Societatea Energetica Electrica S.A
Annual Report 2023

Plain-text annual report

Annual REPORT 2023 2 3 Summary 04 06 Message from the Chair of the Boards of Directors Message from the Chief Executive Officer 08 366 370 2023 Directors’ Report Explanations Regarding the Differences between Consolidated Financial Statements OMFP 2844/2016 vs IFRS-EU 2023 Separate Financial Statements 438 446 524 INDEPENDENT AUDITOR’S 2023 Consolidated REPORT on 2023 Financial Statements separate financial (OMFP 2844/2016) statements INDEPENDENT AUDITOR’S REPORT on 2023 consolidated financial statements (OMFP 2844/2016) years from the admission to trading on the Bucharest Stock Exchange and London Stock Exchange. Electrica Group is a key player in the energy sector, active in the distribution, supply, production, and energy services segments, serving over 3.9m users. 532 614 624 2023 Consolidated INDEPENDENT AUDITOR’S Financial Statements REPORT on 2023 Statement of the Management (IFRS-EU) consolidated financial statements (IFRS-EU) 2023 ANNUAL REPORTSUMMARY2023 ANNUAL REPORT4 5 MESSAGE FROM THE CHAIR OF THE BOARD OF DIRECTORS With a challenging year behind us, we are proud to look back on Electrica Group’s achievements in 2023 and move confidently and enthusiastically towards the future. Last year saw a remarkable development, highlighting the team’s ability to successfully navigate the energy market complexities and to turn obstacles into opportunities for growth and innovation. 2023 marked a significant milestone in the company’s path to excellence, managing to generate a financial result that reflects solid performance at consolidated level and efficiency of cost optimization strategies. This result is proof of our ongoing commitment to efficiency, sustainability and innovation. In the context of a constantly changing energy landscape, Electrica has adapted and refined its strategy in force to meet the needs of the customers and of the market and to ensure a smooth transition to a green economy, at the end of the year being launched the strategy for the next six years. The new strategic directions are meant to strengthen the Group’s position on the energy market and to accelerate performance growth, bringing benefits for customers through diversification and improvement of the portfolio of services, and also benefits for shareholders through stable long-term results. As we look to the future, our strategy for 2024-2030 is clear and ambitious. We aim to accelerate the transition to green energy and to contribute to achieving the national and European sustainability goals. We are determined to explore new growth opportunities and to harness the potential of emerging technologies for creating innovative and sustainable energy solutions. The year 2024 also represents a transition phase from the Fourth Regulatory Period (RP4) to the Fifth Regulatory Period (RP5), which will bring important news for the industry. Therefore, the watchword of this year should be flexibility - the willingness to find the best solutions, to adapt to a world in constant transformation. At the same time, 2024 also marks the 10th anniversary of the company’s listing on the capital market. This milestone opened new horizons for Electrica, by accessing capital for strategic investments and expansion in related fields. Moreover, the listing strengthened the commitment to transparency and excellence in corporate governance, building a solid foundation for the relationship with shareholders and investors. This anniversary is the opportunity to reaffirm Electrica Group’ vision and to renew its commitment to all stakeholders. It is an opportunity to celebrate past achievements but, more importantly, to look with optimism and determination to the future. In conclusion, I would like to express my gratitude to all those who contributed to Electrica’s success - the dedicated team, partners, shareholders and, of course, customers. Together, we will continue to innovate, to grow and to contribute to a greener and more sustainable world! D um it ru Chi riță Chair of the Board of Directors of Electrica MESSAGE FROM THE CHAIR OF THE BOARDS OF DIRECTORSMESSAGE FROM THE CHAIR OF THE BOARDS OF DIRECTORS2023 ANNUAL REPORT2023 ANNUAL REPORT6 7 MESSAGE FROM THE CEO The energy sector continues to undergo a stage marked by significant transformations globally and locally, against the backdrop of climate change, legislative developments, and technological innovations. With over 125 years of experience and a solid team, Electrica has successfully responded to the challenges, meeting the set objectives, although the path has not always been easy. The year 2023 was defined by our commitment to green energy and strategic investments. We focused on developing renewable energy production, expanding in this segment being more than just a business decision. It is part of our vision to contribute to building a sustainable future for Romania. As a Romanian company, we take responsibility for innovating and implementing solutions that benefit not only us and our customers but society as a whole. This is the direction we pursue with determination, with a strong focus on promoting a green economy and ensuring a cleaner environment for future generations. At the same time, thanks to optimization measures and the joint effort of the Group, we achieved solid financial results. The Electrica Group ended 2023 with an 11% increase in consolidated net profit, amounting to 620.4 million lei, and a 27% increase in EBITDA, reaching a value of 1,732.7 million lei. Together, we have succeeded in increasing the capacity of Group companies to optimize their operations, make investments, even exceeding 100% in the distribution area, improve network access, and, very importantly, better coordinate field activities. We continued to invest heavily in modernizing our IT infrastructure and management systems, as well as in cybersecurity, all contributing to the safety and improvement of the quality of services offered to our customers. The optimization process is a complex and continuous one, naturally pursuing the interests of both our customers and our shareholders. Also, through our distribution operator, last year we achieved another important milestone - attracting non-reimbursable financing totalling about a quarter of a billion euros for the development and modernization of the networks we manage. This is the largest amount in the field. In terms of recognition, for the third consecutive year, Electrica has been among the companies that received a maximum score of 10 in the VEKTOR evaluation, the indicator of communication with investors for companies listed on the stock exchange. Moreover, this has been a constant concern for us, as throughout the year we were one of the three companies selected in the Investor Relations and Liquidity Support Program run by the European Bank for Reconstruction and Development and the Bucharest Stock Exchange. Also, another remarkable achievement is the inclusion of Electrica in the international FTSE Russell indices starting on 18 March 2024, which complements the fact that Electrica shares recorded an exceptional yield both in 2023 (43.4%) and in the first quarter of 2024 (16%), exceeding the BET-TR index (40% in 2023, respectively 10.8% in the first quarter of 2024). Also in 2023, Electrica maintained its position as 7th in the Top 50 most valuable Romanian brands, being the highest position occupied so far. The company’s brand market value, estimated in the ranking, reached 260 million euros, representing a 28% increase compared to 2022. Last but not least, I want to thank each member of the Electrica team for their dedication and effort in 2023. I am grateful to our partners, collaborators, shareholders, and, of course, our customers for the trust they have placed in us and for the constant support they have provided. Collectively, we hold the power to craft a greener and more prosperous future for Romania’s energy landscape! Al ex a ndru Chiriță Electrica’s CEO MESSAGE FROM THE CHIEF EXECUTIVE OFFICERMESSAGE FROM THE CHIEF EXECUTIVE OFFICER2023 ANNUAL REPORT2023 ANNUAL REPORT8 9 DIRECTORS’ REPORT FOR THE YEAR 2023 (based on the individual and consolidated financial statements prepared in accordance with the International Financial Reporting Standards as adopted by the European Union) – IFRS-EU REGARDING THE ECONOMIC AND FINANCIAL ACTIVITY OF SOCIETATEA ENERGETICA ELECTRICA S.A. and ELECTRICA GROUP as well as (based on the individual and consolidated 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) – OMFP 2844/2016 REGARDING THE ECONOMIC AND FINANCIAL ACTIVITY OF SOCIETATEA ENERGETICA ELECTRICA S.A. and ELECTRICA GROUP in compliance with art. 63 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 for the 12-month period ended 31 December 2023 Code NOTE: This report contains the financial analysis of both sets of financial statements mentioned above, which were drawn up and submitted to the approval of the Ordinary General Meeting of Shareholders on 27 April 2023 by the Board of Directors of Electrica S.A.. Further in this report, where there are differences between financial indicators, the corresponding standard will be expressly marked (S-IFRS-EU, respectively S-OMFP 2844/2016) Free translation from Romanian, which is the official and binding version, and will prevail, in the event of any discrepancies with the English version 10 11 Contents Identification details of Electrica 1 Electrica 2023 Overview 1.1 1.1.1 1.1.2 2023 Key financial data 2023 Key financial data - S-IFRS-EU 2023 Key financial data - S-OMFP 2844/2016 1.2 Key events in 2023 1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 1.2.6 1.3 1.3.1 1.3.2 1.3.3 1.3.4 Decisions of ELSA’s BoD General Meetings of Shareholders (GMS) Other relevant events Litigations with significant impact on the financial performance Distribution segment Supply segment Subsequent events to the balance sheet date General Meetings of Shareholders Decisions of ELSA’s BoD Other relevant events Litigation 2 Electrica Group 2.1 2.2 2.3 2.4 Organizational structure Key elements of the 2024 – 2030 Corporate Strategy Outlook Key factors, directions and significant market trends affecting the operational results of Electrica Group 3 Electrica on the capital markets 3.1 3.2 3.2.1 3.2.2 Ownership structure Shares evolution on BSE and Global depository receipts (GDRs) evolution on LSE BSE shares: Global Depositary Receipts (GDRs) on the LSE: 14 16 18 18 19 26 26 28 29 40 45 47 50 50 50 51 53 55 56 59 63 68 75 76 77 77 78 3.3 3.4 3.5 3.6 3.7 Investor relations (IR) Related parties transactions Dividends policy Dividend distribution Own shares 4 Corporate Governance in ELSA 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Corporate Governance Code General Meeting of ELSA’s Shareholders Shareholders’ rights ELSA’s Board of Directors The activity of ELSA’s Board of Directors and of its consultative committees in 2022 ELSA’s Executive management Remuneration of the Directors and of the Executive Managers with mandate agreements Statement regarding the corporate governance “Comply or Explain” Implementing action plans undertaken by signing the framework agreement with EBRD 4.10 Internal audit activity report for 2023 5 Operating activity of Electrica in 2023 5.1 Operating segments 5.1.1 5.1.2 5.1.3 5.1.4 Distribution segment Supply segment Energy services segment Electricity production 5.2 Fixed assets 5.2.1 5.2.2 Tangible assets – summarize key aspects of their location and main characteristics Tangible assets – summarize key aspects of their attrition 81 83 83 84 85 87 88 90 92 94 108 116 122 122 132 141 143 144 145 146 147 148 149 149 150 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT12 13 5.2.3 5.2.4 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Investments Aspects of ownership of tangible assets Procurement Sales activity Personnel Environmental considerations Research and development activities Significant aspects of the impact of subsidies on the capitalization of additional costs related to technological consumption (NL) Principle of business continuity – substantiation and working hypothesis 6 Electrica financial reporting for 2023 6.1 6.1.1 6.1.2 6.2 6.2.1 6.2.2 6.3 6.3.1 6.3.2 6.4 6.5 6.6 6.7 6.8 6.9 7 Statements Consolidated statement of the financial position Consolidated statement of the financial position – S-IFRS-EU Consolidated statement of the financial position – S-OMFP 2844/2016 Consolidated statement of profit or loss Consolidated statement of profit or loss – S-IFRS-EU Consolidated statement of profit or loss – S-OMFP 2844/2016 Consolidated cash flow statement Consolidated cash flow statement –S-IFRS-EU Consolidated cash flow statement- S-OMFP 2844/2016 Separate statement of the financial position Separate statement of profit or loss Separate cash flow statement Restatements – S-IFRS-EU Risk management Description of the main features of internal control and risk management systems in relation to the financial reporting process 152 157 157 158 162 166 168 169 170 173 174 174 180 186 186 192 199 199 203 207 212 214 218 220 233 237 Appendix 1 – Litigations A.1 Electrica Group litigations in 2023: A.1.1 A.1.2 A.1.3 A.1.4 A.1.5 Disputes with ANRE Fiscal matter disputes Other significant litigations (with a value higher than EUR 500 thousand) Litigations against the Romanian Court of Accounts Other litigations with significant impact204 Appendix 2 – Details of the main investments of Electrica Group during 2023 Appendix 3 – Applicable regulatory framework A.3.1 Applicable legal framework compared to 2023 vs 2022 A.3.1.1 Distribution activity A.3.1.2 Supply activity A.3.2 Changes to the legal framework in 2023/2024 up to the date of approval of the financial statements A.3.2.1 Distribution segment A.3.2.2 Supply segment Appendix 4 – Corporate Governance A.4.1 A.4.2 A.4.3 A.4.4 The Board of Directors of ELSA’s subsidiaries Executive management of ELSA’s subsidiaries Number of shares owned by the managers of Electrica Group General Meetings of Shareholders of ELSA subsidiaries Appendix 5 – Table list Appendix 6 – Figures list Glossary 240 240 240 242 245 256 257 267 281 281 281 313 340 340 347 351 351 352 355 356 358 360 362 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT14 15 Identification details of Electrica Report date: 25 March 2024 Name of the Issuer: Societatea Energetica Electrica S.A. Headquarter: 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 3,464,435,970 Main characteristics of issued shares: 346,443,597 ordinary shares of 10 RON nominal value, out of which 6,890,593 treasury shares and 339,553,004 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. Reporting period: 2023 Year (period 1 January - 31 December 2023) Applicable accounting standards: Audit: • International Financial Reporting Standards as The consolidated financial statements (both sets, S-IFRS- approved by the European Union (“IFRS-EU”) EU and S-OMFP 2844/2016) and respectively the individual • Order of the Ministry of Public Finance no. 2844/2016 financial statements as of and for the period ended 31 for the approval of the Accounting Regulations in December 2023 are audited by an independent financial accordance with International Financial Reporting auditor. Standards (OMFP 2844/2016) Table 1. Company details ISIN ROELECACNOR5 US83367Y2072 Ordinary Shares GDR Bloomberg Symbol Currency 0QVZ RON Nominal Value RON 10 ELSA:LI USD - Stock Market Bucharest Stock Exchange REGS London Stock Exchange MAIN MARKET Ticker Source: Electrica EL ELSA 2023 DIRECTORS’ REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORT2023 ANNUAL REPORT16 17 1. ELECTRICA 2023 OVERVIEW 18 19 1.1 2023 Key financial data 1.1.1 2023 Key financial data - S-IFRS-EU S-IFRS-EU: In 2023, the net result of the Electrica Group was a profit of RON 772.1 mn., a result generated mainly by the performance of the distribution segment in the context of decreasing electricity costs to cover NL. as a result of the implementation of the MACEE centralized purchase mechanism, according to which producers are to sell 80% of the available energy at a price of 450 RON/MWh, impact mitigated by the increase in volumes of electricity needed to cover grid losses. S-IFRS-EU: For the supply segment, both in 2023 and 2022, the effect of retail electricity prices was covered by subsidies received from the state authorities as a result of the application of the electricity and natural gas price cap mechanism, following the application of Ordinance 27/2022, as amended and supplemented. The way these schemes were implemented and the mechanism for the settlement of the amounts granted as support to customers, ex-post from the state budget to the electricity suppliers, generated constraints in terms of cash flow, as well as uncertainties regarding the full recovery of these amounts by the suppliers. In this context, EFSA has adapted its medium and long-term strategy to manage the impact of these measures on the company’s activities in a responsible and sustainable manner in the context of a regulatory framework that has undergone many successive and major changes in recent times. S-IFRS-EU: As of 31 December 2023, the Group has a capital structure with net debt position of RON 3,835 mn. (31 December 2022: RON 3,051 mn., respectively 31 December 2021: RON 1,056 mn.). Figure 1: Consolidated revenue of Electrica Group (RON mn.) - S-IFRS-EU Figure 2: EBITDA (RON mn.) and EBITDA margin (%)- S-IFRS-EU 10,010 10,010 9,8179,817 9,401 9,273 7,1797,179 6,597 17.5% 1,714 3.7% 374 -1.8% (128) Green Certificates Revenues Revenues excl Green Certificates EBITDA EBITDA Margin Source: Electrica Source: Electrica S-IFRS-EU: The revenues of the Electrica Group in 2023, 2022 and 2021 were RON 9,817 mn., RON 10,010 mn., respectively RON 7,179 mn. Figure 3: Consolidated net profit (RON mn.) - S-IFRS-EU Figure 4: Net debt (RON mn.) - S-IFRS-EU Table 2. Key financial data for 2023 – 2021 - S-IFRS-EU (RON mn.) Revenue Other operating income Operational costs EBITDA EBIT Gross profit Net profit 2023 9,817 3,499 2022* 10,010 2,841 2021 7,179 196 (12,123) (12,973) (7,980) 1,714 1,192 898 772 374 (123) (288) (240) (128) (606) (632) (553) Source: Electrica *The amounts for 2022 have been restated, detailed in sub-chapter 6.7 of this report S-IFRS-EU: As can be seen in the graphs below, the EBITDA margin increased by RON 1,340.5 mn. in 2023 compared to 2022 (vs. RON 502 mn. increase in 2022 compared to 2021), while the net profit margin increased by RON 1,012.6 mn. (vs. increase RON 312.5 mn. in 2022 compared to 2021). 1 Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation or namely EBITDA) is defined and calculated as profit/ (loss) before tax adjusted for i) depreciation, amortization and impairment/reversal of impairment of property, plant and equipment and intangible assets, and iii) net finance income. EBITDA is not an IFRS measure and should not be treated as an alternative to IFRS measures. Moreover, EBITDA is not uniformly defined. The method used to calculate EBITDA by other companies may differ significantly from that used by the Group. As a consequence, the EBITDA presented in this note cannot, as such, be relied upon for the purpose of comparison to EBITDA of other companies. 7.9% -2.4% 3,051 3,835 -7.7% 1,056 Net Result Net Result Margin Source: Electrica Source: Electrica 1.1.2 2023 Key financial data - S-OMFP 2844/2016 S-OMFP 2844/2016: In 2023, the net result of the Electrica Group was a profit of RON 620 mn., a result generated mainly by the performance of the distribution segment in the context of decreasing electricity costs to cover NL. as a result of the implementation of the MACEE centralized purchase mechanism, according to which producers are to sell 80% of the available energy at a price of 450 RON/MWh, impact mitigated by the increase in volumes of electricity needed to cover grid losses. Starting from 30 September 2022, the Company applies the provisions of GEO no. 119/2022, whereby the additional costs with the purchase of electricity made in the period 1 January 2022 - 31 August 2023, in order to cover its own technological consumption, compared to the costs recognized in the regulated tariffs, are capitalized quarterly. For the evolution in terms of financial performance 2023 vs 2022, in 2023, the capitalized NL for the period 01 January - 31 December 2023 was approx. 18 mn. RON compared to 2022 2 Net debt/(Cash) is defined as bank borrowings + bank overdrafts + financial leases + funding for concession agreements - cash and cash equivalents – restricted cash - bank deposits, treasury bills and government bonds. 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT20 21 when a value of 989 mn. RON was recorded, the Group managing to reduce the additional costs related to S-OMFP 2844/2016: As of 31 December 2023, the Group has a capital structure with net debt position of RON the purchase of electricity for NL on the distribution segment. The operational performance was motivated 3,835 mn. (31 December 2022: RON 3,051 mn., respectively 31 December 2021: RON 1,056 mn.). by the decrease in NL costs and by the reduction of other operational costs as well as by higher revenues from reactive energy. It should be mentioned that the intangible assets built up together with the income from capitalisation of NL costs are non-cash, in the coming periods they will be recovered in terms of billings and subsequently receipts, starting from 01 April 2023. S-OMFP 2844/2016: For the supply segment, both in 2023 and 2022, the effect of retail electricity prices was covered by subsidies received from the state authorities as a result of the application of the electricity and natural gas price cap mechanism, following the application of Ordinance 27/2022, as amended and supplemented. The way these schemes were implemented and the mechanism for the settlement of the amounts granted as support to customers, ex-post from the state budget to the electricity suppliers, generated constraints in terms of cash flow, as well as uncertainties regarding the full recovery of these amounts by the suppliers. In this context, EFSA has adapted its medium and long-term strategy to manage the impact of these measures on the company’s activities in a responsible and sustainable manner in the context of a regulatory framework that has undergone many successive and major changes in recent times. S-OMFP 2844/2016: The revenues of the Electrica Group in 2023, 2022 and 2021 were RON 9,817 mn., RON 10,010 mn., respectively RON 7,179 mn. Table 3: Key financial data for 2023 – 2021 - S-OMFP 2844/2016 (RON mn.) Revenue Other operating income Capitalised costs of intangible non-current assets 2023 9,817 3,499 19 2022 10,010 2,841 989 2021 7,179 196 - Figure 5: Consolidated revenue of Electrica Group (RON mn.) - S-OMFP 2844/20166 Figure 6: EBITDA (RON mn.) and EBITDA margin (%) - S-OMFP 2844/2016 10,010 10,010 9,8179,817 7,1797,179 6,597 9,401 9,273 -1.8% 13.6% 1,363 17.7% 1,733 Green Certificates Revenues Revenues excl Green Certificates EBITDA EBITDA Margin Source: Electrica Source: Electrica Figure 7: Consolidated net profit (RON mn.) - S-OMFP 2844/2016 Figure 8: Net debt (RON mn.) - S-OMFP 2844/20166 5.6% 559 6.3% 620 (553) -7.7% 3,051 3,835 1,056 Operational costs (12,323) (13,011) (7,980) Net Result Net Result Margin EBITDA EBIT Gross profit Net profit Source: Electrica 1,733 1,011 717 620 1,363 829 664 559 (128) (606) (632) (553) Source: Electrica Source: Electrica DISTRIBUTION SEGMENT Essential market information: S-OMFP 2844/2016: As can be seen in the graphs below, the EBITDA margin increased by RON 370 mn. in • Electricity distribution in Romania is fulfilled mainly by six electricity distribution system operators, 2023 compared to 2022 (vs. RON 1,491 mn. increase in 2022 compared to 2021), while the net profit margin regulated by ANRE; increased by RON 61 mn. (vs. increase RON 1,112 mn. in 2022 compared to 2021). • Each company is responsible for the exclusive distribution of electricity in the region for which it is 3 Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation or namely EBITDA) is defined and calculated as profit/ (loss) before tax adjusted for i) depreciation, amortization and impairment/reversal of impairment of property, plant and equipment and intangible assets, ii) impairment of assets held for sale and iii) net finance income. EBITDA is not an IFRS measure and should not be treated as an alternative to IFRS measures. Moreover, EBITDA is not uniformly defined. The method used to calculate EBITDA by other companies may differ significantly from that used by the Group. As a consequence, the EBITDA presented in this note cannot, as such, be relied upon for the purpose of comparison to EBITDA of other companies. authorized, under a concession agreement concluded with the Romanian State; • PPC (formerly Enel) owns three distribution companies each, while Electrica through Distributie Energie Electrica Romania (formed by the merger at 31 December 2020 of Societatea de Distributie a Energiei Electrice Transilvania Nord, Societatea de Distributie a Energiei Electrica Transilvania Sud and Societatea de Distributie a Energiei Electrice Muntenia Nord), owns 3 network zones, CEZ through Distributie Oltenia and E.ON through Delgaz Grid own the remaining two; 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT22 23 • Electrica Group is a key player in the electricity distribution sector, both in terms of areas covered and of KEY FINANCIAL INDICATORS FOR DISTRIBUTION SEGMENT number of users served; • The estimated Regulated Assets Base (RAB) value at the end of 2023 was RON 7.2 bn (nominal terms); • S-IFRS-EU: In 2023, revenues from the electricity distribution segment increased by • 203,391 km of electric lines - 7,604 km for High Voltage (“HV”), 46,941 km for Medium Voltage (“MV”) and 148,846 km for Low Voltage (“LV”); • Total area covered: 97,196 km2, 40.8% of Romania’s territory; • 3.93 mn. users (2023) for the distribution activity; • 17.05 TWh of electricity distributed in 2023, a decrease of 3.8% as compared to 2022; • 39.7% market share for the distribution of electricity to final users in 2022 (based on distributed quantities, according to ANRE report for 2022). Figure 9: Romanian electricity distribution map Source: Electrica Figure 10: Evolution of the number of users (mn.) Figure 11: Quantity distributed (TWh) 9.559.55 5.785.78 3.773.77 9.679.67 5.875.87 3.803.80 9.799.79 9.99.9 5.965.96 6.066.06 3.833.83 3.883.88 44.90 44.90 44.1044.10 46.30 46.30 44.65 44.65 27.1727.17 26.62 26.62 27.83 27.83 26.93 26.93 17.73 17.73 17.48 17.48 18.47 18.47 17.73 17.73 Electrica Others Electrica Others Source: ANRE Report for performance indicators’ monitoring 2022, Electrica Source: ANRE Report for performance indicators’ monitoring 2022, Electrica approximately RON 1,014.8 mn., or 29.9%, to RON 4,411.5 mn., from RON 3,396.6 mn. in 2022 mainly due to the effect of the RON 407.6 mn. increase in revenues recognized under IFRIC 12 (recognised on the basis of the stage of completion of the works, in accordance with the accounting policy on the recognition of revenue from construction contracts), to which was added the increase in distribution tariffs as well as the decrease in volumes of electricity distributed, with a net impact of RON 725.9 mn. or 39.9%. • S-IFRS-EU: The net profit of the segment is RON 637.8 mn. in 2023, compared to the net loss of RON 491.2 mn. in 2022. The net profit is favourably influenced by the increase of revenue of RON 1,014.8 mn., reaching RON 4,411.5 mn. in 2023 compared to RON 3,396.6 mn. in 2022. • S-OMFP 2844/2016: In 2023, revenues from the electricity distribution segment increased by approximately RON 1,014.8 mn., or 29.9%, to RON 4,411.5 mn., from RON 3,396.6 mn. in 2022 mainly due to the effect of the RON 407.6 mn. increase in revenues recognized under IFRIC 12 (recognised on the basis of the stage of completion of the works, in accordance with the accounting policy on the recognition of revenue from construction contracts), to which was added the increase in distribution tariffs as well as the decrease in volumes of electricity distributed, with a net impact of RON 607.2 mn. or 24.9%. • S-OMFP 2844/2016: EBITDA in the distribution segment was favourably influenced in 2022 by revenues from the production of intangible assets from the capitalisation of additional costs with NL which contributed with an increase of RON 989.3 mn. compared to 2023 when their contribution was only RON 18.6 mn.. • S-OMFP 2844/2016: The net profit of the segment is RON 486.0 mn. in 2023, compared to the net profit of RON 308.2 mn. in 2022. The net profit is unfavourably influenced by the increase of the negative financial result by RON 57.7 mn., reaching RON 209.8 mn. in 2023 compared to the negative financial result of RON 152.0 mn. in 2022. • Also, at the beginning of the current RP4 regulatory period, ANRE made a total negative closing correction to RP3 amounting to RON (855) mn. (nominal terms) and RON (665) mn. (2018 terms), of which RON (341) mn. (2018 terms) for meters recognized as investments in RP2 (2008-2013). The meter correction was challenged in court by the distribution subsidiary of Electrica Group, because in 2013 ANRE recognized the meters in RAB based on the principle of non-discrimination of all distribution operators, although they were not registered as fixed assets. The total negative correction related to RP3 decreased the regulated profitability related to RP4, with the value for 2023 being (93) mn. RON (nominal terms). Figure 12: Revenues - distribution segment (RON mn.) - S-IFRS-EU 4,4114,411 Figure 13: EBITDA – distribution segment (RON mn.) - S-IFRS-EU 2,731 3,397 1,436 1,436 Source: Electrica Source: Electrica 372 28 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT24 25 Figure 14: Net Profit – distribution segment (RON mn.) - S-IFRS-EUU Figure 15: Net debt/(cash) – distribution segment (RON mn.) - S-IFRS-EU KEY FINANCIAL INDICATORS FOR SUPPLY SEGMENT 1,397 1,530 1,530 Revenues from electricity and natural gas supply decreased in 2023 by approximately RON 905.8 mn., or 11.1%, to RON 7,280.3 mn. from RON 8,186.0 mn. in 2022. Source: Electrica Source: Electrica Figure 16: Revenues - distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 17: EBITDA – distribution segment (RON mn.) - S-OMFP 2844/2016 4,4114,411 3,397 2,731 1,455 1,455 1,017 Source: Electrica Source: Electrica Figure 18: Net Profit – distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 19: Net debt/(cash) – distribution segment (RON mn.) - S-OMFP 2844/2016 1,397 1,530 1,530 706 Source: Electrica Source: Electrica SUPPLY SEGMENT Essential market data (according to ANRE Report for November 2023) • The supply market comprises both competitive segment and universal service and supplier of last resort (US and SoLR); • Universal service and supplier of last resort segment comprises five suppliers of last resort nominated at national level; • Competitive segment comprises 92 suppliers, (last resort suppliers active on Retail Market competitive segment included) from which 85 are relatively small (<4% market share); Electrica Furnizare (EFSA) has a total market share of 16.61%; and on the competitive market has a share of 10.25% (ANRE Report - November 2023). By comparison, in 2022 Electrica Furnizare had a total market share Quantities of electricity supplied decreased in 2023 by approximately 9%, due to the decrease in the customer portfolio, as well as the decrease in consumption at the national level (as an effect of electricity price increases but also energy efficiency measures implemented). In terms of EBITDA, the supply segment recorded in 2023 a decrease to RON 305.5 mn. from the EBITDA of RON 390.9 mn. recorded in 2022, and also a decrease in the EBITDA margin from 4.8% in 2022 to 4.2% in 2023. The supply segment has a net cash financial position that increased compared to 2022 by approx. 443.0 mn. RON, reaching 1,892.4 mn. RON in 2023. Figure 20: Revenues - supply segment (RON mn.) 8,1868,186 Figure 21: EBITDA - supply segment (RON mn.) 5,772 5,772 5,188 7,570 7,280 7,280 6,731 4.8% 390.9 4.2% 305.5 -7.6% Green Certificates Revenues Revenues excl Green Certificates EBITDA EBITDA Margin Source: Electrica Source: Electrica Figure 22: Net profit - supply segment (RON mn.) Figure 23: Net debt/(Cash) - supply segment 3.2% 1.4% 1,892 1,892 1,449 -6.8 Net Result Net Result Margin 242 of 17.96% and a competitive market share of 12.79% (ANRE report - December 2022). Source: Electrica Source: Electrica 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT26 27 1.2 Key events in 2023 During 2023 the following main events took place: 1.2.1 Decisions of ELSA’s BoD Changes in the composition of the BoD and BoD Committees May 2023. • On 31 July 2023, the Board of Directors of • On 27 January 2023, ELSA’s Board of Directors Electrica decided to modify the Audit and Risk decided to establish a new consultative Committee component, for the period starting committee within its structure, the Climate with 1 August 2023 and until 31 December 2023. Governance and Public Affairs committee. The Climate Governance and Public Affairs – Mr. Radu Mircea Florescu – Chair; Audit and Risk Committee: Committee: – Mr. Dragos-Valentin Neacsu – Chair; – Mr. George Cristodorescu – Member; – Ms. Valentina Elena Siclovan – Member; – Mr. Iulian Cristian Bosoanca – Member. – Mr. Iulian Cristian Bosoanca – Member. • On 15 December 2023, Electrica’s Board of Electrica decided the re-election of the BoD • During the meeting from 15 May 2023, the Board Chair and to maintain the composition of its of Directors of the Company took note of the of consultative committees until 31 January 2024. the ending of the mandate agreement of Mr. Cristodorescu George, BoD member. Regarding the composition of ELSA’s BOD, on 31 December 2023, it was the following: • On 16 May 2023, Electrica’s Board of Directors decided to modify as follows the composition for two of its consultative committees, for the period starting 17 May 2023 and until 31 December 2023, namely: The Strategy and Corporate Governance Committee: – Mr. Gicu Iorga – Chair; – Mr. Dragos Valentin Neacsu – Member; – Mr. Adrian-Florin Lotrean – Member. The Climate Governance and Public Affairs Committee: – Mr. Dragos Valentin Neacsu – Chair; – Mr. Radu Mircea Florescu – Member; – Mr. Cristian Bosoanca – Member. • On 19 July 2023, Electrica’s Board of Directors appointed Ms. Valentina Elena Siclovan as interim member of the BoD, starting 24 July 2023 until the next Ordinary General Meeting of Shareholders, on the position vacant since 15 – Mr. Iulian Cristian Bosoanca – Chair; – Mr. Gicu Iorga – Member; – Mr. Ion Cosmin Petrescu – Member; – Mr. Adrian-Florin Lotrean – Member (independent); – Mr. Dragos-Valentin Neacsu – Member (independent); – Mr. Radu Mircea Florescu – Member (independent); – Ms. Valentina Elena Siclovan – Member (independent) Regarding the composition of the ELSA’s BoD Committees, on 31 December 2023, it was the following: The Audit and Risk Committee: – Mr. Radu Mircea Florescu – Chair; – Ms. Valentina Elena Siclovan – Member; – Mr. Iulian Cristian Bosoanca – Member. The Nomination and Remuneration Committee: – Mr. Adrian-Florin Lotrean – Chair; – Mr. Radu Mircea Florescu– Member; – Mr. Ion Cosmin Petrescu – Member. Development Officer (appointed for 4 years The Strategy and Corporate Governance – Ms. Livioara Sujdea – Chief Distribution Committee: – Mr. Gicu Iorga – Chair; Officer (appointed for twice 4 years mandate, starting 1 February 2021) and – Mr. Dragos-Valentin Neacsu – Member; Chief People Officer (interim, starting 3 – Mr. Adrian-Florin Lotrean – Member. January 2022). mandate, starting 15 March 2023); The Climate Governance and Public Affairs Other BoD decisions Committee: – Mr. Dragos Valentin Neacsu- Chair; • On 7 March 2023, Board of Directors of Electrica – Mr. Radu Mircea Florescu – Member; decided to convene the Ordinary General – Mr. Cristian Bosoanca – Member. Meeting of Shareholders and the Extraordinary BoD decisions regarding ELSA’s Executive Management General Meeting of Shareholders, on 27 April 2023. • In the meeting of 26 April 2023, the Board of Directors of Electrica approved the consolidated • On 27 February 2023, 26 April 2023, 24 August value of the Investment Plan (CAPEX) of the 2023 and 14 December 2023, ELSA’s Board of Group for the year 2023. Directors decided to extend the term of office • On 27 June 2023, Electrica’s Board of Directors granted to Mr Alexandru - Aurelian Chirita, decided to convene the Extraordinary General as Acting CEO, under the same conditions. Meeting of Shareholders of Societatea Currently, Mr. Chirita has a CEO mandate of until Energetica Electrica S.A., on 16 August 2023. 31 December 2024 (inclusively). • On 4 July 2023, Electrica’s Board of Directors • On 27 February 2023, ELSA’s Board of Directors convened the Extraordinary General Meeting of decided to extend the duration of the mandate Shareholders of Societatea Energetica Electrica of Mr. Stefan-Alexandru Frangulea, as interim S.A. on 23 August 2023. CFO, for a period of 2 years, until 27 February • On 3 October 2023, Electrica’s Board of Directors 2025 (inclusively). Currently, Mr. Frangulea convened the Extraordinary General Meeting of has a CFO mandate until 27 February 2025 Shareholders of Societatea Energetica Electrica (inclusively). S.A., on 22 November 2023. • On 14 March 2023, ELSA’s Board of Directors • On 30 October 2023, Electrica’s Board of Directors decided the appointment of Ms. Ioana - Andreea convened the Ordinary General Meeting of Lambru, as Chief Business Development Officer Shareholders and Extraordinary General Meeting (CBDO), starting with 15 March 2023, for a four- of Shareholders of Societatea Energetica year period. Electrica S.A. on 20 December 2023. • On 27 June 2023 the BoD acknowledged that, on 1 • On 30 November 2023, Electrica’s Board of June 2023, the mandate agreement of Mr. Mircea Electrica, at the request of the Ministry of Modran, CIO, was effectively terminated upon Energy, on behalf of the Romanian State, as a lapse of the 4-year duration. shareholder of Electrica SA with 48.7948% of the share capital, decided to convene the Ordinary Regarding the composition of ELSA’s Executive General Meeting of Shareholders on 26 January Management, on 31 December 2023, it was the 2024. following: • On 14 December 2023, Electrica’s Board of – Mr. Alexandru-Aurelian Chirita – CEO Electrica approved the Corporate Strategy of (appointed until 31 December 2024); Electrica Group for 2024-2030. – Mr. Stefan-Alexandru Frangulea - CFO (appointed until 27 February 2025); – Ms. Andreea Lambru – Business 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT28 29 1.2.2 General Meetings of Shareholders (GMS) OGMS and EGMS from 27 April 2023 EGMS from 23 August 2023 • On 27 April 2023, the Ordinary General Meeting • On 23 August 2023, the EGMS took place, of Shareholders (OGMS) and the Extraordinary physically and online through the voting General Meeting of Shareholders (EGMS), which platform https://electrica.voting.ro/, with a took place physically and online through the quorum of 78.4741% of the total voting rights and voting platform https://electrica.voting.ro/, with 76.9133% of the share capital of the Company, a quorum of approx. 76.8% of the total voting which mainly approved: rights, approved mainly: – In principle, the merger by absorption – The separate and consolidated financial between Electrica (ELSA), Electrica Productie statements, drafted in accordance with Energie SA (EPE), Electrica Energie Verde 1 OMFP 2844/2016 and IFRS-EU; SRL (EEV) and Green Energy Consultancy & – The total gross dividend value of RON Investments SRL (GECI), with Electrica (ELSA) 39,999,343, the gross dividend per share as absorbing company; of RON 0.1178, the date of payment of the – The increase of the guarantee granted by dividends for the year 2022 as 23 June 2023 ELSA within the nonrevolving term facility, and the registration date as 31 May 2023; concluded between EBRD and DEER, in order – The 2023 individual and consolidated to finance the current activity, especially budgets; the purchase of the electricity necessary to – A revision of the Remuneration Policy for cover the own technological consumption Directors and Executive Managers; and the liquidity deficit. The amount of the – The appointment of Deloitte Audit SRL as credit facility will increase from RON 180 mn. financial auditor for 3 years. up to RON 240 mn. Also, the OGMS and EGMS rejected some EGMS from 22 November 2023 modifications to the remuneration of the directors, the replacement of the long-term remuneration • On 22 November 2023, the EGMS took place, plan for executive managers within the Electrica physically and online through the voting Group from granting virtual shares (OAVT) to platform https://electrica.voting.ro/, with a granting free shares, and, implicitly, the program for quorum of 77.03% of the total voting rights and buyback by the Company of its own shares. 75.49% of the share capital of the Company, EGMS from 16 August 2023 which mainly approved: – Increasing the loan ceilings for the EFSA and DEER (Electrica subsidiaries), up to • On 16 August 2023, EGMS took place physically RON 850 mn. for each, with the Electrica SA and online through the voting platform https:// guarantee (which is not a real guarantee); electrica.voting.ro/, with a quorum of approx. – The conclusion of an additional act to the 76.7% of the total voting rights. EGMS approved: loan agreement between DEER and the EIB – The documentation on the basis of which land ownership certificates (Romanian “CADP”) are to be obtained: “Teren incinta Beius”; “Teren cladire Administrativa Oravita”; „Teren cladire Statie 110kv Otelu Rosu”. (93414/7Dec2021) to increase the amount granted for the financing of the investment plan for the period 2012-2023 from EUR 90 mn. to EUR 120 mn.. – Completing the secondary activities of Electrica SA with two new activities and updating the Articles of Association accordingly. OGMS and EGMS from 20 December 2023 • On 20 December 2023, the OGMS and EGMS took place, physically and online through the voting platform https://electrica.voting.ro/, with a quorum of 76.65% of the total voting rights, which mainly approved: – The election of Ms. Valentina Elena Siclovan, proposed by the shareholder European Bank for Reconstruction and Development (EBRD), as an independent member to fill the vacant position within Electrica BoD; – The separate interim financial statements for the first 9 months of 2023 of Electrica SA, in view of the Merger between ELSA and EPE, GECI and EEV1; – Implementation and completion, by 31 December 2023, of the merger by absorption between Electrica SA (ELSA), as the absorbing company, and its subsidiaries EPE, GECI and EEV1, as absorbed companies. 1.2.3 Other relevant events • On 20 January 2023, the Ministry of Energy, as located near Vulturu locality, Vrancea county. the concessionaire, amended the concession The project is in the “ready-to-build” phase. contract with the Electrica Group for the distribution segment to reflect that, in the • On 7 March 2023 Electrica published the event of early termination of the concession consolidated annual financial statements for the contract, for any reason, the concessionaire year 2022, drawn up in accordance with OMFP would reimburse the Group the current value 2844/2016, and on 27 March 2023 published of the costs of purchasing electricity for own the consolidated annual financial statements technological consumption compared to the for the year 2022, drawn up in accordance with costs included in the regulated tariffs. the International Financial Reporting Standards adopted by the European Union (IFRS-EU), as well • On 6 February 2023, Electrica has completed as an announcement explaining the differences the acquisition of the project company Green between the two sets of consolidated financial Energy Consultancy & Investments S.R.L., which statements. develops the photovoltaic project “Vulturu”, with a designed installed capacity of 12 MWp DC • On 13 March 2023, Electrica organized a web (peak power at the panels level) and 9.75 MW conference – Presentation of the Financial AC (authorised power for delivery into the grid), Results for FY 2022 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 30 31 • On 24 March 2023, Electrica completed the • On 23 June 2023, Electrica informed its is a request submitted by SPEEH Hidroelectrica Results for Q3 2023. acquisition of the project company Sunwind shareholders and investors that the 2022 S.A. against ANRE. Energy SRL, which develops the photovoltaic Sustainability Report is available on Electrica’s • On 23 November 2023, Electrica announced project “Satu Mare 2”, with a designed installed website. capacity of 27.055 MW, located near Botiz • On 25 August 2023, Electrica published the H1 that the annulment appeal against the decision 2023 Simplified Consolidated Interim Financial issued by the ICCJ on 25 February 2022 in file locality, Satu Mare county. The project is in the • On 30 June 2023, Electrica informed its Statements and the Board of Directors’ 3889/2/2018 was settled. “ready-to-build” phase. shareholders that its subsidiary Distributie Consolidated report for H1 2023 prepared in • On 31 March 2023, Electrica announced the EUR 6.25 mn. non-reimbursable financing Finance 2844/2016. publication in the Official Gazette no. 266 from through the Modernisation Fund, the total attraction of a new non-reimbursable financing of RON 17.4 mn. through the Modernization Fund. Energie Electrica Romania (DEER) has attracted accordance with the Order of Ministry of Public • On 29 November 2023, Electrica announced the 30 March 2023 of the ANRE Order no. 27 from amounts drawn, up to 30.06.2023, being • On 30 August 2023, Electrica organized a web 29 March 2023, through which the specific tariffs EUR 64 mn. for the electricity distribution service, applicable conference – Presentation of the Financial • On 15 December 2023, Electrica announced that Results for H1 2023. the BoD approved the Corporate Strategy of from 1 April 2023 for Distributie Energie Electrica • On 7 July 2023, Electrica announced its Electrica Group for 2024-2030. Romania S.A. (DEER) were modified. shareholders and investors of the fact that, • On 20 September 2023, Electrica published • On 28 April 2023, the company published the of Appeal partially admitted the claim Financial Statements and the Board of Directors’ that it met all the criteria for entering the 2022 Annual Report. made by Electrica and partially annulled the Resolution no. 12/27.02.2017 and the Decision Standalone Report for H1 2023 prepared in international FTSE Russell indices in 2024. accordance with the Order of Ministry of Public • On 15 May 2023 was published the Q1 2023 no. 12/27.12.2016, issued by the Romanian Court Finance 2844/2016. condensed consolidated interim financial of Accounts, regarding the following deviations • On 22 December 2023, Electrica informed about the specific tariffs applicable to DEER from 1 in file no. 2229/2/2017*, the Bucharest Court the H1 2023 Condensed Separate Interim • On 20 December 2023, Electrica announced statements and the Board of Directors’ from the Decision (respectively to the correlative • On 28 September 2023, Electrica published January 2024. consolidated report for Q1 2023. measures). The decision is subject to appeal, the H1 2023 Simplified Consolidated Interim • On 15 May 2023, the Company informs its shareholders that, following the resolution of the • On 18 July 2023, Electrica informed its Consolidated Report for H1 2023 prepared in accordance with IFRS-EU. Previously, on ordinary general meeting of the shareholders shareholders and investors about the regulatory 20 September 2023, Electrica published an dated 27 April 2023, will pay the dividends for the news on electricity distribution - 2024 will financial year 2022, starting with 23 June 2023. represent a transition period from the fourth announcement release in which it reiterated the differences between the consolidated financial within 15 days from its communication. Financial Statements and the Board of Directors’ regulatory period (RP4) to the fifth regulatory statements prepared according to OMFP • On 17 May 2023, Electrica announced the final period (RP5). settlement by the High Court of Cassation and Justice (ICCJ) of the litigation against ANRE in • On 2 August 2023, Electrica published the Interim file 7614/2/2018. Key Operational Indicators for Q2 2023. 2844/2016 and those prepared according to IFRS-EU. • On 25 October 2023, Electrica published the Interim Key Operational Indicators for Q3 2023. • On 22 May 2023, Electrica organized a web • On 16 August 2023, Electrica’s Management conference – Presentation of the Financial organized a Workshop for the presentation of the • On 27 October 2023, Electrica announced to the Results for Q1 2023. merger proposed for the in-principle approval market the information published on the jut. • On 25 May 2023, Electrica announced the definitive resolution by the High Court of • On 18 August 2023, Electrica informed its on the EGMS on 23 August 2023. ro portal in connection with file 724/1285/2023 opened at the Cluj Specialized Court. Cassation and Justice (ICCJ) of the appeal filed shareholders and investors that Electrica’s • On 30 October 2023, Electrica published the by Electrica Furnizare (EFSA) in file 6665/3/2019. subsidiary, Electrica Furnizare S.A. (EFSA), was simplified standalone financial statements for • On 19 June 2023, Electrica announced its file no. 1927/2/2019 (Bucharest Court of Appeal) Merger by absorption subject for EGMS approval shareholders and investors that its subsidiary as a forced intervener (defendant), together on 20 December 2023. introduced in the case which is the object of the the first 9 months of 2023, on the occasion of the Distributie Energie Electrica Romania (DEER) with all the other last resort suppliers in 2019. has attracted EUR 57 mn. non-reimbursable EFSA was summoned for the term of 23 October • On 20 November 2023, Electrica organized a financing through the Modernisation Fund. 2023. The object of the court file no. 1927/2/2019 web conference – Presentation of the Financial Transactions with related parties During 2023, until 31 December 2023, ELSA published 25 announcements, according to art. 108 of Law no. 24/2017, reporting transactions concluded in this period between EFSA – OPCOM, DEER – OPCOM, DEER – EFSA, EFSA - Transelectrica, DEER - Hidroelectrica, whose cumulated value in the case of each announcement case exceeds the threshold of 5% of ELSA’s net assets, calculated on the basis of Electrica’s latest available individual financial statements. Also, on 31 January 2023, Electrica published the Auditor’s report regarding the transactions reported in H2 2022 according to Art. 108 Law 24/2017 (R). On 31 July 2023, Electrica informed the shareholders of the date of publication of the independent limited assurance report of the financial auditor on the transactions reported by Electrica in the period from 1 January to 30 June 2023, in accordance with the provisions of Article 108 of Law 24/2017. Also, on 11 August 2023, Electrica published the Auditor’s report regarding the transactions reported in H1 2023 according to Art. 108 Law 24/2017 (R). 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT32 33 All these announcements and auditor’s reports can guarantees until 31 December 2024. ING Bank, withing the cash pooling structure, mn. which extends the validity of Overdraft limit be found on ELSA’s website, at this address: https:// which modifies the commercial conditions and until 14 April 2024, and the validity of the Facility www.electrica.ro/en/investors/results-and-reports/ • On 30 January 2023, EFSA concluded with Banca establishes the automatic renewal of the facility. for issuing letters of guarantee until 14 April 2025. current-reports-art-108/. Transilvania, SE Electrica SA as co-debtor, the At the same time, additional acts for the intraday For more details, please see chapter 3.4 in the Additional Act no.3 to the Loan Agreement credit limit, within the cash-pooling structure, • On 18 May 2023 was signed the Additional Act no. current report. no.11673879/02.02.2022, in amount of RON 190 were concluded between DERR, EFSA, SERV, EEV1, 2 to the Loan Agreement no. GRIM/43778 dated Treasury matters Loans related to third-parties • On 9 January 2023, was signed the Additional mn., which extends the validity of the facility until SE Electrica SA and ING Bank, regarding the 19 May 2022, concluded by EFSA and Unicredit 30 January 2024 and changes the commercial automatic renewal. conditions. Bank SA, SE Electrica SA as guarantor, through which the value of the loan is converted from • On 3 March 2023, EFSA concluded with BRD the RON to EUR 60.8 mn., extends the validity of Act no.2 to the Loan Agreement no. 2022012502 • On 3 February 2023, EFSA concluded with BRD the Additional Act no.3 to the Loan Agreement no. Overdraft limit until 18 May 2024, and the validity concluded by DEER and BCR which extends the Additional Act no.2 to the Loan Agreement no. 17/8130/2022 dated 4 February 2022, SE Electrica of the Facility for issuing letters of guarantee validity of overdraft limit of RON 220 mn. and the 17/8130/2022 dated 4 February 2022, SE Electrica SA as co-debtor, in amount of RON 220 mn., until 17 May 2025. validity for issuing bank guarantees until SA as co-debtor, in amount of RON 220 mn., which extends the validity until 2 February 2024. 25 January 2024. which extends the validity until 5 March 2023. • On 25 May 2023 was signed the Additional Act • On 18 January 2023, was signed the Additional • On 7 February 7, 2023 was signed the Additional Act no.5 to the multi-product Credit Facility 2022, concluded by DEER and Raiffeisen Bank SA, Act no.4 to the Loan Agreement no. 10091385 Act no. 4 to the Loan Agreement no. 111 dated Agreement no. 201910080129, for overdraft and in amount of RON 220 mn., which extends the dated 16 December 2020 concluded by DEER and April 16, 2019, for credit line and issuance of bank issuance of bank guarantee letters, concluded validity of Overdraft limit until 26 July 2023. Banca Transilvania, which extends the validity guarantees, in amount of RON 160 mn. between by EFSA and BCR, which increases the value of of Overdraft limit until 01 February 2024, and SE Electrica SA, EFSA, SERV and BNP PARIBAS, the overdraft limit up to RON 165 mn. • On 31 May 2023 was signed the Additional Act no. the validity of the Facility for issuing letters of which modifies the commercial conditions. 6 to the Loan Agreement no. 201910080129 dated guarantee until 01 February 2025. • On 17 March 2023, was signed the Loan 08 October 2019, concluded by EFSA and BCR, in • On 23 January 2023, was signed the Additional Paribas, SE Electrica SA acting as guarantor, the EBRD, SE Electrica SA as guarantor (corporate the commercial conditions, extends the validity Act no.1 to the Loan Agreement no. 350 dated 06 Additional Act no. 1 to the Loan Agreement no. guarantee), in amount of RON 180 mn., for of the loan until 31 May 2024 and the validity of September 2022 concluded by EFSA and Alpha 148 dated December 24, 2021, for issuing bank working capital and validity until 31 January the Facility for issuing letters of guarantee until Bank Romania, SE Electrica SA as guarantor, in guarantees, in amount of RON 220 mn., which 2028. 