A N N U A L R E P O R T 2 0 1 8 | 1
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 3
CONTENTS
KEy figURES
4
MESSAgE fROM THE CHAiRMAN
8-9
MESSAgE fROM THE CEO
10-11
DiRECTORS’ REPORT
12-140
for the year 2018
CONSOLiDATED fiNANCiAL STATEMENTS
141-213
as at and for the year ended
31 december 2018
iNDEPEDENT AUDiTOR REPORT
214-219
consolidated financial statements
SEPARATE fiNANCiAL STATEMENTS
220-277
as at and for the year ended
31 december 2018
iNDEPEDENT AUDiTOR REPORT
278-283
individual financial statements
DECLARATiON Of THE MANAgEMENT
284
ELECTRICA SA 4 | A N N U A L R E P O R T 2 0 1 8
KEy figURES gROUP
KEy figURES ELECTRiCA gROUP
Operational results
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)
THE STRUCTURE Of ELECTRiCA gROUP
2016
17.5
3.67
10.6
3.60
9,685
2016
5,518
960
586
357
718
569
1.05
2017
17.8
3.70
9.2
3.57
8,792
2017
5,603
601
197
128
389
742
0.38
2018
17.7
3.78
8.6
3.54
7,995
2018
5,613
681
261
230
696
913
0.68
99.99%
Electrica Furnizare
3.54 mn. consumers1
Market share4 17.02%
Revenues: RON 3,995 mn.
EBITDA: RON 137 mn.
99.99%
Societatea de
Distributie a Energiei
Electrice Transilvania
Nord S.A
1.28 mn. users1
Market share2 11.9%
Revenues: RON 896 mn.
EBITDA: RON 211 mn.
Electrica SA
99.99%
Societatea de
Distributie a Energiei
Electrice Transilvania
Sud S.A
1.17 mn. users1
Market share2 13.8%
Revenues: RON 918 mn.
EBITDA: RON 186 mn.
99.99%
Societatea de
Distributie a Energiei
Electrice Muntenia
Nord S.A
1.33 mn. users1
Market share2 14.6%
Revenues: RON 893 mn.
EBITDA: RON 109 mn.
Supply business:
88.6 TWh on the retail
market in 2018
Distribution business (2018):
3.78 mn. users / area of 97,196 km2 covered / distributed quantity 17.66 TWh
RON 5.3 bn. (EUR 1.1 bn3) Regulated Asset Base (RAB) / concession ending
in 2054 (+24.5 years possibility of extension)
100%
Electrica Serv
100%
External services:
SE Muntenia
Revenues: RON 161 mn.
EBITDA: RON 27 mn.
Source: Company data – Consolidated
financial statements - segment reporting,
ANRE.
1. Consumer = Any natural person or
legal entity that enters a contract
to purchase electricity. User = Any
producer, transmission system
operator, distribution system
operator, supplier, eligible consumer
or captive consumer connected to the
network;
2. As of 31 December 2017 Market
share is based on volumes (ANRE
Report);
3. As of 31 December 2018 as per the
financial section converted from
RON to EUR using 31 December 2018
exchange rate of 4.6639 for balance
sheet data and average rate of
4.6535 for income statement data;
4. As of 30 November 2018 Market
share is based on volumes
Additional shareholder in distribution and supply subsidiaries
The existence of additional shareholder was imposed by the observance of the provisions of Art. 10, paragraph (3) of the Law no. 31/1990 regarding the companies. As a result:
SDTS holds 10 shares in SDMN, SDMN holds 10 shares in SDTN, SDTN holds 10 shares in SDTS and Electrica Serv holds 10 shares in EF.
Source: Datele companiei – Situatii financiare consolidate - raportarea pe segmente, ANRE.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 5
KEy gROUP iNfORMATiON
Summary Consolidated Financials
Revenues (RON mn)
Adjusted EBITDA Growth and Margin Performance
EBITDA (RON mn) and EBITDA Margin (%)
Net Profit (RON mn)
Net Cash Position Net Debt1/(Net Cash) (RON mn)
Earnings and gross dividends per share (RON)
Source: Company data
1 Net debt/ ( net Cash) is calculated as bank borrowings + bank overdrafts + financial leases + Financing of PP&E - Cash and cash equivalents - bank deposits - T-bills and
government bonds.
ELECTRICA SA Începând cu data de 1 noiembrie, Consiliul de
Administrație a desemnat-o pe Corina Popescu ca
Director general provizoriu al Grupului Electrica,
pentru o perioadă de un an sau până la numirea
unui nou Director, după ce Cătălin Stancu și-a încetat
colaborarea cu Grupul.
noștri”, spune Corina Popescu.
După ce în 2017 a realizat un re-
cord în privința investițiilor în rețelele
de distribuție - 736 milioane de lei,
în acest an, Electrica și-a propus din
nou cel mai ambițios plan de investiții
din industrie, în valoare de 900 mili-
oane de lei. Toate aceste investiții vor
avea ca efect principal îmbunătățirea
Corina Popescu preia conducerea
in vedere asigurarea unor rezultate fi-
calității serviciului. “O provocare im-
Electrica, după ce a făcut parte din
nanciare sustenabile pentru acționarii
portantă pentru ceea ce urmează este
Consiliul de Administrație și a condus
noștri. În privința furnizării, avem în
dată de reducerea semnificativă a ca-
Societatea de Distribuție a Energiei
vedere trecerea de la poziția de vân-
drului de reglementare, care, cel puțin
Electrice Muntenia Nord, parte a Gru-
zător de energie la aceea de furnizor
într-o primă etapa, va încetini ritmul
pului Electrica. Cunoaște foarte bine
integrat de servicii, iar primii pași în
investițiilor în infrastructură. Și asta
Electrica, pe care o consideră „com-
această direcție au fost deja făcuți,
reprezintă o mare provocare, în con-
pania sa de suflet”. „M-am format sub
prin obținerea licenței de furnizare a
dițiile în care infrastructura de energie
umbrela Electrica. Profesioniștii care
gazelor naturale. Este o zonă pe care
are nevoie de continuarea investițiilor
au lucrat în această companie sunt
vrem să o dezvoltăm, pentru a veni
masive”, consideră noul Director Ge-
cei care m-au îndrumat în primii ani
în întâmpinarea așteptărilor clienților
neral al Electrica.
ai carierei mele. Să mă întorc la Elec-
trica, pe această poziție, este o onoare,
dar și o mare provocare pentru mine”.
Procesele de optimizare a activi-
tăților rămân prioritate, atât pe seg-
mentul de distribuție, cât și pe aria
de furnizare, la fel și modernizarea
infrastructurii de distribuție. Strategia
Electrica este de a oferi stabilitate și
predictibilitate celor peste 3,7 milioa-
ne de clienți ai noștri, dar și servicii cu
valoare adăugată.
“Modernizarea rețelelor la nivelul
celor trei operatori de distribuție din
cadrul Grupului Electrica va continua
să fie o prioritate pentru companie,
ținând însă cont, evident, de noile
reglementari din domeniu și având
Corina Popescu este un executiv de top cu o experiență impresionan-
tă în domeniul energiei electrice și al gazelor naturale. De la data de
1 iunie 2018, doamna Popescu ocupă poziția de Director General al
Societății de Distribuție a Energiei Electrice Muntenia Nord, parte a
Grupului Electrica.
Absolventă a Facultății de Energetică din cadrul Universității Poli-
tehnica București, specializarea Electroenergetică, Georgeta Corina
Popescu și-a început cariera profesională în cadrul Sucursalei de Dis-
tribuție și Furnizare a Energiei Electrice București.
Începând cu anul 2007, Georgeta Corina Popescu a trecut în sectorul
privat, unde a ocupat funcții importante în cadrul Grupului E.ON Ro-
mânia și al Grupului OMV.
În perioada decembrie 2015 - februarie 2017, Corina Popescu a ocu-
pat poziția de Secretar de stat în Ministerul Energiei. În martie 2017,
a fost numită în Directoratul Transelectrica, iar începând cu 1 iunie
2017 Președinte al Directoratului Transelectrica.
6 | A N N U A L R E P O R T 2 0 1 8
DiSTRiBUTiON
Distributed Volumes (TWh)
The structure of Electrica Group’s investments in 2018
3
Capital expenditures 2016 – 2018 (RON mil)
SUPPLy MARKET
Volumes of electricity supplied on retail market (TWh)
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 7
E L E C T R I C A S A
Overall Market Share 12M 2018
Share of Competitive Market 12M 2018
Share of Regulated Market 12M 2018
Source: ANRE Report December 2018
1. ENEL refers to ENEL Energie Muntenia and ENEL Energie
8 | A N N U A L R E P O R T 2 0 1 8
MESSAgE fROM THE CHAiRMAN
Of THE BOARD Of DiRECTORS
for the electrica Group, the year 2018 represented
a natural continuation of the path started in 2014,
when the privatization started with listings on both
the bucharest stock exchange and the london stock
exchange. the complex reconfiguration process of the
company and the achievement of record investments
for the industry remained our top priorities, given the
significant changes in the energy market. during
the last years, electrica has made major progresses
as regards the operational efficiency and the
improvement of service quality, especially concerning
the optimization of the processes at Group level. the
efforts were focused on the sustainable development
of the business, so that our activity generates added
value to all interested parties: shareholders, investors,
clients and business partners, as well as to the
communities where we operate.
last years were marked by
significant
the
transformations of the energy industry, and the board
of directors and the management team of electrica
had to find the balance between the long-term
strategic objectives and the challenges of the current
activity.
it has been, and will still be, necessary to adapt to the
permanent changes on the energy market, which,
at the same time, come with challenges that are
difficult to anticipate at times. besides these, there is
also the technological progress with which we must
keep up, starting with digitalization, smart metering
or electrical mobility. customers' expectations have
diversified, and the role of distribution and supply
companies will gradually change. it is fundamental
to continue to focus on the assurance of the human
resources needed for the key areas of the business,
the electrica Group aiming to invest in professional
training centers and in dual education.
in 2018 as well, the board of directors has
continued to closely collaborate with the executive
management of the company in order to ensure
the acceleration of the transformation process
initiated in 2017, in distribution companies. the
finalization and operational implementation of a
new organizational model represented an important
objective, given the very ambitious targets in terms of
operational efficiency and quality of the distribution
service, established by the methodology for the new
regulation period. as regards the supply segment, we
focused on the increase of the profitability of the client
portfolio, through measures to improve customer
satisfaction, portfolio restructuring and competitive
and dynamic procurement strategies, in the context
of a volatile and unpredictable market.
the measures undertaken in 2018 establish a solid
ground for the Group’s ambition to be the market
leader and to ensure, in a sustainable manner,
profitability and satisfaction for all the interested
parties. moreover, at the end of 2018, the board of
directors of the company has approved the new
strategic directions of the Group for the next five years.
even though 2018 was a year with fluctuating
evolutions, the financial results were solid. We
concluded the year with an individual net profit with
24% over the budgeted level and with a consolidated
net profit with 34.3% higher than in 2017. thus, we
proposed to the shareholders of the company the
distribution of dividends with an attractive return,
representing 87.4% of the net profit.
on behalf of the board of directors, i ensure you
that the electrica Group granted particular interest
in the increase of the transparency degree and the
enhancement of communication with all interested
parties, through their active involvement and through
the reports on actions related to the sustainable
development, environment and social responsibility
actions, in line with the objectives of the company to
integrate sustainability elements in all its activities.
the year 2019 represents an important year for us.
beyond the major challenges ahead, we are celebrating
5 years since the listing of the company, and i will take
this opportunity to pass on the consideration of the
board of directors for the efforts of all the employees
of the Group during this challenging period.
VALENTiN RADU
CHAiRMAN Of THE BOARD Of DiRECTORS Of
ELECTRiCA SA
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 9
ELECTRICA SA 10 | A N N U A L R E P O R T 2 0 1 8
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 11
MESSAgE fROM THE CEO
2018 was a year filled with challenges, as well as
with numerous accomplishments for electrica, one
of the most important being the implementation of
the most ambitious investment plan in the industry.
Almost 900 million RON were allocated for the
refurbishment and upgrade of the distribution
infrastructure, resulting in an enhanced operational
efficiency and an improvement of the electrical
energy distribution service.
moreover, in response to the energy market changes,
we continued the program for the transformation
and optimization of the distribution and service
activities. the program’s main objective consists of the
implementation of a new model for the organization
of the distribution segment, which is translated into
efficiency improvement, by means of the functional
coordination of all activities within the company.
We follow the same course of action in the supply
area, where, in 2018 as well, we searched for balance
between profitability and market share. it is obvious
that the transfer from our energy provider position
to that of an integrated service provider should be
achieved with expediency, and we are glad we can
say that we have taken the first steps towards creating
a multi-utility-type company, as electrica furnizare
already has the license for natural gas supply, an
area which we intend to develop, in order to meet our
clients’ expectations.
increase
thus, together we have managed to
the Group companies’ capacity to streamline its
operations, to make investments, to improve access
to the network and, very important, to attain better
coordination of field activities. the transformation
process is very important indeed, it will also continue
this year and it will, naturally, pursue the interest of
our customers, as well as that of our shareholders.
also in 2018, due to the streamlining measures and
to the joint effort at Group level, we managed to
obtain solid financial results. We ended the year with
total operational revenues of 5.778 million ron, an
individual net profit 24% above the budgeted level,
and a net consolidated profit of 230 million ron,
34.3% higher than in the previous year. thus, we
managed to provide an attractive dividend yield to
the company’s shareholders, of 7%, calculated at the
price valid end of day, 5 march 2019.
at the same time, we also enhanced our social
responsibility projects, and we carried out the third
edition of the Grant Program “electrica puts romania
in a different light”, which enjoys increasing notoriety
and appreciation from the communities we activate
in. in 2018, electrica ranked 9th among the 50 most
valuable romanian brands, going up one place as
compared to 2017. at the same time, electrica ranked
among romania’s most appreciated companies in
terms of transparency, as a result of launching the
sustainability report.
2019 marks the beginning of a new regulatory period,
which incurs important changes to the industry.
consequently, this year’s tagline should be flexibility -
the availability to find the best solutions, to adjust to a
continuously changing world.
in 2019, the electrica Group’s main objectives consist
of improving the offer of products and services, as well
as of meeting the customer’s needs and demands, by
developing new solutions and services, and also by
steady investments into networks and technology.
to this end, we aim to supplement the activities which
are already being performed, for the optimization of
the distribution companies, by means of concrete
actions in the supply and services area, as well as by
streamlining measures for the supporting functions.
also, out of the desire to develop sustainable
partnerships, in addition to the traditional products,
we also aim to support the development of the gas
segment, as well as other solutions which bring added
value to the customers and to the shareholders.
gEORgETA CORiNA POPESCU
CEO
ELECTRiCA S.A.
ELECTRICA SA 12 | A N N U A L R E P O R T 2 0 1 8
DiRECTORS’ REPORT
fOR THE yEAR 2018
(based on the individual financial statements prepared in accordance with the Order of the
Ministry of Public finance no. 2844/2016 for the approval of the Accounting Regulations
in accordance with international financial Reporting Standards, respectively on the
consolidated financial statements prepared in accordance with international financial
Reporting Standards as adopted by the European Union)
REgARDiNg THE ECONOMiC AND fiNANCiAL ACTiViTy Of
SOCiETATEA ENERgETiCA ELECTRiCA S.A. and ELECTRiCA gROUP
in compliance with art. 67 of the Law no. 24/2017 on issuers of financial instruments and
market operations and with annex no. 15 to ASf Regulation no. 5/2018 and the Bucharest
Stock Exchange Code
for the 12 month period ended 31 December 2018
Free translation from Romanian, which is the official and binding version, and will prevail, in the event of any discrepancies with the English version
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 13
TAblE of ConTEnTS
Organizational structure
Mission, vision, values
Key elements of the 2015 – 2018 Strategic Plan
Outlook
Key factors, directions and significant market trends affecting the operational results of Electrica group
Key financial data 2018
Key events in 2018 and up to the report’s publication date
Post balance sheet events date
Identification details of Electrica
1 Electrica 2018 Overview
1.1.
1.2.
1.3.
2 Electrica Group
2.1.
2.2.
2.3.
2.4.
2.5.
3 Electrica on the capital markets
Ownership structure
3.1.
Shares evolution on BSE and global depository receipts (gDRs) evolution on LSE
3.2.
investor relations (iR)
3.3.
Legal acts reported
3.4.
Dividends policy
3.5.
Dividend distribution
3.6.
3.7.
Own shares
4 Corporate Governance in ELSA
Corporate governance Code
4.1.
general Meeting of ELSA’s Shareholders
4.2.
Shareholders’ rights
4.3.
ELSA’s Board of Directors
4.4.
The activity of ELSA’s Board of Directors and of its Consultative Committees in 2018
4.5.
ELSA’s Executive management
4.6.
Remuneration of the Directors and of the Executive Managers
4.7.
Corporate governance in ELSA’s Subsidiaries
4.8.
Statement regarding the corporate governance “Comply or Explain”
4.9.
implementing action plans undertaken by signing the framework agreement with EBRD
4.10.
4.11.
internal audit report for 2018
5 Operating activity
5.1.
5.2.
5.3.
5.4.
5.5.
5.6.
5.7.
5.8.
6 Electrica financial reporting 2018
6.1.
6.2.
6.3.
6.4.
6.5.
6.6.
6.7.
Consolidated statement of the financial position
Consolidated statement of profit and loss
Consolidated cash flow statement
individual statement of the financial position
individual statement of profit or loss
individual cash flow statement
Risk management
Operating segments
fixed assets
Procurement
Sales activity
Reorganization and disposal of assets
Personnel
Environmental considerations
Research and development activities
6.8.
Description of the main features of internal control and risk management systems in relation to the
financial reporting process
15
16
17
20
25
26
27
29
29
30
32
34
35
38
43
44
44
45
45
46
47
47
48
50
55
60
63
65
68
76
79
80
81
83
86
86
89
89
91
91
92
93
96
103
105
108
111
112
116
Appendix 1 – Litigations
Appendix 2 – Details of the main investments accomplished in 2018 by the Electrica Group
119
136
ELECTRICA SA 14 | A N N U A L R E P O R T 2 0 1 8
gLOSSARy
ANRE
Romanian Energy Regulatory Authority
BPS
BoD
BRP
BSE
Basis points
Board of Directors
Balance Responsible Party
Bucharest Stock Exchange
CAPEX
Capital Expenditure
CgC
CMC
CMUS
CNTEE
CSR
DAM
DSO
DMS
EBiT
EBiTDA
EDN
ELSA
EgMS
EU
EUR
fCA
gC
gDP
gDR
gEO
gMS
HV
iAS
ifRiC
ifRS
iMS
iPO
iR
iSiN
KPi
kV
LR
Corporate governance Code
Competitive Market Component
Centralized Market for Universal Service
The National Transmission System
Operator
Corporate Social Responsibility
Day Ahead Market
Distribution System Operator
Distribution Management System
Earnings before interest and tax
Earnings before interest, tax,
depreciation and amortization
Electrical Distribution Network
Electrica S.A.
Extraordinary general Meeting of
Shareholders
European Union
The monetary unit of several member
states of the European Union
financial Conduct Authority – United
Kingdom
green Certificates
gross Domestic Product
global Depositary Receipts
government Emergency Ordinance
general Meeting of Shareholders
High Voltage
international Accounting Standard
international financial Reporting
interpretations Committee
international financial Reporting
Standard
integrated Management System
initial Public Offering
investor Relations
international Securities identification
Number
Key Performance indicators
KiloVolt
Last Resort
LSH
LV
MV
MVA
MWh
MKP
NAfA
NES
NL
NRC
OMPf
OgMS
OHS
OHSAS
Labour safety and health
Low Voltage
Medium Voltage
Mega Volt Ampere
MegaWatt hour
Management Key Position
National Agency for fiscal
Administration
National Electricity System
Network Losses
Nomination and Remuneration
Committee
Order of Ministry of Public finances
Ordinary general Meeting of
Shareholders
Occupational Health and Safety
Occupational Health and Safety
Assessment Series
OPCOM
Romanian gas and Electricity market
operator
PBS
PCB
RAB
RM
RON
RRR
SAD
SCADA
SDEE
SDMN
SDTN
SDTS
SED
SEM
SEO
SoLR
TWh
TSO
UM
US
USD
VAT
Percentage basis points
Polychlorinated Biphenylsor
Regulated Asset Base
Retail Market
Romanian monetary unit
Regulated Rate of Return
Distribution Automation System
Supervisory Control And Data
Acquisition
Societatea de Distributie a Energiei
Electrice
Societatea de Distributie a Energiei
Electrice Muntenia Nord
Societatea de Distributie a Energiei
Electrice Transilvania Nord
Societatea de Distributie a Energiei
Electrice Transilvania Sud
Servicii Energetice Dobrogea SA
Servicii Energetice Muntenia SA
Servicii Energetice Oltenia SA
Supplier of last resort
TeraWatt hour
Transmission and system operator
Unit of Measurement
Universal Service
United States Dollar
Value Added Tax
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 15
identification details of Electrica
Report date: 5 March 2019
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: 13267221
Trade Registry No: J40/7425/2000
LEI Code (Legal Entity Identifier): 213800P4SUNUM5AUDX61
Subscribed and paid share capital: RON 3,459,399,290
Main characteristics of issued shares: 345,939,929 ordinary shares of 10 RON nominal value, out
of which 6,890,593 are treasury shares and 339,049,336 are shares issued in dematerialized form and
freely transferable, nominative, tradable and fully paid.
Regulated market where the issued securities are traded: the Company’s shares are listed on
the Bucharest Stock Exchange (ticker: EL), and the global Depositary Receipts (ticker: ELSA) are listed
on the London Stock Exchange
Applicable accounting standards: Order of the Ministry of Public finance no. 2844/2016 for
the approval of the Accounting Regulations in accordance with international financial Reporting
Standards and the international financial Reporting Standards as approved by the European Union
Reporting period: year 2018 (period 1 January - 31 December 2018)
Audit: The individual and consolidated financial statements as at and for the period ended 31
December 2018 are audited by an independent financial auditor
ISIN
Bloomberg Symbol
Currency
Nominal Value
Ordinary Shares
ROELECACNOR5
0QVZ
RON
RON 10
GDR
US83367y2072
ELSA:Li
USD
RON 40
Stock Market
Bursa de Valori Bucuresti REgS
London Stock Exchange MAiN
MARKET
Ticker
Source: Electrica
EL
ELSA
ELECTRICA SA 16 | A N N U A L R E P O R T 2 0 1 8
1
ELECTRiCA 2018
OVERViEW
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 17
1.1. Key financial data 2018
in 2018, Electrica group net profit increased by 34.3% as compared to the previous year, mainly driven by the higher
profitability of supply segment.
The group revenues in 2018 and 2017 were of RON 5,613 mn and RON 5,603 mn respectively.
RON mn
Revenue
Other operating income
Operational costs
Adjusted EBiTDA1
EBiT
gross profit
Net profit
Source: Electrica
2018
5,613
165
2017
5,603
173
2016
5,518
243
(5,517)
(5,580)
(5,175)
656
261
263
230
614
197
207
172
998
586
589
469
in
the charts
As presented
the adjusted EBiTDA
below,
margin went up by 73 bps in
2018 compared to 2017, while
the net profit margin increased
by 34.1%.
On 31 December 2018, the group
has a Net Debt/(Cash) position2 of
minus RON 350.4 mn.
Figure 1: Consolidated revenue of Electrica Group (RON mn)
Figure 2: Adjusted EBITDA (RON mn) and adjusted EBITDA margin (%)
Figure 3: Net profit (RON mn)
Figure 4: Net debt/(Cash) (RON mn)
ELECTRiCA 2018
OVERViEW
Source: Electrica
1 The Company defines the consolidated adjusted EBITDA as consolidated EBITDA adjusted for non-recurring events, i.e. impairment/ reversal of impairment of trade and
other receivables, net at consolidated level
2 Net debt/(Cash) is defined as bank borrowings + bank overdrafts + financial leases + funding for concession agreements - cash and cash equivalents - bank deposits and
treasury bills and government bonds.
ELECTRICA SA 18 | A N N U A L R E P O R T 2 0 1 8
DiSTRiBUTiON SEgMENT
Essential information:
Electricity distribution in Romania is fulfilled currently
mainly by eight electricity distribution system
operators, regulated by ANRE.
Each company
is responsible for the exclusive
distribution of electricity in the region for which it is
authorized, under a concession agreement concluded
with the Romanian state.
Electrica and Enel each own three distribution
companies, while CEZ through Distributie Oltenia and
E.ON through Delgaz grid own the remaining two.
Electrica group is a key player in the electricity
distribution sector, both in terms of areas covered and
in number of users served.
The Regulated Assets Base (RAB) estimated value at
the end of 2018 was RON 5,256 mn.
197,946 km of electric lines - 7,595 km for High Voltage
(“HV”), 45,755 km for Medium Voltage (“MV”) and
144,596 km for Low Voltage (“LV”).
Total area covered: 97,196 km2, 40.7% of Romania’s
territory.
3.8 mn users (2018) for the distribution activity.
17.7 TWh of electricity distributed in 2018, a decrease
of 0.9% as compared to 2017.
40.3% market share for the distribution of electricity
to final users in 2017 (based on distributed quantities,
according to ANRE report for 2017).
Figure 5: Romanian electricity distribution map
Figure 6: Evolution of the number of users (mn)
Figure 7: Quantity distributed (TWh)
Source: Electrica
Source: ANRE Report – Performance Indicators 2017
Source: ANRE Report – Annual Report 2017
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 19
Key financial indicators
Revenues from the distribution segment
increased by
RON 62.8 mn, or 2.3%, to RON 2,738.6 mn as compared to
RON 2,675.7 mn in 2017, as a result of both the increase of
distributed quantities on medium and low voltages by 6.1%
and 1.5% respectively, and of the increase of the investments
made in the network, registered as intagible assets, according
to ifRiC 12.
The increase of costs with the energy purchased to cover
network losses, the increase in costs with employee benefits,
and other categories of expenses led to a decrease of RON
117.2 mn or 18% of EBiTDA on the distribution segment.
The EBiTDA margin decreased by 19.8% in 2018, from 24.3% in
2017 to 19.5% in 2018.
The net profit was additionally influenced by the increase
in depreciation and amortization costs, driven by the
investments made in the electricity distribution network.
Figure 8: Revenues from distribution (RON mn)
Figure 9: EBITDA – distribution segment (RON mn)
Figure 10: Net Profit – distribution segment (RON mn)
Figure 11: Net debt/(Cash) – distribution segment (RON mn)
Source: Electrica
Source: Electrica
Source: Electrica
Source: Electrica
SUPPLy SEgMENT
Essential market data (according to ANRE
Report for November 2018)
The supply market
from
competitive segment and from the regulated
segment;
is composed both
The regulated segment comprises five suppliers of
last resort.
The competitive segment comprises 97 suppliers
(including suppliers of last resort with activity in
competitive segment from retail market), out of
which 91 are relatively small (<4% market share).
EfSA has a market share of 17.02%; is the market leader
on regulated market with a share of 45.42%, on the
competitive market having a market share of 9.34% (ANRE
report from November 2018). By comparison, in 2017 EfSA
had a regulated market share of 40.79% and a competitive
market share of 11.58% (ANRE report from December
2017).
Key financial indicators
Revenues from supply activity have decreased by RON
229.2 mn or 5.4%, at RON 3,995.5 mn in 2018, from RON
4,224.7 mn in 2017.
This decrease is the net effect of the energy supply activity,
which had a positive influence, due to the 6.9% increase in
sales price, covering the impact generated by the decrease
of the quantity supplied by 3.4%, and of the decrease of the
revenues from Balance Responsible Party (BRP), mainly as a
ELECTRICA SA 20 | A N N U A L R E P O R T 2 0 1 8
result of the accounting of BRP, beginning with 1 January
2018, in accordance with ifRS 15, which removes the
revenues and the expenses related to BRP.
The financial position of the supply segment is relatively
stable compared to 2017, having a cash position of RON
243.7 mn.
in terms of EBiTDA, EfSA recorded an increase of RON 127.3
mn in 2018 compared to 2017, mainly due to the decrease
of cost of electricity purchased.
Figure 12: Revenues for the supply segment (RON mn)
Figure 13: EBITDA for the supply segment (RON mn)
Figure 14: Net profit of the supply segment (RON mn)
Figure 15: Net debt/(Cash) - the supply segment (RON mn)
Source: Electrica
Source: Electrica
Source: Electrica
Source: Electrica
1.2. Key events in 2018 and up to the report’s publication date
During 2018 and 2019, until the issue date of this report, the
following main events took place:
Î ELSA’s General Meetings of Shareholders:
During 2018, three Ordinary general Meetings of
Shareholders (OgMS) took place in 9 february, 27
April and 18 September as well as an Extraordinary
Meeting of Shareholders (EgMS) in 27 April.
The main resolutions of the OgMS dated 9 february
2018 refer to:
the approval of the remuneration policy of
the members of the Board of Directors of the
Company and its application from the date of
the OgMS approval;
the approval of
the proposed Mandate
Agreement for the members of the Board
of Directors of the Company and of the
remuneration limits of the Company’s executive
managers.
The main resolutions of the OgMS and EgMS dated
27 April 2018 refer to:
the approval of 2017 audited financial
individual and consolidated
statements, at
levels;
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 21
the approval of 2018 revenue and expenses
budget, at individual and consolidated levels;
the approval of the 2017 profit distribution (the
total gross dividend value was of RON 245.37
mn, and the gross dividend per share of RON
0.7237);
through
the election of ELSA’s Board of Directors
members
the cumulative voting
method: Ms. Elena Doina Dascalu, Mr. gicu iorga,
Ms. Ramona Ungur, Mr. Valentin Radu, Ms. Arielle
Malard De Rothschild, Mr. Bogdan george
iliescu, Mr. Willem Jan Antoon Henri Schoeber
and the setting of their mandate’s duration for a
period of four years;
the rejection of the appointment of Deloitte
Audit as ELSA’s financial auditor;
the rejection of setting the company’s working
point in Bucharest, 4 - 8 Nicolae Titulescu Road,
West Wing, 6th floor, district 1, Romania;
in the OgMS dated 18 September 2018, the
shareholders approved the appointment of Deloitte
Audit as ELSA’s financial auditor for a three-year
period, respectively for financial years 2018, 2019
and 2020.
Î Changes in the structure of ELSA’s Board of
Directors (BoD) and of the BoD’ Committees:
On 12 October 2018, ELSA announced the decision
of Ms. Arielle Malard de Rothschild to renounce her
position as member of the BoD, due to additional core
activity responsibilities;
On 15 November 2018, ELSA announced that Ms.
Doina Elena Doina Dascalu, the chair of the BoD since
date of 14 May 2018, has resigned from the position
as member of the BoD, following her nomination, by
the Romanian Parliament, as first Vice President of
the financial Supervisory Authority;
following the resignation of Ms. Arielle Malard de
Rothschild, the BoD appointed Mr. Dragos Andrei as
interim member of the Board of Directors, starting
with 1 December 2018 and until 30 June 2019 or
until the OgMS having on the agenda the filling of
the vacant director position, whichever would have
occured first;
On 18 December 2018, Mr. Willem Jan Antoon Henri
Schoeber notified the Company about his decision
to resign from his position in the Board of Directors
of ELSA, 6 february 2019 being the last day Mr.
Schoeber was a member of the Board of Directors;
following the resignation of Ms. Elena Doina Dascalu
from her position as member of the BoD, the BoD
appointed Mr. Valentin Radu as Chair of the Board
of Directors for a mandate of one year, starting 12
December 2018;
The composition of the BoD’s committees and their
chairs with 1-year mandate were decided in 2018 on
14 May as follows:
The Strategy and Corporate governance
committee: Mr. Willem Jan Antoon Henri
Schoeber - chair, Ms. Arielle Malard de Rothschild
- member, Mr. gicu iorga - member
The Audit and Risk committee: Mr. Bogdan george
iliescu - chair, Ms. Arielle Malard de Rothschild -
member, Ms. Ramona Ungur - member;
The Nomination and Remuneration committee:
Mr. Valentin Radu - chair, Mr. Bogdan george iliescu
- member, Mr. Elena Doina Dascalu - member.
following the changes in the structure of the Board
of Directors, on 12 December 2018, the BoD decided
the composition of the committees and elected their
chairs, as follows:
The Strategy
and Corporate governance
committee: Mr. Willem Jan Antoon Henri Schoeber
- chair, mr. Dragos Andrei - member, Mr. gicu iorga
- member;
The Audit and Risk committee: Mr. Bogdan george
iliescu - chair, Ms. Ramona Ungur - Member, Mr.
gicu iorga - Member;
The Nomination and Remuneration committee:
Mr. Bogdan george iliescu - chair, Mr. Valentin Radu
- member, Ms. Ramona Ungur – member.
On 7 february 2019, the OgMS of ELSA took place,
during which ELSA’s shareholders elected, through
the simple voting method, the members of the
Company’s Board of Directors following the vacancy
of the positions in the Board of Directors, after the
renunciation to the mandate by Ms. Arielle Marie
Malard de Rothschild, Mr. Willem Jan Antoon Henri
Schoeber and by Ms. Elena Doina Dascalu. Thus, the
three new members elected are Mr. Radu Mircea
florescu, Mr. Dragos Andrei si Mr. Niculae Havrilet. Their
mandate period is equal to the period remaining until
the expiry of the mandate for the vacant positions, i.e.
until 27 April 2022.
Î Changes in ELSA’s executive management:
On 25 July 2018, the Board of Directors decided the
revocation of Mr. Dan Crisfalusi from the position of
Chief iT&T Officer;
On 17 September 2018, the BoD decided to revoke
Ms. Dana Alexandra Dragan from the position of Chief
Human Resources Officer, following the mandate’s
termination;
On 15 October 2018, the Board of Directors has
reached a mutual agreement with Mr. Dan Catalin
Stancu to terminate without cause the mandate
agreement from the CEO position of ELSA, starting with
1 November 2018. in the same meeting, Ms. georgeta
Corina Popescu was appointed as ELSA’s interim CEO,
starting with 1 November 2018, for a 1-year period or
until the nomination of a new CEO, whichever would
have occurred first.
By the time of the present report, on 23 January 2019, ELSA’s
Board of Directors decided to appoint Ms. georgeta Corina
Popescu as CEO and to appoint Ms. Bibiana Constantin as Chief
Human Resources Officer, both mandates starting on 1 february
2019, for a period of four years.
ELECTRICA SA 22 | A N N U A L R E P O R T 2 0 1 8
Î Other relevant events:
A) Litigations:
On 8 June 2017, ELSA received a legal summoning
formulated by SAPE against, former managers and
directors, the Ministry of Economy and respectively the
Ministry of Energy. The case is registered at Bucharest
Court under no. 463565/3/2016, being in course of
settlement;
On 20 November 2017, ELSA received the notification
issued by the Bucharest Court (Romanian: Tribunalul
Bucuresti), referring to the file No. 42479/3/2017,
by which Mr. Stanciu Razvan, as shareholder of
the Company, filed a complaint to request the
ascertainment of the "absolute nullity of the decision
no. 2 of the OgMS of ELSA regarding the election of
the BoD members by applying the cumulative vote
and setting the mandate’s duration for the elected
directors for a period of 4 years, pursuant of art. 132
of Law 31/1990, having as a direct consequence the
cancellation of all legal acts concluded by the new
Board of Directors of ELSA". On 6 June 2018, the court
rejected the plaintiff’s action, the decision being final;
in October 2018, ELSA attacked in administrative
contentious the ANRE Orders no. 169/2018 regarding
the Approval of the Tariff Setting Methodology for the
Electricity Distribution Service and no. 168/2018 on
the Regulatory Rate of Return, requesting the partial
and, respectively, the total annulment of these orders.
Thus, both preliminary complaints were sent to ANRE
and actions in court were filed. Applications are filed
under case no. 7591/2/2018 (cancellation of Order
168/2018) and no. 7614/2/2018 (partial cancellation
of Order 169/2018), of the Bucharest Court of Appeal.
At the same time, following the rejection by ANRE of
the preliminary complaints in December 2018, the
actions in administrative litigation were reintroduced,
forming the files 8430/2/2018 (annulment of Order
168/2018) and 8436/2/2018 (partial annulment of
Order 169/2018), also in the role of the Bucharest Court
of Appeal, pending;
in february 2018, ELSA has obtained a favourable
Supreme Court ruling in one of the litigations with
NAfA, which essentially maintains into force a prior
Court of Appeal decision, which is favourable for the
group. Based on this Court ruling and in conjunction
with all other litigations with NAfA on the same
historical amounts, for taxes including penalties and
interest, as well as based on analysis with internal and
external lawyers, the management best estimate as
of 31 December 2017 was that ELSA shall be able to
obtain favourable Court rulings with the end result
of no future cash outflows. As a result, there is no
provision recognized subsequent to 31 December
2017 related to NAfA litigations;
On 12 December 2018, an amount of RON 44.7 mn was
collected by ELSA from Oltchim SA, representing
amounts distributed to creditors in the insolvency
proceedings.
B) Policies in place at ELSA level, in order to comply with best
corporate governance practices (may be accessed on ELSA’s
website, under investors > Corporate governance Section):
The Policy of Transactions with Related Parties has
been revised three times during 2018, the last 2018
approved version being published on ELSA website
on 14 January 2019;
The BoD approved the forecast Policy and the
reviewed version of Dividend Policy, the two
documents being published on the company’s
website on 19 february 2018;
following the resolutions of OgMS dated 9 february
2018, the Remuneration policy of ELSA’s directors
and executive managers was published on the
Company website on 7 May 2018.
C) intra-group loans and other intra-group facilities:
During 2018, ELSA concluded new agreements for
intra-group loans to its distribution subsidiaries in
total amount of RON 520 mn, for financing part of
the 2018 CAPEX Plan, as follows: SDMN – RON 230
mn, SDTS –RON 130 mn and SDTN – RON 160 mn;
On 29 May 2018, ELSA also granted an intra-group
loan in favor of SEM, of RON 5.5 mn.
D) Certifications
During 24 – 25 September 2018, took place an
external audit of ELSA’s integrated Management
System Quality – Environment – Occupational
Health and Safety, implemented according to iSO
9001:2015, iSO 14001:2015 and OHSAS 18001:2007
requirements. The audit was conducted by
DEKRA Certification, one of the world’s leading
accredited certification body, and ended without
any noncompliance, ELSA obtaining the new
certificates issued on 5 November 2018 valid until
October 2019;
Risk Management: Electrica group Risk Appetite
was approved by the Board of Directors Decision
no. 14 on 14 August 2018.
ELSA Risk Management Policy was approved by the
Board of Directors Decision no. 22 on 13 December 2018.
DiSTRiBUTiON SEgMENT
With regard to the Transformation Plan of the
distribution area (EL SERV, SDMN, SDTN, SDTS),
initiated on 10 August 2017, it was completed
during the year 2018 and considered mainly the
following:
implementing a new target organizational
model of the distribution segment, based on
redesigned processes with focus on efficiency
and quality of customer services;
internalization in the distribution subsidiaries
of certain activities of EL SERV, having as main
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 23
objective the consolidation of the investment
execution capabilities, as well as the increase of
the reaction capacity and the improvement of
the performance in the operational activity;
a new performance-based
remuneration
concept;
a proper concept for a cost reduction and cost
controlling program;
developing and implementing a new business
plan for EL SERV;
following the completion of this organizational
transformation program, the companies
in
question went through a period of stabilization
and consolidation, a necessary step before the
start of a new regulatory period.
A new business plan has been approved for EL SERV,
providing measures to streamline and optimize the
operational processes, including:
improving the services currently provided and
extending them to companies outside Electrica
group;
developing new products and supporting
activities for the companies within the group;
streamlining of the real estate portfolio;
reduction of the administrative and general
costs.
in January 2018, the Articles of Association of
EL SERV was amended, so that the structure of
the Board of Directors was reverted to five non-
executive members. Between December 2016 and
January 2018, the Board of Directors was composed
of three non-executive members, being applicable
the version of the Articles of Association approved
in December 2016.
Î Distribution activity:
During 2018, ANRE issued basic documents for the
regulatory framework of the 4th Regulatory Period:
Order no. 168/2018 approving the regulated rate
of return (RRR) begining with 1 January 2019;
Order no. 169/2018 approving the Methodology
for establishing distribution tariffs.
Thus, in the period April – October, according to the
evolution of the legislative framework, the strategic
package for the 4th Regulatory Period, which
represented the basis for the regulated revenues
in the distribution area for the next five years, was
prepared and subject to approval by ANRE;
Specific tariffs for electricity distribution for the year
2019 were approved by ANRE through Orders no. 197,
198 and 199/2018, applicable until 28 february
2019, with average values equal to or slightly
above those of 2018. On 25 february 2019 were
approved by ANRE through Orders No. 24, 25 and
26/2019 the new distribution tariffs, applicable
from 1 March 2019. The new tariffs represent an
increase of approximately 2.3% compared to the
tariffs applied in the first two months of 2019;
for
the
implementation areas
framework conditions
On 10 October 2018, the Regulatory Authority
approved
the
electricity smart metering system implementation
timetable at national level, through Order no.
from 15 October 2018.
177/2018, effective
Based on the specific legislation, the distribution
companies have developed the implementation
plans of the electricity smart metering systems
(low-voltage), based
on
on criteria of economic efficiency, security and
ensuring the participation on the competitive
market, the main objectives being: to provide
benefits to the users, better asset management and
quality indicators. These widespread deployment
plans for smart metering systems were subject
to ANRE approval in January 2019. Subsequent to
approval, the portfolio of projects considered in the
cost-benefit analyzes will be included in the annual
investment plans to be developed and approved
according to the specific legislation in force;
in 2018,
for the three distribution operators,
investments amounting to approx. RON 836 mn
were made and commissioned, being the highest
post-iPO value, also higher by over 80% than the
recorded average of other distribution operators
nationwide in 2017 and higher by 14% than their
own performance in 2017;
in 2019, the distribution operators will continue
to invest in the distribution infrastructure, the
investments planned to be commisioned related to
2019 for the three distribution operators cumulating
RON 612.5 mn (nominal terms 2019), but decreasing
as compared to the previous years, considering
the possibilities of sustainable funding, as well as
the regulated rate of return level, under the new
regulatory framework. The investment plans for
2019 have been prepared in accordance with the
requirements set out by the Regulatory Authority in
the specific legislation in force.
SUPPLy SEgMENT
Starting with 1 April 2018, the Balance Responsible
Party (BRP) activity and its related assets were
transferred, from ELSA to EfSA, the supply subsidiary
of the group. The transaction price was of RON 19.8 mn
and was established considering the transferred
activity’s market value, based on a valuation report
delivered by an ANEVAR authorized valuator;
in 2018, the implementation of initiatives identified
for the operational streamlining of EfSA activity was
continued, as follows:
the acquisition of an iT application for managing
the electricity purchase activity;
developing the OPEN BRP application;
continuous improvement of mobile application
MyElectrica and its alignment with the web
interface;
continuing the implementation of Customer
Relationship Management (CRM) system;
ELECTRICA SA 24 | A N N U A L R E P O R T 2 0 1 8
modernizing the integrated risk management
system;
implementing a continuous monitoring system
for customer satisfaction and identifying the
measures to improve the quality of services;
starting the
implementation of a modern
solution for the commercial call-center;
implementation of a project for digitalization/
modernization of customer relations centers;
continuing the process of optimizing the
portfolio of products/services tailored to the
needs of customers.
