695,820
Impairment
Gross value
Impairment
-
-
-
-
322,729,680
336,460,800
383,398,860
57,695,820
-
-
-
-
445,743,000
(144,849,133)
445,743,000
(144,849,133)
Servicii Energetice Muntenia SA
29,640,430
-
29,640,430
-
Servicii Energetice Moldova SA
106,162,492
(106,162,492)
106,162,492
(106,162,492)
Servicii Energetice Oltenia SA
82,033,220
(82,033,220)
82,033,220
(82,033,220)
Total
1,763,864,302
(333,044,845)
1,763,864,302
(333,044,845)
Electrica SA also holds shares in two companies that are in bankruptcy (Servicii Energetice Banat si Servicii Energetice
Doborgea), the net value of these investments being zero. The Company has lost control over them in November 2014
and respectively in January 2015, when they have entered bankruptcy.
Societatea de Distributie a Energiei Electrice
Muntenia Nord
Societatea de Distributie a Energiei Electrice
Transilvania Nord
Societatea de Distributie a Energiei Electrice
Transilvania Sud
Electrica Furnizare SA
Electrica Serv SA
Servicii Energetice Muntenia SA
Total investments in subsidiaries
Investments in the subsidiaries, net value
31 December 2016
31 December 2015
322,729,680
322,729,680
336,460,800
336,460,800
383,398,860
383,398,860
57,695,820
300,893,867
29,640,430
1,430,819,457
57,695,820
300,893,867
29,640,430
1,430,819,457
The Company fully accounted the impairment of investments in Servicii Energetice Oltenia SA, which is in reorganization
process, because is deemed to be an unrecoverable investment. The Company did not adjusted the carrying amount of
the investments in Servicii Energetice Muntenia as long as 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 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 2016 (345,939,929
ordinary shares at 31 December 2015) with a nominal value of RON 10 per share. All shares rank equally with regard
to the Company’s net assets. Ordinary shares grant the right to dividends and one vote per share in the shareholders’
meetings of the Company, except for 6,890,593 shares repurchased by the Company in July 2014 in order to stabilize
the price. All shares confer equal rights to the net assets of the Company, except for 6,890,593 shares repurchased by
the Company in July 2014 in order to stabilize shares price.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
The Company recognizes changes in share capital only after their approval in the General Shareholders Meeting and
their registration by the Trade Register.
After IPO privatization, 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 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.
The General Meeting’s of Shareholders decision no. 1/27.04.2015 approved the use of the amount known as “Inflation
adjustment to share capital” to cover the accounting loss reported according to OMVFP 1286/2012.
(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 reserves
The reconciliation between opening and closing revaluation reserve is as follows:
Balance at 1 January
Release of revaluation reserve to retained earnings corresponding to
depreciation and disposals of property, plant and equipment
Balance at 31 December
2016
769,261
(59,287)
709,974
(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 legal provisions. These reserves are deductible for income tax purposes
and are not distributable.
(e) Dividends
The dividends distributed by the Company in 2015 and 2014 (from the statutory profits of preceding years) were as
follows:
Distributed dividends
2016
291,582,429
2015
244,691,906
In 2016, the dividends per share paid to the shareholders of the Company were: RON 0,86 per share (2015: RON 0,7217
per share). When calculating the dividend per share, the Company’s repurchased own shares (6,890,593 shares) were
not treated as outstanding shares and are deducted from the total number of issued ordinary shares.
Out of the dividends declared by the Company of RON 291,582,429 the dividends paid were RON 291,198,118, the
remaining difference represents dividends unclaimed by the shareholders from the Depositary.
24 Trade payables
Electricity suppliers
Capital expenditure suppliers
Other suppliers
Total
31 December 2016
31 December 2015
62,675,233
1,629,999
3,285,801
67,591,033
35,737,272
18,995,707
5,900,739
60,633,718
Electricity suppliers are mainly related parties, as detailed in Note 28. Other suppliers include suppliers of services,
materials, consumables, etc.