07 October 2025. • On 17 February 2023, EFSA concluded with BNP Agreement no. 53747, concluded by DEER and amount of RON 165 mn. through which modifies • On 13 March 2023, was signed the Additional no. 1 to the Loan Agreement no. 20 dated 26 May amount of EUR 60 mn., through which is added modifies the commercial conditions and validity the movable mortgage over receivables. of the bank guarantees. • On 28 March 2023, ELSA concluded with • On 06 June 2023 was signed the Additional Act Vista Bank the Additional Act no.1 to the Loan no. 3 to the Loan Agreement no. WB/C/379 dated • On 27 January 2023, was signed the Additional • On 17 February 2023, EFSA signed with ING Agreement no. FA 8376 dated 30 December 2022, 25 March 2022, concluded by DEER and ING Bank Act no.5 to the Credit facility agreement no. 3189 Bank, SE Electrica SA acting as guarantor, the which increases the value limit of the facility NV, SE Electrica SA as guarantor, which converts dated 28 January 2020, in amount of RON 210 Additional Act no. 4 to the Loan Agreement no. (overdraft and issuance of bank guarantee the value of the Overdraft credit facility from RON mn., concluded by SE Electrica SA and ING Bank, WB/C/14 dated 18 February 2022, in amount of letters) up to RON 125 mn. withing the cash pooling structure, extending EUR 34.3 mn. which extends the validity until 16 to EUR, up to the value of EUR 10 mn., modifies the commercial conditions and the validity of the validity until 27 February 2023. At the same February 2024. • On 11 April 2023 was signed the Additional Act the loan until 22 March 2024 with automatic time, additional acts for the intraday credit no. 3 to the Loan Agreement no. 56 dated 26 extension for 12 months. limit, within the cash-pooling structure, were • On 20 February 2023, was signed the Credit October 2021, concluded by EFSA and Raiffeisen concluded between DERR, EFSA, SERV, EEV1, SE Facility Agreement no. 49183, concluded by DEER Bank SA, SE Electrica SA as guarantor, in amount • On 07 June 2023 was signed the Additional Act Electrica SA and ING Bank, with validity until 27 and Garanti BBVA, SE Electrica SA as guarantor, of RON 150 mn., which extends the validity of no. 5 to the Loan Agreement no. 240PJ dated February 2023. a non-cash facility for the issuance of bank Overdraft limit until 28 July 2023, and the validity 30 June 2020, concluded by DEER and INTESA • On 27 January 2023, EFSA concluded with until 20 April 2025. until 31 December 2024. extends the validity of Overdraft limit until 03 July guarantee in amount of RON 103 mn. and validity of the Facility for issuing letters of guarantee SANPAOLO, in amount of EUR 27.3 mn., which Raiffeisen Bank, SE Electrica SA as guarantor, 2024. the Additional act no. 2 to the Loan Agreement • On 27 February 2023, was signed the Additional • On 13 April 2023 was signed the Additional Act no. no. 56, dated 26 October 2021, which extends Act no. 6 to the Credit facility agreement no. 1 to the Loan Agreement no. 20220406018 dated • On 26 July 2023 was signed the Additional Act the validity of the overdraft until 28 April 2023 3189 dated 18 January 2020, in amount of RON 15 April 2022, concluded by EFSA and BCR, SE no. 2 to the Loan Agreement no. 20 dated 26 May and the validity of the facility for issuing bank 210 mn., concluded by SE Electrica SA and Electrica SA as guarantor, in amount of RON 220 2022, concluded by DEER and Raiffeisen Bank SA, 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 34 35 in amount of RON 220 mn., which modifies the • On 05 September 2023 was signed the 03 March 2026 in the form of a revolving loan • On 28 December 2023, the Additional Act no.6 to commercial conditions and extends the validity Additional Act no. 2 to the Loan Agreement ceiling. of Overdraft limit until 25 August 2023. no. 350 dated 06 September 2022, concluded the Credit Agreement GRIM/75912/2017 dated 19 July 2017, was signed by SE Electrica SA, SERV and • On 27 July 2023 was signed the Additional Act as guarantor, in amount of EUR 60 mn., which 3/2023 to the Overdraft Credit Facility Agreement loan was extended until 31 December 2031 and no. 4 to the Loan Agreement no. 56 dated 26 extends the validity of Credit Line until 06 with the possibility of issuing letters of guarantee the drawing period until 31 December 2024. by EFSA and Alpha Bank SA, SE Electrica SA • On 21 December 2023, the Additional Act no. UniCredit Bank SA, whereby the maturity of the October 2021, concluded by EFSA and Raiffeisen September 2024. Bank SA, SE Electrica SA as guarantor, in amount and opening letters of credit No. 61/2021, was signed by EFSA and Raiffeisen Bank SA, SE of RON 150 mn., which extends the validity of • On 11 September 2023 was signed the Additional Electrica SA as guarantor, extending the validity Overdraft limit until 28 August 2023, and the Act no. 3 to the Loan Agreement no. 350 dated of the overdraft limit and the facility for issuing validity of the Facility for issuing letters of 06 September 2022, concluded by EFSA and letters of guarantee until 24 March 2024. guarantee until 31 December 2024. Alpha Bank SA, SE Electrica SA as guarantor, in amount of EUR 60 mn., through which the value • On 21 December 2023, the Additional Act • On 04 August 2023 it was signed the Multicredit of the facility is converted from EUR to RON, up to no.6/2023 to the Credit Facility Agreement Facility Agreement no. RQ23079467247483 the maximum value of RON 300 mn.; the facility no.56 dated 26.10.2021, was signed by EFSA and concluded by EFSA and CEC Bank, SE Electrica can be used in EUR and RON. SA as guarantor, by which the Lender provides Raiffeisen Bank SA, SE Electrica SA as guarantor, whereby the movable mortgage on all the the Borrower with a multi-credit facility up to • On 02 November 2023 was signed the Additional collections related to any commercial contracts the value of RON 150 mn., as follows: a credit Act no. 1 to the Loan Agreement dated 03 line valid until 03 August 2025 and a facility for November 2021, concluded by SE Electrica SA entered into with eligible clients approved by the Bank, established by the Movable mortgage issuing bank guarantees valid until 03 August with Erste Group Bank AG and Raiffeisen Bank SA contract no.56/IC/2023, ancillary contract to 2026. as Borrower, by which the amount of facility is Contract 56/2021, is extinguished. reduced from 750 mn. RON to 450 mn. RON and • On 09 August 2023 was signed the Additional Act the validity of the credit line is extended until 03 • On 22 December 2023, the Loan Agreement no. 3 to the Loan Agreement no. 20 dated 26 May November 2024. 2022, concluded by DEER and Raiffeisen Bank SA, No.1430 was signed, concluded by DEER and EXIM BANCA ROMANEASCA SA, SE Electrica SA in amount of RON 220 mn., which modifies the • On 15 December 2023 was signed the Additional as guarantor, whereby a non-revolving loan in commercial conditions and extends the validity Act no. 2 to the Loan Agreement no. 165 dated of Overdraft limit until 26 May 2024. 27 December 2022, concluded by EFSA and BNP the amount of RON 250 mn. was granted, for the financing of current activity, valid until 21 • On 22 August 2023 was signed the Additional of RON 240 mn., by which the limits of the facility Paribas, SE Electrica SA as guarantor, in amount December 2027. Act no. 5 to the Loan Agreement no. 56 dated 26 are modified as follows: the value of the facility • On 22 December 2023, the Amendment Letter October 2021, concluded by EFSA and Raiffeisen is extended to RON 440 mn. until the date of 30 No.1 was signed, with reference to the financing Bank SA, SE Electrica SA as guarantor, in amount January 2024; on 31 January 2024, the amount of RON 150 mn, which extends the validity of of the facility is reduced by RON 90 mn. and contracts no. 92.394/2020-0391, 93.414/2020- 0391 and the related guarantee agreements, Overdraft limit until 28 July 2024, and the validity becomes RON 350 mn.; on 31 March 2024, the concluded by DEER and the European Investment of the Facility for issuing letters of guarantee amount of the facility is reduced by RON 100 mn. Bank (EIB), SE Electrica SA as guarantor, whereby until 31 December 2024. and becomes RON 250 mn., and starting with 01 amendments to certain clauses and definitions April 2024, the value of the facility will be RON have been agreed to allow disbursements under • On 22 August 2023 was signed the Additional 250 mn. Act no. 2 to the Loan Agreement no. 61 dated the two Financing Agreements. 24 December 2021, concluded by EFSA and • On 18 December 2023, the Additional Act • On 22 December 2023, was signed the Raiffeisen Bank SA, SE Electrica SA as guarantor, no.1 to the Multicredit Facility Agreement no. in amount of RON 220 mn., which modifies RQ23079467247483/04.08.2023 was signed Amendment no.1 to the Financing contract dated 17 March 2023, concluded between DEER IBAN account and the validity of Overdraft limit between EFSA and CEC Bank, SE Electrica SA as and the European Bank for Reconstruction until 24 December 2023, and the validity of the guarantor, whereby it was agreed to supplement and Development (EBRD), SE Electrica SA as Facility for issuing letters of guarantee until 24 the credit facility by the amount of RON 50 guarantor, whereby the credit facility was December 2024. mn. up to the maximum ceiling of RON 200 increased by RON 60 mn., up to the maximum mn., starting from 18 December 2023 and until ceiling of RON 240 mn. Intragroup Loans • On 04 April 2023, was signed the Additional Act no. 1 to the Internal Treasury Convention dated 16 December 2020, concluded by SE Electrica SA and Electrica Energie Verde 1 SRL (EEV1), which modifies the commercial conditions. • On 04 April 2023, was signed the Additional Act no. 3 to the Internal Treasury Convention no. 25 dated 05 February 2020, concluded by SE Electrica SA and EFSA, which modifies the commercial conditions. • On 07 April 2023, SE Electrica SA concluded with Sunwind Energy SRL the Loan Agreement no. 36, in amount of RON 1.8 mn. and validity until 06 April 2024, for the repayment of the shareholder’ s loan granted to Sunwind Energy by Mr. Emanuel Muntmark and payment of the invoice related to the development services provided by Monsson Alma SRL to Sunwind Energy SRL. • On 13 June 2023, was signed the Additional Act no. 2 to Loan Agreement no. 40 dated 14 June 2022, concluded by SE Electrica SA and Societatea New Trend Energy SRL, which extends the validity until 13 June 2024. • On 15 June 2023, was signed the Additional Act no. 1 to the Internal Treasury Convention no. 26 dated 05 February 2020, concluded by SE Electrica SA and SERV, which modifies the commercial conditions. • On 19 June 2023, was signed the Additional Act no. 4 to the Loan Agreement no. 68 dated 27 October 2022, concluded by SE Electrica SA and Societatea GREEN Energy Consultancy& Investments SRL, which modifies the object of the contract. 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 36 37 • On 24 October 2023, was signed the Additional RON 8.5 mn... • On 30 June 2023, SE Electrica SA concluded with • On 14 July 2023, was signed the Additional Act no. 5 to Loan Agreement no. 40 dated 14 DEER the Contract no. 54, valid until 31 December Act no. 1 to Loan Agreement no 46 dated 15 June 2022, concluded by SE Electrica SA and • On 29 December 2023, was signed the Additional 2024, in order for ELSA to carry out, at DEER’s July 2022, concluded by SE Electrica SA and Societatea New Trend Energy SRL, which extends Act no. 3 to Loan Agreement no. 61 dated 22 request, the necessary steps with UniCredit Bank, Societatea Electrica Productie Energie SA, which the amount of the facility up to RON 7.6 mn. and September 2022, concluded by SE Electrica SA in order for the bank to issue bank guarantees in extends the validity until 14 July 2024. modifies the clause regarding the purpose of and EFSA, by which the maximum amount for amount of RON 187 mn.. granting the facility. • On 11 August 2023 SE Electrica SA concluded with which ELSA will facilitate the obtaining of bank guarantees by EFSA is increased up to RON 150 • On 30 June 2023, was signed the Additional Act EFSA the Transaction Agreement no.62, which • On 14 October 2023, was signed the Additional mn., and extends the utilization period until 12 no. 1 to the Internal Treasury Convention no. regulates contractual aspects in connection Act no. 1 to Loan Agreement no. 73 dated 10 December 2024 and validity until 31 December 22 dated 05 February 2020, concluded by SE with the amount used by EFSA based on the November 2022, concluded by SE Electrica SA 2025. Electrica SA and DEER (formerly SDMN), which Internal Treasury Convention. and Societatea Sunwind Energy SRL, which modifies the commercial conditions. modifies the commercial conditions and extends • On 29 December 2023, was signed the Additional • On 30 June 2023, was signed the Additional Act Additional Act no. 3 to Loan Agreement no. 40 July 2023, concluded by SE Electrica SA and no. 1 to the Internal Treasury Convention no. dated 14 June 2022, concluded by SE Electrica • On 16 November 2023, was signed the Additional DEER, which extends the utilization period until 12 23 dated 05 February 2020, concluded by SE SA and Societatea New Trend Energy SRL, which Act no. 2 to Loan Agreement no. 61 dated 22 December 2024 and validity until 31 December Electrica SA and DEER (formerly SDTS), which extends the amount of the facility up to RON 2.5 September 2022, concluded by SE Electrica SA 2025. • On 08 September 2023, was signed the the validity until 25 October 2024. Act no. 1 to Loan Agreement no. 54 dated 07 modifies the commercial conditions. mn.. • On 30 June 2023, was signed the Additional Act • On 25 September 2023, was signed the no. 1 to the Internal Treasury Convention no. Additional Act no. 1 to Loan Agreement no. 63 24 dated 05 February 2020, concluded by SE dated 27 September 2022, concluded by SE and EFSA, by which the maximum amount for which ELSA will facilitate the obtaining of bank guarantees by EFSA is increased up to RON 115 mn., and establish the utilization period until 12 December 2023 and validity until 31 December Guarantees offered by ELSA, for its subsidiaries and other third parties Corporate guarantees within the credit facilities force Electrica SA and DEER (formerly SDTN), which Electrica SA and Societatea Sunwind Energy 2024. modifies the commercial conditions. SRL, which modifies the purpose of granting • On 30 June 2023, was signed the Additional Act September 2024. no. 2 to the Internal Treasury Convention no. with FOTON POWER ENERGY S.R.L. the Additional Act 1 to the Loan Agreement no. 73/11.10.2023, 23 dated 05 February 2020, concluded by SE • On 09 October 2023, was signed the Additional which increased the amount of the loan by up to Electrica SA and DEER (formerly SDTS), which Act no. 4 to Loan Agreement no. 40 dated 14 RON 1.0 mn. RON, so that the total amount of the modifies the commercial conditions. June 2022, concluded by SE Electrica SA and loan is RON 3.6 mn... the facility and extends the validity until 25 • On 29 November 2023, SE Electrica SA signed Societatea New Trend Energy SRL, which modifies • On 13 July 2023, SE Electrica SA concluded with the clause regarding the purpose of granting the • On 18 December 2023, SE Electrica SA signed with EFSA the Transaction Agreement no. 57, which facility. regulates contractual aspects in connection EFSA the Loan Agreement No.90/18.12.2023 in the amount of RON 100 mn. for financing the working with four bank guarantees for which ELSA carried • On 11 October 2023 SE Electrica SA concluded capital, with maturity date 02 November 2024. out, at EFSA’s request, the necessary steps with with Foton Power Energy SRL the Loan Agreement the UniCredit Bank, in order for the bank to issue no. 73, in amount of RON 2.6 mn. and validity • On 21 December 2023, SE Electrica SA signed with the bank guarantees. until 10 October 2024, in order to finance the working capital. • On 13 July 2023, was signed the Additional Act no. 1 to the Contract no. 61 dated 22 September • On 17 October 2023, was signed the Additional SUNWIND ENERGY S.R.L. the Additional Act No. 2 to the loan contract no. 63/27.09.2022, which increased the amount of the loan by up to RON 0.5 mn., so that the total amount of the loan is 2022, concluded by SE Electrica SA and EFSA, Act no. 5 to Loan Agreement no. 68 dated 27 RON 1.7 mn... by which the maximum amount for which ELSA October 2022, concluded by SE Electrica SA and will facilitate the obtaining of bank guarantees GREEN ENERGY CONSULTANCY & INVESTMENTS • On 21 December 2023, SE Electrica SA signed with by EFSA, is increased for a limited period (until SRL, which modifies the clause regarding the New Trend Energy SRL the Additional Act no.6 September 20, 2023) from RON 90 mn to RON purpose of granting the facility and extends the to the Loan Agreement no.40/14.06.2022, which 101 mn., and the commercial conditions are validity until 26 October 2024. modified. increased the amount of the loan by up to RON 0.9 mn. so that the total amount of the loan is • On 16 April 2019, was signed the Credit Facility Agreement no. 111, concluded by SE Electrica SA, EFSA, SERV and BNP PARIBAS, in amount of RON 160 mn., amended by Additional Act no. 1, 2, 3 and 4, with SE Electrica SA as guarantor (corporate guarantee). The value of the guarantee, which is not a real guarantee, is a maximum of RON 160 mn. • On 25 June 2020, was signed Loan Agreement no. 76/8130/2020, concluded by DEER (SDTN) and BRD, in amount of RON 100 mn., amended by Additional Act no. 1, with SE Electrica SA as guarantor (corporate guarantee). The value of the guarantee, which is not a real guarantee, is a maximum of RON 110 mn.. • On 25 June 2020, was signed the Loan Agreement no. 74/8130/2020, concluded by DEER (SDTS) and BRD, in amount of RON 80 mn., amended by Additional Act no. 1, with SE Electrica SA as guarantor (corporate guarantee). The value of the guarantee, which is not a real guarantee, is a maximum of RON 88 mn. 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT38 39 • On 14 September 2020, was signed the Loan EFSA and BNP PARIBAS, in amount of RON 220 no. GRIM/43778/CSC, concluded by EFSA and concluded by EFSA and CEC Bank, in amount Agreement no. 20200911050, concluded by mn., amended by Additional Act no. 1, with SE Unicredit Bank SA, in amount of EUR 60.8 mn., of RON 150 mn., increased by Additional Act to DEER (SDMN) and BCR, in amount of RON 155 Electrica SA as guarantor (corporate guarantee). amended by Additional Act no. 1 with SE Electrica RON 200 mil, with SE Electrica SA as guarantor mn., amended by Additional Act no. 1, with SE The value of the guarantee, which is not a real SA as guarantor (corporate guarantee). The (corporate guarantee). The value of the Electrica SA as guarantor (corporate guarantee). guarantee, is a maximum of RON 242 mn.. value of the guarantee, which is not a real guarantee, which is not a real guarantee, is a The value of the guarantee, which is not a real guarantee, is a maximum of EUR 66.9 mn. maximum of RON 200 mn.. guarantee, is a maximum of RON 170.5 mn. • On 02 February 2022, was signed the Loan Agreement no. 11673879, concluded by EFSA • On 06 September 2022, was signed the Loan • On 22 December 2023, was signed the Loan • On 02 July 2021, was signed the Loan Agreement and Banca Transilvania, in amount of RON 190 Agreement no. 350, concluded by EFSA Alpha Agreement No.1430, concluded by DEER and EXIM no. 52212, concluded by DEER and EBRD, in mn., amended by Additional Act no. 1, 2, 3 and Bank, in amount of RON 300 mn., amended by BANCA ROMANEASCA SA, in amount of RON 250 amount of RON 195.1 mn., with SE Electrica SA as 4 with SE Electrica SA as guarantor (corporate Additional Act no. 1, 2 and 3 with SE Electrica SA mn., SE Electrica SA as guarantor (corporate guarantor (corporate guarantee). The value of guarantee). The value of the guarantee, which is as guarantor (corporate guarantee). The value guarantee). The value of the guarantee, which is the guarantee, which is not a real guarantee, is a not a real guarantee, is a maximum of RON 209 of the guarantee, which is not a real guarantee, not a real guarantee, is a maximum of RON 325 maximum of RON 246.3 mn.. mn.. is a maximum of RON 300 mn.. mn.. • On 14 July 2021, was signed the Loan Agreement • On 04 February 2022, was signed the Loan • On 22 December 2022, was signed the Loan • On 31 December 2023, the value of the corporate no. FI N° 92.394, concluded by DEER and BEI, in Agreement no. 17/8130/2022, concluded by EFSA Agreement no. 1218, concluded by DEER and guarantees (which are not real guarantees), amount of EUR 120 mn., with SE Electrica SA as and BRD, in amount of RON 220 mn., amended by EXIM BANK, in amount of RON 250 mn., with SE established by ELSA within the credit facilities, is guarantor (corporate guarantee). The value of Additional Act no. 1, 2, 3 and 4 with SE Electrica SA Electrica SA as guarantor (corporate guarantee). RON 6,119 mn.. the guarantee, which is not a real guarantee, is a as guarantor (corporate guarantee). The value The value of the guarantee, which is not a real maximum of EUR 144 mn.. of the guarantee, which is not a real guarantee, guarantee, is maximum of RON 325 mn.. • On 26 October 2021, was signed the Credit Facility Agreement no. 56, concluded by EFSA • On 18 February 2022, was signed the Credit and Raiffeisen Bank SA, in amount of RON 150 Facility Agreement no WB/C/14, concluded by mn., amended by Additional Act no. 1, 2, 3, EFSA and ING Bank, in amount of EUR 34.3 mn., 4, 5 and 6, with SE Electrica SA as guarantor amended by Additional Act no. 1, 2, 3, 4 and 5 is a maximum of RON 242 mn.. • On 27 December 2022, was signed the Credit Facility Agreement no. 165, concluded by EFSA and BNP Paribas, in amount of RON 240 mn., increased by Additional Act to RON 440mn., with SE Electrica SA as guarantor (corporate (corporate guarantee). The value of the with SE Electrica SA as guarantor (corporate guarantee). The value of the guarantee, which is guarantee, which is not a real guarantee, is a guarantee). The value of the guarantee, which is not a real guarantee, is a maximum of RON 484 maximum of RON 150 mn.. not a real guarantee, is a maximum of EUR 37.7 mn.. • On 07 December 2021, was signed Loan mn.. Agreement no. FI N° 93.414, concluded by • On 25 March 2022, was signed the Credit • On 20 February 2023, was signed the Loan Agreement no. 49183 concluded by DEER DEER and BEI, in amount of EUR 90 mn., with SE Facility Agreement no. WB/C/379, concluded by and GarantiBBVA, in amount of RON 103 mn., Electrica SA as guarantor (corporate guarantee). DEER and ING Bank, in amount of RON 205 mn., amended by Additional Act no. 1 with SE Electrica The value of the guarantee, which is not a real amended by Additional Act no. 1, 2 and 3 with SE SA as guarantor (corporate guarantee). The guarantee, is a maximum of EUR 108 mn.. Electrica SA as guarantor (corporate guarantee). • On 24 December 2021, was signed the Credit guarantee, is a maximum of RON 225.5 mn.. Facility Agreement no. 61, concluded by EFSA and Raiffeisen Bank SA, in amount of RON 220 • On 15 April 2022, was signed the Credit Facility mn., amended by Additional Act no. 1, 2 and 3 Agreement no. 20220406018, concluded by EFSA The value of the guarantee, which is not a real value of the guarantee, which is not a real guarantee, is a maximum of RON 103 mn.. • On 17 March 2023, was signed the Loan Agreement no. 53747 concluded by DEER and EBRD, in amount of RON 180 mn., increased by with SE Electrica SA as guarantor (corporate and BCR, in amount of RON 220 mn., amended Additional Act to RON 240 mn., with SE Electrica guarantee). The value of the guarantee, which is by Additional Act no. 1 with SE Electrica SA as not a real guarantee, is a maximum of RON 220 guarantor (corporate guarantee). The value of SA as guarantor (corporate guarantee). The value of the guarantee, which is not a real mn.. the guarantee, which is not a real guarantee, is a guarantee, is a maximum of RON 312 mn.. • On 24 December 2021, was signed the Credit • On 04 August 2023 was signed the Multicredit Facility Agreement no. 148, concluded by • On 19 May 2022, was signed the Loan Agreement Facility Agreement no. RQ23079467247483 maximum of RON 242 mn. Parent Corporate Guarantees • On 01 September 2021, the Parent Corporate Guarantee in amount of RON 29 mn., amended on 04 November 2021, was established in favor of EFSA, having as beneficiary ENGIE ROMANIA SA, validity date 31 January 2024. • On 11 November 2021, the Parent Corporate Guarantee was established in favor of EFSA, having as beneficiary AXPO ENERGY ROMANIA SA, in amount of RON 4.9 mn., validity date 31 January 2024. • On 15 December 2021, the Parent Corporate Guarantee in amount of RON 14.5 mn., was established in favor of EFSA, having as beneficiary MVM PARTNER, validity date 29 February 2024. • On 16 May 2022, the Parent Corporate Guarantee in amount of RON 14.3 mn., was established in favor of EFSA, having as beneficiary AXPO BULGARIA EAD, validity date 31 January 2024. • On 14 December 2022, the Parent Corporate Guarantee in amount of RON 62.1 mn., was established in favor of EFSA, having as beneficiary COMPLEXUL ENERGETIC OLTENIA, 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 40 41 validity date 15 February 2024. • On 28 December 2022, the Parent Corporate Guarantee in amount of RON 118.8 mn., was established in favor of EFSA, having as beneficiary COMPLEXUL ENERGETIC OLTENIA, validity date 15 February 2024. • On 29 December 2022, two Parent Corporate Guarantees in amount of RON 1.9 mn. each, were established in favor of EFSA, having as beneficiary BIOENERGY SUCEAVA, validity date 25 January 2024. As of 31 December 2023, the amount of the Parent Corporate Guarantees (which are not real guarantees), constituted by ELSA in favor of EFSA, is RON 247.5 mn.. 1.2.4 Litigations with significant impact on the financial performance Case no. 1221/1285/2022 Case no. 1100/1/2023 Following the appearance in the public space Societatea Energetica Electrica S.A. (ELSA) filed an of some information regarding the submittal by annulment appeal against civil decision no. 5599 Eurototal Comp SRL Bucuresti of an insolvency of 22 November 2022, by which the High Court petition against Electrica’s subsidiary, Distributie of Cassation and Justice rejected the appeal Energie Electrica Romania SA (DEER), registered on declared by ELSA against Sentence no. 707/2019, 28 December 2022 under file no. 1221/1285/2022 by pronounced by the Bucharest Court of Appeal in file the Specialized Courthouse Cluj, Electrica informs its no. 3889/2/2018. shareholders and investors that DEER was informed about this file registration by Eurototal Comp SRL The annulment appeal was registered under no. on 31 December 2022, the date on which the total 1100/1/2023 of the High Court of Cassation and invoiced balance of RON 1,255 mn. was already fully Justice. On 22.11.2023, the Court dismissed the paid, the debit being thus extinguished and the annulment appeal filed by ELSA as inadmissible. request of the above-mentioned insolvency claim remaining without object. The file no. 3889/2/2018 has as object the On 02 May 2023, Cluj Court of Appeal found 77/20.12.2017, and in the alternative, the reduction Eurototal Comp’s recourse to be null, the decision of the fine established for ELSA up to the minimum being final. legal level of 0.5% of ELSA’s turnover, by annulment of the Competition Council Decision no. re-individualizing the alleged anti-competitive the same court for re-examining the main action. act, with the retention and full capitalization of all The term in this case is 28 March 2024. mitigating circumstances applicable to ELSA. By the Decision of the Competition Council no. 77/20.12.2017 The file has as object Societatea de Distributie a was found the breaching of the provisions of art. 5 Energiei Electrice Transilvania Sud SA (at present par. (1) of the Competition Law no. 21/1996 and art. DEER) and Electrica`s request for the cancellation of 101 par. (1) TFEU by several companies which have the Order of ANRE President no. 199/2018 regarding sold meters and related measuring equipment the approval of specific tariffs for the electricity for electricity in Romania, in the procedures for distribution service and the price for reactive the award of supply contracts in the period from electricity, for Societatea de Distributie a Energiei 27 November 2008 to 30 September 2015 and by Electrice Transilvania Sud - S.A. Electrica, as a facilitator, in the period from 24 November 2010 to 30 September 2015. The sanction The action was rejected by the trial court, Electrica applied to Electrica consists in a fine amounting and SDEETS filed an appeal against this decision. to RON 10,800,984.04 (paid by ELSA), representing 2.98% of the total turnover achieved in the financial Case no. 7614/2/2018 year 2016. In determining the amount of the fine, it was taken into account that (i) Electrica cooperated On 16 May 2023, the High Court of Cassation and fully and effectively with the Public Competition Justice definitively resolved case no. 7614/2/2018 Council during the investigation procedure, outside and dismissed the claim. the scope of the leniency policy and beyond the legal duty to cooperate, and (ii) it is for the very first The file had as object the cancellation for partial time when the authority retains the role of facilitator revocation of the Tariff Pricing Methodology for for a company organizing public procurement Electricity Distribution Service, approved through the procedures. On the merits of the case that was ANRE President Order no. 169/2018, as regards Art. the subject of file 3889/2/2018, by Sentence no. 5 RAB definition, art. 18-19, art. 26, art. 33-34, art. 39, 707/25.02.2019, the Bucharest Court of Appeal art. 43-44, art. 47-49, art. 54-57, art. 64, art. 67-68, rejected the annulment action as unfounded, and art. 93-94, art. 103, art. 107, art. 126 paragraph 1, art. the High Court of Cassation and Justice rejected 129 of the Methodology approved through the Order the appeal declared by ELSA against the above and issuing a new Order, taking into account the sentence. observations submitted by the companies. On November 22, 2023, the High Court of Cassation Case no. 6665/3/2019 and Justice rejected, as inadmissible, the annulment appeal filed by ELSA against civil decision no. 5599 The High Court of Cassation and Justice cancelled of November 22, 2022, by which the appeal declared as unfounded the appeal declared by EFSA by ELSA against Sentence no. 707/2019. This decision, against civil decision no. 1492 of 07 October 2022, pronounced in file no. 1100/1/2023, is final. At this pronounced by the Bucharest Court of Appeal in file moment there is no financial impact of this court no. 6665/3/2019. The ruling pronounced is final. decision, the fine established by the Competition Council for ELSA being paid on 11 October 2018. We mentioned that the claims requested by EFSA Case no. 435/2/2019 amounted RON 6,232,398.04, representing claims according to the Decision of the Court of Accounts no. 11/2016 and the Inspection Report of the Court On 26 April 2023, the High Court of Cassation and of Accounts no. 5799/29Nov2016 and also the legal Justice settled the appeal filed by Societatea de interest namely: the amount of RON 793,234.07 Distributie a Energiei Electrice Transilvania Sud SA representing the legal interest calculated from (at present DEER) and Electrica S.A. in the file no. the date when Electrica S.A. collected the sums 435/2/2019, by admitting it and sending the case to of money (the total amount of which is RON 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT42 43 6,232,398.04) until 31 March 2019, the legal interest provision for the exclusive needs of the company responsibility in the contested Decision, items 1 to Enel Energie Muntenia S.A., E.ON Energie Romania calculated from 31 March 2019 until the date of was not provided, respectively with the value of 4 8, with the consequence of removing the measures S.A., Electrica Furnizare S.A. (with its branches execution of an enforceable court decision and technical studies purchased for activities that are ordered in items 1, 3 to 9 inclusively; the partial Electrica Furnizare Muntenia Nord, Electrica Furnizare the legal interest calculated from the date of not found in the object of activity of the verified cancellation of the Court of Accounts’ Resolution Transilvania Sud, Electrica Furnizare Transilvania the enforceable court decision up to the date of entity, being related to activities belonging to other no. 12/27.02.2017 through which Electrica’s appeal Nord)., and the court admitted the request to bring effective payment by Electrica S.A. of the principals legal entities (electricity distribution subsidiaries), against the Court of Accounts’ Decision no. the suppliers of last resort into the case. As the debit in the amount of RON 6,232,398.04. By the without being invoiced to the subsidiaries for the 12/27.12.2016 was rejected, respectively regarding time of this announcement, the litigation is in the decision no. 2336 of 1 October 2021, the Bucharest recovery of the expense. The four studies are related the irregularities and the ordered measures, evaluation process within the legal department. Tribunal rejected as unfounded the request filed to the electricity distribution activities carried out by and additionally the extension with at least 12 by EFSA and by the decision no. 1492 of 7 October the electricity distribution subsidiaries (Transilvania months of the deadlines for the fulfilment of all the From a preliminary analysis of the Legal Department: 2022, the Bucharest Court of Appeal rejected as Sud, Muntenia Nord and Transilvania Nord), which measures ordered to Electrica through Decision no. (i) of Hidroelectrica’s claims, it results that for the unfounded the appeal filed by EFSA against the are organized as separate legal entities, activating 12/27.12.2016. decision of the Bucharest Tribunal. in a field in which the entity (Electrica) is not contracts concluded with Electrica Furnizare, the differences would be to approximately RON 77.85 Case no. 2229/2/2017* it own such electricity distribution networks; - settled in this case being 27 March 2024. action, it turns out that for Electrica Furnizare, in licensed by ANRE to carry out activities, nor does The decision was appealed by both parties, the term mn.; (ii) in relation to the claims from the legal On 6 July 2023, Bucharest Court of Appeal partially exceeding the period 17 July 2013-01 September Case no. 1927/2/2019 admitted the claim made by Electrica and partially 2013, the measure being maintained for the rent partially annulled item 5 (measure II.7), for the rent the situation in which the court would order the obligation of ANRE to issue a new Decision regarding the regulated price for the energy purchased by annulled the Resolution no. 12/27.02.2017 and the related to the period 17 July 2013- 01 September 2013 Electrica’s subsidiary, Electrica Furnizare S.A. (EFSA), Electrica Furnizare from SPEEH Societatea Energetica Decision no. 12/27.12.2016, issued by the Romanian - Making payments, during July 2013 - June 2014, in was introduced in the case which is the object Electrica S.A. 9, Grigore Alexandrescu str. 010621 Court of Accounts, regarding the following the estimated amount of RON 36,385, for expenses of the file no. 1927/2/2019 (Bucharest Court of District 1, Bucharest, Romania Phone: 021-208 59 99; deviations from the Decision (respectively to the without a legal basis, respectively for expenses Appeal) as a forced intervener (defendant). EFSA Fax: 021-208 59 98 Fiscal Registration Certificate RO correlative measures): - annulled item 1 (measure with the rent of a building classified as company was summoned for the term of 23 October 2023. 13267221 J40/7425/2000 Share capital: 3.464.435.970 II.3) - The hiring of funds in the estimated amount housing for the benefit of the CEO, considering that The object of the court file no. 1927/2/2019 is the LEI www.electrica.ro Public Hidroelectrica in the of RON 224,622,940 (without VAT), for the execution the housing was not granted in accordance with the request submitted by SPEEH Hidroelectrica S.A. period 1 March 2019 – 31 December 2019 on the basis of works related to the objective “AMR system law; - annulled item 6 (measure II.8) - Unjustified against ANRE, through which SPEEH Hidroelectrica of regulated contracts, because this court decision, necessary for the measurement activity and increase in expenses amounting to RON 2,400, S.A. requested: i. the partial annulment of the ANRE doubled by the issuance of a new ANRE Decision, consumption dispatcher at Electrica SA level”, for representing land valuation services, engaged in the President’s Decision no. 324/25.02.2019 regarding could lead to the triggering of other litigations which the purchased goods, although they were same year, several times, with the same appraiser, the establishment of regulated prices for delivered regarding the status of these contracts and in highlighted in the accounting, are not physically for the same patrimonial elements; - annulled item electricity and quantities of electricity sold based relation of the regulated price differences. According found in the patrimony nor were they used for the 7 (measure II.9) - Non-compliance with the legal on regulated contracts between 1 March 2019 and to what was presented by SPEEH Hidroelectrica, activities carried out according to the object of provisions regarding good management in the use 31 December 2019 by SPEEH Hidroelectrica S.A.; ii. in the public offer prospectus in June 2023: “The activity, being necessary for the performance of of funds, respectively the employment of services at issuing a Decision approving the regulated price resolution of the case (1927/2/2019) is significantly the activity of other legal entities (the company’s overvalued prices by awarding a service contract to for the electricity sold by SPEEH Hidroelectrica, influenced by the decision pronounced by the subsidiaries); - annulled item 2 (measure II.4) - The an economic operator who presented a price offer between 1 March 2019 and 31 December 2019, based court for the appeal filed by Hidroelectrica against unjustified increase in the expenses with technical higher than those of other competitors. on regulated contracts concluded with suppliers ANRE Order no. 10/2019 regarding the approval assistance services in the estimated amount of last resort in compliance with legal provisions; of the pricing methodology (file no. 1170/2/2019). of RON 2,337,657.50 (without VAT), intended for Also, the head of claim regarding the extension iii. the payment to Hidroelectrica of the amounts Because the appeal that was the subject of file no. carrying out the activities of other legal entities of the implementation deadlines was rejected representing the damage suffered as a result of 1170/2/2019, was rejected by the final decision of the (the distribution subsidiaries); - annulled item 3 as unfounded and it was noted that the plaintiff the effects of the ANRE President’s Decision no. High Court of Cassation and Justice, Hidroelectrica (measure II.5) - Unjustified increase in operating reserved the right to submit a separate claim for the 324/25.02.2019, the amount to which is added the anticipates that the decision in file no. 1927/2/2019 expenses with the amount of RON 74,667.60 legal expenses incurred in the case. legal interest related to the loss suffered, damage will be unfavorable”. (without VAT), representing maintenance services related to the period 1 March 2019 to 31 December for the equipment located in the communications The file no. 2229/2/2017* on the docket of the 2019. infrastructure of the subsidiaries, which are Bucharest Court of Appeal has as its object, mainly, In the event that, following the analysis carried out by the legal department, additional information separate legal entities; - annulled item 4 (measure the partial annulment of the Court of Accounts’ We mention that ANRE requested the introduction will result that will lead to a different conclusion on II.6) – Unjustified increase in operating expenses Decision no. 12/27.12.2016, issued by the director of in the case as forced interventionist of the following the possible outcome of the litigation, Electrica will with services in the estimated amount of RON Directorate 2 within Department IV, respectively: last resort suppliers: Cez Vanzare S.A., Enel Energie inform the shareholders and investors. 273,500 (without VAT), for which proof of their regarding the irregularities found to be Electrica’s S.A. (with the licensed areas Banat and Dobrogea), 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT44 45 The next term in the case is 18 March 2024. Regarding transparency, Electrica reaffirmed its IEC 27001:2018. Additionally, also in October 2023, Case no. 724/1285/2023 the legality of the negative certificate of verification, Sustainability Report for the seventh consecutive Management System from the certification body the court ruled as follows: “it can be clearly seen year. This report provides detailed information SRAC Cert affiliated with IQNet, in accordance with Following the appearance on portal.just.ro of that the payment was made as an immediate about all the companies within the Electrica Group, the requirements of the international standard SR EN In case no. 621/117/2023, in which the EC challenged commitment to stakeholders by publishing the Electrica S.A. obtained certification for the Energy information on the file no. 724/1285/2023, regarding consequence of the formulation of a petition for and can be accessed on the company›s official ISO 50001:2019. the filing by Eurototal Comp SRL Bucharest (EC) the opening of insolvency proceedings against website. Additionally, all these reports formed the of an application for the opening of insolvency the defendant, because immediately after the basis for evaluating sustainability-related aspects. During the year 2023, the companies DEER and proceedings against Electrica SA, Distributie Energie formulation of this petition to the court, the Electrica Romania SA (DEER), Electrica makes the defendant paid the countervalue of the invoices • Certifications following clarifications: related to the hand cream, including the penalties claimed by the claimant, although through all Between the distribution subsidiary of Electrica communications between the parties previously SA, DEER, as Contracting Entity – Beneficiary and issued, it refused to pay the countervalue of the the company EC, as Supplier, the Sectoral Product hand cream for the reasons shown. For these Contract no. 5003/28Sep2022 – for the supply of reasons, since it is clear from the evidence “Hygienic and sanitary materials: hand cream, hand submitted that the applicant has improperly washing paste, nail brush, to–el, soap, toilet paper” performed the contractual obligations assumed was carried out, the contract price being RON under the sectoral contract for products No 1.074.973 plus VAT. 5003/28Sep2022, the document contested in the present case was duly issued, so that the On 28 December 2022, the Specialized Court of Cluj applicant’s claim is unfounded”. Judgment no. registered EC’s request for the opening of insolvency 636/20Mar2023 remained final by decision no. In October 2023, Electrica S.A. underwent the annual audit for the supervision of the Integrated Quality Management System - Environment - Occupational Health and Safety - Information Security in accordance with the requirements of international reference standards SR EN ISO 9001:2015, SR EN ISO 14001:2015, SR ISO 45001:2018, and SR EN ISO/ 1.2.5 Distribution segment EFSA underwent annual surveillance audits of the Integrated Quality Management System - Environment - Occupational Health and Safety, implemented in accordance with the requirements of the reference standards ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018. These audits were conducted by the external certification body SRAC Cert. No major non-conformities were identified. proceedings against DEER – file no. 1221/1285/2022. 6/25May2023 pronounced by the Cluj Court of For the distribution segment, the significant 1 April 2022-31 March 2023, as well as for the After the communication of the request, DEER Appeal. proceeded to pay the allegedly due amounts. We changes in the Romanian legislation were detailed amendment and completion of some normative at Appendix 3.1.1. Based on these changes, the acts in the field of energy and the amendment remind that Electrica informed investors about the On 25 October 2023, a new insolvency file was expected effects refer to: file 1221/1285/2022 from December 2022 through the registered with the Cluj Specialized Court, under of the GEO no. 119/2022 for amending and supplementing the GEO no. 27/2022 regarding current report of 3 January 2023. number 724/1285/2023, by EC. • GEO no. 119/2022 for the amendment and the measures applicable to final customers The Cluj Specialized Court, by Judgment no. At the term of 11.01.2024, the court takes note of the measures applicable to final customers in the the period 1 April 2022-31 March 2023, as well 74/12Jan2023, took note of the waiver of the creditor renunciation of the creditor EUROTOTAL COMP S.R.L., electricity and natural gas market in the period as for the modification and completion of EC to the judgement of the application for the when judging the request to open the insolvency 1 April 2022—31 March 2023, as well as for the some normative acts in the field of energy: (i) opening of insolvency proceedings filed against procedure filed against the debtor DEER, it finds that modification and completion of some normative in the period 1 January 2023-31 March 2025 DEER SA, the decision remaining final by Decision DEER’s appeal remains without object; without court acts in the field of energy - in force starting the mechanism for the centralized purchase no.115/02May2023 pronounced by the Cluj Court of costs. At the same time, the court takes note of the from 1 September 2022: (i) the additional costs of electricity is established; (ii) OPCOM is Appeal. parties’ manifestation of will to waive the appeal. with the purchase of electricity, made between designated as the sole purchaser, it buys the The sentence is final. 1 January 2022 and 31 August 2023, in order to electricity from the planned producers and completion of GEO no. 27/2022 regarding the in the electricity and natural gas market in Subsequently, within the framework of the file no. 133/117/2023*, DEER requested the reimbursement of the not due payments and accessories and • Corporate image also issued a negative certificate of verification as a result of the non-fulfilment of contractual obligations by the company EC. By Judgment no. 2227/17Oct2023 the court admitted DEER’s claim. The decision can be appealed within 15 days from the communication. Subsequent to this judgment, EC made a partial payment of the amount it was obliged to pay. Mainly, as a result of the PR & Communication efforts, Electrica maintained its position at number 7 in the top of the most valuable Romanian brands in 2023. This represents the company›s highest ranking to date. In the same top, the brand›s market value is estimated at EUR 260 mn., an increase of 28% compared to the previous year. cover the NL, compared to the costs included in sells the purchased electricity to the electricity the regulated tariffs, are capitalized quarterly, suppliers who have contracts concluded with RRR = 50% of the RRR applicable to each periods; final customers, the electricity transport and GEO no. 119/2022 was approved and amended system operator and the electricity distribution by Law no. 357/2022, application period 1 operators, for covering the own technological January 2023 – 31 March 2025. consumption of the networks operated by them. DO can buy from OPCOM through an annual/ • GEO no. 153/2022 for the amendment and monthly mechanism 75% of the amount of NL completion of GEO no. 27/2022 regarding the forecasted and validated by ANRE at the price of measures applicable to final customers in the 450 RON/MWh, and producers can sell to OPCOM electricity and natural gas market in the period through an annual/monthly mechanism 80% of 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT46 47 the amount produced forecasted and validated 2024, the net accounting value of the fixed investments from EU funds only if they did not to use the place of consumption and to keep by ANRE and Transelectrica at the price of 450 assets included in the RAB on 31 December benefit from the PCI incentive. its destination for a period of at least 15 years RON/MWh. GEO no. 153/2022 was approved and 2023; (vi) The regulated rate of return for the from the date of the PIF, otherwise he is obliged amended by Law 206/2023. year 2024 is maintained at the value of 6.39%; (vii) The inflation corrections related to RP4 will • Law no. 158/2023 for the amendment and to return to the OD the value of the design completion of the Electricity Law no. 123/2012 and execution of the connection installation, • ANRE order no. 129/2022 for the approval of the be calculated in 2024 and added to the target provides that for the supply of equipment and proportionally with the period remaining unused, Methodological Norms for the recognition in income of 2025, which represents the first year aggregates for irrigation and for economic gradually, in accordance with ANRE regulations. tariffs of the additional costs with the purchase of RP5; (viii) The deadline for submitting to ANRE operators that carry out activities included in of electricity to cover the own technological the documentation substantiating the tariffs and CAEN codes 01 Agriculture, hunting and related • The regulation approved by ANRE Order no. consumption compared to the costs included the investment program for the year 2024 was 15 services and CAEN 10 Food industry, DSO has 99/2023 allows granting to the TSOs and DSO in the regulated tariffs, application period August 2023. 1 January 2022 – 31 August 2023 - (i) the the obligation to ensure the financing and the right to own, develop, manage or operate realization of the design and execution works electrical energy storage facilities (ISE) that quarterly capitalization of the additional costs • OD sent to ANRE the data for monitoring the of the connection installation of the non- represent fully integrated network components with NL compared to the costs included in the simulation of the application of binomial tariffs domestic final customer, whose length will be (CRCI). CRCI cannot be used by the TSO/ regulated tariffs; (ii) the capital costs related for the year 2022 until 31 March 2023. up to 2.5 km located on the territory and for DSO to buy or sell electricity on the electricity to the year 2022 are recognized in a distinct the connection installations that exceed the markets: for the purpose of system balancing component related to the additional cost with NL • The modification of the Investment Procedure by length of 2.5 km, the financing of the difference or congestion management or to cover the own applicable starting on 01 April 2023, outside the ANRE Order no. 6/2023 considers the recognition from the network falls on the responsibility of technological consumption of the electricity 7% limitations imposed for tariff increases; (iii) of DO investments in energy storage and the non-domestic final customer. The counter network. the recognized NL price for 2022 will be equal to production for control and NL: (i) inclusion in the value of the design and execution works of the the reference price calculated as an average category of justifiable investments of energy connection installation will be recognized in the among network operators, increased by 5%; (iv) production installations from renewable sources tariff by ANRE, the resulting assets become the the additional cost with NL capitalized in 2023 for NL supply and control consumption from will be included in the separate NL component the station; (ii) the inclusion in the category of applicable in 2024. By ANRE Order no. 104/2023, necessary investments of electricity storage the application period was changed until March facilities; (iii) the possibility for DO to own 31, 2025, according to the changes approved by storage facilities, by way of exception from Law no. 357/2022. the provisions of the Energy Law (art. 46^1 para. (1)), only with prior approval by ANRE; • ANRE order no. 79/2023 regarding the (iv) establishing the method of calculating modification and completion of the Methodology the economic efficiency of investments in for establishing tariffs for the electricity production/storage, to be recognized by ANRE. distribution service, approved by ANRE Order no. 169/2018 with the following changes: (i) The • The Methodology for the evaluation of year 2024 represents the transition period from investments in projects of common interest the fourth period (RP4) to the fifth regulatory (PCI) approved by the ANRE Order no.1.2023 is period (RP5); (ii) The target income of the DO modified as follows: (i) expanding the scope for the year 2024 is established according to of the Methodology for DO investments (in the Methodological Norms that complete the addition to TSOs), (ii) granting a 1% RRR incentive Methodology (Annex 1^1); (iii) In 2024, ANRE for PCI, (iii) expanding the scope of the type approved for DEER regional distribution tariffs of PCI from electric transmission networks, established on the basis of a single regulated to: a) electrical transmission and distribution income and a single NL target; (iv) The forecast networks; b) offshore networks for energy from for NL price for the year 2024 is calculated as renewable sources; c) projects that integrate a weighted average considering 75% the price innovative technical solutions and which, approved by MACEE and 25% the DAM price for although they have low capital costs, involve May 2023; (v) The value of the RAB achieved on significant operating costs. The Methodology 31 December 2023 will be calculated in 2024, for establishing distribution tariffs was also and the DO will transmit to ANRE, until 31 May modified by granting the RRR incentive of 2% for property of OD from the moment the connection installation is installed. The applicant, a future non-domestic end customer, has the obligation 1.2.6 Supply segment The regulatory framework has undergone significant 1. Price cap for household and non-household changes over the last decade, in terms of full consumers according to GEO no. 27/2022, with liberalization of electricity and natural gas market, subsequent amendments and additions; supply and distribution activities unbundling, 2. Limitation of average acquisition price implementation of renewable energy support considered for determining the amounts to be scheme, support for electricity consumers and price recovered from state budget to 1,300 RON/MWh capping for final consumers. initially, lowered to 900 RON/MWh in present Starting 1 November 2021, against the background of - amendment according to Law no.206/2023 the increase in energy and natural gas price on the (approving GEO 153/2022), except for acquisition international and national markets, the energy crisis, intended for Supply of Last Resort, where this as well as the effects caused by these increases limitation does not apply; among population in Romania, a series of support 3. Centralized Electricity Purchase Mechanism schemes have been applied to electricity and gas (CEPM): the mechanism provides that OPCOM, consumers, by establishing compensation and as the sole purchaser, buys electricity from capping schemes between 1 November 2021 and 31 producers (electricity producers with an March 2025. installed power capacity equal to or greater than 10 MW) and sells purchased electricity Therefore, the year 2023 was under the influence of to suppliers who have contracts with end the following features: customers, transmission system operator and 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT48 49 distribution system operators to cover their own The categories of customers benefiting from natural technological consumption; the price paid by gas cap in 2023: Due to recent changes in world energy market, OPCOM to energy producers for sold electricity • household customers – the maximum price is including EU, each member state of the European quantities is 450 RON/MWh, and the OPCOM capped at 0.310 RON/KWh; Union must modify its own energy sector legal selling price to economic operators is also 450 • non-household customers - the maximum framework in order to protect civil society’s interests, RON/MWh (OPCOM has the right to charge price is capped at 0.370 RON/KWh for an annual on the one hand, and on the other hand to ensure a balance and adequate functionality on the local energy market by supporting energy suppliers. Subsidies to be received As of 31 December 2023, the estimated amount to be received from the Ministry of Energy for subsidies is RON 2,595.5 mn. (31 December 2022: RON 1,280.7 mn.), and from the County Agency for Payments and Social Inspection is worth RON 18.9 mn.. Of the amount of subsidies to be collected, RON 1,528.7 mn. represents uncollected claims submitted to the state authorities and RON 1,085.9 mn. claims not yet submitted to the state authorities by 31 December 2023. market participants tariffs/commissions at the consumption of up to 50 GWh. level of costs recorded through the organization of Centralized Electricity Purchase Mechanism). In order to carry out the transactions, OPCOM will organize an annual procurement procedure each month, as well as an additional monthly procurement procedure, for electricity quantities to be delivered in the following month; the annual and monthly quantities of electricity are binding on the electricity producers and economic operators for all settlement intervals each month (contracts are concluded by signature, within a maximum of three working days); 4. The mandatory natural gas underground storage was calculated by ANRE according to two criteria: obligation of all suppliers to store a quantity of gas that would cover 90% of Romania’s storage capacity and the market share of each supplier in 2022; 5. Obligation of natural gas producers to sell at the price of 150 RON/MWh the quantities needed to supply household customers/heat energy producers. The compensated amounts are settled by the National Agency for Payments and Social Inspection (“ANPIS”) for household consumers and by the Ministry of Energy for non-household consumers. Transactions on the competitive gross market are transparent, public, centralized and non- discriminatory. Participants on the gross market can trade electricity based on bilateral contracts concluded on distinct markets. Green certificates Electricity suppliers have the legal obligation to purchase green certificates from renewable energy producers, based on the annual targets or quotas established by law, which apply to the amount of electricity purchased and supplied to final consumers. The cost of green certificates is billed to final consumers separately from electricity tariffs. The impact of energy prices increase After the full liberalization of electricity market The categories of customers benefiting from from January 1, 2021, for all types of consumers, electricity cap in 2023:3: the international context of energy markets • household customers (consumption <100 characterized by an unbalance between demand KWh/month - maximum price 0.68 RON/KWh, and supply at European level, combined with consumption range 100-300 KWh/month – by energy policies developed both at EU level and at delimiting the volume exceeding 255 KWh/ national level, it led to an increase in electricity month - respectively the price level capped at prices. Additionally, the strong increase in energy 0.800 RON/KWh and with a maximum price of 1.3 prices is both the result of external factors, such as RON/KWh; exponential increase in emission certificates price, • non-household customers - divided separately and of internal factors, such as large volumes of by activity field into three categories: energy traded on the Day-Ahead Market (DAM). customers benefiting from capping for 85% of The entire energy sector was affected by electricity consumption with a price capped at 1 RON/KWh, price. customers benefiting from capping for 100% of consumption, price capped at 1 RON/KWh and The difficult conditions mentioned above have led the rest of the customers at a maximum price of to an increase in operating expenses, mainly for the 1.3 RON/KWh. purchase of energy for the NL and for the supply activity. 