Î Supply activity:
in 2018, EfSA’s activity was influenced by a series of laws and
ANRE orders with a significant impact in the purchase and sale
of electricity to final customers, as follows:
ANRE Order no. 75/2017, applicable in H1 2018 -
Centralized Market for Universal Service (CMUS) was
the bound market for the suppliers of last resort
(SoLR) (at least 50% of the electricity required for US
customers was purchased from CMUS, the rest can
only be purchased from other Centralized Markets);
following the completion of the schedule of
regulated tariffs removal and the total electricity
market liberalization as of 1 January 2018, ANRE
approved the regulatory package for the supply
activity of last resort/universal service, applicable
starting with S2 2018:
ANRE Order no. 27/2018 - CMUS was the
voluntary market for SoLR;
ANRE Order no. 26/2018 – the SoLR designation
was achieved through a competitive process:
bound SoLRs were appointed for a four-year
period based on eligibility and capability criteria
and optional SoLRs were appointed for one year
on basis of eligibility, capability and availability
criteria. Through ANRE Decision no. 657/2018,
EfSA was appointed as bound SoLR for the period
1 July 2018 –30 June 2022 for network areas
North Muntenia, North Transylvania and South
Transylvania;
ANRE Order no. 39/2018 – ANRE modified the
pricing endorsement principles applied by SoLR
and established for each network area and for each
SoLR the maximum price for US based on three
components: the purchase cost (depending on
the actual purchase and the average prices in the
centralized market), the supply cost of RON 5.4/
consumption point/month (which includes the
recognized profit), the adjustment cost (previous
corrections) and endorses the prices proposed by
SoLR at most equal to the maximum prices for US
considered justified by ANRE.
Law no. 167/2018 regarding the amendment
and completion of electricity and natural gas
law no. 123/2012, introduced new obligations for
suppliers:
the supplier has the obligation to purchase
electricity in order to ensure the coverage of
its customers’ consumption, prioritizing the
customers which are beneficiary of US from
their own portfolio;
the supplier does not have the right to
unilaterally terminate the electricity supply
contracts with the final customers.
The ANRE Order no. 157/2018 approved the
the mandatory
Methodology of establishing
annual quota for purchasing of green certificates
and the ANRE Order no. 158/2018 established the
mandatory estimated quota for purchasing of green
certificates for the period August – December
2018 (0.425 gC/MWh), being higher by 22.8%
than the quota set for the period January – July
2018 (0.346 gC/MWh);
the establishment of measures
government Emergency Ordinance no. 114/2018
regarding
in
areas as public investments and fiscal-budgetary,
amendment and completion of some normative
acts and the extension of deadlines, imposes to the
eletricity market participants:
new rules for trading the quantities required
to cover the consumption of SoLR’s household
customers;
reintroduction of regulated tariffs for household
customers;
increasing the annual contribution to be paid by
the license holders to ANRE from 0.1% to 2% of
the turnover;
restoring regulated prices to households for the
period 1 March 2019 – 28 february 2022;
the differences in suppliers’ purchasing costs
from the years 2018 to 2019, unrecovered
through the prices charged, will be recovered
until 30 May 2022, according
to ANRE
regulations.
The ANRE Order no. 11/2019 for the approval of the
methodology for setting the regulated tariffs and
the prices applied by the last resort suppliers to
the final customers, applicable from 1 March 2019,
establishes: the calculation method of the regulated
tariffs applied to the household customers, the
terms of the price approval for the universal service
and the price for inactive customers applied by
the last resort suppliers (fUi), the ultimate pricing
principles applied by the fUi.
The year 2018, the first year of complete deregulation of
customers’ consumption that are beneficiary of US, was a
year of legislative instability, especially for the universal service
customers.
The main events that the electricity market faced are the
following:
After a beginning of year characterized by moderate
temperatures, rising hydraulicity and DAM prices
lower than those of the forward markets, once the
ANRE Order no. 39/2018 that aims to modify the
Pricing Methodology applied by the SoLRs for the
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 25
universal service customers entered into force, the
OPCOM forward trading prices have been steadily
increasing. According to this order, the price
applied by the SoLRs to the customers benefiting
of the US is established for the first endorsement
period (1 July 2019 – 30 June 2019) taking into
account the weighted average price of the SoLRs
transactions in the period 21 March 2018 – 30 April
2018, adjusted with a profiling coefficient of 5% or
8%, depending on the purchases coverage degree
of the consumption forecast for this category of
customers. This regulation led to a sudden increase
in demand on the forward markets and, as a result, of
the trading price and given the very short deadline
for the electricity purchase, did not allow the trading
of sufficient volumes in order to secure the price of
US for the whole endorsed period;
The increase in the trading prices, both on the spot
and on the forward markets, was correlated with:
a decrease in the production from hydro sources,
both in Romania and in the region, as well as the
increase in consumption;
an accelerated growth in the price of CO2
emissions certificate. Thus, during 2018, the CO2
emission certificate price has tripled, exceeding
EUR 20 on 23 August 2018 and reaching a
maximum of EUR 24.85 on 10 September 2018;
a regulatory change regarding the bid prices in
the balancing market, brought by ANRE Order
no. 31/2018; as a result of which, starting with
1 September 2018, the deficit price increased
significantly compared to the first 8 months of
the year.
Î Corporate image:
As a result of the PR and Communication activities,
ELSA has ranked 9th in TOP 50 of the most valuable
Romanian brands, made by Brand finance –
advancing a position compared to 2017. At the same
time, ELSA entered the top of the most appreciated
companies in Romania, in terms of transparency,
following the launch of the Sustainability Report.
Î Ethics and Compliance
Reviewing the Policy on transactions with related parties
and adopting the updated version at group level, in order
to align its provisions to the legislative changes, trends
and best practices, as well as to cover better particular
aspects and specificities of Electrica group companies;
Assessing the 2017 transactions of the company and
of its subsidiaries with the related parties, regarding the
possibility of conflicts of interest occurence;
Launching the analysis regarding the assimilation of new
steps in the development of Ethics and Compliance’
activity;
Report regarding the potential conflicts of interest in
Electrica group in 2018;
Report regarding the assessment of the company’s and
its subsidiaries related parties’ transactions, from the
perspective of generating/consuming conflicts of
interest in H1 2018.
1.3. Post balance sheet events date
During the period between the 2018 financial year closing
and the date of the present report, the following relevant
events took place at the group level:
On 16 January 2019, the Company informed its
shareholders and investors about the conclusion in
the first semester of 2019 of a legal act with a value
greater than EUR 50,000 with SDTS, affiliate, where
ELSA is the main shareholder;
On 5 february 2019, the external financial auditor
report on factual findings according to art. 82 of Law
no. 24/2017 regarding the transactions reported in
the second semester of 2017 was published;
in January 2019, ELSA, together with its distribution
subsidiaries, have filed
for
cancellation of ANRE orders for the setting of
regulated tariffs for the distribution of electricity,
being constituted on the role of the court the
following files:
in court requests
file no. 434/2/2019 - cancellation of ANRE
Order no. 197/2018 regarding the approval of
the specific tariffs for the electricity distribution
service and the price for the reactive electricity
for SDMN;
file no. 435/2/2019 - cancellation of ANRE
Order no. 199/2018 regarding the approval of
the specific tariffs for the electricity distribution
service and the price for the reactive electricity
for SDTS;
file no. 436/2/2019 - cancellation of ANRE
Order no. 198/2018 regarding the approval of
the specific tariffs for the electricity distribution
service and the price for the reactive electricity
for SDTN.
At the same time, in each file, it was requested from ANRE
the recognition of the amounts that were not included in
the 2019 tariffs and also, to include these amounts in the
computation of the tariffs for the year following litigation’s
final decision. The files are pending at the Bucharest Court
of Appeal, in preliminary procedure.
The Company has published current reports to the market
to inform the investors and all stakeholders about these
events.
in addition, during the period between the 2018 financial
year closing and the date of the present report, SDMN’s
share capital was increased from RON 354,364,670 to
RON 355,906,870 through contribution in kind by ELSA
shareholder with the value of four plots of land in a total area
of 19,672 sqm. in the amount of RON 1,542,200 (according
to SDMN EgMS Decision of 14 february 2019).
ELECTRICA SA 26 | A N N U A L R E P O R T 2 0 1 8
2
ELECTRiCA gROUP
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 27
On 31 October 2018, the court decided the bankruptcy
of SEO, at the request of the judicial administrator, and
cancelled its right of management.
At the date of this report, SEM completed the reorganization
plan, the payables included in the payment schedule
being fully paid, thus the legal procedures for exiting the
insolvency procedures can be completed in the following
period.
General overview
ELSA is the parent company for the group, which comprises
four subsidiaries in the distribution segment: SDTN, SDTS,
SDMN, EL SERV, whereas the supply segment comprises
one subsidiary, EfSA.
The Company also owns all shares of SEO and SEM.
in January 2014, the Board of Directors of SEO and in
October 2014, the Board of Directors of SEM decided the
commencement of the insolvency procedure with a view
to reorganization. The insolvency procedures were initiated
in 2014.
2.1. organizational structure
As of 31 December 2018, the biggest shareholder of ELSA is the Romanian State, represented by the Ministry of Energy
(48.78%), after its ownership was diluted following the initial public offering in 2014.
Figure 16: The Group’s subsidiaries at 31 December 2018
99.99%
Electrica
Furnizare
(EFSA)
99.99%
Societatea de Distributie
a Energiei Electrice
Transilvania Nord S.A
(SDTN)
Electrica SA
99.99%
Societatea de
Distributie a Energiei
Electrice Transilvania
Sud S.A
(SDTS)
99.99%
Societatea de
Distributie a Energiei
Electrice Muntenia
Nord S.A
(SDMN)
100%
Electrica Serv
(EL SERV)
100%
Servicii Energetice
Muntenia S.A. (SEM)
Additional shareholder in
distribution and supply subsidiaries
The existence of additional shareholder
was
imposed by the observance of
the provisions of Art. 10, paragraph (3)
of the Law no. 31/1990 regarding the
companies. As a result:
SDTS holds 10 shares in SDMN;
SDMN holds 10 shares in SDTN;
SDTN holds 10 shares in SDTS;
Electrica Serv holds 10 shares in Ef.
Source: Electrica
ELECTRiCA gROUP
ELECTRICA SA 28 | A N N U A L R E P O R T 2 0 1 8
The group’s subsidiaries that were included in the consolidated financial statements for the year are presented below:
Subsidiary
Activity
Registration
code
Headquarters
% shareholdings as of
31 December 2018
Societatea de Distributie a
Energiei Electrice Muntenia
Nord SA (SDMN)
Electricity distribution
in North Muntenia
geographical area
Societatea de Distributie a
Energiei Electrice Transilvania
Nord SA (SDTN)
Electricity distribution
in Northern Transylvania
geographical area
Societatea de Distributie a
Energiei Electrice Transilvania
Sud SA (SDTS)
Electricity distribution in
Southern Transylvania
geographical area
Electrica furnizare SA (EfSA)
Electrica Serv SA (EL SERV)
Servicii Energetice Muntenia SA
(SEM) - in insolvency
Servicii Energetice Oltenia S.A.*
Supply and trading of
electricity
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
99.9999696922382%
14476722
Cluj-Napoca
99.9999829770757%
14493260
Brasov
99.999976413243%
28909028
Bucharest
99.9998390431663%
17329505
Bucharest
100%
29384120
Bucharest
100%
29389861
Craiova
n/a*
Source: Electrica
*Societatea Energetica Electrica SA lost the control of Servicii Energetice Oltenia starting November 2018 when the bankruptcy proceedings of the subsidiary began. As of
this date, the Group ceased to consolidate this company.
The main activities of the group are the regulated
(through operation and
distribution of electricity
development of electricity distribution networks) and
the electricity supply to end 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), ensuring
the service of the network users by operating installations
that function at voltages ranging from 0.4 kV to 110
kV (power lines, substations and electrical transformer
stations).
The Company’s distribution subsidiaries (SDTN, SDTS
and SDMN) invoice the electricity distribution service to
electricity suppliers (mainly to EfSA subsidiary, the main
electricity supplier in North Muntenia, North Transylvania
and South Transylvania), which
invoice the
electricity consumption to end consumers.
further
EfSA is an electricity supplier in the competitive market
and a supplier of last resort defined as bound supplier for
the network regions: North Muntenia, North Transylvania
and South Transylvania.
According to the regulations issued by ANRE, the bound
suppliers of last resort ensure the electricity supply to
the end consumers, which benefit, under the law, from
universal service, to non-household customers who have
not exercised their eligibility right and to non-household
customers taken over because they have not secured the
supply of electricity from any other source.
in the regulated market, the electricity supply was done
based on competitive market component (CMC) and
last resort (LR) tariffs endorsed by ANRE for H1 2018,
respectively on final prices for universal service, final prices
for inactive customers (Pi) and final prices for last resort
customers (LR) in H2 2018.
in the competitive market, the electricity supply was done
based on contracts and on negociated prices.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 29
2.2. mission, vision, values
To ensure a high level of performance, Electrica group has defined its Vision, Mission and Set of Values. These identity
elements represent the foundation for formulating and implementing the strategic goals of the group.
Vision
Mission
Values
The group’s vision is to expand its
in the electricity
leading position
supply market
distribution
and
segments, both nationally
and
regionally.
The group’s mission is to deliver long-
term value to the shareholders by
distributing and supplying electricity
and providing high quality services
to the customers, in a safe, reliable,
affordable and sustainable manner.
Figure 17: Electrica Group Corporate Values
represent
structures
The values cultivated across all
are especially
group
those related to professionalism and
responsibility for a real orientation
towards customers, in an increasingly
challenging market context, including
framework
from
regulatory
the
perspective. These
the
base for a viable and sustainable
performance,
to match
the strategic objectives with the
legal requirements, industry trends,
and market context. it also reflects
the group’s commitment to create
an
internal environment where
integrity and ethics are the corporate
culture’s
are
fundamentals
based on an open and transparent
communication.
in order
and
2.3. Key elements of the 2015 – 2018 strategic Plan
The Strategic Plan for the period 2015-2018, which reflects
the Board of Directors’ vision of the management of activities
in the stakeholders’ best interest, both on a medium term
and a long-term horizon, has been formulated following an
analysis of the following areas:
objectives and the action plan with measures to implement.
ELSA’s corporate strategic directions with respect to the
group are the following:
Preserve and enlarge the activities of the distribution
the external environment, to determine the main
environmental
factors affecting the electricity
market and the key drivers that can significantly
influence the evolution of the electricity market in
the future;
industry analysis, in order to identify 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, to assess its past
and current performance (relative to other market
players).
Based on the above analysis, the Board of Directors has
formulated the corporate and business strategies of
ELSA with respect to the group, has set out the strategic
and supply segments in Romania.
Explore potential opportunities to expand the
distribution and supply segments in the region.
Enlarge the business portfolio, by developing
“value-added services” related to distribution and
supply activities, which can be offered to customers.
Divest the unprofitable business segments and
activities.
Electrica group`s business strategy addresses three key
success factors in its implementation:
operational excellence for efficiency and quality;
ensuring a committed and qualified workforce;
the highest standards in corporate governance.
ELECTRICA SA 30 | A N N U A L R E P O R T 2 0 1 8
The strategic action plans defined by ELSA Board:
1. Overall financial performance for the group
2. Excellence in financial processes management
3. Overall operational performance for the group
4. Quality of services provided
5. Employees’ productivity and support for their
development
6.
implementation by
distribution segment of the investment program
subsidiaries of
the
the
7. Corporate governance and enhancement of our
sustainability profile.
in 2018, Electrica group took actions to improve the
financial performance in the context of a challenging
energy market, and to ensure the sustainable growth of
its activities. The group priorities have been to increase
performance, improve services, diversify and expand the
activities and business portfolio. Moreover, beside these, for
the next period, will be continued the efforts of operational
streamlining and orientation towards customers.
The year 2018 meant for the distribution companies the
finalization of the transformation process initiated in 2017
and the finalization and operational implementation of
the new organizational model in five key functional areas:
Asset Management, Network Development, Network
Operations, Energy Management and Common Services.
The achievement of the ambitious investment program
focused on the financing of the rehabilitation works and
on the network modernization, in order to improve the
quality of the service, on the improvement of the energy
efficiency and on the losses reduction represented the
2.4. outlook
Considering energy policies developed at both EU and
national level, as well as the international context of
the energy markets, the following trends are expected
to characterize on medium and long term the local
electricity market
increased competition among the players on the
national electricity supply market, especially in terms
of diversifying the portfolio of products offered
to customers (offers for natural gas, insurance,
household products etc.) and digital services offered
(mobile applications, invoices and online payments,
expansion of customer service with chat solutions);
The customers who, according to the
legal
provisions, have the right to benefit from the
universal service and do not wish to migrate to the
eligible segment, shall be provided with the supply
of electricity under regulated conditions;
The new secondary legislation under discussion3
which
regulated
reintroduces provisions on
contracts and changes the tariffs methodology for
the household customers, will also influence the
greatest challenge in 2018, in the context of the transition
in 2019 to a new regulatory period. The new regulatory
period focuses on the operational efficiency and the
distribution service quality, and a significant attention is
paid to the comparative analysis of the relevant indicators
among the national DSOs by the ANRE.
In the supply segment, the company focused in 2018
on increasing the profitability of its customer portfolio
by developing specific measures to increase customer
satisfaction, through portfolio restructuring and through
competitive and dynamic acquisition strategies, in the
context of a volatile and unpredictable energy market.
in addition, the traditional offer of electricity supply was
completed with combined electricity and gas packages.
The measures taken during the year 2018 represent a
stable foundation for the group’s ambition to be a market
leader and to ensure, in a sustained way, the profitability
and satisfaction for customers and partners.
Negotiations with the social partners (representatives
of fNSE Univers, ELSA Union) took place in 2018, in
order to implement a new concept of performance-
based remuneration within the group. As a result, since
1 October 2018 the new concept has been implemented
within SDMN subsidiary and since 1 January 2019 is to
be applied in the other distribution subsidiaries and the
supply subsidiary, as well as in ELSA.
Electrica group continued also this year to provide a
major interest in increasing the degree of transparency
and enhance the communication with all stakeholders
by actively engaging them and by reporting on subject
such as sustainable development, environment and
social responsibility, in line with the group’s objectives to
integrate sustainability in all activities.
electricity market and the future strategies of the
SoLRs in respect to portfolio management;
A regulatory trend in electricity distribution area is
the principle of remuneration of the distribution
operator considering both the quality of the service,
as well as the operational costs and efficiency based
on comparative analyzes between DSO;
Electricity distributed generation technologies will
determine the distribution operators to adapt their
processes and strategies regarding the upgrade and
development of the network and to offer solutions
to
independent producers, considering
the appearance of prosumers, which are active
participants in the energy market; in this context,
significant investments are necessary in order to
improve both the transmission and the distribution
infrastructure;
the
full electric vehicles, light commercial vehicles and
electrification of railways are expected to increase
the consumption of electricity in the transportation
sector.
3 As of the date of the report – March 2019; through the implementation of the ANRE regulations in accordance with GEO no. 114/2018
ELECTRICA SA future development of technologies will support
energy efficiency policies such as:
Development of transmission and distribution
including smart grid and smart
networks,
metering;
End-use energy efficiency (thermal integrity of
buildings, lighting, electric appliances, motor
drives, heat pumps etc.);
The implementation of smart metering will offer
complex tarrifs options to the consumers, detailed
information regarding the consumption profile,
which might lead to increased flexibility and peak
demand reduction. Thus, the consumers shall
be better
in decision-
making process, as active particiants. The smart
informed and
involved
A N N U A L R E P O R T 2 0 1 8 | 31
metering implementation pace depends on the
implementation timetable to be adopted at national
level;
The significat reduction in the cost of photovoltaic
technologies is an opportunity for the development
of small-scale generation projects, especially in the
domestic area;
The development of
the
and
infrastructure
transmission and
distribution
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.
The key drivers of changes in the electricity market are presented in the following table:
Key driver
Description
gDP evolution
and industry
structure
The economic growth is a key determinant of electricity demand. Although there
is not a one-to-one relationship between gDP growth rate and electricity demand
growth rate, 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.
intensification of electricity consumption is a major trend in Romania. Over 2010 -
2018, there was a significant increase in consumption, as opposed to a decrease of
the gas consumption over the same period, mainly due to the curtailment of heavy
industry production.
Despite the demographic decline recorded at EU and Romanian level, the electricity
consumption is impacted by the changes in the consumer behaviour and the
increase in urbanization. for example, smart devices are expected to generate a
massive increase in connected devices and implicitly in the electricity consumption
and revenue growth across multiple industries.
The regulatory framework has undergone major changes with the aim of aligning
the Romanian legislation with the EU legislation. 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. from 2019, the 4th Regulatory Period will start and ANRE approved significant
changes in the methodology for all tariff elements (Regulated Rate of Return,
Regulated Assets Base, Network losses, Operating Expenses, TOU distribution tariffs
starting from 2020). Also for the supply segment important changes are forecasted
in the acquisition strategies and the sales to final customers, considering the
impact of the methodologies under discussion regarding the reintroduction of
regulated contracts with the producers for the household customers. The change
in the amount of the contribution to be paid to ANRE from 0.1% to 2% of the
turnover generated by licensed activities has the potential to lead to restructuring
the activities of the players in the electricity market.
Smart networks and smart meters will create benefits for the end consumers,
distributors and suppliers in terms of energy efficiency, resource optimization
and network operation, implementation of demand response etc. it is necessary
to prepare the networks and to integrate the distributed resources (storage
solutions, micro-grids, local production, electric machines, etc.), considering also
the management of their impact.
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.
Demographic
evolution and
technology
development
Changes in
regulations
Technological
development
increase in
environmental
awareness
Source: Electrica
Impact on
Electricity
consumption
Electricity
consumption
Electricity
prices
Electricity
prices and
consumption
Electricity
prices and
consumption,
regulatory
framework
ELECTRICA SA 32 | A N N U A L R E P O R T 2 0 1 8
The regulatory framework perspective and
the impact on the energy market
The energy regulatory framework has experienced major
changes in the past decade, including market liberalization,
unbundling and support scheme implementation for
renewable energy, and the changes brought by gEO
no. 114/2018 will most likely lead to new market rules and
possible reorganization in the activities of energy market
players.
For the distribution area, the most significant changes
in the Romanian legislation refer to the following:
The change in 2018 of the regulatory framework for
the 4th Regulatory Period – 2019 – 2023, according
to the Methodology for establishing the distribution
tariffs, approved through ANRE Order no. 169/2018
and of the remuneration of the distribution
operators – according to the ANRE order
no. 168/2018, starting with 2019, the regulated rate
of return (RRR) approved for the DSOs decreased
from 7.70% to 5.66% for the existing RAB and 6.66%
for the investments put into operation during the
period 2019-2023;
The changes brought by the new tariff setting
methodology and by the new RRR will have a
negative impact on the operational and financial
performance of the DSOs, as a result of the ANRE
approval of operating and maintenance costs
and of costs with the purchase of electricity to
cover network losses lower than the necessary
costs demanded by the DSOs, as well as ANRE’s
implementation of corrections for the annual costs
and planned investments.
ANRE approved the framework conditions
for the achievement of the timetable for
the
implementation of electricity smar t
metering systems at national level through
Order no. 177/2018. Based on the cost-benefit
analyzes, the DSOs have sent to ANRE for approval
the proposals regarding the implementation of
electricity smart metering plans for the period 2019-
2028, on an annual basis;
On 29 December 2019, the gEO no. 114/2018
entered into force, regarding the setting of several
measures in the field of public investments and
of some fiscal-budgetary measures, the change
and completion of some normative acts and the
prorogation of certain terms that have a negative
impact on the results of the distribution operators
due to the non-recognition in the distribution tariffs
of the cost of the monopoly tax.
The changes to the Romanian legislation with relevant
impact for the supply segment are the following:
The amendments to the Electricity and Natural gas
Law no. 123/2012 introduce the obligation of the
electricity suppliers to purchase electricity to ensure
the coverage of their customers’ consumption,
with priority for the customers of the US in their
own portfolio. The provision affects the electricity
purchase strategy of the SoLRs, with impact on the
functioning of the entire market in the short and
medium term. in addition, the supplier does not
have the right to unilaterally terminate the electricity
supply contracts with the final customers;
gEO no. 114/2018 influences the supply area also,
through the increase of the amount of annual
contributions related to the organization and
functioning of ANRE and introduction of new
provisions related to the regulated household
segment;
The new secondary
legislation, submitted by
ANRE for public consultation at the beginning of
2019, reintroduces the regulated contracts with
producers and changes the tariff methodology for
the regulated segment of customers. These changes
have the potential to bring significant changes in
market participant’s strategies for the next period;
in 2018 were published the normative acts
regarding a new category of market participants,
the prosumers, defining the guide rules for the
commercializing of the eelctricity produced by
them. Prosumers who own electricity-generating
units with renewable power of up to 27 kW
installed power per consumption place can sell
the electricity produced and delivered into the grid
to the electricity suppliers with whom they have
supply agreements concluded, according to ANRE
regulation.
Considering legislative and regulatory changes, Electrica
group is reviewing its medium and long-term strategy in
order to manage responsibly and sustainably their impact
on the company’s activities, in the context of a regulatory
framework that has undergone numerous successive and
profound changes in the last months of 2018 and early
2019.
2.5 Key factors, directions and significant market trends affecting
the operational results of electrica Group
The company analyzes the strategic options and aims to
implement streamlining measures, through restructuring
programs and transformation of group’s divisions, training
and staff development programs, redesigning business
models, or entering new business segments, in order to
improve both the quality of the services offered and the
financial performance.
The most important assumptions considered for the
strategy review are the following:
The Romanian energy mix landscape is changing
significantly, being heavily disrupted by the advent
of renewables, together with the emergence of the
prosumers in the following years;
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 33
on customer orientation and maximizing their
satisfaction. The aim is to increase the natural gas
supply side, to provide value added solutions
(products and services) and to digitalize specific
operations and processes;
Ensure the necessary human resources (internally
or through specific recruitment) for key business
areas and train the employees and capitalize on
their potential, expertise and aptitudes, in order to
increase productivity and individual performance. in
the context of a labour market expected to be tense
also in the next years for the qualifed labor force
segment, the group aims to invest in vocational
training centers and dual education, which are so
important in order to provide qualified personnel
needed to ensure optimal conditions and services
to the grid;
Optimise the support functions and implement iT
tools to support business lines and create synergies
that bring value added. Processes’ digitalization and
integration into iT platforms are to be provided to
both business lines, in the context of the changes
brought by smart grids, prosumers and the trend
in streamlining the customers’ consumption, so the
iT department becomes a strategic partner in the
years to come;
Continue to improve the corporate governance
framework, closely
the Corporate
governance Action Plan established with EBRD
beginning with 2014.
following
Please note that other factors unavailable (eg. legislation and
regulatory provisions under disscusions or final versions not
available at the date of the report – march 2019 etc.), or not
presented above, or not considered by the Group may occur
and may have a significant impact on the implementation
and evolution of the Group’s strategy.
Romanian gDP will have a stable evolution in the
future;
Different
trends
in electricity
(increasing trend on a medium term, but
stagnation/reduction on the long term);
consumption
in
Romania will maintain its commitment towards the
accomplishment of the 20-20-20 strategy regarding
the climate changes and the implementation of the
new framework for the period 2020-2030;
for the next regulatory period, the remuneration
mechanism, the tariffs and methodology
for
applying corrections to the tariff are subject to
changes, these key factors being considered in the
strategic planification;
The supply sector will experience a short to medium
term repositioning following the reintroduction of
the regulated contracts and the changes in the tariff
calculation methodology for SoLR;
The impact coming from the recent change in
the legislative framework, as well as its lack of
predictability in the medium and short term;
No major geopolitical turbulences have been taken
into account, which might significantly affect the
Romanian electricity market;
financial markets will allow access to profitable
financing sources to support companies’ investment
programs.
in December 2018, the Board of Directors of the Company
approved the new strategic directions for the electricity
distribution and supply business lines for the next five
years, and, in the next period, the strategy and the
implementation plan for the period 2019-2023 will be
defined according to these new directions.
For this period, Electrica Group targets the following
lines of action:
in the distribution segment, the focus
is on
operational efficiency, by reducing technical and
commercial losses, by optimizing internal processes,
ensuring optimal use of resources, on customer
orientation and ensuring their satisfaction, by
improving network access and quality of service, on
the development of smart grid technologies and on
cost recovery. increasing operational performance
will lead to a positive impact on the lives of our
customers, from continuity in the electricity supply,
to the quality of the service and of the interaction
with our staff. At the same time, exploiting the
significant potential for optimization and reducing
losses by streamlining the distribution operators’
activities are key factors for optimal allocation of
resources, an important requirement during this
regulatory period;
The supply segment will focus on diversifying the
business through offers and services tailored to
customers’ needs, on operational efficiency through
optimized sales and purchasing processes and
ELECTRICA SA 34 | A N N U A L R E P O R T 2 0 1 8
3
ELECTRiCA
ON THE CAPiTAL
MARKETS
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 35
3.1 ownership structure
Until July 2014, the Romanian state, through the Ministry of Energy, was the sole shareholder of ELSA.
As of 4 July 2014, after the initial Public Offering, the Company’s shares are listed on the Bucharest Stock Exchange
(BSE – ticker EL), and the global Depository Receipts are listed on the London Stock Exchange (LSE – ticker ELSA).
following the stabilization process after the June 2014 iPO, ELSA owns 6,890,593 of its shares, representing 1.99% of
the total share capital, which does not entitle ELSA the right neither to vote, nor to receive dividends.
The ownership structure according to the records of Central Depository (Romanian: Depozitarul Central) as
of 31 December 2018 is presented in the following table:
Shareholder
Number of shares
Stake held
(% of the share capital)
The Romanian state, through the Ministry of Energy,
Bucharest, Romania
The European Bank for Reconstruction and Development,
London, UK
Electrica SA
BNy MELLON DRS, New york, USA
Other legal entities*
individuals
TOTAL
Source: Central Depository, Electrica
* Dedeman SRL owns between 5 and 10% of the total number of shares
Figure 18: Ownership structure on 31 December 2018
168,751,185
23,955,272
6,890,593
5,931,364
121,776,730
18,634,785
345,939,929
48.7805%
6.9247%
1.9918%
1.7146%
35.2017%
5.3867%
100.0000%
ELECTRiCA
ON THE CAPiTAL
MARKETS
Source: Central Depository, Electrica
ELECTRICA SA
36 | A N N U A L R E P O R T 2 0 1 8
At 31 December 2018, 81.96% of the total number of
shares were held by Romanian investors, while 18.04%
were owned by shareholders with European (other than
Romanian) and North American residence.
Figure 19: The structure of the Romanian shareholders
at 31 December 2018
Source: Central Depository, Electrica
As of 31 December 2018, out of the total shares owned
by Romanian shareholders, 59.52% where held by the
Romanian state through the Ministry of Energy, 6.39%
were shares belonging to individual shareholders and
31.66% were owned by legal shareholders. The remaining
2.43% represented Electrica’s shares, bought back for price
stabilization purposes in July 2014.
Of the remaining 18.04% of the share capital held by
foreign shareholders, the European shareholders (other
than Romanian ones) held 81.17% as of 31 December
2018 (out of which EBRD 38.39%), while the American
shareholders held 18.19%, this category including the
gDRs holders. More details on these holdings are shown in
the following figure.
The shares that appear to be held by the Bank of New york
Mellon are the global deposit receipts (gDRs) owned by
ELSA shareholders that are traded on the London Stock
Exchange (LSE). A global deposit receipt represents four
shares. Bank of New york Mellon is the depository bank for
these securities.
ELECTRICA SA
A N N U A L R E P O R T 2 0 1 8 | 37
Source: Central Depository, Electrica
Figure 20: Geographical distribution of shareholders outside Romania as of 31 December 2018
ELECTRICA SA 38 | A N N U A L R E P O R T 2 0 1 8
3.2 shares evolution on bse and Global depository receipts
(Gdrs) evolution on lse
BSE:
ELSA’s shares are included in several BSE indices, including
the BET index (the reference index for the Romanian capital
market reflecting the performance of the most traded
companies on the BSE’s regulated market), as well as in the
BET-Ng index (the sectoral index that reflects the evolution
of the companies listed on BSE’s regulated market having
as main activity energy and related utilities).
Between 4 July 2014 - 31 December 2018, ELSA’s shares
recorded a minimum price of RON 9.10 (13 July 2018) and
a maximum price of RON 14.96 (12 May 2017), therefore
the weighted average price was RON 12.13. Compared to
the iPO price (RON 11), ELSA closed the year 2018 at a price
of RON 9.7, down by 11.8%, while the BET index increased
by 5.3% and the BET-Ng index dropped by 14.5%.
The gross dividends per share granted by ELSA in this
period reached a cumulative value of RON 3.0469, with a
return of 27.7% as reported to the closing price of the last
day of 2018. At the same time, all the companies included
in BET index granted dividends with a cumulative yield
of 36.7% (calculated at the closed prices of the last day of
2018). Thus, the aggregate yield generated by ELSA’s shares
(along with dividends) from the iPO and by the end of 2018
was 15.9%.
from the iPO dated 4 July 2014 until the end of 2018, ELSA
shares attracted a RON 2.73 bn liquidity on BSE, with
a daily average of RON 2.43 mn. During this period of
about 4 years and a half, 225.2 mn ELSA shares had been
traded, representing 65% of the share capital and 174.4%
of the free float (computed without the shares held by
the Romanian State through the Ministry of Energy, the
European Bank for Reconstruction and Development
(EBRD) and ELSA’s own shares). Thus, the average daily
turnover during this period on BSE was 200,522 shares.
Strictly analyzing the year 2018, the maximum closing
price was RON 12.18 RON (29 January) and the minimum
closing price was RON 9.10, so the weighted average was
RON 10.99. During the year, ELSA’s share price fell by 14.2%,
while the BET index decreased by 4.8% and the BET-Ng
index depreciated by 7.4%.
The gross dividend per share granted by Electrica in 2018
(for 2017) was RON 0.7237, slightly below the 2017 level (by
2.4%), with a yield of 6.4% (computed at the last price in
2018). At the same time, the shares from BET composition
granted dividends with an average yield of 9.1%. Thus, the
aggregate yield generated by ELSA’s shares (together with
dividends) in 2018 was -7.8%.
During 2018, ELSA shares attracted a liquidity of RON 468.4 mn
on BSE, with a daily average of RON 1.88 mn, down by 27%
compared to 2017, the sixth in the market. The volume of
shares traded was 42.63 mn, down by 12% from 2017, so
the daily average volume was of 171,201 shares. The total
volume of shares traded in 2018 accounted for 12.3% of
the share capital and 36.2% of the free float. Since the
holdings larger than 5% are removed from the free float
(according to the BVB index methodology), the previous
calculation eliminates from the share capital the holdings
of the Romanian state through the Ministry of Energy,
EBRD, ELSA and Dedeman.
During the period from the beginning of 2019 until
15 february 2019, ELSA’s share price had an ascending
trend, with an advance of 10.10%, reaching a closing price
of RON 10.68. This evolution was recorded on a traded
volume of 4.55 mn shares, with an average daily turnover
of 146,943 shares. in the same period, the BET index grew
by 3.7% and the BET-Ng index went up by 11.2%.
LSE:
The GDRs’ weight in ELSA’s total share capital diminished
following the initial Public Offering, reaching a level of 1.71% at
the end of 2018 compared to 10.17% at 4 July 2014.
The maximum price reached by the gDRs was USD 15.3,
in September 2014. Subsequently, the gDRs’ price followed a
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 39
fluctuating but declining trend, to a price of USD 9.6 at
31 December 2018. The gDRs recorded a minimum price of
USD 8.9 on 27 December 2018.
Without taking into consideration the dividends granted, the
gDRs price dropped by 29.7% from the iPO price (USD 13.66) at
the end of 2018 (18.3% drop in 2018 and 3.7% in 2017).
gDRs liquidity was USD 159.3 mn from the iPO until the end
of 2018. in 2018, the liquidity recorded was of USD 1.75 mn,
compared to USD 4.78 mn in 2017. in this period, 12.42 mn gDRs
had been traded. Refering only to year 2018, the total traded
volume was 151,962 gDRs, with over 50% lower than compared
to the 2017 volume.
A summary of the above mentioned aspects is found next:
4 Jul 2014 -
31 Dec 2018
2018
2017
Variation
2018 vs 2017
Indicator
Bucharest Stock Exchange
Total liquidity (RON)
Average daily liquidity (RON)
Turnover (no. shares)
Average daily turnover (no. shares)
2,730,696,104
468,419,456
644,878,005
2,431,608
225,185,693
200,522
1,881,203
42,628,976
171,201
2,600,315
48,467,600
195,434
Market cap. - end of period (RON)
3,355,617,311
3,355,617,311
3,909,121,198
Minimum price (RON)
Maximum price (RON)
Average price (RON)
ELSA Share price performance (%)
BET performance (%)
BET-Ng performance (%)
Dividend(s)
ELSA’s Dividend(s) yield (%)
BET-TR Dividend(s) yield 4 (%)
ELSA’s Adjusted price performance (%) 5
BET-TR performance (%)
London Stock Exchange
ELSA’s gDRs liquidity (USD)
ELSA’s gDRs turnover (no. of gDRs)
gDRs price performance (%)
9.1
14.96
12.13
-11.80%
5.30%
-14.50%
3.0469
27.70%
36.70%
15.90%
41.90%
9.1
12.18
10.99
10.78
14.96
13.31
-14.20%
-14.10%
-4.80%
-7.40%
0.7237
6.40%
9.10%
-7.80%
4.30%
9.40%
10.80%
0.7415
5.60%
9.70%
-8.50%
19.10%
159,324,372
12,419,189
-29.7%
1,753,268
4,778,489
151,962
-18.3%
358,614
-3.7%
4 Computed at the periods’ last day close price (for comparability)
5 Computed together with dividend(s) granted during the analyzed period
-27.4%
-27.7%
-12.0%
-12.4%
-14.2%
-15.6%
18.6%
-17.4%
0.2%
-
-
-2.4%
13.7%
-6.0%
-8.8%
-77.5%
-63.4%
-57.6%
-
ELECTRICA SA 40 | A N N U A L R E P O R T 2 0 1 8
No
Date
Event description
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
5-Jan-18
Competition Council Ruling - fine amounting to RON 10.8 mn
16-Jan-18
Rejection suspension of the OgMS dated 26 October 2017 resolution
18-Mar-18
Action in annulment of the OgMS dated 26 October 2017 resolution
29-Mar-18
9-feb-18
ELSA announced the achieved value of the investments in distribution infrastructure
of RON 727 mn in 2017 and assumed an investment plan of RON 900 mn for 2018
OgMS approved a new Mandate Agreement and a new Remuneration policy for the
members of the ELSA's BoD as well as new remuneration limits for executive managers
of ELSA
15-feb-18
ELSA published the preliminary separate financial statements for 2017 (unaudited)
7-Mar-18
ELSA published the convening of the OgMS and EgMS on 27 April 2018 and the
related documents: financial statements, director's report, auditor report for 2017,
2018 budget and the dividend proposal for 2017
16-Mar-18
fy 2017 Results Presentation for analysts and investors (teleconference)
27-Mar-18
29-Mar-18
5-Apr-18
19-Apr-18
27-Apr-18
ELSA published the supplemented convening notice of the gMS dated 27 April 2018
with the election of the BoD through cumulative voting method by the request of the
Ministry of Energy
ELSA announced the transfer, starting 1 April, of the BRP (Balance Responsible Party)
activity to EfSA
ELSA announced the conclusion of three legal acts (intra-group loans), each with a
greater value than EUR 50,000, with its distribution subsidiaries
Competition Council denounces a cartel during 2008-2015 between distribution
operators and some meter suppliers
ELSA gMS approved the 2017 financial statements and 2018 Budget at standalone
and consolidated level, the 2017 dividend, elected the new BoD members through
cumulative voting method and rejected the appointed proposed financial auditor
and the establishing of a new working point in “America House’.
ANRE published a document regarding the substantiation of the 2019 distribution
tariffs with a proposal to reduce the RRR level from 7.7% to 5.07%.
14-May-18
Appointment of the BoD chair and of the BoD's committees
15-May-18
ELSA published the Q1 2018 financial statements and a current report regarding the
appeal to the Competition Council's decision.
Figure 21: Share price evolution on BSE and the most important events occurred from the beginning of 2018 until 15 February 2019 (RON)
Source: BSE, Electrica
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 41
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
16-May-18
Q1 2018 results Presentation for analysts and investors (teleconference)
7-Jun-18
25-Jul-18
Ex-date for 2017 dividend. The price decreased by 1.2% - less than the gross value of
dividend per share
ELSA published the convening of the gMS on 18 September 2018.
Revocation of the Chief iT&T Officer
14-Aug-18
ELSA published the H1 2018 financial statements and held a webconference for H1
2018 Results Presentation for analysts and investors
17-Sep-18
Revocation of the HR Manager following the mandate termination
18-Sep-18
12-Oct-18
16-Oct-18
23-Oct-18
15-Nov-18
OgMS approved the appointment of Deloitte Audit SRL as ELSA's financial auditor for
the financial years 2018, 2019 and 2020
ELSA's BoD announces the renouncement to the position as member of BoD of Ms
Arielle Malard de Rothschild
ELSA's BoD announces the termination of the mandate of CEO Mr Catalin Stancu,
by mutual agreement, and the nomination as interim CEO of Ms Corina georgeta
Popescu starting 1 November 2018
ELSA announces the application for annulment of the ANRE Orders no. 168 and 169
from 2018 regarding the methodology and the distribution tariffs
ELSA published the Q3 financial 2018 results, BoD appointed Mr. Dragos Andrei as
interim member of the BoD after the resignation of Ms. Arielle Malard de Rothschild.
Ms. Doina Dascalu resigned from her position as Chair of the BoD, considering the
Parliament nominated her as first Vice President of ASf
13-Dec-18
ELSA published the Convening notice for OgMS for the election of the BoD members
for filling in the vacant position
18-Dec-18
Mr. Willem Schoeber announced his decision to resign from his position in the BoD.
The Ministry of finance announced an Emergency government Ordinance introducing
new taxes mainly for banks and energy companies.
The stock exchange collapses by 17% in 3 days and ELSA loses 15%
20-Dec-18
25-Jan-19
7-feb-19
ELSA published the tariffs approved by ANRE for its three distribution subsidiaries for
2019
The BoD appinted Ms. georgeta Corina Popescu as CEO and Ms. Bibiana Constantin as
HR Manager, with a four-year mandate
ELSA OgMS elected Mr. Radu Mircea florescu, Mr. Dragos Andrei and Mr. Niculae
Havrilet as new BoD members, with mandate until April 2022
Figure 22: Global depositary receipts’ price history on LSE, together with the most important events occurred from the
beginning of 2018 until 15 February 2019 (USD)
Source: LSE, Electrica
ELECTRICA SA 42 | A N N U A L R E P O R T 2 0 1 8
Figure 23: Monthly trading volume and weighted average monthly closing price of shares on BSE (in RON) and GDRs on LSE (in USD)
(until 15 February 2019)
Source: BSE, LSE, Electrica
Figure 24: Evolution of the adjusted closing price6 of ELSA’s shares vs BET-TR index
Source: BSE, Electrica
6 Adjusted at each ex-date with the annual value of the dividend/share
Electrica adjusted price with dividends
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 43
3.3 investor relations (ir)
Throughout 2018, ELSA’s management team was involved
in numerous activities for investors and analysts, whether
it was national or international conferences, individual
meetings with Romanian or foreign investors and analysts,
or conference calls with them.
Like in every year, four teleconferences were organized
to present the annual, quarterly and half-yearly financial
results of the group. The events have been streamed live
through webcasts; both the supporting documents and
the webconference recordings can be accessed on the
company’s website, under investors section > Results and
Reports.