25 Other payables
Payables to the State budget
Other payables
Total
31 December 2016
31 December 2015
Current
9,677,979
2,038,946
11,716,925
Non-current
-
-
-
Current
5,840,517
1,791,673
7,632,190
Non-current
-
-
-
Other liabilities include mainly guarantees and sundry creditors.
26 Provisions
Balance at 1 January 2016
Provisions made
Provisions used
Provisions reversed
Balance at 31 December 2016
Litigations and other risks
31,250,650
23,648,000
(41,210,654)
(13,687,996)
-
During the year 2015, the Company has recognized a provision for the amount of 31,250,650 RON for disputes with
National Agency for Fiscal Administration “NAFA” having as object the penalties for payment delay claimed by the NAFA
due to unfavorable sentence no. 1029/17.04.2015. Also, during the year 2016 the Company has created additional
provisions in the amount of 23,648,000 RON as a result of the court of first instance’s decision of rejecting the appeal
against enforcement. In December 2016, the Company made payments in the amount of 41,210,654 RON as a result of
the forced execution procedure started due to these litigations and reversed the constituted provisions. See also Note
9 (c). As a result of this litigation, disputes, forced executions, the Company’s fiscal file is still not definitively closed.
Company’s management estimates that there won’t be significant additional amounts.
27 Financial instruments - fair values and risk management
(A) ACCOUNTING CLASSIFICATIONS 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 December2016
Note
Loans and
receivables
Carrying amount
Held-to-
maturity
investments
Other
financial
liabilities
Total
Financial assets not measured at fair value
Trade receivables
Other receivables
Deposits, treasury bills and government bonds
Cash and cash equivalents
Restricted cash
Total
Financial liabilities not measured at fair value
Trade payables
Total
16
18
17
19
19
24
64,074,773
11,480,832
-
-
- 1,867,115,360
197,644,018
134,491,752
-
-
407,691,375 1,867,115,360
64,074,773
11,480,832
1,867,115,360
197,644,018
134,491,752
2,140,314,983
67,591,033
67,591,033
67,591,033
67,591,033
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
31 December 2015
Note
Loans and
receivables
Carrying amount
Held-to-
maturity
investments
Other
financial
liabilities
Total
Financial assets not measured at fair value
Trade receivables
Other receivables
Deposits, treasury bills and government bonds
Cash and cash equivalents
Total
Financial liabilities not measured at fair value
Trade payables
Total
16
18
17
19
25
77,531,461
12,821,074
-
-
- 1,900,395,387
-
283,366,031
373,718,566 1,900,395,387
77,531,461
12,821,074
1,900,395,387
283,366,031
2,274,113,953
60,633,718
60,633,718
60,633,718
60,633,718
(B) FINANCIAL RISK MANAGEMENT
The Company has exposure to the following risks arising from financial instruments:
•
•
• market risk
credit risk
liquidity 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 mainly 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-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 is in process of
implementing a procedure regarding trade receivables’ insurance.
Cash, bank deposits, treasury bills and government bonds are placed in financial institutions, which are considered to
have good creditworthiness. The carrying amount of financial assets represents the maximum credit exposure.
Trade receivables
The Company establishes an allowance for impairment that represents the best estimate of incurred losses in respect
of trade receivables.
Impairment
The ageing of trade receivables is 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
31 December 2016
31 December 2015
Gross value
50,863,472
42,817,162
1,940,414
507,346
7,623,813
299,311
670,503,816
774,555,334
Bad debt allowance
-
(32,097,026)
(1,543,044)
(507,346)
(5,530,018)
(299,311)
(670,503,816)
(710,480,561)
Gross value
41,487,637
27,556,241
8,088,743
399,034
474,206
104,441
667,158,074
745,268,376
Bad debt allowance
-
-
-
(194)
(474,206)
(104,441)
(667,158,074)
(667,736,915)
Allowances for impairment are referring mainly to Oltchim SA (RON 667,735,915) and to Transenergo Com S.A. (RON
31,561,656). Please see Note 16.