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT50 51 1.3 Subsequent events to the balance sheet date Below are presented the relevant events that took place at the Group level in the period between 31 December 2023 and the date of the present report. 1.3.1 General Meetings of Shareholders On 26 January 2024, the Ordinary General Meeting Also, Electrica shareholders approved with the of Shareholders approved the election of the majority of votes cast by the shareholders present following members of the Company’s Board of or represented: Directors by applying the cumulative vote method: • Establishing the term of office of the members • Mr. Ion-Cosmin Petrescu • Mr. Dumitru Chirita • Ms. Georgiana Bogasievici • Mr. Dragos-Valentin Neacsu • Mr. Adrian-Florin Lotrean • Mr. Marian-Cristian Mocanu • Ms. Valentina-Elena Siclovan The following members of the Board of Directors are considered revoked: Mr. Iulian Cristian Bosoanca, Mr. Radu Mircea Florescu and Mr. Gicu Iorga. They were not reconfirmed as a result of applying the cumulative voting method, their mandate ending as a consequence on the OGMS date, according to the provisions of art. 167 paragraph (3) of Regulation no. 5/2018 of the Financial Supervision Authority. elected by applying the cumulative voting method, for a period of 4 (four) years. • Establishing the remuneration due to the members of the Board of Directors elected by applying the cumulative vote method, respectively that established according to the Remuneration Policy for Administrators and Executive Directors, approved by the Resolution of the Ordinary General Meeting of Shareholders no. 1/27 April 2023. • Establishing the form of the mandate contract that will be signed with the members of the Board of Directors elected by applying the cumulative vote method, respectively the one approved by the Resolution of the Ordinary General Meeting of Shareholders no. 1 of 9 February 2018. The Audit and Risk Committee: The Climate Governance and Public Affair • Ms. Valentina-Elena Siclovan – Chair; Committee: • Mr. Adrian-Florin Lotrean – member; • Mr. Dragos Valentin Neacsu – Chair • Mr. Ion Cosmin Petrescu – member. • Ms. Valentina-Elena Siclovan – member • Ms. Georgiana Bogasievici – member 1.3.3 Other relevant events On 19 January 2024, Electrica received from the All these announcements and auditor’s reports can European Bank for Reconstruction and Development be found on ELSA’s website, at this address: https:// (EBRD) a notification according to which, on 15 www.electrica.ro/en/investors/results-and-reports/ January 2024, the EBRD disposed of a number current-reports-art-108/. of 205,505 Electrica shares, falling below the 5% threshold provided by article 71 of Law 24/2017 On 31 January 2024, Electrica published the Auditor’s on issuers of financial instruments and market Report on transactions reported in H2 2023 pursuant operations, thus reaching a holding of 4.9502% of to Art. 108 of Law 24/2017 (R). the voting rights of Electrica calculated on the basis of all the shares to which voting rights are attached, For more details, please see chapter 3.4 in the even if for the shares own shares (6,890,593 own current report. shares) their exercise is suspended, in accordance with the provisions of art. 71 (1) of Law no. 24/2017 Treasury aspects regarding issuers of financial instruments and market operations. Loans related to third parties On 14 February 2024, Electrica published the • On 18 January 2024, the Intra-Group Domestic preliminary key performance indicators for Q4 2023. Cash Pooling Services Agreement No. On 15 February 2024, Electrica published a current Generale SA and Societatea Energetica Electrica report regarding the final settlement of a case SA, as “Pool Leader” and DEER, as “Participating 8/8130/2024 was signed between Groupe Societe 1.3.2 Decisions of ELSA’s BoD against ANRE. Company”, to ensure the optimal management of the cash deficit or surplus in the bank On 22 January 2024 and subsequently on 25 March During the same meeting from 12 February 2024, On 22 February 2024, Electrica announced the accounts of each of the Group Companies. 2024, ELSA’s Board of Directors decided to extend the Board of directors decided the following attraction of EUR 171 mn. Non-Reimbursable the duration of the mandate of Mr. Alexandru- composition for its consultative committees, until 31 Financing Through the Modernisation Fund. • On 18 January 2024, the Intra-Group Domestic Aurelian Chirita, as CEO, under the same conditions, Decemebr 2024: until 31 December 2024 (inclusively). The Strategy and Corporate Governance Transactions with related parties Cash Pooling Services Agreement No. 9/8130/2024 was signed between Groupe Societe Generale SA. and SE Electrica SA, as “Pool During its meeting on 12 February 2024, ELSA’s BoD Committee: After 31 December 2023, Electrica published 6 more Leader” and EFSA and SERV, as “Participating elected Mr. Dumitru Chirita as the Chair of the Board • Mr. Marian Cristian Mocanu – Chair; current report according to art. 108 of Law no. Companies”, to ensure the optimal management of Directors until 31 December 2024. • Mr. Dumitru Chirita – member; 24/2017, reporting transactions concluded between of the cash deficit or surplus in the bank • Mr. Dragos Valentin Neacsu – member. DEER – OPCOM, EFSA – OPCOM, DEER – EFSA and EFSA accounts of each of the Group Companies. Also, the Board of Directors decided, in accordance with art. 18, para. 14 from the articles of Association of the Company, to establish two vice-chair positions. Therefore the Board of Directors elected Mr. Dragos-Valentin Neacsu and Mr. Adrian-Florin Lotrean as Vice-Chairs, until 30 December 2024. The Nomination and Remuneration Committee: • Mr. Adrian-Florin Lotrean – Chair; • Mr. Marian Cristian Mocanu – member; • Mr. Ion Cosmin Petrescu – member. - TEL, as well as a current report for information on the signing of contracts on MACEE, for the year 2024, • On 18 January 2024, the Loan Facility Agreement by DEER and EFSA. no.10/8130/2024 was signed by SE Electrica SA and BRD - Groupe Societe Generale SA within Also, on 30 January 2024, Electrica published the the cash-pooling structure, whereby the bank Auditor’s report regarding the transactions reported provides the borrower with a revolving credit in H2 2023 according to Art. 108 Law 24/2017 (R). facility in the total amount of RON 150 mn., valid 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 52 53 until 17 January 2025, to finance the funding ING Bank, SE Electrica SA as guarantor, extending • On 31 January 2024, SE Electrica SA concluded The amount of the Parent Corporate Guarantees needs of the Participating Companies and the the validity of the facility until 29 March 2024. the Loan Agreement no. 19 dated 31 January (which are not real guarantees), constituted by ELSA borrower within the structure from the Cash 2024 with Foton Power Energy SRL, for a loan in favor of EFSA, is RON 161.6 mn.. Pooling Agreements. • On 19 February 2024, was signed the contract FA in the amount of RON 245 mn. and 12 months • On 22 January 2024, was signed the Additional Vista Bank, SE Electrica SA as guarantor, whereby necessary for the completion and operation of 9178/19.02.2024, concluded between EFSA and validity, to finance the investment works Subsidies receivables Act no.3 to the Loan Agreement no. 2022012502 a facility for working capital was granted, in the the photovoltaic power plant “Bihor”. Subsequent to the reporting date, claims amounting concluded by DEER and BCR which extends amount of RON 17 mn., valid until 19 February the validity of the overdraft facility and bank 2025. guarantees, in the amount of RON 220 mn., until 30 April 2024. • On 20 February 2024, was signed the contract 02246681CR/01/20.02.2024, concluded between • On 30 January 2024, was signed the EFSA and Vista Leasing IFN, SE Electrica SA as Additional Act no.4 to the Loan Agreement no. guarantor, whereby a facility for working capital 11673879/02.02.2022, in the amount of RON 190 was granted, in the amount of EUR 6 mn., valid mn., concluded by EFSA and Banca Transilvania, until 10 February 2025. SE Electrica SA as guarantor, extending the validity of the facility until 30 January 2025 and amending the commercial terms. Intragroup Loans Guarantees established by ELSA, for its subsidiaries and other third parties Parent Corporate Guarantees • On 01 February 2024, was signed the Additional act no.1 to the Parent Corporate Guarantee established on 14 December 2022 in favor of EFSA, having as beneficiary COMPLEXUL ENERGETIC OLTENIA. The amount of the guarantee was reduced to RON 32.1 mn. and the validity was extended until 10 March 2024. to RON 605 mn. were submitted to the state authorities for the period prior to 31 December 2023 (invoices issued in October - November 2023), subject to GEO no. 27/2022 applicable with subsequent amendments. Legislation The legislative changes with significant impact in the activity of the Electrica Group and published in the period between the closure of the financial year 2023 and the date of this report are presented in Appendix A.3.2. • On 31 January 2024, was signed the Additional Act No. 5 to the Loan Agreement 10091385 of 16.12.2020 concluded by DEER and Banca Transilvania SA, extending the validity of the period of use until 30 January 2025 and maturity until 31 January 2026 for the facility in amount of RON 160 mn., for credit line and for issuing bank guarantees. • On 02 February 2024, was signed the Additional Act no.4 to the Loan Agreement no. 17/8130/2022 dated 04 February 2022 concluded by EFSA and BRD, SE Electrica SA as guarantor, extending the validity of the facility in amount of RON 220 mn. until 02 February 2025 and amending the commercial terms. • On 8 February 2024, was signed the Additional Act no. 1 to the Credit Facility Agreement no. 49183, non-cash facility for issuing bank guarantees, concluded between DEER and Garanti BBVA, SE Electrica SA as guarantor, in the amount of RON 103 mn., which extended the validity of the facility until 20 April 2026. • On 14 February 2024, was signed the Additional Act no. 5 to the Credit Facility Agreement no. WB/C/14 dated 18 February 2022 in the amount of EUR 34.3 mn., concluded between EFSA and • On 13 January 2024, was concluded the Interna Treasury Convention no.13/22.01.2024, between • On 01 February 2024, was signed the Additional SE Electrica SA and EFSA, within the Cash Pooling act no.1 to the Parent Corporate Guarantee structure, to ensure the optimal management of established on 28 December 2022 in favor the cash deficit or surplus in the bank accounts of EFSA, having as beneficiary COMPLEXUL of each of the two companies. ENERGETIC OLTENIA. The amount of the guarantee was reduced to RON 62.8 mn. and the validity • On 13 January 2024, was concluded the Interna was extended until 10 March 2024. Treasury Convention no.14/22.01.2024, between SE Electrica SA and DEER, within the Cash Pooling structure, to ensure the optimal management of the cash deficit or surplus in the bank accounts of each of the two companies. • On 13 January 2024, was concluded the Interna Treasury Convention no.15/22.01.2024, between SE Electrica SA and SERV, within the Cash Pooling structure, to ensure the optimal management of the cash deficit or surplus in the bank accounts of each of the two companies. • On 23 January 2024, SE Electrica SA concluded the Loan Agreement no. 17 dated 23 January 2024 with New Trend Energy SRL, for a loan in the amount of RON 200 mn. and 12 months validity, to finance the investment works necessary for the completion and operation of the photovoltaic power plant “Satu Mare 3”. 1.3.4 Litigation Case no. 2790/1/2023 (former 360/2/2015) On 14 February 2024, the High Court of Cassation Following Electrica’s request, the case was and Justice definitively settled the case no. suspended until the final resolution of Electrica’s 2790/1/2023 (former number 360/2/2015), against file against ANRE no. 192/2/2015, having as its ANRE, rejecting Electrica’s recourse as unfounded object the annulment of ANRE’s President Order (the case was also dismissed on merits). The object no. 146/2014 regarding the establishment of the of the file is Electrica’s request for the annulment regulated rate of return applied to the approval of of ANRE President’s Order no. 156/2014 regarding tariffs for the electricity distribution service provided the approval of the specific tariffs for the electricity by concessionaire distribution operators starting distribution service and of the price for reactive from January 1, 2015 and the repeal of art. 122 of the electricity, for Societatea Comerciala “Filiala de Methodology for establishing tariffs for the electricity Distributie si Furnizare a Energiei Electrice Electrica distribution service, approved by the Order of the Distributie Transilvania Sud” S.A., now Distributie President of the National Energy Regulatory Authority Energie Electrica Romania S.A. (DEER), Electrica’s no. 72/2013. subsidiary. 2023 DIRECTORS’ REPORTELECTRICA 2023 OVERVIEW2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA 2023 OVERVIEWELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 54 55 2. ELECTRICA GROUP 56 57 2.1 Organizational structure Table 4. ELSA’s subsidiaries Electrica Group is one of the main distributors and suppliers of electricity on the Romanian market. Subsidiary Activity The main activity segments of the Group consist of the distribution of electricity to users, the supply of electricity to domestic and non-domestic consumers, the segment of services related to external distribution networks as well as the segment regarding the production of electricity from renewable sources. Currently, the Group includes the parent company of the Group, Societatea Energetica Electrica SA (“ELSA”) and the following subsidiaries and associated entities:: • Distributie Energie Electrica Romania S.A. („DEER”) resulted from the merger through absorption of the three distribution subsidiaries Societatea de Distributie a Energiei Electrice Muntenia Nord (“SDMN”), Societatea de Distributie a Energiei Electrice Transilvania Sud (“SDTS”) and Societatea de Distributie a Energiei Electrice Transilvania Nord (“SDTN”), the last one being the absorbing company. DEER is the main electricity supplier in Transilvania Nord area (Cluj, Maramures, Satu Mare, Salaj, Bihor and Bistrita Nasaud counties), Transilvania Sud area (Brasov, Alba, Sibiu, Mures, Harghita and Covasna counties) and Muntenia Nord area (Prahova, Buzau, Dambovita, Braila, Galati and Vrancea counties), ensuring the service of network users by operating the installations that work at 0.4 kV to 110 kV (power lines, substations and transformation stations). DEER holds exclusive distribution licenses for the aforementioned regions, which have a validity period until 2027, with the possibility of extension for a period of 25 years; • Electrica Furnizare S.A. („EFSA”), company whose main activity is the supply of electricity to final consumers. EFSA holds an electricity supply license that covers the entire territory of Romania, which was renewed in 2021 for a period of 10 years, and a license for carrying out the activity of natural gas supply, valid until 2022. In view the expansion of the economic activities of Electrica Furnizare S.A. (EFSA) in Hungary, the electricity trading license was granted by the Hungarian Energy and Public Utilities Regulatory Authority (MEKH) for Electrica Furnizare, by Decision no. H879/2022. Also, the Group holds a natural gas supply license valid until 2032. • Electrica Serv S.A. („SERV”) starting on 30 November 2020, the company absorbed Servicii Energetice Muntenia SA (“SEM”), following a merger process. SERV provides repair services and other related Sole registration code Head Office % shareholding as at 31 December 2023 14476722 Cluj-Napoca 99.99999929% Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% Services in the energy sector (maintenance, repairs, construction) 17329505 Bucuresti 99.99998095% Production of electricity 42910478 Constanta Production of electricity 42921590 Constanta Production of electricity 43652555 Constanta 100% 60% 60% Distributie Energie Electrica Romania S.A. („DEER”) Electrica Furnizare S.A. (“EFSA”) Electrica Serv S.A. (“SERV”) Sunwind Energy S.R.L. (“SWE”) New Trend Energy S.R.L. (“NTE”) Foton Power Energy S.R.L. (“FPE”) Table 5. ELSA’s associates Source: Electrica Associate Activity Sole registration code Head Office % shareholding as at 31 December 2023 Crucea Power Park S.R.L. (“CPP”) Production of electricity 25242042 Constanta 40% • Crucea Power Park S.R.L. („CPP”) develops the wind project “Crucea Est”, with a designed installed capacity of 121 MW and a projected electricity storage capacity of 60 MWh (15 MW x 4h), located outside the Crucea commune, Constanta county. Source: Electrica services to third parties and various services to the companies in the group (car rental, building rental, Merger by absorption within the Group: etc.). • Sunwind Energy S.R.L. („SWE”) is developing the photovoltaic project “Satu Mare 2” with a designed the merger by absorption between Societatea Energetica Electrica SA (“ELSA”), Societatea Electrica installed capacity of 27 MW, located near Satu Mare and became subsidy on 21 March 2022 as a result of Productie Energie SA (“EPE”), Electrica Energie Verde 1 SRL (“EEV1”) and Green Energy Consultancy & ELSA owning 60% of shares. On 24 March 2023, ELSA bought the remaining shares up to 100%; Investments SRL (“GECI”) (together the “Companies”) and the participation of the Companies in the merger, • New Trend Energy S.R.L. („NTE”) develops the photovoltaic project “Satu Mare 3”, with a designed Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed companies, with the capacity of 59 MW, located near Satu Mare and became subsidy on 27 May 2022 as a result of ELSA effective date of the merger being 31 December 2023. with Societatea Energetica Electrica SA as absorbing company, Electrica Productie Energie SA, Electrica On 20 December 2023, the Extraordinary General Meeting of the Company’s Shareholders (EGMS) approved owning 60% of shares. • Foton Power Energy S.R.L. („FPE”) develops the photovoltaic project “Bihor 1”, with a designed installed capacity of 77.5 MW, located near Oradea city and became subsidy on 31 July 2023 as a result of ELSA owning 60% of shares. 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT58 59 Table 6. Long term investments owned by ELSA Company Activity CCP.RO Bucharest S.A. („CCP.RO”) Source: Electrica Financial brokerage activities, exclusively insurance activities and pension funds (risk management through derivative products on the energy market) Sole registration code Head Office % shareholding as at 31 December 2023 2.2 Key elements of the 2024 – 2030 Corporate Strategy The results of the Corporate Strategy for 2019-2023 were the starting point for the analyzes and debates necessary to develop the Corporate Strategy for 2024-2030. The Board of Directors approved the new strategic directions and objectives, the document being available on the company’s website in the section 17777754 Bucuresti 7.72% Investors > Strategy overview > Key elements of Electrica Group’s Strategy for 2024-2030 – document • On 8 December 2022, the effective subscription was made in the amount of RON 7 mn., equivalent to 8.06% of the share capital of the company CPP.RO Bucharest S.A. after the increase of the share capital, CCP.RO thus becoming a financial investment owned by ELSA for the long term. Following the completion of the share capital increase process approved by the EGMS of the Company on 29 May 2023, in which ELSA did not participate, ELSA’s holding in the share capital of CCP.RO was reduced to 7.72% as of 18 August 2023.. Electrica Group Structure at the Date of this Report Distributie Energie Electrica Romania S.A. (cid:23)(cid:21) (cid:31)(cid:31)(cid:30)(cid:31)(cid:31)(cid:29)(cid:28) Distribution Operator (cid:27)(cid:26)(cid:26)(cid:29)(cid:28) Sunwind Energy SRL Photovoltaic project development company - 27 MW Electrica Furnizare S.A. (cid:23)(cid:21) (cid:31)(cid:31)(cid:30)(cid:31)(cid:31)(cid:29)(cid:28) New Trend Energy SRL (cid:25)(cid:26)(cid:29)(cid:28) serv (cid:27)(cid:21) FISE Electrica Serv S.A. (cid:23)(cid:21) (cid:31)(cid:31)(cid:30)(cid:31)(cid:31)(cid:29)(cid:28) Foton Power Energy SRL (cid:25)(cid:26)(cid:29)(cid:28) CCP.RO Bucharest S.A. (cid:24)(cid:30)(cid:24)(cid:23)(cid:29)(cid:28) Crucea Power Park SRL (cid:22)(cid:26)(cid:29)(cid:28) 1) Filiala de intretinere si Servicii Energetice 2) The existence of additional shareholders was imposed by the provisions of Art. 10, paragraph (3) of the Law no. 31/1990 regarding the companies. published on December 22, 2023. The main strategic directions assumed are: • Contribution to a green economy transition • Promoting network security and business sustainability • Accelerating the digital transition in the Group’s operations. By adopting strategic directions, aligned with those at national and European level, Electrica Group could play an important role in transforming the energy sector, contributing to a new era of energy that is sustainable, efficient and environmentally friendly. Governance and investor relations remain in focus for the Group, pursuing continuous improvement and implementation of best practices in corporate governance and investor relations. The general objectives proposed within the corporate strategy cover all Group operations and constitute the response adapted to new trends and market requirements: – 1. Diversification of renewable energy sources → Active contribution to large-scale projects to increase the share of renewable energy sources in the national energy mix through significant investments in the development and implementation of renewable energy technologies, such as solar, wind, CCGT and hydrogen potential, including energy storage solutions. – 2. Implementing ESG in business models → Implementing a comprehensive governance framework for stakeholder engagement, while promoting sustainable practices across the Group, actively participating in initiatives aimed at reducing greenhouse gas emissions and combating climate change, investing in training programs and education to ensure a workforce prepared for the new requirements of the energy sector, awareness and education initiatives for communities and customers on the benefits and importance of sustainable energy. – 3. Sustainable electrification and modern infrastructure → Investment in automation and development of smart grids for efficient grid management and smart energy distribution, as well as to support the transition to renewables, promoting sustainable mobility through investments in charging infrastructure for electric vehicles. – 4. Energy efficiency and customer solutions → Implementing extensive energy efficiency programs in the Group’s operations and integrating digital technologies for optimizing and efficiently monitoring energy consumption, integrating innovative services, customized energy solutions and educational programs for customers in order to reduce energy consumption. – 5. Digitalization and innovation → Automating business processes and integrating them on interconnected platforms to increase operational efficiency, develop virtual communication channels to improve customer experience, support innovative initiatives and develop strategic partnerships with other companies and organizations to share expertise and collaborate on innovative projects that contribute to the modernization of the organization and the transformation of the energy sector. 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORTPhotovoltaic project development company - 59 MWPhotovoltaic project development company - 77 MWElectricity and natural gassupply companyEnergy services companyWind project development company - 121 MW60 61 In addition to traditional areas of interest, namely embraces diversity, we remain committed term strategy. Thus, in the Distribution segment, Within the strategy there is a strong focus on the electricity distribution, electricity and natural gas to creating the most equitable and inclusive we aim to develop smart grids and increase their implementation of ESG (Environmental, Social, supply and energy services, there is a high interest workplaces, advancing diversity representation at flexibility to meet the needs of consumers and Governance) principles and the development of in developing new activities based on innovative every level of the organization. to integrate electric vehicles. We aim to increase organisational excellence programmes. In view of technology, while continuing to monitor and network security, accelerate the digitisation process the geopolitical crisis in 2022, which has led to a analyze growth opportunities through mergers or By translating general strategic objectives into and improve business resilience to face future steep rise in energy prices, we are also focusing on acquisitions. It also aims at a closer relationship objectives and plans of specific initiatives, at the market challenges. streamlining operational costs and securing funding with customers, based on skills development, but level of each Subsidiary, the organization adapts sources for future investments. also on an offer of products and services in line with to market conditions, customer expectations and As a result of the implementation, as of 1 January their needs. the rapid pace of technology so as to deliver value 2022, of the new unified target organization Ultimately, our strategy is a response to changes in Also, an important role will be played by optimizing consistently. chart, whereby all structures in the area of the energy sector and market needs, and the need strategic activities (asset management, energy for continuous adaptation and innovation remains IT&C support functions and aligning with industry- Distribution segment management, integration program management, at the heart of our actions. specific trends and solutions. In this context, beyond IT&C, strategic project management), financial the digitization of processes and their integration In the Distribution segment, the organizational and support activities have been brought together Establishing a predictable and incentivising into IT platforms, the development of smart grids, transformation process initiated in 2017 was under a single coordination at the level of the regulatory framework for the fifth regulatory the integration of smart meters into the rhythm consolidated by the legal merger of the three company resulting from the merger - Distributie period will boost investment in the modernisation, of their implementation plan, support for the Distribution Operators of the Group in 2020, under Energie Electrica Romania SA (DEER), in the coming automation and digitalisation of distribution operationalization of prosumers, etc. are foreseen the umbrella of Distributie Energie Electrica Romania years will continue the process of adaptation networks to meet the requirements of a sustainable in the distribution area. In the supply area, the SA (DEER). The post legal merger integration and continuous improvement of processes and energy infrastructure. development of a customer-friendly interface, the facilitated the adaptation and improvement of supporting technology, as defined by the approved automation of contracting, reporting and invoicing processes and technology according to the new Strategy for the distribution segment. As a result To finance investments in the Distribution segment, processes and data exchange with all distributors strategy (horizon 2019-2023) and the program of of the implementation of the organisational investment financing mechanisms will be optimised, in Romania are critical elements supported by IT&C measures related to the integration. transformation plan as of 1 February 2023, a number using both own sources and European funding in order to ensure strategic advantages for the Group’s business segments. The current strategy, approved last December, is based on three main pillars: sustainable – simplification and structuring of the upgrading networks and transforming them into decision-making chain by branches of smart grids, which will be reflected both in improved of strategic objectives have been pursued, such as: programmes, which provide opportunities for The corporate governance framework continues growth of the company’s value, transformation activity; network resilience and increased operational to improve, closely following the Corporate and sustainability through the implementation – specialisation and professionalisation of efficiency. Governance Action Plan established with the EBRD of ESG principles and organisational excellence since 2014. It was approved the establishment of the programmes, and efficiency through increased human resources in key activities; – reducing the NL by creating a well- Climate Governance and Public Policy Committee network security, digitalisation and improved structured organisational branch so Supply segment in order to prepare the necessary framework for business resilience. implementing initiatives that contribute to achieving that there are no decision-making or operational bottlenecks; In 2023, the company carried on the strategy from the EU’s objective of zero greenhouse gas emissions The long-term strategy is designed to position us at – corporate cultural transformation of the previous year, focusing on securing its portfolio by 2050 and ensuring the long-term resilience of the forefront of the national energy transition and the organisation, focused on efficiency of customers by developing specific measures the companies within the Group, in light of potential contribute to achieving our 2030 and 2050 targets, and performance, ensuring business to increase client satisfaction. Also, traditional structural changes in the business environment, not only responding to today’s challenges but also sustainability; electricity supply offer was enlarged with combined arising from climate change. anticipating the future of the energy sector. – retention of highly skilled workforce; electricity - gas and value-added services – human resources concentration, packages. From a process-oriented culture to a results- Strategic objectives at Group level include development and specialisation; oriented and customer-centered culture, through diversifying renewable energy sources, with a focus – accelerating the adoption of best practices In 2023, EFSA continued the implementation of leadership and improving employee satisfaction, on generation and storage, to contribute to the and new technologies, bringing increased measures settled in order to transform the company we aim to realign the culture with the vision, mission transition to a green economy and to offer a variety transparency and reduced monitoring into an organization capable of successfully and core values of the organization to achieve the of services such as energy efficiency solutions and costs; responding to current and future challenges of strategic objectives proposed in the horizon 2024- exploring regional growth opportunities. – increasing financial and operational energy market, including improving the financial 2030. performance and keeping within ANRE situation, improving NPS, defining a competitive We are dedicated to cultivating a culture that situations, adaptability is a key element of the long- Considering the market context and unpredictable regulated costs. commercial program, improving positioning and transforming the organization into a flexible and 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT62 63 agile one. costs; Therefore, during 2023, evaluations will be continued for the construction of photovoltaic power plant at each organizational entity level with the aim of assembly works; • creation of a structure of qualified personnel identifying new measures necessary to improve the activity. Also, as part of priority measures for upgrading and adjustment of internal IT systems during 2023, SAP ISU implementation project was carried out with January 2024 as deadline for migration to the new system. Ethics remains a priority for the organization, as a preliminary requirement for the sustainable development of the Electrica Group. On medium term, it is desired the development of an ethics 2.3 Outlook During 2019-2023, the global energy industry support, tax incentives and gas saving and storage has undergone significant transformations, and initiatives, some of which were also adopted in Romania has been directly affected by changes Romania. The REPowerEU plan, introduced in May at European and national level. One of the most 2022, aimed to reduce dependence on fossil fuels notable developments has been the shift towards in Russia and included increasing the target for sustainable energy sources, with increasing renewables to 45% by 2030. culture within Electrica Group, by moving from the investment in renewable energies such as solar, reactive stage to the integrity stage, by internalizing wind, hydro and geothermal. In the European In the Romanian context, adapting to the energy the ethical standards and the values of the context, this change has been supported by policies crisis and transforming the electricity market organization, understanding the ethics role as a and regulations adopted to promote the sustainable involves sustained efforts to increase the production value enhancing factor and providing a permanent development of the energy sector. capacities of net-zero emission technologies and Services segment internal control system which involves the entire company’s personnel. Nationally, this transition has been reflected in essential to assess the impact of proposed reforms increased investment in renewable energy projects to ensure that they are efficient and appropriate for ensure the flexibility of the electricity system. It is The main development directions of SERV branch for the next period are: • further development of projects for the implementation of new activities: design and installation of B2B/B2C photovoltaic power plants, reactive energy compensation, power supply stations, smart metering solutions; • expansion of Electrica Serv’s activity on the services market outside the Group and consolidation of the business lines for the new activities identified, simultaneously with the improvement of the already existing activities for which the company has accumulated experience; • the efficiency of maintenance and repair works for electricity distribution and transmission installations and investment works in the energy sector, with priority being given to compliance with the conditions imposed so that the result leads to “zero penalties”; • providing preventive and corrective maintenance services leading to safe and efficient electricity supply to consumers; • significantly improve asset management, by leasing or selling “non-essential”/”non-core” assets; • optimising the real estate portfolio by selling intra-group assets; • re-alignment of the operational staffing structure and reprioritisation of business lines; • reduction of administrative overheads, production costs, material, services and labour The CSR (Corporate Social Responsibility) activites such as wind farms and solar farms. The Romanian Romania’s specific energy mix. still remain very important for the Electrica Group, government has encouraged this development by with multiple key areas being supported, with introducing support policies for renewable energies As Romanian consumers become more aware of hundreds of projects registered annually to benefit and measures to improve energy efficiency. In rising energy prices, the retail sector (retail sale from Electrica’s support. addition, technological and digital advances of energy) is facing significant transformations. have been integrated into industry, and the Energy suppliers should support consumers in their Also, an important role will be played by the implementation of artificial intelligence, Internet energy transitions by providing solutions for energy optimization of the IT&C support functions, they will of Things (IoT) and energy storage solutions have efficiency, consumption management and access have an increasingly important role for the base business lines; IT&C takes over the responsibility of capitalizing on the synergies, but also of supporting the specific competencies that offer become increasingly important in optimizing energy to affordable energy. Taking a more sustainable production, distribution and consumption processes approach and diversifying the offer of products nationwide. and services becomes essential to respond to new energy market challenges in the specific national strategic advantages to the business units. In this Since September 2021, Romania has also felt the context. context, beyond the processes’ digitization and their integration in IT platforms, the development impact of extremely high prices and significant volatility on European electricity markets, a Electrica Group operates in a key economic sector of smart grids, the smart meters’ integration in the phenomenon generated mainly by high natural gas and therefore is closely monitoring both the national rhythm of their implementation plan, support for the costs. This situation has contributed to an energy and the international context, in order to make operationalization of prosumers etc. are provided crisis in Europe, and Russia’s involvement in using the best decisions in the following period and for in the distribution area. In the supply area, the natural gas for political purposes has increased addressing the challenges on the short and medium development of a customer-friendly interface, the pressure. As a result, Romania has intensified its term. automation of contracting, reporting, and invoicing efforts to become energy independent and develop processes and data exchange with all Romanian its own production capacities, in order to reduce The current strategy of the Electrica Group is distributors are critical elements supported by IT&C dependence on resources from Russia. built on a set of trends and assumptions, and the it is an activator of competitive advantages. acceleration of digitization and the implementation In October 2022, the European Commission of Artificial Intelligence (AI) is one of its objectives. presented a set of measures to address the Thus, the already started efforts to support impact of high energy prices by providing revenue investments in IT tools and automation to increase 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT 64 65 efficiency, reduce costs and optimize operations the field of energy, ANRE approved by ANRE of buildings, lighting, electric appliances, electricity market target model, which implies through artificial intelligence will continue. Order no. 129/2022 Methodological norms for motor drives, heat pumps etc.); the development of Europe’s internal electricity Considering the energy policies developed at both with the purchase of electricity to cover own • The smart metering implementation will offer with future trends and challenges in the energy the recognition in tariffs of additional costs market, will continue to evolve and be in line EU and national level, as well as the international technological consumption compared to the complex tariffs options to the consumers, industry; context of the energy markets, the following trends costs included in the regulated tariffs; detailed information regarding the consumption are expected to characterize on medium and long profile, which might lead to increased flexibility • Process optimization based on artificial term the local electricity market: • Regulation (EU) 2022/1854, regarding an and demand reduction during peak periods. intelligence; • Competition between players on the electricity emergency intervention to address the problem Thus, the consumers shall be better informed supply market in terms of diversifying the of high energy prices, provides for a maximum and involved in decision-making process, • Using machine learning algorithms to optimize portfolio of products offered to customers with threshold of 180 Euro/MWh for solar, nuclear, as active participants. The smart metering production processes and minimize waste; a focus on the value-added products offered hydro, wind and lignite production, incomes implementation pace depends on the (especially energy efficiency) and digital above this threshold will be collected by the implementation calendar adopted at national • Adopting similar AI strategies can optimize services offered (mobile applications, invoices state; and online payments, expanding customer level; energy production, increase equipment reliability and minimize operational expenses. service through chat solutions); • Electricity distributed generation technologies • The development of the transmission and will determine the distribution operators to • In the electricity distribution area, the regulatory adapt their processes and strategies regarding trend is to provide remuneration to the the upgrade and development of the network distribution operator considering both the and to offer solutions to the independent quality of the service, as well as the operational producers, considering the appearance of costs and efficiency based on comparative prosumers, which are active participants in analysis between DSOs. An element that affects the energy market; in this context, significant and will continue to significantly affect the investments are necessary in order to improve profitability of distribution companies is the both the transmission and the distribution increase in the purchase price of NL, a situation infrastructure. The high price of electricity which was partially regulated by the entry into in 2022 and the uncertainty of keeping the force of: (i) Government Emergency Ordinance electricity price cap in place has increased the no. 118/2021 regarding the establishment of a interest of consumers to produce part of their compensation scheme for the consumption energy independently, which has accelerated of electricity and natural gas for the cold the trend. The significant reduction in the cost season 2021-2022, (ii)Government Emergency of photovoltaic technologies represents a Ordinance no. 27/2022 on the measures development opportunity for smaller-scale applicable to final customers in the electricity generation projects, especially in the domestic and natural gas market between 1 April 2022 and area; 31 March 2023, as well as for the modification and completion of some normative acts in the • On the long term, full electric vehicles, light energy field, (iii) EMERGENCY ORDINANCE no. commercial vehicles and electrification 119/2022 for the amendment and completion of railways are expected to increase the of GEO no. 27/2022 regarding the measures consumption of electricity in the transportation applicable to end customers in the electricity sector; and natural gas market in the period 1 April 2022 - 31 March 2023, as well as for the modification • Future development of technologies will support and completion of some normative acts in the energy efficiency policies such as: field of energy, (iv) EMERGENCY ORDINANCE no. 153/2022 for the amendment and completion of GEO no. 27/2022 and the amendment of GEO no. 119/2022, as well as for the modification and completion of some normative acts in – Development of transmission and distribution networks, including smart grid and smart metering; – End-use energy efficiency (thermal integrity distribution infrastructure and long-distance interconnection will become a necessity. The Table 7. The key drivers of changes in the electricity market Key drivers Description Impact on GDP evolution and industry structure The economic growth is a determinant factor 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. Also the evolution of the number/quantity of energy produced/injected by consumers will determine differences between the trend in the amount of energy distributed and the trend in GDP. GDP evolution and industry structure Demographic evolution and technology development In contrast with the demographic decline recorded at EU and Romanian level, the electricity consumption is positively impacted by the changes in the consumer behaviour and the increase in urbanization. For example, the massive increase in the number of connected devices and implicitly, in a less accelerated manner, in the electricity consumption, maintains the increasing trend of consumption. Electricity consumption Russia’s invasion of Ukraine has massively disrupted Europe and global energy markets, prompting the urgent need to identify a plan to stop the EU’s dependence on imports of fossil fuels from Russia. International geopolitical context REPower EU is the EU’s response plan to this context, a plan for the period 2022- 2030. The REPower EU plan sets out a series of measures to rapidly reduce energy and accelerate the green transition while increasing the resilience of the EU energy system. Electricity prices The plan targets 4 areas: Saving, diversifying sources, accelerating the shift to clean energy, investment and reform. 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT66 67 Key drivers Description Impact on Key drivers Description Impact on The evolution of the electricity price in the market Energy is an indispensable resource for both the population and the economic operators. Thus, the sharp increase in energy prices is reflected on the dynamics of consumer prices, respectively on the generalized increase in inflation rates. The transactions concluded on the centralized platforms exceeded the threshold of 2,500 RON/MWh for the AN product and 4,000 RON/MWh for the short-term products related to the winter period, and on the DAM the weighted average price doubled compared to the beginning of 2022. The distribution operators purchase purchased energy for NL at a price four times higher than the ex-ante approved price in the distribution tariffs. In the period 1 January 2023-31 March 2025, the mechanism for the centralized purchase of electricity is established, and OPCOM is designated as the sole purchaser. Electricity prices and inflation rate Technological development Smart networks and smart meters will create benefits for the end consumers, distribution operators 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.), also considering the management of their impact. Electricity prices and consumption Electricity prices Increase in environmental awareness Romania has adopted the strategy “Europe 2020” - program 20-20-20, aiming to reduce greenhouse gas emissions, improve energy efficiency and raise the share of renewable energy. Moreover, the 2030 Framework provides even more ambitious targets and therefore more efforts are needed from governments and market players to achieve them. Renewable energy is the cheapest and cleanest energy available and can be generated domestically, reducing our need for energy imports. Energy efficiency and the use of renewable energy sources can enable industry to reduce the impact of market evolution. Energy saving is the cheapest, safest and cleanest way to reduce the repercussions of the trend in the energy market. In addition to energy efficiency measures, individual actions have a positive impact on energy bills (consumption and price level). Electricity prices and consumption, regulatory framework Changes in regulatory framework The approved schemes to support customers in payment of electricity/ natural gas bills, with initial application between November 1, 2021 and March 31, 2022, through which price caps, compensations for household customers and exemptions for SMEs were granted, later extended for the period April 1, 2022 - March 31, 2025, by which the prices applicable to final customers were capped, assume ex post recovery of amounts related to these schemes by suppliers, risking affecting supply activity in case of delays in settling the amounts incurred by suppliers or of non-recovery in the situation where the costs recorded in the balancing market exceed the purchase costs by more than 5% or in the situation where the average purchase price exceeds the cap of 1,300 RON/MWh/ or 900 RON/ MWh after the publication of Law approving GEO 153/2022 in the Official Monitor. Also, as a result of entering into force of the new Electricity and Natural Gas Supply Activity Performance Standard, more demanding requirements are applied regarding the quality of supply service and responsibility towards customers, including through the obligation of automatic payment of compensations to all customers categories, in case of non-compliance with standard indicators. Since 2020, the regulatory framework for connections has changed repeatedly, the connection process being carried out successively on the basis of the following ANRE Orders: ANRE Order no. 160/2020 amending and supplementing the Regulation on the connection of users to the electricity networks of public interest, approved by the Order of the President of the National Energy Regulatory Authority no. 59/2013, ANRE Order no. 17/2021 approving the Procedure for the connection to the public interest electricity networks of consumption sites belonging to non-household end-users through connection installations with lengths up to 2 meters. 500 metres and household customers, ANRE Order no. 18/2022 approving the Procedure for the connection to the low voltage public interest electricity networks of consumption sites belonging to household customers, ANRE Order no. 17/2022 amending and supplementing the Regulation on the connection of users to the public interest electricity networks, approved by the Order of the President of the National Energy Regulatory Authority no. 59/2013, ANRE Order no. 19/2022 approving the Procedure for the connection of consumption and production sites belonging to prosumers to public interest electricity networks, ANRE Order no. 4/2023 amending and supplementing some orders of the President of the National Energy Regulatory Authority in the field of connection of users to the public interest electricity network. In 2023, the free connection of irrigation equipment and appliances was introduced for non-household customers with CAEN code 01 Agriculture, hunting and related services and CAEN code 10 Food industry, for connection installations with a length of less than 2.5 km, the financing of the network difference exceeding 2.5 km is provided by non-household customers. Also, as a result of the entry into force of the new Performance Standard for the electricity distribution activity, more demanding requirements on the technical quality of the distribution service and increased demands on the monitoring of technical quality parameters are applied. At the same time, the changes regarding prosumers such as: the rules for selling electricity produced by prosumers, respectively quantitative compensation for customers with installed power of up to 200 kW and financial compensation for customers with installed power between 200 and 400 kW, generated a flow of new requests for this customer segment, but also important changes to the invoicing IT system for this customer category. 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT68 69 2.4 Key factors, directions and significant market trends affecting the operational results of Electrica Group The significant increase in renewable energy production will generate a surplus in certain hourly segments, according to the production and consumption curve for the period 2022-2032. Although Romania’s energy efficiency has decreased in recent years, our country has a significant potential to improve indicators in this area. In 2023, a series of challenges and opportunities of the electricity market have left their mark on the Electrica group: • Current distribution networks have an old infrastructure, with performance indicators (SAIDI, SAIFI) below the European average. The Green Deal will put additional pressure on networks, with tens of billions of euros of investment expected at European level; • Network flexibility, achieved through storage, distributed generation aggregation and digitalised planning with artificial intelligence, can significantly reduce costs, by more than EUR 29 bn. annually at European level; • Pressure on tariffs and competition in supply and generation markets require permanent cost control; • ESG has become an essential component of the corporate agenda in response to stakeholder electricity production from renewable sources (40% by 2030); • The energy mix in Romania changes significantly in the medium and long term, mainly by increasing the production capacity of electricity from renewable sources; • “Democratization of energy” brings about important changes in the way electricity is transmitted and distributed; • The energy market will continue to register a production deficit both due to the accelerated growth in demand (caused by the electrification of transport and, partially, heating systems) and due to the environmental limitations to which energy production (European, regional, national) has committed; • The supply segment experiences unpredictable developments, with very frequent changes in incident legislation, which (at least so far) diminishes competition and relativizes any planning scenario; • Geopolitical developments in the region will remain at their peak in 2022, but we do not exclude the possibility of escalations; • Financial markets will allow access to advantageous funding sources to support companies’ investment programs, but companies’ involvement in ESG practices will play a role in the success of financing. The IT&C activities within the group were reviewed and re-focused on the key areas of business support in accordance with the Group Strategy. Subsequently, the structure and projects in the subsidiaries were re-reviewed and accelerated to achieve the optimal level of support for electricity distribution and supply activities, including automation projects, digitization, friendly and simplified interface with external and internal customers. Emerging technologies, with an impact on the resilience of IT&C services, are constantly evaluated and monitored in the Group and tested in pilot mode in Electrica SA. Cyber Security: expectations; ESG can be a source of increasing company value through staff engagement, reduced • Impact: Increasing cyber threats to critical infrastructure in the energy sector can affect the operations regulatory risks, lower capital costs and financing; • Robust ESG strategy must cover topics that are holistically relevant and tailored to industry specificities; • In order to fully capitalize on the opportunities offered by the energy transition, Electrica must go beyond ESG statements and reporting and implement concrete initiatives with significant impact. and security of networks and systems. • Directions: – Development and implementation of advanced cyber security measures, including protection solutions against sophisticated attacks. – Strengthening capabilities for monitoring and responding to cyber incidents. Electrica has the potential to become a leader in Romania’s energy transition by implementing an Digitization and Automationa: ambitious strategy that takes into account the challenges and opportunities outlined above. At the same time, digitization generates benefits on multiple levels: but also introduce new risks and dependence on IT systems. • Impact: The integration of digital technologies and the automation of processes can optimize efficiency, • Improving customer value • Cost reduction • Efficiency • New sources of income • Reduced risks • Directions: – Implementing automation systems to improve the efficiency of operations and reduce human error. – Careful management of risks associated with increased reliance on digital technologies. The end of 2023 meant the approval of a new corporate strategy, and the most important assumptions we Directions and Trends: looked at were the followinge: • The European Union maintains targets for reducing greenhouse gas emissions from green energy production; • Romania’s GDP will have an upward and stable evolution in the medium term, even if some slowdown is possible in the near period of industrial production; • Romania will remain committed to achieving the objectives of the European Green Deal, focusing on reducing greenhouse gas emissions (55% reduction compared to 1990 by 2030) and increasing 1. The Internet of Things (IoT) in Smart Energy: • Impact: Increased connectivity through IoT can provide real-time data • Trends: – Expanding the use of IoT devices for monitoring and controlling energy infrastructure equipment. – Implementing security protocols to protect IoT devices. 