Among the conferences that took place during 2018,
we mention the attendance at:
The Central & Eastern European forum 2018 in
Vienna (16 – 17 January 2018);
Romania investor Days in London
(28 february – 1 March 2018);
Concorde Securities’ annual “face to face”
conference in Budapest (3-4 April 2018);
BCR investor Conference in Bucharest (8 May 2018);
CEE investor Days Conference in New york
(23-24 May 2018);
frontier investor Days in Bucharest
(6-7 September 2018);
Romania investor Day in Warsaw
(13 September 2018);
Romania investor Day in Zagreb
(20 September 2018);
CEE investors Conference in Stegersbach
(9-10 October 2018);
Romania investor Days Nordics in Stockholm
(18 October 2018);
7th Annual WOOD’s Winter Wonderland in Prague
(5 - 7 December 2018)
in the first part of 2018, the first ”Meet the Company, Meet
the CEO” event, dedicated to individual (retail) investors at
the company level was organized, in collaboration with
investors Club. Approximately 20 persons interested to
meet the company’s management attended the meeting
at ELSA’s headquarters. Thus, investors had the opportunity
to get in touch with the company’s representatives, to
ask questions of interest to them and to deepen relevant
information about the group.
ELSA aims at achieving the best-in-class investor program,
constantly developing the equity story. As a novelty, in
the second half of 2018, ELSA conducted a study on the
perception of local and international investors and analysts.
The way that the company is perceived at individual level,
compared to the industry and to similar market-cap peers
was determined.
The company’s goal was to better understand investors and
their needs in order to avoid inappropriate communication,
to minimize information misinterpretation and to improve
the quality of communication with existing and potential
investors and analysts.
Refering to fairly, continuously and transparently informing
investor Relations Department has
stakeholders, the
disseminated over 45 current reports and communications
on the platforms of the Bucharest Stock Exchange (BSE),
the London Stock Exchange (LSE), the financial Supervisory
Authority (ASf and fCA), as well as on ELSA’s website.
All these documents can be accessed on the company’s
website, under investors section > Results and Reports.
ELECTRICA SA 44 | A N N U A L R E P O R T 2 0 1 8
3.4 legal acts reported
The legal acts reported in 2017 according to Art. 82
of Law No. 24/2017 are the following:
EL SERV – Subsequent Agreement no. 344/29
December 2017 – valid until 30 June 2018 - Auto
transportation services for ELSA for the period 1
January 2018 – 30 June 2018 – value: RON 447 th;
EfSA – Business Transfer Agreement no. 42/28 March
2018 - Business Transfer of Balance Responsible
Party activities and assets – amount: RON 19,762 th
(the transaction’s price was established considering
the transferred activity’s market value, based on a
valuation report delivered by an ANEVAR authorized
valuator);
SDTS – Loan Agreement no. 73/05 April 2018 -
granting of a loan in amount of up to RON 130 mn
– expiry date 4 April 2025;
SDMN – Loan Agreement no. 74/05 April 2018 -
granting of a loan in amount of up to RON 230 mn
– expiry date 4 April 2025;
3.5 dividend policy
SDTN – Loan Agreement no. 75/05 April 2018 -
granting of a loan in amount of up to RON 160 mn
– expiry date 4 April 2025;
SDMN – Services agreement no. 153/27 April 2018
– Rendering services in the AMR system until
30 September 2018; amount: RON 5,496 th;
subsequently, the services agreement no. 219/24
October 2018 was signed, having the same scope,
with expiry date 28 february 2019, agreement in
total amount of RON 4,580 th;
SDTS – Services agreement no. 154/27 April 2018 –
Rendering ser vices in the AMR system until
31 December 2018; amount: RON 7,354 th;
SDTN – Services agreement no. 155/27 April 2018 –
Rendering ser vices in the AMR system until
27 April 2019; amount: RON 8,943 th;
SEM – Loan Agreement no. 167/29 May 2018 -
granting of a loan in amount of up to RON 5.5 mn
– expiry date 29 May 2020.
ELSA’s dividend policy was updated in february 2018,
and the document can be accessed on the company’s
website under investors section > Corporate governance
> Corporate Policies.
ELSA’s dividends are distributed from the annual net
distributable profit based on the annual
individual
audited financial statements after their approval by ELSA’s
Ordinary general Shareholders’ Meeting (OgMS) and
the approval of the dividend proposal by the OgMS. The
shareholders receive dividends proportionally to their
share in the company’s paid-up capital. The company has
345,939,929 ordinary shares issued, all shares conferring
equal rights on the net assets of the company. Out of the
total number of shares issued, 339,049,336 shares offer the
right to dividends and the right to one vote per share in the
shareholders’ meetings of the company. The remaining
6,890,593 shares were bought back by the company in
July 2014 in order to stabilize the price and do not confer
any right to dividends or any voting right.
Regarding the global deposit receipts that are traded
on the London Stock Exchange, ELSA pays dividends to
the gDRs issuer proportionally to its holdings. Holders
of gDRs will then receive dividends from the gDR issuer,
proportionally to their holdings.
According to the policy in force, the dividend distribution
that the Board of Directors will consider in formulating the
proposal to ELSA’s OgMS will be between 65% and 100%
of its distributable net profit. in case there are deviations
outside this range, they will be substantiated and explained
to shareholders in the periods in which they occur. The
company will pay all dividends in RON.
The dividend payout ratio from the distributable profit
of the group subsidiaries shall be consistent with ELSA’s
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 45
present dividend policy. The dividends paid by the group’s subsidiaries to ELSA in year N (related to year N-1 results) are
recorded as finance income in ELSA’s individual financial statements in year N and incorporated into dividends paid by
ELSA to its shareholders in year N+1 (related to the result of year N).
3.6 dividend distribution
Figure 25: Gross dividends distributed (2014-2017) - RON mn
Figure 26: Gross dividend per share (RON) and dividend yield (%)
The dividends distributed by ELSA fluctuated in the period
2014 - 2017, between RON 244.7 mn and RON 291.6 mn,
but the dividend payout ratio7 was 100% each year, except
for 2014, when it reached a level of 96%. in 2015, the net
dividend distributions included the amount of RON 5.7 mn
representing the retained earnings from 2014.
3.7 own shares
in July 2014, ELSA 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
The yield of the dividend paid in 2018 (for the 2017 results),
recorded the highest level in the 2014-2017 period,
reaching a level of 7.3%. The gross dividend per share
paid in 2018 was 0.7237 RON. The dividend yield (%) is
calculated as gross dividend per share/Closing share price
on BSE at ex-date.
Depositary Receipts was RON 75,372 th. There were no
changes in the number of the treasury shares until the date
of the report.
7 Dividend payout ratio is calculated as Gross Dividends/ Net profit distributable to dividend, whereas Net profit distributable to dividend is Net profit
according to individual financial statements of ELSA less the required distributions to legal to legal reserves
ELECTRICA SA 46 | A N N U A L R E P O R T 2 0 1 8
4
CORPORATE
gOVERNANCE
iN ELSA
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 47
ELSA confers a great importance to the principles of good
corporate governance, considering corporate governance
a key element for sustainable growth of the business and
for enhancement of long-term value for shareholders.
ELSA constantly develops and adapts
its corporate
governance practices and model, both at standalone,
as well as at group level, so that it can align with the
increasingly rigorous capital market requirements and with
the best practices in corporate governance at European
level, as well as for creating opportunities and increasing
competitivity.
Corporate governance represents the principles at the basis
of the governance framework through which the company
is administered and controlled. Transposed in the internal
regulations, these principles determine the efficiency and
effectiveness of the control mechanisms adopted with
the purpose of protecting and harmonizing the interests
of all the stakeholders – shareholders, directors, executive
managers, managers of different structures of the
company, employees and the organizations that represent
their interests, customers and business partners, suppliers,
central and local authorities, regulators and operators of
the capital markets, etc.
ELSA’s Code of Corporate governance presents primarily
the main work methods, attributions and responsibilities
of the management and supervisory structures of the
company, as well as those of the committees constituted
to support these structures to fulfil their responsibilities.
ELSA undertook from the iPO and admission to trading from
July 2014 the implementation of a corporate governance
action plan, as part of the framework agreement with the
European Bank for Reconstruction and Development. The
standards and measures provisioned in this plan have
been implemented and continuously monitored. for more
details about this action plan, please see chapter 4.10.
4.1 corporate Governance code
ELSA adhered to and has been applying the provisions of the
Corporate governance Code issued by the Bucharest Stock
Exchange (BSE CgC). This code, entered into force starting
with 4 January 2016, can be accessed on the BSE’s website
at the address: http://m.bvb.ro/Regulations/Legalframework/
BvbRegulations.
The CgC is also a guide for ELSA’s management and
employees and for 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.
ELSA’s compliance with BSE’s code is being thoroughly
assessed and periodically reported to the market as new
developments are observed.
ELSA had officially adopted and applies the Corporate
governance Code (ELSA CgC) starting with 2014 financial year.
formally, ELSA adopted the Code of Corporate governance
(ELSA CgC) starting with february 2015 and made it available
to all the interested parties on ELSA’s website, in the section
investors > Corporate governance > Corporate governance
Code.
ELSA CgC embeds ELSA’s general principles and conduct
rules that set forth the corporate values, the responsibilities,
obligations and business conduct of the company.
ELSA CgC comprises also ELSA’s Articles of Association, the
charters of the BoD and those of its committees, and all
these documents together contain the terms of reference
and responsibilities of the administrative and executive
management of the company.
The most recent update of ELSA CgC took place in April 2017,
following the update of the Articles of Association of the
Company that was approved by the gMS on 27 April 2017.
The “Comply or Explain” Statement from chapter 4.9 presents
the company’s compliance level with the provisions of BSE’s
CgC code. ELSA is in compliance with all of these provisions.
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
implementation of the whistle-blower policy.
ELSA has implemented a procedure for reporting ethical
deviations, frauds and any other aspects of non-compliance
that otherwise could cause
image and/or commercial
prejudice or even involve legal sanctions, thus damaging the
prestige and profitability of the Company.
functions
The whistleblowing
according to this procedure, as well the procedure itself, are
available on ELSA’s website, in the Whistleblowing section.
tools, which
reporting
Whereas the shares of the Company are allowed for trading
both on the regulated market administered by Bucharest Stock
Exchange (BSE), and through gDRs on the market managed by
the London Stock Exchange (LSE), ELSA is subject to the rules
imposed by the national and European laws on market abuse
regarding market abuse prevention and the arrangements
applicable to inside information. Thus, ELSA CgC includes
instructions on the use of insider information and market
manipulation. ELSA has implemented a procedure to comply
with the national and European regulations regarding market
abuse prevention.
4.2 General meeting of elsa’s shareholders
The general Meeting of Shareholders (“gMS”) is the main
corporate governance body of ELSA, 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 ELSA’s Articles of Association,
which is available in electronic format on ELSA’s website, in
the section group > About.
ELECTRICA SA 48 | A N N U A L R E P O R T 2 0 1 8
The ordinary general meeting of the shareholders has
the following main duties:
as joint ventures in excess of the same value and
with a duration of over one year;
to appoint and revoke the members of the Board of
directors and establish the level of their remuneration
and other rights according to the legal provisions;
to establish the revenues and expenses budget, to set
out the activity schedule of the Company;
to establish the revenues 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 auditor;
to approve the profit distribution according to the law
and to establish the dividend;
to decide on the management activity of the directors
and on the discharge of their liability, in accordance
with the law;
to decide to file legal actions against the directors,
managers as well as financial auditor for damages
they caused to the Company by breaching their
obligations towards the Company;
to decide on mortgaging, renting or closing of one or
more units of the Company;
to appoint and revoke 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 liens related to these loans, in each case in
accordance with the competence limits provided
in Annex 1 to Articles of Association;
regarding
operations
the acquisition,
sale,
exchange or creation of encumbrances over fixed
assets of the Company whose value 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
approving
investment projects
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, allotment
rights or other similar financial
instruments;
approving the competencies delegated to the
Board;
changing the legal form;
relocation of the registered office;
changing the main or secondary business 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
the Articles of
to
Association;
the establishment or dissolution of secondary
offices: branches, agencies, representative offices,
working points or other similar units without legal
status, according to the legal provisions;
participation in the establishment of new legal
persons;
approval of the eligibility and independence
criteria with respect to the Board members;
approval of the corporate governance strategy of
the Company, including the corporate 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 mn per operation;
any other decision that requires the approval of the
extraordinary general meeting of the shareholders.
4.3 shareholders’ rights
Rights of the Company’s shareholders, including the
minority ones, are protected according to the relevant
legislation. Shareholders have, amongst others rights
provided under the Company’s Articles of Association
and the laws and regulations in force, the right to obtain
information about the operations and results of ELSA,
regarding the exercise of voting rights and the voting
results in the gMS.
Shareholders have also the right to participate and vote
in the gMS, as well as to receive dividends. Except for the
shares owned by ELSA following the stabilization after the
iPO in 2014, there are no preference shares without voting
rights. There are no shares conferring the right to more
than one vote.
Moreover, shareholders have the right to challenge the
decisions of gMS or to withdraw from the Company
and to request the Company to acquire their shares, in
certain conditions mentioned by the law. Likewise, one
or more shareholders holding, individually or jointly, at
least 5% of the share capital, may request the calling of a
gMS. Such shareholders have also the right to add new
items to the agenda of a gMS, provided such proposals
are accompanied by a justification or a draft resolution
proposed for approval and copies of the identification
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 49
to a general meeting of shareholders, 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 shareholders
of the Company and any registration date for the
identification of the shareholders which have
rights deriving from their 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
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.
documents of the shareholders who make the proposals.
in the
following paragraphs are presented aspects
regarding the shareholders’ rights, extracted from ELSA’s
Articles of Association.
Rights and obligations deriving from the shares:
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.
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.
The exercise of the rights by the holders of the
depositary certificates8:
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 the documents and the
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
8 According to ELSA’s Articles of Association; the provisions are according to CNVM Regulation 6/2009 and will be updated in accordance with Law no. 24/2017 on issuers of
financial instruments and market operations.
ELECTRICA SA 50 | A N N U A L R E P O R T 2 0 1 8
4.4 elsa’s board of directors
ELSA adopted a one-tier (unitary) corporate governance
system, consistent with the principles of good corporate
governance, transparency and accountability towards its
shareholders and other categories of stakeholders, aiming to
support and drive the business development and efficient
exchange of relevant corporate information.
The Board of Directors (BoD) is responsible for taking all the
necessary measures to carry out as well as to supervise the
activity of the Company. its structure, organization, duties
and responsibilities are established under the Articles of
Association and the Charter of the BoD.
According to the provisions of the company’s Articles of
Association, starting with 14 December 2015, the BoD is
composed of seven non-executive directors, elected by
the Ordinary general Meeting of Shareholders for a four
years mandate, four of whom must meet the criteria of
independence provided by the Articles of Association.
During 2018, the composition of the BoD has
undergone several changes, as follows:
At the beginning of the year, the BoD consisted
of the following members: Mr. Cristian Busu, Ms.
Arielle Malard de Rothschild, Ms. Elena Doina
Dascalu, Mr. Bogdan iliescu, Mr. gicu iorga, Mr.
Pedro Mielgo Alvarez and Mr. Willem Schoeber;
On 27 April 2018, according to shareholders’
request, the general Meeting of Shareholders
elected a new BoD through the cumulative vote
method, for a four-year mandate, as it follows:
Ms. Elena Doina Dascalu, Mr. gicu iorga, Ms.
Ramona Ungur, Mr. Valentin Radu, Ms. Arielle
Malard de Rothschild, Mr. Bogdan iliescu, and Mr.
Willem Schoeber. five out of the seven directors
fulfilled the independence criteria provided by
the Articles of Association, according to their
statements, namely: Ms. Ramona Ungur, Mr.
Valentin Radu, Ms. Arielle Malard de Rothschild,
Mr. Bogdan iliescu, and Mr. Willem Schoeber;
On 11 October 2018, Ms. Arielle Malard de
Rothschild
renounced her position as a
member of the BoD, her mandate ceasing
on 11 November 2018. in this context, the BoD
decided to appoint Mr. Dragos Andrei as interim
member of the BoD, starting with 1 December
2018;
On 15 November 2018, Ms. Elena Doina Dascalu
renounced her position as a member of the BoD,
following her nomination as first-Vice-president
of the financial Supervisory Authority (ASf),
starting 14 November 2018;
in order to fill in the vacant positions,
on 13 December 2018, the BoD decided to
convene the general Meeting of Shareholders on
7 february 2019.
On 18 December 2018, Mr. Willem Schoeber
informed the BoD about his resignation, and about
the ceasing of his mandate on 6 february 2019.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 51
At the end of 2018, the members of the BoD were the following:
No Name
1.
2.
3.
4.
5.
Mr. Valentin Radu
Ms. Ramona Ungur
Mr. gicu iorga
Mr. Bogdan iliescu
Mr. Willem Schoeber
Term of office (starting with
27 April 2018)
4 years
4 years
4 years
4 years
4 years
Status
non-executive director,
independent
non-executive director,
independent
non-executive director
non-executive director,
independent
non-executive director,
independent
non-executive director
Starting date of the
first mandate
27 April 2018
27 April 2018
1 May 2017
14 December 2015
1 May 2016
Mr. Dragos Andrei
6.
Source: Electrica
*Note: Following Ms. Arielle Malard de Rothschild renunciation of her mandate as member of the Board of Directors, on 13 November 2018, the Board of Directors appointed
Mr. Dragos Andrei as interim member, starting with 1 December 2018, and until 30 June 2019 or until the General Meeting of Shareholders having on the agenda the filling
of the vacant position, whichever comes first.
1 December 2018
interim*
At the date of this report, the members of the BoD were the following:
No
Name
Term of office
(until 27 April 2022)
Status
non-executive director,
independent
non-executive director,
independent
Starting date of the
first mandate
27 April 2018
27 April 2018
non-executive director
1 May 2017
non-executive director,
independent
14 December 2015
Mr. Valentin Radu
Ms. Ramona Ungur
Mr. gicu iorga
Mr. Bogdan iliescu
4 years
4 years
4 years
4 years
1.
2.
3.
4.
5.
6.
7
Mr. Dragos Andrei
~ 3 years, 5 months
non-executive director
1 December 2018
Mr. Niculae Havrilet
~ 3 years, 3 months
non-executive director
7 february 2019
Mr. Radu florescu
~ 3 years, 3 months
non-executive director,
independent
7 february 2019
More details on the Board members’ biographies can be found on the group’s website in the section investors > Corporate
governance > Board of Directors.
ELECTRICA SA 52 | A N N U A L R E P O R T 2 0 1 8
We present below the most relevant aspects regarding the professional experience of the members of the BoD:
Name
Valentin
Radu
Mandate
duration
4 years
Ramona
Ungur
4 years
4 years
Bogdan
George
Iliescu
Gicu Iorga 4 years
Willem
Jan
Antoon
Henri
Schoeber
~2 years,
9 months,
until
6 february
2019
Dragos
Andrei
~3 year,
5 months
Professional experience
Currently – founding member and Managing Partner at Platinum Capital
from August 2005 until August 2007 – general Manager, Chair of the Board of Directors –
TiriacAuto, Autorom – general Supplier DaimlerChrysler
During March 2003 – August 2007 – CEO within TiriacHoldings
from April 1995 – March 2003 – Senior Project Manager – Roland Berger Strategy Consultants
Currently – Member of the Board of Directors of Oil Terminal SA, and Romgaz SA
During January 2013 – April 2018 – Head of department/Supervisor – SME Reorganization
Department/Office – Banca Comerciala Romana
from May 2010 until January 2013 – Coordinator of Recovery Department - Banca Comerciala
Romana.
from December 2008 until December 2009 – Head of Risk and Credits Division - Eximbank
Romania
During April 2003 – December 2008 – Head of Credit Management Department and Deputy
Manager/Control Officer – internal Control Department - Credite Europe Bank, Bucharest
from 1998 until 2003 - Banking Supervision inspector –National Bank of Romania, Tg. Mures
During August 1991 – August 1992 – Compensation Referent, Banca Agricola SA (Raiffeisen
Bank), Bacau
Currently - Board member, Nomination and Remuneration Committee member, Rating and
Audit Committee member, Strategy committee member, SNTgN Transgaz SA, Medias;
Between 2014 - 2016 - Executive Director, Corporate finance Department, BRD – group
Societee generale;
Between 2007 - 2014 - Managing Director, BRD Corporate finance;
from 2005 until 2009 – Board member, SAi iNVESTiCA ASSET MANAgEMENT SA, Bucharest;
Between 2001 - 2007 - Project Manager, BRD/Sg Corporate finance;
Between 1997 - 2001 - Analyst, BRD – group Societe generale.
Currently - general Secretary in the Ministry of Energy;
Between 2014 - 2017 - Senior Advisor A.N.A.f. - D.g.V. (general customs direction) Bucharest;
Between 2012 - 2014 - Head of customs office - D.g.V. (general customs direction) Bucharest/
Ploiesti;
Between 2011 - 2012 - Head of municipal tax information office/Deputy executive manager –
economic - D.g.f.P.M. Bucharest (general Direction of Public finance of Bucharest Municipality);
Between 2010 - 2011 - Chief of administration - Administration of the consolidated state
budget D.g.f.P.M. Bucharest, A.f.P – 5th district;
30 years’ experience in economics, finance-fiscal and public administration.
independent business consultant (since 2013);
Member of the board of directors of Neste Oyj (Helsinki, finland) and of the supervisory board
of gasunie NV (groningen, the Netherlands) since 2013 and member of the audit committees
of these boards;
Chair of the Board of Directors of EWE Turkey Holding AS (istanbul, Turkey), Bursagaz (Bursa,
Turkey), Kayserigaz (Kayseri, Turkey) (2010 - 2015);
Member of the executive board of EWE Ag (Oldenburg, germany), responsible for power
generation and the utility businesses in Turkey and Poland (2010 - 2013);
Chairman of the executive board of swb Ag (formerly „Stadtwerke Bremen Ag”, the integrated
utility company of the city of Bremen, germany) (2007 - 2011);
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) (1977 - 2007).
Currently – Member of the Board of Directors, Alternate Executive Director of the Board Turkey/
Romania/Azerbaijan/Moldova/Kirghistan - EBRD, London
During January 2013 – March 2015 –State Counsellor, Chancellery of the Prime Minister,
Romanian government
During September 2011 - January 2013, february 2005 – August 2007 and March 1999 – April
2003 – President of Valsa Consulting SA
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 53
Name
Mandate
duration
Professional experience
from August 2007 until August 2011 – Minister Counsellor at the Permanent Representation of
Romania to the European Union, Brussels;
from April 2003 until January 2005 had several positions within the Romanian government,
as follows: April 2004 - January 2005 – Secretary of State within the Ministry of Public finance;
September 2003 –April 2004 – Advisor of the Minister of internal Affairs and Administration;
April – September 2003 – Secretary of State, Administration Ministry;
During April 1998 – february 1999 – first Vice-president, Banca Romana de Comert Exterior,
BANCOREX SA
from September 1995 until March 1998 – Vice-president of the Board of Directors and Deputy
general Manager, ABN AMRO Bank Romania
During June 1992 – August 1995, Chief Operations Officer and general Manager, Banque
franco RouMayne SA
from December 1990 until May 1992 – Chief of Service “foreign exchange reserves”, National
Bank of Romania
During September 1988 – November 1990 – international money market research analyst,
institute of World Economy, Bucharest
from September 1995 until August 1988, Analyst within the Ministry of Oil, iCE Rompetrol,
Bucharest
With over 35 years of experience in the field of electricity and natural gas, out of which he spent
20 years in managerial positions, Niculae Havrilet holds, since february 2018, the position of
counsellor to the Minister of Energy.
A graduate of the Technical University of Cluj-Napoca, the faculty of Mechanical Engineering,
Niculae Havrilet has gathered significant experience in the field of central public administration.
Between June 2012 and October 2017, he held the position of President of the Romania’s
National Energy Regulation Agency (ANRE), a time when he was also a member of the Council
of Regulator Authorities within the Agency for the Cooperation of Energy Regulators (ACER),
as well as a member of the general Assembly of the Council of European Energy Regulators
(CEER). Between 2002 and 2012, he served as general Secretary of the National Professional
Association of Natural gas, and from 2001 to 2012 he was general Manager of gascop Company.
in 2000, Niculae Havrilet was decorated with the Order of the “Star of Romania”, in the rank of
Knight. Niculae Havrilet has been appointed member of the BoD of ELSA since february 2019.
Radu florescu is currently CEO of Centrade-Cheil, for the South East Europe, the regional
communications center for Cheil Worldwide, coordinating 11 markets in the Adriatic and
Balkan countries.
for more than 25 years, Radu florescu has worked with top multinational companies to be
found in fortune 500, working in emerging countries, including within EU funded programs.
A graduate in Marketing and finance at Boston College, Radu florescu began his Merrill Lynch
commodity trading career at NyMEX, focusing his activity on WTi, fuel oil and gasoline. in
1989, he co-founded Centrade USA and brought pioneering communication services to the
Romanian market through the launch of Saatchi & Saatchi, the establishment of Cable Direct
and the foundation of Zenith Media.
Among the positions he held the following are to be mentioned: founding member of iAA
Romania, co-founder of the Union of Advertising Agencies of Romania (UAPR), member of
the EACA European Council representing Romania and Eastern Europe in Brussels (2012-2015,
2017 up to present), member of the Council and vice-president of the American Chamber of
Commerce in Romania (2013-2015 and 2016 up to present), member of the TAROM Board of
Directors (March 2015-June 2017), coordinator and member of Coalition Coordination group
for Romania’s Development – the “umbrella” type leading association representing the business
community and trade sections of the embassies in Bucharest.
Radu florescu is also active in the field of social responsibility, having a long history of
contribution brought to the local community. Currently, Radu is a member of the AiESEC
Romania Board, member of the JA (Junior Achievement) Council, member of the OvidiuRo
Council, member of the Supervisory Board of the Principesa Margareta foundation, president
of the MBA ASEBUSS Program Board, member of Top Business School in Romania and member
of the Hospice Casa Sperantei Board. He was also a member of the United Way Romania
Council for 12 years and president of the Council.
Radu florescu holds the position of member of the ELSA BoD since february 2019.
Niculae
Havrilet
~3 year,
3 months
Radu
Florescu
~3 year,
3 months
Source: Electrica
ELECTRICA SA 54 | A N N U A L R E P O R T 2 0 1 8
During January – April 2018, Mr. Cristian Busu performed
the duties of Chair of the BoD, according to the decision
made by the Board in its meeting on 13 November 2017.
On 14 May 2018, the BoD decided to appoint Ms. Doina
Dascalu as Chair for a mandate of one year. following her
resignation, on 12 December 2018, Mr. Valentin Radu was
elected Chair of the BoD, with a mandate of one year.
On 7 february 2019, the Ordinary general Meeting of
Shareholders, convened in order to fill in the vacant
positions of the BoD, decided to appoint as directors the
following members: Mr. Radu florescu, Mr. Dragos Andrei
and Mr. Niculae Havrilet, the duration of the term of office
of the elected administrators being equal to the period
remaining until the expiry of the term of office for the
vacant positions, respectively until 27 April 2022.
and
the Nomination
Three committees support the activity of the BoD,
Remuneration
respectively
Committee, the Audit and Risk Committee and the
Strategy and Corporate governance Committee, each
of them composed of three Directors and chaired by
an independent Director. The majority members of the
Nomination and Remuneration Committee and of the
Audit and Risk Committee are independent Directors.
The 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 ELSA, respectively in the committee
Charters - an integrant part of the Corporate governance
Code of the Company.
According to the changes registered in the BoD
composition, the composition of the committees
changed during 2018, as it follows:
Î 1 January – 27 April 2018
Nomination and Remuneration Committee
Mr. Pedro Mielgo Alvarez – Chair of the committee
Mr. Bogdan iliescu
Mr. gicu iorga
Audit and Risk Committee
Mr. Bogdan iliescu - Chair of the committee
Ms. Arielle Malard de Rothschild
Ms. Doina Dascalu
Strategy and Corporate Governance Committee
Mr. Willem Schoeber - Chair of the committee
Ms. Arielle Malard de Rothschild
Mr. Cristian Busu
Î 14 May – 11 December 2018
Nomination and Remuneration Committee
Mr. Valentin Radu – Chair of the committee
Mr. Bogdan iliescu
Ms. Doina Dascalu 9
9 renounced her mandate on 15 November 2018
10 renounced her mandate on 11 October 2018
Audit and Risk Committee
Mr. Bogdan iliescu - Chair of the committee
Ms. Arielle Malard de Rothschild10
Ms. Ramona Ungur
Strategy and Corporate Governance Committee
Mr. Willem Schoeber - Chair of the committee
Ms. Arielle Malard de Rothschild9
Mr. gicu iorga
Î 12 – 31 December 2018
Nomination and Remuneration Committee
Mr. Bogdan iliescu – Chair of the committee
Mr. Valentin Radu
Ms. Ramona Ungur
Audit and Risk Committee
Mr. Bogdan iliescu - Chair of the committee
Ms. Ramona Ungur
Mr. gicu iorga
Strategy and Corporate Governance Committee
Mr. Willem Schoeber - Chair of the committee
Mr. Dragos Andrei
Mr. gicu iorga
Î On 18 February 2019, the new Board of Directors
revised the committees’ composition, valid until
31 December 2019, as follows:
The Strategy and Corporate Governance committee
Mr. Valentin Radu – Chair
Mr. Dragos Andrei – Member
Mr. Niculae Havrilet – Member
The Audit and Risk committee
Ms. Ramona Ungur – Chair
Mr. Bogdan george iliescu – Member
Mr. Radu florescu – Member
The Nomination and Remuneration committee
Mr. Bogdan george iliescu – Chair
Mr. gicu iorga – Member
Mr. Valentin Radu – Member
According to the available
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.
information, there
As of 31 December 2018, the members of the BoD did not
hold ELSA shares.
At 15 february 2019, out of the members of the BoD, only
Mr. Niculae Havrilet held ELSA shares (199 shares).
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 55
According to the available
information, the Board
members were not involved in litigations or administrative
proceedings regarding their activity within the Company
or regarding their capacity to fulfil their duties within the
Company in the past five years.
4.5 the activity of elsa’s board of directors and of its consultative
committees in 2018
in 2018, the Board of Directors met 22 times. Out of the
22 meetings that took place in 2018, 18 meetings were
organized with physical presence of the members, 3 were
held by conference call, in accordance with Art. 18 para. 20
of the Company’s Articles of Association and one was held
electronically, in accordance with the provisions of Art. 18
para. 23 of the Articles of Association of the Company .
The Board members’ attendance (in person, by conference
call or by email) in the meetings of the Board of Directors
is presented below:
in 2018
and
its committees
The Board of
Directors
(no. of meetings
- 22)
The Audit and
Risk Committee
(no. of meetings
- 13)
The Nomination
and Remuneration
Committee
(no. of meetings
- 11)
The Strategy
and Corporate
Governance
Committee (no. of
meetings - 11)
6
6
14
18
22
21
20
16
16
1
-
-
10
4
13
1
-
-
9
-
-
4
-
6
11
4
-
7
1
-
3
-
7
-
-
8
11
-
-
-
Nume
Cristian Busu12
Pedro Mielgo Alvarez12
Arielle Malard de
Rothschild13
Doina Dascalu14
Bogdan iliescu
gicu iorga
Willem Schoeber
Valentin Radu15
Ramona Ungur15
Dragos Andrei16
Source: Electrica
in accordance with the provisions of the Collective Labor
Agreement, when appropriate, invitations to attend the
BoD meetings were sent to Trade Union representatives.
The key decisions taken by the BoD during 2018 refer
to:
Election of the Chairman of the BoD and establishing
the composition of the consultative committees
and election of their chairpersons ( after the gMS
has established the new structure);
Revision and endorsement of ELSA revenue and
expenses budgets at standalone and consolidated
levels, as well as of the revenue and expenses
budgets of company’s subsidiaries for the financial
year of 2018;
Analysis and endorsement of ELSA financial
statements at individual and consolidated levels, as
well as of the financial statements of the Company’s
subsidiaries for the financial year of 2017; the
quarterly analysis of the financial results, including
their analysis as compared to the budget;
Revision of Company’s Delegation of Authority;
Revision of the Policy on Transactions with Related
Parties.
Regarding the structuring and development of
Group’s business portfolio:
Redefining the strategic directions of group’s
development, of the vision, mission and values, taking
into consideration the market and the company’s
already initiated transformation process, as well as the
European and national perspectives;
11 When the Board members were unable to attend the meetings organized by the three methods specified by the Company’s Articles of Association (physical presence, by
telephone conference call and electronic), they were represented based on the mandates given to another Board member.
12 His mandate ceased according to the OGMS decision no 2/ 27 April 2018
13 On 11 October 2018, Ms. Arielle Malard de Rothschild renounced her position as a member of the Board of Directors
14 On 15 November 2018, Ms. Elena Doina Dascalu renounced her position as a member of the Board of Directors
15 Nominated through the OGMS decision no 2/ 27 April 2018
16 Following Ms. Arielle Malard de Rothschild’s renunciation of her position as member of the Board, on 13 November 2018, the Board of Directors decided to appoint Mr.
Dragos Andrei as interim member of the Board of Directors, starting with 1 December 2018
ELECTRICA SA 56 | A N N U A L R E P O R T 2 0 1 8
Revision and approval of ELSA and of the consolidated
investment plan for the financial year of 2018, as well
as the monthly analysis of its achievement;
Analysis, coordination and approval of several
proposals submitted by the executive management
regarding investment opportunities on renewable
energy, given the context of the energy market, the
impact on the supply activity and the competitive
advantages of the competitors;
The transfer of Balance Responsible Party (BRP) from
ELSA to EfSA, along with the approval of the Market
Risk Management Strategy, including the strategic
provisions regarding the energy procurement by
EfSA;
Policy, in order to be implemented on 2019 within
the entire group;
Running the selection process and submission for
gMS approval the appointment of the new financial
auditor of the Company.
Evaluation of the Board of Directors:
According to the established mechanism, namely to carry
out the evaluation of its activity either with the support of
a consultant or by self-evaluation, alternatively, an internal
evaluation of the Board activities was carried out at the
beginning of 2019, based on a questionnaire defined and
thoroughly discussed and agreed by the Board members.
Monitoring the implementation and the performance
of the transformation program for the distribution
segment;
The questionnaire, using a scale of 1 to 5, served to
perform an assessment of the Board’s activities in
the following areas:
A new business plan was approved for EL SERV, plan
that provides efficiency and optimization measures,
such as:
improvement of the services currently provided
and their development for companies outside
Electrica group;
Development of new products and ancillary
services for the companies within the group;
Streamline the real estate portfolio;
Reduction of administrative and general costs.
Approval of
the efficiency project of ELSA,
concentrated on personnel reduction at holding
level, starting the employees’ evaluation process, and
implementing an optimal organizational structure
aimed to streamline the activity.
Regarding the human resources and the managerial
competences:
Along with the overseeing of the recruitment process
of the general managers for ELSA’s subsidiaries, a new
system of key performance indicators and a new
assessment methodology for the performance of
executive management, providing general, specific
and individual indicators for each executive manager
of ELSA were set in place, followed by their cascading
within the subsidiaries.
In terms of audit and financials:
Approval of the group’s financing strategy, under
ELSA’s coordination, as well as the Treasury Strategy,
including the optimization of financial placements
strategy;
Overseeing the implementation of the internal audit
plan for 2018 and the approval of the 2019 audit plan;
Monitoring the risk management at group level,
based on the reports presented by the executive
management, the corrective measures regarding
the high risk identified noncompliance and the
recommendations made by the Audit and Risk
Committee and approving the Risk Management
Specific KPis as provided in the mandate agreements
(the main objectives defined by the general
Meeting of Shareholders: group strategy, Corporate
governance, Placement of financial investments
and investments achievement in the distribution
companies)
Board Efficiency and Ways of Working of the Board
Board interactions and activities’ dynamics
Self-Assessment of each Board member
functioning of the Board Chair
Board’s interactions with CEO/Management
Board’s interactions with stakeholders.
After analysing the results of the questionnaire, the
following conclusions were drawn:
Most respondents assessed the overall work of the
Board in 2018 as being generally good;
in
Regarding the achievements of the Board’s own
KPis, it was noted that the investments made and
commissioned during 2018
the distribution
companies reached the expected level, creating the
prerequisites for the development and improvement
of the results recorded by the distribution subsidiaries
in the future. Thus, there is an improvement compared
to the previous years, both quantitative (in terms of
value of investments) and in terms of effort’s efficiency
(a higher degree of achievement);
As in previous years, the Board’s ability to predict
evolutions in the business environment in which
the Company operates and potential opportunities
impacted mainly by the
or threats, has been
unpredictability of the regulatory framework, even
in identifying business opportunities (e.g. renewable
energy);
The relationships with important shareholders, as
well as public communication have been improved
compared to previous years.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 57
In this context, for the next year, the Board has set
the following priority directions:
The Board will pay more attention to the compliance
with the corporate governance framework at group
level, to ensure an efficient functioning, an increased
collaboration and a quick
reporting
within the group, all with strict compliance with the
unbundling rules;
functional
The Board considers that progress has been made
in establishing the company’s mission, vision and
strategic directions, but it is necessary to continue
and materialize the efforts to achieve the medium-
term objectives, taking into consideration market
opportunities and challenges;
The Board identified a considerable improvement in
the company’s activity on the correct identification
of the main risks and on the implementation of
efficient mechanisms for their mitigation. However,
it is necessary to permanently monitor the potential
risks and refine the management mechanisms by
continuously adapting them to the new market and
regulatory conditions.
The Nomination and Remuneration Committee
The Nomination and Remuneration Committee consists of three
non-executive BoD members, two of them being independent
members, while the chair of the Committee is an independent
director.
The role of the Committee is to propose candidates for the BoD,
to develop and propose to the Board the selection procedure
of candidates for the executive managers’ positions and other
management positions, to recommend to the Board candidates
for the positions listed, to formulate proposals on the managers’
remuneration and other management positions.
The Committee has the
concerning nomination matters:
following responsibilities
Recommending 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 advising 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
dismissal of the CEO, making recommendations on
the appointment and dismissal of the Company’s
executive management team after considering
the views of the CEO, and making proposals on
the appointment and dismissal of subsidiary board
members in accordance with the group governance
Policy;
Recommending the Board policies in the human
resources field, including those covering recruitment
and dismissal, 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;
Periodically assessing
the size, composition and
Committee’s structure and making recommendations to
the Board with regard to any changes;
Advising the Board on continuous skill development
for Board members and executive
programmes
management;
Overseeing the nomination process of the CEOs and
executive managers in the subsidiaries according to the
nomination and remuneration Policy.
The Committee has the following duties regarding
remuneration:
Advising the Board in relation to the remuneration,
incentive and severance compensation policies of the
Company;
Advising the Board on the structure of the remuneration
policy for Board members;
Advising the Board in relation to the remuneration of the
CEO and other executive managers, including the main
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 areas relevant to
the group;
Overseeing the remuneration process of the CEOs and
executive managers in the subsidiaries according to the
Nomination and Remuneration Policy.
The Nomination and Remuneration Committee met 11
times during 2018. The main topics addressed and referred
to the BoD for approval/endorsement, additionally to the
recurrent activities, were the following:
Analysis of the executive managers KPis achievement for
2017 and implementing a new improved system for 2018
- at ELSA and group level;
Drafting, in order to be approved by the BoD, of the
Recruitment and Nomination Policy of candidates for
the executive positions of the companies within Electrica
group, as well as overseeing the recruitment processes of
the general managers of ELSA’s subsidiaries, followed by
recommendations;
Analysis of the remuneration system applied within the
group, at different levels of administration and management,
compared to the market and its trends; setting the guidelines
for further updates in the next period;
Analyze the activity of the executive managers, revising the
executive management team and prospect the market in
order to select the new CEO and the Human Resources
Manager.
ELECTRICA SA
58 | A N N U A L R E P O R T 2 0 1 8
The Audit and Risk Committee:
The Committee is composed of three non-executive BoD
members, two of them being independent members, while
the chair of the committee is an independent director.
The Committee’s composition 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 Committee has the following duties in terms of
financial reporting:
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 the report prepared by the
Head of internal Audit assessing the effectiveness of
the system of internal control across the group.
The Committee has the following responsibilities
concerning risk management matters:
Reviewing regularly the main risks facing the
Company and group, recommending to the Board
adequate policies for risks identification, mapping,
management and mitigation;
Reviewing annually a report from management
assessing the effectiveness of the risk management
system across the group;
Examining the integrity of annual and interim financial
statements or disclosures for ELSA 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 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;
Making recommendations to the Board on the
appointment, 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,
reviewing
adequacy
the
Making
recommendations
the Board on
equity and debt financing, including proposals
for contracting any type of loans and securities
associated with these loans;
to
Making recommendations to the Board regarding
major economic transactions within the authority of
the general Meeting of Shareholders, assessing the
associated risks regarding such transactions.
The Audit and Risk Committee met 13 times
during 2018. The main issues that the work of the
Committee focused on, in addition to recurring
activities, were the following:
The financial statements of ELSA at standalone
and consolidated levels for the financial year of
2017, as well as financial statements of Company’s
subsidiaries for the financial year of 2017; The
financial auditor report and recommendations,
issued during the auditing process; ELSA’s budget
execution, the consolidated budget execution and
the quarterly financial results registered;
The internal audit plan for 2018 and the analysis of its
achievement, as well as the reports submitted by the
internal Audit Department, with the formulation of
recommendations;
Running the selection process and submitting for gMS
approval the prosposal for the appointment of the new
financial auditor of the Company;
Approval of the financing Strategy of the group,
regarding cash pooling and the general financing
framework of the investment activity, and the Treasury
Strategy, including the Strategy for optimizing the
placement of financial investments;
Risk Management policy; analyze the risks management
at group level, based on the reports submitted by the
management, and of the status of implementation of
the corrective measures pertaining to non-compliances
of higher risk identified and on the recommendations
of the Audit & Risk Committee;
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 59
Selecting the new Head of the
internal Audit
Department.
At the same time, the Committee has duties in terms
of corporate governance:
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
functionally to the BoD through the Audit and Risk
Committee and administratively to the CEO.
The Strategy and Corporate Governance
Committee:
The Committee was composed of three non-executive
directors, the chair being a non-executive independent
director.
The Committee has the following duties in terms of
strategy:
Making proposals to the Board on the development
the medium-term strategic plan, making
of
the strategic direction,
recommendations on
priorities and long term objectives of ELSA and its
subsidiaries (the group);
Reviewing management proposals on the group’s
consolidated annual budget, subsidiary annual
budgets, 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, company’s competiveness
and advances in technology;
Periodically reviewing the overall strategic planning
process, including the process for developing a
medium-term strategic plan;
Making
to
the
recommendations
the Board
regarding proposed acquisitions, divestments,
investment projects, joint-ventures, and cooperation
projects, particularly assessing their alignment with
the group’s strategy;
Performing any other activities or assuming
responsibilities regarding strategic matters which
may be delegated from time to time to the
Committee by the Board.
Regarding the tasks of the Committee on
restructuring, they mainly relate 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 decision
regarding the conducting or rationalization of core
businesses;
Regularly reviewing the organisational structure
the Company, and making
and chart of
recommendations to the Board in this regard;
Performing any other activities or responsibilities on
restructuring matters as may be delegated to the
Committee, from time to time, by the Board.
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
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 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 delegations of authorities charrt for
the Company in order to ensure that the delegation
of authorities to management allows for effective
and efficient decision-making process, and making
recommendations to the Board;
Reviewing the Company’s policy for corporate social
responsibility and stakeholder engagement, and making
recommendations to the Board in this regard;
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
prepairing Board papers and presentations.