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
Net trade receivables
31 December 2016
50,863,472
10,720,136
397,370
-
2,093,795
64,074,773
31 December 2015
41,487,637
27,556,241
8,088,743
398,840
-
77,531,461
(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 has significant cash and cash
equivalents so that no liquidity risk is experienced.
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 table presents the contractual maturities of financial liabilities at the reporting date. The amounts are
gross and undiscounted, and include estimated interest payments.
Financial liabilities
31 December 2016
Trade payables
Total
31 December 2015
Trade payables
Total
Carrying
amount
Contractual cash flows
Total
less than 1 year
67,591,033
67,591,033
67,591,033
67,591,033
67,591,033
67,591,033
60,633,718
60,633,718
60,633,718
60,633,718
60,633,718
60,633,718
(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 market risk management is to
manage and control market risk exposures within acceptable parameters, while optimizing the return.
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 the
Company is the Romanian Leu (RON).
The currencies in which these transactions are primarily denominated are RON, EUR and USD. The Company also has
deposits and bank accounts denominated in foreign currency (EUR and USD). 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 of the quantitative data about the Company’s exposure to currency risk is as follows:
In RON
Cash and cash equivalents
Deposits (deposits, treasury bills and government
bonds)
31 December 2016
31 December 2016
31 December 2015
USD
4,669,081
-
EUR
2,533,008
-
EUR
10,241,023
139,580,825
Net statement of financial position exposure
4,669,081
2,533,008
149,821,848
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
The following significant exchange rates have been applied during the year:
Average rate
Year-end spot rate
RON
EUR 1
USD 1
Sensitivity analysis
2016
4.4908
4.0592
2015
4.4450
4.0057
2016
4.5411
4.3033
2015
4.5245
4.1477
A reasonable possible appreciation (depreciation) of the EUR against RON at 31 December would have affected
the measurement of financial instruments denominated in a foreign currency, the profit before tax and the equity,
respectively, by the amounts shown below. The analysis assumes that all other variables, in especially the interest rates,
remain constant and ignores the impact of forecasted sales and purchases.
Effect
31 December 2016
EUR (5% movement)
31 December 2015
EUR (5% movement)
Profit before tax
Appreciation Depreciation
126,650
(126,650)
7,491,092
(7,491,092)
A reasonable possible appreciation (depreciation) of the USD against RON at 31 December would have affected the
measurement of financial instruments denominated in foreign currency and profit before tax, the equity, respectively, by
the amounts shown below. The analysis assumes that all other variables, especially the interest rates, remain constant
and ignores the impact of forecasted sales and purchases.
Effect
31 December 2016
USD (5% movement)
31 December 2015
USD (5% movement)
Interest rate risk
Profit before tax
Strengthening Weakening
233.454
(233.454)
-
-
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 2016
31 December 2015
Bank accounts (cash and cash equivalent)
193,787,807
181,248,010
Deposits, treasury bills and government
bonds
1,867,115,360
1,900,395,387
Restricted cash
134,491,752
-
2,195,394,919
2,081,643,397
Fair value sensitivity analysis for fixed-rate instruments
28 Related parties
(a) Main shareholders
At 31 December 2016, the 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 administrators’ compensation
Management compensation
1,039,030
1,483,880
2016
2015
At the beginning of 2016, Electrica SA’s management included five managers remunerated based on mandate contract.
Two managers resigned in March 2016 and October 2016, respectively, while in October 2016 a new manager concluded
the same agreement type. As at 31 December 2016, the Company had four managers with mandate contracts.
Compensations granted to the members of the Board of Directors were as follows:
Members of Board of Directors
2,136,888
863,361
2016
2015
Electrica SA’s Board of Directors comprised 5 members until 14 December 2015 and 7 members afterwards. Also, the
amount of fixed monthly remuneration was increased and remuneration for participation in meetings of the Board of
Directors and of its Committees was established. According to the remuneration policy approved by the General Meeting
of Shareholders that took place on 31 March 2016, the annual number of paid sessions is limited to twelve for Board
of Directors meetings and to six for each of the committees.