2. Predictive Analysis and Artificial Intelligence: • Impact: The use of predictive analytics and artificial intelligence (AI) can improve decision-making and 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT 70 71 optimize operations but requires the management of sensitive data.. power consumption from the station or for the development of electricity storage facilities and the way to • Trends: integrate flexibility services. – Integrating AI solutions to effectively anticipate and manage energy demand. – Using machine learning algorithms to identify and prevent security incidents. 3. Smart Grids and Microgridd: • Impact: The development of smart grids and microgrids can improve the distribution and efficient use of energy. • Trends: – Implementation of automation technologies in smart grids to improve energy flow management. – Focus on cyber security to protect communications and control in smart grids. 4. Blockchainin Energy: • Impact: Blockchain technology can ensure transparency, safety and efficient management of energy transactions. • Trends: – Development of blockchain solutions to facilitate decentralized energy transactions. – Using blockchain to ensure the authenticity and integrity of energy data. 5. Green Energy and Sustainable Technology: • Impact:Integration of renewable energy sources can optimize energy distribution and consumption. • Trends: – Expansion of energy storage capacities to handle fluctuations generated by renewable sources. – Use of sustainable technologies to reduce the carbon footprint of the IT infrastructure. These directions and trends reflect the continued evolution of technology and its impact on the energy sector, highlighting the need for an integrated approach that takes into account both the advantages and challenges associated with emerging technologies. In the distribution segment, the focus is on operational efficiency, by reducing technological and commercial losses, optimizing internal processes, ensuring an optimal level of resources used, on user orientation and ensuring their satisfaction, by improving the network access and the quality of service, on development of smart grid technologies and cost recovery. Increasing the operational performance will lead to a positive impact on the users’ experience, ensuring continuous supply security, at high quality and high standard interactions with our staff. In parallel, exploiting the significant optimization potential and reducing losses by streamlining the distribution operators’ activities are key factors in the optimal allocation of resources, so important in this regulatory period. The year 2024 was approved by ANRE as the transition period towards the fifth regulatory period, the DEER distribution tariffs for the year 2024 are transitory and established on the basis of a single income, the NL target being unique for the total DEER. In the year 2024 distribution operators will submit to ANRE approval the data for substantiating the projection of revenues and profitability for the fifth regulatory period 2025- 2029. The supply segment will focus on diversifying its activity through offers and services adapted to customer needs, on operational efficiency through optimized electricity sales and purchase processes, and on orientation towards customers and maximization of their satisfaction. The goal is to increase the supply segment, offer value-added solutions (products and services) and digitize specific operations and processes. Taking into consideration that other factors that are not available at the date of this report (e.g. regulations and legislation being amended) or that have not been presented above, or that have not been taken into account by the Group, may occur and can have a significant impact on Group’s strategy implementation and evolution. The regulatory framework has undergone significant changes over the last decade, including liberalisation of electricity and gas markets, unbundling of supply and distribution activities, implementation of the support scheme for renewable energy, support for electricity prosumers and end-customer price caps. In 2023, the electricity market was completely liberalized for all customer categories and the price was set by suppliers through free market mechanisms, both for universal service offers and for offers related to competitive market, in compliance with price capping invoicing rules. Regarding electricity and natural gas last-resort supply, a monthly rotation system was introduced for the Supplier of Last Resort nomination, which automatically takes over customers from all areas of the country. For this purpose, the Suppliers of Last Resort list is established according to the market share, each Supplier of Last Resort in the list being nominated by turn, monthly, to automatically take over the customers with no supplier. Thus, in 2023, EFSA was the nominated Supplier of Last Resort for electricity in May and October, and for natural gas in April and November 2023. ANRE’ s development of the online platform for changing electricity and natural gas supplier (OPCS) helps energy market in Romania to achieve the objective provided by the European legislation regarding the change of supplier in 24 hours, starting with 2026. Regarding the legislation related to prosumers, the change of electric power installed level in power plants from renewable energy sources belonging to prosumers, from 100 kW to 400 kW per place of consumption and the introduction of quantitative compensation led to an increase in the number of prosumers, which One of the main factors influencing the strategic decisions for the Distribution area is represented by the led to an increase of 185% in 2023 compared to 2022. trend of energy market prices which negatively impacts in a significant way the cost of energy acquisition for network losses, with a significant negative impact over profitability if the method of capitalizing on the additional costs of the procurement of electricity for the NL or the mechanism for the centralized Just as importantly, in 2023 the New Regulation for Electricity Supply to Final Customers entered into force, approved by ANRE Order no. 5/2023, which triggered various innovations that had to be implemented in the procurement by OPCOM of energy for the NL does not lead to the improvement of the results. electricity supply activity. An important factor is the alignment of strategic decisions with the 10-year development plan which was developed by DEER to be approved by ANRE, after public consultation with all stakeholders, and that includes both investment works for the production of energy from renewable sources for NL and the As part of price increase on electricity and natural gas markets at international and national level, as well as the effects caused by these increases for the Romania’ s population, a series of support schemes for electricity/natural gas customers are to apply, through the effect of GEO no. 27/2022 with the respective 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT72 73 changes and additions. Considering the implementation method of these schemes and the settlement • Acceleration and optimization of the implemented digitization and development of synergies mechanism of amounts granted as support to clients, ex post from the state budget to electricity suppliers, within national supplier change platform, by adapting and homogenizing processes to optimize the they are generating constraints in terms of cash flow, and uncertainties regarding the full recovery of the relationship with clients; respective amounts by suppliers. • Adapting to internal context created by liberalization of energy prices, as well as to the international one In this context, EFSA has adapted its medium and long-term strategy in order to manage the impact of • Support measures granted to both household consumers and non-households; these measures on company’s activities in a responsible and sustainable manner in the situation of a • Maximizing the results obtained following the development of partnership relations in the dynamic regulatory framework that has seen numerous successive and high-impact changes in the recent period. context created by liberalization. causing supply fluctuations; The evolution of acquisition costs 2023 was characterized by an extremely low liquidity on gross market generated by the implementation at the end of 2022 of some measures in order to reduce electricity and natural gas price, GEO 27, GEO 119 and GEO 153, respectively. New regulations were introduced, as follows: • The introduction of Centralized Electricity Purchase Mechanism (CEPM); • Capping the selling price on retail market for certain categories of end customers; • Mechanisms for recognizing the cost of acquisition achieved; • Overtaxing producers/traders on income obtained from the sale of electricity, if the average price exceeds 450 RON/MWh; • Limiting the profit from the wholesale of energy and natural gas to 2%, the difference set to be paid to the energy transition fund; • Limiting electricity exports; • Establishing the maximum value of the acquisition price recognized by suppliers, for energy billed to capped customers. The average trading price of energy in the Day Ahead Market, in 2023, recorded a decrease of approximately 61% from 1,306.61 RON/MWh average price recorded in 2022 to 510.63 RON/MWh. Over-taxation of the income obtained from energy sold by producers/traders as well as the obligation of large producers to sell the energy produced exclusively through CEPM resulted in a reduced number of transactions on the gross market. For natural gas, the transaction price on the spot market decreased in 2023 by approximately 65.5% compared to the transaction price achieved in 2022, from 574.4 RON/MWh to 198.3 RON/MWh Under these circumstances, the market low liquidity as a result of Centralized Electricity Purchase Mechanism introduction, the unpredictability created by the legislative framework as well as the limitations established by the government regarding the acquisition/sale prices of electricity and natural gas, it is difficult to forecast the evolution of wholesale electricity and natural gas market in 2024. In absence of major investments in new production and storage capacities but also of maintaining a reduced demand from consumers, it is estimated that prices will stabilize and be maintained at a level similar to those achieved in 2023. The impact on customers The impact on clients in the dynamic domestic and international context: 2023 DIRECTORS’ REPORT2023 DIRECTORS’ REPORT2023 ELECTRICA ANNUAL REPORT2023 ELECTRICA ANNUAL REPORT74 75 3. ELECTRICA ON THE CAPITAL MARKETS 76 77 3.1 Ownership structure Until July 2014, the Romanian State, through the Ministry of Economy, Energy and Business Environment, 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 Depositary Receipts are listed on the London Stock Exchange (LSE – ticker ELSA). Subsequently, a secondary public offer took place, which ended on 3 December 2019, during which a total number of 208,554 new shares were subscribed, with a nominal value of RON 10 and a total nominal value of RON 2,085,540. As of 31 December 2023, the ownership structure according to the records of Depozitarul Central (the Romanian Central Depository) is presented below. Table 8. Ownership structure Shareholder Number of shares Stake held (% of the share capital) Percent of voting rights (%) ELSA the right to receive dividends. Figure 24: Ownership structure as of 31 March 2024 . 7 0 % 7 N I A 3 A M O R THER LE G O E R S O NS 40.57% L P A R O M ANIAN STA T E 4 8 . 7 7 % S 4 . 9 C O O T U H 2 . N E T R 8 7 R I E % S N O S R E L P A U D I V I D I N B E R D ( U K ) 3 . 0 1 % ELECTRICA S.A 1.99% BNY MELLON DRS (LSE) 0.58% Shareholder No. of Shares Percentage of share capital (%) Percentage of shares with voting right (%) % 9 Romanian State through the Ministry of Energy 169.046.299 48.7948% 49.7850% European Bank for Reconstruction and Development (EBRD) 10.423.457 3.0087% 3.0698% Electrica 6.890.593 1.9890% 0% Bank of New York Mellon - GDRs 2.010.808 0.5804% 0.5922% Other legal persons Individual persons Total 140.547.720 40.5687% 41.3920% 17.524.720 5.0585% 5.1611% 346.443.597 100.00% 100.00% The Romanian State, through the Ministry Energy, Bucharest, Romania 169,046,299 48.7948% 49.7850% Source: Depozitarul Central, Electrica The European Bank for Reconstruction and 17,355,272 5.0096% 5.1112% Development Electrica SA 6,890,593 1.9890% - BNY MELLON DRS, New York, USA 2,060,808 0.5948% 0.6069% Other legal entities* 131,281,205 37.8940% 38.6629% At 31 March 2024, ELSA’s shares were owned by a total of 13,637 shareholders, of which 252 legal entities and 13,385 individuals from 30 countries. 93.49% of the total number of shares (323,901,544 shares) were owned by investors with residence in Romania. Thus, foreign shareholders held 6.51% of the share capital (22,542,053 shares), the largest weight being represented by European citizens. Shareholders in the United Kingdom and Ireland held 3.38% of share capital, while those in the USA held 2.05%, in this category being included also the GDRs holders. 19,809,420 5.7179% 5.8340% 3.2 Shares evolution on BSE and Global depository receipts Individuals TOTAL Source: Depozitarul Central, Electrica Note 1: Shares with voting rights - 339,553,004, representing the total number of shares (346,443,597) without the number of own shares held by Electrica (6,890,593), for which the voting right is suspended * Paval Holding, NN Group NV and Allianz SE hold, directly or indirectly, between 5% and 10% of the total number of shares with voting rights 346,443,597 100.0000% 100.0000% (GDRs) evolution on LSE 3.2.1 BSE shares: 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 sectorial index that reflects the evolution of the companies The shares presented to be held by the Bank of New York Mellon represent the global depositary receipts listed on BSE’s regulated market having as main activity energy and related utilities). (GDRs) owned by ELSA shareholders that are traded on the London Stock Exchange (LSE). A global depositary receipt represents four shares. The Bank of New York Mellon is the depositary bank for these Between 4 July 2014 - 31 December 2023, ELSA’s shares recorded a minimum price of RON 6.10 (29 securities. September 2022) and a maximum price of RON 14.96 (12 May 2017), therefore the weighted average price was RON 11.5. Following the stabilization process after the June 2014 IPO, ELSA owns 6,890,593 of its shares, representing 1.989% of the total share capital at 31 December 2022, with suspended voting rights, which does not entitle The gross dividends per share granted by ELSA in this period reached a cumulative value of RON 5.7995. 2023 DIRECTORS’ REPORTELECTRICA ON THE CAPITAL MARKETS2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA ON THE CAPITAL MARKETSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 78 79 Thus, the aggregate yield generated by ELSA’s shares (along with dividends) from the IPO and until the end Table 9. BSE Shares and Global Depositary Receipts (GDRs) on LSE of 2022 was 57.08%, of which 4.36% from share evolution and +52.72% from dividend yield. From the IPO dated 4 July 2014 until the end of 2021, ELSA shares attracted a RON 4.317 bn. liquidity on BSE, with a daily average of RON 1.79 mn. During this period of about 9.5 years, 375.42 mn ELSA shares have been traded (including DEAL transactions), representing 108.4% of the share capital and 110.6% of the voting rights (total shares without ELSA’s own shares). Thus, the average daily turnover during this period on BSE was of 156,099 shares. The gross dividend per share granted by ELSA in 2023 (for 2022) was RON 0.1178, below those granted in the previous years, with a yield of 1.4% (computed at the ex-date closing price of RON 8.57 from 30 May 2023). During 2023, ELSA shares attracted a liquidity of RON 247.1 mn. on BSE, with a daily average of RON 1 mn., increasing by 71% compared to 2022, the 10th in top trading data on BSE. The volume of shares traded was 26 mn, increasing by 50% compared to 2022, so the daily average volume was 105,060 shares. The total volume of shares traded in 2023 accounted for 7.5% of the share capital. In order to support the liquidity of its listed shares, ELSA concluded at the end of 2022 two Market Making services for Issuer agreements, with SSIF BRK Financial Group S.A. and WOOD & Company Financial Services, a.s. Praga, for two years, starting 1 January 2023, with the main purpose of accessing the FTSE Russell international indices. Thus, in 2023, Electrica shares met the liquidity criteria according to FTSE Russell methodology, respectively they recorded a median monthly volume above the minimum threshold of 76,576 shares (0.05% of free- float) in 10 months out of the 12 of the year, and therefore, considering that the capitalization criteria was easily met, Electrica met all the conditions, according to internal calculations, for accessing the FTSE Russell Indices series. The official announcement regarding the inclusion of Electrica shares in the FTSE Russell Indices was made on 27 February 2024, and the official inclusion in the FTSE Russell indices to take place at the meeting of 18 March 2024. A statement in this regard was issued by Electrica on 28 February 2023 (https://www.electrica. ro/wp-content/uploads/2024/02/ELSA_EN_Announcement_Inclusion-in-FTSE-Russell-indexes_28Feb2024_ LSE.pdf). 3.2.2 Global Depositary Receipts (GDRs) on the LSE The GDRs’ weight in ELSA’s total share capital diminished during the period following the Initial Public Offering, reaching a level of 0.59% at the end of 2023, compared to 10.17% at 4 July 2014. The maximum price reached by the GDRs was USD 15.3, in September 2014 and the minimum price was USD 5.25 on 9 November 2022. Subsequently, the GDRs’ price followed a fluctuating trend. During 2023 the trend was a upward, ending 2023 at a price of USD 9.90, increasing by 68% compared to the end of 2022 (USD 5.90). Indicator 4 Jul 2014 - 31 Dec 2023 2023 2022 Variation 2023 vs 2022 Bucharest Stock Exchange Total liquidity (RON) Average daily liquidity (RON) Turnover (no. shares) 4,316,702,362 247,111,195 144,828,599 -33.33% 1,794,884 996,416 574,717 -33.33% 375,417,612 26,054,922 17,327,927 -1.8% Average daily turnover (no. shares) 156,099 105,060 68,762 -1.8% Market cap. - end of period (RON) 3,977,172,493 3,977,172,493 2,802,728,700 -19.4% Minimum price (RON) Maximum price (RON) Average price (RON) 6.10 8.01 6.10 -37.8% 14.96 11.56 11.02 -21.8% 11.50 9.48 8.36 -32.1% Price at the end of period (RON) 11.48 11.48 8.09 -19.4% ELSA Share price performance (%) 4.36% 41.9% -19.4% BET performance (%) BET-NG performance (%) Dividend(s) ELSA’s Dividend(s) yield1 (%) BET-TR Dividend(s) yield 1 (%) - - - 119.1% 31.8% -10.70% 58.8% 31.4% -4.98% 5.7995 0.1178 0.45 -38.4% 52.72% 1.46% 4.48% -22.9% 129.80% 8.15% 8.85% 30.1% ELSA’s Adjusted price performance (%)2 25.20% 43.36% -14.94% BET-TR performance (%) 314.4% 39.9% -1.85% - - ELSA’s GDRs liquidity (USD) 162,825,743 229,723 427,357 -3.7% London Stock Exchange In the period since the IPO and until the end of 2023, 12.71 mn. GDRs have been traded, out of which 28,787 GDRs in 2023, dropping by 48% compared to 2022 (55,452). ELSA’s GDRs turnover (no. of GDRs) 12,710,816 28,787 55,452 54.6% A summary of the previous mentioned aspects is found in following table. GDRs price performance (%) Sursa: BVB, Electrica -27.5% 67.8% -34.44% - 2023 DIRECTORS’ REPORTELECTRICA ON THE CAPITAL MARKETS2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA ON THE CAPITAL MARKETSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT80 81 Figure 25: Evolution of the adjusted closing price of ELSA’s shares vs BET-TR index during were exceeded, 10 RON (nominal value) and 11 RON (IPO price), unreached for about 2 years. 2023 and January 2024 EL: +66.10% BET-TR: +55.72% 43.36 39.93 3.00 ia n.- 2 3 fe b.-2 3 a r.- 2 3 m a p r.- 2 3 ai-2 3 m iu n.-2 3 iul.-2 3 a u g.-2 3 s e p t.- 2 3 o ct.-2 3 n o v.- 2 3 d e c.-2 3 ia n.- 2 4 fe b.-2 4 a r.- 2 4 m Sursa: BVB, Electrica BET-TR Electrica adjusted price with dividends 1 Computed at the previous periods’ last day close price (for comparability) 2 Computed together with dividend(s) granted during the analyzed period 66.10 70.00 60.00 50.00 55.72 40.00 30.00 20.00 10.00 0.00 During 2023, the price of Electrica’s shares gradually recovered from the ground lost in 2022, benefiting both from the favorable market context - which recorded an impressive yield -, as well as from the financial results that continue to consolidate, on the background of the stabilization of prices on the energy market and of MACEE implementation. Two more delicate moments occurred, one in June, on the basis of the launch of the Public Offer of Hidroelectrica, an event that shifted the attention of many players from trading certain shares, including Electrica, and another in October, when the market reached an annual minimum of interest investors, on the background of the uncertainties related to the key interest rate of several central banks, the discussions regarding the future fiscal measures in the foundation of the budget for 2024, etc., these two months being the only ones in which the Electrica shares did not meet the liquidity criteria according to the FTSE Russell methodology. Thus, if in the first five months of 2023 Electrica shares recorded an aggregate return above the market (BET-TR), from June to November, although they continued to have a consistent appreciation of 20%-30%, this was below that of the market, the gap with the market increasing in October to around 10 percentage points, and in November to 15 percentage points. The month of December came instead with an impressive interest of investors for Electrica shares, being almost the best month in the history of Electrica on the BSE: 1) the highest monthly return was recorded, over 17%, which contributed to the doubling of the aggregate return since the beginning of the year, from 22.35% (at the end of November) to 43.36% (at the end of December); 2) Electrica shares recovered the entire gap of 15 percentage points compared to the market (BET-TR) existing at the end of November, managing to close even above the market, with 3.4 percentage points (43.36% vs 39.93% - see the previous graph); 3) have met the liquidity criteria according to FTSE Russell for the 10th month out of the 12 of the year, which is equivalent to meeting all the conditions for entering the FTSE Russell indices in 2024; 4) the highest turnover of Electrica shares in the last 3.5 years was recorded, over 5.93 mn. shares; 5) two psychological thresholds Figure 26: Monthly trading volume and weighted average monthly closing price of shares on BSE (in RON) and GDRs on LSE (in USD) during 2023 and January 2024 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 8.44 7.00 2,000,000 1,429,127 2,477,762 1,812,392 1,145,678 2,771,782 1,640,284 1,901,038 1,153,818 889,958 837,703 5,929,147 4,066,233 4,407,763 3,134,591 4,000 14,588 0 0 40 496 15,104 13,760 0 0 51,280 15,880 12,400 1,000 35,224 - ia n.- 2 3 fe b.-2 3 a r.- 2 3 m a p r.- 2 3 ai-2 3 m iu n.-2 3 iul.-2 3 a u g.-2 3 s e p t.- 2 3 o ct.-2 3 n o v.- 2 3 d e c.-2 3 ia n.- 2 4 fe b.-2 4 a r.- 2 4 m BSE - Shares - Mo nthly volume LSE - GDRs - Monthly volume (shares equ iv.) BSE - Shares - Average monthly clos in g price (RON) LSE - GDRs - Average monthly clos ing price (USD) Source: BSE, LSE, Electrica 12.41 12.00 11,603,624 10.54 10.00 8.00 6.00 4.00 2.00 - 3.3 Investor relations (IR) Electrica’s management understands that, as any investor to be accurately and comprehensively a listed company, efficient and transparent informed can be found on the company’s website, in communication with investors is essential to gain the Investors section. and maintain their trust, thus contributing to the company’s long-term success on the financial In 2023, with the participation of the entire executive market. During 2023, as every year since the listing management team of the Electrica Group, four in 2014, the management was actively involved in teleconferences were organized to present the activities dedicated to investors and analysts. annual, quarterly and half-yearly financial results of the Group. The events were broadcast live via In order to inform stakeholders fairly, continuously webcast, and both the supporting documents and transparently, the Investor Relations and the recordings and transcripts of the department has disseminated numerous current teleconferences can be accessed on the company’s reports and announcements on the platforms of website, in the section Investors > Results and Reports the Bucharest Stock Exchange (BSE), the London > Presentations and other information. Stock Exchange (LSE), the Financial Supervisory Authority (FSA), as well as on ELSA’s website. All ELSA’s management representatives also these documents, as well as the data necessary for participated in the most important national and 2023 DIRECTORS’ REPORTELECTRICA ON THE CAPITAL MARKETS2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA ON THE CAPITAL MARKETSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 82 83 international conferences dedicated to investors promoted from Small Cap to Mid Cap/Large Cap aims to improve the visibility and liquidity of All actions undertaken during 2023 as well during 2023, interacting directly with dozens of and its shares were included in the MSCI Frontier companies listed on the capital market, the three as plans for the coming years have as main investors and analysts, both institutional and and MSCI Romania indices. selected companies benefiting from personalized objective the implementation of the best investor individual: advice provided by a team of professional investor program, increasing transparency and quality • 3 March 2023, WOOD Conference - Romania accessing FTSE Russell international indices, and in an IR strategy. Thus, during 2023, the company’s with a constant concern for retention, attraction Investor Day, London, UK this regard, in order to stimulate investor interest investor relations strategy was outlined, in parallel and satisfaction of shareholders and investors. In 2023, Electrica aimed to meet the criteria for relations and communication consultants to achieve of communication with investors and analysts, • 7-8 September 2023, WOOD-BVB Conference - Romania Investor Days - Bucharest, Romania and increase the liquidity of Electrica shares, and with the Corporate Strategy of Electrica Group, Evidence of the recognition of these efforts was the consequently to meet these criteria, it contracted which was approved by the Board of Directors on 14 positioning in the top of listed companies in terms of • 5-8 December 2023, WOOD’s Winter Wonderland on the Romanian market, respectively Wood & two market makers with experience and results December 2023. transparency and communication in the relationship with investors, by obtaining in 2023 the maximum EME Conference - Prague, Czech Republic • 11 December 2023, Quarterly Report, quarterly conference organized by Ziare.Com and TradeVille for retail investors – Bucharest, Romania During 2023, Electrica’s management organized a workshop both physically and online, with its shareholders, for consultations and in order to provide additional details on topics subject to their approval in principle through the EGMS of 23 August 2023, respectively the merger by ELSA absorption of its renewable electricity production subsidiaries. Also, Electrica’s management, the investor relations team and specialists from within the Electrica Group organized during the year multiple workshops, both physical and online, with analysts and investors, both on company representatives’ initiative and at the analysts’ & investors’ proposal, in order to provide more details about regulatory, operational, financial and strategic aspects. On 23 November 2023, the entire executive management of Electrica participated in such a hybrid event (physical and online) dedicated to local analysts. In 2023, ELSA continued to be an associate member of the Romanian Investor Relations Association (ARIR), being involved in its numerous projects. In ELSA’s 2019-2023 strategy, updated in April 2022, one of Electrica’s strategic objectives was to increase its market value. In this respect, Electrica aimed, among other things, to be included and remain in relevant international indices. In August 2023, Electrica was one of six companies Company Financial Services a.s. and BRK Financial Also, Electrica continues to partner with the grade, 10, for Vektor – Investor communication Group. Bucharest Stock Exchange (BSE) and supports indicator for companies listed in Romania, for the its platform BVB Research Hub, which aims to third consecutive year. On 20 December 2023, the company informed its increase the visibility of listed companies, attract shareholders and investors about the degree of investors and analysts, offering the public, especially compliance with the criteria of the global index individual investors, access to informative and provider FTSE Russell, in view of the inclusion, for educational materials, tools and analyses through the first time, of Electrica (EL) shares in the FTSE its online portal, www.bvbresearch.ro. Global Equity Index Series (GEIS). Based on the internal monitoring, in line with the methodology of the global provider FTSE Russell, Electrica’s shares met the capitalization criterion throughout 2023 and also passed the liquidity test (median daily trading volumes exceeded 0.05% of the number of free float shares) in 10 of the 12 months of 2023. Thus, according to the methodology and thresholds published by FTSE Russell, Electrica shares will be included in the FTSE Global All Cap Index and, given the capitalization thresholds of the FTSE Global Equity Index Series (GEIS) published in November 2023, Electrica shares will be included in the FTSE Global Mid Cap Index (which requires a total capitalization of over USD 570 mn. An announcement from FTSE Russell officially confirming the inclusion of Electrica shares in the mentioned indices was made on 27 February 2024, and the actual inclusion will be made starting with the trading session on 18 March 2024 (https://www. electrica.ro/wp-content/uploads/2024/02/ELSA_ EN_Announcement_Inclusion-in-FTSE-Russell- indexes_28Feb2024_LSE.pdf). During 2023, Electrica was selected to participate in the joint programme of the European Bank for Reconstruction and Development (EBRD) and the Bucharest Stock Exchange (BSE) Investor Relations and Liquidity Support Programme (IRLSP), launched in Romania at the beginning of 2023. This program 3.4 Related parties transactions ELSA has the obligation to report the significant December 2022 - RON 199,818,824, on 30 June 2023 transactions concluded by ELSA or its subsidiaries – RON 198,490,436 RON and on 30 September 2023 – with related parties, as per art. 108 of law no. RON 198,760,627). 24/2017. „Significant transaction” means any transfer of resources, services or obligations, The 29 announcements related to these type of whether or not it involves the payment of a price, the transactions published by ELSA in 2023 and until individual or cumulative value of which represents 17 January 2024 can be found on the company’s more than 5% of ELSA’s net assets, according to the website, at a https://www.electrica.ro/en/investors/ latest individual financial statements published results-and-reports/current-reports-art-108/. by ELSA (in 2022, there were three references: on 31 3.5 Dividends policy ELSA’s dividend policy, updated in May 2022, can be Ordinary General Shareholders’ Meeting (OGMS) and accessed on the company’s website under section the approval of the dividend proposal by the OGMS. a https://www.electrica.ro/en/investors/corporate- The shareholders receive dividends proportionally governance/corporate-policies/. to their share in the company’s paid-up capital. The company will pay all dividends in RON. ELSA’s dividends are distributed from the annual net distributable profit based on the annual individual Regarding the global deposit receipts that are audited financial statements, and/or from other traded on the London Stock Exchange, ELSA pays items of equity (e.g. retained earnings) set up at the dividends to the GDRs issuer proportionally to its level of the Company, after their approval by ELSA’s holdings. Holders of GDRs will then receive dividends 2023 DIRECTORS’ REPORTELECTRICA ON THE CAPITAL MARKETS2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA ON THE CAPITAL MARKETSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT84 85 from the GDR issuer, proportionally to their holdings. as finance income in ELSA’s individual financial Figure 28: Gross dividend per share (RON) and statements in year N and thus constitute the source dividend yield (%)) In selecting a certain dividend pay-out ratio of the net result from which ELSA declares and according to the dividend policy, the Board of subsequently pays dividends to its shareholders in Directors takes into consideration the following: year N+1 (related to the result of year N). The payment of dividends is subject to the general provisions on prescription (by reference also to the incidence of the provisions of art. 2554 of the Civil Code regarding the extension of the term). Thus, the payment of dividends that are not claimed within three years from the approved date of their payment will be prescribed and they can be kept by the Company. • Reducing the fluctuations in dividend yield from one period to the next, as well as the absolute dividend per share value; • Electrica’s investment needs and opportunities; • Contributions of non-monetary items to net reported profit; • Financial resources available for dividends payment as well as Electrica’s indebtedness; • Dividend yield comparable to other listed companies in the industry or related sectors. The dividend distribution rate from the distributable profit of the Electrica group subsidiaries will be consistent with the dividend policy in force. The dividends paid by the Group’s subsidiaries to ELSA in year N (related to year N-1 results) are recorded 3.6 Dividend distribution Figure 27: Gross dividends distributed (2014- 2022) (RON mn.) 291.6 244.7 251.4 245.4 247.5 246.1 247.9 The dividends1 distributed by ELSA fluctuated in the period 2014 - 2022, between RON 39.9 mn. and RON 291.6 mn., and the dividend payout ratio2 was 96% in 2014, 100% each year between 2015-2017, 87% in 2018 (RON 35.57 mn. was distributed to “Others reserves”), 100% in 2019, 87.5% in 2020 and 50% in 2021 (RON 152.9 mn. was distributed to “Others reserves”). 152.8 40.0 40.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 The dividend payout ratio for 2022 was 174% (RON 16.97 mn. was distributed from “Others reserves”). Source: Electrica 6.9% 0.8600 6.1% 0.7217 7.3% 6.8% 5.2% 6.9% 6.0% 5.2% 0.7415 0.7237 0.7300 0.7248 0.7300 The yield of the dividend paid in 2023, for the 2022 results, recorded a level of 1.4%, the gross dividend per share paid in 2023 being RON 0.1178. The dividend yield (%) is calculated as Gross dividend per share/Closing share price on BSE at ex-date. 0.4500 1.4% 0.1178 0.1178 1.0% Thus, Electrica offered investors a stable return for each year in the period 2014 – 2021, in the range 5.2% - 7.3%, with the exception of 2022, for which the yield and dividend level were affected by the energy 2014 2015 2016 2017 2018 2019* 2020 2021 2022 2023 crisis. Source: Electrica 1 The dividends refer to each financial year indicated and are paid in the following year. 2 The dividend distribution rate is calculated as gross dividends/Net profit distributable on dividends, where Net profit distributable on dividends is net profit according to ELSA’s individual financial statements, except for mandatory distributions to legal reserves. More details about dividends and their distribution can be found on the website: https://www.electrica.ro/ en/investors/shares-and-shareholders/dividende_en/. 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 Depositary Receipts was RON 75.4 mn.. There were no changes in the number of the treasury shares until the date of the report. 2023 DIRECTORS’ REPORTELECTRICA ON THE CAPITAL MARKETS2023 DIRECTORS’ REPORTELECTRICA S.AELECTRICA ON THE CAPITAL MARKETSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT86 87 4. CORPORATIVE GOVERNANCE IN ELSA 88 89 ELSA confers a great importance to the principles of different structures of the company, employees the organization and functioning regulations of the inside information and market manipulation (Policy good corporate governance, considering corporate and the organizations that represent their interests, Board of Directors and those of its committees. regarding Market Abuse). governance a key element for the sustainable customers and business partners, suppliers, central The purpose of this policy is to prevent violations business growth and for the enhancement of long- and local authorities, regulators and capital markets ELSA CGC is also a guide on business conduct and of the legal provisions regarding the misuse of term value for shareholders. operators etc. corporate governance matters for the management inside information, by increasing the awareness ELSA constantly develops and adapts its corporate ELSA’s Code of Corporate Governance presents and for the employees of ELSA, as well as for other of all persons who possess inside information governance practices and model, both at primarily the main work methods, attributions and stakeholders, and provides information about the regarding the obligations, restrictions and sanctions standalone, as well as at Group level, so that it responsibilities of the management and supervisory company’s principles and policies. The corporate applicable in case of possession and abusive use of can align with the increasingly rigorous capital structures of the company, as well as those of the policies and documents referred to in ELSA CGC inside information or in case of market manipulation market requirements and with the best practices committees constituted to support these structures can be accessed on the company’s website in regarding ELSA’s securities. in corporate governance at European level, and to fulfil their responsibilities. the section Investors > Corporate Governance > also for creating opportunities and increase ELSA undertook, from the moment of the IPO Corporate policies and other documents. All the owners of financial instruments of the competitiveness. and admission to trading from July 2014, the same type and class issued by ELSA are entitled The corporate governance represents the set of implementation of a corporate governance During 2023 the following corporate documents to equal treatment. In order to ensure efficient, principles standing at the basis of the governance action plan, as part of the framework agreement have been revised and published on Electrica’s active and transparent communication with its framework used for the company’s management concluded with the European Bank for website: Remuneration Policy for Directors and shareholders, within ELSA activates the investor and control. Transposed in the internal rules Reconstruction and Development. The standards Executive Managers – approved at the Electrica relations department and related processes have and regulations, these principles determine and measures provisioned in this plan have been OGMS of April 27, 2023, Policy on Organizing and been set up to ensure efficient and transparent the efficiency and effectiveness of the control implemented and continuously monitored. For more Running the General Meetings of Shareholders – on communication with investors, in compliance mechanisms aiming to protect and harmonize the details about this Action plan, please see chapter 17 August 2022, and the Articles of Association – with the legal obligations in force, which can be interests of all the stakeholders – shareholders, 4.9. directors, executive managers, managers of 4.1 Corporate Governance Code Effective November 22, 2023. found in the Investor Relation Corporate Disclosure Policy, applicable at ELSA level, available, in the In compliance with company’s policies and with the updated form, on the company’s website since 25 procedures of the Code of Ethics and Professional August 2020. The company’s rules and procedures Conduct, the Audit and Risk Committee ensures that that establish the framework for organizing and the company’s activity is carried on with honesty conducting general meetings of shareholders and integrity, including the implementation of the are contained in ELSA’s GMS Policy, amended on Starting with 2014, ELSA adheres to and applies Investors > Corporate Governance. whistle-blower policy. wilfully the provisions of the Corporate Governance 17 August 2022 and available electronically on the company’s website in the sections Investors > Code issued by BSE, reviewed periodically. This ELSA’s compliance with BSE’s Corporate Governance ELSA has implemented a procedure for reporting General Meeting of Shareholders and Investors > code can be accessed on the BSE’s website at the Code is being thoroughly assessed, and as updates ethical deviations, irregularities and any other Corporate Governance > Corporate policies and following address: : https://www.bvb.ro/Regulations/ and developments appear, ELSA promptly reports aspects of non-compliance with the law that other documents. Legal Framework/BvbRegulations. them to the capital market. The compliance with otherwise could cause image and/or commercial the provisions of the CGC issued by the BSE is prejudice or even involve legal sanctions, thus The section dedicated to investors is available on In order to ensure high standards of corporate presented annually in the Declaration on Corporate damaging the prestige and profitability of the ELSA’s website by accessing https://www.electrica. governance, transparency and business integrity, Governance “apply or explain” in Chapter 4.8. This company. The whistle-blowing reporting system ro/en/investors/. Up-to-date essential information, ELSA also applies provisions of the LSE’s Corporate is also available on the company’s website in the which functions according to this procedure, as of interest for the investors, can be found in this Governance Code. section Investors > Corporate Governance > Comply well as the procedure itself, are available on ELSA’s section, providing access to documents governing or Explain. website, in the Whistleblowing section. the company, in accordance with the provision of Formally, ELSA adopted the Code of Corporate the CGC issued by BSE. This section also contains Governance (ELSA CGC) starting with February 2015 ELSA CGC embeds the general principles and Since ELSA’s shares are allowed for trading both on the name and contact details of the person who can and made it available to all the interested parties on conduct rules that set forth and regulate the the regulated market managed by Bucharest Stock provide, upon request of interested parties, relevant ELSA’s website, in the section Investors > Corporate corporate values, the responsibilities, the obligations Exchange (BSE), as well as on the market managed information regarding the activity of the company. Governance. and the business conduct of the company. by the London Stock Exchange (LSE), ELSA is subject to the rules imposed by the national and European In 2020, the chapter 6 of the CGC ELSA regarding ELSA CGC contains the terms of reference and laws regarding market abuse prevention and the the risk management system was revised; in July the main responsibilities of the company’s regime applicable to inside information. Thus, ELSA 2020 the amended ELSA CGC was published on the administrative and executive management, as has implemented a Policy on preventing the misuse company’s website and is available in the section they are detailed in ELSA’s Articles of Association, of inside information, unauthorized disclosure of 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT90 91 4.2 General Meeting of ELSA’s Shareholders The General Meeting of Shareholders (“GMS”) is g. to decide to file legal actions against the the main corporate governance body of ELSA, directors, managers as well as financial auditors deciding on the items as outlined in the Articles for damages they caused to the Company of Association. The convening, functioning, voting by breaching their obligations towards the method, as well as other provisions regarding the Company; GMS are detailed in ELSA’s Articles of Association, which is available in electronic format on ELSA’s h. to decide on mortgaging or leasing or closing of website: https://www.electrica.ro/en/the-group/ one or more units of the company; about/constitutive-act/. Starting with 1 February 2020, ELSA has in place a i. to appoint and revokes the financial auditor and policy on organizing and conducting the general to set the minimum term of the financial audit meetings of shareholders of the company, which contract; presents in detail aspects of interest for investors regarding the way of organizing and carrying j. approves the Remuneration Policy for Directors out the GMS. It was updated in August 2022, it is and Managers (appointed by the board of extended by the introduction of electronic vote. directors); The policy is available on the company’s website, under the section Investors > Corporate Governance k. approves the Remuneration Report for Directors > Corporate Policies > Policy on organizing and and Managers (appointed by the board of running General Meetings of Shareholders. directors); ELSA’s ordinary general meeting of the l. approves the overall limit of all Managers’ shareholders (OGMS) has the following main duties: (appointed by the board of directors) remuneration and remuneration of Board a. to appoint and revoke the members of members; the Board and establish the level of their remuneration and other rights according to the m. to carry out any other duties set out by the law. legal provisions; b. to establish the income and expenses budget, ELSA’s extraordinary general meeting of the to set out the activity schedule; shareholders (EGMS) shall decide on the following: exceeds, individually or cumulated, during any m. carrying out any bond issuance, as per the financial year, 20% of the total fixed assets, provisions of art. 10 of the Articles of Association, less receivables and rentals of tangible assets, or conversion of a category of bonds in a for a period of more than one year, whose different category or in shares; individual or cumulative value compared to the same co-contractor or persons involved n. approving the conversion of preferential or acting in concert exceeds 20% of the total and nominative shares from one category to value of fixed assets, less receivables at the another, according to the law; date of conclusion of the legal act, as well as associations over a period of more than one o. any other amendment to the Articles of year, exceeding the same value; Association; d. leases of tangible assets for periods longer than p. approval of the eligibility and independence one year, whose individual or cumulated value criteria with respect to the Board members; towards the same co-contractor or involved persons or with whom it acts in concert exceeds q. approval of the corporate governance strategy 20% of the fixed assets value, less receivables of the Company, including the corporate at the time of entering in the relevant operation, governance action plan; as well as joint ventures in excess of the same value and with a duration of over one year; r. donations within the limits of the competence provided in Appendix 1 to these Articles of e. approving investment projects in which the Association; and Company will be involved in accordance with the competence limits provided in Annex 1 to s. approves granting of intragroup loans with a these Articles of Association, other than the value of more than EUR 50 mn. per operation; ones provided in the annual investment plan of the Company; t. any other decision that requires the approval of the extraordinary general meeting of the f. approving the issuance and admission shareholders. to trading on a regulated market or on a multilateral trading facility of shares, depositary certificates, allotment rights or other The OGMS is convened at least once a year, within similar financial instruments; approving the a maximum of four months from the end of the competencies delegated to the Board; financial year. Except for this situation, OGMS and c. to establish the income and expenses budget a. withdrawal of the preference right of consolidated at the group level; shareholders upon subscription of new shares g. changing the legal form; EGMS are convened as many times as needed, being convened by ELSA’s Board of Directors whenever necessary for the activity of Electrica d. to discuss, approve or amend the annual financial statements according to the reports b. contracting any type of loans, debts or submitted by the Board and the financial obligations representing a loan, as well as issued by the Company; auditors; creating real or personal security related to these loans, in each case in accordance with e. to approve the profit distribution according to the competence limits provided in Annex 1 to the the law and to establish the dividend; Articles of Association; f. to decide on the management activity of the c. operations regarding the acquisition, alienation, directors and on the discharge of liability, in exchange or creation of encumbrances over accordance with the law; fixed assets of the Company whose value h. relocation of the registered office; Group. The GMS may be convened also, upon the i. changing the main or secondary business cumulatively, at least 5% of the share capital. In this request of shareholders representing, individually or objects; case, the general meeting of the shareholders shall be convened by the Board of Directors within no j. increasing the share capital, as well as more than 30 days and shall meet within no more decreasing the share capital, according to the than 60 days from the date of receiving the request. law; k. the merger or the separation; l. the dissolution of the Company; 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 92 93 4.3 Shareholders’ rights The rights of all ELSA’s shareholders, independent shareholder of the company together with of their holdings, are protected according to the all rights and obligations deriving from this relevant legislation. Shareholders have, amongst capacity, in accordance with the law and the other rights provided under the company’s Articles Articles of Association; of Association and the laws and regulations in force, the right to obtain information about ELSA’s • The rights and obligations deriving from the operations and results, regarding the exercise of shares are transferred to the new acquirers voting rights and the voting results in the GMS. together with the shares; Shareholders have also the right to participate and • When a nominative share becomes the vote in the GMS, as well as to receive dividends. property of several persons, the transfer Except for the shares owned by ELSA following the shall be registered only if they appoint a sole stabilization after the IPO in 2014, there are no shares representative for exercising the rights derived without voting rights. There are no shares granting from the shares; the right to more than one vote. Moreover, shareholders have the right to challenge by its social patrimony, and the liability of the the decisions of GMS or to withdraw from ELSA and shareholders is limited to the subscribed share • The obligations of the company are secured to request the Company to acquire their shares, in capital; certain conditions mentioned by the law. Likewise, one or more shareholders holding, individually or • The shareholder that has, in a certain operation, jointly, at least 5% of the share capital, may request either personally or as representative of another the calling of a GMS. Those shareholders have also person, an interest contrary to the interest of the right to add new items to the agenda of a GMS, the company, must refrain from deliberations provided that those proposals are accompanied regarding the respective operation. by a justification or a draft resolution proposed for approval and copies of the identification documents of the shareholders who make the proposals. The exercise of the rights by the holders of the depositary certificates5 is realized as follows: The rights and obligations of the holders of • The rights and obligations related to the the shares, as extracted from ELSA’s Articles of underlying shares based on which the Association, are: depositary certificates were issued are exercised by the holders of the deposit • Each share subscribed and fully paid in by certificates, proportionally to their holdings of the shareholders, in accordance with the law, deposit certificates and taking into account the grants the shareholders (i) the right to one vote conversion rate between underlying shares and in the general meeting of the shareholders, (ii) the deposit certificates; the right to elect the management bodies, (iii) the right to participate to the profit distribution, • The holder of the depositary certificates as well as (iv) other rights provided by these issued based on the underlying shares has the Articles of Association and by the legal capacity of shareholder within the meaning and provisions; for the application of Law 24/2017 on the issuers of financial instruments and market operations. • The acquisition of the property right over a The issuer of the depositary certificates is fully share by a person, directly or indirectly, has responsible for informing the holders of the as effect the obtainment of the capacity of depositary certificates in a correct, complete 5 According to ELSA’s Articles of Association reflecting the dispositions of Law no. 24/2017 on issuers of financial instruments and market operations. and timely manner, observing the provisions to send the voting instructions of the holders of of the issuance documents of the depositary the depositary certificates related to the topics certificates, about the documents and the on the agenda of the general meeting of the informative materials related to a general shareholders; meeting of shareholders, as made available to the shareholders by the Company. • Any reference date for the identification of the shareholders which have the right to take • In order to exercise its rights and obligations part and to vote in the general meeting of related to a general meeting of shareholders, the shareholders of the Company and any a holder of deposit certificates will send to registration date for the identification of the the entity where it has opened its account for shareholders which have rights deriving from deposit certificates the voting instructions their shares, as well as any other similar date for the topics on the agenda of the general set by the Company related to any corporate meeting of the shareholders, so that the events of the Company will be established in respective information is sent to the issuer of accordance with the applicable legal provisions the depositary certificates; and with a prior notice sent with at least 15 free calendar days (in Romanian, zile calendaristice • The issuer of the deposit certificates votes in libere) to the issuer of the deposit certificates, the general meeting of the shareholders of the in the name of which the underlying shares company in accordance with and within the are registered based on which the deposit limits of the instructions of the holders of the certificates mentioned above are issued. The deposit certificate which have this quality at the reference date will be prior with at least 15 reference date; working days to the deadline for submitting the power of attorney related to the vote.. • The issuer of the deposit certificates may cast different votes for certain underlying shares in Transfer of shares the general meeting of the shareholders than those expressed for other underlying shares; The shares are indivisible. The company shall recognize a sole owner per each share, subject • The issuer of the deposit certificates is fully to the provisions of article 11 paragraph (4) from responsible for taking all necessary measures, Articles of Association. so that the entity which keeps the records of the holders of the deposit certificates, the The partial or total transfer of shares between the intermediaries involved in the custody services shareholders or to third parties shall be carried out for holders of the deposit certificates on the according to the terms and procedure provided by market where the deposit certificates are the applicable legal provisions, including the capital traded and/or any other entities involved in markets legislation. recording the holders of the deposit certificates, 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT94 95 4.4 ELSA’s Board of Directors ELSA adopted a one-tier (unitary) corporate of Association, as well as of art. 20, point ii) Table 10. Members of the BoD in 2023 governance system, in accordance with the of the mandate contract concluded with Mr. principles of good corporate governance, Cristodorescu George. transparency and accountability towards its shareholders and other categories of stakeholders, • On 18 July 2023, following the legal termination aiming to support and drive the business of the mandate of Mr. George Cristodorescu, The development and the efficient exchange of relevant BoD nominates Ms. Valentina–Elena Siclovan corporate information. as an interim member of the Board of Directors, starting on 24 July 2023 and until the date of the The Board of Directors (BoD) is responsible for next meeting of the Ordinary General Meeting of taking all the necessary measures to carry out, as Shareholders of Electrica.On 20 December 2023, well as to supervise the activity of the company. Its the GMS approved the election of Ms. Valentina- structure, organization, duties and responsibilities Elena Siclovan as an independent Director with are established under the Articles of Association the duration of the mandate equal to the period and the Charter (organization and functioning remaining until the expiration of the mandate regulations) of the BoD. related to the vacant position, i.e. until 28 April According to the provisions of the company’s 2025. Articles of Association, starting with 14 December On 26 January 2024, the GMS appointed a new 2015, the BoD is composed of seven non-executive Board of Directors, through the cumulative vote directors, elected by the Ordinary General Meeting method, therefore, at the date of the Directors of Shareholders of the company for a four-year report, the BoD consists of the following members: mandate, out of which four must meet the criteria Mr. Ion-Cosmin Petrescu, Mr. Dumitru Chirita, Ms. of independence provided by the Articles of Georgiana Bogasievici, Mr. Dragos-Valentin Neacsu, Association. Mr. Adrian-Florin Lotrean, Mr. Marian-Cristian Mocanu, Ms. Valentina-Elena Siclovan; During 2023, the Board of Directors’ structure has undergone changes, as follows: • At the beginning of the year, the BoD consisted of the following members: Mr. Iulian Cristian Bosoanca – Chair, Mr. George Cristodorescu, Mr. Radu Mircea Florescu, Mr. Gicu Iorga, Mr. Adrian- Florin Lotrean, Mr. Dragos-Valentin Neacsu and Mr. Ion-Cosmin Petrescu; • The members of the Board re-elected Mr. Iulian Cristian Bosoanca as Chair of the BoD starting with 01 January 2023 and until 31 December 2023; • On 15 May 2023, the BoD took note of the legal termination of the mandate of Mr. Cristodorescu George, in accordance with the provisions of art. 2030 para. (1) of the New Civil Code, of art. 18 para. (10) letter d) of the company’s Articles 1. 