During 2018, the Committee met 11 times, and the
main topics of the Committee’s work, in addition to
recurring activities, were the following:
Developing and substantion of decisions regarding the
strategy of the different areas of activity of the group,
within a cycle of analyzes and debates initiated in the
„Strategy Day”, finalized by redefining the strategic
directions of group development, vision, mission and
values, subject to approval of the BoD;
Analysis of the opportunity and efficiency of the
investment in different renewable production capacities,
followed by recommendations regarding the conditions
for the implementation of such an approach;
Monitoring the implementation and performance of the
transformation program for the distribution area, aimed
to achieve the ambitious investment plan for 2018, as well
as to increase the reaction capacity and to improve the
performance in the operational activity, by internalizing
the design, procurement and logistics, maintenance,
investment execution, technical service activities and
the dedicated staff from EL SERV, within the distribution
companies;
Reviewing the Hedging Strategy and Market Risk
Management and Credit Policy for EfSA;
Development of a Communication Strategy with
investors, adapted to the Company’s strategic objectives;
Delegation of Authority (DoA) Revision, analyzed in
several stages.
ELECTRICA SA 60 | A N N U A L R E P O R T 2 0 1 8
4.6 elsa’s executive management
in accordance with art. 19 letter A, item 1, paragraphs (f )
and (k) of ELSA’s Articles of Association (approved by the
gMS on 27 April 2017), the BoD appoints and revokes the
CEO, as well as the other executives with mandates and
also approves their empowerments.
The duties of Company’s executive managers (including
those of the CEO) are determinated by the mandate
contracts on which the managers operate within the
Company, an internal regulation for the organization
and functioning of the Company and applicable legal
provisions.
Until 1 November 2018, Mr. Dan Catalin Stancu held the
position of CEO of ELSA. He had been appointed starting
with 24 October 2016, with a mandate of four years. in
15 October 2018, the BoD of ELSA and Mr. Dan Catalin
Stancu have reached a mutual agreement regarding the
termination without cause of the CEO mandate agreement.
On the same date, the BoD decided the appointment of
Ms. georgeta Corina Popescu as interim CEO, starting
1 November 2018, for a 1-year period or until the
appointment of a new CEO – whichever occurs first.
During 2018, the BoD decided the revocation of the Chief
iT & Telecom Officer, Mr. Dan Crisfalusi (decision taken on
25 July 2018), and of the Executive Manager of Human
Resources Division, Ms. Dana Alexandra Dragan (decision
taken on 18 September 2018).
On 23 January 2019, the BoD appointed Ms. georgeta
Corina Popescu as CEO, starting 1 february 2019, for a four
years period.
On 23 Januar y 2019, the BoD appointed Ms.
Bibiana Constantin as Human Resources Director,
star ting 1 february 2019, for a period of four years.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 61
Following this changes, at the end of the year 2018 and at the date of this report, ELSA’s executive managers,
each appointed for a period of four years were:
No.
Name
Function
Starting date of the Executive
Manager’s mandate
1.
2.
3.
4.
5.
6.
7
georgeta Corina Popescu
Mihai Darie
Chief Executive Officer
Chief financial Officer
Alexandra Romana Augusta Popescu
Borislavschi
Chief Corporate governance &
M&A Officer
Livioara Sujdea
Anamaria Dana Acristini-georgescu
Chief Distribution Officer
Chief Strategy & Performance
Management Officer
1 february 2019 17
3 January 2018
4 August 2015
1 february 2017
1 May 2017
Catalina Popa
Bibiana Constantin
Chief Sales Executive Officer
12 December 2017
Human Resources Director
1 february 2019
More details on the executive managers’ biographies can be found on ELSA’s website in the section investors > Corporate
governance > Executive Management..
17 Ms. Popescu was appointed as interim CEO starting with 1 November 2018
ELECTRICA SA 62 | A N N U A L R E P O R T 2 0 1 8
We present below the most relevant aspects regarding the professional experience of ELSA’s executive
managers:
Name
Professional experience
georgeta Corina
Popescu - Chief
Executive Officer
Ms. georgeta Corina Popescu is a top executive with an impressive experience in the field of
electricity and natural gas. Appointed general Manager of SDMN, part of Electrica group, on
1 June 2018, Corina Popescu also took over from 1 November 2018, the position of interim
CEO of ELSA.
Mihai Darie - Chief
financial Officer
Alexandra Borislavschi
- Chief Corporate
governance & M&A
Officer
Livioara Şujdea - Chief
Distribution Officer
graduate of the faculty of Power Engineering at the Polytechnic University of Bucharest,
Power Engineering Systems department, georgeta Corina Popescu started her professional
career in Sucursala de Distributie si furnizare a Energiei Electrice Bucuresti.
Since 2007, georgeta Corina Popescu has worked in the private sector, holding important
positions in E.ON Romania group and OMV group.
Between December 2015 and february 2017, Corina Popescu held the position of State
Secretary within the Ministry of Energy, during which time she was also a member of the
BoD of ELSA. Starting with 1 May 2017, she was appointed in Transelectrica’s Directorate, and
during the period of June 2017 – April 2018 she was Transelectrica’s Directorate Chairperson.
Mr. Mihai Darie has 19 years of professional experience in finance, acquired in various fields
such as energy, infrastructure, financial advisory, banking, investment funds in executive
as well as management positions accumulated in companies such as Nuclearelectrica SA,
fondul Proprietatea SA, Raiffeisen Bank and BDO Romania.
Mihai Darie has a Bachelor Degree in finance and Banking from the Academy of Economic
Studies Bucharest, he is an expert accountant member of CECCAR, he is a graduate of
Asebuss Bucharest EMBA program and he is an ACCA UK member as well as a CfA charter
holder.
Ms. Alexandra Borislavschi was appointed as Executive Manager of Corporate governance &
M&A Division starting with 1 May 2017.
from August 2015, Alexandra Borislavschi coordinated the Strategy and Corporate
governance Division, as Executive Manager. Ms. Borislavschi joined ELSA’s team in June 2013,
as Deputy Manager of the Economic and Corporate Business Division, and was promoted
Manager of the Corporate finance and governance Division in february 2014.
The most important project managed by her was the initial public offering of 105% of
the share capital, between October 2013 – July 2014, which was successfully completed
through the double listing of Electrica on the Bucharest Stock Exchange and the London
Stock Exchange, being the largest public offering in Romania until now.
Prior to joining our company, Alexandra Borislavschi had been working for BRD-groupe
Societe generale, between 2003 and 2013. She was Retail Manager within BRD’s Victoria
Agency and continued as Credit Analyst for Large Corporate Clients. Starting 2007, she joined
the investment Banking team of BRD-groupe Societe generale through BRD Corporate
finance department, as Project Coordinator.
Alexandra Borislavschi holds a Master’s degree in finance and Management Control from
institut d’Administration des Entreprise, Universite d’Orleans since 2003.
With over 20 years of experience in energy field, Livioara Şujdea started her activity as a
Design Engineer at ELSA, subsequently occupying various top management positions,
including Deputy general Manager and member of the BoD at E.ON Moldova Distribuție,
E.ON gas Distribuție, E.ON Distribuție România, Director of Operation and Maintenance at
Delgaz grid and Deputy general Manager and member of the BoD at E.ON Energie.
Livioara Şujdea graduated the Technical University “gheorghe Asachi” of iaşi – faculty of
Electrical Engineering and Energy, where she also obtained a master’s degree in Business
Management and Commercial Engineering, and she also has an Executive MBA with
specialization in general Management at the University of Sheffield U.K. and a Strategic
Management and Leadership Degree from the Chartered Management institute London,
U.K.
Anamaria Acristini - Chief
Strategy & Performance
Management Officer
Anamaria Acristini has an experience of over 10 years in the field of energy, in particular from
the strategic and financial perspectives; the last position held was that of Strategy Director
within E.ON Romania. Previously, she has held important positions in leading companies,
such as Ernst&young, Mazars and KPMg.
Anamaria Acristini is a graduate of the Bucharest Academy of Economic Studies, has a
master’s degree in international Project Management and holds an Executive MBA from
Sheffield University (U.K.). Moreover, she is a scheme member of the ACCA U.K..
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 63
Name
Professional experience
Catalina Popa - Chief
Sales Executive Officer
With an experience of more than 28 years in the field of electrical power and natural gases,
Catalina Popa has started her activity as an engineer within ELSA. Subsequently, she occupied
several top management positions within E.ON, among which Sales Management Executive
Director, Director of Operations, financial Director and Director of the Management of the
performance of power networks.
Catalina Popa is a graduate of the faculty of Power Engineering of the University Politehnica
of Bucharest, holding as well a diploma in Management & Business Administration from
Codecs-Open University, great Britain.
Bibiana Constantin
– Human Resources
Director
graduate of the faculty of Psychology and Sociology – West University of Timisoara and
of a Master in Human Resources Management and Communication, as well as of a Master
in Psychology, Bibiana Constantin has experience in consultancy and HR management for
various industries, including the energy field.
With more than 10 years of experience in managing company restructuring and executive
search projects, at national and international level, but also with a solid knowledge of the
human resources market, Bibiana has provided, in the recent years, specialized consultancy
and occupied positions in the top management of large companies in the industry.
According to information held by ELSA, there is no
contract, understanding or family relationship between
the executive managers of the Company and another
person who may have contributed to their appointment as
executive managers.
managers mentioned in this chapter have not been
involved, in the last five years, in any litigations or
administrative proceedings related to their activity within
the company and neither to their capacity to fulfil their
work-related duties in the group.
According to available
information, ELSA’s executive
4.7 remuneration of the directors and of the executive managers
The Remuneration Policy for Directors and Executive
Managers was prepared based on the best practice used at
international and national level by companies comparable to
ELSA, as approached after the iPO, and updated taking into
consideration the impact of the fiscal changes introduced
within the Romanian legislation. The Policy was approved
by the general Shareholders Meeting – as regards the
Directors’ remuneration and the remuneration limits for the
executive managers, respectively by the Board of Directors –
as regards the setting of the remuneration and benefits for
each executive position, according to the Nomination and
Remuneration Committee’s recommendation.
According to the Corporate governance Code of ELSA,
the Nomination and Remuneration Committee (NRC)
established within the BoD has the following responsibilities
as regards remuneration:
making recommendations to the Board in relation to the
remuneration, incentive and severance compensation
policies of the Company;
making
recommendations
to
the Board on
the
remuneration framework for Board members;
making recommendations to 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
remuneration of subsidiaries board members and
the general
limits of remuneration for subsidiaries
management;
the Board on
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.
in this context, in 2018, based on the NRC recommendations,
the Board endorsed and submitted for the gMS approval
two proposals on updating the Remuneration Policy of
the members of the BoD, and respectively on revising the
remuneration limits of executive managers, in order to
counterbalance the fiscal changes impact.
The Remuneration Policy for Directors and Executive
Managers is subject to annual review of NRC and describes
the main pillars of remuneration, as well as the terms,
conditions and non-financial benefits approved by the
corporate bodies of ELSA.
The Directors and the Executive Managers are remunerated
for the work performed with a fixed monthly remuneration
and a variable component. The variable component is either
paid according to their involvement in supporting the Board
activity (in case of the Directors) or according to achievement
of the objectives and key performance indicators set in the
mandate agreements of the Executive Managers.
The Remuneration Policy has the following objectives:
To establish clear guidelines and thresholds on
remuneration matters;
To establish the remuneration structure;
To set the correlation matrix between remuneration
levels within the Company.
ELECTRICA SA 64 | A N N U A L R E P O R T 2 0 1 8
The principles governing this policy are:
A. Board of Directors
1.
2.
The remuneration structure is defined separately
for the Board of Directors and the executive
management.
The remuneration structure and thresholds were
set considering national and international best
practices and benchmarks, respectively:
2.1. the remuneration system includes a fixed
and a variable component based on
performance, in line with market practice;
additionally,
include non-financial
benefits;
it also
2.2. the benchmarks were established based
on compensation data
several
international companies of comparable size
in the energy sector, in Romania, but, also,
compared to other industries (e.g. Oil & gas
industry) and other countries in SEE;
from
2.3. most companies’ practice to choose the
range between the median and upper
quartile in order to be attractive on the
competitive market, that is, however, not
positioned to the upper limit;
3.
The variable component is composed of:
3.1. a short term variable remuneration (variable
salary), attributed for the collective and
individual contribution of the executive
managers to the company’s objectives,
determined yearly based on performance
criteria;
3.2. a long term variable compensation – a
package of options of virtual shares –
considered as compensation
for
executives managers with the aim of
promoting added value and contribution
over medium to long term;
tool
3.3. for
the Board members – both
the
international norm and the fact that ELSA is
a listed company on both Bucharest Stock
Exchange and London Stock Exchange,
for Board
provide an attendance
members participating to the BoD and its
committees’ meetings;
fee
4.
5.
6.
The importance of the Company on the energy
market – ELSA is a strategic company in the
energy sector, with potential of becoming a
regional player;
The need to attract and retain in the BoD specialists
and senior managers with broad experience in a
wide range of activities, not only in the energy
sector, nationally and internationally;
The 2017 amendments to the fiscal Romanian
legislation on both staff taxation and social
security contributions and those that entered into
force as of 1 January 2018 have had a significant
negative impact on the net income.
The BoD members’ remuneration has as main pillars a monthly
fixed remuneration and an attendance fee for participating at
meetings, and it is completed by facilities (benefits) necessary
for the mandate fulfilment, as follows::
The fixed monthly remuneration
is differentiated
between the Chair and the Board members, respectively
EUR 3,630 gross for the BoD members and EUR 4,985
gross for the Chair.
The attendance fee to the Board and its committees’
meetings is differentiated as well between the
members and the committees’ Chairs, respectively
EUR 1,200 gross for the Board/committees’ members
and EUR 1,445 gross for the committees’ chairs. The
annual number of meetings to be remunerated is
limited to 12 for BoD and to 6 of each committee.
However, if the BoD composition changes, either as
effect of registering a vacancy of one or more Director
positions, or as effect of applying the cumulative
voting method, the Director appointed as such will
be entitled to receive the remuneration fee for the
Board/committees meetings attended.
Reimbursement of reasonable expenses related to the
execution of the mandate.
A “directors & officers’
insurance policy,
supported by the company, according to market terms.
liability”
Same medical services and/or medical
insurance
package contracted by the Company for the employees
(if any).
Other legal expenses sustained by the Director in
defending against a third party claim made against
the Director in relation to the performance of its duties
according to his mandate agreement, the Articles of
Association, the Board Charter or the Legal framework
shall be borne by the Company, to the extent that
they are not already covered by the directors & officers
liability insurance policy in force at the time.
A compensation in case of unjustified revocation.
B. The Executive Management
B.1. General remuneration limits for ELSA CEO
The remuneration of ELSA CEO is comprised of: (a) a fixed
monthly remuneration, (b) a variable yearly remuneration or
remuneration element or variable compensation depending
on the achievement of the performance indicators and (c) a
package of options of virtual shares (hereinafter referred to
as “OAVT”), as follows:
a.
b.
The fixed monthly remuneration is between EUR 9,000
and EUR 13,050 gross. This remuneration is established
by the BoD within the limits approved by the gMS.
The variable yearly compensation is between 30%
and 50% of the fixed yearly remuneration. The
percentage is established by the BoD within the limits
approved by the gMS. The payment of the variable
yearly compensation (partially or in full) depends on
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 65
Each executive manager
(unless mandated on
interim or on a short-term basis) will receive at the
beginning of the term an OAVT package. The value of
the OAVT package will be between 60% and 160% of
the fixed yearly remuneration. The executive manager
is entitled to cash in the value of the OAVT package
only at the end of the term, according to the mandate
agreement.
At the beginning of the mandate of the Executive Manager
(including the CEO), the BoD will set up the long-term KPis
(for the duration of the mandate). At the end of the term, the
Board will review the achievement of the long-term KPis and
will adjust the final value of the OAVT package paid out to
the executive manager, including the CEO.
in order to perform more efficiently his/her duties and
obligations, in a proper and safe manner, the mandate
agreements of the executive managers (including the CEO),
approved by the BoD, stipulate the specific equipments that
the company makes available (e.g.: company car, mobile
phone, laptop), the rules to use it, as well as other kind of
related benefits (e.g.: reimbursement of reasonable expenses
related to the execution of the mandate, a “directors &
officers’ liability” insurance policy).
the achievement of the KPis set for the respective
year.
c.
c.
The value of the OAVT package will be set between
150% and 200% of the fixed yearly remuneration and
cashed only at the end of the term, according to the
mandate agreement
B.2 General remuneration limits for the Executive
Managers (mandated by the BoD)
The remuneration of the executive managers is comprised
of: (a) a fixed monthly remuneration, (b) a variable yearly
compensation depending on the achievement of KPis and
(c) a package of options of virtual shares (hereinafter referred
to as “OAVT”), as follows:
a.
b.
The fixed monthly remuneration will be between
EUR 6,980 and EUR 11,700 gross. This remuneration is
established by the BoD within the limits approved by
the gMS.
The variable yearly compensation of an executive
manager is between 15% and 40% of the fixed
yearly remuneration. The percentage is established
by the BoD within the limits approved by the gMS.
The payment of the variable yearly compensation
(partially or in full) depends on the achievement of
the KPis set for the respective year.
4.8 corporate Governance in elsa’s subsidiaries
The Board of Directors of ELSA’s subsidiaries
During 2018 all the Boards of Directors of ELSA’s subsidiaries were composed of non executive directors. During the year,
the Boards of Directors of ELSA’s subsidiaries were as follows:
Members of the Boards of Directors of distribution companies, respectively SDTN, SDTS and SDMN,
between 1 January and 31 December 2018
1 January – 31 October
2018
Dan Catalin Stancu – chairman
Livioara Sujdea
20 November– 14 December
2018
georgeta Corina Popescu18
Livioara Sujdea
Anamaria Acristini
Ana Maria Nistor
Madalina Rusu
Anamaria Acristini
Ana Maria Nistor
Madalina Rusu
15 December – 31 December
2018
georgeta Corina Popescu
Livioara Sujdea
Ana Maria Nistor
Members of the Board of Directors of Electrica Furnizare SA between
1 January 2018 and 31 December 2018
1 January 2018 – 26 July 2018
30 July 2018 – 31 December 2018
Catalina Popa - chairman
Dan Crisfalusi
Mihai ioanitescu
Diana Moldovan
Alexandra Borislavschi
Catalina Popa - chairman
Mihai Darie
Mihai ioanitescu
Diana Moldovan
Alexandra Borislavschi
18 Ms. Georgeta Corina Popescu was appointed by the BoD as temporary director starting from 20 November 2018.
ELECTRICA SA 66 | A N N U A L R E P O R T 2 0 1 8
in the case of energy services company EL SERV, the Extraordinary general Meeting of Shareholders approved in
January the amendment of the Articles of Associations, provisioning that the Board of Directors is comprises five
non-executive members. Hence, during the year 2018 the composition of the Boards of Directors of EL SERV was
as follows:
Members of the Board of Directors of Electrica Serv SA
between 1 January – 31 December 2018
1 – 8
January
2018
iuliana
Andronache -
chairman
9 – 28
January
2018
Alexandra
Borislavschi
29 January
– 1 December
2018
Alexandra
Borislavschi -
chairman
2 – 13
December
2018
Alexandra
Borislavschi -
chairman
14 – 18
December
2018
Alexandra
Borislavschi -
chairman
Mirela
Dimbean Creta
Mirela
Dimbean Creta
Mirela
Dimbean Creta
Mirela
Dimbean Creta
Mirela
Dimbean Creta
Dragos george
Serban
Dragos george
Serban
Dragos george
Serban
Mihai Darie
Mihai Darie
19 - 31
December
2018
Diana Moldovan -
chairman
Alexandra
Borislavschi
Mirela
Dimbean Creta
Mihai Darie
Mihai ioanitescu
Mihai ioanitescu
Mihai Darie
Mihai ioanitescu
Diana Moldovan
Mihai ioanitescu
Between 31 December 2018 and until the date of this report, the members of the ELSA subsidiaries boards changed as
follows:
Mr. Stefan-Alexandru frangulea was appointed starting from 23 January 2019 as temporary director of SDMN’ s
BoD.
Ms. georgeta Corina Popescu was appointed as director of the three distribution subsidiaries (SDMN, SDTS, SDTN)
starting from 14 february 2019.
Executive management of ELSA’s subsidiaries
The table below shows the subsidiaries’ executive managers with delegated management duties by ELSA Board of
Directors in 2018, as well as until the date of this report:
Name
Position
Subsidiary
Valentin Branescu
1 Jan – 31 May 2018
Georgeta Corina Popescu
1 May – 31 Oct 2018
Valentin Branescu
1 Nov 2018 – date of the report
Valentin Branescu
1 Jun – 31 Oct 2018
Constantin Coman
1 Jan – 31 Aug 2018
Vasile Claudiu Tudose
1 Sep 2018 – date of the report
Gabriel Gheorghe
1 Jan – 31 Aug 2018
Ilie Marin
1 Sep 2018 – date of the report
Marius Raduta Petrescu
1 Jan 2018 – date of the report
Gabriela Dobrescu
24 Sep 2018 – date of the report
Marian Stegarita
22 feb – 31 Aug 2018
Ioana Tabara
1 Sep – 31 Oct 2018
Raluca Florentina Dumitriu
5 Nov 2018 – date of the report
general Manager
Deputy general Manager
Energy Management Division Manager
Network Development Division Manager
SDMN
Network Operations Division Manager
Asset Management Division Manager
Shared Services Division Manager
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 67
Name
Position
Subsidiary
Emil Merdan
1 Jul 2017 – date of the report
Sorin Viorel Muresan
1 feb 2019 – date of the report
Dora Fataceanu
1 Oct 2017 – date of the report
Constantin Buda
1 Oct 2017 – date of the report
Sorin Viorel Muresan
1 Oct 2017 – 31 ian 2019
Vasile Farcas
1 Oct 2017 – date of the report
Gabriel – Adrian Margin
1 Oct 2017 – date of the report
Nicu Constandache
6 feb 2017 – 30 Jun 2018
Eduard Staicu
1 Jul– 27 Aug 2018
Sinan Mustafa
28 Aug 2018 – date of the report
Eduard Staicu
1 Jul 2018 – date of the report
Dorel Mircea Stanescu
1 Apr – 14 Oct 2018
Raul Toma
15 Oct 2018 – date of the report
Alexandru Iulian Gyorgy
1 Apr – 31 Jul 2018
Attila Lajos Simon
1 Aug 2018 – date of the report
Catalin Grama
1 Oct 2017 – 31 Jan 2018
Attila Lajos Simon
1 feb – 29 Jun 2018
Nicu Constandache
1 Jul – 31 Jul 2018
Dragos Eduard Staicu
1 Aug 2018 – date of the report
Florinel Boboc
28 Sep 2017 – date of the report
Monica Radulescu
28 Sep 2017 – date of the report
Mircea Patrascoiu
1 Jan 2018 – date of the report
Darius Mesca
1 feb – 30 Apr 2019
Cristina Pana
1 feb – 30 Apr 2019
Mihai Beu
1 feb – 30 Apr 2019
general Manager
Deputy general Manager
Shared Services Division Manager
Asset Management Division Manager
SDTN
Energy Management Division Manager
Network Operations Division Manager
Network Development Division Manager
general Manager
Deputy general Manager
Energy Management Division Manager
Network Operations Division Manager
SDTS
Asset Management Division Manager
Network Development Division Manager
Shared Services Division Manager
general Manager
Deputy general Manager
financial Manager
Portfolio Management Manager
EFSA
ELECTRICA SA 68 | A N N U A L R E P O R T 2 0 1 8
Name
Position
Subsidiary
Sinan Mustafa
1 Jan – 26 Aug 2018
Gheorghe Batir
27 Aug 2018 – 6 Jan 2019
Ovidiu-Aurelian Andrei
Starting from 7 Jan 2019
Marius Viorel Stanciu
1 Jan 2018 – date of the report
Daniel Marin
1 Jan 2018 – date of the report
Vasile Ionel Bujorel Oprean
1 Jan 2018 – date of the report
Gheorghe Batir
1 Jun 2018 – date of the report
Source Electrica
general Manager
Deputy general Manager
financial Manager
Property Management and Product
Development Manager
Technical Manager
EL SERV
Number of shares owned by the managers of Electrica Group
The table below shows the status as of 31 December 2018 of shares holdings in ELSA (EL) held by the executive managers
of ELSA and by the executive managers of ELSA subsidiaries, to whom ELSA BoD delegated management duties in 2018:
Item no.
Name
Number of shares
Share in the share capital (%)
1
2
Emil Merdan
Dora fataceanu
Source: Central Depository, Electrica
7,277
1,000
0.0021%
0.0003%
According to information held by ELSA, there is no contract, understanding or family relationship between the executive
managers of the company and another person who may have contributed to their appointment as executive managers.
According to available information, the members of the BoD and the executive managers of the group companies
mentioned in this chapter have not been involved, in the last five years, in any litigations or administrative procedures
related to their activity within the group and to their capacity to fulfil their work-related duties within the group.
4.9
statement regarding the corporate governance “comply or explain”
The present Statement reflects the status of compliance with the new BSE Corporate governance Code as of 5 March 2019.
Note: considering the fact that there are no mentions for ”Reason for non-compliance”, the corresponding
column has been removed from the table below.
No.
Provisions of the BSE Corporate Governance
Code
Compliance
YES/NO/
PARTIALLY
Other remarks
Section A - Responsibilities
A.1.
All companies should have an internal regulation
of the Board which includes terms of reference/
responsibilities for the Board and the key
management functions of the company, applying,
among others, the general Principles of this
Section.
yES
ELSA’s CgC was adopted in february 2015
and published on ELSA’s website (includes
the Articles of Association of ELSA, the
Charter of the BoD and of its committees).
All the above mentioned documents
include the terms of reference/the BoD’s
responsibilities, as well as those of the key
management functions of the company.
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 recommendations
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 69
No.
Provisions of the BSE Corporate Governance
Code
Compliance
YES/NO/
PARTIALLY
Other remarks
made in the Board activity evaluation report
of the previous year.
The last version of ELSA’s CgC was published
on ELSA’s website on 27 April 2017, together
with the amendment of ELSA’s Articles of
Association (AoA).
Such provisions are mentioned in ELSA’s
CgC, in the Articles of Association, in the
Code of Ethics and Professional Conduct, as
well as in the revised BoD Charter
ELSA’s BoD comprises seven members since
14 December 2015.
All the members of ELSA’s BoD are non-
executive. According to the AoA, at least
four from the seven members must be
independent. The independence criteria
provided by the AoA are similar and even
more restrictive than the ones provided by
BSE Corporate governance Code.
four out of seven are independent
members. All the independent members
submitted a declaration of independence, at
the time they were elected by the OgMS.
A.2.
A.3.
A.4.
yES
yES
yES
Provisions for the management of conflict
of interest should be included in the Board
regulation.
The Board of Directors should have at least five
members.
The majority of the members of the Board of
Directors should be non-executive. in the case
of Premium Tier Companies not less than two
non-executive members of the Board of Directors
or Supervisory Board should be independent.
Each independent member of the Board of
Directors 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 and according to the following criteria:
A.4.1. he/she is not the CEO/executive officer of the
company or of a company controlled by it and
has not been in such position for the previous
5 years;
A.4.2. he/she is not an employee of the company
or of a company controlled by it and has not
been in such position for the previous five (5)
years;
A.4.3. he/she does not and did not receive additional
remuneration or other advantages from the
company or from a company controlled by
it, apart from those corresponding to the
position of a non-executive director;
A.4.4. he/she is nor or has not been an employee
of, or has not or had not a 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. he/she has not and did not have during the
previous year a business or professional
relationship with the company or with a
company controlled by it, either directly or as
a customer, partner, shareholder, member of
the Board/Director, CEO/executive officer or
employee of a company if, by its substantial
character, this relationship could affect his/her
objectivity;
A.4.6. he/she is not and has not 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 of a company controlled by it;
ELECTRICA SA 70 | A N N U A L R E P O R T 2 0 1 8
No.
Provisions of the BSE Corporate Governance
Code
Compliance
YES/NO/
PARTIALLY
Other remarks
A.4.7. he/she is not a CEO/executive officer in
another company where another CEO/
executive officer of the company is a non-
executive director;
A.4.8. he/she has not been a non-executive
director of the company for more than
twelve years;
A.4.9. he/she does not have family ties with a
person in the cases referred to at points
A.4.1. and A.4.4.
Other relatively permanent professional
commitments and engagements of a Board
member, including executive and non-executive
Board positions in companies and not-for-profit
institutions, should be disclosed to shareholders
and 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
chair or the nomination committee and, if it has,
to 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.
The corporate governance statement should
contain information on the number of meetings
of the Board and committees during the past
year, the attendance by the directors (in person
and in absentia) and a report of the Board and
committees on their activities.
yES
yES
yES
yES
yES
A.5.
A.6.
A.7.
A.8.
A.9.
A.10.
The corporate governance statement should
contain information on the precise number of the
independent members of the Board of Directors.
yES
The professional background of the
proposed candidates, as well as of the
current Board members are published
on ELSA’s website in the investors > gMS
section. Their biographies contain all the
relevant information requested by this
provision of the Code.
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 briefly informed the entire
Board.
The company has established the general
Secretariat Department, which functionally
reports to the BoD.
The A.8 provision was applied starting
from 2015 - the Board has carried out an
annual review process of its activity with the
support of an external consultant (in 2015
and 2017), or by using a self-assessment
questionnaire (in 2016 and 2018).
More details are provided in the Annual
Report for 2015-2017 - chapters 6.1 and 6.2
and for 2018 in this report at chapters 4.4
and 4.5.
Details regarding the compliance with
this provision are presented in the Annual
Report, in the Corporate governance
chapter. for 2018, please see chapter 4.5.
four out of seven members of the BoD are
independent and this is specified in the
Annual Report. More details are provided in
the Annual Report for 2015-2017 - chapters
6.1 and 6.2 and for 2018 in this report at
chapters 4.4 and 4.5.
On ELSA’s website, in the investors >
Corporate governance > Board of Directors
section, it is mentioned which members are
independent.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 71
Compliance
YES/NO/
PARTIALLY
yES
No.
Provisions of the BSE Corporate Governance
Code
A.11.
The Board of Premium Tier companies should
set up a nomination committee consisting
of non-executive members to lead the
nomination of new members to the Board and
make recommendations to the Board on the
appointment and dismissal of the Chief Executive
Officer and the management team. The majority
of the members of the nomination committee
should be independent.
Section B - Risk management and internal control system
B.1.
yES
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 qualification relevant to the
functions and responsibilities of the committee.
At least one 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.
B.2.
The audit committee should be chaired by an
independent non-executive member.
yES
B.3.
Among its responsibilities, the audit committee
should undertake an annual assessment of the
internal control system.
yES
Other remarks
The Articles of Association and ELSA’s CgC
highlight the existence of this committee
(Nomination and Remuneration Committee
- NRC), its structure and responsibilities.
The NRC composition is reviewed annually,
according to NRC Charter and at the
beginning of each new mandate of the
BoD. in 2018, as well as in february 2019,
its composition was reviewed according
to the changes occurred within the board
composition. Details regarding the NRC
members are presented in chapter 4.4.
Two members are independent.
The Articles of Association and ELSA’s CgC
highlight the existence of this committee
(Audit and Risk Committee - ARC), its
structure and responsibilities.
The ARC composition is reviewed annually,
according to ARC Charter and at the
beginning of each new mandate of the BoD.
in 2018, as well as in february 2019, its
composition was reviewed according to
the changes occurred within the board
composition. Details regarding the
ARC composition are presented in the
chapter 4.4. Two members are independent.
During 2018, the Chair of the Audit and
Risk Committee was Mr. Bogdan iliescu,
independent non-executive board member.
Starting from 18 february 2019, the Chair of
the Audit and Risk Committee is Ms. Ramona
Ungur, independent non-executive board
member.
According to the revised Charter, the Audit
and Risk Committee (ARC) has the following
responsabilities with regards to internal
control matters:
(i) regularly reviewing the adequacy and
implementation of key internal control
policies, including policies for detecting
fraud and the 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 department assessing
the effectiveness of the internal control
system across the group.
ELECTRICA SA 72 | A N N U A L R E P O R T 2 0 1 8
No.
B.4.
B.5.
B.6.
Compliance
YES/NO/
PARTIALLY
yES
Provisions of the BSE Corporate Governance
Code
The assessment should consider the effectiveness
and scope of the internal audit function, the
adequacy of risk management and internal control
reports submitted to the audit committee of
the Board, management’s responsiveness and
effectiveness in dealing with identified internal
control deficiencies or weaknesses following the
internal control and the 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
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.
B.9.
Whenever the Code mentions reports or analysis
initiated by the Audit Committee, these should be
followed by periodic (at least annual) or ad-hoc
reports to be submitted to the Board afterwards.
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.
yES
yES
Other remarks
The evaluation report for 2018 provided by
the CgC was prepared and discussed by ARC
in its meeting of 4 March 2019.
The evaluation report for 2018 provided by
the CgC was prepared and discussed by ARC
in its meeting of 4 March 2019.
The ARC has at least the following
responsibilities with regards to risk
management matters:
(i) reviewing regularly the main risks to
which the company and group, are
exposed, recommending to the Board
relevant policies for their identification,
mapping, management and mitigation;
(ii) reviewing annually a report from
management assessing the effectiveness
of the risk management system within
the group.
Based on the new provisions introduced in
the ARC Charter, the evaluation report for
the 2018 year was prepared and discussed
by ARC in its meeting of 4 March 2019.
Details regarding the ARC activity are
presented in the Annual Report 2018 -
chapter 4.5..
The ARC has the following responsibilities
with regards to internal audit 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,
dismissal and remuneration of the Head
of internal Audit department;
(iii) monitoring the adequacy, effectiveness
and independence of the internal audit
function.
Details regarding the ARC activity are
presented in chapter 4.5.
Provisions on this matter are included in
ELSA’s CgC and in the Policy on Transactions
with Affiliated Parties.
ELECTRICA SA
A N N U A L R E P O R T 2 0 1 8 | 73
Compliance
YES/NO/
PARTIALLY
yES
Other remarks
The Audit and Risk Committee and the Board
reviewed the Policy on Transactions with
Related Parties in their meetings of february,
September and December 2018.
yES
yES
yES
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.
The remuneration limits for the general
Manger and other mandate managers
were approved by the general Meeting of
Shareholders (gMS) on 9 July 2015. in March
2016 the gMS approved the new Directors
Remuneration Policy.
Taking into account the tax changes
introduced during 2017, the Board has
analyzed their impact and submitted for
the gMS approval proposals regarding the
revision of the Remuneration Policy for the
BoD members and of the remuneration
limits for the executive managers.
On 9 february 2018 the gMS approved the
Remuneration Policy of the members of the
BoD of the company and the remuneration
limits for the executive managers, both
revised.
The Remuneration Policy for directors and
the executive management is available on
ELSA’s website.
No.
Provisions of the BSE Corporate Governance
Code
B.10.
B.11.
B.12.
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 a
mandatory opinion of the Board’s audit committee
and fairly disclosed to shareholders and potential
investors, to the extent that these transactions fall
within the category of events subject to reporting
requirements.
The internal audits should be carried out by
a separate structural division (internal audit
department) within the company or by hiring an
independent third-party entity.
To ensure the fulfillment of the core functions of
the internal audit department, 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.
Section C - Fair rewards and motivation
C.1.
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.
The remuneration policy should be drafted in such
a way that allows shareholders 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 manager’s contract and their
notice period and the eventual compensation for
revocation without cause.
The remuneration report should present the
implementation of the remuneration policy for
the persons identified in the remuneration policy
during the annual period under review.
Any essential change of the remuneration policy
should be published on the company’s website in
a timely manner.
ELECTRICA SA 74 | A N N U A L R E P O R T 2 0 1 8
No.
Provisions of the BSE Corporate Governance
Code
Compliance
YES/NO/
PARTIALLY
Section D - Building value through investors’ relations
Other remarks
yES
The company has both an investor Relations
department and a dedicated investor
Relation section on its website (both in
Romanian and English). in the investors
section on ELSA’s website are published all
relevant information for investors.
yES
yES
The BoD reviewed the Dividends Policy
in its meeting of 14 february 2018. it is
published also on ELSA’s website, under
investors section > Corporate governance >
Corporate Policies.
The BoD reviewed the forecasts Policy
in its meeting of 14 february 2018. it is
published also on ELSA’s website, under
investors section > Corporate governance >
Corporate Policies.
D.1.
D.2.
D.3.
The company should have an investor Relations
function - indicating the person (s) responsible
or the organizational unit, to the general public.
in addition to information required by legal
provisions, the company should include on its
corporate website a dedicated investor Relations
section, both in Romanian and English, with all
relevant information of interest for investors,
including:
D.1.1. Principal corporate regulations: the articles
of association, general shareholders’ meeting
procedures.
D.1.2. Professional CVs of the members of its
governing bodies, other professional
engagements of the BoD members,
including executive and non-executive
board of directors positions in companies or
non-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 relevant
information upon request;
D.1.7. Corporate presentations (e.g. iR
presentations, quarterly results
presentations, etc.), financial statements
(quarterly, semi- annual, annual), audit
reports and annual reports.
A company should have a policy on the annual
distribution of dividends or other benefits to
shareholders, proposed by the CEO or the
Management Board and adopted by the Board, in
the form of a set of guidelines that the company
intends to follow regarding the distribution of
net profit. The principles of annual distribution
policy to shareholders will be published on the
company’s website.
A company should have adopted a policy with
respect to forecasts, whether they are published 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 upon
a high level of uncertainty, with results sometimes
significantly different from forecasts initially
presented. The policy regarding forecasts should
provide the frequency, envisaged timeframe 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 company’s website..
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 75
No.
D.4.
D.5.
D.6.
D.7.
D.8.
D.9.
D.10.
Provisions of the BSE Corporate Governance
Code
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 the
decision of the general meeting.
Any professional, consultant, expert or financial
analyst may participate in the shareholders’
meeting upon prior invitation from 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.
Compliance
YES/NO/
PARTIALLY
yES
yES
yES
yES
yES
yES
yES
Other remarks
The rules of general meetings of
shareholders are included within each
convening notice, published in accordance
with the legal requirements, approximately
45 days prior to the meeting.
External auditors attend each OgMS for
approving the annual reports.
The annual directors’ report, presented to
the annual general meeting of shareholders,
togethe with the financial statements
includes 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.
in this respect, shareholders’ agreement
present to the general Meetings was
requested each time it was needed.
Electrica holds quarterly teleconferences
with analysts and investors, publishes the
presentations and the audio recording of the
webcasts on ELSA’s website, under investors
section > Results and Reports > Analyst
Presentations.
in 2017, 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
ELSA’s website.
Annually, based on the Corporate Social
Responsibility Policy, the CSR Plan is
approved.
Electrica’s Sustainability Report for 2017,
published in 2018, includes informations
regarding all the projects and activities
sustained during the reporting year.
ELECTRICA SA
76 | A N N U A L R E P O R T 2 0 1 8
4.10 implementing action plans undertaken by signing the
framework agreement with ebrd
The company’s initial Public Offer and dual listing
preparation process
the signing of a
involved
framework Agreement with the European Bank for
Reconstruction and Development
(EBRD) which
includes extensive action plans with implications
for developing a culture of integrity at Electrica
group level, for adopting best practices with regard
to corporate governance and
incorporating the
sustainability principles into the group’s development
strategy.
As for the development of a culture of integrity at
Electrica group level in line with the EBRD standards,
in 2018 the company
implemented the ethics
compliance framework, defined by The Code of Ethics
and Professional Conduct and subsequent policies,
based on a compliance program with three main
priorities:
updating and developing
the compliance
framework;
maintaining functional dedicated organizational
structures for ethics and compliance;
monitoring the compliance.
With mainly a preventive role with respect to the
risks the organization is exposed to, compliance adds
value to each business, but in order to be efficient, the
compliance framework has to adapt to the realities
of the organization and to align permanently with
legislative changes, external environment trends,
business ethics best practice and organizational
transformations of the companies and the group.
Knowing these aspects, ELSA embraced a proactive
attitude updating and developing the compliance
framework in order to better suit to practical aspects
and specificities of the group companies activities.
in this regard, in 2018, the Policy regarding transactions
with Related Parties was reviewed and updated in line
with legal and organizational framework evolution.
After adopting the reviewed policies, ELSA initiated
personnel awareness programs and compliance
their provisions,
regarding
monitoring plans
implemented by
organizational
the
structures dedicated to ethics and compliance at
group’ companies level.
existent
for
capacity of
the operational
the
Regarding
organizational entities dedicated
to ethics and
compliance, after a uniform structure was set in
2017
the electricity distribution companies
within the group by defining ethics and compliance
departments directly subordinated to the company’s
Chief Executive Officer, the structures were populated
in two of the companies. The existent dedicated
organizational structures, existing since 2015, were
maintained during 2018 at EfSA and EL Serv level, but
for two energy services companies within the group
the appointed ethics and compliance officers left
the companies during 2018 following the insolvency
procedures. Within ELSA, in the fourth quarter of
2018, in the context of streamlining the activity, the
organizational structure was modified by removing
the subordinate department to the Chief Executive
Officer and setting up a position of ethics and
compliance officer directly subordinated to the BoD.
The efforts to professionally train the dedicated staff,
but also to increase its cohesion and encourage the
exchange of ideas and solutions, materialized in an
in-house workshop during the second half of 2018
and individual counseling sessions.
implementing ethical and compliance standards and
compliance monitoring process continued during
2018 in all Electrica group companies.
The action plan regarding corporate
governance
The action plan on corporate governance assumed as
part of the framework Agreement with the European
Bank for Reconstruction and Development was taken
into consideration ever since the iPO and the listing of
the company. The standards and measures it envisaged
have been implemented and monitored continuously.
Selecting independent directors
in the articles of
included
EBRD guidelines were
association of electrica adopted on 4 July 2014, and
were in force until the Extraordinary general Meeting of
Shareholders dated 10 November 2015, whose decision
changed the number of members of the BoD of the
company, from five to seven directors, out of which four
independent ones.
for details about ELSA’s Board of Directors, its members
and the selection of its members, please see chapter 4.4.
Nomination and Remuneration Policies
for details regarding the remuneration of the Board
members and of the executive management of ELSA,
please see chapter 4.7.
ELSA developed the nomination and remuneration
policies with the support of a reputable international
consultant
in human resources. These have been
endorsed by the BoD and were approved by decision of
the general Meeting of Shareholders, on 31 March 2016.
Advisory Committees of the Board of Directors
There are three advisory committees at the level of
ELSA’s BoD. for details, please see chapter 4.5.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 77
Internal Control Framework
The BoD approved the internal audit procedure and related
documents updated versions since the beginning of 2015
and on 15 November 2016, the code of ethical conduct of
the internal auditor was approved, meant to set universal
ethic standards, applicable to all its own or contracted
auditors at group level.
internal Audit in Electrica group is governed by The
Audit Charter and Audit Manual of Electrica group, the
last update of these documents have been approved by
the BoD in December 2018. These are available on ELSA’s
website in the section The group > internal Audit.
The annual internal audit plan and any updates are prepared
by the specialized department, reviewed by the Audit and
Risk Committee, approved by BoD decision based on the
committee recommendation and implemented in the
approved version.
for more details about the internal control and internal
audit, please see chapter 4.11.
to
policies was started, in order to align them to reflect
the new organizational structures,
implement
the principles updated in ELSA’s policy and to more
accurately reflect their specific activity. The updating
process didn’t finalize in 2018 and will be completed
in 2019, when an update of the delegation of authority
policy is envisaged for the rest of the group companies
(EL SERV and SEM).