No loans were granted to managers and administrators in 2016 and 2015.
(c) Transactions with the subsidiaries
(i) Balance of receivables and payables from / to subsidiaries:
Electrica Furnizare
Societatea de Distributie a Energiei Electrice
Muntenia Nord SA
Societatea de Distributie a Energiei Electrice
Transilvania Nord SA
Societatea de Distributie a Energiei Electrice
Transilvania Sud SA
Electrica Serv
Servicii Energetice Moldova
Servicii Energetice Muntenia
Servicii Energetice Oltenia
Total
Receivables balance
from
Payables balance
to:
31 December
2016
31 December
2015
31 December
2016
31 December
2015
6,435,530
8,067,916
5,321,472
4,392,453
2,428,881
830,343
439,209
1,522,087
5,932,916
3,696,938
246,823
638,824
5,864,832
2,244,875
20,677
390,440
10,602,735
10,429,579
261,773
370,089
-
-
-
147,305
2,952
320,025
-
-
-
-
-
-
36,903,929
26,513,720
3,397,363
3,751,784
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.
Receivables and payables from/to electricity distribution and supply subsidiaries mainly include, receivables/payables
from/to electricity supply, mainly from settlements on the balancing market.
The receivables from Electrica Serv are mainly represented by loans granted by the company to Electrica Serv that
reached maturity but are undrawn. The Company estimates that these amounts will be cashed in the next period.
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SOCIETATEA ENERGETICA ELECTRICA S.A. - NOTES TO THE SEPARATE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016 (All amounts are in RON, if not otherwise stated)
(ii) Transactions with subsidiaries:
Electrica Furnizare
Societatea de Distributie a Energiei Electrice
Muntenia Nord SA
Societatea de Distributie a Energiei Electrice
Transilvania Nord SA
Societatea de Distributie a Energiei Electrice
Transilvania Sud SA
Electrica Serv
Total
Sales
in 2016
43,903,009
37,824,810
Sales
in 2015
59,726,555
42,850,446
Purchases
in 2016
22,793,574
4,997,798
Purchases
in 2015
13,513,298
16,176,868
16,124,831
25,151,596
2,713,149
10,415,814
16,380,289
16,497,151
3,116,268
9,379,110
-
114,232,939
807,297
145,033,045
1,337,065
34,957,854
1,796,940
51,282,030
(d) Transactions with companies in which the state has control or significant influence
In 2016 the Company had sold and purchased transactions mainly with the following companies:
Transelectrica
OPCOM
ANRE
ANCOM
ICPE
Others
TOTAL
Net Receivables
balance at
31 December
2016
Payables balance
at 31 December
2016
Sales 2016
Purchases 2016
1,335,460
259
-
-
19,386
544
1,355,649
47,481,338
-
1,683
126,647
-
423,175
48,032,843
14,445,437
888,780
-
-
242,166
1,399,383
16,975,766
228,274,428
-
305,539
499,443
-
2,670,409
231,749,819
The transactions with Transelectrica represent electricity imbalances from the balancing market.
In 2015 the Company had sold and purchased transactions mainly with the following companies:
Transelectrica
CET Braila
Complexul Energetic Oltenia
OPCOM
CET Grivita
ANRE
ANCOM
ICPE
Altii
TOTAL
Net Receivables
balance at
31 December
2015
Payables balance
at 31 December
2015
Sales 2015
Purchases 2015
1,376,440
3,656,056
-
-
2,161
-
-
396,998
28,346
5,460,001
23,719,925
-
-
31,496
22,176
-
-
4,748
20,444
23,798,789
6,075,370
-
-
-
79,641
-
-
386,225
217,622
6,758,858
317,210,185
-
197,326
56,692
194,727
188,235
131,402
79,648
223,042
318,281,257
The transactions refer mainly to purchase and sale on the balancing market.