2. 3. 4. 5. 6. 7. No Name Term of office (until 27 April 2025) Status Mr. Iulian Cristian Bosoanca Mr. George Cristodorescu * Mr. Radu Mircea Florescu 4 years 4 years 4 years Chair, non-executive director non-executive director, independent non-executive director, independent Starting date of the first mandate 29 April 2020 28 April 2021 7 February 2019 Mr. Gicu Iorga 4 years Mr. Adrian-Florin Lotrean Mr. Dragos-Valentin Neacsu Mr. Ion-Cosmin Petrescu 4 years 4 years 4 years 8. Ms. Valentina-Elena Siclovan Starting with 24 July 2023 and until 30 April 2024 or until the date of the next meeting of the Ordinary General Meeting of Electrica Shareholders On 20 December 2023, the GMS approves the election of Ms. Valentina-Elena Siclovan as an independent member with the duration of the mandate equal to the period remaining until the expiration of the mandate related to the vacant position, i.e. until 28 April 2025 non-executive director 1 May 2017 non-executive director, independent non-executive director, independent 28 April 2021 28 April 2021 non-executive director 28 April 2021 non-executive director, 24 July 2023 independent Source: Electrica * On 15 May 2023, the BoD took note of the legal termination of the mandate of Mr. Cristodorescu George, in accordance with the provisions of art. 2030 para. (1) of the New Civil Code, of art. 18 para. (10) letter d) of the company’s Articles of Association, as well as of art. 20, point ii) of the mandate contract concluded with Mr. Cristodorescu George 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT96 97 Dumitru Chiriță • Chair of the Board of Directors • Non-executive Director appointed on 26 January 2024 • Member of the Strategy and Corporate Governance Committee At the date of issuing of this report, the members of the Board of Directors were the following: No. Name Term of office (until 26 January 2028) Status Starting date of the first mandate 1. 2. 3. 4. 5. 6. 7. Mr. Dumitru Chirita 4 years Chair, non-executive director 26 January 2024 Mr. Marian Cristian Mocanu 4 years non-executive director, independent 26 January 2024 Ms. Georgiana Bogasievici 4 years non-executive director 26 January 2024 Ms. Valentina – Elena Siclovan 4 years non-executive director independent 24 July 2023 Mr. Adrian-Florin Lotrean 4 years non-executive director, independent 28 April 2021 Mr. Dragos-Valentin Neacsu 4 years non-executive director, independent 28 April 2021 Mr. Ion-Cosmin Petrescu 4 years non-executive director 28 April 2021 Source: Electrica More details on the Board members’ biographies can be found on the Group’s website in the section Investors > Corporate Governance > Board of Directors. Below are presented the most relevant aspects regarding the professional experience of the members of the Board in office at the date of this report, as well as of those in office in 2023. Born in 1963, Mr. Dumitru Chirita has more than 30 years of professional experience in the field of energy and labour relations, holding over time management positions in various key state institutions, in historical moments for Romania such as the accession to the European Union. For 13 years (legislatures: 2000-2004, 2008- 2012, 2012-2016, 2016-2017), Mr. Dumitru Chirita held the position of deputy in the Romanian Parliament, working within the Commission for Industries and Services as a member and vice- president of this forum. Since 2000, as a deputy, Mr. Chirita was a member and Secretary of the Commission for European Integration, actively participating in the negotiations with the European Parliament in the process for Romania’s accession to the European Union. Between 2004 and 2008, Dumitru Chirita was the Vice-president of the National Health Insurance House, and in the period 2017 to 2023 he held the position of President of the Romanian Energy Regulatory Authority (ANRE). Dumitru Chirita is a graduate of the Faculty of Law and International Relations - ‘Nicolae Titulescu’ University and a MA student of the University of Bucharest - Faculty of Law - MA in ‘Labour and Industrial Relations”. In his capacity as President of the ‘Univers’ National Federation of Electricity Trade Unions, President of the ‘Energia’ Free Trade Union and Vice-president of the Confederation of the National Trade Union Bloc, he constantly represented the interests of employees in the energy sector. Dumitru Chirita also held the positions of member of the Board of Directors of the National Employment Agency and member of the Board of Directors of the National Council for Professional Training of Adults. Mr. Chirita was elected as a non-executive director, member of the Board of Directors, by the Ordinary General Meeting of Shareholders of Electrica on 26 January 2024. Starting with 12 February 2024 Mr. Chirita is the Chair of the Board of Directors and a member of the Strategy and Corporate Governance Committee. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT Dragoș Valentin Neacșu Born in 1965, Mr. Neacsu has an extensive professional experience in the field of investment management and financial markets, for almost three decades. Adrian-Florin Lotrean 98 99 • Vice-Chair of the Board of Directors • Non-executive Independent Director since 28 April 2021, re-elected on 26 January 2024 • Chair of the Nomination and Remuneration Committee and member of the Audit and Risk Committee • Vice-Chair of the Board of Directors • Non-executive Independent Director since 28 April 2021, re-elected on 26 January 2024 • Chair of the Climate Governance and Public Affairs Committee and Member of the Strategy and Corporate Governance Committee • Mr. Neacsu is currently the CEO of the GS1 Romania Association, part of a global federation of 116 not- for-profit organizations, with an activity focused on elaborating and promotion of global standards, that aim to create a common foundation for business administration, by uniquely identifying, accurately capturing and automatically sharing information about products, locations and assets. Until October 2019, Mr. Neacsu held the position of Chief Executive Officer, Chair of the Board of SAI Erste Asset Management SA, previously being Director, Financial Advisory Services of Deloitte Consultancy SRL. Between February-September 2005 he was State Secretary Minister, Head of State Treasury within the Ministry of Public Finance. Between July 1998 and February 2005 he held the position of President – CEO of SSIF Raiffeisen Capital & Investment S.A. Among other relevant positions held by Mr. Neacsu: Member of the Board of Governors EFAMA (European Fund and Asset Management Association, between 2013-2016), Romania’s representative in multilateral financial institutions (Council of Europe Bank (BDCE), Black Sea Trade and Development Bank (BSTDB)), Vice-president and then President of the Romanian Association of Asset Managers (AAF, between 2008- 2016), founding member and first Vice President of the Board of Romanian Association for Privately Managed Pension Funds (APAPR in 2004), Member of the Supervisory Board of BCR Pensii, Private Pension Fund Management Company S.A. (between 2009- 2019), Member of CEC Bank S.A Board (between 2005- 2006), Member of the Bucharest Stock Exchange Board of Governors (2001-2005), of the first Board after the demutualisation (2005) and between 2021 and 2024, as well as Independent Non-Executive Member of the Board of FINS IFN SA (2018-present), Board Member of the Romanian Business Leaders Foundation (2017-2023), member of the Board of “Merito” educational project (2017-present). He is part of the first generation (1994-1995) of the Romanian-Canadian MBA Program, cooperation of UQAM and McGill Canadian universities, together with Academy of Economic Studies in Bucharest and holds a BA in Civil Engineering from Technical University Bucharest (1989). Dragos-Valentin Neacsu is a non-executive independent member of the Board of Directors since 28 April 2021. From 6 May 2021 to 30 July 2023, he was a member of the Audit and Risk Committee. From 17 May 2023 to 26 January 2024, he was member of the Strategy and Corporate Governance Committee and from 27 January 2023, since its set up until 26 January 2024, he was the Chair of the Climate Governance and Public Affairs Committee. He was re-elected by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Mr. Neacsu is Vice-Chair of the Board of Directors, member of the Strategy and Corporate Governance Committee and Chair of the Climate Governance and Public Affairs Committee. Born in 1980, Mr. Lotrean holds currently the position of coordinating associate of Infinexa Restructuring SPRL and extensive professional experience in the field of insolvency, coordinating as insolvency practitioner, complex restructuring projects on production of thermal energy and electricity in cogeneration (for clients such as CET ARAD SA, Electrocentrale Constanta SA), being consultant to the judicial administrator of Electrocentrale Bucuresti SA and coordinating the restructuring procedure of Hidroserv S.A. In terms of corporate governance, Mr. Lotrean had a significant impact as Chair of the Board of Directors of the Municipal Company Termoenergetica Bucuresti SA between May 2021 and November 2023, a period in which the foundations were laid for the resumption of investments in the heating network in Bucharest. Previously, between September 2019 – December 2020, Mr. Lotrean held the position of Member of the Board of Directors of Electroplast SA Bistrita, between November 2007 and February 2010 he was insolvency practitioner in the professional civil company Casa de Insolventa Transilvania S.P.R.L where he participated in the management of projects for more than 50 comercial companies. Between January 2003 – November 2007, Mr. Lotrean held the position of Financial Consultant within SC Depofarm SLR, providing consultancy for the elaboration of projects financed from European funds, the elaboration of feasibility studies, business plans and financial-fiscal consultancy. Previously, between November 2001 and December 2002, he held the position of specialized inspector within the Fiscal Control Department of the General Directorate of Public Finance Satu Mare. Adrian Florin Lotrean is a non-executive independent member of the Board of Directors since 28th April 2021. From 6 May 2021 to 26 January 2024 he was the Chair of the Nomination and Remuneration Committee and a member of the Strategy and Corporate Governance Committee. He was re-elected by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Mr. Lotrean is Vice-Chair of the Board of Directors, a member of the Audit and Risk Committee and the Chair of the Nomination and Remuneration Committee. 100 101 Ion Cosmin Petrescu • Non-executive Director since 28 April 2021, re-elected on 26 January 2024 • Member of the Audit and Risk Committee and of the Nomination and Remuneration Committee Born in 1978, with an extensive professional experience in business development, sales and management, Mr. Cosmin Petrescu presently activates in FNGCIMM (The National Loan Guarantee Fund for SMEs), where he leads the activity of IT, State Aid and Reporting Divisions. Cosmin Petrescu is also the President of the working groups dedicated to the program IMMINVEST ROMANIA and for the relation with the European Bank of Reconstruction and Development. Starting February 2021, he holds the position of Adviser within the Chancellery of the Prime Minister, on digitization issues. Previously, starting with the year 2001, Mr. Petrescu held different positions within companies acting in the Oil&Gas sector where he proved competence in optimizing business processes (Lean Management). Ion-Cosmin Petrescu is a non-executive director, member of the Board of Directors, starting 28 April 2021. From 6 May 2021 to 26 January 2024 was a member of the Nomination and Remuneration Committee. He was re-elected by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Mr. Petrescu is member of the Audit and Risk Committee and of the Nomination and Remuneration Committee. Georgiana Bogasievici • Non-executive Director since 26 January 2024 • Member of the Climate Governance and Public Affairs Committee Born in 1991, Ms. Georgiana Bogasievici is a dedicated legal professional with experience in the field of law and public administration, reflected in her varied and significant roles. With a legal career started at the Faculty of Law of the University of Bucharest, she deepened her knowledge with a master’s degree in Civil Law and Civil Procedure at Titu Maiorescu University. She has demonstrated proficiency in environmental management and public procurement, occupying positions of legal advisor and leader in various public and private organizations. English and Spanish are among her advanced language skills. Ms. Bogasievici has distinguished herself through communication and interpersonal skills, stress management and adaptability, qualities that make her a valuable addition to any team. Ms. Bogasievici was elected as a non-executive director, member of the Board of Directors, by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Ms. Bogasievici is member of the Climate Governance and Public Affairs Committee. 102 103 Valentina Elena Şiclovan • Non-executive Independent Director since 24 July 2023, re-elected on 26 January 2024 • Chair of the Audit and Risk Committee and member of the Climate Governance and Public Affairs Committee Marian Cristian Mocanu • Non-executive Independent Director since 26 January 2024 • Chair of the Strategy and Corporate Governance Committee and member of the Nomination and Remuneration Committee Born in 1983, Mr. Mocanu has more than 17 years of experience as a business lawyer, being involved in both consultancy activities and in dispute resolutions projects, with an emphasis on insolvency and restructuring issues, corporate law (shareholders’ rights), including the defence of the interests of persons involved in complex investigations. Throughout his career, Mr. Mocanu has advised and represented both local and international clients, thus building solid experience in a wide range of business sectors, such as real estate, energy, banking, automotive, IT&C, industrial production, or consumer goods. Starting from 2020, Mr. Mocanu acts also as an insolvency practitioner, managing several insolvency cases during this period, with the purpose to ensure the highest possible degree of debt recovery. Mr. Mocanu was elected as a non-executive independent director, member of the Board of Directors, by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Mr. Mocanu is the Chair of the Strategy and Corporate Governance Committee and member of the Nomination and Remuneration Committee. Born in 1960, Ms. Şiclovan has an extensive experience, more than 20 years in senior executive positions, in public and private sector and 14 years in international financing. She has started her executive career in the Ministry of Finance and in 2001 took an executive position in the Black Sea Trade and Development Bank as VP Banking, an international financial institution headquartered in Thessaloniki, Greece. Eventually she spent 14 years in this bank, the last 8 years as VP Finance/CFO, being fully involved in all strategic decisions. Ms. Şiclovan has also experience in energy sector, holding for a period of time the position of Vice- President, Business Development & Strategy, in Gaz de France Suez (Engie), responsible for the development of energy projects in South East Europe. She was Board member in Tarom, member of the Interministerial Committee for Credits and Guarantees – Exim Bank and Board member in EnergoNuclear SA, representing GDF Suez. From 1997 until 2000 Ms. Şiclovan represented Romania in the Boards of Directors of the Black Sea Trade and Development Bank and of the Council of Europe Development Bank. Since 2022 she is independent Board member in ICME-ECAB, a Romanian company, part of the Hellenic Cables- Greece, one of the largest cable manufacturers in Europe. Ms. Şiclovan has a degree in finance and accounting from the Romanian Academy of Economic Studies and she did her post-graduate studies (DESS – Master) at Paris- Dauphine University in France. She is financial auditor, member of the Romanian Chamber of Financial Auditors and she is certified in Corporate Governance (INSEAD Fontainebleau). Ms. Şiclovan was appointed interim director by the Board of Directors of Electrica starting with 24 July 2023. From 1 August 2023 to 26 January 2024 she was a member of the Audit and Risk Committee. On 20 December 2023 Ms. Şiclovan was appointed as a non-executive independent director, member of the Board of Directors, by Electrica’s Ordinary General Meeting of Shareholders, and then was re-elected by Electrica’s Ordinary General Meeting of Shareholders from 26 January 2024. Starting with 12 February 2024 Ms. Şiclovan is the Chair of the Audit and Risk Committee and member of the Climate Governance and Public Affairs Committee. 104 105 Biographies of incumbent directors as of 31 December 2023, who were not reconfirmed in office (following the application of the cumulative voting method) by the Ordinary General Meeting of Shareholders on 26 January 2024: Mr. Iulian Cristian Bosoanca was non-executive director appointed on 29 April 2020, Chair of the Board of Directors since 18 July 2020, member of the Risk and Audit Committee, and member of the Climate Governance and Public Policy Committee since 27 January 2023. Mr. Bosoanca was the Chair of the Board of Directors starting on July 18, 2020, he was a member of the Audit and Risk Committee starting on May 13, 2020 and a member of the Climate Governance and Public Policies Committee from January 27, 2023. Born in 1976, he holds a bachelor’s degree in economics and law, he has a master’s degree in financial accounting management and he is an expert accountant and tax consultant. He holds relevant professional experience in the economic field, especially in the areas of finance, accounting, economic financial analysis and taxation, having over 20 years of practical activity. He also holds competences in management, compliance, legal, payroll and human resources, developed within practicing his activity for over 25 years and following graduated specializations or courses. The basic profession, accounting and taxation, he carries out as a freelancer ever since 2008, within more companies, members of CECCAR, where he is also an associate and/or administrator/coordinator, but also individually, for the activities of accounting, fiscal and judicial expert. Starting with 1998, Mr. Bosoanca held several positions, executive or management positions, being also a member of the Boards of Directors in various companies such as: Cazanele SA in the period August 2005 – September 2006, Mehedinti County Health Insurance House in the period May 2012 – October 2014 and Secom SA in the period September 2017 – May 2018, and National Road Infrastructure Management Company (CNAIR - Compania Nationala de Administrare a Infrastructurii Rutiere, in Romanian) in the period May 2020 - May 2021. He coordinated a Board of Directors, being elected Chair of the Board of Directors of Secom SA from September 2017 to May 2018 and a Supervisory Board, being appointed Chair of the Supervisory Board of the State Assets Management Authority from April 2020 to May 2021. From March 2020 to June 2023, as Director of the Cabinet Office, he managed the work of the Cabinet Office at the Ministry of Economy, Energy and Business Environment (December 2020) and the Ministry of Energy (June 2023). In 2016, he was elected President of the Body of Expert Accountants and Certified Accountants in Romania, Mehedinti Branch, being re-elected in 2019. He also worked as a lecturer in the Body of Expert Accountants and Certified Accountants in Romania. He is an authorized Mediator, a member of the Romanian Body of Mediators. Mr. Radu Mircea Florescu was an independent non-executive director since 7 February 2019, Chair of the Audit and Risk Committee and member of the Nomination and Remuneration Committee. Mr. Florescu was the Chair of the Audit and Risk Committee from May 6, 2021 to January 26, 2024, previously being a member of this committee between February 18, 2019 and December 31, 2020, a member of the Nomination and Remuneration Committee between May 6, 2021 and January 26 2024 and a member of the Strategy and Corporate Governance Committee between January 28, 2020 and May 6, 2021. Born in 1961, Mr Radu Mircea Florescu is currently the CEO of Centrade | Cheil, South East Europe, the regional communications hub for Cheil Worldwide, coordinating 11 markets in the Adriatic and Balkan region. For more than 40 years, Radu Florescu worked in top multinational companies from Fortune 500, activating in emerging countries, including programs financed from EU funds. Mr. Florescu began his career in trading at NYMEX where he coordinated all trading activities for petroleum products and precious metals. A graduate of Marketing and Finance from Boston College with a Bachelor of Science degree, Radu Mircea Florescu began his career in commodity trading with Merrill Lynch/EF Hutton at NYMEX (New York Mercantile Exchange), with a specific focus on WTI (West Texas Crude), fuel oil and gasoline. In 1989, he co-founded Centrade USA and became one of the leading pioneers for marketing and communication services on the Romanian market with the launch of Saatchi & Saatchi, SSX, Chainsaw Studios, Cable Direct and Zenith Media. Radu Florescu has held other notable positions including nomination as member to numerous board positions: founding member and board member of IAA Romania, co-founder and member of the Union of Advertising Agencies of Romania (UAAR), member of the European Council of the European Association of Communication Agencies (EACA), representing Romania and Eastern Europe in Brussels (2012 - 2015, 2017 and presently Treasurer), member of the Board of Directors and vice-president of the American Chamber of Commerce in Romania (2013 - 2015 and 2016 - 2021), member of TAROM’s Board of Directors (March 2015 - June 2017), non-executive board member of SulNOx Group PLC, president of the Administrative Council of Foreign Democrats in Romania, coordinator and member of the Steering Committee for Coalition for Romania’s Development – the “umbrella” group and leading association representing the business community and trade sections from key foreign embassies in Bucharest. Radu Mircea Florescu is also active in the field of social responsibility, having a long history of contribution in local community, presently acting as Member of the Board of Directors for different organizations such as AIESEC Romania (International Association of Students in Economics), Junior Achievement Program, OvidiuRo, Principesa Margareta Foundation, ASEBUSS and United Way Romania. Mr. Gicu Iorga was a non-executive director since 1 May 2017 and Chair of the Strategy and Corporate Governance Committee. Mr. Iorga was the Chair of the Strategy and Corporate Governance Committee from May 6, 2021 to January 26, 2024, previously being a member of this committee in the period of May 14, 2018 - February 18, 2019.. He was a member of the Nomination and Remuneration Committee in the periods November 13, 2017-May 14, 2018, February 18, 2019 - January 28, 2020 and May 13, 2020 - May 6, 2021 and a member of the Audit and Risk Committee in the periods of December 12, 2018-February 18, 2019 and January 28, 2020-May 13, 2020. Born in 1958, Mr. Gicu Iorga has an experience of over 35 years in the field of economics and public administration until November 2023 he held the position of Head of Customs Office within A.N.A.F. – D.G.V Bucharest. Most of his professional activity was carried out in institutions such as National Customs Authority, A.N.A.F – General Customs Directorate, General Public Finances Directorate Bucharest and National Sanitary Veterinary and Food Safety Authority (A.N.S.V.S.A.). Starting with April 2017 and until November 2019 Mr. Gicu Iorga held the position of General Secretary within the Ministry of Energy where he coordinated the good functioning of the departments and functional activities within the Ministry. Further to that, starting March 2020 and until March 2021 he occupied the position of Deputy General Secretary within the Ministry of Economy, Energy and Business Environment. 106 107 Four consultative committees support the activity Climate Governance and Public Policies - Mr. Iulian Cristian Bosoanca – Member. Strategy and Corporate Governance Committee: of the BoD, respectively the Nomination and Committee since 27 January 2023 Remuneration Committee, the Audit and Risk Committee, the Strategy and Corporate Governance Committee and the Climate Governance and Public Policies Committee each of them composed of three directors and chaired by one of them. The majority members of the Nomination and Remuneration Committee and of the Audit and Risk Committee, as well as their Chairs, are independent directors. - Mr. Dragos-Valentin Neacsu – Chair; - Mr. George Cristodorescu – Member; - Mr. Iulian Cristian Bosoanca – Member 16 May – 30 July 2023 The consultative committees’ members are elected for a period of one year. Changes in the Nomination and Remuneration Committee: - Mr. Adrian-Florin Lotrean – Chair; Strategy and Corporate Governance Committee: - Mr. Marian -Cristian Mocanu - Chair; - Mr. Gicu Iorga - Chair; - Mr. Dragos Valentin Neacsu – Member; - Mr. Dragos Valentin Neacsu – Member; - Mr. Dumitru Chirita – Member. - Mr. Adrian-Florin Lotrean – Member. Climate Governance and Public Policies Climate Governance and Public Policies Committee Committee - Mr. Dragos-Valentin Neacsu – Chair; - Mr. Dragos-Valentin Neacsu – Chair; - Ms. Valentina Elena Siclovan – Member; - Mr. Radu Florescu – Member; - Ms. Georgiana Bogasievici – Member. composition of the committees during this period - Mr. Radu Mircea Florescu – Member; - Mr. Iulian Cristian Bosoanca – Member. At the issue date of this report, the composition of the BoD Committees is as follows: Nomination and Remuneration Committee: Mr. Dragos-Valentin Neacsu holds a number of 20 According to the available information, there is no agreement, understanding or family relation between the directors of the company and another person who may have contributed to their appointment as directors. As of 31 December 2023, among the BoD members, ELSA shares. According to the available information, the BoD 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 may intervene with the vacancy of a Board position. The organization, duties and responsibilities of each committee are set under ELSA’s Articles of Association, respectively in the committee Charters - Mr. Ion Cosmin Petrescu – Member Audit and Risk Committee: and in the Company’s Corporate Governance Code. - Mr. Radu Mircea Florescu - Chair; The composition of the committees during 2023, as it follows: - Mr. Dragos-Valentin Neacsu – Member; - Mr. Iulian Cristian Bosoanca – Member. 01 January – 15 May 2023 Strategy and Corporate Governance Committee: - Mr. Gicu Iorga - Chair; - Mr. Dragos Valentin Neacsu – Member; - Mr. Adrian-Florin Lotrean – Chair; - Mr. Marian -Cristian Mocanu – Member; - Mr. Ion Cosmin Petrescu – Member Nomination and Remuneration Committee: - Mr. Adrian-Florin Lotrean – Member. Audit and Risk Committee: - Ms. Valentina Elena Siclovan - Chair; years. - Mr. Adrian-Florin Lotrean – Member; - Mr. Ion Cosmin Petrescu – Member. - Mr. Adrian-Florin Lotrean – Chair; Climate Governance and Public Policies - Mr. Radu Mircea Florescu – Member; Committee - Mr. Ion Cosmin Petrescu – Member - Mr. Dragos-Valentin Neacsu – Chair; Audit and Risk Committee: - Mr. Radu Mircea Florescu - Chair; - Mr. Dragos-Valentin Neacsu – Member; - Mr. Iulian Cristian Bosoanca – Member. - Mr. Radu Florescu – Member; - Mr. Iulian Cristian Bosoanca – Member. 31 July – 31 December 20233 Strategy and Corporate Governance Committee: Nomination and Remuneration Committee: - Mr. Gicu Iorga - Chair; - Mr. George Cristodorescu – Member; - Mr. Adrian-Florin Lotrean – Member. - Mr. Adrian-Florin Lotrean – Chair; - Mr. Radu Mircea Florescu – Member; - Mr. Ion Cosmin Petrescu – Member Audit and Risk Committee: - Mr. Radu Mircea Florescu - Chair; - Ms. Valentina Elena Siclovan – Member; 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT108 109 4.5 The activity of ELSA’s Board of Directors and of its consultative committees in 2023 Evaluation of the Board of Directors Board evaluates annually its activity and that of its consultative Committees to identify areas of improvement, and to increase its efficiency. The • Board coordination; • BoD committees; • Interactions between the BoD and the Executive team; In 2023, the Board of Directors met 47 times; Below are presented the Board members’ purpose of the evaluation is to provide members • Dynamics of the interactions and processes; of these, 23 meetings were organized with the attendance (in person, by conference call, or by physical presence of the members, 6 were held by e-mail) in the meetings of the Board of Directors conference call, in accordance with Art. 18 para. and its committees in 2023. 20 of the company’s Articles of Association and 18 meetings were organized electronically. Table 11. Participation of the BoD members at the BoD meetings and of the committees meetings in 2023 Name The Strategy The Audit The Nomination and The Board of and Risk and Corporate Directors Committee Remuneration Governance (no. of (no. of Committee Committee meetings 47) meetings - (no. of meetings (no. of 31) - 20) meetings - Iulian Cristian Bosoanca George Cristodorescu Radu Mircea Florescu Gicu Iorga Adrian-Florin Lotrean Dragos-Valentin Neacsu Ion-Cosmin Petrescu Valentina Elena Siclovan Source: Electrica 47 17 47 46 46 47 47 20 31 - 30 - - 17 - 14 - - 20 - 19 - 20 - 30) 12 - 29 30 16 - - Climate Governance and Public Policies Committee (no. of meeting – 6) 6 - 6 - - 6 - - of the Board with an overview of their activity, strengths/weaknesses, performance and the potential of collective and individual development, in order to efficiently and effectively fulfil their responsibilities as members of the Board. According to the established mechanism, the evaluation is conducted either with the support of a consultant or by self-evaluation. The Board of Directors decided, to conduct the evaluation of its activity and functioning • Performance management; • Strategic Management and Risk Management; • Innovation and digitalization; • Sustainability. Following the evaluation, a detailed summary was made with the analysis of the result of the evaluation process. From the analysis of the results of the questionnaire, it emerged as a general conclusion that the development of the BoD activity during the year 2023 took place in good conditions, during 2023, internally, using a self-assessment the following being highlighted: questionnaire, discussed and agreed by Board members. • The majority of respondents assessed the overall activity of the Board during 2023 as good, the The questionnaire, using a scale of 1 to 5, served to average marks awarded being between 3 and 5, perform an assessment of the Board’s activities in on a scale of 1-5; the following areas: • Regarding the performance indicators of • Specific KPIs as provided in the mandate the Board members, it was appreciated agreements (the main objectives defined by that the target was reached regarding the the General Meeting of Shareholders: Group implementation of corporate governance at strategy, Corporate Governance, Placement the group level, less in relation to the subsidiary of financial investments and Investments BoDs, at the same time new strategies were achievement in the distribution companies); developed at the group level; • Board Efficiency and Ways of Working of the • Regarding the level of investments made and 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 Previously, the evaluation of the Board of Directors activity in 2022 was carried out with the support of an external consultant. The evaluation process focused on the following 11 dimensions relevant to the activity of the Board of put into operation in 2023, the set/expected level was reached, creating the conditions for the future development and improvement of the results recorded by the subsidiaries (eg: The second cash pooling scheme was developed, the mix diversified of financing by activating some medium-term facilities for investments of some IFIs Preparation of future issues of green and sustainability-linked bonds, as well as an issue of shares, following the inclusion of Electrica in the FTSE Russell regional/global indices; The second system of CashPool is approved and functional); Directors and the market context of Electrica SA: • As in previous years, the ability of the Board • Composition and expertise of the BoD; • Quality of information and materials; • Agenda and Board meetings; to identify developments in the business environment in which the Company operates and potential opportunities was exploited, the general assessment being that the competence 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 110 111 of analysis and strategic planning is at a higher workshops on topics of common interest, report in the Directors’ Report; • makes recommendations to the Board on the level; • Regarding the efficiency and working method of stimulating interactive participation in periodic presentations, as well as in market events; • advises the Board on the appointment and dismissal of the Chief Executive Officer, makes the Board, the members appreciated that their • Board members consider that the functionality recommendations on the appointment remuneration of subsidiaries’ board members and the general limits of remuneration for subsidiaries’ executive management; contribution to the development of the company of the company’s management system can be and dismissal of the company’s executive • monitors compensation trends within areas is substantial, considering further that it is improved; management team after consulting with the relevant to the Group; necessary to focus on the strategic aspects of the company. In addition, the current component of the Board was appreciated as a good one, which benefits from diversified expertise; • At the same time, the BoD appreciates as a critical point the improvement of the interaction with the company’s subsidiaries in order to ensure the achievement of the assumed Chief Executive Officer, and makes proposals on the appointment and dismissal of subsidiaries’ board of directors members in accordance with the Group Governance Policy; • oversees the remuneration process of the subsidiaries’ chief executive officer and executive managers according to the nomination and remuneration policy at the • Regarding the identification and mitigation of strategic objectives; • recommends to the Board policies in the Group level; risks, BoD members appreciated that the main risks and their management mechanisms have been identified, although some mechanisms are not under the company’s control; • The members of the Board appreciated the personal contribution made by each of the members in the activity carried out, the involvement and the impact of the adopted decisions; • The communication within the Board is positively appreciated, regarding the frequency and intensity of communication, the reduction of the time affected by physical meetings and the efficiency of the decision-making process, the issues addressed as well as the transparency and sincerity of the dialogue, and according to the assessment of the BoD members, the atmosphere from the level of the Board encourages the expression of all points of view, of open debates, a fact that constitutes one of the bases for the substantiation of the adopted decisions. The decisions were taken by • Paying more attention to succession planning at the level of Senior Management as well as stimulating its implementation remains a point of interest for the Council in future activity; • At the same time, the BoD considers it appropriate to adopt measures that lead to the improvement of the meeting preparation process, respectively the size and format of the materials received. The Nomination and Remuneration Committee The Nomination and Remuneration Committee consists of three non-executive BoD members, two of its members are independent. 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 the Board candidates for these positions, to formulate proposals on the managers’ and other management positions’ consensus, after the expression, discussion and remuneration. mediation of contradictory points of view. At the same time, the activity at the committee level has significantly improved in this interval; • Also, the activity submitted by the Chair received positive assessments from the respondents, especially regarding the facilitation of an open and constructive dialogue within the Board meetings. The following aspects for improvement were suggested: The Committee has the following responsibilities concerning nomination matters: • recommends to the Board a nomination policy, including a target Board profile, the process and principles to be considered by the shareholders when proposing candidates for company’s directors, and advises the Board regarding the nomination of interim directors in accordance with the policy; • It is still necessary to improve communication with the general public and strategic communication with shareholders, by running • reviews the implementation of the nomination policy, submits a report to the Board on its implementation and presents a summary of this human resources field, including those covering recruitment and dismissal, talent management and development and succession planning across the company and its subsidiaries (the Group); • verifies at least once a year the number of mandates held in other companies by the members of the Board and by the executive managers, in order to evaluate their independence; • recommends to the Board a succession policy, both for the members of the board and for the • oversees the annual evaluation process of the Board of Directors’ activity. executive team; • supervises the process of annual evaluation of the effectiveness of the Council and its advisory committees; • periodically assesses the size, composition and Committee’s structure and makes recommendations to the Board with regard to any changes; • advises the Board on continuous skill development programmes for Board members and executive management; • oversees the nomination process of the appointment of subsidiaries’ CEOs and executive managers according to the nomination and remuneration policy. The Nomination and Remuneration Committee met 20 times during 2023, among the main aspects on which the activity of the Committee focused, were the following: • Analysis of ELSA executive managers’ KPIs achievement for 2022 and establishing of the KPIs for 2023; • Supervising the evaluation process of the Board of Directors’ activity during 2023; • Endorsing the proposals regarding the nomination of ELSA Managers and of the subsidiaries’ Board members; • Endorsement of the Remuneration Policy for the Company’s Directors and Executive managers; The Committee has the following duties a regarding remuneratione: The Audit and Risk Committee The Committee is composed of three non-executive • advises the Board in relation to the BoD members, two of them being independent. The remuneration, incentive and compensation Committee’s composition provided the necessary policies of the company; expertise in finance and risk management, • advises the Board regarding the periodic review of the remuneration policy for Board members and executive managers; according to legal requirements. The main role of the Committee is to support the Board in fulfilling its duties of verifying the • advises the Board in relation to the remuneration efficiency of company’s financial reporting, internal of the CEO and other executive managers, including the main remuneration components, annual and long term performance objectives and regarding evaluation methodology; 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 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 112 113 accurate, balanced and comprehensive and provide • makes recommendations to the Board on and assesses the associated risks regarding • advises the Board in monitoring and assessing all the necessary information for the shareholders’ the appointment, rotation or dismissal of the such transactions. evaluation of the financial performance. company’s external auditor; The Committee has the following duties in terms of financial reporting: • examines and monitors the financial reporting process, the integrity of annual and interim financial statements, at standalone and consolidated levels, or of disclosures made by ELSA and its subsidiaries; • reviews press releases announcing financial or operational results related to or derived from such financial statements, as well as any financial information or earning guidance, to be provided to financial analysts or rating agencies, by analyzing the fairness and adequacy of the • reviews the plan, activity and findings of the external auditor; • assesses the independence and objectivity of the external auditor and monitors the compliance with relevant ethical and professional guidance, including the requirements on the rotation of audit partners; • monitors the application of the legal standards and generally accepted internal audit standards; • endorses the internal audit reports, the recommendations made by the internal auditors and the plans of measures for the implementation of the recommendations; content and presentation of such statements or • performs any other activities established by the information; Board and the law; • regularly reviews the adequacy of the Group’s • regularly reviews the adequacy of the key accounting policies; • reviewes the financial forecast policy of the internal control policies, including fraud detection and bribe prevention policies; Company and recommends, to approval, • reviews the operations between affiliated parties towards Board of Directors; • reviews and advises the Board on whether the in accordance with a policy drafted by the Committee and approved by the Board; content of the annual report, taken as a whole, • analyzes the annual report prepared by represents a fair, balanced and understandable the Internal Audit Department and/or Risk account for shareholders and provides them Management, which evaluates the effectiveness with the information necessary to assess the of the internal control system within the Group. Company’s performance. Regarding the audit and internal control matters, the Committee has the following responsibilitiesi: The Committee has the following responsibilities concerning risk management matters: • reviews regularly the main risks facing the company and the Group, recommending to the • endorses, for the Board’s approval, the annual Board adequate policies for risks identification, plan at Group level, based on the annual risk mapping, management and mitigation; assessment, as well as any significant changes to the plan and receives periodic reports on activities, important findings and follow-up of internal audit reports; • monitors the main categories of risks that are recorded annually in the management report in order to reduce them and to evaluate the efficiency of the risk management system within • periodically reviews the charter and internal the Group; audit manual and submits them to the Board, for approval; • makes recommendations to the Board on financing methods, including proposals for • advises the Board on the appointment, dismissal contracting any type of loans and securities and remuneration of the Head of Internal Audit associated with these loans; Department; • makes recommendations to the Board regarding • monitors the adequacy, effectiveness and major economic transactions within the independence of the internal audit function; authority of the General Meeting of Shareholders The Audit and Risk Committee met 31 times during 20233, among the main aspects on which the activity of the Committee focused, being the following: • Analysis of the financial statements of ELSA at standalone and consolidated level for the financial year of 2022, as well as the financial statements of company’s subsidiaries for the financial year of 2022, together with the financial auditor report and recommendations, issued during the auditing process; • ELSA’s budget execution, the consolidated budget execution and the quarterly financial results; • Monitoring of the internal audit plan for 2023 and analysis of its achievement, as well as the reports submitted by the Internal Audit Department, proposing recommendations; • Monitoring the implementation of the recommendations made by the internal audit department. The internal audit activity is carried out by a structurally separate organizational unit (the internal audit department), within the Company. 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 is composed of three non-executive BoD members, holding the necessary expertise in performing the committee’s specific duties, two of them being independent. The Committee has the the Group’s performance in relation to the approved strategic plan, budgets, investment plans, industry trends, local and regional market trends, company’s competiveness and technological advances; • periodically reviews the overall strategic planning process, including the process of developing the medium-term strategic plan, makes recommendations on the issues that can be improved in strategic planning and provides feedback to the executive management; • makes recommendations to the Board regarding the proposed acquisitions, divestments, investment projects, joint-ventures and collaboration projects, especially assessing their alignment with the Group’s strategy; • performs any other activities or assume responsibilities regarding strategic matters which may be delegated periodically to the Committee by the Board. Regarding the tasks of the Committee on restructuring, they mainly relate to the following: • reviews and makes 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 conduct or efficiency of core businesses; • regularly reviews the organizational structure and chart of the company, and makes recommendations to the Board in this regard; • performs any other activities or responsibilities on restructuring matters as may be periodically delegated to the Committee by the Board. following duties in terms of strategy: Also, the Committee has duties in terms of • makes proposals to the Board on the development of the medium-term strategic plan, makes recommendations on the strategic direction, priorities and long term objectives of ELSA and its subsidiaries; • reviews management proposals on the Group’s consolidated annual budget, subsidiaries’ annual budgets, investment plans of the Group companies and makes relevant recommendations to the Board; corporate governance: • oversees and monitors the company’s compliance with legal and contractual obligations on corporate governance, as well as other applicable corporate governance principles and makes recommendations to the Board; • regularly reviews the company’s Corporate Governance Code, the Charter of the Board of Directors and the company’s Articles of 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT114 115 Association and makes recommendations to the Board on relevant amendments to the company’s corporate governance policy and documentation; Climate Governance and Public Policies Committee The committee is made up of three non-executive members of the CA, two of them being independent. • submits the Group Governance Policy to the The Committee component provided expertise and • (8) Ensuring the consistent, transparent • (12) Monitoring and assessing the communication on the material climate risks accomplishment rate of the key performance identified to all stakeholders, especially to indicators related to the climate goals, and investors and to the regulatory and supervisory issuing recommendations for the Board with authorities, if applicable. respect to the review of such goals, or to taking Board for approval and regularly reviews it understanding of threats and opportunities arising • (9) Defining a set of long-term performance sanctioning measures, as applicable; indicators and some key performance indicators • (13) Periodically reviewing the internal policies to help reaching the goal of ”zero impact of and regulations with an impact on the climate the greenhouse gas emissions caused by goals, and drafting recommendations intended the business of the Electrica Group on the for the Board in relation to the adequacy of the environment”, to be submitted to the Board for investment level within the Group, as those are approval; necessary to reach the climate goals within the • (10) Conveying some recommendations with set timeframe; respect to setting the annual targets for the key • (14) Ensuring a climate of trust, by cooperating performance indicators set for the executive with the investors in order to understand management, following consultations with their topics of interest and priorities, with the the executive management and after having purpose of accomplishing an effective climate obtained the latter’s commitment; governance. • (11) Ensuring the alignment of the methods for The Climate Governance and Public Policies rewarding the executive management in order Committee met 6 times during the year 2023, to promote the Company’s sustainability and among the main aspects on which the Committee’s welfare, on the long term. The Committee shall activity was focused, including the following: consider issuing some recommendations to include the key indicators related to climate goals within the reward schemes included in the Remuneration Policy for Directors and Executive Managers; – ESG Electrica score report analysis; – Request to establish the assigned responsibles for the implementation of the ESG strategy at Group level; – Endorsement of the Sustainability Strategy of the Electrica Group, 2024-2030 thereafter; from climate change. • reviews the company’s Delegation of Authorities policy and the company’s Delegation of Authority standard in order to ensure that the delegation of authorities to management allows for effective and efficient decision-making process, and makes recommendations to the Board in this respect; • reviews the company’s policy for corporate social responsibility and stakeholder engagement, and makes recommendations to the Board in this regard; • makes recommendations to the Board on improving the quality of information flows to the Board, including the improvement of reports sent, key performance indicators presented to them, and guidelines for preparing Board documents and presentations; • drafts reports or materials related to corporate governance, upon the Board request. The committee has the following responsibilities: • (1) Ensuring the preparation, at Electrica Group (the Group) level, of the framework required for implementing initiatives contributing to compliance with the EU objective of zero greenhouse gas emissions by 2050, at national level; • (2) Implementing at Group level the Principles of the World Economic Forum for an effective climate governance, while using corporate governance for company transition towards a low carbon emission economy; • (3) Ensuring long-term resilience for the companies of the Group in terms of potential structural changes of the business environment triggered by the climate changes; • (4) Providing an optimal mix of know-how, relevant experience, and capacity to justify the debates – all necessary for the decision-making During the year 2023, the Committee met 30 times, process within the Board, based on a proper among the main aspects on which the activity of the knowledge and understanding of the threats Committee focused, being the following: and opportunities that arose as a result of the • Analysis of the opportunities and the efficiency climate changes; of investments in different renewable production • (5) Establishing the most effective way of capacities and participation in various competitive processes in this regard; integrating considerations pertaining to climate change within the organisational structures of • Endorsement of the amendments to the ELSA’s the Company; Articles of Association; • (6) Monitoring the provision of a continuous • Endorsement of the Revenue and Expenditure assessment process by the executive Budget for the year 2023; • Analysis of the revision of the Electrica Corporate Strategy 2024-2030; • Endorsement of the Corporate Human Resources Strategy 2024-2026(2030); • Endorsement of the of changes to the Organization Chart; • Endorsement of the Project and the Merger Process through the absorption of some companies (EPE, GECI and EEV1). management, as well as the materiality of the risks and opportunities deriving from climate reasons for the Company on a short, medium, and long term; • (7) Ensuring a permanent exchange of opinions and a continuous dialogue within the industry, with the decision-makers in terms of public policies, with the investors, and the other stakeholders in order to encourage the joint use of relevant methodologies and the exchange of information; 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT116 117 4.6 ELSA’s Executive management In accordance with ELSA’s Articles of Association, the Board of Directors (BoD) appoints and revokes the CEO, More details on the in place executive managers’ biographies can be found on ELSA’s website in the section as well as the other executives with mandates and also approves their empowerments. - https://www.electrica.ro/en/investors/corporate-governance/executive-management/. The duties of the company’s directors (including those of the Managing Director) are laid down in the According to the information held by ELSA, there is no contract, understanding or family relationship mandate contracts on the basis of which the directors carry out their activities within ELSA, ELSA’s internal between the executive managers of the Company and another person who may have contributed to their rules of organisation and operation and the applicable legal provisions. appointment as executive managers. During the meetings held on 27 February 2023, 26 April 2023, 24 August 2023, 14 December 2023 and 22 According to available information, ELSA’s executive managers mentioned in this chapter have not been January 2024, the ELSA Board of Directors decided to extend the term of office granted to Mr. Alexandru - involved, in the last five years, in any litigations or administrative proceedings related to their activity within Aurelian Chirita, as interim CEO, under the same conditions. Mr. Chirita’s CEO mandate currently lasts until 31 the company and neither to their capacity to fulfil their work-related duties in the Group. December 2024 (inclusively). During the meeting held on 27 February 2023, the ELSA Board of Directors decided to extend the term of office granted to Mr. Stefan - Alexandru Frangulea, as interim Chief Financial Officer, for a period of 2 years, until 27 February 2025 (inclusively). Mr. Frangulea’s CFO mandate currently lasts until 27 February 2024 (inclusively). At its meeting of 14 March 2023, the ELSA Board of Directors decided to appoint Ms. Ioana - Andreea Lambru as Executive Director of the Business Development Department, starting from 15 March 2023, for a period of 4 years. On 27 June 2023, the Board of Directors took note of the fact that on 1 June 2023, the contract of mandate of the Director of Information Technology, Mr. Mircea Modran, effectively terminated on the expiry of the four- year term. Following these changes, during 2023, ELSA’s executive directors, appointed under the terms of office, are presented in the table below. Table 12. ELSA’s Executive management during 2023, appointed on the basis of mandate contracts Name Function The Executive Manager’s mandate Alexandru-Aurelian Chirita Chief Executive Officer 17 May 2022 – 31 March 2024 Stefan Alexandru Frangulea Chief Financial Officer 4 January 2022 – 27 February 2025 Livioara Sujdea Chief Distribution Officer 1 February 2017 – 31 January 2021, the mandate being renewed for a period of 4 years, respectively 1 February 2021 - 31 January 2025 Mircea Toma Modran Chief IT & C Officer 1 June 2019 - 1 June 2023 Ioana Andreea Lambru Business Development Officer 15 March 2023 – 14 March 2027 Source: Electrica 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT118 119 Alexandru-Aurelian Chiriță • Chief Executive Officer (CEO) • • Starting on 2 June 2023 - Interim Chief Information 17 May 2022 – 31 December 2024 Officer (CIO) Ștefan-Alexandru Frangulea • Chief Financial Officer (CFO) • 04 January 2022 – 27 February 2025 Starting with 4 January 2022, Mr. Ștefan Alexandru Frangulea has taken over the position of Chief Financial Officer, his mandate being until 27 February 2025 (inclusively). Ștefan-Alexandru Frangulea has 20 years of experience in the financial-banking and energy sectors, in areas such as: corporate banking, corporate treasury, corporate finance, strategy, financial and capital markets, general management, business development, having held various executive and management positions. A graduate of the Academy of Economic Studies, Finance, Banking, Insurance and Stock Exchanges as well as the professional Executive MBA programs of the Wirtschaftsuniversität Wien (WU) and IEDC Bled School of Management, Ștefan joined the Electrica team in February 2018 as Director of the Department Treasury, Debt Collection and Credit Risk Management, subsequently changed following the modification of the organizational chart to Director of the Treasury Department (Head of Treasury). Ștefan-Alexandru Frangulea is one of the founding members and currently Vice-President of the Board of Directors of the Association of Treasurers from Romania (ATR), the professional organization of corporate treasurers in our country, affiliated to the European Association of Corporate Treasurers (EACT) and International Group of Treasury Associations (IGTA). Also he is a member of the Association of Independent Administrators from Romania. Alexandru Chiriță is a professional with a substantial experience in the legal and energy fields. He earned his Bachelor’s degree from the Faculty of Law at the University of Bucharest in 2008, and subsequently dedicated nearly a decade to practicing law. Throughout his career, he has amassed comprehensive expertise in consultancy on various legal matters, encompassing corporate law, commercial transactions, and litigation. His profound understanding of legal frameworks, coupled with his aptitude for devising and executing effective legal strategies, has been instrumental in achieving organizational objectives. Alexandru Chiriță’s multidisciplinary background is evident in his academic accomplishments. He holds a Master’s degree in Law and European Governance from the National School of Political and Administrative Studies (SNSPA), a Master’s degree in European Union Law, and a Bachelor’s degree in Law from the Faculty of Law at the University of Bucharest. He is currently pursuing a Doctorate in Administrative Sciences at SNSPA. As an active member of the professional community, Alexandru Chiriță participates in several organizations, such as The International Association of Privacy Professionals, the European Law Institute, the United Nations Association of Romania, and the Romanian Arbitration Institute. Before joining Electrica, he held the positions of Legal Manager and Data Protection Manager at Hidroelectrica. In these capacities, he formulated and executed legal and data protection strategies, ensuring compliance with regulatory mandates, managing litigation and disputes, and supervising contract negotiations. His legal acumen and experience have proven invaluable in his role as CEO of Electrica, a position he has held since May 2022. 