Code of Conduct
EBRD requirements are covered by the code of ethics
and Professional conduct developed with the support
of Transparency international and the Whistleblowing
Policy as part of the Corporate governance Code. The
documents were approved on 2 february 2015 and
published on ELSA’s website in the section The group >
Ethics, Sustainability and Conformity.
in 2018, the Code’s implementation and compliance
monitoring activities were carried on at group level.
included
ELSA’s Articles of Association
EBRD guidelines were
in the Articles of
Association of ELSA adopted on 4 July 2014. During 2017,
the company’s Articles of Association have been updated
by the resolution of the Extraordinary general Meeting of
Shareholders dated 27 April. As a result, the competences for
the approval of the subsidiaries’ global strategy (including
but not limited to their development and restructuring),
as well as the competence for the company’s mandate to
vote in the subsidiaries gMS regarding mergers and spin-
off, is ELSA’ BoD responsibility.
The changes were aimed to transform the approval process,
with respect to the subsidiaries, into a more flexible and
efficient mechanism. in the same time, the changes aimed
to reduce the complexity and the number of the gMSs,
as well as the related costs, both from the company and
shareholders’ perspective. All the versions of the Articles of
Association adopted since the listing of ELSA are available
on the company website in the section The group > About
> Articles of Association.
Clear lines of competence and responsibility
in order to establish duties and competencies, as well as
to clearly define a reporting system within the company,
ELSA performed the mapping of its processes, benefiting
from external advice in this regard. The first of these
projects was completed by defining the procedures
in the company, audited to be certified
applied
according to
iSO 14001/2015
standards. following the external audit conducted by
Dekra Romania, Electrica received the certification for its
integrated management system quality - environment
- HSS.
iSO 9001/2015 and
During 2018, the policy for the delegation of authority
was updated at ELSA and EfSA level. At the level of
the distribution subsidiaries, similar policies have
been approved by their boards in 2017, but in 2018 a
procedure for updating the delegation of authority
Compliance with BSE Governance Code
On 4 January 2016 the New Code of Corporate
governance of the Bucharest Stock Exchange entered
into force and, on this occasion, ELSA published on 8
January 2016 the „Corporate governance Code Apply or
Explain” statement according to the new provision. ELSA
publishes the updated statement yearly and reports
promptly any update to the capital market.
for details, please see chapter 4.9.
Between June - September 2016, ELSA developed
the Market Abuse Procedure, in compliance with the
national and European provisions in this field. it was
adopted in September 2016 and is being implemented
across the entire group.
The environmental and social responsibility
plan
The implementation of the Social and Environmental
Action Plan, annex to the framework Agreement signed
by ELSA with the European Bank for Reconstruction and
Development started by the end of 2014, continuing
during the next years and aiming a high degree of
compliance with the bank standards.
1.1. following the organizational changes that took place
between 2016 and 2018, Electrica group companies
have redefined their
integrated quality-environment-
OHS management systems by reviewing the processes
and the applicable procedural framework. All companies
successfully completed the recertification and supervision
external audits performed by the accredited certification
bodies, maintaining certifications in accordance with iSO
9001: 2015 and iSO 14001: 2015, OHSAS 18001: 2007
Currently, a process of alignment of the integrated quality -
environment - OHS management systems documentation
at distribution operators and ELSA level is ongoing, aiming
to simplify and streamline processes at the group level,
ELECTRICA SA 78 | A N N U A L R E P O R T 2 0 1 8
focusing on the distribution activity and especially on its
development (investment) component.
implementing the energy management
international
standard iSO 50001:2011 is considered after the Electrica
group organizational transformation project finishes.
1.2. for ensuring contractors compliance with the
group OHS standards and procedures, ELSA developed
certain provisions integrated in dedicated conventions
concluded for group companies agreements with works
and services providers and infrastructure users (for
example, telecommunications companies).
1.3. During 2018 the practice of introducing chapters
dedicated to the environmental aspects, occupational
health and safety, according to the requirements, in
the new investment projects, continued at group level.
Main measures were envisaged for the grid crossing the
protected areas and the Natura 2000 sites, according
to the developed digital maps highlighting the priority
areas for risk mitigation.
1.4. As far as Corporate Social Responsibility is concerned, in
2018 ELSA revised and approved grant policies, donations
and sponsorships, the new form of policies being available
on its website.
As in previous years, during 2018 the company carried
the Corporate Social Responsibility Program,
out
materialized by financial support of social causes
through prestigious non-governmental organizations
in Romania, as well as the third edition of the grant
Program „Electrica puts Romania in a different light”,
through which projects with long-term positive social
impact across the country were financed. All information
on donations, sponsorships and grants awarded by ELSA
are available on its website under the CSR section.
At the end of the first half of 2018, ELSA has posted on
its website the group’s Second Sustainability Report, for
2017, developed according to the requirements of the
global Reporting initiative (gRi) standards.
involves
level and
1.5. Complaints’ management within Electrica group
in force at
is based on conventional procedures
each company
internal Audit
department and Legal & Control department/division
for investigations and analysis, as well as experts from
other departments, if the situation requires. for 2019,
the development and implementation of an iT tool for
process management, with the subsequent review and
alignment of the companies’ procedures, is considered.
Since April 2015, at Electrica group level is available and
functional a reporting system for ethical misconduct,
irregularities or any violations of the law by professional
alert devices (whistleblowing system). it includes a
hotline, postal addresses (physical and electronic) and
an online platform for taking over reports, accessible
on the websites of all companies within the group. The
integrity alerts takeover and anonymization services
have been outsourced since the launch of the system,
including during 2018.
1.6. identify and assess environmental and social risks by
an independent consultant was part of the Project for
improving and developing the risk management system
inside ELSA according to iSO 31000:2010, launched in
November 2017. The Consultant has defined a dedicated
methodology, analyzing all vulnerabilities in relation to
the environment, communities, occupational health
and safety and to business ethics and has conducted
interviews and evaluation sessions across all of the
group’s companies. At the end of the first half of 2018, the
vulnerability analysis was finalized and in September 2018,
the Project Steering Committee approved the external
consultant’s report on Electrica group environmental and
social risks.
1.7. With regard to the development of a corporate policy
regarding the reorganization/restructuring actions carried
out at the group level, in the context of the implemented
organizational
dedicated
programs were developed. ELSA defined a medium - term
strategy for training and development of employees, the
necessary budget for its implementation being already
anticipated by the Human Resources Department.
transformation
projects,
2.1. RENAR accredited laboratory of iCEMENERg National
Research and Development institute conducted recently a
study on the level of electromagnetic fields in installations
belonging to SDTS (transformer stations and 110 kV aerial
power lines). The study showed no parameters exceeds the
standards admitted in accordance with the legal provisions
in force, in any of the locations for which the evaluation
was conducted. The external consultant involved in the
environmental and social risk assessment at the group
level also found that the aspect has no significant impact.
2.2. Electrica group companies selectively collect and
temporary deposit generated waste according to legal
requirements in force, submitting all reports requested by
the environmental authorities, based on own implemented
waste management procedure. ELSA developed a
framework procedure for implementing an integrated
waste management system at group level, which will
become effective after the organizational transformation
process.
2.3. Electrica group companies have a program to
eliminate asbestos and PCB from their installations,
according to specific national and European legislation
in force, developed on the basis of a risk assessment
of the use of these materials in their own activity. The
program
is monitored semi-annually and annually
through reports, the objective being followed in all the
investment projects initiated.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 79
4.1. 2018 meant, for management of the emergency
and fire protection within ELSA, a series of preventive
measures implemented at the level of all companies,
including: control of compliance with specific rules
by its own authorized personnel; periodic training
for all categories of staff, according to the approved
training programs and themes; performing intervention
and evacuation exercises
in emergency situations;
verification and maintenance of fire protection facilities
and of fire-fighting equipment and devices for each
location, with authorized companies; free access to
evacuation routes; measures for prevention of fires in
the hot and the cold seasons.
2.4. Accidental leakage of insulating oil from transformers
from the stations of distribution subsidiaries within
Electrica group are monitored and recorded in Registers
of faults. for a number of locations (repair shops,
warehouses) of EL SERV, soil and water analysis were
conducted, according to the requirements imposed
by environmental permits. During 2018, there were
no significant impact environment incident and no
decontamination of soil and groundwater was required.
3.1. Reducing noise pollution in residential areas and
associated health risks is accomplished by including
specific provisions in contracts for works and services,
where applicable. for 2018 no significant impact on
noise pollution and no complaints or notices related to
noise pollution have been reported.
4.11 internal audit report for 2018
The Annual Audit plan prepared for 2018, endorsed by
the Audit & Risk Committee and approved by the Board
of Director, included assurance missions - the type of
audit being a regulatory audit, but also ad-hoc missions,
at the request of the Audit & Risk Committee. During the
year a number of seven missions were performed on the
following audit areas: acquisitions, patrimony, SMi & HSS,
financial - accounting, technical, legal. This plan was taken
from 2016-2018 strategic plan, drafted based on a detailed
risk analysis. The audit team consisted of five internal
auditors on 1 January 2018 and reached three internal
auditors on 31 December 2018, of which one person with
management function.
The internal audit missions carried out in 2018 had
the following specific subjects:
5. The assessment of receivables collection activity
within EfSA, followed by the elaboration of a single
internal audit report which included a number of
four recommendations with high impact;
6. The assessment of measurement, recording and
purchase of electrical energy for network losses - NL
for Distribution Companies within the group (SDMN,
SDTN, SDTS), with three internal audit reports which
included a number of 24 recommendations with a
high impact;
7. The assessment of legal department activity at ELSA
and EfSA level, with two internal audit reports that
included a number of one recommendation with
high impact.
The internal audit reports, that were based on the mission
mandate approved by the chairman of the Audit and Risk
Committee, were endorsed by the management of the
audited entities, endorsed by the Audit Committee of
ELSA, and the implementation of the recommendations
has been and is continuously monitored through their
tracking sheets. following the completion of the audit
missions and the acceptance of the recommendations by
those concerned, the audited structures prepare their own
action plans in order to comply with the recommendations.
1. The assessment of the direct purchases over
EUR 3,000 made at the level of the companies in the
Electrica group (SDMN, SDTN, SDTS, EL SERV, EfSA),
a single audit report was issued for this mission
without recommendations with high impact;
2. The assessment of the activity regarding the
inventory of the assets of the companies belonging
to the Electrica group (ELSA, EfSA, EL SERV SDMN,
SDTN, SDTS), with six internal audit reports, which
included a number of six recommendations with a
high impact at group level;
3. The assessment of the SMi & HSS activity for the
distribution companies within the group (SDMN,
SDTN, SDTS), with three internal audit reports, which
included a number of three recommendations with
a high impact at group level;
4. The assessment of the activity regarding the
forecasting, elaboration and execution of revenues
and expenses budget within ELSA, with only
one internal audit report, without high impact
recommendations;
ELECTRICA SA 80 | A N N U A L R E P O R T 2 0 1 8
5
OPERATiNg
ACTiViT y
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 81
5.1 operating segments
The operations of each reportable segment are summarized below.
Segments
Electricity and gas supply
Operations
Purchasing and supplying electricity and gas to end consumers (EfSA,
including the trading and representation activity on the Balancing Market as
Balance Responsible Party – BRP)
Electricity distribution
Electricity distribution service (includes SDTN, SDTS, SDMN, EL SERV)
External electricity network services Repairs, maintenance and other services for electricity networks owned by
Headquarters
Source: Electrica
other distributors (include SEO and SEM)
includes corporate services at parent level
The figure below shows the areas covered by the group subsidiaries and the number of customers/users they serve
Figure 27: The geographical coverage of the companies in the Electrica Group
Societatea de
Distributie a Energiei
Electrice Transilvania
Nord (SDTN)
1.28 mn users
Societatea de Distributie
a Energiei Electrice
Muntenia Nord (SDMN)
1.17 mn users
Societatea de Distributie
a Energiei Electrice
Transilvania Sud (SDTS)
1.33 mn users
Electrica Furnizare (EF)
3.5 mn customers
Source: Electrica
Note: The figure relates to
the number of company’s
customers/users on
31 December 2018.
DISTRIBUTION SEGMENT
Electrica group’s distribution segment refers to the activity of
its subsidiaries SDMN, SDTN, SDTS and EL SERV.
The electricity distribution segment is a regulated area of
activity in which operations are conducted in a geographically
limited area in accordance with the concession agreement,
the nature of the services provided and the specific obligations
are stipulated in the license conditions of the concessionary
operators. Thus, Electrica group, through its subsidiaries, is
the electricity distribution operator in Transilvania Nord (Cluj,
Maramures, Satu Mare, Salaj, Bihor, Bistrita-Nasaud counties),
Transilvania Sud (Brasov, Alba Sibiu, Mures, Harghita and
Covasna counties) and Muntenia Nord regions (Prahova,
Buzau, Dambovita, Braila, galati and Vrancea counties),
operating electrical installation with voltages between 0.4 kV
and 110 kV.
activity, EL SERV provides maintenance, repair and various
services to group companies (car rental, rental of buildings,
etc.) as well as repairs and other related services to third parties.
The specific tariffs applicable to distribution services are
approved by ANRE based on a “tariff basket ceiling’’ mechanism
as established by ANRE Orders no.168/2018 and no.169/2018
(applicable in the 4th regulatory period 2019-2023), amended
and completed by ANRE Order no. 193/2018.
The “tariff basket ceiling” methodology plans to reduce
income fluctuations and avoid significant fluctuations for the
electricity tariffs charged to consumers for the distribution
of electricity. The tariff model is based on the principle of
remuneration (through tariffs) of controllable costs recorded
by the distribution operator, the distributor’s main source
of profit being the rate of return on capital invested in the
distribution activity.
The group has exclusive electricity distribution licenses for
these regions valid for a nine years period with an extension
clause for another 25 years. Within its service for distribution
The tariffs are adjusted on an annual basis considering the
achieved operating performance, the volumes of distributed
electricity, the quantities and the acquisition price of electricity
ELECTRICA SA 82 | A N N U A L R E P O R T 2 0 1 8
to cover the network losses (“NL”), the uncontrollable costs,
the change of revenues from reactive energy compared
to the forecasted ones, depreciation and forecasted capital
expenses, change of forecasted gross profit from other
activities, as well as corrections from previous periods made in
accordance with the methodology.
The current regulatory period (“the 4th regulatory period”)
within which the group operates has started on 1 January 2019
and will end on 31 December 2023. 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 2023. 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 users are cumulated depending on their
corresponding voltage level (i.e. the tariff for medium voltage
also includes the tariff for high voltage, and the tariff for low
voltage includes also the tariff for high and medium voltages).
ANRE sets up the annual regulated income levels required
for each year of the regulatory period, based on projections
submitted by the distribution operators, in line with the
methodology requirements, at the beginning of the
regulatory period.
Starting 1 January 2019, the electricity distribution tariffs approved by ANRE are as follows (RON/MWh):
Tariff
(RON/
MWh)
SDMN
SDTN
SDTS
ANRE Order no.
High
voltage
Medium
voltage
Low
voltage
Applicable between 1 January -28 February 2019
114.18
197/14.12.2018
98.67
198/14.12.2018
100.21
199/14.12.2018
33.08
41.84
39.83
15.21
18.16
20.27
High
voltage
Medium
voltage
ANRE Order
no.
Low
voltage
Applicable between 1 March – 31 December 2019
116.80
24/25.02.2019
100.98
25/25.02.2019
102.56
26/25.02.2019
33.84
42.82
40.77
15.56
18.58
20.75
Source: ANRE
SUPPLY SEGMENT
The Electrica group operates on the supply segment
through its EfSA subsidiary, both on the regulated electricity
market (supplier of last resort in geographical regions where
the group distribution segment operates) as well as on
the competitive market at national level. The group has an
electricity supply license covering Romania’s territory valid
until 2021, with the possibility of extension. Starting with 10
May 2018, the group’s second license for electricity supply,
ELSA’s, ceased according to the ANRE Decision no. 728/2018
– at the request of the operator. in addition, EfSA holds a
license to carry out its gas supply activity, valid until 2022.
The electricity market is divided into the regulated market
(electricity supplied as last resort supplier) and competitive
market. On both markets, electricity may be sold and/or
purchased wholesale or retail.
Regulated market
Liberalization of the electricity market was completed
starting with 1 January 2018. The competition between
traditional suppliers and other new suppliers to the
electricity market has increased in the sense of massive bids
to household customers from the regulated market. in 2018
there was an increase in the number of products offered by
suppliers to end customers and an increase in customers’
choice for bids that combine electricity, gas and/or telecom
services.
Currently, EfSA is obligated “Supplier of Last Resort” for
approximately 3.3 mn customers. Until 28 february 2019,
EfSA has been obligated SoLR only for the areas covered
by the Electrica group distribution operators. Starting with
1 March 2019, EfSA is optional SoLR for the other areas of
Romania.
EfSA incurs supply costs that include mainly costs related
to conclusion of contracts, invoicing, collection and costs
iT&C
related to database management,
infrastructure.
ANRE may supplement the cost of supply with the share
of occasional costs incurred by EfSA as a result of special
situations (for example: re-contracting, modification of
information systems to comply with new regulations, losses
from receivables, etc.).
in the first semester of 2018, household and non-household
customers which benefit from the universal service were
subject to CMC tariffs endorsed by ANRE on the basis of the
justified purchase and supply costs and of on the regulated
profit share. Non-household customers who do not benefit
from the universal service have been invoiced at last resort
tariffs for 100% of their consumption.
Any difference between revenues and costs plus justified
profit realized from the supply activity at CMC tariffs/last
resort tariffs from previous periods is corrected if it is justified
in the next stage of setting the prices applied to last resort
customers.
in the second semester of 2018, household and non-
household customers which benefits from the universal
service were subject to universal service tariffs. Non-
household customers who do not benefit of universal
service were invoiced at tariffs for inactive customers,
respectively non-household customers taken over due to
the fact that they had no electricity supply ensured from any
source at last resort tariffs.
Competitive market
Trading on the wholesale competitive electricity market is
carried out in a transparent, public, centralized and non-
discriminatory manner on market platforms managed
by OPCOM. The prices may be freely negotiated by the
parties on the retail competitive market. The wholesale
market participants can trade electricity based on bilateral
contracts concluded on the markets managed by OPCOM
or on spot markets managed by OPCOM. Starting 19 July
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 83
The balancing market, a component of the wholesale energy
market, is mandatory and each license holder must either
assume or delegate its responsibility for balancing to a BRP. By
transferring the responsibility to a Balance Responsible Party
there is an advantage for the aggregation of the imbalances,
in order to reduce costs on the Balancing Market compared
to when the producer/supplier/distributor would act on its
behalf as a Balance Responsible Party.
.
ENERGY SERVICES SEGMENT
The group’s portfolio also includes the energy services
segment (equipment maintenance, repairs and other
additional services related to the network), performed
almost entirely for the distribution companies outside the
group.
in 2018, the energy services segment consists of SEO and SEM.
2012, the Energy Law does not allow the conclusion of sale
and purchase contracts on the wholesale electricity market
outside of the centralized markets.
BRP Electrica - Balance Responsible Party
The representation activity in the Balancing Market as
Balance Responsible Party (”BRP Electrica”) was performed
by ELSA from 2005 until March 2018 based on electricity
supply license no. 1091/2012. This activity is compliant with
market mechanisms detailed in the Romanian Commercial
Energy Wholesale Code.
Starting with 1 April 2018, the transfer of the representation
activity in the balancing market as Balance Responsible Party
was made from ELSA towards EfSA. The customer portfolio
is diversified, consisting in producers (hydro, thermal, wind,
photovoltaic, biogas, biomass), suppliers and distributors,
providing balancing services for over 24% of the total
consumption in NES.
The distribution companies within the Electrica group have
delegated their responsibilities to BRP EfSA.
5.2 fixed assets
The number of users and volume of installations at 31 December 2018 at the level of the three distribution
subsidiaries (SDTN, SDTS and SDMN) and at group’s overall level are quantified as follows:
Geographical coverage
Number of users, of which:
high voltage (HV)
medium voltage (MV)
low voltage (LV)
Overhead power lines length, out of
which:
high voltage (HV)
medium voltage (MV)
low voltage (LV)
out of which connections
Underground power lines length, out of
which:
110 kV
medium voltage (MV)
low voltage (LV)
out of which connections
Cumulative power of transformers/
power AT
in power stations(HV/MV + MV/MV)
in HV/MV power stations
in MV/MV power stations
Switching stations/Transformer stations
No. of substations, out of which:
HV/MT power stations
MT/MT power stations
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
-
-
pcs
SDTN
34,162
1,275,460
33
4,115
1,271,312
SDMN
28,962
1,328,070
39
4,050
1,323,981
SDTS
34,072
1,172,893
44
2,955
1,169,894
Total
97,196
3,776,423
116
11,120
3,765,187
52,882
59,040
45,622
157,544
2,197
11,863
38,822
18,149
2,146
12,561
44,332
24,080
3,166
10,471
31,985
17,259
7,509
34,896
115,139
59,488
16,504
11,919
11,979
40,402
30
3,935
12,539
7,312
6,161
3,739
3,690
49
2,422
113
92
21
15
3,423
8,481
2,167
41
3,501
8,437
2,675
86
10,859
29,457
12,154
8,710
6,746
21,617
5,716
5,364
352
2,994
212
124
88
4,146
4,068
78
2,682
105
101
4
13,601
13,122
479
8,098
430
317
113
8,971
10,396
9,198
28,565
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The vast majority of the distribution equipment currently in the
assets of the electricity distribution subsidiaries within the Electrica
group, approximately 70% of the total volume, were built during
1960-1990, 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 category accounting for approx. 30% of the total
equipment is represented by new installations, commissioned
after 1990, meeting current requirements. it is notable that the
installations commissioned between 1980 and 1990 (approx.
10%) are gradually exceeding their normal lifetime.
Considering the voltage level, categories of installations, the year
of commissioning and the specific operating conditions, the
installations’ degree of wear and tear can be assessed as follows:
High voltage power lines (110 kV)
Medium voltage power lines
Low voltage power lines
Substations
Transformers
Underground power lines
Overhead power lines
Underground power lines
Overhead power lines
Underground power lines
Overhead power lines
Pole - mounted
Concrete enclosure
Pad - mounted
Underground
Concrete base
SDTN
25%
74%
48%
59%
52%
57%
70%
44%
50%
69%
15%
10%
SDMN
45%
65%
65%
60%
70%
65%
75%
50%
65%
75%
95%
9%
SDTS
50%
75%
65%
60%
75%
68%
60%
50%
75%
20%
85%
12%
Source: Electrica
Investments
The investments at the Electrica group level have been
prioritised considering especially the degree of wear of the
assets of the distribution companies, with a particular focus on
the improvement of the quality of the distribution service, the
safety in operations as well as the increase in efficiency.
installing
The group will continue to modernize and to develop
intelligent
the smart distribution network by
network infrastructure systems, such as SCADA, SAD, energy
measurement systems, etc., in order to improve the operational
efficiency and the energetic efficiency, to reduce the network
losses, to improve the network flexibility, the distribution
service quality, the continuity and reliability of the network.
The implementation of the investment program is compliant
with the group’s Strategy considering the following criteria:
Tracking the inclusion of regulated investments in
the RAB;
Non-regulated investments of the group must
provide an iRR higher than weighted average cost
of capital;
The proposed investment program must follow
the group’s financial strategy of maintaining a solid
capital structure.
Thus, a priority are those categories of capital expenditure
contributing to the development of a profitable and
sustainable distribution activity and to the creation of access
conditions to the electricity distribution network for energy
consumers and producers, in line with market requirements,
especially based on:
Automation of the distribution by integrating of the
installation in SCADA, SAD, DMS etc.;
Modernizing the equipment in transformer stations
and in the medium voltage network;
introducing equipment with reduced technological
and
operating
efficiencies
losses,
higher
environmentally friendly;
Modernizing
the medium and
low voltage
distribution network and connections;
Expanding the modern energy measurement and
transmission of power consumption systems.
At the same time, the group is considering investments in
the upgrade of iT infrastructure and information technology
systems, taking into account both the legal requirements
regarding data protection and the positive effect on the
quality of the provided services..
The following table presents the investment program
approved by ANRE for the distribution subsidiaries within
Electrica group (in real terms 2013):
Commissioning program approved by ANRE for the period 2014 - 2018 (RON mn)
2014
117.0
126.0
113.8
356.8
2015
180.0
184.0
171.3
535.3
2016
219.6
223.2
205.0
647.8
2017
250.0
259.2
252.4
761.6
2018
287.5
288.0
287.1
862.6
Total
1,054.1
1,080.4
1,029.6
3,164.1
SDTS
SDTN
SDMN
Total
Source: ANRE
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Based on iPO proceeds, Electrica group has decided to
increase the volume of investments in the distribution
network in the third regulatory period compared to the
volume approved by ANRE at the end of 2013.
The consolidated investment plan at group level in 2018
was RON 1,010 mn (CAPEX), out of which RON 970 mn
represent the investments planned by the distribution
operators.
in 2018, the companies of the Electrica group made
the following investments compared to the planned
investments:
Subsidiary Electrica
Group (RON mn)
SDTN
SDTS
SDMN
EfSA
EL SERV
ELSA
Total
Source: ANRE
Planned 2018
Achieved
320
335
315
34
2
4
1,010
283
284
311
32
2
1
913
At Electrica group level, in 2018, the CAPEX plan was
achieved at a rate of 90.4%; the achievement rate of
investment for the distribution subsidiaries alone was
90.5% compared to the total plan approved by ELSA’s
Board of Directors.
The structure of investments realized (CAPEX) by the
distribution subsidiaries in 2018 is presented in the table
below (for details of the most important investments see
Appendix 2).
Category of works (RON mn)
Efficiency out of which:
Energy efficiency/NL
Operational efficiency
Quality of distribution service
Other categories
features for independent equipment
Studies and projects for the coming
years
Total
Source: Electrica
Total
310
239
71
500
16
34
18
878
The main investments of the Electrica group were focused
in 2018 on improving the quality of the distribution
service, as well as on increasing the energy and operational
efficiency.
Figure 28: The structure of CAPEX
achievements for distribution operators
within the group, in 2018 (mn RON)
Source: Electrica
Of the total investments planned to be commissioned
in 2018 value of RON 904.7 mn (nominal terms 2018) by
the distribution operators, the investments made and
commissioned sum up to RON 836 mn. Thus, the executed
and commissioned investment programs approved by
ANRE ex-ante for the distribution operators were achieved
in an average percentage of 92.4%.
Electrica Group (RON mn
in nominal terms)
SDTN
SDTS
SDMN
Total
Source: Electrica
Planned
Achieved
%
300.3
299.8
304.6
296.1
246.3
293.6
98.6
82.2
96.4
904.7
836.0
92.4
ELECTRICA SA 86 | A N N U A L R E P O R T 2 0 1 8
As a result of investments made during 2013-2018, the value of the Regulatory Assets Base of the group’s distribution
operators has progressively changed and is as follows:
RAB (RON mn)
SDTN
SDTS
SDMN
Total
Source: Electrica
2013
1,292
1,332
1,434
4,058
2014 19
1,331
1,333
1,486
4,150
2015
1,420
1,377
1,543
4,340
2016
1,519
1,388
1,581
4,488
2017
1,624
1,475
1,679
4,779
201820
1,785
1,625
1,845
5,255
During 2013 – 2018, RAB had an increasing evolution for all the three distribution companies in the group’s portfolio.
5.3 Procurement
The procurement activity is carried out in accordance with
the legal provisions in force, as well as in accordance with
own procedures and regulations, as appropriate, aiming to
cover the needs of goods, services and works, in order to
carry out in good conditions the group’s activities. in some
5.4 sales activity
Electrica group’s revenues are influenced mainly by the
distribution and supply segments. The contribution of the
distribution segment to the total revenues was of 28.6%
in 2018 (2017: 25.7%), while the contribution of the supply
segment was of 70.7% in 2018 (2017: 73.6%).
The group’s distribution operators are natural monopolies in
their respective markets and as such, they hold a dominant
position. in addition, the group’s distribution operators have a
legal monopoly in their relevant regions; hence, other entities
cannot set up a competing electricity distribution business.
The following figure shows the national market share (based
on the quantities of distributed electricity) held by the group’s
subsidiaries in the electricity distribution segment, according
to the most recent ANRE report available.
Regarding the supply segment, although
it holds a strong position on the electricity
supply market, EfSA is facing growing
competition on its market.
The next figure shows Electrica market
shares for the supply activity as at 31
December 2018 (based on the quantities
supplied):
cases, purchases are carried out centralized, by delegating
the purchase’ coordination to a group company, with the
primary goal of reducing costs, optimizing the procurement
and ensuring a unified policy within the group.
Figure 29: Market share of distribution segment in 2017
Figura 30: Regulated Market, 2018
Source: ANRE
Source: ANRE report
(December 2018)
19 In 2018, ANRE communicated the final value of the investments recognised for 2014, due to this reason starting with 2014 the RAB values have been modified
20 The values estimated as of 31 December 2018 may suffer corrections following ANRE’s analysis process.
ELECTRICA SA
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Figure 31: Competitive Market, 2018
The number of consumption locations was 3.54 mn at 31
December 2018, served through a number of 151 sales
points and customer relationship offices. .
Source: ANRE report, November 2018
Figure 32: Volume of electricity
supplied on the retail market
(TWh)
Figure 33: Evolution in number of
costumers (th.)
Source: Electrica
Source: Electrica
ELECTRICA SA
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Figure 34: Customers by electricity supplied volume, 2018
Figure 35: Customers by revenues, 2018
Source: Electrica
Source: Electrica
were registered with CNTEE Transelectrica, out of which 66
are active.
Between January and March 2018, approximately 96
licensed participants delegated their responsibility to BRP
ELSA, as compared with the first quarter of 2017, when
approximately 164 licensed participants were enrolled in
BRP ELSA.
Between April and December 2018, 98
licensed
participants (seven suppliers, six distribution operators and
85 producers) transferred their responsibility to BRP EfSA.
Thus, the customer portfolio increased by 3% compared
to the first quarter of 2018, respectively increased by 12
customers and a number of approximately 252 bilateral
agreements, i.e. exchanges with OPCOM.
Major customers exposure
EfSA does not have a significant exposure to a certain
customer or group of customers that could significantly
influence its activity.
However, certain electricity customers, 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 customers subject to the insolvency law,
can benefit from protection against creditors and, possibly,
against electricity suppliers. Thus, the electricity must be
supplied by EfSA, even if they are in payment default.
BRP Electrica - Balance Responsible Party
Between January – August 2018, 120 Balance Responsible
Parties were registered with Transelectrica S.A., having a
total of 1,030 licensed participants.
Starting with September 2018, according to ANRE Order
no. 31/31 Jan 2018 - the regulation on the functioning
and settlement of the balancing market and the regulation
for calculation and settlement of imbalances of the parties
responsible for balancing, as well as for the modification,
completion and approval of certain provisions in the electricity
sector, each license holder assumes responsibility for
balancing with the TSO (Transport and System Operator).
Thus, by the end of 2018, 360 Responsible Balance Parties
ELECTRICA SA
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5.5 reorganization and disposal of assets
Regarding financially distressed subsidiaries, the process of
reducing their activity was continued.
in 2013, the Company approved the insolvency
procedure starting for three subsidiaries: SE Banat,
SE Dobrogea and SE Moldova;
SE Moldova, SE Dobrogea and SE Banat entered
bankruptcy procedures in January 2016, January
2015 and August 2014 respectively;
During 2018, the liquidator of each company has
organized several tenders with the objective of
selling the company’s assets under the bankruptcy
procedure;
SEO – During the reorganization period (May
2014 – June 2018), the company failed to pay the
amounts due according to the Reorganization Plan,
and as a result in October 2018 the court ordered
the opening of the bankruptcy procedure for SEO;
currently, the assets’ stock count from the company’s
patrimony is carried out and, following the stock
count’s completion, the procedure for the valuation
of all the company’s assets to be continued and, as
5.6 Personnel
a last step, the assets’ valorification following the
creditors’ approval of the sales regulation and of the
assets valorification method;
judicial
SEM – under
reorganization
since
November 2014, with a
reorganization plan
approved by the Creditors’ Assembly in November
2015 and confirmed by the Court in November
2015. The deadline for the implementation of the
reorganization plan was November 2018, when the
company fulfilled its payment schedule. The appeal
in court of a creditor to the amount registered in
the SEM receivables table is the reason why the SEM
reorganization procedure has not yet been closed.
Until 31 December 2018, the following values were
recorded from the sale of the assets of the subsidiaries
that are bankrupt as of 31 December 2018: SE Moldova
– RON 19,452 th., SEO – RON 8,084 th., SE Dobrogea –
RON 3,428 th., SE Banat – RON 8,115 th.
Also, the value of the receivables recovered by the
subsidiaries that are bankrupt as of 31 December 2018 is:
SE Moldova – RON 42 th., SEO – RON 2,171 th., SE Dobrogea
– RON 849 th., SE Banat – RON 810 th..
On 31 December 2018, the group had 7,995 employees.
The table below provides an overview of the employment
in the group, by business segments, at the end of the
specified years.
including technical, economic, social and administrative
personnel.
The table below presents the Group’s employment
by age, as follows:
Electricity distribution
SDMN
SDTN
SDTS
EL SERV
Supply segment
EfSA
Services related to other
DSOs
SE
Headquarter
ELSA
Total
Source: Electrica
2018
2017
2016
6,697
2,166
2,160
2,024
347
872
872
303
303
123
123
7,995
7,144 7,978
1,872
2,263
1,817
2,241
1,720
2,122
518
2,569
945 1,041
1,041
945
524
548
548
155
155
524
142
142
8,792 9,685
The reduction in the number of group employees during
2018 was mainly due to the voluntary leave program, plus
retirements at the age limit, disability and termination
of individual labour agreements due to other causes
(resignation, mutual agreement etc).
Age
18-30
31-40
41-50
51-60
over 60 years old
Total
Source: Electrica
31 December
2018
31 December
2017
4.41%
18.72%
42.21%
32.99%
1.66%
100%
5.51%
19.49%
44.66%
28.81%
1.53%
100%
On 31 December 2018, about 98% of the group’s
employees were members of trade unions and
their employment conditions are governed by the
Collective Labour Agreement, which will expire on
2 April 2020 for ELSA and on 31 December 2019 for
the group’s subsidiaries. The Electrica group faced
four unionised picketing actions (one per each
distribution company and one held at ELSA HQ) but
these did not significantly interfere with the group’s
day to day activity.
On 31 December 2018, about 55% of the group’s
employees represented directly productive personnel
and 45% represented indirectly productive personnel,
the voluntary
in 2018,
leave program with
compensatory payments has been continued at
group level, program valid until the end of the year.
ELECTRICA SA 90 | A N N U A L R E P O R T 2 0 1 8
ELSA and its subsidiaries prepared internal regulations
related to: employment, non-discrimination, labour
safety and health, rights and obligations of the
employer and of the employees, employee complaint
labour discipline, disciplinary
procedures, rules on
procedure, sanctions and disciplinary infringements,
the criteria and procedures for employees professional
evaluation and termination of employment procedure.
level have taken
The training programs carried out at the Electrica
group
into account both the
constant evolution and the improvement of the group
employees’ skills.
The company’s management supports the principle of
development through continuous training and takes an
active part in involving employees in these programs,
thus supporting them to effectively address their
professional challenges.
HEALTH AND SAFETY AT WORK
The companies within Electrica group use in their
daily activity a set of internal norms and regulations
elaborated in accordance with the legal provisions
and OHSAS 18001 requirements, as part of the
integrated Management System Quality – Environment
integrated
– Occupational Health and Safety.
Management System implemented by each of the
companies are certified and supervised by prestigious
accredited
the
certification bodies: SRAC
distribution operators, EfSA and EL SERV) and Dekra
certification for ELSA. During 2018 all the companies
went through external audits performed by the
certification bodies and maintained their certifications.
These integrated management systems certified and
supervised by external audits ensure services are
provided in safety conditions, for customers and users
and for the organization’s own staff.
(for
The status of work accident at Electrica Group
level
During 2018 there were no fatalities in the Electrica
group companies, but six employees of this companies
suffered unfortunately injures as a result of labor
accidents: three occurred at SDTS, two at SDTN and one
at SEO.
causes
complex of
complementary
The
and
contributing factors that led to the occurrence of
these accidents were analyzed at the level of legal
committees for each case and the research files were
submitted to the Territorial Labor inspectorates to
receive the visa, including for the measures to prevent
some similar situations. Only in one of the six registered
work accidents, the electric risk had consequences,
the rest being the result of mechanical risks (knocking,
falling from the same level or falling from a height),
independent in three of the cases of the professional
activities carried out by the employees.
Overall, in 2018, at Electrica group level, there was a
60% decrease in the number of work accidents, as a
result of the executive management efforts to develop
a safety culture under the motto „zero accidents”, under
the close supervision of the Board of Directors. These
efforts will continue in 2019, with an awareness program
on the risks to the health and safety of employees for
the entire Electrica group being defined.
An achievement in 2018 was also the implementation
of the OHS Phone application, for communicating faster
all OHS events across the group companies, facilitating
the increase of the organization’s speed reaction in the
event of an accident at work.
Actions to improve health and safety at work for
the employees
As a result of the transfer of activity among the
companies within the group, by the end of 2018 the
level of risk was re-evaluated for all the workplaces
within the electricity distribution companies and
within EL SERV. These re-evaluations were the basis
for redefining the OHS training topics, the control
procedure and the level of endowment with protection
equipment.
Thus, 2018 marked the beginning of the digitization of
OHS control activity for Electrica group, a Pilot Project
for implementing a dedicated iT tool being launched in
SDMN. its success has demonstrated the opportunity
to extend its implementation to all the distribution
operators and subsequently to the service companies
within the group.
in 2018, 3,167 OHS controls were carried out by own
OHS control staff, to identify non-compliances and
deficiencies that could increase the level of risk for
employees’ health and safety and to
implement
immediate mitigation measures. During the same period,
12 inspections of the Territorial Labor inspectorates,
External Auditors and Emergency inspectorates took
place. These have resulted in guidance and in actions to
identify deficiencies that require immediate measures
or preventive/corrective medium term measures. The
implementation of the resulting action plans is done in
accordance with the set deadlines.
As for employees training, in 2018, over 360,000 hours
of training in health and safety at work, fire protection
and emergency situations were provided within
Electrica group companies, including compulsory
training, additional training following accidents at work
as well as following the organizational changes and the
training courses of the OHS professionals. The training
topics set up by the Electrica group companies were
based on the national legislation and own internal
instructions, focusing on personnel awareness on the
dangers involved by the professional activity. A special
initiative for 2018 was to introduce the Direct Productive
Employeees Training for first Aid in Case of injury
Module, developed by Electrica group collaboration
with the National Emergency Situations Department,
as part of the group OHS Risks and Aspects Awareness
Raising Program, at SDTS level.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 91
at group Level by the OHS Coordination Committee,
established in August 2018, bringing together members
of representative trade union organizations within the
group companies and the group companies executive
management.
companies in 2018, either for recertification of the iMS or
for its supervision.
in 2018, the main concerns for the environment were as
follows:
Reducing the
impact on the environment by
upgrading installations and promoting smart grids;
Withdrawal
of
PCB-impregnated
dielectric
equipment in accordance with legal requirements;
Responsible waste management by safe disposal of
generated waste, including hazardous waste;
Conservation of biodiversity and resources.
for 2018, no accidental pollution occurred and no
exceedance of the limits allowed by the regulations in
force for emissions were recorded. There have been no
complaints or notices regarding environmental issues.
Other Health & Safety at Work aspects during
2018
There were no occupational illnesses within Electrica
group. Prevention and health at work was done by
doctors specialized in occupational medicine through
dedicated service agreements and was monitored
5.7 environmental considerations
in carrying out
its
its activities and
business strategy, the Electrica group promotes practices
harmonized with the environmental protection norms.
implementing
Electricity distribution and supply activities do not require
environmental authorizations, and EL SERV holds all the
necessary environmental authorizations, according to the
legislation in force.
ELSA and its subsidiaries have implemented integrated
Quality-Environment
and
Safety Management Systems, which aim to improve
environmental performance through pollution prevention
and responsible waste management.
- Occupational Health
The assessment of all real and potential, positive and
negative environmental aspects associated with normal
and abnormal or emergency situations at the level of all
group companies in 2018 has made it possible to identify
aspects with significant impact and to develop and
implement measures programs in order to reduce it.
The efficiency and effectiveness of the environmental
management systems implemented by Electrica group
companies has been assessed during the external audits
performed by accredited certification bodies within the
5.8 research and development activities
Electrica group is promoting technological innovation
by participating in research and development financed/
co-financed by European funds, having the possibility to
test new technologies to manage and optimize energy
efficiency. Also,
the operational electrical networks
distribution integrate a high level of distributed generation
sources.
By participating in these research, development and
innovation projects with financing/co-financing grants,
Electrica group 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;
of the requirements of the new data protection
measurement code and encryption modalities;
use the opportunities to develop self-financing
business portfolio of group Companies;
developing new skills through transfer of know-
how;
compliance with the best practices of similar
companies in Europe;
creating new opportunities for future of financing of
group Companies’ projects through EU funds.
Another important endeavour of the Electrica group in
promoting technological innovation is to disseminate the
solutions for updating its electric grid using a smart grid
concept. Communications take place at international
conferences/symposiums where
group
participates or organizes internally to align development
plans with available new technologies.
Electrica
the possibility of identifying criteria to promote
smart grids and smart metering solutions in terms
.
ELECTRICA SA 92 | A N N U A L R E P O R T 2 0 1 8
6
ELECTRiCA
fiNANCiAL
REPORTiNg
2018
The overview of the company’s consolidated financials is in accordance with 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.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 93
6.1 consolidated statement of the financial position
The following table presents the consolidated statement of the financial position (amounts in RON mn):
31 December
2018
31 December
2017
(*restated)
Variation
2018/2017
ASSETS
Non-current assets
intangible assets related to concession agreements
Other intangible assets
Tangible assets, net
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
Assets held for sale
Total current assets
Total assets
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
Total equity
Liabilities
for network construction
Non-current liabilities
financing
agreements
Deferred tax liabilities
Employee benefits
Other liabilities
Long-term bank borrowings
Total non-current liabilities
related
to concession
4,810.3
13.9
601.2
320.0
28.9
1.9
5,776.2
806.3
38.5
665.7
136.5
63.6
2.7
-
16.4
23.2
1,752.9
4,330.9
14.1
701.5
320.0
41.1
1.3
5,408.9
804.4
55.5
562.5
747.0
21.6
3.7
12.6
1.1
-
2,208.4
11.1%
-1.1%
-14.3%
-
-29.7%
41.1%
6.8%
0.2%
-30.7%
18.4%
-81.7%
194.1%
-27.8%
-100.0%
1,353.4%
-
-20.6%
7,529.1
7,617.3
-1.2%
3,459.4
103.0
(75.4)
5.1
108.7
352.1
1,675.5
5,628.4
5,628.4
1.0
183.4
186.9
41.2
320.0
732.5
3,459.4
103.0
(75.4)
5.1
123.8
326.8
1,712.9
5,655.6
5,655.6
-
-
-
-
-12.2%
7.7%
-2.2%
-0.5%
-0.5%
11.1
-91.2%
200.5
165.4
40.4
320.0
737.4
-8.5%
12.9%
2.0%
-
-0.7%
ELECTRICA SA 94 | A N N U A L R E P O R T 2 0 1 8
Current liabilities
financing for network construction related to concession
agreements
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
The non-current assets increased by RON 367.3 mn in
2018, to RON 5,776.2 mn from RON 5,408.9 mn as of
31 December 2017, mainly due to the net effect of the
network investments made by the distribution subsidiaries
(the most relevant values of the investments and assets
commissioned are presented in Annex 2) and several
assets’ disposals that generate a decrease in the tangible
assets.