29 Contingencies
Litigation and claims
(a)
The Company is involved in various litigations (i.e Fondul Proprietatea – major stakeholder in the subsidiaries, ANRE,
NAFA, Court of Accounts, damage compensation requests, labour litigations etc.).
As summarized in Note 26, the Company set up provisions for litigation and disputes over which management has
assessed that is likely to be necessary an outflow of resources embodying economic benefits due to low chances of
solving them favorably. The Company does not present information in the financial statements and had not set up
provisions for litigation and disputes over which the management has assessed that the possibility of an outflow of
resources is reduced.
f The Company presents below information on the most significant amounts disputed in litigation and for which the
Company had not set up provisions because they relate to potential liabilities arising as a result of past events and
whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events, which
are not fully controlled by the Company (i.e. disputes where different contradictory sentences were pronounced or
litigations which are in early stages and no preliminary ruling had been issued): In 2010, the Company was sued by
Termoelectrica S.A., claiming the payment of RON 25,047,353 representing penalties related to certain invoices, for
the period 1 April 2007 – 31 March 2008. The first ruling in this case was favorable to Electrica SA. In November
2016, the Court of Appeal admitted the appeal of Termoelectrica S.A., cancelled the decision of the first instance
court and admitted Termoelectrica S.A.’s request for penalties to be paid by the Company. In 2017, Electrica SA
filed an appeal against the request of enforcement.
f The Company was sued by hidroelectrica S.A., which required the payment of RON 5,444,761 and other damages,
representing the damages claimed for the sale of electricity at a price estimated by the defendant as being unjust.
Up to the date of the financial statements, no ruling in this dispute was issued.
(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 sometimes demonstrate inconsistency in interpretation of the law. Income tax statements may be subject to
revision and corrections made by tax authorities, generally for a five-year period after they are filled in. The company
was the subject of fiscal inspections until 31 March 2013.
As shown in Note 9 (c) and 26, the Company has incurred significant expenses related to tax adjustments related to
previous years as a result of tax authorities inspections and disputes.
The Company’s management considers that adequate reserves were established in the individual financial statements
for all the significant fiscal obligations, however a risk that the tax authorities could take different positions still persists.
(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 that would have been established between the entities having no affiliation relation and are acting 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.
30 Commitments
Guarantees and pledges
At 31 December 2016, the Company has outstanding bank letters of guarantee as follows:
Bank
Beneficiary
Unicredit
Transelectrica
Value
Currency
Issue Date
25,000,000
05.09.2016
Expiry Date
20.08.2018
Unicredit
Enel Distributie Muntenia SA
1,397,967
BCR
OPCOM
600,000
20.12.2016
12.02.2017 – 12.05.2018
01.04.2016
31.03.2017
RON
RON
RON
The company has a facility for bank letter of guarantee issuance in the amount of RON 60 million contracted from
UniCredit, out of which the used amount is RON 26,397,967. The facility will become due on 22 August 2017.
Contractual commitments
The Company has the following contractual commitments as at 31 December 2016:
Purchase of property, plant and equipment and intangible assets
Amount
5,000,000
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KPMG Audit SRL
Victoria Business Park
DN1, Soseaua Bucuresti-Ploiesti nr. 69-71
Sector 1
P.O. Box 18-191
Bucharest 013685
Romania
Tel:
Fax:
+40 (21) 201 22 22
+40 (372) 377 800
+40 (21) 201 22 11
+40 (372) 377 700
www.kpmg.ro
Independent Auditors’ Report
(free translation1)
TO THE SHAREHOLDERS OF
SOCIETATEA ENERGETICA ELECTRICA S.A.
Opinion
We have audited the separate financial statements of Societatea Energetica Electrica S.A. (“the
Company”), which comprise the separate statement of financial position as at 31 December 2016,
the separate statements of profit or loss, comprehensive income, changes in equity and cash flows
for the year then ended, and notes, comprising significant accounting policies and other explanatory
information.