120 121 Ioana Andreea Lambru • Chief Business Development Officer (CBDO) • 15 March 2023 – 14 March 20277 Starting from March 15, 2023, Ms. Ioana-Andreea Lambru took over the position of Business Development Executive Officer, for a period of 4 years. Ms. Lambru is a graduate of the Faculty of International Financial-Banking Relations at the Romanian American University. With over 10 years of professional experience in public administration, Ms. Ioana-Andreea Lambru was, for the last 6 years before joining the Electrica team, the Chair of the Supervisory Board of Hidroelectrica company. Livioara Şujdea • Chief Distribution Officer • • Starting on 3 January 2022 - Interim Chief People 1 February 2017 – 31 January 2025 Officer (CPO) Starting from 1 February 2017, Ms. Livioara Şujdea took over the position of Distribution Executive Director, for a period of 4 years. Following her reconfirmation in this role, Ms. Şujdea’s second mandate began on 1 February 2021, for another period of 4 years. Between 2017 and 2021, she was a Member of the Boards of Directors of the Electrica’s Group Distribution companies. With over 26 years of experience in the energy field, of which, 15 years in top management positions within large electricity and gas companies, Livioara Șujdea previously held various positions including Deputy General Director and Board Member of E .ON Moldova Distributie, E.ON Gas Distributie, E.ON Distributie Romania, Director of Operation and Maintenance in Delgaz Grid, Deputy General Director and Board Member at E.ON Energie. Livioara Șujdea is a graduate of the “Gheorghe Asachi” Technical University in Iasi – Faculty of Electrical Engineering, majoring in Energetics, where she also holds a master’s degree in management and Commercial Engineering. She also holds an Executive MBA specializing in General Management at the University of Sheffield UK and a Diploma in Strategic Management and Leadership at the Chartered Management Institute London UK (CMI). Livioara Șujdea has extensive experience in corporate reorganization, mergers and post- merger integration, business optimization, regulatory affairs, transformation processes, operational excellence, change management and performance management. She is a member of the Professional Women Network and the Association of Independent Administrators, she graduated the Competencies for Effective Boards Program, Women on Boards Academy, The Henley Board Program, Saïd Business School, University of Oxford Artificial Intelligence Programme and Organizational Leadership at ESMT Berlin. 122 123 4.7 Remuneration of the Directors and of the Executive Managers with mandate agreements Table 13. ELSA’s compliance with the provisions of the BSE Corporate Governance Code No. Provisions of the BSE Corporate Governance Code Other remarks The remuneration of administrators and executive The remuneration policy has the following directors within Electrica is carried out in objectives urmatoarele obiectivele: Section A Responsibilities accordance with the provisions of the Remuneration Policy for Administrators and Executive Directors (Policy) which was approved by the Ordinary General Meeting of Shareholders (AGOA). The last revision of the Policy was approved during the AGOA on 27 April 2023 without any changes to the remuneration limits previously established by the GMS for Directors and Executive Directors. The amendments cover some additions, in order to present in a transparent manner, the elements of fixed and variable remuneration, including financial and non-financial benefits, in any form, which are granted to the directors. In developing the Remuneration Policy, good practices used internationally and nationally for similar companies were taken into account, as identified after the listing of the company. The remuneration policy for directors and executives is reviewed annually by the NRC and describes the main pillars of remuneration, as well as the terms, conditions and non-financial benefits approved by ELSA’s corporate bodies. • setting clear remuneration thresholds and guidelines; • establishing the remuneration structure; • ensuring the correlation between the remuneration levels within ELSA. Starting with 2022, the Company has prepared and published annually the Remuneration Report for Directors and Executive Directors , in accordance with the provisions of Law 24/2017 on issuers of Financial instruments and market operations. The annual Report is approved at the Electrica Ordinary General Meeting of Shareholders (OGMS) (https:// www.electrica.ro/en/investors/general-meetings- of-shareholders/), with the aim of presenting an overview of the remuneration and benefits granted and/or owed during the last financial year, to the managers individually, including new recruits and former managers in accordance with the Company’s remuneration Policy. 4.8 Statement regarding the corporate governance “Comply or Explain” The present Statement reflects ELSA’s status of column has been removed from the table below. Also, compliance with the new BSE Corporate Governance since the Compliance status is YES in all sections, the Code as of 29 February 2024. column „YES/NO/PARTIALLY” is no longer present in the table below: Note: considering the fact that there are no mentions for “Reason for non-compliance”, the corresponding A.1. All companies must have an internal Board regulation which includes the terms of reference/responsibilities of the Board and the key management functions of the company, and which applies, among other things, the General Principles of this Section. • The company had elaborated ever since February 2015 ELSA’s Corporate Governance Code (ELSA’s CGC) that included the Articles of Association of the Company, the rules of organization and functioning of the BoD and of its committees. All these documents mentioned above contain the terms of reference/the responsibility of BoD, as well as those of the key management functions of the company. • In 2016, the Board carried out an extensive project to review the Articles of Association and the above-mentioned regulations in order to detail the responsibilities of the Board, of its committees and of the management team, taking into account the recommendations made in the Evaluation Report of the Board’s activity in the previous year. • In recent years, these documents have undergone successive revisions to align with domestic and international best practices. • In 2022, the Board of Directors (“BoD”) started a project to revise the Articles of Association of Societatea Energetica Electrica S.A. with the purpose of increasing corporate governance standards, focused on: ï ensuring full compliance with all relevant legal provisions, especially by referring to the legislative changes that occurred after the last general review of the Articles of Association; ï clarifying the provisions susceptible to interpretations and, implicitly, generating a risk of non-compliance; ï incorporating the latest unbundling trends and practices. • At the same time, an internal consultation process was carried out regarding the amendment of the Articles of Association. The resulted proposed changes, in principle, aim to: - the addition of CAEN codes necessary for Electrica to provide a series of services for the benefit of its subsidiaries; - the correlation, from a terminological point of view, of the provisions of the Articles of Association with the changes in the legislation specific to the capital market; - aligning the provisions of the Articles of Association with the relevant legal provisions, especially by referring to the legislative changes that occurred after the last general revision of the Articles of Association; - updating with provisions regarding all the committees organized within the BoD, respectively regarding the Strategy and Corporate Governance Committee; - clarification of the granting of mandates necessary to express the vote in the general shareholders’ meetings of the subsidiaries directly owned by the Company; - flexibility of the decision-making mechanism, etc. • The most recent versions of the Articles of Associations, ELSA’s CGC and the Charter of the BoD and its Committees are available on the company’s website in the section Investors -> Corporate Governance. • The last update of ELSA’s CGC took place in July 2020, and the last update of the Articles of Association was on 22 November 2023. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 124 125 No. Provisions of the BSE Corporate Governance Code Other remarks No. Provisions of the BSE Corporate Governance Code Other remarks A.2. A.3. A.4. Provisions for the management of conflict of interest should be included in the Board regulation. Such provisions are mentioned in ELSA’s CGC, in the Articles of Association, in the Code of Ethics and Professional Conduct, and in the BoD organization and functioning regulation. The current version of the Code of Ethics and Professional Conduct entered into force on 1 January 2022 and is available on the company’s website in the section Investors -> Corporate Governance -> Corporate policies and other documents The Board of Directors must consist of at least five members. ELSA’s BoD consists of seven members since 14 December 2015. The majority of the members of the Board of Directors must have no executive function. In the case of Premium Companies no less than two non-executive members of the Board of Directors should be independent. Each independent member of the Board of Directors should submit a declaration at the time of its nomination for election or re-election as well as when any change in its status occurs, indicating the elements on the basis of which it is considered independent in terms of its character and judgement and according to the following criteria: A.4.1. is not the General Manager/ Executive Director of the company or a company controlled by it and has not held such a position for the past five (5) years; A.4.2. is not an employee of the company or a company controlled by it and has not held such a position for the past five (5) years; A.4.3. does not and did not receive additional remuneration or other advantages from the company or from a company controlled by it, other than those corresponding to the quality of a non-executive director; A.4.4. is not or has not been an employee or has not had a contractual relationship, during the previous year, with a significant shareholder of the company, shareholder who controls more than 10% of voting rights or with a company controlled by him; All the members of ELSA’s BoD are non-executive. According to the Articles of Association, at least four out of seven members must be independent. The independence criteria stipulated in the Articles of Association are similar and even more restrictive than those in the BSE’s Corporate Governance Code. Currently, four out of seven members are independent. All independent members submitted a declaration of independence, at the time of their appointment by the OGMS. Details can be found in their biographies, available on the company’s website, in the Investors > Corporate Governance section > the Board of Directors. A.4.5. does not have and did not have in 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/Administrator, General Manger/ Executive Director or employee of a company if, by its substantial nature, this report may affect its objectivity; A.4.6. is not and has not been for the last three years the external or internal auditor or partner or associate employee of the current external financial or internal auditor of the company or a company controlled by it; A.4.7. is not the general manager/ executive director of another company where another general manger/ executive director of the company is a non-executive director; A.4.8. has not been a non-executive director of the company for more than twelve years; A.4.9. has no family ties to a person in the situations mentioned in points A.4.1. and A.4.4.. Other relatively permanent professional commitments and obligations of a Board member, including executive and non- executive Board positions in companies and not-for-profit institutions, must be disclosed to shareholders and potential investors before appointment and during his/her term of office. The professional background of the proposed candidates, as well as of the current Board members are available on ELSA’s website in the Investors > General Meeting of Shareholders > 2024 GMS > General Meeting of Shareholders as of 26 January 2024 section. Their biographies contain all the relevant information requested by this provision of the Code. The updated biographies of each member of the Board are presented annually in the Directors’ Report and on the company’s website in the section Investors > Corporate Governance > Board of Directors. 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. When a Board member has entered into a relation with a shareholder who directly or indirectly holds shares representing more than 5% of all voting rights, he/she promptly informed the entire Board. The company should appoint a Board secretary responsible for supporting the Board’s work. The company has established the General Secretary Department, which is directly subordinated to the Board of Directors. The corporate governance statement will inform whether an evaluation of the Board has taken place under the leadership of the chair or the nomination committee and, if so, will summarize the key measures and changes resulting from it. The company should have a policy/guide regarding the evaluation of the Board including the purpose, criteria and frequency of the evaluation process. This provision was applied starting with 2015, the BoD carrying out an annual assessment process of its activity with the support of an external consultant (in 2015, 2017, 2020 and 2022), or using a self-assessment questionnaire (in 2016, 2018, 2019 and 2021). More details are provided in the 2015-2017 Annual Reports in chapters 6.1 and 6.2, for 2018 and 2019, 2020, 2021 2022 and 2023 in chapter 4.5.. A.5. A.6. A.7. A.8. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT126 127 No. Provisions of the BSE Corporate Governance Code Other remarks No. Provisions of the BSE Corporate Governance Code Other remarks A.9. A.10. A.11. The corporate governance statement must contain information on the number of meetings of the Board and committees during the last year, directors’ attendance (in person or absent) and a report of the Board and committees on their activities. Details regarding the compliance with this provision are presented in the Annual Report, in the Corporate governance chapter. For 2023, please see chapter 4.5. of the Annual Report. The corporate governance statement must contain information on the exact number of the independent members of the Board of Directors. The Board of Premium Companies must set up a nomination committee of non-executive members that will lead the procedure of nomination of new members to the Board and will make recommendations to the Board on the appointment and the revocation of the Chief Executive Officer and the management team. The majority of the members of the nomination committee must be independent. 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 2023 in chapter 4.4. On ELSA’s website, in the section Investors > Corporate Governance > Board of Directors, it is specified exactly which members are independent. The Articles of Association and ELSA’s CGC highlight the existence of this committee (Nomination and Remuneration Committee - NRC), its members and responsibilities. The NRC composition is reviewed annually, in accordance with the NRC organization and functioning regulation (Charter) and at the beginning of each new mandate of a new member of the BoD. In May 2021, its structure was revised according to the changes that occurred in the board structure. According to the NRC’s Charter, in December 2021 the current structure of the NRC was established, two of the members being independent. In 2023, the RNC component established in 2022 was squared. Following the election of new members in BoD Electrica in January 2024, starting February 12, 2024, NRC has a new component. Details of the composition of the RNC are given in Chapter 4.4. of the Annual Report for 2023. Section B Risk management and internal control system B.1. The Board must set up an audit committee in which at least one member must be an independent non-executive director. A majority of members, including the Chair, must have proven that they are adequately qualified relevant to the functions and responsibilities of the committee. At least one member of the audit committee must have proven and appropriate audit or accounting experience. In the case of Premium Companies, the audit committee must consist of at least three members and the majority of the audit committee must be 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 structure is reviewed annually, according to ARC Charter and at the beginning of each new mandate of the BoD. In May 2021, its structure was revised according to changes in the BoD structure. In accordance with the ARC Charter, the current composition of the ARC was voted in December 2021, in which two of the members are independent, and was held until 1 August 2023. Starting 1 August 2023 a new composition of the ARC started its mandate until 26 January 2024. Following the election of new members in BoD Electrica in January 2024, starting February 12, 2024, ARC has a new component. Details are presented in chapter 4.4.. B.2. The Chair of the audit committee must be an independent non-executive member. On the 6 May 2021 and subsequently, on 15 December 2021 and on 20 December 2022, Mr. Radu Mircea Florescu, independent non-executive board member was elected and respectively re-elected as Chair of the Audit and Risk Committee. Mr. Florescu was Chair until 26 January 2024. At the date of this Report, the Chair of the Audit and Risk Committee is Ms. Valetina Elena Siclovan starting with 12 February 2024. B.3. B.4. B.5. Among its responsibilities, the audit committee must carry out an annual assessment of the internal control system. The assessment must consider the effectiveness and purpose of the internal audit function, the adequacy of risk management and internal control reports submitted to the audit committee of the Board, the promptness and effectiveness with which the executive management solves the deficiencies or weaknesses identified as a result of the internal control and the submission of relevant reports to the Board’s attention. The audit committee must assess conflicts of interests in connection with the transactions of the company and its subsidiaries with related parties. B.6. The audit committee must assess the effectiveness of the internal control system and risk management system. According to the organization and functioning regulation, the Audit and Risk Committee (ARC) has the following responsibilities on internal control issues: (i) regularly review the adequacy and implementation of key internal control policies, including fraud detection and bribery prevention policies; (ii) reviewing related parties transactions in accordance with a policy developed by the Committee and approved by the Board; (iii) analysis of the annual report prepared by the Internal Audit Department and/or Risk Management Department assessing the effectiveness of the internal control system within the Group. Such reports are annually presented. The assessment report for 2022 specified in the CGC was presented and discussed by the Audit and Risk Committee in the meeting on 28 February 2023. The 2023 report will be discussed during the meeting on 29 April 2024. The assessment is carried out annually. The assessment report for 2022 specified in the CGC will be presented and discussed by the Audit and Risk Committee during at its meeting on 24 March 2023. The date of analysis of the report in question has not been set for the 2023 Report. The ARC has at least the following responsibilities on risk management issues: (i) regularly review of the main risks to which the company and the Group are exposed, recommending to the Board appropriate policies for identifying, mapping, management and risk reduction; (ii) annual analysis of a management report that assesses the effectiveness of the risk management system within the Group. Based on the ARC Charter’s provisions, the evaluation report for the year 2022 was presented and discussed by the Audit and Risk Committee at its meeting on 27 February 2023. Based on the ARC Charter’s provisions, the evaluation report for the year 2023 was presented and discussed by the Audit and Risk Committee at its meeting on 28 February 2024. Details regarding the ARC activity for year 2023 are presented in chapter 4.5 of the Annual Report. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 128 129 No. Provisions of the BSE Corporate Governance Code Other remarks No. Provisions of the BSE Corporate Governance Code Other remarks Section C Fair rewards and motivation B.7. B.8. B.9. B.10. B.10. B.11. B.12. The audit committee must monitor the application of legal standards and generally accepted internal audit standards. The audit committee must receive and assess the reports of the internal audit team. Whenever the Code mentions reports or analysis initiated by the Audit Committee, these must be followed by regular (at least annual) or ad-hoc reports to be submitted to the Board afterwards. No shareholder may be granted preferential treatment over other shareholders with regards to transactions and agreements concluded by the company with shareholders and their related parties. The Board must adopt a policy to ensure that any transaction of the company with any of the companies with which it has close relations whose value is equal to or more than 5% of the net assets of the company (according to the latest financial report), is 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 under the category of events subject to reporting requirements. Internal audits must be carried out by a separate structural division (internal audit department) within the company or by hiring an independent third-party entity. In order to ensure the performance of the main functions of the internal audit department, it must report functionally to the Board through the audit committee. For administrative purposes and within the framework of management’s obligations to monitor and reduce risks it must report directly to the chief executive officer. The ARC has the following responsibilities on internal audit issues: (i) approval of an annual audit plan at Group level, based on an annual risk assessment, as well as any significant changes to the plan and receipt of periodic reports on activities, key findings and follow up of internal audit reports; (ii) advising the Board on the appointment, revocation 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 of the Annual Report. ARC reports periodically to the BoD. C.1. Provisions on this matter are included in ELSA’s CGC and in the Policy on Transactions with Related Parties. The Policy regarding the transactions with Related Parties, has been updated in July 2020 and covers all the required aspects. The internal audit is carried out by the Internal Audit Department, a structurally separate entity. The Internal Audit Department reports functionally to the BoD through the ARC, while administratively reports to the CEO. The company must publish on its website the remuneration policy, and include in its annual report a statement of the remuneration policy during the annual period under review. The remuneration policy must be formulated in such a way as to allow shareholders to understand the principles and arguments underlying the remuneration of the members of the Board and the CEO, as well as the members of the Management Board in two-tier board systems. It should describe how the process is managed and decision- making on remuneration, detail the components of executive management remuneration (such as salaries, annual bonus, long term incentives related to the value of shares, benefits in kind, pensions, and others) and describe the purpose, principles and assumptions underlying each component (including general performance criteria for any form of variable remuneration). In addition, the remuneration policy must specify the duration of the executive manager’s contract and the notice period provided for in the contract as well as any compensation for revocation without just cause. The remuneration report must present the implementation of the remuneration policy for the persons identified in the remuneration policy during the annual period under review. Any essential change in the remuneration policy must be published in a timely manner on the company’s website. In accordance with Law 24/2017, as amended and subsequently supplemented by Law no. 158/2020 (Art.92 ^ 1), on 28 April 2021, ELSA GMS approved the updated Remuneration Policy for Directors and Executive Managers, in which all the aspects stipulated by this statement are detailed. This policy was subsequently updated and approved by the OGMS on 20 April 2022. The Remuneration Policy for Directors and Executive Managers is available on ELSA website, under Investors > Corporate Governance > Corporate Policies and other documents. In previous years, issues related to the implementation of the Remuneration Policy were presented in the annual report. For the year 2021 ELSA has prepared a report on the remuneration of the administrators and executive directors to be submitted to the consultative vote of the ELSA GMS, according to the applicable legislative provisions. Also, for 2022, this report will be submitted for the consultative vote of the OGMS on 27 April 2023. Also, for 2023, this report will be submitted to the consultative vote of the GSM on 25 April 2024. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 130 131 No. Provisions of the BSE Corporate Governance Code Other remarks No. Provisions of the BSE Corporate Governance Code Other remarks Section D Building value through investors’ relations The company must have an Investor Relations function – indicating to the public the person(s) responsible or the organizational unit. In addition to the information required by legal provisions, the company must include on its website a section dedicated to Investor Relations, both in Romanian and English, with all relevant information of interest to investors, including: D.1.1. Main corporate regulations: the articles of association, the procedures regarding the general meetings of shareholders. D.1.2. Professional CVs of members of the company’s management bodies, other professional commitments of the board members, including executive and non- executive positions on board of directors of companies or non-profit institutions D.1.3. Current 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 details of a person who should be able to provide relevant information upon request; D.1.7. Corporate presentations (e.g. investors presentations, quarterly results presentations, etc.), financial statements (quarterly, semi - annual, annual), audit reports and annual reports. The company will 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 the annual distribution policy to shareholders will be published on the company’s website. D.1. D.2. The company has both an Investor Relations department and a section dedicated to Investor Relations on its website (in both Romanian and English). All relevant information for investors is published under the Investors section on ELSA’s website. Electrica was appreciated for the third consecutive year in 2022 with the maximum grade in the Vektor evaluation, Vektor being the indicator of the communication with investors for listed companies The BoD last revised the Dividends Policy at its meeting on 24 May 2022. It is published on ELSA’s website, in the Investors > Corporate Governance > Corporate Policies and other documents section. The company will adopt a policy regarding the forecasts, whether they are made public or not. The forecasts refer to quantified conclusions of studies aimed at determining the overall impact of a number of factors for a future period (so called assumptions): by its nature, this projection has a high level of uncertainty, the actual results may differ significantly from the forecasts initially presented. The forecast policy will determine the frequency, period envisaged and the content of the 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. The rules of general meetings of shareholders should not limit the participation of shareholders in general meetings and the exercise of their rights. Changes to the rules will take effect at the earliest, starting with the next general meeting of shareholders The BoD last revised the Forecasts Policy in its meeting on 14 February 2018. It is published on ELSA website, in the Investors > Corporate Governance > Corporate Policies and other documents section. ELSA rules and procedures that establish the framework for the organization and conduct of general meetings of shareholders are part of ELSA’s Policy on organizing and running the General Meetings of Shareholders, available from the beginning of 2020 and in its nmost updated form from August 2020, in electronic form on ELSA website in the section Investors > Corporate Governance > Corporate Policies and other documents. Also, the rules of general meetings of shareholders are mentioned in each convening notice, published in accordance with the legal and statutory requirements approximately 45 days before each meeting. Additionally, to facilitate the non-discriminatory participation of all shareholders to the GMS meetings, including remotely, Electrica implemented, starting with 2022, a platform for participating and voting online for the GMS (for the shareholders that are present in the meeting room or remotely, through electronic means), system used in meetings. The external auditors should attend the general meetings of shareholders when their reports are presented. External auditors attend each OGMS in which the financial situations and annual reports are approved. The Board will present to the annual general meeting of shareholders a brief assessment of the systems of internal control and significant risks management, as well as opinions on issues subject to the decision of the general meeting. The directors’ annual report, presented to the annual general meeting of shareholders together with the financial statements, contains the BoD’s assessments on the systems of internal controls and significant risk management. As a practice, all the documents subject of the GSM approval are endorsed by the BoD; this is clearly stated in the documents presented to the shareholders. D.3. D.4. D.5. D.6. 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 132 133 No. Provisions of the BSE Corporate Governance Code Other remarks actions on the following main directions: see chapter 4.4. which the organization operates, through concerted members and the election of its members, please Any professional, consultant, expert or financial analyst may attend the shareholders’ meeting on the bases of a prior invitation from the Board. Accredited journalists may also attend the general meeting of shareholders, unless the Chair of the Board decides otherwise. The quarterly and semi-annual financial reports will include information in both Romanian and English on key factors influencing changes in sales levels, operating profit, net profit and other relevant financial indicators, both from quarter to quarter as well as from one year to another. A company will hold at least two meetings/teleconferences with analysts and investors each year. The information presented on these occasions will be published in the investor relations section of the company’s website at the date of the meetings/teleconferences. If a company supports different forms of artistic and cultural expression, sport activities, educational or scientific activities, and considers that their impact on the innovative character and competitiveness of the company part of its mission and development strategy, it will publish the policy regarding its activity in this area. D.7. D.8. D.9. D.10. Source: Electrica In this respect, the agreement of the shareholders present at the General Meetings was requested each time it was the case. The quarterly and half-yearly financial reports can be consulted on the company’s website in the section Investors> Results and Reports> Financial results and fulfil all the requirements. ELSA organizes quarterly teleconferences with analysts and investors and publishes presentations and audio recordings of the teleconference on the ELSA website, in the section Investors > Results and Reports > Presentations and other information. Information regarding the CSR activities can be found online on the company’s website, in the CSR section. The projects and activities supported each year are presented in ELSA’s annual Sustainability Reports, available on the ELSA website, in the section CSR > Non-financial Reporting. 4.9 Implementing action plans undertaken by signing the framework agreement with EBRD The company’s initial public offering and the sustainability principles at Group level. dual listing process involved the signing of a framework agreement with the European Bank for As for the development of a culture of integrity Reconstruction and Development (EBRD), which and compliance at Electrica Group level, in line includes action plans aiming at key dimensions for with the EBRD standards, the year 2023 meant the company’s transformation: developing a culture maintaining the compliance framework from an of integrity and compliance, adopting best practices ethical perspective and updating it in accordance regarding corporate governance and incorporating with the evolutions of the social and legal context in • maintaining the organizational structures dedicated to ethics and compliance; Nomination and Remuneration Policies • monitoring the compliance in relation to the framework defined by the Code of Ethics and Professional Conduct and subsequent policies and procedures. Having mainly a preventive role in relation to the risks to which the organization is exposed, compliance adds value to each business, but in order to be effective, the compliance framework must be adapted to the organization transformations and to be aligned permanently with legislative changes, external environment trends and business ethics’ best practices. The information and awareness activities regarding the provisions of the compliance framework from the ethical perspective of the organization’s staff were carried out exclusively through the online environment. ELSA uses nomination and remuneration principles in accordance with best practices for the appointment and remuneration of directors and executive management. In this respect, the Profile of the Board of Directors and the Policy for recruiting and nomination of the candidates for executive management were elaborated. The remuneration policy for directors and executives of ELSA (Policy) is reviewed periodically by the nomination and remuneration Committee and describes the main pillars of remuneration as well as the terms, conditions and non-financial benefits approved by ELSA’s corporate bodies. As a result of the change of the European and national legal framework, according to the European Directive no. 828/2017, transposed into national legislation by Law no. 24/2017, as it was subsequently amended and supplemented by Law no. 158/2020 (Art.92^1). The Policy was revised Regarding the organizational structures dedicated and approved at the ordinary General meeting of to ethics and compliance, these exist at each shareholders (OGMS), presenting transparently company level from the Group. The action plan regarding corporate governance The implementation of the Corporate Governance Action Plan, assumed as part of the Framework Agreement with EBRD, has been considered since the IPO and the company’s listing. The standards and measures it envisaged have been implemented, maintained and continuously monitored. Selection of independent directors The EBRD guidelines were included in ELSA’s Articles of Association adopted on 4 July 2014, being maintained in the context of increasing the total number of directors from five to seven, by adopting the Extraordinary General Meeting of Shareholders decision from 10 November 2015; out of the seven directors, four must meet the independence criteria. For details about ELSA’s Board of Directors, its the elements of fixed and variable remuneration, including financial and non-financial benefits, in any form, that may be granted to Directors. In the year 2023, no changes were made to the Policy; the remuneration limits previously established by the General Shareholders’ Meeting (GMS) for Administrators and Executive Directors remain unchanged. Starting from 2023, the company has published the Remuneration Report for Administrators and Executive Directors for the year 2022, in accordance with the provisions of Law 24/2017 regarding issuers of financial instruments and market operations. The report was approved during the Ordinary General Shareholders’ Meeting (OGMS) Electrica on 27 April 2023 and can be accessed at the following link: [Remuneration Report for Directors and Executive Managers of Electrica, for 2022]. The purpose of the report is to provide an overview of the remuneration 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 134 135 and benefits granted and/or due during the processes, subprocesses, and activities conducted, last financial year to the executives individually, the workflow for reporting, and the establishment including newly recruited and former executives, in of responsibilities and dedicated competencies are accordance with the company’s Policy. described. guaranteed by Electrica S.A. for financing DEER’s assessment for the investment projects included in CAPEX Plan 2021 – 2023. The revised ESAP includes the CAPEX Plan. If DEER is to develop and implement the following actions, their status of implementation impact assessments under national legislation for being also mentioned in the following section. investment projects targeting certain installations, For details regarding the remuneration of the Board Code of Conduct members and of the executive management of ELSA, please see chapter 4.7. EBRD requirements are covered by the Code of Ethics and professional Conduct. Regarding the Advisory Committees of the Board of Directors Whistleblowing Policy, it has been updated and is In order to increase the effectiveness of its available on the company’s website. activity, ELSA’s Board of Directors has established the following committees with advisory role: During 2023, follow-up actions were carried out Organogram of EHS management structure and update certification Develop an organogram presenting the EHS management structure from Group-level management, to County-level implementation within DEER. Make this accessible on the Group intranet portal, alongside the existing E&S Policy, the Nomination and Remuneration Committee, in relation to the provisions of the Code at group under their management systems page and shared the Audit and Risk Committee, the Strategy and level, or to prevent the occurrence of any forms of with all staff. Corporate Governance Committee and The Climate conduct contrary to the provisions of the Code and Governance and Public Affairs Committee. For subsequent policies applicable at Group level. details, please see chapter 4.5. Internal Control and Audit Framework Compliance with BSE Corporate Governance Code In the course of the year 2023, the organizational structure of DEER included the Health and Safety Department, with Zonal Health and Safety Offices (MN, TN, and TS), and the Quality and Environment which are not initially foreseen (including cutting protected tree species), they must be developed according to EU standards. The EBRD will be informed about the environmental impact studies related to investment projects carried out at the level of DEER by sending the post link on their website. The inclusion in the Electrica Group’s Annual Sustainability Report of a summary of environmental impact studies with reference to non-technical summaries for CAPEX investment projects posted on DEER’s website. During 2022, the documentation governing the On 4 January 2016, the new BSE Corporate Management Office. internal audit activity at Electrica Group level Governance Code entered into force and, on this No Environmental impact Studies were required under Law 292/2018 Annex 5E for the development approved in November 2019 was maintained and occasion, ELSA published on 8 January 2016 the The certification of DEER’s Environmental of the distribution infrastructure included in DEER applied. This documentation was approved in its „Corporate Governance Code Apply or Explain” Management System in accordance with the ISO Investment Plan until now. first version by the BoD at the beginning of 2015 and statement according to the new provisions. ELSA 14001:2015 standard was obtained in April 2021. includes the Internal Audit Charter, the Audit Manual publishes the updated statement yearly and reports and the Auditor’s Code of Ethics, its last update promptly to the capital market any update of its dating from 2019. The documents are available on compliance. ELSA’s website in the section The group > Internal Audit. For details about the internal audit please see On its turn, ELSA adopted its own Corporate Throughout the year 2023, the Company maintained its certification in accordance with the requirements of the ISO 14001:2015 and ISO 45001:2018 reference standards, granted by the external certification chapter 4.10. and for more details on the internal Governance Code since the beginning of 2015, its body SRAC Cert. control, please see chapter 6.10. last update being approved by the BoD on 23 June Permits DEER will ensure that it obtains all necessary authorizations/certificates from the Ministry of Culture, as well as environmental ones from local authorities with competence in the field, according to the Urban planning Certificate for the investment ELSA’s Articles of Association 2020. This version, as well as the policies and other corporate documents referred to by the Corporate Governance Code of ELSA are available on the EBRD guidelines were included in the Articles of company’s website in the Investors > Corporate Association of ELSA adopted on 4 July 2014. Governance section (https://www.electrica.ro/en/ In 2023, ELSA’s Articles of Association were updated investors/corporate-governance/). according to ELSA Board of Directors’ decisions from 22 November 2023. All versions of the ELSA Articles For details, please consider chapters 4.8 and 4.1. of Association adopted since the listing of the At the same time, at the level of the Electrica Group, company are available on its website in the section a Market Abuse Policy was developed, adopted by all The group > About > Articles of Association. subsidiaries. Clear lines of competence and responsibility The Environmental and Social Action Plan (ESAP) In the documentation of our own IMS (Integrated Management System) developed at the level of ELSA and its subsidiaries, which documents the During 2022 the Environmental and Social Action Plan was updated by SAP as part of the Loan Agreement signed by DEER with EBRD and Project-Specific Risk Assessments projects carried out. Development and implementation of a standardized instrument for the assessment of social and environmental risks (methodology) and its application for the categories of works/works included in the CAPEX Plan 2021-2023. All the necessary authorizations/certificates according to the Urban planning Certificate were obtained for all the investment projects included in the CAPEX Plan at DEER level. Social, environmental and SSM risks, as well as mitigation measures are included in DEER technical projects for investment works, a methodology being developed to ensure a unitary approach across all technical projects. Environmental impact studies Obtaining the building permit is conditioned by obtaining all the approvals required in the Urban planning Certificate. Stunting environmental and social requirements Environmental management plans for the works must be developed by contractors before starting Continue to implement the legal requirements work, based on the risk assessments carried out in the field of environment regarding the impact at the level of Electrica group and the specific 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT136 137 instructions of the group companies. These plans staff reduction at group level are included in the • Increased selective collection and recovery of capacitors with PCB content in operation. The must be stunned by the contractor (general Collective Labour Agreement signed with the trade recyclable waste. contractor) to all sub-contractors. unions and renegotiated every two years. process is monitored annually through reporting, and the results are published in the Electrica Technical projects including the section on social, In the case of reorganisation decisions, such environmental and SSM risks and measures to initiatives will be designed in accordance with reduce them are part of the contract signed with best practice and in compliance with national contractors and are binding on them and their legislation. In 2023 there were NO restructurings subcontractors. and NO collective redundancies. • Installation of GPS, GPS monitoring (via the Group’s Sustainability Report. SafeFleet platform), route optimization, fuel consumption monitoring, periodic technical maintenance of the vehicle fleet. Health and Safety System and Policy Maintaining the certification of the SSO • Reduction in the number of business-related Management System according to ISO 45001:2018 trips. for DEER. Revision of OSH policy Ensuring the accommodation of workers Analysis of greenhouse gas emissions • Staff awareness through the inclusion of The certification of the Occupational Health and Check the accommodation conditions provided to workers who cannot return home daily (where relevant), ensuring it at an adequate level of quality and in accordance with the EBRD/IFC guidelines.. The development of a study on greenhouse gas (GHG) emissions at the level of Electrica Group’s operations and the identification of areas with potential emission reduction, with the publication of results in the Electrica Group’s Sustainability Report. An annual presentation of the implementation The accommodation conditions for its staff status of measures and progress made in reducing are checked and controlled at the time of the emissions is included in the Sustainability Report. accommodation. In the year 2023, at the DEER level, the procedure regarding the On-site Environmental Control was revised, introducing the mandatory verification of accommodation conditions in the control activities for contracted investment works. . Restructuring with reduced personnel The company will develop and maintain provisions on personnel reduction (collective/individual redundancies) in the collective Labour Agreement and will plan restructuring initiatives in alignment with the EBRD guidelines in the field, so as to minimize the social and economic impact of staff reductions, if necessary. These initiatives will be designed in accordance with good practice and in compliance with national law. The Company shall inform the Bank of any major restructuring (more than 500 affected employees) and shall submit a plan for tarting/reducing the impact at least 1 The determination of the level of greenhouse gas (GHG) emissions for the activities of the Electrica Group in the year 2022 and the identification of areas with potential emission reduction were carried out at the level of each company within the Group. The results are published in the Electrica Group’s Sustainability Report for the year 2023. At the DEER level, the measures taken aimed at reducing both direct and indirect emissions include: • Analysis and increase in the percentage of distributed electrical energy purchased from renewable sources. • Modernization of energy facilities. • Implementation of a program to reduce Specific Energy Consumption (NL). • Installation of own renewable energy sources (photovoltaic panels). month before the CIM is terminated. Restructuring • Application/adherence to regulations for programs that will affect more than 100 employees, optimizing and improving energy consumption but less than 500 employees will be presented in in DEER’s administrative and technological carbon footprint reduction aspects in the topics Safety Management System in accordance with covered in the IMS - Environmental Protection the ISO 45001:2018 standard was maintained at training. Energy management the DEER level in the year 2023, with no major non- conformities recorded by the external certification body SRAC Cert. Implementation and certification of the Energy Management System, in accordance with the requirements of ISO 50001 standard at the level of the Electrica Group. Azbestos The implementation of the Energy Management System at DEER level is foreseen after the completion of the organizational transformation project following the merger of distribution operators, so that the certification will be obtained in 2024. PCB Continuation at DEER level of the program to eliminate PCBs (polychlorinated biphenyls) from electrical installations in operation, the deadline for complete disposal being 2028, with annual reporting to the EBRD. The process of eliminating Polychlorinated Biphenyls (PCBs) from the operating electrical installations continued throughout the year 2023, ensuring the company’s compliance with the national elimination program within the established timeframe (2028), as per Government Decision 1497/2008. In 2023, a total of 400 capacitors with PCB content and 1 transformer with PCB content Carrying out a study on asbestos-containing materials for the targeted transformation stations (by the CAPEX Plan) and developing an asbestos management plan for the locations included in the CAPEX Plan, in order to facilitate a comprehensive investigation, DEER must also ensure that, all electrical equipment is insulated and safe during the study. Waste management procedures during investment works documented by environmental management plans during work should include preventive measures/approaches to situations where asbestos is identified during work and should comply with the asbestos Management Plan. Maintain a plan to assess and eliminate asbestos risk. DEER continued to monitor the state of degradation of the asbestos-cement coating for the posts, transformation stations and administrative buildings, being replaced with other materials by third-party companies during the restoration/ modernization works.. the Annual Report. spaces. were removed from operation. Community Health & Safety The provisions on restructuring/reorganisation with • Reduction of operating time through the appropriate use of ITC equipment. As of the end of the year, there were still 1089 After the implementation of the CAPEX Plan, the 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT138 139 distribution infrastructure must be inspected overhead power lines with underground cables), in Electromagnetic Fields branch for the year 2023. periodically to verify that the equipment is properly accordance with the applicable legal provisions, installed and that the elements that ensure the especially at the community level. Continue monitoring potential impacts from electromagnetic fields (EMF) from transformer The bird mortality situation in 2023 at the DEER level is as follows: Emergency Preparedness and Response stations and transmission lines in compliance with National legislation with respect to EMF. . Checking the emergency plans and ensuring the endowment of all locations with extinguishers within There are studies on electromagnetic fields for the the validity term, in accordance with the provisions distribution infrastructure of DEER indicating that – 145 incidents resulting from bird interaction with electrical installations (collision/electrocution) – 161 deceased birds (mostly crows, storks, rooks). of the legislation in force. . they are within the limits of national legislation. Avoiding and mitigating against bird deaths For all locations owned by DEER, there are defined fire prevention plans. Preventive measures are implemented and consist of: Control of compliance with legal regulations by own authorized personnel; DEER analyzes options for including electromagnetic field measurements for new installations in the commissioning process and for independent studies. regular entry for all categories of employees, in Land Acquisition Framework protection of the community (for example, when electrocution) are functional/applied as part of the infrastructure maintenance plan. Any unprotected equipment that could cause damage to the local community must be reported and repaired/ replaced. Throughout the year 2023, DEER continued monitoring the degradation status of asbestos- cement roof coverings associated with posts, transformer stations, and administrative buildings. Replacement with other materials was arranged by third-party companies during refurbishment/ modernization works. Working at Height and Lockout/Grounding Instruction and installations complies with the regulations in force at national level. Completion of the electrical separation and working at height instruction/ instructions. The SSM instructions on the de-voltage and the provision of the working area for networks and distribution installations, as well as on working at height, are in force and comply with national regulations. Visual Impacts taking into account local communities’ perception of their construction (through environmental and social management plans) in compliance with national legislation in this field. accordance with the approved annual training programs; evacuation and intervention exercises in case of emergency situations; maintenance of fire prevention and extinguishing equipment and facilities for each location with authorized Ensuring that the SSM documentation providing providers; maintenance of unobstructed access on rules for the voltage removal and ensuring the evacuation routes; additional actions to prevent working area for electricity distribution networks fires for the hot and cold season. establishing and implementing mitigation/reduction measures, if necessary (if measurements indicate overruns of the legislated level). At DEER level, in the year 2023, the instruction ‘DEER- I3-PS-06 - Environmental Protection Control’ was developed, including Annex 1.1 - ‘Noise Measurement Assessing the visual impact for new networks in the Program.’ The instruction pertains to environmental design phase and establishing mitigation measures, control, incorporating the activity of monitoring e.g. moving lines underground, changing routes by noise levels for DEER installations. Noise monitoring program. Monitoring the noise level for areas with high No new land surveys were required for the sensitivity (residential, hospitals, schools) that claim development of the distribution infrastructure that the noise level generated by DEER equipment and is the subject of the Investment Plan so far. If it will be necessary to purchase land for the implementation of the CAPEX Program, a document will be developed to define the Land acquisition Framework (LAF), which will present the Electrica policy on fair compensation and compliance of the procurement process with the relevant national legislation and RP5. It will ensure compliance with this framework for installations part of the CAPEX Bird death monitoring Develop and implement a system for monitoring mortality among birds due to their collision with LEA, providing annual estimates of mortality. The monitoring will be done by on-site trips with search on the ground. DEER has developed and approved the instruction DEER-I5-PS-06 regarding ‘Monitoring The continuation of the replacement of the lines with classical (uninsulated) conductor with twisted (insulated) conductors, within the investment projects carried out in areas with significant activity of birds, defined by the relevant NGOs and environmental authorities. It will continue the installation of stork nests on the low and medium voltage LEA poles and the installation of electoinsulating sheaths to protect all these species that have their habitats in DEER activity areas. Mapping sensitive areas from a biodiversity perspective. If necessary, bird markers shall be used and the risk of electric shock of birds shall be reduced by a suitable design of the insulation of electrical installations. It will be considered for all new or modernized LEA to have safety elements that will lead to the avoidance of mortality among birds. In the design phase for new networks or the modernization of existing electrical networks, DEER adopts technical solutions designed to ensure the protection of biodiversity and considers the replacement of overhead lines with underground lines, of non-insulated conductors with twisted conductor, the installation of insulating sheaths. Technical guidelines are being developed to ensure a unified approach to the design of power grids at DEER level, which will include standardized measures for bird protection. The procedure for random discoveries (cultural values) Adoption of a Protocol on random discoveries in order to identify and effectively manage any discoveries with cultural value that occurred during the implementation of the projects. This At the level of each branch, sound level meters Bird Mortality Resulting from Interaction with are available, and during the year 2023, the noise measurement program was planned and implemented. Records of these noise Electrical Installations,’ based on alerts from SCADA systems and field inspections to identify carcasses. According to the provisions of Annex At the design stage DEER adopts technical measurements are documented in the ‘Noise Level 1 of the instruction, the ‘Bird Mortality Monitoring solutions taking into account the visual impact of Monitoring Register,’ which is maintained at the Register Resulting from Interaction with Electrical its future distribution installations (replacement of branch level.. Installations’ was developed at the level of each 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 140 141 protocol should define the internal communication/ resolution in their legal framework in accordance escalation chain, the notification of relevant with the legal requirements (ANRE). The complaints institutions with regard to discovered objects/sites, registered directly with DEER will be recognized the information of the personnel involved in the and resolved in accordance with the regulations projects on the possibility of such discoveries and in force (ANRE) (between 15 days and 30 days to the way of surrounding the area in order to protect respond, depending on the nature of the complaint/ against destruction or alteration of the discoveries, complaint). where necessary. The protocol will be aligned with the rules for the application of Law 50/1991 on the authorization of construction works. The mechanism for monitoring complaints is defined according to the regulations in force and available on DEER website. Records of complaints The accidental Discovery Protocol is part of all DEER and complaints are kept and submitted to ANRE contracts as a separate section/clause. regulator upon request or during the performed Update Stakeholder Engagement Policy (SEP) Updating the engagement methods used in controls. Community Guide to Security accordance with the policy in order to align with Develop a guide that contains relevant information what is actually done and developing the section on about the process of electricity distribution. The complaints and integrity warnings. guide addresses with priority the local communities In the context of specific legislation transposing EU unbundling directives, DEER is working toward finalizing its own stakeholder engagement policy involving all relevant departments. The policy will be published on the company’s website after obtaining all necessary corporate approvals. Stakeholder Engagement for the 2021-2023 CAPEX Plan Development of a stakeholder engagement plan dedicated to the CAPEX Program 2021 – 2023 to ensure that all the necessary involvement/ consultation activities are carried out during the implementation of the following projects included in the CAPEX Program financed by the EBRD. DEER has a stakeholder engagement plan, and the Investment Plan section will be presented on DEER website. A unitary mechanism for monitoring complaints/ complaints Development and implementation of a unitary it system at DEER level of registration, analysis, served by DEER activity and presents details regarding: DEER’s emergency procedure for the safe erection of the fallen LEA poles; the activities of involvement of the interested parties and the mechanism for submitting complaints/complaints; Determination of the levels of electromagnetic fields in transformer and LEA stations and its impact on health; risk related to theft of electricity, etc. Consideration will also be given to the implementation of other mechanisms to raise awareness of the local community about the safety in the use of electricity energy (through the European Commission’s “Energy saving” program (“Economie la energie”), for example. Ensuring reporting in line with the provisions of the EU Directive on non-financial reporting and including in the Sustainability Report relevant information on the climate impact produced in accordance with the Green and Social Taxonomy adopted since 2022. The Electrica Group publishes its annual sustainability report in accordance with the provisions of the EU Directive on non-financial reporting. 4.10 Internal audit activity report for 2023 The Internal Audit Squad is responsible for the implementation degree of the audit conducting risk-based audit missions at Group recommendations related to the issued reports; • 5. At the request of Management Board three ad-hoc missions were carried out in a mixed team ELSA-EFSA, missions accomplished at EFSA level; • 6. Based on the integrity warning analysis procedure, 13 warnings were received through the „whistleblower” system. Out of the total number of warnings received in 2023, 10 warnings have been assessed, and 3 of those received towards the end of the year are still under analysis, with only one of them undergoing analysis at the Internal Audit Squad ELSA level. The audit reports are agreed by executive management and further submitted to the Audit and Risk Committee of ELSA, as well as to the Board of Directors. Following the conclusion of the audit engagements and after agreeing the audit recommendations with the responsible persons, the Internal Audit Squad works together with the audited structures in order to draw up the action plans aimed to reduce or eliminate the identified risks. companies’ level. The Internal Audit Squad performs its activity based on an annual audit plan, which is endorsed by the Audit and Risk Committee, and subsequently approved by the Board of Directors. The 2023 Audit Plan included assurance and operational missions, as well as ad-hoc audit missions started after their validation by the Audit and Risk Committee. The Audit Plan is aligned with the risk register at Group level and prioritizes the main risks identified for the major business areas. During 2023, assurance audit missions were carried out, as well as various ad-hoc missions on the most important business activities. The audit missions were performed on major projects or events within the Group, but also on procurement activity, activity of the squad Investor Relations and Project Management. The Audit and Risk Committee together with the Board of Directors analyzed the audit reports regarding the findings identified, as well as the action plans established to remedy them. Throughout 2023, the Internal Audit Squad team consisted of one person with management role, one person with a full – time and two persons with part time work (2h/week). Among the most important audit missions carried out in 2023 are: • 1. Evaluation and audit of procurement activity. The audit report contains 4 findings of which 0 with hight impact; • 2. Evaluation and auditing of the activity of the squad Investor Relations. The audit report contains 5 findings of which 0 with hight impact; • 3. Evaluation and auditing of Project Management. The audit report contains 3 findings of which 0 with hight impact; • 4. Three “follow-up” missions were carried out, which were aimed to identify and monitor 2023 DIRECTORS’ REPORTCORPORATE GOVERNANCE IN ELSA2023 DIRECTORS’ REPORTELECTRICA S.ACORPORATE GOVERNANCE IN ELSAELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT142 143 5. OPERATING ACTIVITY OF ELECTRICA IN 2023 144 145 5.1 Operating segments The operations of each reportable segment are summarized below. Table 14. Operating segments Segments Operations Electricity and gas supply 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 (include DEER and activity performed by SERV within distribution segment) Electricity generation Production of electricity from renewable sources (photovoltaic panels) External electricity network services Repairs, maintenance, and other services for electricity networks owned by other distributors (includes Electrica SERV SA activity without the one mentioned above for the distribution segment) Headquarters Includes corporate services at parent level Source: Electrica The figure below shows the areas covered by the Group subsidiaries and the number of customers/users they serve. Figure 29: The geographical coverage of the companies in the Electrica Group in 2023 NETWORK AREA OF TRANSILVANIA NORTH 1.37 mn. users NETWORK AREA OF MUNTENIA NORTH 1.35 mn. users NETWORK AREA OF TRANSILVANIA SOUTH 1.22 mn. users ELECTRICA FURNIZARE (EF) 3.5 mn. consumption places Source: Electrica Note: The figure refers to the company’s number of consumption places/users at 31 December 2023 5.1.1 DISTRIBUTION SEGMENT Electrica Group’s distribution segment, starting with on the principle of remunerating in tariffs the 1st of January 2021 refers to the activity of DEER (with justifiable costs recorded by the distribution system the following network areas: Transylvania North, operator, the main source of profit of the distribution Transylvania South and Muntenia North) and SERV. company being the rate of return of capital invested The electricity distribution segment is a regulated in the distribution activity. area of activity, in which operations are conducted The tariffs are adjusted annually, taking into in a geographically limited area in accordance account the operational performance achieved, the with the concession agreement, the nature of the quantities of electricity distributed, the quantities services provided, and the specific obligations and the purchase price of electricity needed are stipulated in the license conditions of the to cover network losses (NL), controllable and concessionaire operator. Thus, the electricity noncontrollable costs, the change in reactive energy distribution subsidiary of Electrica Group is the revenues from forecasted values, the depreciation energy distribution operator in Transylvania North and carrying out expected capitalizable expenses, (Cluj, Maramures, Satu Mare, Salaj, Bihor and the changes in actual gross profit from other Bistrita-Nasaud counties), Transylvania South activities compared to the forecasted one, as well (Brasov, Alba, Sibiu, Mures, Harghita and Covasna as the corrections in previous periods carried out counties) and Muntenia North (Prahova, Buzau, according to the methodology. Dambovita, Braila, Galati and Vrancea counties), operating electrical installation with voltages between 0.4 kV and 110 kV. On 31 December 2023, the Group was in a surplus position, estimated at about RON 150 mn. (representing corrections related to the year 2023), DEER holds the exclusive electricity distribution which will be recovered through the distribution license in these regions of network areas valid until tariffs of the following years. the year 2027, with an extension clause for another 25 years. Within its service for distribution activity, 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 current regulatory period (the fourth regulatory period – RP4) began on 1 January 2019 and it ended on 31 December 2023. ANRE sets the annual level of distribution tariffs in RON per MWh for each distribution company, respectively on each network area in case of a merged DSO and for each voltage The specific distribution tariffs are determined level (high, medium and low). The invoiced tariffs and approved by ANRE based on the “tariff basket are summed up according to the related voltage cap” method as set out in ANRE Order no. 169/18 level (e.g., the medium voltage tariff includes September 2018 regarding the approval of the tariff the high voltage tariff, and the low voltage tariff setting methodology for the electricity distribution includes the high voltage and medium voltage service (applicable in the fourth regulatory period tariff). 2019 - 2023), with subsequent amendments, and respectively GEO no. 1/15 January 2020 and ANRE Order no. 75/6 May 2020 regarding the establishment of RRR applied to the approval of tariffs for the electricity distribution service. ANRE determines the annual regulated revenue required for each year of the regulatory period on the basis of the projections submitted by the distribution operators in accordance with the methodological requirements at the beginning of The regulatory method “tariff basket cap” aims to the regulatory period. avoid significant fluctuations in the tariffs applied to the users for electricity distribution. The model for determining the regulated income is based The year 2024 represents the transition period from the fourth period (RP4) to the fifth regulatory period 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT146 147 (RP5), the target income of the DSO for the year for DEER regional distribution tariffs established on Competitive market 2024 is established according to the Methodological the basis of a single regulated income and a single At the end of 2023, a number of 97 licensed participants had transferred responsibility to PRE Norms approved by ANRE Order no. 79/2023 that NL target. complete the Methodology. In 2024, ANRE approved The electricity distribution tariffs approved by ANRE starting with 1 April 2023 are as follows (RON/MWh): Table 15. The electricity distribution tariffs approved by ANRE starting with 1 April 2023 RON/MWh DEER area Applicable starting with 01 April 2023 ANRE Order no. High Voltage Medium Voltage Low Voltage 31.23 69.44 229.96 29.09 71.38 182.24 28.48 62.32 171.97 In 2023, electricity trading in the gross market was EFSA, of which: carried out on the basis of directly negotiated bilateral contracts, of transactions carried out transparently on the centralized markets administered by OPCOM as well as on the spot markets also administered by OPCOM. The Emergency Ordinances issued by the Government with the aim of implementing measures to protect the end customer in the sense of establishing cap prices as well as the over taxation of revenues from the sale of electricity on the gross market, have generated extremely low liquidity in this market. PRE Electrica - The Party Responsible for Balancing • 14 suppliers representing 14.43% of the total PRE; • 5 distribution operators representing 5.15% of the total PRE; • 78 producers representing 80.42% of the total PRE. The distribution companies of the Electrica Group have delegated their responsibility to PRE EFSA. The Balancing Market, the component of the gross energy market, is a market for which each license holder must either assume balancing responsibility or transfer balancing responsibility to a PRE. By transferring the responsibility to a party responsible for balancing, there is the advantage of aggregating The representation activity in the Balancing Market imbalances, in the sense of reducing costs on the as the Party Responsible for Balancing (PRE) was Balancing Market compared to the situation where 29.20 58.33 198.81 carried out by EFSA. 27/29 March 2023 26.94 60.90 157.27 26.85 55.74 150.17 2.03 2.15 1.63 11.11 31.15 10.48 24.97 6.58 21.80 Starting with 2023, the client portfolio is diversified, being made up of producers (hydro, thermal, wind, photovoltaic, biogas, biomass), suppliers and distribution operators, ensuring the balancing service of over 21% of the total electricity consumption in Romania. 5.1.3 ENERGY SERVICES SEGMENT the producer/supplier/distributor would constitute itself as the Party Responsible for Balancing. MN TN TS MN TN TS MN TN TS The specific tariff, composed of: The main component The component related to additional costs with NL Source: ANRE 5.1.2 SUPPLY SEGMENT The Group’s portfolio also includes the energy installation of photovoltaic panels and reactive services segment (equipment maintenance, repairs energy compensators, smart lighting solutions, and other ancillary services related to the grid), backup power, smart metering. mainly provided to distribution companies outside the Group. SERV’s main objectives for the coming period are: • Expansion of the activity on the service market The Electrica Group operates on electricity supply last resort suppliers and the competitive market. On segment through its subsidiary, EFSA, both on the both markets, electricity can be sold/acquired gross Until 30 November 2020, the segment was outside the ELSA group and consolidation in the regulated electricity market (Supplier of Last Resort) or retail. and in the competitive market, at national level. EFSA detains an electricity supply license that covers the entire territory of Romania, which was extended in 2021 for a period of 10 years. It also holds a license for carrying out the activity of supplying natural gas, valid until 2032. The electricity market is divided into the market of The market for universal service and providers of last resort Currently, EFSA supplies approximately 1.6 mn. clients with 1.8 mn. places of consumption under universal service and last resort. represented by SEM, and after the merger by business lines of new activities simultaneously absorption between SERV and SEM, the segment with reactivation of old activities for which there includes SERV’s energy services business. is accumulated experience; • Adapting the business and staff structure Electrica Serv will multiply its efforts to develop the to make the activity more efficient and market for green energy power generation solutions compensate for the losses incurred in the last - photovoltaic power plants and reactive energy fiscal years; compensators - by strengthening its partnership • Consolidation of the current financial situation with Electrica Furnizare in finding solutions and and reinvestment of resources for the opportunities for customer efficiency through the development of the company in new directions. 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT148 149 5.1.4 ELECTRICITY PRODUCTION For the production segment, the development of Green certificates already purchased projects continued in order to reach the ready to build stage, respectively: Producers of electricity from renewable energy sources (RES) have the right, according to Law no. • Final development on the final process of 220/2008, to receive a certain number of green obtaining all necessary permits to start certificates, depending on the technology used construction for renewable projects; (for example: Hydraulics, wind, solar, geothermal, biomass, wind energy, bioliquids, biogas), for each 5.2 Fixed assets 5.2.1 Tangible assets – summarize key aspects of their location and main characteristics The number of users and volume of installations as of 31 December 2023 at the level of the three distribution regions (North Transylvania area - TN area, South Transylvania area - TS area and North Muntenia area - MN area) and total DEER (Romania Electrical Energy Distribution) are quantified as follows: • Continuing the planning and construction of start-up activities for projects that have MWh produced and delivered in the network and for Table 16. Number of users and volume of installations as of 31 December 2023 a certain period of time, depending on the degree of Stanesti photovoltaic Park has the right to receive, starting with February 2013, for a period of 15 Geographical coverage (fifteen) years, 6 (six) green certificates for each Number of users, of which: reached the ready to build stage during 2023, novelty of the group/power plant. respectively: • Conduct a competitive procedure for the selection of the EPC Contractor, sign the EPC Contract and start the implementation phase for the Vulturu project; • Start the competitive procedure for the selection of the EPC Contractor for the implementation of the Satu Mare 2 project. MWh of electricity produced and delivered in the grid, of which, for the period 1 July 2013 - 31 December 2020, according to Law 23/2014 and Law 184/2018, 2 (two) green certificates were postponed from trading, to be recovered in equal monthly installments starting with 1 January 2021 until 31 In addition to the above-mentioned issues, activities December 2030. are continued on: • Evaluation of opportunities for the acquisition of new RES projects and/or the establishment of partnerships through the acquisition of majority stakes in RES projects (already developed by potential partners); • Project development activities started for: natural gas generation, energy storage in batteries; • Start of planning activities for the operationalisation of the production segment phased both in line with the development and implementation timetable for energy generation and storage projects, as well as the merger process and absorption into ELSA of the subsidiaries EPE, EVE1 and GECI. The green certificates issued by Transelectrica for the production carried out by the Stanesti photovoltaic park, during the validity period of the accreditation decision issued by ANRE, can be traded, according to GEO 24/2017, until 31 March 2032, respectively, after the expiry of the validity period of the accreditation decision (31 January 2028 in the case of Stanesti photovoltaic park). The green certificates can be traded on the OPCOM spot, forward or combined markets. The selling price must be between the minimum and maximum values established by Law no. 220/2008 for the establishment of the system for the promotion of electricity production from renewable energy sources, republished, with subsequent amendments. Revenues from the sale of green certificates are recognised as profit or loss at the time of their sale on the market. UM km² no. no. no. no. km km km km km km km km km km TN MN TS Total 34,162 28,962 34,072 97,196 1,366,852 1,347,725 1,217,704 3,932,281 34 42 45 121 4,573 4,614 3,152 12,339 1,362,245 1,343,069 1,214,507 3,919,821 53,288 59,767 46,081 159,136 2,191 2,146 3,150 7,487 11,874 12,664 10,530 35,067 39,223 44,958 32,401 116,582 18,377 24,482 17,596 60,455 18,183 12,615 13,458 44,255 37 17 63 117 4,486 3,596 3,791 11,874 13,659 9,001 9,603 32,264 8,052 2,543 3,199 13,793 high voltage (HV – 110 Kv) medium voltage (MV) low voltage (LV) Overhead power lines length, out of which: high voltage (HV – 110 Kv) medium voltage (MV) low voltage (LV) out of which connections Underground power lines length, out of which: high voltage (HV – 110 Kv) medium voltage (MV) low voltage (LV) out of which connections 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT150 151 UM TN MN TS Total Table 17. Degree of attrition of the installations Cumulative power of transformers/ power AT in power stations (HV/MV + MV/MV), out of which: in HV/MV power stations in MV/MV power stations MVA MVA MVA MVA 6,339 8,943 6,892 22,174 High voltage power lines (110 kV) Underground power lines 3,776 5,898 4,167 13,841 Overhead power lines 3,728 5,545 4,161 13,434 Medium voltage power lines Underground power lines 48 353 6 407 Overhead power lines Switching stations/Transformer stations MVA 2,564 3,045 2,725 8,333 Low voltage power lines Underground power lines No. of substations, out of which: HV/MV power stations MV/MV power stations Number of switching stations and transformer stations Source: Electrica pcs pcs pcs pcs 122 93 29 215 127 88 105 101 4 442 321 121 9,527 10,731 9,802 30,060 5.2.2 Tangible assets – summarize key aspects of their attrition Most of the distribution installations currently in the patrimony of the electricity distribution company (detailed by geographical areas) within Electrica Group, about 80% of the total volume, was built in the Source: DEER Overhead power lines Substations Transformers Pole - mounted Concrete enclosure Pad - mounted Underground Concrete base TN 25% 74% 46% 56% 51% 56% 69% 44% 50% 70% 15% 10% MN 45% 64% 62% 57% 67% 63% 73% 48% 65% 76% 95% 8% TS 50% 75% 62% 59% 73% 67% 60% 50% 75% 20% 85% 12% period 1960-1990, in the successive stages of development of the National Energy System. This has led The lands on which the existing electrical distribution networks are located at the entry into force of Law to a wide variety of equipment currently in operation. These represent installations made with Romanian 13/2007 are and remain the public property of the state. technology in the period 1960 - 2000, where there is a high degree of physical and moral wear and tear. It should be noted that the installations put into operation between 1980 - 2000 (approximately 10%) gradually exceed the normal operating time. A relatively small category, representing about 20% of the total installations, is represented by the new installations, put into operation after 2000 and which are made to technical standards that meet the current requirements. Depending on the voltage level, categories of installations, the year of commissioning and the specific operating conditions, the degree of attrition of the installations can be assessed as follows: In general, electric distribution networks are developed on public land of the state (public roads, land of the UAT) and partly on private land (those that serve mainly the user who owns the property) for the location of transformative posts and/or individual bransings. In most cases the location of new distribution networks/installations is made in compliance with the urban regulations of the area. It is intended that the delimitation of the operator/user installations to be carried out at the limit of the private domain, with access from the public road. Maintenance of tangible assets, modernization and development of new assets is carried out on the basis of the annual maintenance plans and annual investment plans approved by ANRE. The annual investment plans are approved both as a total value cap, with a minimum required level, to be achieved, at the value of the annual depreciation, as well as detailed covering every investment goal. The annual maintenance plans are valorically approved by ANRE and must be carried out in the amount of at least 95%. 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 152 153 In 2023, Electrica Group companies realized the following investments, compared to the planned values. Table 19. Investments planned 2023 vs achieved 2023(RON mn.) Electrica Group subsidiary (RON mn.) Planned 2023 Achieved 2023 DEER zone TN DEER zone TS DEER zone MN EFSA ELSA SERV EPE GEC&I SWE Total Source: Electrica 240.0 303.0 282.0 65.2 19.4 10.5 16.3 52.0 94.8 273.6 329.0 345.9 32.4 2.8 2.1 - 1.1 1.5 1,0832.2 988.4 At Electrica Group level, in 2023, the consolidated CAPEX plan was achieved at a rate of 91.2% compared to the plan approved by the Board of Directors of ELSA in April 2023, and for the distribution subsidiary DEER, the average degree of achievement is of 114.9% compared to the approved plan. The synthetic structure of investments achieved (CAPEX) by the distribution subsidiary in 2023 is presented in the table below (for details of the most important investments see Appendix 2). 5.2.3 Investments The investments at Electrica Group level have been prioritized considering especially the distribution company’s assets degree of wear, and with a particular focus on the improvement of the distribution service quality, the safety in operations, as well as the increase in efficiency. The Group will continue to modernize and to develop the smart distribution network by installing smart network infrastructure systems, such as SCADA, SAD, electricity measurement systems etc., in order to improve the energetic and operational efficiency, to improve the network flexibility, the distribution service quality and to ensure the continuity in the electricity supply and the networks’ safety. In the investments program implementation, the Group’s strategy and in particular the following criteria are ensured: • tracking the inclusion of regulated investments in the RAB; • non-regulated investments of the Group must provide an internal rate of return higher than the weighted average cost of capital; • the proposed investment program must follow the Group’s financial strategy of maintaining a solid capital structure. Thus, those categories of capital expenses that contribute to the development of a profitable and sustainable distribution activity, as well as to the creation of the conditions of access to the electricity distribution network for the consumers and electricity producers, in accordance with market requirements, are prioritized, based in particular on: • distribution automation by integrating of the installation in SCADA, SAD, DMS etc.; • modernizing the equipment from the substations and the medium voltage network; • introducing equipment with reduced technological losses, higher operating efficiencies and environmentally friendly; • modernizing of the medium and low voltage distribution network and connections; • expansion of modern systems for measuring electricity consumption and transmitting consumption data. At the same time, the Group is considering investments in the upgrade of IT infrastructure and IT systems, considering both the legal requirements regarding data protection and the positive effect on the quality of the services provided. The following table presents the investment program approved by ANRE for the distribution area within Electrica Group for the period 2019 - 2023 (in 2018 real terms): Table 18. Investment program approved by ANRE for 2019-2023 (RON mn.) Commissioning program approved by ANRE for the period 2019 - 2023 (RON mn.) 2019 2020 2021 2022 2023 Total 190 200 200 590 175 190 190 555 170 170 160 500 160 170 160 490 160 160 165 485 855 890 875 2,620 SDTN SDTS SDMN Total Source: ANRE 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT154 155 Table 20. The synthetic structure of investments achieved by distribution subsidiary in 2023 Figure 30: The structure of CAPEX achievements for distribution operator within the Group, (RON mn.) in 2023 (RON mn.) Category of works (RON mn.) Total Efficiency, out of which: Energy efficiency/NL Operational efficiency Quality of distribution service, out of which: Continuity of supply Energy quality Legal obligations (network extention/reinforcement) Connections (additional to the plan) Other categories, from which Endowments (including auto) Projects and studies Modernization of buildings, premises Total Source: Electrica The main investments of the Electrica Group were focused in 2023 on improving the quality of the distribution service, as well as on increasing the energy and operational efficiency. % 28% 19% 8% 62% 20% 11% 11% 19% 11% 6% 1% 4% Other categories 102 - 11% Connections (additional to the plan) 179 - 19% Legal obligations (network extention/reinforcement) 104 - 11% Energy quality 106 - 11% Energy efficiency/NL 183 - 19% Operational efficiency 80 - 8% Continuity of supply 194 - 20% 262 183 80 583 194 106 104 179 102 57 6 39 948 100% Source: Electrica The approved plan of investments to be commissioned in 2023 for Societatea Distributie Energie Electrica (DEER), the distribution company within Electrica group, was in total amont of RON 764.1 mn., this value also including investments carried forward, for the year 2022 (RON 135.6 mn.). The total value of the investments carried out and commissioned in 2023 by DEER is RON 777.1 mn. representing an average percentage of 102% compared to the total planned value. From the total of RON 777.1 mn. investments carried out and commissioned, RON 559.7 mn. are related to 2023 plan, RON 121.9 mn. are additional works from legal obligations and RON 95.5 mn. represent investments carried forward from 2022 plan. 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT156 157 1,331 1,420 1,519 1,624 1,728 1,851 1,938 2,016 2,098 2,443 Obligations of the distribution license holder: Table 21. PIF plan vs achieved 2023 (RON mn.) DEER (RON mn.) Total 2023 plan Total achieved 2023 Total percentage of achievement % MN area TS area TN area Total DEER Source: Electrica 249.8 278.9 235.3 764.0 257.3 266.7 253.1 777.1 103% 96% 108% 102% As a result of investments made during 2014-2023, the value of the Regulated Assets Base (RAB) of the Group’s distribution operators has progressively changed, with an increasing evolution, and is as follows: Table 22. RAB evolution 2014-2023 (RON mn.) 20146 2015 2016 2017 2018 2019* 2020* 2021* 2022* 2023** RAB (RON mn.) SDTN SDTS SDMN Total Source: Electrica 1,333 1,377 1,388 1,475 1,521 1,679 1,772 1,838 1,889 2,235 1,486 1,543 1,581 1,679 1,769 1,909 2,030 2,094 2,150 2,501 4,150 4,340 4,488 4,779 5,019 5,440 5,739 5,948 6,137 7,179 Considering the significant volume of investments required for the next period, efforts have been intensified to access the non-reimbursable financing schemes: Large Infrastructure Operational Program (POIM), Modernization Fund, National Recovery and Resilience Plan (PNRR). In 2023, DEER developed five projects with an eligible value of RON 231 mn. within the Large Infrastructure Operational Program (POIM) 2014-2020. 30 projects were submitted for financing from the Modernization Fund (FM), total amounting ~ EUR 1.2 bn. (without VAT), of which the eligible amount is ~ EUR 0.9 bn.. At the end of 2023, six of these had financing contracts signed and are ongoing. The projects aim at increasing the reliability and capacity of the distribution network, the quality of the distribution service and energy efficiency, ensuring the safety of electricity supply for existing users as well as ensuring the possibility of connecting future consumers and producers. DEER also submitted within the competitive call of National Recovery and Resilience Plan (PNRR/2022/C6/M ENERGIE/I1), projects for installing photovoltaic systems to cover the own consumption in substations and headquarter, eight of these being in pre-contracting stage at the end of 2023. 6 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. * Modified value as a result of unused FA and exits from RAB between 2019 and 2022 ** The value may change as a result of the final closing of 2023 and the analysis carried out by ANRE. 5.2.4 Aspects of ownership of tangible assets The operation of assets is realized: i) under the concession contract, by which the Concendent (Ministry of Energy) has transmitted to the concessionaire (distribution operator) the right and obligation to operate the activities and service of electricity distribution; ii) based on the distribution license - ANRE Order 73/2014 - regarding the approval of the general conditions associated with the licenses for the provision of the electricity distribution service. During the period of validity of the license, the license holder has the exclusive right to provide the electricity distribution service, under the conditions of the regulations in force, in the area defined under the specific conditions associated with the license, using the electrical distribution network that it holds as owner or with any other legal title, provided under the specific conditions associated with the license, in compliance with the provisions of the concession contract concluded with the contracting authority. In order to ensure the normal functioning of the distribution network that it operates, the license holder has the right to exercise, under the conditions of the Law, the rights provided by the law for the holders of licenses on land and public or private property of other natural or legal persons and on the activities carried out by natural and legal persons in the vicinity of the components of the electrical distribution network, as well as the right of access to public utilities. • The obligation to allow the use of the electrical distribution network; • Ensuring the connection to public interest electricity networks; At the request of any natural or legal person, the license holder is obliged to provide access to the distribution network provided under the specific conditions associated with the license, in order to make a new connection or to modify an existing connection. • Development of the electrical distribution network. The license holder is obliged to carry out planning and development works of the distribution electrical networks, under conditions of technical and economic efficiency, according to the provisions of the law and in compliance with the technical regulations in force. 5.3 Procurement The acquisition activity at the level of ELSA and its subsidiaries is carried out in accordance with the legal provisions in force, as well as its own procedures and regulations as the case may be, aiming to cover the needs of goods, services and works for the smooth running of the Group’s activities. In the case of distribution subsidiary DEER, the sectoral procurement legislation is observed, mainly Law no. 99/2016 on sector acquisitions and GD no. 394/2016 approving the methodological norms for the application of the provisions regarding the award of the sectoral contract/framework agreement of Law no. 99/2016 on sector acquisitions. 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 158 159 In some cases, the acquisitions are carried out and centralized by delegating the coordination of the Regarding the supply segment, although it holds an important position on the electricity supply market, acquisition to a group company, with the primary objective of reducing costs, optimizing the acquisition EFSA faces strengthening competition on the market it operates on. and ensuring a unitary policy within the Group. Among the purchases made centrally, we mention D&O insurance services, the purchase of services to determine the carbon footprint of the Electrica Group for the year 2022 and the purchase of Communications Services, voice and data, fixed and mobile. The figures below show the market shares of Electrica Group for the supply activity on 30 November 2023 (based on supplied volumes): Figure 32: Total market shares, 2023 Figure 33: Competitive Market, 2023 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 25.9% in 2023, while the contribution of the supply segment was 74.2%. Others 33.94% The Group’s distribution operators (one operator from 1 January 2021) 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 2022 ANRE report for performance indicators’ monitoring. Engie România 4.07% CEZ Vânzare 5.17% Hidroelectrica 13.14% E.ON Energie România 9.11% Figure 31: Market share of distribution segment in 2022 Source: ANRE monthly report (November 2023) Electrica Furnizare 16.61% PPC2 17.96% Others 40.48% Electrica Furnizare 10.25% PPC2 17.66% E.ON Energie România 6.62% CEZ Vânzare ; 4.46% Engie România 4.85% Hidroelectrica 15.68% Source: ANRE report (November 2023) Notes: *”Others” segement includes suppliers with individual market share under 4% **PPC includes PPC ENERGIE and PPC ENERGIE MUNTENIA DEER TN, 13.32% DEER TS, 12.69% DEER MN 13.69% Others, 60.30% Figure 34: Volume of electricity supplied on Figure 35: Evolution of consumer numbers the retail market (TWh) (ths.) 9.2 9.3 9.4 4.9 5.1 3.8 8.6 0.9 2.4 4.4 4.2 5.6 5.4 7.8 1.5 2.2 4.2 2019 2020 2021 2022 2023 Competitive Un iversal Service Last Resort Supplier 3,553 3,583 3,510 3,498 36 3,495 26 1,953 1,817 1,746 3,284 3,269 1,556 1,645 1,724 269 2019 314 2020 2021 2022 2023 Competitive Un iversal Service Last Resort Supplier Source: ANRE Report for performance indicators’ monitoring 2022 Source: Electrica Source: Electrica 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT160 161 Figure 36: Consumers structure with split on Figure 37: Consumers structure with split on • 14 suppliers representing 14.43% of the total PRE; electricity volumes supplied in 2023 revenues in 2023 • 5 distribution operators representing 5.15% of the total PRE and • 78 producers representing 80.41% of the total PRE. NON-HOUSEHOLD - LAST RESORT SUPPLIER 19.00% NON-HOUSEHOLD - LAST RESORT SUPPLIER 26.31% Figure 38: PRE Electrica Furnizare Members HOUSEHOLD - LAST RESORT SUPPLIER 0.03% HOUSEHOLD - LAST RESORT SUPPLIER 0.04% HOUSEHOLD - UNIVERSAL SERVICE HOUSEHOLD - COMPETITIVE MARKET NON-HOUSEHOLD - COMPETITIVE MARKET 27.74% 27.72% HOUSEHOLD - UNIVERSAL SERVICE 16.75% HOUSEHOLD - COMPETITIVE MARKET 25.05% 25.51% NON-HOUSEHOLD - COMPETITIVE MARKET 31.84% 15% 5% 80% Source: Electrica Source: Electrica Major client exposure Source: Electrica Suppliers Distributors Producers EFSA does not have a significant exposure to a certain industrial sector that could have major influence In 2023, more than 300 bilateral contracts, exchanges with OPCOM respectively, were notified to on company’s activity. The position of market leader gives the essential advantage of having a very Transelectrica (OTS). large portfolio of customers and thus the effect of risk dispersion is obtained and therefore the risk of its concentration does not emerge. This advantage was confirmed during the pandemic, proving that the economic sectors affected by the pandemic, although they generate significant exposures, cannot represent sources of systemic risks at the level of company’ s entire portfolio. Another advantage held by EFSA is the possession of a considerable portfolio of household clients. However, certain consumers such as hospitals, ambulance stations, schools, nurseries and kindergartens, air or naval traffic services are considered to be of special importance and cannot be disconnected by the electricity distributor, as they are considered vulnerable consumers. Customers who come under the incidence of insolvency law can benefit from its protection against creditors and therefore possibly also from electricity suppliers for the supply contracts in force at the time of insolvency proceedings opening. PRE Electrica - the Party Responsible for Balancing The activity of representation in the Balancing Market as the Party Responsible for Balancing (Electrica Furnizare PRE) is carried out by Electrica Furnizare SA based on the electricity supply license no. 2279/04.08.2021. PRE EFSA’s client portfolio is diversified, consisting of producers (hydro, thermal, wind, photovoltaic, biogas, biomass), suppliers and distribution operators. At the end of 2023, a number of 97 licensed participants had transferred responsibility to PRE EFSA, of which: Starting from February 2021, settlement in PE is carried out at 15-minute intervals using the single-price methodology according to ANRE Order no. 213/2020. The single price turns into a dual, excess and loss price, in the intervals where the conditions in the Order are met. EFSA’s PRE uses the internal unbalance allocation method in settlement, so that PRE members benefit from cost reduction/increase in revenue for dual price ranges (single price ranges do not allow compensation). During January - November 2023, out of a total number of 32,064 intervals, the dual price was applied to a number of 2,558 intervals (7.98%). As a result of the internal allocation of unbalances, within the PRE EFSA there was an improvement in excess and loss prices by 29.03 RON/MWh compared to the unbalance prices calculated by OPCOM/OTS (a degree of compensation of approximately 49%. 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 162 163 January-November 2023 Excess Average Price OPCOM/OTS Excess Average Price EFSA PRE 353.91 382.940 Ensuring the necessary human resources for the key business areas, staff training and capitalizing on their potential, expertise and skills, in order to increase work productivity and individual performance, are treated as priority topics. As of 31 December 2023, approximately 71% of the Group’s employees represent directly productive staff, and 29% represent indirectly productive staff, including technical, economic, social and administrative Loss Average Price OPCOM/OTS Loss Average Price EFSA PRE personnel. 473.03 444.000 Table 24. Group’s employment by age, 2021 - 2023 Source: Electrica Age category 31 December 2023 31 December 2022 31 December 2021 Electrica Furnizare SA, through the PRE Service, operates on the Intraday Market (IM) starting from February 2021 to buy/sell the electricity volumes not traded on the Day-Ahead Market (DAM). For 2023, the Intraday Market trading results are as follows: • On purchase - the quantity of 39,342.45 MWh at an average price of 618.25 RON/MWh; • For sale - the quantity of 15,166.80 MWh at an average price of 870.44 RON/MWh. Out of a total traded for purchase on IM OPCOM of 128,014.35 MWh (at an average price of 642.92 RON/MWh), EFSA traded a volume of 39,342.45 MWh representing a percentage of about 31%, and of the total traded for sale on IM OPCOM of 152,180.43 MWh (at an average price of 753.17 RON/MWh). EFSA traded a quantity of 15,166.80 MWh representing a percentage of about 10%. under 18 18-30 31-40 41-50 51-60 over 60 years old Total Source: Electrica 0.01% 6.03% 14.27% 33.58% 42.94% 3.17% 100% 0.00% 5.10% 14.70% 34.30% 43.30% 2.60% 100% 0.00% 4.76% 16.06% 34.96% 41.44% 2.85% 100% 5.5 Personnel On 31 December 2023, Electrica Group had 7,945 employees. The table below provides an overview of the employment in the Group, by business segments, at the end of the specified years. Starting with 2020, the figures include also the mandate contracts. Table 23. Number of employees evolution 2019 – 2023 Organizational entity/year 2023* Electricity distribution segment - DEER DEER - MN DEER - TN DEER - TS Services segment - SERV Supply segment – EFSA Services related to other distribution networks – SEM (included in SERV starting December 2020) Headquarters – ELSA Total Source: Electrica 6,589 2,186 2,301 2,102 473 796 - 87 7,945 2022 6,555 2,211 2,262 2,082 469 816 - 71 2021 6,454 2,156 2,259 2,039 612 838 - 2020 7,213 2,184 2,248 2,087 694 793 - 109 120 2019 6,972 2,191 2,233 2,085 463 896 296 128 *According to the modified reporting methodology to INS, the employees number from 31.12.2023 also includes 29 persons who worked based on a mandate agreement. As of 31 December 2023, about 98% of the depending on the workforce need. Group’s employees are Union members and their employment conditions are governed by the Collective Labor Agreement, which will expire on 17 May 2024 for ELSA and between February- June 2024 The improvement and continuous development of the performance management system have contributed to the achievement of Electrica Group for the Group’s subsidiaries. The Electrica Group did key objectives, set for the 2019-2023. not face Union actions in 2023. Both ELSA and its subsidiaries have drawn updated policies, procedures and internal regulations that contain provisions regarding employment, non- discrimination, occupational health and safety, employer and employees’ rights and obligations, the procedure for solving the employees’ complaints, the labor discipline, disciplinary sanctions and deviations, rules regarding the disciplinary procedure, criteria and procedures for the The long-term strategic objectives, set at the end of 2023, outlined a broad framework for business development and viability, covering areas such as renewable energy, service diversification, ESG integration in business concepts, digitization and organizational excellence. In line with these objectives, we focus our efforts on attracting, motivating and retaining a qualified and diverse workforce, necessary to support the initiatives for the next period, in the conditions of an accentuated professional evaluation of employees, succession dynamics of the labor market. and final provisions. The Group is involved in the life of the communities in which it operates, supporting children of families with modest material possibilities to remain in the education system, and at the same time, forming To ensure a work environment where employees feel valued and fulfilled, we focus on continuous professional development, including the acquisition of skills and competences in the “green” and digital fields. In light of the sharp increase in interest in renewable energy, energy efficiency, digitization and ESG principles, we are committed to implementing 7,911 8,013 8,126 8,292 a solid base of young electricians who will be able in the future to join the distribution company, 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 164 165 training and development programs to improve of international best practices was developed These accidents were caused by failure to comply with the instructions on health and safety at work, due to existing skills and attract new talent with the to increase the maturity of the performance the carelessness of workers, one of which was a road accident. There were no fatalities during the reporting necessary expertise. management system within Electrica, which period. To support the fulfilment of these objectives and to attract talented young people, we aim to develop internship programs, participate in innovation projects, establish educational partnerships and launch mentoring programs. These initiatives will contribute not only to attracting and developing talent, but also to promoting a culture of innovation, considers the continuous improvement of the employee evaluation process and the development of the necessary tools to build a solid performance- based system. At the level of the entire Group, the 360-degree evaluation process was carried out, with the aim of developing a culture of feedback within the organization. sustainability and social responsibility. The training programs carried out at the Electrica Group level considered both the constant evolution and the improvement of the Group employees’ skills. The company’s management supports the principle of development through continuous training by involving employees in these programs, thus supporting them to effectively address their professional challenges. We continue to promote diversity and inclusion at every level of the organization and leverage modern technologies to streamline human resource management and encourage innovation and sustainable development. In order to improve the employer’s image in the post-pandemic context, the hybrid („work from home/office”) system was implemented within the Electrica Group, complying with the internally defined processes, regarding workplace safety and human resources activity management. In 2023, it was continued the methodological and conceptual framework for the application HEALTH AND SAFETY AT WORK In 2023, all the companies of the Electrica Group maintained their Integrated Quality-Environment Management System certification, which ensures the compliance of the companies with the legal requirements in the field of occupational health Figure 39: Frequency index 2021-2023 1.55 1.03 1.16 0.75 0.63 0.78 0.66 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2021 2022 2023 Group Nationa l Industry IF* is a statistical indicator recommended by the International Labour Organization (ILO) through the Resolution on Statistics of Occupational Injuries adopted in October 1998 as it correlates the number 0.89 0.8 of accidents with the number of workers, increasing the comparability of organisation’s performance in the field of OSH and eliminating distortions caused by the size of these organisations (number of employees in each organisation). Source: Electrica *the year 2023, the data published by the Ministry of Labor and Social Solidarity is as of September 30, 2023, with the final figures set to be published on April 15, 2024. Starting from the year 2021 and continuing in the following years, IF for Electrica Group’s performance has consistently remained below both the industry average in which it operates and the national average. Aspects regarding the employees health and safety and with those of the SR ISO 45001:2018 referential. There is thus a guarantee that services and processes are provided and carried out in safe conditions for the company’s own staff and contractors, as well as for customers. The Electrica Group’s field of activity does not Prevention, monitoring and occupational health involve a risk of developing diseases caused insurance at Electrica Group level was carried out exclusively by working conditions, so no by doctors with specialisation in occupational occupational diseases have been recorded in 2023 medicine through dedicated service contracts or in previous years. and was followed up at ELSA level for the portfolio companies through reports. The work accidents situation and specific indicators at Electrica Group level In 2023 there were 9 work related accidents within similar situations that need to be implemented by Electrica Group, increasing compared to 2022, but the company. there were no fatal accidents. The complex of complementary causes and of accidents per 1,000 employees is for 2023 at the contributing factors that led to the occurrence of Group level 1.17‰, registering an increase compared each of these accidents was analysed at DEER level to 2022, correlated with the increase in the number by the legally constituted committees, and the of accidents at the Group level. investigation files include the measures to prevent The frequency index (FI), expressed as the number Actions to improve safety and health of employees at work place At the company level, training and control activities The shift in organizational culture and focus on in the field of occupational health and safety (SSM) values such as safety, responsibility, discipline, have been maintained. The conducted controls are and collaboration is a lengthy process that primarily oriented towards ensuring compliance requires sustained human and financial effort. This with current instructions and regulations, the is achieved through the implementation of the violation of which was identified as the main cause following actions: for accidents in 2023. These controls target both internal and contractor personnel, with the long- term objective of achieving ‚zero’ accidents for both groups. • Development and implementation of a dedicated policy and programs to promote responsibility and compliance with occupational 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT166 167 health and safety rules, as well as accident In 2023 the total number of SSM - SU training hours The calculation of emissions for all companies within the Group was conducted with the support of an prevention measures; reached 333,792 compared to 315,295 SSM - SU external specialized consultant, using the GHG Protocol standard. The result indicates that a significant • Consultation of workers from all workplaces in the process of improving the work environment and conditions; • Development of a communication system for events/near misses in the field of SSM through IT&C platforms, ensuring quick and easy communication with the option of anonymity, if desired, for electricians, coupled with encouragement for reporting; training hours in 2022, motivated by the increase in source of GHG emissions continues to be the own technological consumption (OTC) from distribution personnel numbers in 2023 compared to 2022. networks (results can be analyzed in the Sustainability Report for the year 2022, published in June 2023, available on the website www.electrica.ro). At the Group level, a number of 902 OSH controls were carried out, to identify deficiencies that could At the level of the distribution operator DEER within the Group, the PCB (polychlorinated biphenyls) generate risks for the safety and health at work of elimination program from operating electrical installations continued in 2023, complying with the legally employees, followed by immediate treatment of the established national deadline of 2028 for their total elimination (cf. Government Decision no. 1497/2008), non-compliances found. with a considerable reduction observed. In 2023 a total of 2,435 controls in the field of occupational health and safety were conducted Figure 40: PCB capacitors in operation at the end of 2023 compared to 2022 • Provision of entry-level devices and minimal by certified personnel, compared to 1,999 controls voice and data subscriptions for directly in 2022. Following these controls, preventive and productive workers to extend and operationalize corrective measures were established with the aim reporting platforms; of reducing the incidence of workplace accidents and mitigating associated risks. 