Current assets
in 2018, the current assets decreased by RON 455.5 mn as
compared to 2017, from RON 2,208.5 mn to RON 1,752.9 mn, this
(mil. RON)
Bank current accounts
Call deposits
Cash in hand
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
Source: Electrica
Deposits, treasury bills and government bonds
The deposits with initial maturity of more than three months
and have an average interest rate (yield) of 2.9%.
The significant variation of these elements from RON 747 mn
31 December
2018
31 December
2017
(*restated)
Variation
2018/2017
32.7
-63.8%
11.9
119.0
742.2
181.1
5.0
78.0
29.1
1.9
247.9
689.4
134.2
7.4
78.9
29.9
3.9
1,168.2
1,224.3
1,900.7
7,529.1
1,961.7
7,617.3
-52.0%
7.7%
34.9%
-31.6%
-1.2%
-2.6%
-50.8%
-4.6%
-3.1%
-1.2%
evolution being the net effect of the decrease in deposits,
treasury certificates and government bonds’ value and the
increase in the cash and cash equivalents. The evolution
of the current assets that generate most of the variation is
presented below.
Cash and cash equivalents
Cash and cash equivalents include cash balances, call
deposits and deposits with maturities of up to three
months that have an insignificant exposure to the fair
value change risk, being used by the group for short-
term commitments’ management. Their value increased
by RON 103.2 mn in 2018 to RON 665.7 mn, from RON
562.5 mn in 2017.
31 December 2018
354.5
311.0
0.2
31 December 2017
330.6
231.8
0.1
665.7
(119.0)
546.8
562.5
(247.9)
314.6
to RON 136.5 mn is the result of using internal financing for
investments. As at 31 December 2018 the group no longer
holds treasury bills and government bonds.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 95
Share capital and share premium
The subscribed share capital in nominal terms consists
of 345,939,929 ordinary shares as of 31 December 2018
(345,939,929 ordinary shares on 31 December 2017) with
a nominal value of RON 10/share. All the shares give equal
rights to the net assets of the Company. 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 and (excepting the 6,890,593 shares repurchased
by the Company in July 2014 with the purpose to stabilize the
share price).
Number of ordinary shares
2018
345,939,929
2017
345,939,929
-
-
345,939,929 345,939,929
Number of shares at
1 January
Shares issued during
the year
Number of shares at 31
December
Source: Electrica
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 with the
Trade Register at the end of the year are recognized as “Pre-
paid capital contributions in kind from shareholders”.
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 in amount
of RON 354.8 mn. in 2015, the amount was used to cover
the cumulated accounting losses according to the general
Meeting of Shareholders decision from 27 April 2015.
in 2018, the Company reclassified the amount of RON 354.8
mn in the statement of financial position, from Share capital
to Retained earnings, by restating each affected element
of the prior periods statement of financial position, the
reclassification having no impact within the Equity line.
Own Shares
Revaluation reserves
The reconciliation between the opening balance and the
closing balance of the revaluation reserve is presented
below (amounts in RON mn):
Balance at 1 January
Reserve from the revaluation of property,
plant and equipment, attributable to the
owners
Related tax
Release of revaluation reserve to retained
earnings corresponding to depreciation
and disposals of property, plant and
equipment
Other effects
Balance at 31 December
Source: Electrica
2018
2017
123.7 104.7
55.9
-
-
(8.8)
(8.9)
(27.9)
(6.2)
-
108.7 123.8
Other reserves
The other reserves include:
Legal reserves are 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 share capital of each company,
according to legal provisions. These reserves are
deductible for income tax purposes and are not
distributable.
Other reserves set up in compliance with the
legislation in force.
RON mn
Balance at 1 January 2016
Set-up of legal reserves
Balance at 31 December 2016
Set-up of legal reserves
Balance at 31 December 2017
Set-up of legal reserves
Balance at 31 December 2018
Source: Electrica
Legal reserves
273.9
28.3
302.2
24.5
326.8
25.3
352.0
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 75.4 mn and the value is unchanged since then.
Non-current liabilities
The non-current liabilities recorded an insignificant decrease,
of RON 4.9 mn, to RON 732.5 mn in 2018, from RON 737.4 mn
in 2017.
Dividends
Dividends for the financial year 2017, with a total gross value
of RON 245.4 mn. were declared based on the individual
annual audited statutory financial statements prepared
in accordance with OMPf no. 2844/2016 for the approval
of the accounting regulations in accordance with ifRS as
adopted by the EU. Dividends for 2017 were approved by
the Ordinary general Meeting of Shareholders dated
27 April 2018 and were paid starting with 22 June 2018. The
gross dividend per share approved by the OgMS was of
RON 0.7237.
Current liabilities
in 2018, the current liabilities decreased by RON 56,1 mn, to
RON 1,168.2 mn, from RON 1,224.3 mn at the end of 2017,
as a result of the changes in the categories listed below
(representing approx. 92% of the total current liabilities).
Overdrafts
The overdrafts decreased significantly in 2018, by RON 128.9 mn,
or 52%, reaching RON 119 mn, from RON 247.9 mn in 2017;
this evolution is correlated with the group’s working capital
financing needs.
ELECTRICA SA
96 | A N N U A L R E P O R T 2 0 1 8
Trade payables
The trade payables increased by 7.7% in 2018, to RON 742.2
mn, from RON 689.4 mn at the end of 2017. The main trade
payables are to electricity suppliers, suppliers of non-current
assets and other suppliers (suppliers of services, materials and
consumables etc.).
Other current liabilities
Other current payables, detailed in the table below, increased
by 34.9% in 2018, compared to 2017.
RON mn
31 December
2018
31 December
2017
VAT payable
Other liabilities to the State
Other liabilities
Total
Source: Electrica
85.3
8.5
87.3
181.1
85.8
21
27.4
134.2
Other liabilities refer mainly to guarantees, various creditors,
connection fee, habitat fee and contribution for cogeneration;
other non-current liabilities refer to guarantees cashed from
customers related to electricity supply.
Provisions
As of 31 December 2018, the provisions refer mainly to::
potential tax charges of the group (including
interest and penalties), of RON 14 mn;
benefits upon the termination of executive
managers’ contracts in the form of the non-
compete clause, of RON 4.9 mn;
work litigations, RON 0.7 mn;
various claims and litigations involving the group
companies, of RON 9.5 mn.
RON mn
Balance at 1 January 2018
Provisions recognized
Provisions used
Provisions reversed
Effect of loss of control over
subsidiaries
Balance on 31 December 2018
Source: Electrica
Provisions
29.9
23.9
(20.4)
(4.0)
(0.3)
29.1
6.2 consolidated statement of profit and loss
The following table presents the consolidated statement of profit or loss of Electrica group, for 2018 and 2017 (amounts in
RON mn):
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
impairment loss on assets held for sale
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
Basic and diluted earnings per share (RON)
Source: Electrica
2018
2017
5,612.8
164.9
(2,718.3)
(378.3)
(841.5)
(671.5)
(86.9)
(423.3)
3.6
25.2
(0.1)
0.5
(426.1)
261
14
(12.3)
1.8
262.7
(32.3)
230.4
230.4
-
230.4
5,603.2
173.5
(2,972.8)
(372.9)
(745.3)
(642.4)
(61.7)
(395.6)
(8.8)
(12.9)
-
32.5
(399.8)
197
20.1
(10.4)
9.7
206.8
(35.2)
171.6
127.7
43.8
171.6
Variation 2018/2017
0.2%
-5%
-8.6%
1.4%
12.9%
4.5%
40.7%
7%
-
-
-
-98.4%
6.6%
32.5%
-30.3%
18.3%
-82%
27.1%
-8.1%
34.3%
80.4%
-
34.3%
0.68
0.38
80.4%
ELECTRICA SA
A N N U A L R E P O R T 2 0 1 8 | 97
KEY FINANCIAL INDICATORS FOR 2018
Î Revenues: RON 5.6 bn, a 0.2% y-o-y increase;
Î EBiTDA:
RON 680.7 mn, a RON 79.3 mn (13.2%) increase compared to the last year;
Î EBiT:
RON 261 mn, a RON 64 mn (32.5%) increase compared to 2017;
Î EBT:
RON 262.7 mn, a RON 55.9 mn (27.1%) increase compared to the last year;
Î Net Profit: RON 230.4 mn, a RON 58.8 mn (34.3%) y-o-y increase.
Revenues and other income
in 2018, Electrica recorded total revenues (including
other income) of RON 5,777.7 mn, with a slight increase
of RON 1 mn, from RON 5,776.7 mn in 2017.
Revenues
Figure 36: Revenue for 2018 and comparative
information (RON mil.)
As of 1 January 2018, the group applied ifRS 15 “Revenue
from contracts with customers”, so that that the revenue
and expenses from Balance Responsible Party activity
(“BRP”) have been eliminated, without affecting the
margin of this activity. if this financial reporting standard
would not have been implemented, the Revenues
and respectively Electricity purchased lines from the
consolidated statement of profit or loss for 2018 would
have been higher by RON 120.9 mn, without any impact
on the margin.
The first part of 2017 has been significantly affected by
the balancing market evolution, when there have been
recorded significant values of imbalances due to the energy
market crisis. The consolidated revenues presented for
2017 include Balance Responsible Party activity revenues
of approx. RON 297.8 mn, since the group decided to
apply ifRS 15 using the modified retrospective method,
without restating the figures of the comparative period.
The revenues increased by RON 9.5 mn, or 0.2%, as a net
effect of the following main factors:
external evolution
the
(outside
electricity sales towards third parties have increased
by RON 185.1 mn, generating a favorable impact on
the consolidated revenue;
the group):
RON 62.8 mn increase of the distribution segment
revenues;
decrease by RON 229.2 mn of the supply segment
revenues.
Other income
in 2018, the other income decreased by RON 8.6 mn, or 5%,
to RON 164.9 mn, from RON 173.5 mn realized in 2017. The
decrease is generated by the fact that in the previous year,
revenues from litigations won regarding old receivables
and, also, revenues from compensations obtained from
contracts termination on the supply segment were
recognized.
Source: Electrica
ELECTRICA SA 98 | A N N U A L R E P O R T 2 0 1 8
Electricity purchased
in 2018, the expense for electricity purchased
at group level decreased by RON 254.5 mn, or
8.6%, to RON 2,718.3 mn, from RON 2,972.8 mn in the
comparative period.
This decrease was mainly because the first part of 2017
was affected by the unfavorable events from the energy
market, which generated significantly higher electricity
prices as compared to 2018.
The table below presents the structure of the electricity
purchased expenses for the indicated periods:
RON mn
Electricity purchased to cover
network losses
Electricity purchased for supply
and balancing
Transmission and system services
related to supply and balancing
activities
2018
605.3
2017
581.4
1,883
2,139.1
230
252.3
Total electricity purchased
2,718.3
2,972.8
Source: Electrica
Green certificates
Electricity suppliers have a legal obligation to acquire/
supply green certificates based on the annual quotas set
by law according to the weight of gross production from
renewable sources. The expenses with green certificates is
a pass-through cost.
Construction costs
in 2018, the network construction costs related to
concession agreements increased by RON 96.1 mn or
12.9%, to RON 841.5 mn, from RON 745.3 mn recorded
in 2017. This increase is attributable to the realized
investments related to the Regulated Asset Base.
Employee benefits
Expenses with employee benefits increased in 2018 by RON
29.1 mn, or 4.5%, reaching an amount of RON 671.5 mn,
from RON 642.4 mn in 2017, mainly due to the changes in
the structure of employee benefits.
Repairs, maintenance and materials
in 2018, the repairs, maintenance and materials expenses
recorded an increase of RON 25.1 mn, or 40.7%, to
RON 86.9 mn, from RON 61.7 mn in the comparative
period, considering the group’s reorganization process of
maintenance, investments and design activities, to support
the investments plan.
Impairment of trade and other receivables
The main factor generating the positive variance of the
impairment adjustments for receivables, in amount of RON
38.1 mn, is the recognition of the partial cash collection
from Oltchim (RON 44.7 mn) by ELSA; the positive effect
was partially reduced by the recognition of other provisions
for customers and sundry debtors.
Change in provisions, net
The provisions recorded a negative variation in 2018 as
compared with the prior year, of RON 32 mn.
in 2018, the net change in provisions generates an income
of RON 0.5 mn, the most significant movement being
related to the provision recorded for potential tax impact
of the changes in the accounting policy in the statutory
financial statements, in amount of RON 11.4 mn, and to the
provision used, related to the fine from the Competition
Council, in amount of RON 10.8 mn.
in 2017, the net change in provisions generated an income
of RON 32.5 mn, the main income being the reversal of the
provision in amount of RON 20.7 mn related to the Court of
Accounts inspection at SDTS, following the closing of the
fiscal inspection Report in 2017.
Other operating expenses
The other operating expenses recorded an increase of RON
26.3 mn, or 6.6%, from RON 399.8 mn in 2017 to RON 426.1
mn in 2018, mainly as a result of the reorganization process
of the maintenance, investment and design activities
mentioned above.
EBITDA and EBITDA margin
Figure 37: EBITDA and EBITDA margin for 2018 and comparative
information (RON mn and %)
Source: Electrica
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 99
Operating profit
Net finance income
The group EBiT increased by approx. RON 64 mn y-o-y,
impact of the
adding to the EBiTDA evolution the
increase
depreciation and amortization expenses, an
of RON 27.7 mn, or 7%, mainly due to a higher level
of investments’ commissioning, and the impact of the
impairment adjustments of property, plant and equipment
(variation of RON 12.4 mn).
Figure 38: EBIT and EBIT margin for 2018 and comparative
information (RON mn and %)
The net financial result at group level decreased by 82%
in 2018 compared to 2017, due to lower finance income,
while the finance costs remained around the same level.
Profit before tax
The profit before tax increased in 2018 by RON 55.9 mn, to
RON 262.7 mn, from RON 206.8 mn in 2017.
Income tax expense
The income tax decreased by RON 2.9 mn, or 8.1%, to
RON 32.3 mn in 2018 from RON 35.2 mn in 2017.
Net profit for the period
As a result of the above described factors, in 2018, the net
profit increased by RON 58.8 mn, to RON 230.4 mn, from
RON 171.6 mn in 2017..
Source: Electrica
SEGMENT REPORTING - DISTRIBUTION
Key indicators - The distribution segment
Figure 39: Distribution segment revenues w/o conso adjustments
(RON mn)
Figure 40: Distribution segment EBITDA w/o conso adjustments
(RON mn)
Source: Electrica
Source: Electrica
ELECTRICA SA 100 | A N N U A L R E P O R T 2 0 1 8
Source: Electrica
Figure 41: Distribution segment net profit (RON mn)
Figure 42: Distribution segment net debt/(cash) (RON mn)
Source: Electrica
The following table presents elements from the reporting
of the statement of profit or loss of the group’s distribution
segment, for the period 2018 - 2017 (amounts in RON mn).
External revenues
2018
2017
1,602.8
1,437.6
inter-segment revenue
1,135.8
1,238.1
Segment revenue
2,738.6
2,675.7
Segment profit (loss) before
tax
103.6
243.2
Net finance (cost)/income
(27.0)
(8.5)
Depreciation, amortization and
impairment, net
EBiTDA
Net profit/(loss) of the
segment
Source: Electrica
(402.6)
(392.1)
533.2
650.4
90.6
205.2
Revenues
in 2018, the revenue from the electricity distribution
segment increased by aprox. RON 62.9 mn, or 2.4%, to RON
2,738.6 mn, from RON 2,675.7 mn in 2017, as a result of the
following factors:
the total distributed quantity slightly decreased as a
result of the high voltage distributed quantity drop
by 22%, partially compensated by the increases
recorded on medium and low voltage by 6.1% and
1.5%, respectively, where the distribution tariffs are
higher, thus generating a positive effect on the total
distribution revenues;
positive
increase;
impact from reactive energy revenue
the recognition of investments into the network
under concession agreements in accordance with
ifRiC 12, which increased in 2018, influenced, also,
favourable the revenues from the distribution
segment.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 101
consolidation adjustments between Electrica Serv and the
distribution subsidiaries.
This decrease was caused especially by the diminished
level of expenses with network maintenance, as a result
of the investments made by the distribution subsidiaries,
and by the capitalization of certain maintenance and repair
expenses.
EBITDA
The increase in electricity acquisition costs to cover
network losses as well as other unfavorable elements, led
to a decrease of RON 117.2 mn or 18% of EBiTDA on the
distribution segment.
Net profit of the segment
The net profit followed a similar trend with EBiTDA,
decreasing by RON 114.6 mn, or 55.9%. The net profit
margin decreased to 3.3% in 2018 from 7.7% in 2017.
Electricity purchased
The cost of electricity purchased to cover network losses
increased by RON 23.9 mn, or 4.1%, reaching RON 605.3
mn in 2018, from RON 581.4 mn in 2017. This evolution is
the net effect of the rise in the average electricity purchase
prices (negative effect of RON 32.8 mn) and of the decrease
in the level of quantity of electricity used to cover the
network losses (positive effect of RON 8.9 mn).
Employee benefits
The expenses with employee benefits increased by RON
11.5 mn or 2.2%, to RON 533.6 mn in 2018, from RON 522.1
mn in 2017, mainly due to the changes in the structure of
the benefits granted to employees.
Repairs, maintenance and materials
Repairs, maintenance and materials significantly decreased,
by RON 118.5 mn, or 59.1%, to RON 82.1 mn in 2018 from
RON 200.5 mn in 2017, values that do not include the
SEGMENT REPORTING – SUPPLY
Key indicators - the supply segment
Figure 43: Revenues - supply segment (RON mn)
Figure 44: EBITDA - supply segment (RON mn)
Source: Electrica
Source: Electrica
Figure 45: Net profit - the supply segment (RON mn)
Figure 46: Net debt/(Cash) - supply segment (RON mn)
Source: Electrica
Source: Electrica
ELECTRICA SA 102 | A N N U A L R E P O R T 2 0 1 8
The following table presents the elements from the reporting of the statement of profit or loss of the group`s supply
segment for 2018 and 2017 (amounts in RON mn):
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
2018
2017
3,966.7
28.7
3,995.5
127.1
4.3
(14.4)
137.2
107.7
4,125.7
99
4,224.7
(1.6)
1.1
(12.7)
9.9
1.2
Revenues
The increase was mainly generated by:
in 2018, cumulated with the
1% increase in the average price, from an average
price of RON 132.71/gC in 2017 to RON 133.99/
gC
in
average regulated quota of gC imposed by ANRE
to electricity suppliers at 0.346 gC/MWh supplied
from 0.320 gC/MWh supplied in 2017 (RON 47 mn
negative variance);
increase
5% lower supplied volumes for which there is an
obligation to purchase gC (RON 20 mn positive
variance);
the regularization impact – positive variance of RON
22 mn, reflected in both revenue and expenses,
therefore with no impact on the margin (the
regularization for 2017 of RON 36 mn with impact in
2018 compared to the RON 14 mn regularization for
2016 with impact in 2017).
Employee benefits
Employee benefits increased by RON 6.1 mn, or 7.8%, from
RON 78.6 mn in 2017, to RON 84.7 mn in 2018.
EBITDA
The above presented factors generated an increase in
EBiTDA of RON 127.3 mn, respectively an increase of the
EBiTDA margin from 0.2% in 2017, up to 3.4% in 2018.
Segment net profit
The net profit followed a trend similar to EBiTDA, increasing
by RON 106.6 mn as compared to 2017.
The revenue from the supply activity decreased by RON
229.2 mn or 5.4% to RON 3,995.5 mn in 2018, from RON
4,224.7 mn in 2017.
The variation of the supply segment is generated by two
elements:
the electricity supply activity, with a positive impact
on the segment revenue, mainly due to the sale
price increase by 6.9%, which covers the impact of
the quantity decrease of 3.4%;
the Balance Responsible Party activity revenues,
whose variation had a negative influence mainly due
to the accounting for BRP activity starting 1 January
2018 in accordance with ifRS 15, by eliminating the
BRP revenues and the corresponding expense.
The value of the green Certificates included in the invoice
to the final consumer, set by ANRE, increased from an
average price of RON 45.93/MWh in 2017 to an average
price of RON 50.84/MWh in 2018.
Electricity purchased
including the
The cost of the electricity purchased for supply and
balancing, the amount
intercompany
transactions, decreased by RON 530.6 mn, or 14%, to RON
3,270.6 mn in 2018, from RON 3,801.2 mn recorded in
2017. The main factor is the reduction in the volatility of
electricity purchase prices; out of this variance, RON 120.9
mn decrease is attributable to the change in the financial
reporting standards.
Green certificates
green certificates’ (gC) cost is recognized in the statement
of profit and loss based on the quantitative quota set by
the regulatory authority and is influenced by the quantity
of the gC that the group has to purchase for the current
year and the purchase price of gC on the centralized
market. The cost with the acquisition of green certificates
is a pass through cost.
in 2018, the cost of gC increased by RON 5.4 mn, or 1.4%,
to RON 378.3 mn, from RON 372.9 mn in the same period
of the prior year.
ELECTRICA SA
A N N U A L R E P O R T 2 0 1 8 | 103
6.3 consolidated cash flow statement
The following table presents the consolidated statement of cash flows of Electrica group, for 2018 and 2017 (amounts in RON mn).:
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortization
(Reversal of impairment)/impairment of property, plant and equipment, net
Loss on disposal of property, plant and equipment
(Reversal of impairment)/impairment of trade and other receivables, net
impairment of assets held for sale
Change in provisions, net
Net finance income
gain on loss of control over subsidiaries in financial distress
income tax expense
Total Adjustments:
Changes in :
Trade receivables
Other receivables
Prepayments
green Certificates
inventories
Trade payables
Other payables
Employee benefits
Deferred revenue
Cash generated from operating activities
interest paid
income tax paid
2018
2017
(restated)
Variation
2018/2017
230.4
171.6
34.3%
38.3
385
(3.6)
13.1
(25.2)
0.1
(0.5)
(1.8)
(0.3)
32.2
667.9
(27.8)
13.4
1
12.6
(42)
39.4
59.2
27
(2.3)
748.5
(3.1)
(49)
32.0
363.6
8.8
4.6
12.9
-
(32.5)
(9.7)
-
35.2
586.4
(196.1)
(28.5)
1.9
(12.6)
1.1
120.7
(16.3)
(14.7)
2.9
444.9
(2.2)
(53.2)
19.7%
5.9%
-
184.8%
-
-
-98.5%
-81.4%
-
-8.2%
13.9%
-85.8%
-
-47.4%
-
-
-67.4%
-
-
-
68.2%
40.9%
-7.9%
Net cash from operating activities
696.4
389.4
78.8%
Cash flows from investing activities
Payments for purchases of tangible assets
Payments for network construction related to concession agreements
Payments for purchases of other intangible assets
Proceeds from sale of property, plant and equipment
Restricted cash
Payments for purchases of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Payments for deposits with maturity of 3 months or longer
Proceeds from deposits with maturity of 3 months or longer
interest received
Net cash effect due to loss of control over subsidiaries
Consideration paid to acquire non-controlling interests
(3.2)
(803.1)
(9.9)
15.6
-
(95.3)
550.1
(654)
802.2
11.7
(1.2)
-
(52.9)
(726.7)
(2.4)
2.6
(185.5)
(543.1)
1,838.2
(995.6)
820.3
20.0
-
(752.0)
-94%
10.5%
312.5%
500%
-
-82.4%
-70.1%
-34.3%
-2.2%
-41.5%
-
-
ELECTRICA SA
104 | A N N U A L R E P O R T 2 0 1 8
Net cash used in investing activities
Cash flows from financing activities
Proceeds from long term bank loans
Dividends paid
Repayment of financing for network construction related to concession
agreements
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 31 December
Source: Electrica
2018
2017
(restated)
Variation
2018/2017
(187.1)
(577.2)
-67.6%
-
(244.7)
(32.4)
192.3
(349.4)
(86.8)
-30%
-62.7%
(277.1)
(243.9)
13.6%
232.2
314.6
546.8
(431.6)
746.2
314.6
-
-57.8%
73.8%
Cash flow
in 2018, the net cash from operating activities was of RON
696.4 mn.
The net profit for the analyzed period was RON 230.4 mn.
The main adjustments were:
i)
ii)
adding the depreciation and amortization of
RON 423.3 mn, the impact of the impairment
adjustments and of the result of disposal of
tangible assets worth RON 9.5 mn, the net change
in the impairment of trade and other receivables
and assets held for sale of RON 25.1 mn, deducting
a net finance result of RON 1.8 mn, net change in
provisions value of RON 0.5 mn, the impact of loss
of control over subsidiaries in financial distress of
RON 0.3 mn, and adding the income tax of RON
32.2 mn;
a variation of trade receivables, other receivables
and prepayments worth RON 13.4 mn, of
inventories value of RON 42 mn, variation of trade
payables and other payables worth RON 98.6 mn,
gC variation of RON 12.6 mn, employee benefits
adjustment of RON 27 mn and the deferred
revenue impact, in value of RON 2.3 mn.
The income tax and interest paid totaled RON 52.1 mn. in
2018.
in 2017, the net cash from operating activities amounted
to RON 389.4 mn.
The profit before tax for the period was RON 171.6 mn. The
main adjustments were:
i)
ii)
adding the depreciation and amortization of
RON 395.6 mn, the impact of the impairment
adjustments and of the result of disposal of
tangible assets worth RON 13.4 mn, the net
change in the impairment of trade and other
receivables of RON 12.9 mn, deducting a net
finance result of RON 9.7 mn, net change in
provisions of RON 32.5 mn, and adding the
income tax of RON 35.2 mn;
the variation of trade receivables, other receivables
and prepayments worth RON 222.7 mn, of the
inventories of RON 1.1 mn, trade payables and
other payables worth RON 104.5 mn; gC variation
of RON 12.6 mn, employee benefits adjustment of
RON 14.7 mn, and the deferred revenue impact,
value of RON 2.9 mn.
The income tax and interest paid totaled RON 55.4 mn
in 2017.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 105
6.4
individual statement of the financial position
financial information selected from company’s separate statement of financial position (amounts in RON mn):
31 December
2018
31 December
2017
Variation (%)
ASSETS
Non-current assets
Property, plant and equipment
intangible assets
investments in subsidiaries
Restricted cash
Loans granted to subsidiaries
Total non-current assets
Current assets
Cash and cash equivalents
Deposits, treasury bills and government bonds
Trade receivables
Other receivables
inventories
Prepayments
Loans granted to subsidiaries – short term
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Treasury shares
Pre-paid capital contributions in kind from shareholders
Revaluation reserves
Legal reserves
Retained earnings
Total equity
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
225.9
0.6
2,180.2
320
968.1
3,694.8
170
101.5
9
17
0.1
-
5.2
302.8
3,997.6
3,459.4
103.1
(75.4)
5.1
11.8
184.2
288.6
3,976.8
1.9
1.9
4
4
0.6
6.6
3.7
18.9
20.8
270.7
0.6
2,183.9
320
246.5
3,021.7
126
747
79.3
54.9
0.2
0.1
-
1,007.5
4,029.2
3,459.4
103.1
(75.4)
5.1
16.3
169.3
246.4
3,924.2
-16.5%
1.4%
-0.2%
0%
292.6%
22.3%
34.9%
-86.4%
-88.6%
-69%
-56.1%
-
-
-69.9%
-0.8%
0%
0%
0%
0%
-27.4%
8.8%
17.1%
1.3%
1.6
1.6
19.5%
19.5%
72.4
12.9
0.8
5.0
12.3
103.4
105
-94.5%
-69%
-23%
32%
-69.8%
-81.8%
-80.2%
3,997.6
4,029.2
-0.8%
ELECTRICA SA 106 | A N N U A L R E P O R T 2 0 1 8
Non-current assets
On 31 December 2018, as compared to 31 December
2017, fixed assets increased by RON 673 mn or 22.3%, to
RON 3,694.8 mn from RON 3,021.7 mn.
Equipment and tangible assets in progress mainly
include the costs related to the implementation of the
AMR system (Automatic Meter Reading) for electricity
measuring and dispatch activity of Electrica group.
On 31 December 2018, the net capitalized amount
regarding the AMR system is RON 135.1 mn (2017:
RON 155.2 mn), out of which a part is recognized as
tangible asset in progress amounting to RON 21.9
mn as at 31 December 2018 (2017: RON 21.9 mn).
During the year 2017, an evaluation of the entire AMR
system was performed by an independent evaluator
in order that the distribution subsidiaries of the
group to take over the AMR system. As a result of the
ANRE’s refusal to approve the transfer of AMR system
from ELSA to distribution subsidiaries, with the
subsequent recognition into RAB, the transfer was not
implemented. in connection with the AMR system, the
company had concluded service agreements with its
distribution subsidiaries. The main services provided
are obtaining data from the real-time measurement
groups with accuracy and increased frequency by the
distribution companies within the Electrica group,
using remote reading systems at the electricity
metering points, owned by the company, located at
consumption points, respectively in Electrica group
distribution subsidiaries’ grid.
As at 31 December 2018, the company recognized a
partial impairment loss for the AMR system equipment
that are proposed to be written off, in the amount of
RON 6.8 mn.
At the end of the year 2018, the buildings and land
include ELSA’s administrative headquarters and related
land, as well as land for which it has obtained ownership
titles and is intended to contribute to the share capital
of its subsidiaries. At 31 December 2018, the building
of the administrative headquarters has a net book value
of RON 20.6 mn (2017: RON 20.9 mn) and the related land
has a net book value of RON 13.1 mn (2017: RON 13.1 mn).
land and the building were revalued by an
The
independent valuer on 31 December 2017, the results
representing a net increase in the revaluation reserve of
RON 18.6 mn and a net impact of RON 1.9 mn in the
statement of profit or loss.
During 2018, ELSA
in
increased
subsidiaries, ELSA and EL SERV, by contributing in kind
to their share capital with the following land:
investments
its
in March 2018, the share capital of the
subsidiary EL SERV was increased by the
contribution in nature with four land with
a total surface area of 31,668.92 sqm. The
accounting value of the four land at the time
of the transfer was of RON 16 mn, while the
value of the contribution is of RON 15 mn,
according to the evaluation reports drawn up
by the appointed evaluator expert;
in December 2018, the share capital of the
subsidiary EL SERV was
increased by the
contribution in nature of two plots with a total
surface of 678.9 sqm. The contribution value is
RON 0.8 mn, according to the evaluation reports
prepared by the evaluator expert, equal to the
carrying amount of the two land at the time of
the transfer.
Trade receivables
As of 31 December 2018, the receivables of the
company decreased by RON 70.3 mn or 88.6%,
to RON 9 mn, from RON 79.3 mn on 31 December
2017, as a result of the adjustments recorded for
the
impairment of receivables at the amount of
expected credit losses (calculated based on historical
loss rates). impairment adjustments mainly refer to
trade receivables from Oltchim amounting to RON
614.1 mn (31 December 2017: RON 658.8 mn), from
Transenergo Com S.A. in the amount of RON 35.7 mn
(31 December 2017: RON 35.9 mn) and from fidelis
Energy in the amount of RON 11.2 mn (31 December
2017: RON 11.2 mn).
On 12 December 2018, the company received the
amount of RON 44.7 mn from Oltchim, representing
amounts distributed to creditors in the insolvency
proceedings. The adjustment of RON 44.7 mn was
reversed as a result of the receivable collection.
Cash, restricted cash and short-term
investments
As of 31 December 2018, the category of cash and
cash equivalents increased by RON 44 mn or 34.9% to
RON 170 mn from RON 126 mn at 31 December 2017
31 December
2018
31 December
2017
Bank current accounts
2.4
3.5
Call deposits
Total cash and cash
equivalents in the
separate statement
of financial position
and in the separate
statement of cash flow
167.6
122.5
170
126
On 31 December 2018, ELSA has collateral deposits with
BRD – groupe Societe generale as collateral for long-
term loans received from BRD by SDTS, SDTN and SDMN.
The value of collateral deposits as 31 December
2018 is RON 320 mn, without any change from the
balance at 31 December 2017. These collateral deposits
are presented in the separate statement of the financial
position as long-term restricted cash.
ELECTRICA SA Deposits, treasury bills and government
bonds (amounts in mn RON)
Deposits with an initial maturity over three months have
an average interest rate of 2.9% compared to 1.3% average
yield in 2017. As at 31 December 2018 the company no
longer holds treasury bills and government bonds.
31
December
2018
31
December
2017
101.5
-
284.2
462.7
101.5
746.9
Deposits with maturity of
more than three months
Treasury bills and government
bonds denominated in RON
with original maturity of more
than three months
Total deposits, treasury
bills and government
bonds
Source: Electrica
Loans granted to subsidiaries (RON mn)
Subsidiaries
SDTN (long term loan granted)
SDMN (long term loan granted)
SDTS (long term loan granted)
EL SERV (long term loan granted)
SEM (short term loan granted)
Total loans granted to
subsidiaries
Source: Electrica
31
December
2018
31
December
2017
359.6
366.6
241.9
-
5.2
94.4
94
49.3
8.9
-
973.3
246.5
The closing balance of the loans with subsidiaries are
related to intragroup loans granted in 2017 and 2018;
of these, in 2018, the company has entered into loan
agreements as
lender with the group’s distribution
subsidiaries, as follows:
intragroup loan agreement concluded
with SDMN in April 2018. The main provisions
are: maximum loan amount of the loan: RON
230 mn; purpose of the loan: financing the
investment program of 2018; interest rate:
2.79% per annum; maturity: 84 months; period
allowed for disbursements: 12 months; full
in
repayment at maturity; reimbursement
advance allowed, but not earlier than the 12
months of the period of use. As of 31 December
2018, loan balance is RON 216.6 mn;
intragroup loan agreement concluded
with SDTN in April 2018. The main provisions
are: maximum loan amount of the loan: RON
160 mn; purpose of the loan: financing the
investment program of 2018; interest rate:
2.79% per annum; maturity: 84 months; period
allowed for disbursements: 12 months; full
repayment at maturity; reimbursement
in
advance allowed, but not earlier than the 12
A N N U A L R E P O R T 2 0 1 8 | 107
months of the period of use. As of 31 December
2018, loan balance is RON 159.6 mn;
intragroup
loan agreement concluded with
SDTS in April 2018. The main provisions are:
loan: RON
loan amount of the
maximum
130 mn; purpose of the loan: financing the
investment program of 2018; interest rate: 2.79%
per annum; maturity: 84 months; period allowed
for disbursements: 12 months; full repayment at
maturity; reimbursement in advance allowed,
but not earlier than the 12 months of the period
of use. As of 31 December 2018, loan balance is
RON 81.9 mn;
in May 2018, the company concluded a loan
agreement with SEM. The main provisions are:
maximum amount of the loan: RON 5.5 mn,
granted in two installments; purpose of the
loan: first installment in the amount of RON
1.5 mn for financing the payment of the last
installment due to the creditors enrolled at
the creditors’ table, second installment in the
amount of RON 4 mn for the financing of the
working capital needs; interest rate: 4.5% per
annum; withdrawal period: 1 to 12 months
from the date of granting, 2 to 24 months
from the date of granting; reimbursement: first
installment – within maximum 12 months from
the date of granting; second installment – at any
time during the term of the loan, but not later
than the final maturity of the entire installment,
i.e. 2 years from the date of signing the loan
agreement. At 31 December 2018, the balance
of the granted loan is of RON 5.2 mn.
in December 2018, following the drawing up of the transfer
price file for 2018 and in accordance with the provisions
of the OMfP no. 442/2016 regarding the amount of the
transactions, the deadlines for drawing up, the content
and the conditions for requesting the transfer price file and
the procedure for adjusting/estimating the transfer prices,
the interest rates for the loans granted to the distribution
subsidiaries, respectively the interest collected during the
year 2018, were adjusted according to the transfer pricing
legislation mentioned above as follows:
interest rate on loans granted in 2017 have been
updated to 2.79%;
interest rate on loans granted in 2018 have been
updated to 4.70%.
Provisions (RON mn)
Balance at 1 January 2018
Provisions made
Provisions used
Provisions reversed
Balance at 31 December 2018
Source: Electrica
Litigations and
other risks
12.3
3.7
(12.3)
-
3.7
ELECTRICA SA 108 | A N N U A L R E P O R T 2 0 1 8
Competition Council
During 2018 there were no changes in the share capital.
On 31 December 2017, the company recognized a
provision of RON 10.8 mn for the fine from the Competition
Council. As the fine received in October 2018 was executed
by NAfA, ELSA has reversed the provision amounting to
RON 10.8 mn and acknowledged the fine as expenses with
damages, fines and penalties.
Provisions
Provisions in the amount of RON 3.7 mn recognized during
the financial year ended at 31 December 2018 refer mainly
to the benefits granted upon the termination of the
executive managers’ contracts as non-compete clauses.
Share Capital
The subscribed share capital in nominal terms consists
of 345,939,929 ordinary shares on 31 December 2018
(345,939,929 ordinary shares on 31 December 2017), with a
nominal value of RON 10/share. Ordinary shares are entitled to
dividends and the right to one vote per share in the general
Meetings of Shareholders of the company, except for the
6,890,593 shares repurchased by the company in July 2014
with the scope to stabilize the share price. All shares confer
equal rights on the net assets of the company, except for the
6,890,593 shares repurchased by the company in July 2014 in
order to stabilize the share price.
The Company recognizes the changes in share capital only
after the approval in the general Meeting of Shareholders and
the registration with the Trade Register.
Dividends
The Company can distribute dividends from the statutory
profit according to the individual audited statutory financial
statements prepared
in accordance with Romanian
accounting regulations.
The dividends distributed by the company in the years
2018 and 2017 (from previous year’s statutory profits) were
in RON mn):
as
2017
251.4
(amounts presented
2018
245.4
follows
Distributed dividends
Source: Electrica
On 27 April 2018, the general Meetings of Shareholders
of the company approved the distribution of dividends
of RON 245.4 mn. The amount of dividends per share
distributed to the company’s shareholders was RON 0.7237
per share (2017: RON 0.7415 per share). in the calculation
of dividends per share, own shares redeemed by the
company (6,890,593 shares) are not considered as shares
in circulation and are deducted from the total number of
ordinary shares issued.
Of the distributed dividends for the year 2017 in the amount
of RON 245.4 mn, RON 244.7 mn was paid, the difference
representing dividends unclaimed by shareholders from
the Depositary.
6.5
individual statement of profit or loss
financial information selected from the company’s separate statement of profit or loss (RON mn):
Indicator
Revenues
Other income
Electricity purchased
Employee benefits
Depreciation and amortization
Reversal of impairment/(impairment) of trade and other receivables, net
Reversal of impairment/(impairment) of property, plant and equipment
impairment of equity interests in subsidiaries
Change in provisions, net
Other operating expenses
Operating loss
finance income
finance expenses
Net finance income
Profit before tax
income tax – benefit/(expense)
Profit for the year
Earnings per share
Basic and diluted earnings per share (RON)
Source: Electrica
31 December
2018
31 December
2017
Var. (%)
16.8
20.3
-
(36.8)
(21.8)
41.2
5.7
(19.5)
8.6
(45.9)
(31.4)
329.4
-
329.4
298
0
298
0.88
481.9
5.5
(469.7)
(25.9)
(23.5)
(15.1)
(1.9)
-
(12.3)
(48.1)
(109.1)
364.8
(0.5)
364.3
255.2
3
258.2
-96.5%
272.5%
-
42.5%
-7.6%
-
-
-
-
-4.7%
-71.2%
-9.7%
-
-9.6%
16.8%
-
15.4%
0.76
15.4%
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 109
Revenues
During the year 2018, ELSA recorded revenues of RON 16.8 mn
compared to RON 481.9 mn in 2017. The variation is mainly
determined by the adoption of the new reporting standard
regarding revenues and the transfer of the BRP activity to
EfSA starting 1 April 2018.
Starting 1 January 2018, the company adopted the new
standard ifRS 15 ” Revenue from Customer Contracts,”
thus eliminating the impact of revenues from balancing
market and related costs without affecting the margin
resulted from the Balance Responsible Par ty (“BRP”)
activity. if this standard had not been implemented,
the “Revenue” and “Electricity purchased” positions in
the separate statement of profit or loss for 2018 would
have been higher by RON 40 mn, without impact on the
margin.
in 2018, the main revenues earned by the company are
represented by revenues from service contracts related to
the AMR system concluded with its distribution subsidiaries
that include data telemetry services, communications and
monitoring of the quality parameters of electricity.
The breakdown structure of the revenues is as follows (amounts in RON mn):
Revenues from services contracts related to the
Automatic Meter Reading System
income from the Balance Responsible Party activity
(fixed and variable rate)
Revenue from supply of electricity on the Balancing
Market
Total
Source: Electrica
2018
14.7
2.1
-
%
87.5%
12.5%
-
2017
1.3
10.6
470
16.8
100%
481.9
%
0.3%
2.2%
97.5%
100%
Other income
During the financial year ended 31 December 2018, ”Other
income” includes mainly the income of RON 19.8 mn obtained
from the transfer of the BRP activity to EfSA, representing
the transfer of the BRP department employees, the existing
customer agreements, as well as the related software, the
market value being determined by an external evaluator.
During the financial year ended 31 December 2017, „Other
operating income” includes mainly rental income and
penalties for deferred payment from customers.
Electricity purchased
During the financial year ended 31 December 2017,
the purchased electricity includes the cost of electricity
purchased for balancing market settlements in the amount
of RON 469.7 mn. During the year 2018, ifRS 15 standard
has been applied, which led to the elimination of balancing
market revenues impact, as well as related costs, without
affecting the margin of Balance Responsible Party (“BRP”)
activity.
Depreciation and amortization of tangible
and intangible assets
The depreciation and amortization expense is of RON
21.8 mn in 2018, compared to RON 23.5 mn in 2017,
decrease as a result of the termination of certain AMR
system equipment depreciation and the lower value of
investments made in 2018.
Employee benefits
in 2018, employee benefits increased by RON 10.9 mn
to RON 36.8 mn from RON 25.9 mn in 2017. The increase
comes
from the compensatory payments provided
through the voluntary leave program, as well as from non-
recurring events, such as the remuneration of executive
management in the event of termination of mandate
contracts.
Impairment of trade receivables and other
receivables
Starting 1 April 2018, ELSA transferred the BRP activity to
EfSA, therefore as at 31 December 2018 there is no trade
receivable recorded from the supply of electricity on the
balancing market.
impairment adjustments for other receivables recognized
in 2018 amount to RON 3.4 mn in respect of interest
receivable from EL SERV subsidiary (RON 1.8 mn) for loans
repaid after maturity and from SDTN (RON 1.6 mn) related
to dividends paid after maturity.
On 12 December 2018, ELSA received the amount of
RON 44.7 mn from Oltchim SA, representing amounts
distributed to creditors as part of in the insolvency
proceedings, therefore the adjustment was reversed as a
result of the collection of the claim. Due to the uncertainties
regarding the recoverability of the amounts owed by this
customer, ELSA has recognized in prior years depreciation
adjustments for the total amount of receivables. The
procedure is ongoing, the company being enrolled at the
creditors’ table.
Starting 1 January 2018, ELSA applied for the first time the
new standard ifRS 9 ”financial instruments”, which results in
early recognition of impairment adjustments of receivables
up to the amount of forecasted credit losses calculated
based on historical loss rates. ELSA adopted ifRS 9 as of
1 January 2018 using the modified retrospective method
with cumulative adjustments in the initial application
recognized on 1 January 2018 in equity, without altering
the figures for prior periods. for the company’s trade
receivables, there are no significant differences between
the initial measurement method according to iAS 39 and
the new valuation categories under ifRS 9.