In our opinion, the accompanying separate financial statements give a true and fair view of the separate
financial position of the Company as at 31 December 2016, and of its separate financial performance
and its separate cash flows for the year then ended in accordance with Order of Minister of Public
Finance no. 2844/2016 for approval of accounting regulations in accordance with International Financial
Reporting Standards (“OMPF no. 2844/2016”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for the
Audit of the Separate Financial Statements section of our report. We are independent of the Company
in accordance with the ethical requirements that are relevant to our audit of the separate financial
statements in Romania, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the separate financial statements of the current period. These matters were addressed in
the context of our audit of the separate financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
©2017 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
1 TRANSLATOR’S EXPLANATORY NOTE: The above translation of the auditors’ report is provided as a free translation from
Romanian, which is the official and binding version.
SOCIETATEA ENERGETICA ELECTRICA S.A.
INDEPENDENT AUDITORS’ REPORT
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Taxation
Litigations and claims
Penalties to the State and other payments to the State budget (RON 62,417,320 – Note 9(c))
Change in provisions for tax risks during the year, net (RON 31,250,650 – Note 26)
Refer to Notes 6(f), 6(p), 6(q) (accounting policy), 9(c) and 26 (financial disclosures) to the separate
financial statements.
Key audit matter
How the matter was addressed in
our audit
The Company has been subject to various
adjustments related to corporate income tax and
value added tax imposed by tax authorities as a
result of their tax audits from prior periods.
The Company is involved in litigation or disputes
with tax authorities regarding findings of tax
audits from prior years.
Our audit procedures included, among others:
•
using our own tax specialists, assessing the
interpretation and application
Company’s
of relevant tax
law, and evaluating the
appropriateness of key assumptions used
and the reasonableness of estimates
in
relation to uncertain tax positions and the
level of related liabilities or provisions;
Key judgments are made by management in
estimating tax exposures and quantifying related
liabilities, provisions and/or contingent liabilities.
•
•
•
obtaining and evaluating responses to our
audit inquiry letters from the Company’s
in-house and external lawyers in relation
to existing or potential tax proceedings and
assessing the Company’s position in relation
to specific matters disputed;
inspecting the Company’s correspondence
with tax authorities during the reporting
period and subsequently, until the date of
our report;
the adequacy of disclosures
assessing
related to taxation in the separate financial
statements, with particular focus on uncertain
tax positions and tax-related contingencies.
Refer to Notes 6(p), 6(q) (accounting policy) and 29 (disclosures) to the separate financial statements.
Key audit matter
How the matter was addressed in our
audit
Our audit procedures included, among others:
In the normal course of the Company’s business,
potential exposures arise from administrative or
court proceedings. As disclosed in Note 29 to
the separate financial statements, the Company
is involved in litigations with different authorities,
business partners or other parties.
•
•
Whether a liability is recognized or disclosed as
a contingent liability in the financial statements
judgmental and dependent on
is
inherently
significant assumptions and
a number of
assessments.
The amounts involved are potentially significant
if any, to be
and determining the amount,
recognised or disclosed in the financial statements,
is inherently subjective.
•
inspecting minutes of the shareholders’ and
Board of Directors’ meetings;
obtaining and evaluating lawyers’ responses
to our audit inquiry letters and discussing
the nature and status of the litigations and
potential legal exposures with the Company’s
management and
legal counsel,
with particular focus on the open litigations
with Termoelectrica S.A. (RON 25,047,353)
and hidroelectrica S.A. (RON 5,444,761);
in-house
critically assessing the Company’s assumptions
and estimates in respect of litigations and
claims, including the liabilities or provisions
recognized or contingent liabilities disclosed
in the separate financial statements. This
involved assessing the probability of an
unfavourable outcome of a given proceeding
and the reliability of estimates of related
amount;
•
assessing whether the disclosures detailing
significant
legal proceedings adequately
disclose the Company’s potential liabilities.
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Other information - Separate Administrators’ Report
The other information comprises the separate Administrators’ Report. The Administrators are responsible
for the preparation and presentation of the separate Administrators’ Report in accordance with
OMPF no. 2844/2016, articles 15–19 of the accounting regulations in accordance with International
Financial Reporting Standards, and for such internal control as Administrators determine is necessary to
enable the preparation and presentation of separate Administrators’ Report that is free from material
misstatement, whether due to fraud or error.