ELECTRICA SA 110 | A N N U A L R E P O R T 2 0 1 8
Other operating expenses
On 31 December 2018, ELSA recorded expenses of
RON 45.9 mn from other operating activities compared
to RON 48.1 mn at 31 December 2017.
in December 2018, ELSA derecognized the ongoing
investments of RON 12.5 mn related to the investment
projects for the construction of two wind farms in
frumusita and Chirnogeni areas, the costs of the two
projects being recognized as expense with the ceded
assets, while adjustment for impairment of tangible
fixed assets with the same value was reversed.
ELSA was penalized on 4 January 2018 by the
Competition Council by a fine of RON 10.8 mn and in
October 2018 the fine received was executed by NAfA;
the company reversed the provision of RON 10.8 mn
and recognized the amount as “Expenses with fines and
penalties”.
in 2017, the court ordered ELSA to pay the amount of RON
25 mn and late payment penalties amounting to RON
0.8 mn for invoices related to the period 1 April 2007 - 31
March 2008 owed to Termoelectrica S.A.
Operating loss
As a result of the above mentioned factors, ELSA recorded
a loss resulting from the operating activity in amount of
RON 31.4 mn, lower as compared with RON 109.2 mn in
2017.
Finance income
ELSA’s main financial income is provided by the dividends
distributed by its subsidiaries.
During the financial year ended 31 December 2018, ELSA
registered dividend income amounting to RON 301.5 mn
representing dividend income from its subsidiaries (2017:
RON 347.3 mn), structured as follows
SDMN
SDTS
SDTN
EfSA
TOTAL
Source: Electrica
2018
2017
38.1
96.7
80.1
86.6
301.5
68.6
77
78.4
123.4
347.3
Another category of financial
its
subsidiaries is represented by interest income, which
increased to RON 23.2 mn in 2018 compared to RON 0.2
mn in 2017, according to the detail:
income related to
SDMN
SDTN
SDTS
EL SERV
SEM(insolvency proceedings)
TOTAL
Source: Electrica
2018
7.7
9.2
4.3
1.8
0.1
23.2
2017
0.1
0.1
0
-
-
0.2
The average interest rate for treasury bills, government
bonds and deposits with an original maturity of more than
three months increased from 0.78% in 2017 to 1.91% in
2018.
Profit before tax
in 2018, profit before tax increased by RON 42.8 mn or
16.8% to RON 298 mn from RON 255.2 mn in 2017.
Income tax expense
in 2017, ELSA recorded a deferred tax asset of RON 3 mn,
that has been utilized in 2018.
Net Profit for the year
As a result of the factors presented above, the net profit
realized in 2018 recorded an increase of 15.4% compared
to 2017, to RON 298 mn from RON 258.2 mn.
.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 111
6.6
individual cash flow statement
financial information selected from the cash flow statement of the company (RON mn):
Indicator
31 December
2018
31 December
2017
Var. (%)
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortization
(Reversal of impairment)/impairment of property, plant and equipment
impairment of equity interests in subsidiaries
Loss from the disposal of tangible assets
(Reversal of impairment)/impairment of trade and other receivables,
net
Net finance income
Changes in provisions, net
income tax - (benefit)
Changes in:
Trade receivables
Other receivables
Trade payables
Other payables
Employee benefits
Cash generated from/(used in) operating activities
Cash flows from investing activities
Payments for purchases of property, plant and equipment
Payments for purchase of intangible assets
Payments for purchase of additional shares in subsidiaries
Proceeds from the sale of intangible assets
Restricted cash
Payments for purchase of treasury bills and government bonds
Proceeds from maturity of treasury bills and government bonds
Payments for deposits with maturity of 3 months or longer
Proceeds from deposits with maturity of 3 months or longer
Proceeds relating to loans granted to subsidiaries
interest received
Dividends received
Loans granted to related parties
Net cash from investing activities
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Source: Electrica
298
21.4
0.3
(5.7)
19.5
12.6
(41.2)
(329.4)
(8.6)
(0)
(33)
108
10.2
(64.9)
(9.8)
1.8
12.4
(0.2)
(0.3)
-
0.9
-
(95.3)
550.1
(619)
802.2
9.5
18.2
346.5
(736.2)
276.3
258.2
15.4%
22
1.5
1.9
-
-
15.1
(364.3)
12.3
(3)
(56.3)
(53.3)
(3.9)
27.8
0.2
2
(83.6)
(1)
(0.2)
(752)
-
(185.5)
(543.1)
1,838.6
(995.6)
820.3
-
17
302.3
(237.7)
263.1
-2.8%
-78.7%
-398.8%
-
-
-
-9.6%
-
-99.9%
-41.5%
-
-
-
-
-9.9%
-114.8%
-74.9%
59.1%
-100%
-
-100%
-82.4%
-70.1%
-37.8%
-2.2%
-
6.9%
14.6%
209.8%
5%
(244.7)
(244.7)
(251.2)
(251.2)
-2.64%
-2.64%
44
126
170
(71.7)
197.6
126
-
-36.3%
34.9%
ELECTRICA SA 112 | A N N U A L R E P O R T 2 0 1 8
Cash flow
In 2018, the net cash generated from operating activity
amounted to RON 12.9 mn.
The net profit for the analyzed period was RON 298 mn, the
main adjustments being:
(i)
the amortization and depreciation of tangible and
intangible assets in the amount of RON 21.7 mn;
impairment adjustments for tangible assets and the
impact of tangible assets disposal in net amount of
RON 6.9 mn; impairment of trade receivables and
other receivables of RON 41.2 mn; adjustment of
the investments in subsidiaries amounting to
RON 19.5 mn; deduction of a net financial result
of RON 329.4 mn, the adjustment of provisions in
value of RON 8.6 mn;
(ii)
the deduction of a variation of trade receivables
and other receivables of RON 118.2 mn, of trade
and other payable of RON 74.7 mn and a change
in employee benefits of RON 1.8 mn.
The cash flow statement for the investment activity during
the year 2018 increased by 5% compared to 2017, reaching
RON 276.3 mn. The main adjustments are those related to
the net receipts on maturity of treasury certificates and
government bonds amounting to RON 454.8 mn, to net
receipts from deposits with an initial maturity of more than
3 months worth RON 183.2 mn, the dividends received
from its subsidiaries of RON 346.5 mn and the loans granted
to them, amounting to RON 736.2 mn.
Dividends paid during the year 2018 amounted to
RON 244.7 mn.
During the year 2017, the net cash used in operating
activity amounted to RON 83.6 mn.
6.7 risk management
To implement the risk management system, as well as an
internal control/management system at group level, the
following were taken into consideration, as appropriate:
international Standards on Risk Management
Systems (iSO 31000 family);
Best practices and methodologies applied by
listed and non-listed companies;
internal policies and procedures adopted for
this purpose.
in 2018, ELSA continued the process of redesigning
and improving the risk management system according
to the international standard iSO 31000: 2010 ”Risk
Management - Principles and guidelines” provisions,
launched during the 4th quarter of 2017, in order to
adapt to the new market conditions and to integrate it
across the group.
in 2018, the operational
risk management
Thus,
framework model was defined at
the Electrica
group level, the process was redesigned and the risk
management policy and procedure were redefined.
At the each level of company within Electrica group,
The net profit for the analyzed period was RON 258.2 mn,
the main adjustments being:
(i)
the amortization and depreciation of tangible
and intangible assets in the amount of RON
23.5 mn; impairment adjustments for tangible
assets and the impact of tangible assets disposal
in net amount of RON 1.9 mn; adjustments
for impairment of trade receivables and other
receivables, RON 15.1 mn; the deduction of a net
financial result of RON 364.3 mn, the adjustment
of provisions in value of RON 12.3 mn;
(ii)
the deduction of a variation of trade receivables
and other receivables amounting to RON 57.2 mn,
of trade and other payables of RON 28 mn and a
change in employee benefits of RON 2 mn.
The cash flow of the investment activity during the
year 2017 shows a value of RON 263.1 mn. The main
adjustments are those related to payments for purchase
of additional shares in its subsidiaries, amounting to RON
752 mn, restricted cash of RON 185.5 mn, net receipts on
maturity of treasury certificates and government bonds
amounting to RON 1,295.5 mn, the net variation between
the payments and the receipts value related to deposits
with an initial maturity of more than 3 months worth RON
175.3 mn, the dividends received from its subsidiaries in
the amount of RON 302.3 mn and the loans granted to
them, amounting to RON 237.7 mn.
Dividends paid during 2017 amounted to RON 251.2 mn.
workshops were organized, during which the main risks
associated with their specific operational areas were
identified, analyzed and estimated and appropriate
control measures were set up to avoid, reduce or control
the identified risks.
Among the identified risk categories at Electrica group
companies the level, we can mention:
strategic risks
operational risks
market risks
compliance risks
financial risks
social, environmental, health and safety
risks.
identifying, analyzing and estimating
During the first half of the year, a methodology
for
social,
environmental and OHS risks was defined and applied,
starting with the assessment of all the organization’s
vulnerabilities
in relation to the environment, the
communities in which it operates, its own staff and
business ethics.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 113
The Board of Directors of ELSA set the Risk Appetite for
Electrica group in September 2018 and the Policy in the
field in December 2018. By the end of the year, the executive
management adopted the Risk Management Procedure to
be implemented during 2019 by all the group companies,
in line with the development strategy of the group
cash equivalents, bank deposits and treasury bills and
government bonds.
Cash, bank deposits, treasury bills and government bonds
are placed in financial institutions, which are considered to
have low risk of default. The carrying amount of financial
assets represents the maximum credit exposure.
FINANCIAL RISK MANAGEMENT
Trade receivables
The group is exposed to the following risks resulting from
the use of financial instruments: credit risk, liquidity risk and
market risk.
Î 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 group’s receivables from customers, cash and
in
The group’s credit risk in respect of receivables was
concentrated
state-controlled
the past around
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 establishes an allowance for impairment that
represents the amount of expected credit losses, calculated
based on the expected loss rates.
The following table provides information on the credit risk exposure and expected loss rates on trade receivables
at 31 December 2018:
Gross value
31 December 2018
Bad debt
allowance
Net trade
receivables
Credit impaired
Weighted
average rate
of losses
1%
3%
9%
29%
100%
641.9
Neither past due nor impaired
141.5
Past due 1-30 days
28.8
Past due 31-60 days
6.2
Past due 61-90 days
1,013.7
Past due more than 90 days
Total
1,832
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
(4.3)
(4.3)
(2.5)
(1.8)
(1,012.8)
(1,025.7)
637.5
137.2
26.3
4.4
0.9
806.3
No
No
No
No
yes
Comparative information in accordance with IAS 39
An analysis of the trade receivables from the credit risk perspective, and the maturity of the trade receivables as of
31 December 2017, is as follows:
Gross value
Bad debt allowance
31 December 2017
Neither past due nor impaired
Past due 1-90 days
Past due 90-180 days
Past due 180-360 days
Past due 1-2 years
Past due 2-3 years
Past due more than 3 years
Total
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
530.4
274.5
25.3
60.5
34.8
92.6
845.8
1,863.9
Î 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.
(7.5)
(5.9)
(22.3)
(56.4)
(28.9)
(92.6)
(845.8)
(1,059.5)
Net trade
receivables
522.9
268.6
3.0
4.1
5.9
-
-
804.4
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 overdraft
facilities. Also, starting with 2016, some subsidiaries have
signed
improve their
financial position.
loan agreements to
long-term
ELECTRICA SA 114 | A N N U A L R E P O R T 2 0 1 8
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are
presented in RON mn, gross and undiscounted, and include estimated interest accrued.
(RON mn)
Financial liabilities
31 December 2018
Bank overdrafts
financing for network
construction related to
concession agreements
Long term bank borrowings
Trade payables
Total
(RON mn)
Financial liabilities
31 December 2017
Bank overdrafts
financing for network
construction related to
concession agreements
Long term bank borrowings
Trade payables
Total
Carrying
amount
119.0
12.8
Total
119.0
12.9
320.0
742.2
1,194.0
330.2
742.2
1,204.3
Carrying
amount
247.9
43.8
Total
247.9
50.6
Contractual cash flows
less than
1 year
1-2 years
2-5 years more than
5 years
119.0
11.9
-
742.2
873.1
-
1.0
330.2
-
331.2
-
-
-
-
-
-
-
-
-
-
Contractual cash flows
less than
1 year
1-2 years
2-5 years more than
5 years
247.9
33.9
2.6
689.4
973.8
-
15.3
2.6
-
17.8
-
1.4
327.7
-
329.1
-
-
-
-
-
332.8
689.4
1,320.7
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
320.0
689.4
1,301.1
Î 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 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 Company. The functional
currency of the Company is the Romanian Leu (RON).
The currency in which these transactions are primarily
denominated is RON. Certain liabilities are denominated
in foreign currency (EUR). The Company 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 Company
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:
(RON mn)
31 December
2018
EUR
31 December
2018
USD
31 December
2017
EUR
31 December
2017
USD
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: Consolidated financial statements of Electrica Group as of 31 December 2018
0.8
-
(12.8)
(12.0)
0.1
-
-
0.1
0.1
1.2
(43.8)
(42.4)
-
0.1
-
0.1
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 115
The following significant exchange rates have been applied during the year:
EUR/RON
USD/RON
Average rate
Year-end spot rate
2018
4.6535
3.9416
2017
4.5681
4.0525
2018
4.6639
4.0736
2017
4.6597
3.8915
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
Sensitivity analysis
A reasonably possible aprreciation (depreciation) 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. Amounts in
thousands RON.
A reasonably possible appreciation/depreciation 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.
Interest rate risk
(RON mn)
Profit before tax
Appreciation
Depreciation
31 December 2018
EUR (change by 5%)
USD (change by 5%)
31 December 2017
EUR (change by 5%)
USD (change by 5%)
(0.6)
0.005
(2.1)
0.003
0.6
(0.005)
2.1
(0.003)
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
Until 2016 the group’s policy was to mainly use supplier credit for financing its capital investments. Starting 2016 the
group started to use also medium term bank loans.
Exposure to interest rate risk
The interest rate profile of the group’s interest-bearing financial instruments is as follows:
(RON mn)
Fixed-rate instruments
Financial assets
Call deposits
Deposits, treasury bills and government bonds
Financial liabilities
financing for network construction related to concession
agreements
finance lease
Total
Variable-rate instruments
Financial liabilities
Overdrafts
Total
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
31 December 2018
31 December 2017
311.0
136.5
(12.8)
(320.0)
114.7
231.8
747.0
(43.8)
(320.0)
614.9
(119.0)
(119.0)
(247.9)
(247.9)
ELECTRICA SA
116 | A N N U A L R E P O R T 2 0 1 8
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.
(RON mn)
31 December 2018
Variable-rate instruments
31 December 2017
Variable-rate instruments
Profit before tax
50 bps increase
50 bps decrease
(0.6)
(1.2)
0.6
1.2
Source: Consolidated financial statements of Electrica Group as of 31 December 2018
6.8 description of the main features of internal control and risk
management systems in relation to the financial reporting
process
the employees,
The internal control represents all measures, procedures
and policies adopted by ELSA management and their
the
implementation by
organizational structure, applied procedures, methods,
techniques and
the purpose of
implementation of company strategy and objectives. The
internal control includes all control forms performed at
company level such as preventive financial control, internal
and managerial control, compliance.
instruments,
regarding
for
The internal control and the risk management systems have
the following main goals:
protecting organizational resources against losses
due to waste, negligence, abuses, fraud etc.;
compliance with the applicable legislation and the
internal regulations;
the reliability of financial reporting (accuracy,
completeness and correctness of the information );
ensuring an environment based on identifying,
understanding and controlling risks, environment
which will
the
organizational goals;
contribute
achieving
to
efficient and effective business operations and use
of resources;
applying the BoD and executive management
resolutions and follow-up.
The achievement of these goals is performed as follows:
recruitment of personnel with an adequate level
of competency, in accordance with the company’s
needs, accompanied by training and development
of personnel skills and knowledge, supplemented
with any external consultants, whenever necessary;
clear definition and split 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 reports, including
financial statements, annual and interim reports,
budget etc) and their appropriate verification and
approval by the Board of Directors, for the purpose
of endorsing and release for publication.
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 zero tolerance towards
corruption, anti-fraud and anti-money-laundering,
avoidance and fighting against conflicts of interest,
policy for gifts and protocol expenses as well as
forbidding facilitating payments, transparency and the
involvement of stakeholders), as well as organizational
measures (policies on the delegation of authority and
responsibilities);
Evaluation of risks – generally, all processes are
within the scope of the internal control system. An
identification process is carried out regarding major
or critical risks, related to particular activities for
stimulating internal control methods;
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 117
Control activities meant to reduce the risks –
Control activities have different forms (managerial
control, general control, preventive financial control,
etc.) and they are implemented and carried out with
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
manner, so that all employees may carry out their
duties.
is performed by
means of disseminating information to all levels,
while the external one implies the dissemination of
information to external parties, in accordance with the
requirements and expectations;
internal communication
Monitoring activities –
the Audit and Risk
Committee and the internal Audit Department assess
the efficiency and the effective implementation of the
internal control system.
The management monitors the functioning of internal
controls by means of periodical analyzes; 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 management, with the
purpose of issuing the corrective actions.
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.
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 assumed strategy and objectives 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 consistently applied for the same
business situations, for the preparation of annual and interim
financial statements of the group on a standalone and
consolidated basis. This guide is subject to review based on
the changes made to the international financial Reporting
Standards as adopted by EU.
The group has appropriate systems in place for the
collection, storage, protection and processing of data
in order to generate financial and managerial reports for
both internal and external use, as well as proper systems
and procedures for meeting the statutory, stock exchange
or other legal requirements concerning financial reports in
a timely manner and subject to control review..
ELECTRICA SA 118 | A N N U A L R E P O R T 2 0 1 8
APPENDiX
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 119
APPENDiX 1
litigations
Electrica group litigations in 2018 – status as of 27 february 2019:
1. Disputes with ANRE
Crt.
no.
Parties/Case file
number
1
Plaintiff: ELSA
Defendant: ANRE
192/2/2015
2
Plaintiff: ELSA;
Enel Distributie
Muntenia S.A.
Defendant: ANRE
7968/2/2015
3
Plaintiff: ELSA;
Defendant: ANRE;
361/2/2015
4
Plaintiff: ELSA;
Defendant: ANRE;
360/2/2015
5
Plaintiff: ELSA;
Defendant: ANRE;
134/2/2016
Subject matter
Court
Case status
Cancellation of the Order of the
president of ANRE no. 146/2014
regarding the establishment of the
regulated rate of return considered
to the approval of the tariffs for
the electricity distribution service
provided by concessionary DSOs
starting with 1 January 2015 and the
abrogation of Art. 122 of the Tariff
Pricing Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Cancellation of ANRE President’s
Order no. 165/2015 regarding the
modification of the Tariff Setting
Methodology for the Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Cancellation of ANRE President’s
Order no. 155/2014 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy for
SDTN.
Cancellation of ANRE President’s
Order no. 156/2014 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy for
SDTS.
Action to suspend the
administrative act – Order no.
165/2015 of ANRE regarding the
modification of the Tariff Setting
Methodology for the Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
Appeal – under pre-filtering
proceedings.
High Court of
Cassation and
Justice
Suspended until the
settlement of the case file no.
192/2/2015.
High Court of
Cassation and
Justice
Suspended until the
settlement of the case file no.
192/2/2015.
High Court of
Cassation and
Justice
The Court has definitely
rejected Electrica’s appeal.
6
Plaintiff: ELSA;
Defendant: ANRE;
Action for partial annulment
(regarding the special tariffs) of the
administrative act – ANRE Order
171/2015.
High Court of
Cassation and
Justice
340/2/2016
7
Plaintiff: ELSA;
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 – in course of
settlement. The suspension
of the case was claimed until
the settlement of the case file
192/2/2015.
Appeal – in course of
settlement. The suspension
of the case was claimed until
the settlement of the case file
192/2/2015.
APPENDiX
ELECTRICA SA
120 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case file
number
Subject matter
Court
Case status
8
9
Plaintiff: ELSA;
SDTN; SDTS; SDMN;
Defendant: ANRE;
Action for partial annulment of
ANRE Order no. 169/2018 regarding
the approval of the Tariff Setting
Methodology for the Electricity
Distribution Service.
7614/2/2018
Plaintiff: ELSA;
SDTN; SDTS; SDMN;
Defendant: ANRE
Action for the annulment of the
ANRE Order no. 168/2018 regarding
the regulatory rate of return and
obliging ANRE to issue a new order.
7591/2/2018
10
Plaintiff: ELSA;
SDTN; SDTS; SDMN;
Defendant: ANRE
8436/2/2018
Action for partial annulment of
ANRE Order no. 169/2018 regarding
the approval of the establishment
Methodology for the energy
distribution tariffs.
Bucharest Court of
Appeal
in course of settlement.
Bucharest Court of
Appeal
in the regularization
procedure.
Bucharest Court of
Appeal
in the regularization
procedure.
11
Plaintiff: ELSA;
SDTN; SDTS; SDMN;
Defendant: ANRE
Action for the annulment of the
ANRE Order no. 168/2018 regarding
the regulated rate of return and
obliging ANRE to issue a new order.
Bucharest Court of
Appeal
in course of settlement.
12
13
14
8430/2/2018
Plaintiff: ELSA,
SDMN
Defendant: ANRE
434/2/2019
Plaintiff: ELSA,
SDTS
Defendant: ANRE
435/2/2019
Plaintiff: ELSA,
SDTN
Defendant: ANRE
436/2/2019
15
Plaintiff: SDMN
Defendant: ANRE
184/2/2015
Action for annulment of ANRE Order
197/2018 regarding the approval of
the specific tariffs for the electricity
distribution service and the price
for the reactive electric energy for
SDMN.
Action for annulment of ANRE Order
199/2018 regarding the approval of
the specific tariffs for the electricity
distribution service and the price for
the reactive electric energy for SDTS.
Action for annulment of ANRE Order
198/2018 regarding the approval of
the specific tariffs for the electricity
distribution service and the price
for the reactive electric energy for
SDTN.
Contentious administrative litigation
– Cancellation of ANRE President’s
Order No. 146/2014 regarding the
setting of the regulated rate of
return applied at the approval of the
tariffs for the electricity distribution
service provided by the DSOs from
1 January 2015 and the abrogation
of Art. 122 of the Tariff Setting
Methodology for the Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Bucharest Court of
Appeal
in the regularization
procedure.
Bucharest Court of
Appeal
in the regularization
procedure.
Bucharest Court of
Appeal
in the regularization
procedure.
High Court of
Cassation and
Justice
Suspended case file until the
final settlement of the case
7341/2/2014.
The Plaintiff quit the
judgement of the appeal
against the suspension
decision. The Court rejects
the appeal filed by fondul
Proprietatea SA against the
Decision of the Bucharest
Court of Appeal of 25 June
2015 – the Section Viii
Administrative and fiscal
Litigation, as unfounded. The
case file no. 7341/2/2014 is in
course of settlement.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 121
Subject matter
Court
Case status
Cancellation of Order no. 165/2014,
of the President of ANRE regarding
the modification of the Tariff
Pricing Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
High Court of
Cassation and
Justice
The case file no 1574/2/2016
has been linked to this case
file. The court of first instance
rejected the application
as unreasonable. SDMN
filed an appeal, in course of
settlement.
Through the Decision
no. 1086/1 April 2016,
the Bucharest Court of
Appeals rejected the
claim on suspension of as
ungrounded. An appeal was
stated, which was definitively
rejected as unfounded.
By Decision no.689/1 March
2017, the Court of Appeal
dismissed the action as
unreasonable. SDMN has filed
an appeal, which is in course
of settlement.
Through the Decision no.
1272/2016 of the Bucharest
Court of Appeals, the claim
for suspension of was
rejected as unfounded. An
appeal was stated, definitively
rejected as unfounded.
High Court of
Cassation and
Justice
High Court of
Cassation and
Justice
High Court of
Cassation and
Justice
Bucharest Court of
Appeal
The file is in the regularization
procedure.
High Court of
Cassation and
Justice
The Court of first instance
upheld the plea of
inadmissibility of all three
heads of claim, dismissing
them as inadmissible. An
appeal was filed – in course
of settlement.
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
The court has definitively
rejected the action of SDTN.
Suspension of the enforcement
of the ANRE President Order
no. 165/2015 regarding the
modification of the Tariff Pricing
Methodology for Electricity
Distribution Service, by the ANRE
Order no. 72/2013.
Cancellation of ANRE President’s
Order No. 172/2015 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy, for
SDMN.
Suspension of the enforcement
of the ANRE President Order no.
172/2015 regarding the approval of
the specific tariffs for the electricity
distribution service and the price for
the reactive energy, for SDMN.
Action in administrative litigation
to oblige ANRE to issue an address
of response to the request of DSOs
from Electrica group to issue a
decision stating whether or not they
have exclusive or special rights in
accordance with the provisions of
Law 99/2016.
Annulment of administrative act
for the refusal to issue a favourable
opinion regarding the transfer of
the AMR system and requiring the
issue of favourable administrative
documents for the cession of the
AMR system from ELSA to DSOs, also
obliging ANRE to make adjustments
of the distribution tariffs of DSOs.
Cancellation of ANRE President’s
Order no. 146/2014 regarding the
establishment of the regulated rate
of return applied to the approval
of the tariffs for the electricity
distribution service provided by the
DSOs from 1 January 2015 and the
abrogation of Art. 122 of the Tariff
Pricing Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Cancellation of the ANRE President’s
Order No. 155/2014 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy for
SDTN.
Crt.
no.
Parties/Case file
number
16
Plaintiff: SDMN
Defendant: ANRE
164/2/2016
17
Plaintiff: SDMN
Defendant: ANRE
165/2/2016
18
Plaintiff: SDMN
Defendant: ANRE
41/42/2016
19
Plaintiff: SDMN
Defendant: ANRE
42/42/2016
20
Plaintiff: SDMN;
SDTS
Defendant: ANRE
8901/2/2018
21
Plaintiff: ELSA;
SDMN; SDTN;
SDTS;
Defendant: ANRE
8019/2/2017
22
Plaintiff: SDTN
Defendant: ANRE
213/2/2015
23
Plaintiff: SDTN
Defendant: ANRE
353/2/2015
ELECTRICA SA 122 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case file
number
24
Plaintiff: SDTN
Defendant: ANRE
18/33/2016
25
Plaintiff: SDTN
Defendant: ANRE
17/33/2016
26
Plaintiff: SDTS
Defendant: ANRE
87/64/2016
27
Plaintiff: SDTS
Defendant: ANRE
18/64/2016
28
Plaintiff: SDTS
Defendant: ANRE
88/64/2016
29
Plaintiff: SDTS
Defendant: ANRE
41/64/2016
30
Plaintiff: SDTS
Defendant: ANRE
371/2/2015
31
Plaintiff: SDTS
Defendant: ANRE
208/2/2015
Subject matter
Court
Case status
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
The court has definitively
rejected the action of SDTN.
Bucharest Court of
Appeals
Suspended until the
settlement of 18/64/2016.
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
Appeal – in course of
settlement.
High Court of
Cassation and
Justice
Suspended until the final
settlement of the case no.
208/2/2015.
High Court of
Cassation and
Justice
Suspended. Waiver of the trial
at the appeal regarding the
suspension decision.
Action for annulment of the
administrative act – Order no.
165/2015 of ANRE regarding the
modification of the Tariff Pricing
Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Action for annulment of the
administrative act – Order no.
165/2015 of ANRE regarding the
modification of the Tariff Pricing
Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Contentious administrative
litigation (request for suspension
of administrative act) – ANRE
President’s Order no. 165/2015
regarding the modification of the
Tariff Pricing Methodology for
Electricity Distribution Service,
approved by the ANRE Order no.
72/2013.
Cancellation of Order no. 165/2015
of the ANRE President regarding
the modification of the Tariff
Pricing Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
Cancellation of the ANRE President’s
Order no. 171/2015 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy, for
SDTS.
Cancellation of the ANRE Order no.
171/2015.
Cancellation of the ANRE President’s
Order no. 156/2014 regarding the
approval of the specific tariffs for the
electricity distribution service and
the price for the reactive energy, for
SDTS.
Cancellation of the ANRE President’s
Order no. 146/2014 regarding the
establishment of the regulated rate
of return applied to the approval
of the tariffs for the electricity
distribution service provided by
DSOs from 1 January 2015 and the
abrogation of Art. 122 of the Tariff
Pricing Methodology for Electricity
Distribution Service, approved by
the ANRE Order no. 72/2013.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 123
Crt.
no.
Parties/Case file
number
32
Plaintiff: SDTS
Defendant: ANRE
73/197/2019
33
Plaintiff: EfSA
Defendant: ANRE
26210/3/2013
34
Plaintiff: EfSA
Defendant: ANRE
8201/2/2015
Subject matter
Court
Case status
Complaint against the
contravention report no. 97341/18
December 2018.
Brasov Court
in regulatory procedures.
Judicial action having as object the
recognition of the right provided
in art. 79 para. (6) of the Law no.
123/2012, the obligation of the
defendant to modify the regulated
tariff by ANRE Order no. 40/2013,
order the defendant to pay the
amount of the prejudice that
cannot be covered by the change of
the mentioned regulated tariff.
Judicial action having as object to
oblige the defendant to resolve a
dispute related to the change of
supplier procedure.
High Court of
Cassation and
Justice
Appeal – in course of
settlemet.
High Court of
Cassation and
Justice
Bucharest Court of Appeals
has admitted the judicial
action stated by EfSA,
obliging ANRE to solve
the dispute. ANRE stated
an appeal, admitted by
the Court. The High Court
dismisses EfSA’s case as
remained without object.
2. Fiscal matter disputes
Crt.
no.
Parties/Case
file number
1
Plaintiff: ELSA
Defendant:
NAfA
7614/2/2013
Subject matter
Court
Case status
High Court of
Cassation and
Justice
Appeal of the Decision no.147/22 May
2013, amounting to RON 2,387,992 (action
for annulment of the Decision no. 147/22
May 2013, issued by NAfA within the
proceedings for solving the administrative
appeals against the debt securities by
which they were established accessories
for delayed payment of the current
budgetary duties, by the Decision no.
214/2012 in the amount of RON 2,387,992).
On 6 March 2015, the court:
- partially upheld the claim and
partially cancelled the Decisions
no. 147/22 May 2013 and no.
214/30 October 2012, issued by
the defendant for the amount
of RON 2,383,070, representing
ancillary tax obligations;
- maintained the claimed fiscal-
administrative acts for the amount
of RON 4,922;
- ordered the plaintiff to pay to
the applicant the amount of RON
30,961, as court charges.
NAfA has stated Appeal –
definitively rejected by court.
ELECTRICA SA 124 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case
file number
Subject matter
Court
Case status
2
3
4
5
6
Plaintiff: ELSA
Defendant:
NAfA
5433/2/2013
Tax appeal of the administrative
annulment of the Decision no. 24/31
January 2013, payment obligations
amounting to RON 9,805,319.
High Court of
Cassation and
Justice
On the merits, the court has partially
admitted the action stated by the
plaintiff ELSA and:
- cancels Decision no. 24/2013,
issued by NAfA-DgSC;
- partially cancels the decisions
regarding the ancillary payment
obligations no. 1270/2012 (in the
amount of RON 5,705,115) and
no. 1271/2012 (in the amount of
RON 3,747,331), issued by NAfA,
as well as the tax decisions issued
by NAfA notices of assessment no.
2143501.5/2012, 2143501.6/2012,
2143501.7/2012, 2143501.11/2012
(regarding the amount of RON
352,873). Rejects the action as for
the rest. forces NAfA to pay RON
20,500 as court charges to the
plaintiff. NAfA and ELSA have stated
an appeal. The High Court dismissed
the appeals as unfounded.
District 1
Court
Suspended until the final
settlement of case no.
9131/2/2017.
Plaintiff: ELSA
Defendant:
NAfA
17237/299/2017
1. Suspension of forced execution initiated
by NAfA-DgAMC in the enforcement file no.
13267221 under the enforceable order no.
13725/3 May 2017 and of the no. 13739/03
May 2017;
2. Cancellation of the enforcement
order no. 13725/3 May 2017, of the no.
61/90/1/2017/263129 (which also bears the
No. 13739/3 May 2017) issued by NAfA-
DgAMC for the amount of RON 39,248,818
and all subsequent execution orders issued
in connection with the forced execution
of the amount of RON 39,248,818 in the
execution file no. 13267221.
Plaintiff: ELSA
Defendant:
NAfA
9131/2/2017
Plaintiff: ELSA
Defendant:
NAfA
3430/2/2017
Plaintiff: ELSA
Defendant:
NAfA
6043/2/2018
Annulment of the tax decisions issued by
NAfA and communicated to the company
by adress no. 665/17 March 2017, new
accessories amounting to RON 39,000,000.
Bucharest
Court of
Appeal
in course of settlement.
Appeal to execution, cancellation
foreclosure for RON 39,083,190 - Decision
no. 665/17/03/2017
High Court of
Cassation and
Justice
The first court dismissed the file as
unfounded. ELSA filed an appeal,
definitively rejected by court.
Bucharest
Court of
Appeal
in course of settlement.
1. Oblige NAfA to correct the evidence of tax
receivables, so that it reflects the judgments
in the litigation between parties through
judgments that have entered into the power
of the trial. 2. in particular, in order to adjust
the fiscal statement in the sense indicated
in paragraph 1, the NAfA shall be obliged to
draw up those corrective administrative acts
or operations which:
a) to reflect in the fiscal file the extinguishing
by prescription of the amount of RON
16,915,950 representing the profit tax
registered in Decision no. 3/2008 (the “Main
Claim”) and the removal from its tax records, ‘
b) to reflect in the fiscal file the
corresponding extinction of all the
accessories calculated by NAfA in the Main
Claim (expired by prescription) and the
removal from their tax records (including the
amount of RON 30,777,354 included in the
Decision no. 357/2008).
ELECTRICA SA
A N N U A L R E P O R T 2 0 1 8 | 125
Crt.
no.
Parties/Case
file number
Subject matter
Court
Case status
7
8
9
Plaintiff: ELSA
Defendant:
NAfA - DgAMC
25091/299/2018
Plaintiff: ELSA
Defendant:
NAfA
7949/2/2018
Plaintiff: SDMN
Defendant:
Public Service
for local
finances Ploiesti
309/42/2015
10
Plaintiff: SDMN
Defendant:
NAfA
1018/2/2016
11
Plaintiff: EL SERV
Defendant:
NAfA
5786/2/2018
Appeal to execution and suspension
of forced execution - cancellation of
the enforcement order no. 13566/22
June 2018 and the notice 13567/22
June 2018, issued in the execution file
no. 13267221/61/90/1/2018/278530,
amounting to RON 10,024,825
(representing the partial fine from the
Competition Council).
Cancellation of administrative act: Decision
no. 231/09/05/2018 issued by NAfA-
DgS in the procedure for solving the
fiscal administrative appeal against the
following tax decisions (communicated
to the company through the address no.
665/17 March 2017): 1. Decision no. 607/
EV2/15 March 2017 - interest and penalties
calculated on the profit tax amounting
to RON 38,687,726; 2. Taxation decisions
on obligations established as a result
of tax adjustments correcting Decision
no. 607/EV2/15 March 2017, by setting
differences in minus, in the amount of
RON 2,125,229; 3. Taxation decisions on
obligations established as a result of tax
adjustments correcting Decision no.
607/EV2/15 March 2017, by establishing
additional differences, in the amount
of RON 2,447,528; 4. Decision no. 620/
EV2/15 March 2017 regarding the related
tax liabilities representing interests and
penalties for delayed payment in the
amount of RON 21,548.
Cancellation of administrative act –
taxation decision no. 124814/28 November
2014. The amount under litigation: RON
11,963,955, representing additional
differences from the fiscal inspection
report, out of which RON 8,528,896
additional tax on buildings for the period
January 2009 - September 2014 and RON
3,439,085 as accessory fiscal obligations
calculated until the date of 11 November
2014.
Cancellation of administrative act –
Decision no. 462/23 November 2015,
litigation amount of RON 7,731,693 (RON
4,689,686 income tax + RON 3,042,007
VAT) and for the amount of RON 6,154,799
(RON 3,991,503 interests/penalties and late
fees related to income tax + RON 2,163,296
interests/penalties and delay fees related
to the VAT).
Cancellation of administrative act NAfA Rif
2017 and decision no. 305/30 May 2017,
value of RON 46,260,952, the amount with
which the fiscal loss of the Company was
diminished; RON 7,563,561 as Additional
VAT set up by VAT refusal to deduct +
related accessories.
District 1
Court
Suspended until the settlement of
case no. 3889/2/2018.
Bucharest
Court of
Appeal
in course of settlement.
High Court of
Cassation and
Justice
By Decision no. 32/10 february
2016, Ploiesti Court of Appeal
dismissed the action as
unfounded. SDMN filed an appeal,
which was rejected by the court;
the company filed an appeal for
annulment (case no. 209/1/2019).
Bucharest
Court of
Appeal
The first court dismissed the
request as unfounded. The plaintiff
filed an appeal, in course of
settlement.
Bucharest
Court of
Appeal
in course of settlement.
ELECTRICA SA
126 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case
file number
12
13
14
Plaintiff: EL SERV
Defendant:
NAfA
31945/3/2018
Plaintiff: SDTN
Defendant: MfP-
NAfA – DgRfP
Cluj – AJfP
Maramures
371/33/2017
Plaintiff: EfSA
Defendant:
NAfA – DgAMC
8709/2/2018
Subject matter
Court
Case status
Cancellation of administrative decision no.
221/19 July 2017 - cancellation of penalties
related to the decision no. 305/2017 from
above, RON 118,215.
Bucharest
Court
Suspended until the final
settlement of the case no.
5786/2/2018.
Taxation contestation no. f-MM-180/2016
on tax and additional VAT, as well as
interest/late payment and delay penalties.
Preliminary administrative procedures
were conducted in 2017, prior to the case
filing.
Amount: RON 32,295,033.
Cancellation of:
DgSC Decision no. 325/26 June 2018
Decision f-MC 678/28 December 2017
Report f-MC 385/28 December 2017
Decision no. 511/24 October 2018
Decision no. 21095/24 July 2018
Value: RON 11,483,652
Cluj Court of
Appeal
Ongoing procedure
Bucharest
Court of
Appeal
in course of settlement.
3. Other significant litigations (whose value is more than EUR 500 th.)
Crt.
no.
Parties/Case file
number
1
Plaintiff: SPEEH
Hidroelectrica S.A.
Defendant: ELSA
13268/3/2015
Subject matter
Court
Case status
High Court
of Cassation
and Justice
The court of first instance rejects
the exception of the prescription
of the material right to action as
unreasonable and the action as
unfounded.
Both parties have appealed,
rejected as unfounded. Both
parties filed an appeal in the filter
procedure.
Obligation of Electrica to pay to SPEEH
Hidroelectrica SA the sum of RON
5,444,761 (the loss suffered by selling
energy at an average price per MWH
under the production cost of 1 MWH);
partially oblige to pay the unrealized
benefit of Hidroelectrica by selling
the total amount of 398,300 MWh,
calculated according to the ANRE
regulations (RON 9,646,826, according
to the written instructions dated 5 May
2015/RON 5,444,761 according to the
applicant’s conclusions mentioned
in the Conclusion of 15 March 2017)
obliging the defendant to pay the
legal interest from the date of delivery
of the decision until the effective
payment, court costs.
2
Creditor: ELSA
Debtor: Petprod
S.A.
47478/3/2012*/a1
3
Creditor: ELSA
Debtor: CET Braila
S.A.
2712/113/2013
insolvency proceedings, enter a claim
to the statement of affairs for the
amount of RON 2,591,163
Bucharest
Court
Ongoing procedure
insolvency proceedings, enter a claim
to the statement of affairs for the
amount of RON 3,826,035
Braila Court Ongoing procedure
4
Creditor: ELSA,
AAAS, BCR SA and
others
insolvency proceeding, enter a claim
to the statement of affairs in amount
of RON 658,535,805
Valcea Court Ongoing procedure
Debtor: Oltchim
S.A.
887/90/2013
ELECTRICA SA Crt.
no.
Parties/Case file
number
5
Creditor: ELSA
Debtor: Romenergy
industry SRL
2088/107/2016
6
Appellant: ELSA
Defendant: AAAS
38859/299/2015
7
Appellant: ELSA
Defendant: AAAS
2155/2/2015
A N N U A L R E P O R T 2 0 1 8 | 127
Subject matter
Court
Case status
insolvency proceedings, enter a claim
to the statement of affairs in amount
of RON 2,917,266
Alba Court
Ongoing procedure
Electrica SA filed an appeal to
enforcement against foreclosure
Administrative Decision no.
P/14/27055/16 December 2014 and
of all the subsequent enforcement
acts (administrative decision issued
by the respondent AAAS against the
subscription for the amount of RON
7,505,637 as recovery of unlawful state
aid granted to ELSA, in the context of
privatization of Electrica Banat SA and
of CSR Resita SA) - claim for cancelling
of this act.
- The cancellation of the payment
order issued by BEJ Oprescu Mihai in
the execution file no. 8/2015 (where
it is stated that “the interest is to
be added starting from the date of
placing the funds at the disposal of
the beneficiary and up to the effective
date of the flow plus RON 99,688 c/v
of execution costs and all subsequent
execution acts.”);
- Cancel all execution acts issued in the
file no. 8/2015;
- Suspension of the forced execution
started by the intimate until the
irrevocable settlement of the current
litigation;
- Provisional suspension until the
settlement of the claim for suspension
requested by the present petition.
- Annulment of the Administrative
Decision no. P/14/27055/16
December 2014, of Order no. 883/16
December 2014 (restitution by ELSA
of the amount of RON 7,505,637 and
interests calculated from 27 March
2006 until the effective date of
payment) and notification no. 883/16
December 2014, issued by AAAS;
- Suspension of the execution of the
contested administrative acts until the
final settlement of the case;
- Order the Defendant to pay the
judicial costs.
Disctrict 1
Court
High Court
of Cassation
and Justice
The court admits the claim
for suspension of the forced
execution formulated by the
Plaintiff ELSA; suspends of the
forced execution performed
based on the foreclosure file no.
8/2015 of BEJ Oprescu Mihai
until the contestation of the
execution. Based on art. 413 para.
1 point 1, CPC suspends the case
regarding the Plaintiff ELSA, until
the final settlement of the file
no. 2155/2/2015 of Bucharest
Court of Appeal. The court
partially upheld the contestation
of execution and canceled the
notice from 26 March 2015 and
all the execution documents
issued in enforcement file no.
8/2015 of BEJ Oprescu Mihai. The
court dismisses as inadmissible
the application for annulment
of Administrative Decision no.
P/14/27055/16 December 2014
issued by AAAS. Returns to the
contestant the amount of RON
1,000 representing the court
expenses related to the appeal
to the execution, after the final
decision has expired, with right
of appeal within 10 days of
communication, definitely by
non-appealing.
On the background of the
case, the court ordered the
annulment of the administrative
decision no. P/14/27055/16
December 2014, of the Order
no. 883/16 December 2014 and
of the Notification no. 883/16
December 2014 issued by the
defendant. The Defendant
filed an appeal, rejected as
unfounded.
ELECTRICA SA 128 | A N N U A L R E P O R T 2 0 1 8
Subject matter
Court
Case status
Bucharest
Court
Appeal at execution regarding the
execution file no. 1914/2015 of
the Bureau of the Associated Legal
Executors Dorina gont, Lucian Panait
and Marian Panait - execution of the
decision no. 6440/01 January 2013 -
case no. 8260/3/2013 - the nominal
value of the shares resulting from
the conversion of ELSA, claimed to
Combinatul Siderurgic Resita S.A.
and the amount resulting from their
capitalization – RON 10,342,892.
Bucharest
Court
Appeal against enforcement initiated
by BEJ Spiridonescu ileana Cornelia
in the execution file no. 30/B/2017, as
well as the subsequent execution acts,
for the amount of RON 26,122,589.
in the alternative, annulment in part
as regards the pursuit of the amount
of RON 1,561,105, representing the
receivable lost by offsetting, with
the consequence of the return of
the execution for this amount, the
partial annulment of the execution
and the subsequent acts regarding
the pursuit of the amount of RON
782,067, representing the receivable
extinguished by offsetting, with the
consequence of the return for this
amount.
The court of first instance
partially admits the contestation
of the enforcement formulated
by the contestants; orders the
cancellation of the measure of
attachment established in the
execution file no. 1914/2015 by
BEJA Dorina gonț, Lucian gonț
and Marian Panait regarding
third parties; rejects the request
for the return of the execution
as unfounded. Dismisses the
application for suspension of
execution as being without
object; with appeal within 10
days of communication. Both
parties filed an appeal, rejected
by court as unfounded.
The merit court partially admits
the appeal, in the sense that it
reduces the execution costs to
RON 135,000. Disputes the return
of forced execution in respect of
the amount of RON 178,554, in
respect of undue enforcement
costs. Otherwise, the
contestation of the execution is
dismissed as unreasonable. ELSA
has filed an appeal definitively
rejected as unfounded.
insolvency proceedings – debt RON
9,542,337.
Bucharest
Court
Ongoing procedure; the
receivable assigned to ELSA
from EL SERV, which was fully
recovered.
insolvency proceedings. Debt RON
37,088,830.
Bucharest
Court
Ongoing procedure
Crt.
no.
Parties/Case file
number
8
Appellant: AAAS
Defendant: ELSA
27873/299/2016*
9
Appellant: ELSA
Defendant:
Termoelectrica S.A.
16159/299/2017**
10
Creditor: ELSA
Debtor: SEM
40081/3/2014
11
Creditor: ELSA
Debtor:
Transenergo Com
S.A.
1372/3/2017
12
Creditor: ELSA
Bankruptcy. Debt: RON 6,027,537.
Bucharest
Court
Ongoing procedure
Debtor: Electra
Management &
Suppy SRL
41095/3/2016
13
Creditor: ELSA
Debtor: fidelis
Energy SRL
3052/99/2017
14
Plaintiff: SAPE
Defendant: ELSA
and others
46365/3/2016
insolvency proceedings. Debt: RON
11,354,912.
iasi Court
Ongoing procedure
Action for damages – RON
3,629,529,920.
Bucharest
Court
in course of settlement.
ELECTRICA SA Crt.
no.
Parties/Case file
number
15
Plaintiff: SEM
Defendant: ELSA
5930/3/2016
16
Plaintiff: ELSA
Defendant:
Competition
Council
3889/2/2018
A N N U A L R E P O R T 2 0 1 8 | 129
Subject matter
Court
Case status
High Court
of Cassation
and Justice
The court of first instance
accepted the exception of the
prescription of the material right
to action, dismissing the action
as prescribed, but the court of
appeal annulled the sentence,
sending the case for re-
judgment. ELSA filed an appeal
- in the filter procedure.
Bucharest
Court of
Appeal
The court dismissed ELSA’s action
as unfounded, appealable in 15
days from it’s communication.
Obligation to increase the share capital
of SEM, with the value of the land
located in Dobroiesti, str. Zorilor no.
71, ilfov County (“Terrain warehouses
and fundeni thermal power station”),
with an area of 6,479.62 sqm, CADP
M03 no. 10982/2008, respectively from
Bucharest, Timisoara Boulevard no. 104,
sector 6 (“Workshop for repairing energy
equipment”), with an area of 8,745.31
sqm, CADP M03 no. 12917/2014 –
amounting to RON 7,344,390.
Action in administrative litigation -
annulment of Competition Council
Decision no. 77/20 December 2017,
imposing on ELSA a fine in the
amount of RON 10,800,984 and, in the
alternative, the reduction of the fine
set up to the legal minimum of 0.5%
of ELSA’s turnover, by re-individualizing
the alleged anticompetitive facts,
retaining and fully capitalizing on all the
attenuating circumstances applicable
to ELSA.
High Court
of Cassation
and Justice
The court of first instance
rejected the request. ELSA has
filed an appeal, in course of
settlement.
Bucharest
Court
Bucharest
Court
Bucharest
Court
in course of settlement.
in regulatory procedures.
in course of settlement.
Prahova
Court
in course of settlement.
17
18
19
20
21
Plaintiff: ELSA
Defendant:
Competition
Council
3883/2/2018
Application for suspension of the
enforcement of the Competition
Council Decision no. 77/20 December
2017, establishing a fine in the amount
of RON 10,800,984 to ELSA.
Plaintiff: ELSA
Defendant: EL SERV
39968/3/2018
Action for damages - request payment
of penalty interest in the amount of
RON 4,671,287, corresponding to the
amount of RON 10,327,442.
Plaintiff: ELSA
Defendant: Elite
insurance Company
44380/3/2018
Claims - request for equivalent
insurance policy issued to guarantee
the obligations of Transenergo Com
S.A., in the amount of RON 4,000,000.
Plaintiff: EfSA
Defendant: ELSA
2869/2/2019
Plaintiff: ViR
Company
international S.R.L.
Defendant: SDMN
7507/105/2017
Claims: request of payment of invocies
paid without justificative documents,
as it has been stated by the Court
of Account, in amount of RON
17,274,162.
Claims - the amount requested by ViR
Company international SRL consists of:
- EUR 5,000,000, damage caused by
delayed issuance of the connection
certificate for the photovoltaic plant
located in Valea Calugareasca village,
Darvari;
- EUR 155,000, equivalent of the amount
of electricity produced by the plant
during the technological evidence
period;
- EUR 145,000, green certificates related
to the amount of energy produced
by the photovoltaic plant during the
technological evidence period.
in addition, it requires to SDMN to pay
the penalty interest of 5.75%/year for
all the amounts of money claimed and
court costs.
ELECTRICA SA 130 | A N N U A L R E P O R T 2 0 1 8
Subject matter
Court
Case status
insolvency proceedings. Debt: RON
8,418,833.
Bucharest
Court
Ongoing proceedings.
Crt.
no.
Parties/Case file
number
22
Creditor: SDMN
Debtor:
Transenergo Com
S.A.
1372/3/2017
23
Plaintiff: SDTN
Bankruptcy - debt: RON 5,439,537.
Alba Court
Ongoing proceedings.
24
Defendant:
Romenergy
industry S.A.
2088/107/2016
Plaintiff: Asirom
Vienna insurance
group S.A.
Defendant: SDTN
439/111/2017
Recourse claims – for the amount
of RON 2,842,347, representing the
indemnity paid by the plaintiff to the
insured company SC Ciocorom SRL
following a fire that took place on 07
March 2013.
SDTN is responsible for the over-
voltage after a power outage.
Bihor Court
in course of settlement.
25
Plaintiff: SDTN
Claims of RON 2,677,707.
Alba Court
Suspended based on the Law no.
85/2014.
Claims of RON 2,387,357.
in course of settlement.
Cluj
Commercial
Court
27
Plaintiff: SDTS
Bankruptcy - debt: RON 3,987,508.
Alba Court
Ongoing proceedings.
Payment ordinance - debt: RON
2,806,318.
Brasov Court Suspended case file until the
Claims: RON 3,009,514.
Alba Court
of Appeal
settlement of the case file
regarding the bankruptcy of
Romenergy industry S.A. (file no.
2088/107/2016).
The court of first instance partially
upheld the application, forcing the
defendant to pay to the applicant
the sum of RON 2,117,046. SDTS
filed an appeal, rejected by the
court, with the possibility of appeal
within 30 days of communication.
The appeal has been dropped,
due to lack of motivation, by a
note approved according to the
proceedings.
30
Plaintiff: EL SERV
Defendant: National
Leasing ifN SA
Claims – EUR 1,177,222, equivalent
of RON 5,298,203, calculated on the
exchange rate respectively of 4.5006
RON/EUR on 30 January 2017.
Bucharest
Court
Suspended according to the
insolvency Law no. 85/2006.
39542/3/2009
Defendant:
Romenergy
industry S.A.
2157/111/2016
Plaintiff: Energo
Proiect SRL
Defendant: SDTN
374/1285/2018
26
Defendant:
Romenergy
industry S.A.
2088/107/2016
28
Plaintiff: SDTS
Defendant:
Romenergy
industry S.A.
3086/62/2016
29
Plaintiff: Project
Service RO SA
Defendant: SDTS
3433/85/2015
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 131
Subject matter
Court
Case status
insolvency – amount to be recovered:
RON 3,938,811.
Bucharest
Court
Ongoing proceedings.
insolvency – amount to be recovered
remained: RON 12,204,221.
Bucharest
Court
Ongoing proceedings.
Summons for payment – RON
3,938,811.
Bucharest
Court
Suspended according to the
insolvency Law no. 85/2006.
Crt.
no.
Parties/Case file
number
31
Plaintiff: EL SERV
Defendant: Best
Recuperare Creante
SRL
2253/3/2011
(former
58348/3/2010)
32
Plaintiff: EL SERV
Defendant: National
Leasing ifN S.A.
18711/3/2010
33
Plaintiff: EL SERV
Defendant: Best
Recuperare Creante
SRL
54060/3/2011
34
Plaintiff: EL SERV
Bankruptcy - debt RON 73,453,299.
Timis Court Ongoing proceedings.
Defendant: Servicii
Energetice Banat
S.A.
8776/30/2013
(joint with cu
2982/30/2014)
35
Plaintiff: EL SERV
insolvency - debt RON 26,448,134.
Dolj Court
Ongoing proceedings.
Defendant: SEO
2570/63/2014
36
Plaintiff: EL SERV
Bankruptcy - debt RON 12.297.491.
Constanta
Court
Ongoing proceedings.
Defendant: SED
8785/118/2014
37
Plaintiff: EL SERV
Defendant: CNAS,
CASMB
43602/3/2015
Recovery amounts of social insurance
– fNUASS – RON 1,384,652, plus
interest.
Bucharest
Court of
Appeal
The court rejects the appeal made
by EL SERV as unfounded. Admits
the appeal filed by Casa de Asigurari
de Sanatate a Municipiului Bucuresti.
it partially amends the civil appeal in
the sense that: forces the plaintiff to
pay to the applicant the amount of
RON 161,657, representing amounts
to be recovered from fNUASS, for
the period January 2013 - March
2013 and January 2014, as well
as to pay the interest legal costs,
calculated from the due date of each
amount to the day of the payment.
it still retains the rest of the decision,
final appeal.
38
Plaintiff: EL SERV
Bankruptcy – debt: RON 73,708,083.
Bacau Court Ongoing proceedings.
Defendant: SEM
4435/110/2015
39
Plaintiff: EL SERV
Defendant: New
Koppel Romania
20376/3/2016
Claims – EUR 655,164, equivalent of
RON 2,948,240.
Bucharest
Court
Ongoing proceedings.
ELECTRICA SA 132 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case file
number
40
Plaintiff: integrator
S.A.
Defendant: EL SERV,
SAP Romania
34479/3/2016**
41
Plaintiff: EL SERV
Defendant: SED
8785/118/2014/a1
42
Creditor: EfSA
Debtor: Apaterm
S.A. galati
4783/121/2011*
43
Creditor: EfSA
44
Debtor: Vegetal
Trading SRL Braila
1653/113/2014
Plaintiff:
Carpatcement
Holding S.A.
Defendant: Ministry
of Economy,
Romanian
government, EfSA
1665/2/2014
45
Creditor: EfSA
Debtor: Ariesmin
S.A. Branch
7375/107/2008
Subject matter
Court
Case status
Claims – RON 17,677,309
Bucharest
Court of
Appeal
The merit court rejects the claim.
The plaintiff filed an appeal,
being in course of settlement.
Bankruptcy – opposition to the
preliminary table - debt RON
3,025,622.
Constanta
Court
Suspended.
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 2,742,115.
galati Court Ongoing proceedings.
insolvency proceedings - enter a claim
to the statement of affairs for the
amount of RON 2,252,570.
Braila Court
Ongoing proceedings.
Compliance obligation - cancelling
penalties in amount of RON 2,440,785
– based on gEO 57/2002.
High Court
of Cassation
and Justice
On the merits, the Plaintiff action
was rejected, the Plaintiff stating
an appeal. The appeal was
definitively rejected.
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 20,711,588.
Alba Court
Ongoing proceedings.
46
Creditor: EfSA
Debtor: Zlatmin S.A.
Branch
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 9,314,176.
Alba Court
Ongoing proceedings.
6/107/2003
47
Creditor: EfSA
Debtor:
Hidromecanica S.A.
3836/62/2009
48
Creditor: EfSA
Debtor:
Nitrarmonia S.A.
261/f/2004
49
Creditor: EfSA
Debtor: Remin S.A.
32/100/2009
50
Creditor: EfSA
Debtor: Oltchim
S.A.
887/90/2013
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 4,792,026.
Brasov Court Ongoing proceedings.
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 2,285,997.
Brasov Court Ongoing proceedings.
insolvency proceedings - enter a claim
to the statement of affairs for the
amount of RON 71,443,402.
Timisoara
Court
Ongoing proceedings.
insolvency proceedings - enter a claim
to the statement of affairs for the
amount of RON 56,533,826.
Valcea Court Ongoing proceedings.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 133
Crt.
no.
Parties/Case file
number
51
Creditor: EfSA
Debtor: Energon
Power and gas
S.R.L.
53/1285/2017
52
Creditor: EfSA
Debtor : CUg S.A.
2145/1285/2005
Subject matter
Court
Case status
insolvency proceedings - enter a claim
to the statement of affairs for the
amount of RON 2,392,985.
Cluj
Specialised
Court
Ongoing proceedings.
Bankruptcy - enter a claim to the
statement of affairs for the amount of
RON 7,880,857.
Cluj
Specialised
Court
Ongoing proceedings.
4. Litigations against the Romanian Court of Accounts
Crt.
no.
Parties/Case
file number
Subject matter
Court
Case status
Court on the merits: Admits in
part the claim. Cancels partially
the Resolution no. 23 on 17
March 2014 regarding the items
1 and 5 and the Decision no. 3/14
January 2014 regarding the items
4 and 8. Rejects, as ungrounded
the claim regarding items 2, 3
and 4 in the Resolution no. 23/17
March 2014 and items 5, 6 and 7
in the Decision no 3/14 January
2014. Rejects the claim for
suspension of the enforcement
of the Decision no. 3/14 January
2014, as ungrounded. Electrica
and CCR have stated Appeal.
The court admits in part ELSA’s
request and sent the case for
rejudgement to the first instance,
regarding the annulament of
item 5 of the Decision no. 23/17
March 2014, coresponding to
item 8 of the Decision no. 3/14
January 2014. Currently the case is
in rejudgement phase.
in course of settlement.
1
Plaintiff: ELSA
Defendant:
Romanian Court
of Accounts
Suspension and cancelling of the
administrative act (Decision no.3/14
January 2014 and the Resolution no.
23/17 March 2014).
Bucharest Court of
Appeal
2268/2/2014*
Bucharest Court of
Appeal
2
Plaintiff: ELSA
Defendant:
Romanian Court
of Accounts
2229/2/2017
Partial annulment of Decision no.
12/27 December 2016, issued by
the director of the 2nd Direction from
the iVth Department of the Court of
Accounts, regarding the faults from
point 1 to 8, with the consequence
of dismissing the actions from point
1, 3 to 9 inclusive, imposed to ELSA
by the disputed Decision; the partial
annulment of the conclusion no. 12/27
february 2017 of the Court of Accounts,
rejecting the objection raised by ELSA
against Decision no. 12, regarding the
faults and orders mentioned above.
in the alternative, the extension of
the deadlines for carrying out all the
measures ordered by ELSA through
Decision no. 12/27 December 2016 with
at least 12 months; the suspension of
the enforceability of Decision no. 12 until
final settlement of the present dispute.
ELECTRICA SA 134 | A N N U A L R E P O R T 2 0 1 8
Crt.
no.
Parties/Case
file number
Subject matter
Court
Case status
3
4
5
6
7
8
Plaintiff: ELSA
Defendant:
Romanian Court
of Accounts
7780/2/2018
Plaintiff: EfSA
Defendant:
Romanian Court
of Accounts
2213/2/2017
Plaintiff: EL SERV
Defendant:
Romanian Court
of Accounts
2098/2/2017
Plaintiff: EL SERV
Defendant:
Romanian Court
of Accounts
1677/105/2017
Plaintiff: SDTS
Defendant:
Romanian Court
of Accounts
2763/62/2017
Action in administrative litigation
for annulment of Decision no. 38/09
October 2018, the annulment of
the decision concluding the appeal
imposed by the Decision no. 12/1 of 27
December 2016, the revocation of the
Decision no. 12/1 and the cessation of
any CCR control act.
Disputes with the Court of Accounts
(Law no. 94/1992), action for the
annulment of the Decision no.
11/2016, of the Decision no. 23/2017
and of the Control Report no.
5799/2016.
Disputes with the Court of Accounts
Administrative act – Decision no. 11/27
february 2017, for the amount of RON
2,351,034.
Disputes with the Court of Accounts
– Annulment of Decision and of the
control report
Bucharest Court of
Appeal
in course of settlement.
High Court of
Cassation and
Justice
The first instance rejected
the request filed by EfSA
as unfounded. EfSA filed
an appeal, in course of
settlement.
Bucharest Court of
Appeal
in course of settlement.
Prahova Court
in course of settlement.
Dispute litigation on Law 94/1992;
annulment of the Decision no. 73/12
January 2017 and of the Decision no.
24/11 April 2017.
Brasov Court of
Appeal
On merits, SDTS’s case was
dismissed, SDTS filed an
appeal, admitted.
Plaintiff: SDMN
Defendant:
Romanian Court
of Accounts
1677/105/2017
Suspension and annulment of
the Control Report of the Prahova
Chamber of Accounts no. 6618/11
November 2016 and of the Decision
no. 45/2016.
Prahova Court
in course of settlement.
5. Other litigations with significant impact
Crt.
no.
Parties/Case file
number
Subject matter
Court
Case status
1
2
Plaintiff: Niculescu
Vladimir
Defendant: SDMN, City
Hall Valenii de Munte
1580/105/2008*
Plaintiff: SDTN
Defendant: Local Council
of Oradea City, RCS&RDS
3340/111/2015
Claim under Law no.
10/2001 – for a land of
1,558 sqm and built area
of 202 sqm, located in
Valenii de Munte, N. iorga
str. No.129 and being
used by the Exploitation
Center Valeni.
Cancellation of Oradea
LCD no. 108/2 february
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.
Ploiesti Court of
Appeal
Bihor Court
On the merits of the case, the plaintiff’s
action was admitted in part, with the
right to repairs by equivalent for the
land of 1,402 sqm located in Valenii
de Munte, Bvd. Nicolae iorga no. 129
(currently no.131), Prahova County.
The Plaintiff and Valenii de Munte
Town Hall filed an appeal - in course of
settlement.
At the request of RCS-RDS, the case
was suspended until the case file
2414/2/2016 was settled with Delalina
SRL, a case file by the Bucharest Court
of Appeal. RCS-RDS filed a request for
re-examination of the stamp duty, so the
case file 3340/111/2015/a1 was formed,
within the application to challenge the
constitutionality of the provisions of art.
39 par. 1 and par. 3 of gEO 80/2013 was
invoked.
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 135
Crt.
no.
Parties/Case file
number
Subject matter
Court
Case status
Plaintiff: Delalina S.R.L.
Defendant: SDTN
910/111/2016
The obligation to issue
technical permit for
connection in the favour
of SC Delalina SRL.
Bihor Court
The exception was admitted in principle
and the case was suspended pending
its settlement by the Constitutional
Court. At the deadline of 31 January
2018, the court rejects the request filed
by the petitioner RCS & RDS SA for the
re-examination of the judicial tax in case
no. 3340/111/2015, as inadmissible.
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.
Plaintiff: Delalina S.R.L.,
foto Distributie S.R.L.
Defendant: SDTN, 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: SDTN
4013/2/2016
Plaintiff: Stanciu Razvan
Defendant: ELSA
42479/3/2017
Plaintiff: Dumitrascu
gabriel
Defendant: ELSA
44217/3/2017
Plaintiff: ELSA
Defendant: E – Distributie
Banat S.A.
30399/325/2018
Plaintiff: ELSA
Defendant: Baile
Herculane City
4572/208/2018
Cancellation of
administrative acts (Order
73/2014, Concession
agreements).
High Court of
Cassation and
Justice
in merits, the court has rejected the
exceptions and the action filed by
the plaintiffs, which have initiated an
appeal; in course of settlement.
Court of
Appeals
Bucharest
The file was suspended until
the settlement of case file no.
2414/2/2016.
Bucharest
Court
The court rejected the request. The
decision is final by non-appealing.
Bucharest
Court
The plaintiff dropped the trial
application.
Timisoara Court
in regularization procedures.
Caransebes
Court
in course of settlement.
The case file has as
object the cancellation
of the ANRE decision on
refusal to give licenses for
electricity distribution
Action for the annulment
of the OgMS Decision
no. 2/26 October 2017,
regarding the election of
the members of the BoD
by cumulative vote.
Action for the annulment
of the OgMS Decision
no. 2/26 October 2017
regarding item 1 – the
election of the members
of the BoD.
Obligation to do -
Mainly obliging the
defendant to hand over
the documentation for
the land in Bocsa. in the
alternative, the obligation
to draw up the CADP
documentation and
damages.
Claim for land Lot 1-NC
32024 (area of 259 sqm)
and lot 2 NC 31944 (with
a surface of 1,394 sqm),
both located in Baile
Herculane, Uzinei str. 1
and fC rectification.
3
4
5
6
7
8
9
ELECTRICA SA 136 | A N N U A L R E P O R T 2 0 1 8
APPENDiX 2
details of the main investments accomplished in 2018 by the
electrica Group
During 2018, the most significant investments accomplish by the group are the following:
CAPEX 2018
DESCRIPTION
MUNTENIA NORD
Modernization of LV connections belonging to transformer stations powered from 20kV OHL Vadu
Soresti, Buzau county
Modernization of transformer stations powered from 20kV Eternitatii underground line, in municipality of
Targoviste, Dambovita county
DAS (Distribution Automation System) URBAN, municipality of focsani, Vrancea county
Modernization of electricity distribution installations belonging to Targoviste branch, for flats housing in
Pucioasa locality
Modernization of 110 kV OHL focsani Vest – Tataranu, pillars 1-125
Modernization and SCADA system integration of Măgura Substation
Modernization and SCADA system integration of Comarnic 110/20 kV Substation
Modernization and SCADA system integration of Breaza 110/20 kV Substation
Modernization of Scaieni 110/20 kV Substation
Modernization and SCADA system integration of 110/20 kV iCM Tecuci Substation, galati county
Mounting the second 110/20 kV power transformer in Vidra, Jugureanu, Bujoru, Cudalbi, galati Centru
110/20 kV Substations – Vol. 2 Jugureanu 110/20 kV Substation
Modernization of 110/MT substations within SDMN - Replacement of 110/MT power transformers
increasing energy efficiency of distribution network and improving technical conditions for power
supply of the consumers by switching to 20 kV transformer stations from the Hipodrom, Obor, Victoriei
neighbourhoods of Braila municipality
Modernization and SCADA system integration of Baraganu 110/20 kV Substation
increasing the energetic efficiency of distribution installations and improving technical conditions for
electricity supply to household customers from 0.4 kV OHL in locality of ianca, Braila county
Modernization of LV electrical connections at flats housing of neighbourhoods Viziru i, Obor, Hipodrom
and of streets Calea galati, Eremia grigorescu from Braila municipality
Modernization and SCADA system integration 110kV/20kV insuratei Substation, Braila county
Modernization of LV OHL and LV electrical connections in locality of Lanurile, Braila county
Modernization of LV OHL and LV electrical connections in locality of Chiscani, Braila county
Modernization and SCADA system integration of Patarlagele 110/20 kV Substation
Switching of MV networks from 6 kV to 20 kV, voltage level improvement of area Sos. Spatarului, Aleea
industriei, Sos. Brailei
Modernization - voltage level improvement at consumers of Village Sibiciu de Jos, Panatau commune,
Buzau county
Modernization of transformer stations of galati municipality, Tiglina 1 area, galati municipality
improving technical conditions for power supply of the consumers in Cheia village, Maneciu commune –
20/6 kV transformer station
Modernization and SCADA system integration of Azuga 110/20/6 kV Substation
Upgrading protections of 110 kV cell and 6 kV cells, installation of the second neutral treatment group by
resistor at 20 kV and SCADA system integration in 110/27,5/20/6 kV Ploiesti Nord Substation
VALUE
(RON mn)
10.43
4.48
8.05
3.96
13.36
3.75
6.64
5.93
5.38
4.41
4.54
22.22
2.06
3.53
4.34
2.14
2.82
2.31
3.47
3.34
2.39
2.36
2.42
2.90
3.20
3.09
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 137
DESCRIPTION
VALUE
(RON mn)
Modernization of LV electrical connections in CE Valeni – locality of Varbilau
Modernization and SCADA system integration of gaesti 110/20 kV Substation
Traction checks, conductors stretching, insulation replacement, protective conductor replacement,
foundation restoration of OHL 110 kV fieni – Moroeni, circuit 1+2, between pillars 1-84
Modernization and SCADA system integration of iUP Targoviste 110/20/6 kV Substation
Modernization of LV OHL and LV electrical connections in glodeni Deal – gusoiu area and central area
Modernization of LV OHL, MV OHL and LV electrical connections in Tetcoiu area, Matarsaru commune
Modernization of 110 kV switches in substations within SDMN
Replacement of primary switching equipment at 110kV cells in the substations managed by SDMN
(Bordei Verde, Coltea, km221, Lacu Rezi, Lebada, Lunca, Port Braila, Spiru Haret, Urleasca, Zatna, faurei,
Buzau Est, Ceil focsani, inetof, Moreni, Lespezi)
Automated distribution system for M.T. air power lines in the Distribution Branches within SDMN, STAgE
V- vol. 3
TRANSILVANIA NORD
Modernization of Nadas 110/20 KV Substation
Optimization of central point’s Cluj and Oradea, implementation and installation of EMS application with
update of DMS Cluj and DMS implementation in Oradea - stage 3, DMS Baia Mare, Bistrita, Satu Mare,
Zalau
Modernization of LV connections in the localities: Salard, Santandrei, fughiu, Nojorid
Modernization of Vascau 110/20 kV Substation
Modernization of Zalau 110/20 kV Substation
Mounting remote-controlled switches and reclosers within SD Zalau and SD Cluj, stage 2018
Modernization of Mihai Viteazu 110/20 kV Substation
Modernization of gherla 110/20 kV Substation
Switching to 20 kV of transformer stations within Baia Mare branch – stage 1 2017
Switching to 20 kV of networks within Satu Mare branch - Distributor: SM1-PA 1003 BUJOR-PA1021
MARA-SM1
Switching of MV networks from 6 kV to 20 kV in the municipality of Carei
Modernization of Unirea 110/20 kV Substation
Switching to 20 kV of distributors L5, L6, L17 and L2SMA from Turda Substation, Turda municipality, Cluj
county
2.60
3.26
3.50
2.42
2.14
2.73
3.17
4.75
3.42
2.00
2.80
5.00
3.80
4.90
3.70
3.20
3.10
4.30
4.00
6.00
4.70
4.30
Replacing of 110/MV power transformers with low-loss transformers SDTN stage 1 and 2
17.10
TRANSILVANIA SUD
Modernization of LV electricity distribution network in Avrig city, Str. gheorghe Lazar area, Sibiu county
Modernization of LV OHL and LV electrical connections in work point Covasna and intorsura Buzaului,
Covasna county
Replacing of LV OHL conductors and modernization of electrical connection in CE Tg. Secuiesc, Covasna
county
Replacing of LV OHL conductors and modernization of electrical connection in CE Sf. gheorghe, Covasna
county
Modernization of electricity supply installations for flats housing within SDTS Harghita
Conductor replacements, systematization and securing of LV OHL electrical connections ileni,
reconfiguration of 20 kV OHL Sebes, Brasov county
Voltage level improvements of LV OHL Ojdula, Covasna county
Voltage level improvements and modernization of 0.4 kV OHL Tarlungeni, in locality of Tarlungeni, Brasov
county
Voltage level improvements in Pauleni – Ciuc commune, villages Pauleni-Ciuc, Soimeni and Delnita,
Harghita county
Voltage level improvements of PTa 1, PTa 2, PTa 3 Micfalau area, Covasna county
2.80
3.90
6.10
7.80
3.30
3.36
3.00
2.30
2.80
2.40
ELECTRICA SA 138 | A N N U A L R E P O R T 2 0 1 8
DESCRIPTION
Modernization of transformer stations (MV cell replacement, indoor network distribution board of Astra
neighbourhood, Tractorul, Triaj, Craiter, garii area, Uzina 2, Racadau, etc), in locality of Brasov, Brasov
county
Modernization of transformer stations and LV connections in locality of Sighisoara ( PTz 75, PTz 70, PTz
5, PTz 72, PTz 37, PTz 62, PTz 82, PTz 81, PTz 11, PTz 1, PTz 78, PTz 44, PTz 8, PTz 12, PTz 4, PTz 23, PTz 38 ),
Mures county
Switching to 20 kV of MT networks PA 3 Astra neighbourhood, in locality of Brasov, Brasov county
Switching to 20 kV of the MT networks operating at the 6 kV in Tg. Mures locality, Mures county – ob. MV
Works
Modernization of 20 kV OHL Ludus - Cipau, Mures county
Modernization and route modifying of 110 kV underground cable lines Brasov - iUS and Zizin – iUS,
Brasov county
Modernization of 110 kV OHL Zizin - iABv - Metrom and 110 kV OHL Darste - iABv - Racadau by partial
passage in 110 kV underground cable line
increasing supply reliability for the users connected to 110/20/6 kV Ocna Mures substation, Alba county
Retrofitting of Medias 110/20 kV substation, Sibiu county
integration of substations belonging to CEM 110 kV Mures into the SCADA DMS system of SDTS
integration of substations belonging to CEM 110 kV Sibiu into the SCADA DMS system of SDTS
Replacing of MV/LV power transformers with low-loss transformers
Modernization (conductor replacements, systematization and securing of LV OHL electrical connections)
of urban networks in Brasov, Brasov county – Str. Lacurilor, Stejarului, Brazilor - Noua neighbourhood
VALUE
(RON mn)
15.10
2.50
3.50
3.90
3.60
4.80
2.80
6.90
4.60
3.40
2.80
13.2
2.12
During 2018, the largest transfers from ongoing tangible fixed assets to tangible fixed assets are mainly represented
by the commissioning of investment objectives, as follows:
Commissioning 2018
DESCRIPTION
MUNTENIA NORD
Modernization of LV connections related to aerial transformation points powered from 20 kV OHL Vadu
Soresti, Buzau county
Modernization of transformer stations powered from 20kV Eternitatii underground line, in municipality
of Targoviste, Dambovita county
DAS (Distribution Automation System) URBAN, municipality of focsani, Vrancea county
implementation of DAS (Distribution Automation System) RURAL in branches of SDMN stage 2016, VOL3
– Targoviste branch + Braila branch
Modernization of electricity distribution installations belonging to Targoviste branch, for flats housing in
Pucioasa locality
Modernization of 110 kV OHL focsani Vest – Tataranu, pillars 1-125
Modernization and SCADA system integration of Comarnic 110/20 kV Substation
Modernization and SCADA system integration of Breaza 110/20 kV Substation
Modernization of Scaieni 110/20 kV Substation
Modernization and SCADA system integration of iCM Tecuci 110/20 kV Substation, galati county
Modernization and SCADA system integration of gaesti 110/20 kV Substation
Mounting the second 110/20 kV power transformer in Vidra, Jugureanu, Bujoru, Cudalbi, galati Centru
110/20 kV Substations – Vol. 2 Jugureanu 110/20 kV Substation
Modernization of 110/MV substations within SDMN - Replacement of 110/MV power transformers -
group i + grup ii
Modernization of 110 kV switches in substations within SDMN
increasing energy efficiency of distribution network and improving technical conditions for power
supply of the consumers by switching to 20 kV transformer stations from the Hipodrom, Obor, Victoriei
neighbourhoods of Braila municipality
VALUE
(RON mn)
9.56
4.72
8.11
4.76
4.18
13.64
4.01
6.57
4.29
5.53
4.60
4.16
21.59
3.87
2.06
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 139
DESCRIPTION
VALUE
(RON mn)
Traction checks, conductors stretching, insulation replacement, protective conductor replacement,
foundation restoration of OHL 110 kV fieni – Moroeni, circuit 1+2, between pillars 1-84
Ensuring the technical conditions for operation of the 110 kV installations at the Maxineni 110/20 kV
Substation, Braila County
Modernization and SCADA system integration of Baraganu 110/20 kV Substation
increasing the energetic efficiency of distribution installations and improving technical conditions for
electricity supply to household customers from 0.4 kV OHL in locality of ianca, Braila county
Modernization of LV electrical connections at flats housing of neighbourhoods Viziru i, Obor, Hipodrom
and of streets Calea galati, Eremia grigorescu from Braila municipality
Modernization of LV OHL and LV electrical connections in locality of Lanurile, Braila county
Modernization of LV OHL and LV electrical connections in locality of Chiscani, Braila county
Modernization and SCADA system integration of Vernesti 110/20 kV Substation
Modernization and SCADA system integration of Patarlagele 110/20 kV Substation
Switching of MV networks from 6 kV to 20 kV, voltage level improvement of area Sos. Spatarului, Aleea
industriei, Sos. Brailei
Modernization - voltage level improvement at consumers of Village Sibiciu de Jos, Panatau commune,
Buzau county
Modernization and SCADA system integration of Magura Substation
improving technical conditions for power supply of the consumers in Cheia village, Maneciu commune
– 20/6 kV transformer station
Modernization of LV connections in CE Valeni- locality of Predeal-Sarari, Teisani
Modernization and SCADA system integration of Azuga 110/20/6 kV Substation
Protections upgrading of 110 kV cell and 6 kV cells, installation of the second neutral treatment group by
resistor at 20 kV and SCADA system integration in 110/27,5/20/6 kV Ploiesti Nord Substation
Modernization of LV electrical connections in CE Valeni – locality of Varbilau
Modernization and SCADA system integration of Aninoasa 110/20 kV substation
Modernization of transformer stations powered from 20kV Bratianu underground line, municipality of
Targoviste, Dambovita county
Modernization of LV OHL and LV electrical connections in glodeni Deal – gusoiu area and central area
Modernization of MV OHL, LV OHL and LV electrical connections in Tetcoiu area, Matasaru commune
Replacement of primary switching equipment to 110kV cells in the substations of SDMN (Bordei Verde,
Coltea, km221, Lacu Rezi, Lebada, Lunca, Port Braila, Spiru Haret, Urleasca, Zatna, faurei, Buzau Est, Ceil
focsani, inetof, Moreni, Lespezi)
TRANSILVANIA NORD
Replacement of protective conductor with OPgW on: 110 kV OHL Vascau-Beius, 110 kV OHL Vascau-Stei,
110kV OHL Vascau-Baita, Connection 110kV Suncuius, 110kV OHL M.Viteazu-Turda; 110kV OHL Vetis-
Carpati-SM1
Replacing of 110/MV power transformers with low-loss SDTN – stage 1 and 2
Optimization of central point’s Cluj and Oradea, implementation and installation of EMS application with
update of DMS Cluj and DMS implementation in Oradea - stage 3, DMS Baia Mare, Bistrita, Satu Mare,
Zalau
Modernization of Mihai Viteazu 110/20 kV Substation
Modernization of gherla 110/20 kV Substation
Modernization of Poiana 110/6 KV Substation and create 20kV bar – modernization of transformer cells
Distribution Automation System (DAS) - Mounting remote-controlled switches and Sf6 reclosers in MV
networks within SDTN – branches Cluj – Napoca, Satu Mare and Oradea
Switching to 20 kV of distributors L5, L6, L17 and L2SMA from Turda Substation, Turda municipality, Cluj
county
Modernization of 110 kV OHL Oradea Vest - Voivozi
Modernization of Vascau 110/20 kV Substation
Modernization of Stei 110/20/6 kV Substation - External 110kV cells
Modernization of Tileagd 110/20 kV Substation - External 110kV cells
Modernization of transformer stations powered from Oradea Nord 110/20kV Substation, SC2, SC2, from
iosia 110/20kV Substation, from Palota 110/20kV Substation, Crisul, Biharea, CET ii, Velenta, and from
Oradea Centru 110/20kV Substation and Oradea Sud, Oradea locality, Bihor county
3.60
2.03
3.04
4.85
2.37
2.32
3.51
2.37
2.59
2.17
2.47
3.12
2.67
2.09
2.21
2.16
2.70
2.33
2.01
2.44
2.11
4.23
2.40
16.80
2.30
4.40
3.40
3.80
10.30
4.60
6.10
2.00
4.40
2.80
10.10
ELECTRICA SA 140 | A N N U A L R E P O R T 2 0 1 8
DESCRIPTION
VALUE
(RON mn)
Construction of MT Underground cable in order to increase the power supply reliability
in area Baile felix, Bihor county
Modernization of LV connections in localities Salard, Santandrei, fughiu, Nojorid – 2528 connections
increasing safety and power supply reliability in area Sintandrei, Santandrei locality, area Calea
Santandreiului, Palota, Porcine, fibralex
increasing power supply reliability for users connected to Somcuta 110/MV Substation
Modernization of Baia Mare 1 - 110/35/20/10/6kV Substation
Switching to 20 kV of Sasar neighbourhood, Baia Mare - stage 3 and 4
Switching to 20 kV of transformer stations within Baia Mare branch – stage 1
Ensuring continuity in power supply of consumers from Carei area - Realization of connection 110kV
underground cable Vetis-Carei
Switching to 20 kV of networks within Satu Mare branch - Distributor: SM1-PA 1003 BUJOR-PA1021
MARA-SM1
Switching of MV networks from 6 kV to 20 kV in the municipality of Carei
increasing power supply reliability for users connected to 110/MV Beclean Substation
Modernization of Unirea 110/20 kV Substation
Modernization of Zalau 110/20 kV Substation
TRANSILVANIA SUD
Modernization of low voltage electricity distribution network in Avrig city, Str. gheorghe Lazar area, Sibiu
county
Modernization of LV OHL and LV electrical connections in work point Covasna and intorsura Buzaului,
Covasna county
Replacing of LV OHL conductors and modernization of electrical connection in CE Tg. Secuiesc, Covasna
county
Replacing of LV OHL conductors and modernization of electrical connection in CE Sf. gheorghe, Covasna
county
Modernization of electricity supply installations for flats housing within SDTN - Harghita
Conductor replacements, systematization and securing of LV OHL electrical connections ileni,
reconfiguration of 20 kV OHL Sebes, Brasov county
Voltage level improvements and modernization of 0.4 kV OHL Tarlungeni, in locality of Tarlungeni,
Brasov county
Voltage level improvements of LV OHL Ladauti, Covasna county
Voltage level improvements of PTa 1, PTa 2, PTa 3 Micfalau area, Covasna county
Modernization of transformer stations (MV cell replacement, indoor network distribution board of Astra
neighbourhood, Tractorul, Triaj, Craiter, garii area, Uzina 2, Racadau, etc),in locality of Brasov, Brasov
county
Switching to 20 kV of MT networks PA 3 Astra neighbourhood, in locality of Brasov, Brasov county
Modernization of 20 kV OHL Ludus - Cipau, Mures, county
Modernization (conductor replacements, systematization and securing of LV OHL electrical connections)
of urban networks in Brasov, Brasov county – Str. Lacurilor, Stejarului, Brazilor - Noua neighbourhood
Modernization of LV networks in the municipality of Brasov, Brasov county - Str. Mircea cel Batran, Barbu
St. Delavrancea, Decebal, Baba Novac, ioan Ratiu, Dealul Cetatii - Old City neighbourhood
Switching of Zarnesti overhead lines (OHL) from 6 kV to 20 kV and increase the power supply reliability in
the Magura area, Pestera, Brasov county - Object 1
Modernization of primary and secondary equipment of Turnatorie 110/6 kV Substation, Alba county
increasing supply reliability for the users connected to 110/20/6 kV Ocna Mures substation, Alba county
Modernization of 110 kV cells in substations
Retrofitting of Medias 110/20 kV substation, Sibiu county
3.70
5.80
2.30
2.20
4.50
3.40
2.00
2.30
3.40
6.70
4.30
4.80
2.60
2.58
4.10
5.4
7.68
4.30
3.26
2.40
2.03
2.5
15.3
2.7
3.26
2.14
2.3
2.34
3.28
6.77
3.05
4.15
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 141
fiNANCiAL STATEMENTS
prepared in accordance with
international financial reporting standards
as adopted by the european union
ELECTRICA SA 142 | A N N U A L R E P O R T 2 0 1 8
CONSOLiDATED
fiNANCiAL
STATEMENTS
as at and for the year ended
31 december 2018
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union
ELECTRICA SA A N N U A L R E P O R T 2 0 1 8 | 143
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
income taxes
income and expenses
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
Restatements
5.
Basis of measurement
6.
Significant accounting policies
7.
New standards and interpretations not yet adopted
8.
Performance for the year
9. Operating Segments
10. Revenue
11. Electricity Purchased
12.
13. Net finance income
14. Earnings per share
Employee benefits
15. Short-term employee benefits
16. Post-employment and other long-term employee benefits
17. Employee benefit expenses
Income taxes
18.
Assets
19. Trade receivables
20. Deposits, treasury bills and government bonds
21. Other receivables
22. Cash and cash equivalents
23. Assets held for sale
24. Property, plant and equipment
25.
intangible assets
Equity and liabilities
26. Capital and reserves
27. Non-controlling interests
28. financing for network construction related to concession agreements
29. Trade payables
30. Other payables
31. Provisions
32. Long-term bank borrowings
Financial instruments
33. financial instruments - fair values and risk management
Other information
34. Related parties
35. Subsidiaries in financial distress
36. Contingencies
37. Commitments
38. Subsequent events
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ELECTRICA SA
iNDEPENDENT
AUDiTOR'S
REPORT
SEPARATE
fiNANCiAL
STATEMENTS
as at and for the year ended
31 december 2018
prepared in accordance with Ministry of Public Finance Order no.
2844/2016 for the approval of the Accounting Regulations in
accordance with International Financial Reporting Standards
Free translation from Romanian, which is the official and binding version
A N N U A L R E P O R T 2 0 1 8 | 221
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 and general information
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 income
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 tax
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. intangible assets
22. investments in subsidiaries and loans granted to 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
31. Subsequent events
1
3
4
5
7
9
11
11
11
12
12
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27
28
29
30
30
31
34
35
37
38
38
38
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42
43
47
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49
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57
59
60
Free translation from Romanian, which is the official and binding version
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10
In 2018, the Company collected the entire amount of the total income of RON 301,491,712 as dividends
from its subsidiaries (2017: RON 302,341,425).
The average interest rate for deposits, treasury bills and government bonds with original maturity of three
months increased from 0.78% in 2017 to 1.91% in 2018.
ELECTRICA SA
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iNDEPENDENT
AUDiTOR'S
REPORT
284 | A N N U A L R E P O R T 2 0 1 8
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, 2018, 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.
Valentin Radu
non-executive director, Chairman of the Board of Directors
Ramona Ungur
non-executive director
gicu iorga
non-executive director
Bogdan iliescu
non-executive director
Dragos Andrei
non-executive director
Niculae Havrilet
non-executive director
Radu florescu
non-executive director
georgeta Corina Popescu
general Manager
ELECTRICA SA