The separate Administrators’ Report presented from page 1 to 63 is not part of the separate financial
statements.
Our opinion on the separate financial statements does not cover the separate Administrators’ Report.
In connection with our audit of the separate financial statements as at and for the year ended 31
December 2016, our responsibility is to read the separate Administrators’ Report and, in doing so,
consider whether there is a material inconsistency between the Administrators’ Report and the financial
statements, whether the Administrators’ Report includes, in all material respects, the information
required by OMPF no. 2844/2016, articles 15–19 of the accounting regulations in accordance with
International Financial Reporting Standards, and whether, based on our knowledge and understanding
of the entity and its environment obtained during our audit of the separate financial statements, the
information included in the separate Administrators’ Report is materially misstated. We are required to
report in respect of these matters. Based on the work performed we report that:
a)
b)
in the separate Administrators’ Report we have not identified information which is not in
accordance, in all material respects, with the information presented in the accompanying
separate financial statements;
the separate Administrators’ Report identified above includes, in all material respects, the
information required by OMPF no. 2844/2016, articles 15–19 of the accounting regulations
in accordance with International Financial Reporting Standards.
In addition, based on our knowledge and understanding of the entity and its environment acquired
during our audit of the separate financial statements as at and for the year ended 31 December 2016,
we have not identified information included in the separate Administrators’ Report that is materially
misstated.
Responsibilities of Management and Those Charged with Governance for the Separate Financial
Statements
The management is responsible for the preparation of the separate financial statements that give a
true and fair view, in accordance with OMPF no. 2844/2016, and for the internal control that the
management determines is necessary to enable the preparation of separate financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, the management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the management either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditors’ Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the separate financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
•
•
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the separate financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors’ report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the separate financial statements,
including the disclosures, and whether the separate financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
•
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the separate financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditors’ report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
Other matter
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 this report, or for the opinion we have
formed.
The engagement partner on the audit resulting in this independent auditors’ report is Razvan Mihai.
Refer to the original signed Romanian version
For and on behalf of KPMG Audit S.R.L.:
Razvan Mihai
KPMG AUDIT S.R.L.
registered with the Chamber of Financial Auditors
of Romania under no. 2561/2008
registered with the Chamber of Financial
Auditors of Romania under no. 9/2001
Bucharest
9 March 2017
DECLARATIA CONDUCERII
Confirmam, bazandu-ne pe datele pe care le detinem, ca situatiile financiare consolidate, intocmite
in conformitate cu standardele de contabilitate aplicabile, ofera o imagine corecta si conforma cu
realitatea privind pozitia financiara a Grupului, performanta financiara si fluxurile de numerar pentru
anul incheiat la 31 decembrie 2016 si ca raportul administratorilor ofera o imagine corecta si conforma
cu realitatea privind dezvoltarea si performanta activitatii Grupului, precum si o descriere a principalelor
riscuri si incertitudini aferente dezvoltarii asteptate a Grupului.
Cristian Busu
administrator neexecutiv, presedinte al Consiliului de Administratie
Willem Schoeber
administrator neexecutiv
Arielle Malard de Rothschild
administrator neexecutiv
Pedro Mielgo Alvarez
administrator neexecutiv
Corina Popescu
administrator neexecutiv
Bogdan Iliescu
administrator neexecutiv
Ioana Dragan
administrator neexecutiv
Catalin Stancu
Director General
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, 2016, 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.
Cristian Busu
non-executive director, Chairman of the Board of Directors
Willem Schoeber
non-executive director
Arielle Malard de Rothschild
non-executive director
Pedro Mielgo Alvarez
non-executive director
Corina Popescu
non-executive director
Bogdan Iliescu
non-executive director
Ioana Dragan
non-executive director
Catalin Stancu
General Manager
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