1489 1089 Despite numerous inspections by Territorial Labor Inspectorates and Emergency Situations Inspectorates during the reference period, none of the Electrica Group companies faced sanctions. • Communication of occupational health and safety objectives to all contractors of Electrica Group companies, as well as monitoring them regarding compliance with legal requirements and specific instructions in the field. Establishment of a working group with representatives from all Group companies to develop the necessary tools for better SSM management in relation to contractors; • Communication to users and communities of the risks associated with unauthorized access to facilities managed by Electrica Group companies, both physical risks (such as electric shock, fall hazards) and legal risks. 2022 2023 Source: Electrica And throughout the year 2023, the principles of selective waste collection and recycling of waste categories generated at the Group level were maintained—whenever the requirements for this are met—or their destruction with authorized operators. This effort aims to contribute to the reduction of environmental pollution and the maintenance of the health of both humans and animals. Figure 41: The quantity of waste (in tons) generated and the treatment methods 3824 4358 Recycle 5.6 Environmental considerations The amount of expenses in the environmental protection domain within the Electrica Group in the year 2023 was RON 17.8 mn.. These expenses continued to be allocated primarily for the prevention and protection against forest fires, waste collection and disposal, protection and conservation of flora and fauna species, land protection, etc. At the Electrica Group level, efforts are made to obtain a detailed understanding of the environmental impact of our activities and to identify optimal solutions for their management. In 2023, monitoring of greenhouse gas emissions (GHG) levels within the companies of the Electrica Group continued, along with their evaluation. 4432 Source: Electrica Coincineration Incineration Storage Temporary storage (own warehouses) 6,7 67,4 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT168 169 Following external certification/surveillance audits conducted by the certification body SRAC Cert throughout the year 2023, the companies within the Electrica Group have maintained the certifications for their own Integrated Quality - Environment - Health and Safety Management Systems. These systems are managed responsibly and efficiently, addressing the environmental aspects specific to the activities carried out, in accordance with legal requirements and the provisions of the reference standard SR EN ISO 14001:2015. 5.7 Research and development activities Electrica Group is promoting technological organizations (companies, universities, etc.), innovation by participating in research and coordinated by Intrasoft International, Belgium, with development projects financed/co-financed a duration of 36 months starting from October 2021. through European funds, which aims to empower the resilience of energy systems with an increasingly complex structure but also more vulnerable to cyber-attacks. In 2023, Electrica, in cooperation with University POLITEHNICA of Bucharest (UPB), created a test laboratory for various countermeasure scenarios of possible cyber attacks on electricity distribution Thus, with the integration of an increasing number networks. of distributed generation sources in the distribution network increases the role of intelligent technologies Electrica achievements: as well in network operation by remote monitoring, control, or operation and even more by network self-healing implementation. • Use case 4 defining - Proactive islanding, that fulfills an efficient detection of cyber threats: addressing and mitigating cyber-attacks in the standards. In this context, Electrica participates in the European project ELECTRON - resilient and self-healed EleCTRical power Nanogrid, financed by the EU, which addresses the need to protect the distribution network against a variety of threats, ranging from cyberattacks, dynamic and evolving Advanced Persistent Threats (APT), and privacy violations, to electricity disturbances. The project aims at delivering a new-generation EPES (Electrical Power and Energy System) platform, capable of empowering the resilience of energy systems through risk assessment, anomaly detection and prevention, failure mitigation and energy restoration, and personnel training. The project is carried out by a consortium of 34 • Analysis of the opportunity to implement the platforms proposed in the project - in the 2nd year of the project; the 2nd year of the project; • Threat level and types of attackers - in the 2nd year of the project; • Testing of ELECTRON components - to ensure increased resistance of the energy system, while ensuring business continuity and critical 5.8 Significant aspects of the impact of subsidies on the capitalization of additional costs related to technological consumption (NL) Distribution segment Having regard to the following aspects concerning the legislative changes in the energy sector concerning the recognition in tariffs of the additional costs of the purchase of electricity to cover their technological consumption compared to the costs included in the regulated tariffs, introduced by: period 1 April 2022 – 31 March 2023, as well as for the modification and completion of some normative acts in the field of energy: for the period 1 January 2023 – 31 March 2025, it is established the mechanism of centralized purchase of electric energy. GEO no. 153/2022 was approved and amended by Law 206/2023. • ANRE order no. 129/2022 for the approval of the methodological norms regarding the recognition in tariffs of the additional costs with the acquisition of electricity to cover the own technological consumption compared to the costs included in the regulated tariffs; Modified by ANRE Order no. 104/2023, which modifies the application period until March 31, 2025, and supplementing the Government Emergency Ordinance no. 27/2022 on the measures applicable to final customers in the electricity and natural gas market during 1 April 2022- 31 March 2023, as well as amending and supplementing some normative acts in the field of energy. GEO no. 119/2022 was approved • Transposing the provisions of the normative acts from the primary and secondary legislation into the financial accounting area by MF order no. 3900/2022 regarding the approval of accounting specifications in the application of the provisions of art. III of Government Emergency Ordinance no. 119/2022 amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to final customers in the electricity and natural gas market between 1 April 2022 - 31 March 2023, as well as for the modification and completion of some normative acts in the field of energy. MF order no. 5378/2023 regarding the approval of some accounting clarifications in application of the provisions of art. III paragraph (1) from GEO no. 119/2022 for the amendment and completion of the GEO no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period 1 April 2022 – 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy, adds the period 1 • GEO. no. 153/2022 for the amendment and January 2024 - 31 March 2025. completion of GEO no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market in the period 1 April 1 2022 – 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy and the amendment Starting with September 2022, it is allowed to capitalize, recognize and report additional costs related to the own technological consumption (NL) of distribution operators. • Vulnerability and impact analysis: estimating the and amended by Law no. 357/2022, application severity of a vulnerability on a certain asset - in period 1 January 2023 – 31 March 2025. operations of the energy community - in the 3rd of the GEO. no. 119/2022 for amending and year of the project. supplementing the GEO. no. 27/2022 regarding the measures applicable to end customers in the electricity and natural gas market in the The growing number of cyber security incidents Romanian Energy Chain - in the 1st year of the according to the changes approved by Law no. in the energy system as well as the need for project; shielding against a variety of threats require 357/2022. novel and holistic solutions that employ cutting • Implementation of Security and confidentiality • Emergency Ordinance no. 119/2022 amending edge technologies to detect and mitigate threats, requirements for users according to the ensuring compliance with the latest cyber security legislation - in the 2nd year of the project; 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 170 171 5.9 Principle of business continuity – substantiation and working hypothesis The going concern principle implies that the entity to the latest ANRE report October 2022 for the supply continues its normal operations without going into segment) as market share on the electricity supply liquidation or significantly reducing its activity. market and having as main shareholder of Electrica This report and the consolidated financial statements published by the Grouo have been prepared on the going concern basis. In making this judgement management considers current trading performance and access to finance resources. The SA the Romanian State, the management believes sufficient financing will be made available to cover any financing requirements arising from market uncertainty and Group will be able to meet its obligations as they fall due. Group has prepared a forecast that includes the Based upon the above projections and other following assumptions: information, given the measures already implemented and the strategies to reduce the • A continuation of the support scheme until risks which may occur due to the instability of the 31 March 2025 according to the applicable economic environment, the Board of Directors has, legislation but with a more stable flow of at the time of approving this report, a reasonable repayments of the reimbursement requests for expectation that the Group has adequate resources subsidies as compared with last year, as the to continue in operational existence for the mechanism has been operationally improved; foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing this • It is planned to renew confirmed financing report and the consolidated financial statements facilities up to RON 4,961.5 mn., including published by the Group. overdraft limits of RON 2,736.4 mn. and RON 2,225.1 mn. limit on long-term loans. • The use of the as yet unconfirmed facilities in the form of overdrafts amounting to RON 574.1 mn. will be drawn down, of which RON 250.0 mn. will be repaid during the forecast period. At the date of issuance of this report the regulatory position may be further amended and there may be further laws enacted which could adversely impact the Groups operating cash flows during the forecast period. Given the current market uncertainties, the Group is closely monitoring the market context and is continuously analysing the opportunities for optimisation of debt and increase of bank overdrafts and long-term loans. In light of the importance of the Group as the supplier and distributed of electricity on the Romanian market, having 39.7 % (according to the latest ANRE report 2022 for the distribution segment) as market share on the electricity distribution and 17.72 % (according 2023 DIRECTORS’ REPORTOPERATING ACTIVITY OF ELECTRICA IN 20232023 DIRECTORS’ REPORTELECTRICA S.AOPERATING ACTIVITY OF ELECTRICA IN 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 172 173 6. ELECTRICA FINANCIAL REPORTING FOR 2023 174 175 The presentation of the Group’s consolidated financial information in chapters 6.1.1, 6.2.1, 6.3.1 and 6.7 is based on the consolidated financial statements that have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) adopted by the European Union (“IFRS-EU”). These consolidated financial statements are presented in RON, which is the functional currency of all companies within the Group. The presentation of the Group’s consolidated financial information in chapters 6.1.2, 6.2.2, 6.3.2 is based on the consolidated financial statements prepared in accordance with OMFP no. 2844/2016. These consolidated financial statements are presented in RON, which is the functional currency of all companies within the Group. 6.1 Consolidated statement of the financial position 6.1.1 Consolidated statement of the financial position – S-IFRS-EU The following table presents the consolidated statement of the financial position. Table 25. Consolidated statement of the financial position 2023-2021 (RON. mn) – S-IFRS-EU 31 December 2023 31 December 2022* Variation 2023/2022 abs 31 December 2021 ASSETS Non-current assets Intangible assets related to concession agreements Goodwill Other intangible assets 6,220.5 5,675.9 544.7 5,514.6 24.7 27.8 12.0 12.9 Property, plant and equipment 595.0 499.4 Investments in associates Other investments Deferred tax assets Other non-current assets Right of use assets 16.6 7.0 32.4 52.0 41.0 18.8 7.0 30.2 2.4 52.2 Total non-current assets 7,017.0 6,310.7 12.7 15.0 95.6 (2.2) - 2.2 49.6 (11.2) 706.3 - 9.0 505.4 25.8 - 83.5 1.7 20.9 6,160.9 Current assets Trade receivables Other receivables 2,540.4 2,466.0 74.4 1,344.6 93.8 127.3 (33.4) 48.6 31 December 2023 31 December 2022* Variation 2023/2022 abs 31 December 2021 Cash and cash equivalents Subsidies receivables Inventories Prepayments Current income tax receivable Assets held for sale 377.2 2,614.5 115.7 12.9 - 0.3 334.9 1,280.8 114.0 13.9 24.0 0.3 42.3 221.8 1,333.7 1.7 (1.0) (24.0) (0.0) - 73.0 5.0 23.8 5.4 Total current assets 5,754.9 4,361.1 1,393.7 1,722.2 Total assets 12,771.9 10,671.8 2,100.1 7,883.1 EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares reserves Pre-paid capital contributions in kind from shareholders Revaluation reserve Legal reserves Retained earnings 3,464.4 3,464.4 103.0 (75.4) 0.0 159.5 449.4 1,259.4 103.0 (75.4) 0.0 92.1 429.6 554.6 - - - 67.4 19.8 704.8 3,464.4 103.0 (75.4) 0.0 102.8 408.4 950.2 Total equity attributable to shareholders of the Company 5,360.4 4,568.5 792.0 4,953.6 Non-controlling interests (0.5) (0.5) 0.0 - Total equity attributable to shareholders of the Company 5,360.0 4,567.9 792.0 4,953.6 Liabilities Non-current liabilities Lease liability – long term Deferred tax liabilities Employee benefits Other liabilities 29.1 121.3 151.4 37.2 34.5 60.3 117.3 72.4 Long-term bank borrowings 794.3 647.2 (5.3) 61.0 34.1 (35.3) 147.2 12.1 161.9 149.2 32.7 118.8 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023176 177 Total non-current liabilities 1,133.3 931.7 201.7 474.7 31 December 2023 31 December 2022* Variation 2023/2022 abs 31 December 2021 Current liabilities Lease liability – short term Bank overdrafts Trade payables Other payables Deferred revenue Employee benefits Provisions Current income tax liability Current portion of long-term bank borrowings 14.1 2,851.2 1,671.5 1,035.1 7.8 120.5 41.2 13.9 523.3 19.2 2,571.0 1,407.1 867.5 24.8 114.2 53.7 1.1 113.5 (5.2) 280.2 264.4 167.6 (16.9) 6.4 (12.5) 12.8 9.4 627.4 891.3 271.3 9.7 101.1 34.9 - 409.8 509.7 Trade receivables Trade receivables mainly include unpaid invoices issued up to the reporting date for the supply and distribution of electricity and services, penalties for late payment and estimated receivables relating to electricity delivered and services rendered up to the year-end but invoiced after the year-end. Trade receivables increased by RON 74.4 mn. in 2023, or 3%, from RON 2,466.0 mn. to RON 2,540.4 mn. at 31 December 2023. Cash and cash equivalents Cash and cash equivalents include cash balances, demand deposits and current accounts with banks. Cash and cash equivalents increased by RON 42.3 mn., or 12.6%, to RON 377.2 mn. from RON 334.9 mn. in 2022. Table 26. Cash and cash equivalents 2023-2021 – S-IFRS-EU (RON mn.) 31 December 2023 31 December 2022 31 December 2021 Total current liabilities 6,278.6 5,172.2 1,106.5 2,454.9 Bank current accounts 223.2 141.7 167.8 Total liabilities 7,411.9 6,103.8 1,308.1 2,929.6 Total equity and liabilities 12,771.9 10,671.8 2,100.1 7,883.1 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 *The amounts for 2022 have been restated, detailed in sub-chapter 6.7 of this report The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 85.7 mn., representing 5% of EBITDA. Fixed assets Call deposits Cash in hand 154.0 193.2 - - 53.9 0.1 Total cash and cash equivalents in the consolidated statement of financial position 377.2 334.9 221.8 Overdrafts used for cash management purposes - - (627.4) Total cash and cash equivalents in the consolidated statement of cash flows 377.2 334.9 (405.6) Fixed assets increased by RON 706.3 mn. in 2023, or 11.2%, from RON 6,310.7 mn. at 31 December 2022 to RON Source: Consolidated financial statements of Electrica Group as of 31 December 2023 7,017.0 mn. at 31 December 2023, this change being mainly the cumulative effect of: • RON 544.7 mn. increase in network investments made by the distribution subsidiaries (the most relevant Share capital and share premium values of investments and start-ups are shown in Appendix 2); The issued share capital in nominal terms consists of 346,443,597 ordinary shares at 31 December 2023 and • increase of RON 95.6 mn. in property, plant and equipment, mainly as a result of the revaluation of property, plant and equipment at fair value on 31 December 2023. Current assets 2022 with a nominal value of RON 10 per share. 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 In 2023, current assets increased by RON 1,393.8 mn. compared to 2022, or 32.0%, from RON 4,361.1 mn. to RON 5,754.9 mn., mainly due to an increase of RON 1,333.8 mn. in subsidies receivable in 2023. contributions in kind from shareholders”. There were no changes in the number of shares in 2023. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 178 179 Table 27. Number of shares 2023 - 2021 – S-IFRS-EU Table 29. Legal reserves 2023-2021 (RON mn.) – S-IFRS-EU Number of ordinary shares 2023 2022 2021 Number of shares at 1 January 346,443,597 346,443,597 346,443,597 Shares issued during the year - - - Number of shares at 31 December 346,443,597 346,443,597 346,443,597 Source: Electrica Revaluation reserves The reconciliation between the opening balance and the closing balance of the revaluation reserve is presented below: Table 28. Revaluation reserves 2023-2021 (RON mn.) – S-IFRS-EU Balance at 1 January 2023 92.1 2022 102.8 2021 116.4 Revaluation surplus of land, land improvements and buildings 85.5 - - Release of revaluation reserve to retained earnings corresponding to depreciation and disposals of property, (4.4) (10.7) (13.5) plant and equipment Deferred tax liability arising on revaluation of land, land improvements and buildings (13.7) - - Balance at 1 January 2021 Set-up of legal reserves Balance at 31 December 2021 Set-up of legal reserves Balance at 31 December 2022 Set-up of legal reserves Balance at 31 December 2023 Legal reserves 392.3 16.1 408.4 21.2 429.6 19.8 449.4 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Non-current liabilities to RON 2,851.2 mn., from RON 2,571.0 mn. at the end of 2022, to cover the financing needs of current Non-current liabilities increased from RON 931.7 mn. activities. as at 31 December 2022 to RON 1,133.3 mn. as at 31 December 2023. Trade payables This evolution is a net effect of the variation of As of 31 December 2023, trade payables increased the main categories of long-term debts, the most by approximately RON 264.4 mn. to RON 1,671.5 significant of which is the increase in the balances mn. from RON 1,407.1 mn. as at 31 December 2022 of long-term loans (CEC Bank and Exim Bank), mainly due to the increase in the balance of energy through drawings made in 2023 mainly to finance suppliers as a result of changes in the energy the Group’s investments. Current liabilities market as well as the increase in the balance of suppliers in relation to capital expenditure. Electricity suppliers are mainly state-owned electricity producers. Balance at 31 December 159.5 92.1 102.8 In 2023, current liabilities increased by RON 1,106.4 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Legal reserves The 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. mn. to RON 6,278.6 mn. from RON 5,172.2 mn. at Other payables the end of 2022, mainly due to the evolution of the categories listed below. Current portion of long-term bank borrowings The current portion of long-term bank loans recorded an increase of 409.8 mn. RON, as a result of the short-term loan with ERSTE Group Bank, Raiffeisen Bank and the maturity of the loan with Vista Bank under 12 months.. As of 31 December 2023, other liabilities increased by approximately RON 167.5 mn. to RON 1,035.1 mn. from RON 867.5 mn. as of 31 December 2022, of which VAT payable increased in 2023 by RON 23.7 mn. and other liabilities increased by RON 122.2 mn.. Other payables mainly include guarantees, sundry creditors, connection fee, habitat tax and cogeneration contributions. Overdrafts The overdrafts increased in 2023 by RON 280.2 mn. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023180 181 31 December 2023 31 December 2022 Variation 2023/2022 abs 31 December 2021 3,464.4 3,464.4 103.0 103.0 (75.4) (75.4) 159.5 92.1 449.4 429.6 0.0 0.0 0.0 67.4 19.8 1,907.0 1,353.9 553.1 3,464.4 103.0 (75.4) 102.8 408.4 950.2 6.1.2 Consolidated statement of the financial position – S-OMFP 2844/2016 The following table presents the consolidated statement of the financial position. EQUITY AND LIABILITIES Table 30. Consolidated statement of the financial position 2023-2021 (RON. mn) – S-OMFP 2844/2016 31 December 2023 31 December 2022 Variation 2023/2022 abs 31 December 2021 ASSETS Non-current assets Intangible assets related to concession agreements 6,220.5 5,675.9 544.7 5,514.6 Intangible assets related to NL capitalization 770.9 951.6 (180.7) Goodwill Other intangible assets 24.7 27.8 12.0 12.9 Property, plant and equipment 595.0 499.4 Investments in associates Other investments Deferred tax assets Other non-current assets Right of use assets 16.6 7.0 32.4 52.0 41.0 18.8 7.0 30.2 2.4 52.2 12.7 14.9 95.6 (2.2) - 2.2 49.6 (11.2) - - 9.0 505.4 25.8 - 83.5 1.7 20.9 Total non-current assets 7,787.9 7,262.3 525.7 6,160.9 Equity Share capital Share premium Treasury shares reserves Revaluation reserve Legal reserves Retained earnings Total equity attributable to shareholders of the Company Liabilities Non-current liabilities Lease liability – long term Deferred tax liabilities Employee benefits Other liabilities Subsidies receivables 2,614.5 1,280.8 1,333.7 Current assets Trade receivables Other receivables Cash and cash equivalents Inventories Prepayments Current income tax receivable Assets held for sale Total current assets 2,540.4 2,466.0 74.4 1,344.6 Long-term bank borrowings 794.3 647.2 Total non-current liabilities 1,256.7 1,083.9 93.8 377.2 127.3 334.9 (33.5) 42.3 115.7 12.9 - 0.3 114.0 13.9 24.0 0.3 1.7 (1.0) (24.0) (0.0) 48.6 221.8 - 73.0 5.0 23.8 5.4 5,754.9 4,361.1 1,393.7 1,722.2 Current liabilities Lease liability – short term 14.1 19.2 (5.1) Bank overdrafts Trade payables Other payables Deferred revenue Employee benefits Provisions 2,851.2 2,571.0 1,671.5 1,035.1 7.8 120.5 41.2 1,407.1 867.5 24.8 114.2 53.7 280.2 264.4 167.6 (17.0) 6.3 (12.5) Total assets 13,542.8 11,623.3 1,919.5 7,883.1 29.1 244.7 151.4 37.2 34.5 212.6 117.3 72.4 (5.4) 32.1 34.1 (35.2) 147.1 172.8 12.1 161.9 149.2 32.7 118.8 474.7 9.4 627.4 891.3 271.3 9.7 101.1 34.9 Total equity attributable to shareholders of the Company 6,008.0 5,367.8 640.2 4,953.6 Non-controlling interests (0.5) (0.5) 0.0 - 6,007.5 5,367.2 640.3 4,953.6 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023182 183 31 December 2023 31 December 2022 Variation 2023/2022 abs 31 December 2021 Cash and cash equivalents Cash and cash equivalents include cash balances, demand deposits and current accounts with banks. Cash and cash equivalents increased by RON 42.3 mn., or 12.6%, to RON 377.2 mn. from RON 334.9 mn. in 2022 Current income tax liability 13.9 Current portion of long-term bank borrowings 523.3 1.1 113.5 12.8 - 409.8 509.7 Table 31. Cash and cash equivalents 2023-2021 – S-OMFP 2844/2016 Total current liabilities 6,278.6 5,172.2 1,106.4 2,454.9 (RON mn.) 31 December 2023 31 December 2022 31 December 2021 Total liabilities 7,535.3 6,256.1 1,279.2 2,929.6 Bank current accounts 223.2 141.7 167.8 Total equity and liabilities 13,542.8 11,623.3 1,919.5 7,883.1 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Call deposits Cash in hand 154.0 193.2 0.0 - 53.9 0.1 The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 86.6 mn., representing 5% of EBITDA. Total cash and cash equivalents in the consolidated statement of financial position 377.2 334.9 221.8 Fixed assets Fixed assets increased by RON 525.7 mn. in 2023, or 7%, from RON 7,262.3 mn. at 31 December 2022 to RON 7,787.9 mn. at 31 December 2023, this change being mainly the cumulative effect of: Overdrafts used for cash management purposes - - (627.4) Total cash and cash equivalents in the consolidated statement of cash flows 377.2 334.9 (405.6) • RON 544.7 mn. increase in network investments made by the distribution subsidiaries (the most relevant values of investments and start-ups are shown in Appendix 2); Source: Consolidated financial statements of Electrica Group as of 31 December 2023 • decrease of 180.6 mn. RON in the capitalization of additional costs with NL; Share capital and share premium • increase of RON 95.6 mn. in property, plant and equipment, mainly as a result of the revaluation of property, plant and equipment at fair value on 31 December 2023. The issued share capital in nominal terms consists of 346,443,597 ordinary shares at 31 December 2023 and 2022 with a nominal value of RON 10 per share. Current assets In 2023, current assets increased by RON 1,393.8 mn. compared to 2022, or 32.0%, from RON 4,361.1 mn. to RON 5,754.9 mn., mainly due to an increase of RON 1,333.8 mn. in subsidies receivable in 2023. Trade receivables Trade receivables mainly include unpaid invoices issued up to the reporting date for the supply and distribution of electricity and services, penalties for late payment and estimated receivables relating to electricity delivered and services rendered up to the year-end but invoiced after the year-end. Trade receivables increased by RON 74.4 mn. in 2023, or 3%, from RON 2,466.0 mn. to RON 2,540.4 mn. at 31 December 2023. 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”. There were no changes in the number of shares in 2023. Table 32. Number of shares 2023 - 2021 – S-OMFP 2844/2016 Number of ordinary shares 2023 2022 2021 Number of shares at 1 January 346,443,597 346,443,597 346,443,597 Shares issued during the year - - - Number of shares at 31 December 346,443,597 346,443,597 346,443,597 Source: Electrica 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 184 185 Revaluation reserves Table 34. Legal reserves 2023-2021 (RON mn.) – S-OMFP 2844/2016 The reconciliation between the opening balance and the closing balance of the revaluation reserve is presented below: Table 33. Revaluation reserves 2023-2021 (RON mn.) – S-OMFP 2844/2016 Balance at 1 January 92.1 102.8 2023 2022 2021 116.4 Revaluation surplus of land, land improvements and buildings 85.5 - - Release of revaluation reserve to retained earnings corresponding to depreciation and disposals of property, (4.4) (10.7) (13.5) plant and equipment Deferred tax liability arising on revaluation of land, land improvements and buildings (13.7) - - Balance at 31 December 159.5 92.1 102.8 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Legal reserves The 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. Balance at 1 January 2021 Set-up of legal reserves Balance at 31 December 2021 Set-up of legal reserves Balance at 31 December 2022 Set-up of legal reserves Balance at 31 December 2023 Legal reserves 392.3 16.1 408.4 21.2 429.6 19.8 449.4 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Non-current liabilities Overdrafts Non-current liabilities increased from RON 1,083.9 The overdrafts increased in 2023 by RON 280.2 mn. mn. as at 31 December 2022 to RON 1,256.7 mn. as at to RON 2,851.2 mn., from RON 2,571.0 mn. at the end 31 December 2023. of 2022, to cover the financing needs of current This evolution is a net effect of the variation of the main categories of long-term debts, the most Trade payables activities. significant of which is the increase in the balances of long-term loans (CEC Bank and Exim Bank), through drawings made in 2023 mainly to finance the Group’s investments. Current liabilities In 2023, current liabilities increased by RON 1,106.4 mn. to RON 6,278.6 mn. from RON 5,172.2 mn. at As of 31 December 2023, trade payables increased by approximately RON 264.4 mn. to RON 1,671.5 mn. from RON 1,407.1 mn. as at 31 December 2022 mainly due to the increase in the balance of energy suppliers as a result of changes in the energy market as well as the increase in the balance of suppliers in relation to capital expenditure. Electricity suppliers are mainly state-owned the end of 2022, mainly due to the evolution of the electricity producers. categories listed below. Other payables Current portion of long-term bank borrowings The current portion of long-term bank loans recorded an increase of 409.8 mn. RON, as a result of the short-term loan with ERSTE Group Bank, Raiffeisen Bank and the maturity of the loan with Vista Bank under 12 months. As of 31 December 2023, other liabilities increased by approximately RON 167.5 mn. to RON 1,035.1 mn. from RON 867.5 mn. as of 31 December 2022, of which VAT payable increased in 2023 by RON 23.7 mn. and other liabilities increased by RON 122.2 mn.. Other payables mainly include guarantees, sundry creditors, connection fee, habitat tax and cogeneration contributions. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023186 187 6.2 Consolidated statement of profit or loss 6.2.1 Consolidated statement of profit or loss – S-IFRS-EU The following table presents the consolidated statement of profit or loss of Electrica Group for 2023, 2022 and 2021. Table 35. Consolidated statement of profit or loss (RON mn.) – S-IFRS-EU Key financial indicators for 2023 and their evolution compared to 2022: • Revenues: RON 9,816.6 mn., down RON 193.3 mn., or 1.9%; • EBITDA: positive RON 1,714.1 mn., up RON 1,340.5 mn. or 358.8%; • EBIT: positive RON 1,191.8 mn., up RON 1,314.4 mn.; • EBT: positive RON 897,9 mn., up RON 1,185.6 mn.; • Net result: net profit of 772.1 mn. RON, up by 1,012.6 mn. RON. Revenues and other income Revenue Other income 2023 2022* Variation 2023/2022 2021 In 2023, Electrica recorded total revenues (including other operating revenues) of RON 13,315.1 mn., an increase of RON 464.3 mn., or 3.6%, from RON 12,850.9 mn. in 2022; the variation is generated by the evolution 9,816.8 10,009.9 (496.1) 7,178.9 of other operating revenues, which mainly represent subsidies for the supply segment. 3,498.6 2,841.0 657.6 195.8 Revenues Electricity and natural gas purchased (9,058.0) (10,506.8) 1,448.8 (5,694.7) (976.4) (593.5) (382.9) (485.8) As at 31 December 2023, Electrica recorded revenues of RON 9,816.6 mn., a decrease of RON 193.3 mn. compared to 31 December 2022, being the net effect of the following main factors: Construction costs related to concession arrangements Employee benefits (962.1) (823.4) (138.7) (802.7) • RON 926.5 mn. decrease in the supply segment; Repairs, maintenance and materials (95.2) (88.2) (7.0) (102.4) • the increase of RON 725.9 mn. in revenues from the distribution segment. Depreciation and amortization (524.5) (496.3) (28.2) (480.8) Impairment for trade and other receivables, net (75.8) (112.3) 36.5 (70.6) Figure 42: Revenue for 2023 and comparative information (RON mn.) – S-IFRS-EU Other operating expenses (431.4) (353.0) (78.4) (343.1) Operating profit 1,191.8 (122.6) 1,314.4 (605.5) Finance income Finance costs Net finance cost Profit before tax Income tax expense Profit for the year Earnings per share 3.4 9.7 6.3 (297.2) (174.7) (122.5) (293.8) (165.0) (128.8) 2.6 (29.5) (26.9) 897.9 (287.6) 1,185.6 (632.4) (125.8) 47.2 (173.0) 79.5 772.1 (240.5) 1,012.6 (552.9) Basic and diluted earnings per share (RON) 2.27 (0.71) 2.98 (1.63) Source: Electrica Source: Consolidated financial statements of Electrica Group as of 31 December 2023 *The amounts for 2022 have been restated, detailed in sub-chapter 6.7 of this report The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 85.7 mn., representing 5% of EBITDA. 10,010 609 9,817 543 9,401 9,273 7,179 582 6,597 2021 2022 2023 Green C ertificates Revenu es Revenu es excl Green C ertificates 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023188 189 Electricity and natural gas purchased EBITDA and EBITDA margin In 2023, purchased electricity expenditure decreased by RON 1,448.8 mn., or 13.8%, to RON 9,058.0 mn. from RON 10,506.8 mn. in the comparative period. This variation is mainly generated by the significant decrease in the cost of electricity and natural gas purchased for the supply activity and for the NL hedging, as well as the cost of green certificates (re- invoiced cost). Electricity purchase prices fell in 2023 as a result of the implementation of the MACEE centralised purchase mechanism, under which generators are obliged to sell 80% of available energy at a price of 450 RON/MWh, an impact mitigated by the increase in electricity volumes needed to cover grid losses. Table 36. Electricity, natural gas and goods purchased 2023-2021 (RON mn.) – S-IFRS-EU (RON mn.) 2023 2022 Variation 2023/2022 2021 Electricity purchased to cover network losses 1,039.9 1,987.2 (947.3) 1,087.1 Figure 43: EBITDA and EBITDA margin for 2023 and comparative information (RON mn. and %) – S-IFRS-EU 17.5% 1,714 -1.8% (128) 3.7% 374 EBITDA EBITDA Margin Source: Electrica Operating profit Electricity, natural gas and goods and purchased for supply Transmission and system services related to supply activities Green certificates 7,202.1 7,613.1 (411.0) 3,750.0 272.6 297.4 (24.8) 275.9 same period last year, with the EBIT evolution mainly due to the favourable impact of lower purchased The Group Operating profit (EBIT) increased increased by approximately RON 1,314.4 mn., compared to the 543.4 609.1 (65.7) 581.7 electricity and natural gas costs. Figure 44: EBIT and EBIT margin for 2023 and comparative information (RON mn. and %) – Total electricity and natural gas purchased 9,058.0 10,506.8 (1,448.8) 5,694.7 S-IFRS-EU Source: Electrica Construction costs In 2023, the costs for the construction of electricity grids in connection with concession agreements increased by RON 382.9 mn. or 64.5% to RON 976.4 mn. from RON 593.5 mn. recorded in 2022, correlating with the evolution of the investments recognizable in RAB made in 2023, which were at a higher level than in 2022. (606) -8.4% -1.2% (123) 12.1% 1,192 EBIT EBIT Margin Source: Electrica 2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023MESSAGE FROM THE CHAIR OF THE BOARDS OF DIRECTORS2023 ANNUAL REPORT190 Net finance cost Net financial expenses (loss from net financial activity) at group level increased by RON 128.8 mn. in 2023 compared to 2022, as a result of the increase in financial expenses, correlated with the increase in external financing. Profit before tax The Group recorded a gross profit in the amount of RON 897.9 mn. compared to loss of RON 287.6 mn. in 2022 as a result of the factors mentioned above. Income tax expense The tax on income was an expense of RON 125.8 mn. in 2023, generated by the incurred gross profit. Net result for the year As a result of the factors presented above, in 2023 the net result of the exercise materialized in a profit of RON 772.1 mn., having an increase of RON 1,012.6 mn. compared to the loss of RON 240.5 mn. recorded in 2022. Figure 45: Net profit and Net profit margin for 2023 and comparative information (RON mn. and %) – S-IFRS-EU 7.9% -2.4% Net Result Net Result Margin -7.7% Source: Electrica ) . n m N O R ( 3 2 0 2 t n e m g e s n o i t u b i r t s i d r o f U E - S R F I - 6 1 0 2 / 4 4 8 2 P F M O - 4 1 0 2 / 2 0 8 1 P F M O - t l u s e r d e t a u g e r l t e n f o s i s y a n A l : 6 4 e r u g i F 8 6 9 - U E - S R F I - S – 9 1 - 5 4 6 3 , 191 8 3 6 9 9 1 6 8 4 8 3 5 9 1 - 1 1 - 0 2 - 2 2 - 1 4 - 1 9 1 - 4 1 - 2 3 - 0 7 7 6 2 7 5 9 1 4 3 8 2 7 5 - 2 5 2 . 1 - Result 2023 IFRS 9 2 - Profit tax IFRS NL depr. (derecognition) NL Capitalization OMFP 2844 net result Other OMFP 2844 adj. OMFP 2844 adj. profit tax OMFP 2844 adj. deprec. OMFP 1802 result Profit tax OMFP 1802 Financial result Operating result Other costs Monopoly tax Provision adjust. Regulated deprec. 5 1 6 - Accounting deprec. NL Capitalization Regulated result 2023 Regulated amortiz. Controlable cost NL realized Deviation of NL. reg. capit. Total net revenue a c i r t c e E l : e c r u o S f o n o i t a z i t r o m a , L N d e z i l a t i p a c l a n o i t i d d a , g n i t r o p e r U E - S R F I r o f , y l l a n o i t i d d A . 3 2 0 2 n i d e z i l a e r L N f o t n u o m a e h t r o f i d e n m r e t e d , . n m 9 1 N O R s a w s h t i l s e u a v d e z i l a e r n i - t s o c L N e h t f o n o i t a v e d e v i i t a g e n e h t f o n o i t a z i l a t i p a c e h t f o t c e f f e e h t e d u c n l i t o n s e o d , . n m 4 3 8 N O R f o t l u s e r d e t a u g e r l e h T . d e z i n g o c e r e d e r a x a t d e r r e f e d d e t a e r d n a 6 1 0 2 / 4 4 8 2 l P F M O - 4 1 0 2 / 2 0 8 1 P F M O n i d e z i n g o c e r s t e s s a e b g n a t n l i i 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 192 193 6.2.2 Consolidated statement of profit or loss – S-OMFP 2844/2016 The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 86.6 mn., representing 5% of EBITDA. The following table presents the consolidated statement of profit or loss of Electrica Group for 2023, 2022 and 2021. Table 37. Consolidated statement of profit or loss (RON mn.) – S-OMFP 2844/2016 Key financial indicators for 2023 and their evolution compared to 2022: • Revenues: RON 9,816.6 mn., down RON 193.3 mn., or 1.9%; • EBITDA: positive RON 1,732.7 mn., up RON 369.8 mn. or 27.1%; Revenue Other income Capitalised costs of intangible non-current assets 2023 2022 Variation 2023/2022 2021 • EBIT: positive RON 1,011.1 mn., up RON 182.2 mn.; • EBT: positive RON 717.3 mn., up RON 53.4 mn.; 9,816.6 10,009.9 (193.3) 7,178.9 • Net result: net profit of 620.4 mn. RON, up by 61.6 mn. RON. 3,498.6 2,841.0 657.6 195.8 Revenues and other income 18.6 989.3 (970.7) - In 2023, Electrica recorded total revenues (including other operating revenues) of RON 13,315.2 mn., an increase of RON 464.3 mn., or 3.6%, from RON 12,850.9 mn. in 2022; the variation is generated by the evolution Electricity and natural gas purchased (9,058.0) (10,506.8) 1,448.8 (5,694.7) of other operating revenues, which mainly represent subsidies for the supply segment. Construction costs related to concession arrangements Employee benefits (976.4) (593.5) (382.9) (485.8) Revenues (962.1) (823.4) (138.7) (802.7) compared to 31 December 2022, being the net effect of the following main factors: As at 31 December 2023, Electrica recorded revenues of RON 9,816.6 mn., a decrease of RON 193.3 mn. Repairs, maintenance and materials (95.2) (88.2) (7.0) (102.4) • RON 269.5 mn. decrease in the supply segment; Depreciation and amortization (723.7) (534.0) (189.7) (480.8) Reversal of impairment/(Impairment) for trade and other receivables, net (75.8) (112.3) 36.5 (70.6) • the increase of RON 39.6 mn. in revenues from the distribution segment. Other operating expenses (431.4) (353.0) (78.4) (343.1) Figure 47: Revenue for 2023 and comparative information (RON mn.) – S-OMFP 2844/2016 Operating profit 1,011.1 828.9 182.2 (605.5) Gain from bargain purchase of subsidiaries* - - - - 2.6 (29.5) (26.9) - 7,179 582 6,597 10,010 609 9,817 543 9,401 9,273 3.4 9.7 (6.3) (297.2) (174.7) (122.5) (293.8) (165.0) (128.8) - 717.3 (96.9) - 663.9 (105.1) - 53.4 (632.4) 8.2 79.5 620.4 558.8 61.6 (552.9) 2021 2022 2023 Basic and diluted earnings per share (RON) 1.83 1.65 0.18 (1.63) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 *the value is included in EBIT, is separated only for disclosure purposes Source: Electrica Green C ertificates Revenu es Revenu es excl Green C ertificates Finance income Finance costs Net finance cost Profit before tax Income tax expense Profit for the year Earnings per share 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023194 195 Income from the production of intangible assets 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy - in In the distribution segment, it is recognized the capitalization of additional costs with the purchase of electricity as income from the production of intangible assets in the amount of RON 18.6 mn. in 2023, compared to RON 989.3 mn. realized in 2022. The capitalization of the additional cost with the purchase of electricity realized in the period April 1, 2022 to March 31, 2025 in order to cover NL compared to the costs included in the tariffs approved for this period is provided for by GEO 119/2022, for the amendment and completion of GEO no. 27/2022, approved and amended by Law no. 357/16 December 2022, and ANRE Order No. 129/2022 approving the Methodological Rules for the recognition in tariffs of additional costs for the purchase of electricity to cover own technological consumption compared to the costs included in the regulated tariffs published in MO 1019/19.10.2022, as amended and supplemented by ANRE Order No. 104. /2023. Capitalised costs are amortised over a period of 5 years from the date of capitalisation and are reimbursed at 50% of the regulated rate of return (RRR) approved by ANRE, applicable during the period of amortisation of these force since 20 December 2023. Correlation of the period of application of GEO 27/2022: The amounts capitalised under Art. III para. (1) of GEO no. 119/2022 amending and supplementing GEO no. 27/2022 on measures applicable to final customers in the electricity and natural gas market for the period from 1 April 2022 to 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy, with subsequent additions, shall be recorded in the accounts under accounting article 208 “Other intangible assets”/separate item = 721 “Income from the production of intangible assets”, as follows: • (f) as at 31 December 2023, for amounts relating to the period 1 September 2023 to 31 December 2023; • (g) quarterly, on the last day of each quarter, for the corresponding amounts for the period from 1 January 2024 to 31 March 2025. Electricity and natural gas purchased costs. These are recognised as a separate component in the regulated tariffs, referred to as the component In 2023, purchased electricity expenditure decreased by RON 1,448.8 mn., or 13.8%, to RON 9,058.0 mn. from RON related to additional costs with NL. 10,506.8 mn. in the comparative period. In both 2022 and 2023, the difference between the actual energy purchase costs and the ex-ante ANRE prices This variation is mainly generated by the significant decrease in the cost of electricity and natural gas purchased recognised in the distribution tariffs are capitalised as intangible assets. These costs will be recovered in tariffs in for the supply activity and for the NL hedging, as well as the cost of green certificates (re-invoiced cost). 5 years. In 2023 ANRE amended the Methodology for setting tariffs for the electricity distribution service, by ANRE Order mechanism, under which generators are obliged to sell 80% of available energy at a price of 450 RON/MWh, an no. 79/2023 (Order) and defined 2024 as the transition period from the fourth regulatory period (RP4) to the fifth impact mitigated by the increase in electricity volumes needed to cover grid losses. regulatory period (PR5). Thus, for DEER, in 2024 the zonal distribution tariffs established on the basis of a single regulated revenue and single NL targets for the total DEER are maintained. Table 39. Electricity, natural gas and goods purchased 2023-2021 (RON mn.) – Electricity purchase prices fell in 2023 as a result of the implementation of the MACEE centralised purchase Capitalised costs with own technological consumption are recognised for each distribution zone, during 2023 they were 18.6 mn. RON, related to the Muntenia Nord distribution zone, as shown in the table below: Table 38. NL - intangible assets 2023 (RON mn.) – S-OMFP 2844/2016 Network distribution areas Net carrying amount at 31 December 2022 Capitalisation cost with NL Intangible asset 01 Jan-31 Dec 2023 (gross value) Amortisation during 2023 Net carrying amount at 31 December 2023 Muntenia Nord area 374.6 Transilvania Nord area 329.9 Transilvania Sud area 247.0 18.6 - - 78.0 66.0 55.2 Total Source: Electrica 951.6 18.6 199.2 315.2 264.0 191.8 770.9 MF Order No. 5378/2023 approving certain accounting specifications in application of the provisions of Article III para. (1) of GEO no. 119/2022 amending and supplementing GEO no. 27/2022 on measures S-OMFP 2844/2016 (RON mn.) 2023 2022 Variation 2023/2022 2021 Electricity purchased to cover network losses 1,039.9 1,987.2 (947.3) 1,087.1 Electricity, natural gas and goods and purchased for supply Transmission and system services related to supply activities Green certificates 7,202.1 7,613.1 (411.0) 3,750.0 272.6 297.4 (24.8) 275.9 543.4 609.1 (65.7) 581.7 Total electricity and natural gas purchased 9,058.0 10,506.8 (1,448.8) 5,694.7 Source: Electrica Construction costs In 2023, the costs for the construction of electricity grids in connection with concession agreements increased by RON 382.9 mn. or 64.5% to RON 976.4 mn. from RON 593.5 mn. recorded in 2022, correlating with the evolution of the investments recognizable in RAB made in 2023, which were at a higher level than in applicable to end customers in the electricity and natural gas market during the period from 1 April 2022 to 2022. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023196 197 EBITDA and EBITDA margin financing, but also of the reduction in financial income, following the decrease in deposits. Figure 48: EBITDA and EBITDA margin for 2023 and comparative information (RON mn. and %) – Profit before tax 13.6%13.6% 1,363 1,363 17.7%17.7% 1,733 1,733 The Group recorded a gross profit in the amount of RON 717.3 mn. compared to RON 663.9 mn. in 2022 as a result of the factors mentioned above. Income tax expense The tax on income was an expense of RON 96.9 mn. in 2023, generated by the incurred gross profit. Net result for the year As a result of the factors presented above, in 2023 the net result of the exercise materialized in a profit of RON 620.4 mn., having an increase of RON 61.6 mn. compared to the profit of RON 558.8 mn. recorded in the period comparison of the year 2022.. EBITDA EBITDA Margin Figure 50: Net profit and Net profit margin for 2023 and comparative information (RON mn. and %) – S-OMFP 2844/2016 S-OMFP 2844/2016 -1.8%-1.8% (128) (128) Source: Electrica Operating profit 5.6%5.6% 559559 6.3%6.3% 620620 Net Result Net Result Margin (553) (553) -7.7%-7.7% Source: Electrica The Group Operating profit (EBIT) increased increased by approximately RON 182.2 mn., compared to the same period last year, with the EBIT evolution mainly due to the favourable impact of lower purchased electricity and natural gas costs. Figure 49: EBIT and EBIT margin for 2023 and comparative information (RON mn. and %) – S-OMFP 2844/2016 8.3%8.3% 10.3%10.3% 1,011 1,011 EBIT EBIT Margin -8.4%-8.4% Source: Electrica Net finance cost Net financial expenses (loss from net financial activity) at group level increased by RON 128.8 mn. in 2023 compared to 2022, as a result of the increase in financial expenses, correlated with the increase in external 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023198 6 8 4 8 3 5 1 1 - 0 2 - 2 2 - 1 4 - 1 9 1 - 4 1 - 2 3 - OMFP 2844 net result Other OMFP 2844 adj. OMFP 2844 adj. profit tax OMFP 2844 adj. deprec. OMFP 1802 result Profit tax OMFP 1802 Financial result Operating result Other costs Monopoly tax Provision adjust. Regulated deprec. 5 1 6 - Accounting deprec. NL Capitalization Regulated result 2023 2 7 5 - Regulated amortiz. Controlable cost NL realized capit. Deviation of NL. reg. Total net revenue 0 7 7 6 2 7 5 9 1 4 3 8 l s e u a v d e z i l a e r n i - t s o c L N e h t f o n o i t a v e d e v i i t a g e n e h t f o n o i t a z i l a t i p a c e h t f o t c e f f e e h t e d u c n l i t o n s e o d , . n m 4 3 8 N O R f o t l u s e r d e t a u g e r l e h T . 3 2 0 2 n i d e z i l a e r L N f o t n u o m a e h t r o f i d e n m r e t e d , . n m 9 1 N O R s a w s h t i a c i r t c e E l : e c r u o S 199 6.3 Consolidated cash flow statement 6.3.1 Consolidated cash flow statement –S-IFRS-EU The following table presents the consolidated statement of cash flows of Electrica Group for 2023, 2022 and 2021. Table 40. Consolidated cash flow statement (RON mn.) –S-IFRS-EU Cash flows from operating activities Profit for the year Adjustments for: Depreciation Amortization Impairment of property, plant and equipment and intangible assets, net 2023 2022* Variation 2023/2022 2021 772.1 (240.5) 1,012.6 (552.9) 16.4 19.9 (3.5) 21.1 508.1 476.5 31.6 459.7 - - - (3.9) Loss on disposal of property, plant and equipment and intangible assets (0.1) (0.4) 0.3 Evaluation of fixed assets recognized in profit, net (2.1) - (2.1) 2.7 - (Reversal of impairment)/Impairment of trade and other receivables, net 75.8 112.3 (36.5) 70.6 (Reversal of impairment)/Impairment of assets held for sale - - - Change in provisions, net (12.5) 18.8 (31.3) 0.6 15.7 Net finance cost 293.8 165.0 128.8 26.9 Changes in employee benefits obligations - (4.4) 4.4 5.1 Corporate income tax expense 125.8 (47.2) 173.0 (79.5) Changes in: Trade receivables Other receivables Prepayments Inventories Trade payables Other payables 1,777.4 500.1 1,277.3 (33.9) (309.2) (1,286.7) 977.5 (391.4) 5.6 0.9 (13.9) (8.3) (22.9) (8.8) 9.7 (2.2) (1.7) (41.0) 39.3 (2.9) 244.4 494.6 (250.2) 274.8 110.4 570.2 (459.8) 32.5 – ) . n m N O R ( 3 2 0 2 t n e m g e s n o i t u b i r t s i d r o f - 6 1 0 2 / 4 4 8 2 P F M O – 4 1 0 2 / 2 0 8 1 P F M O – t l u s e r d e t a u g e r l t e n f o s i s y a n A l : 1 5 e r u g i F 2 5 2 . 1 - 8 6 9 - 6 1 0 2 / 4 4 8 2 P F M O - S 9 1 - 5 4 6 3 , 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 200 201 Employee benefits Deferred revenue Subsidies receivables 2023 2022* Variation 2023/2022 2021 28.5 (6.5) 35.0 (16.9) 15.1 (32.0) (1,333.7) (1,280.8) (52.9) 3.2 4.0 - 2023 2022* Variation 2023/2022 2021 Net cash from/(used in) financing activities 760.0 1,848.6 (1,088.6) (414.0) Net (decrease)/increase in cash and cash equivalents 42.3 113.1 (70.7) (811.5) Cash and cash equivalents at 1 January 334.9 (405.6) 740.5 406.0 Cash generated from operating activities 505.7 (1,030.0) 1,535.7 (138.9) Overdrafts used for cash management purposes - 627.4 (627.4) - Interest paid Income tax paid (278.5) (149.4) (129.1) (24.1) (59.0) (1.2) (57.8) (31.4) Cash and cash equivalents at 31 December 377.2 334.9 42.3 (405.6) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 *The amounts for 2022 have been restated, detailed in sub-chapter 6.7 of this report The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 85.7 mn., representing 5% of EBITDA. Net cash from operating activities 168.3 (1,180.6) 1,348.9 (194.4) In 2023, the net increase in cash and cash equivalents amounted to RON 42.3 mn. Cash flows from investing activities Payments for purchases of property, plant and equipment (10.4) (8.3) (2.1) (10.5) Payments for network construction related to concession agreements (845.3) (537.8) (307.6) (483.8) Payments for purchase of other intangible assets (21.3) (7.8) (13.5) (6.3) Proceeds from sale of property, plant and equipment Interest received Restricted cash Net cash effect from gain of control over the acquired subsidiary Payment for acquisition of associated Payment for acquisition of subsidiaries 0.2 3.3 - (1.9) (4.1) (6.3) 0.6 2.8 - - (0.0) (4.5) (0.4) 0.5 1.5 1.8 - 320.0 (1.9) - (4.1) (25.8) (1.8) - The net cash generated by the operating activity The financing activity generated a decrease in cash was RON 168.3 mn.. The net profit for the period and cash equivalents of RON 1,088.6 mn. (positive was RON 772.1 mn.; the main adjustments for non- impact due to lower borrowed cash than in 2022), monetary elements of the net profit were: the the main factors being withdrawals from long-term addition of depreciation of tangible and intangible bank loans of RON 742.7 mn., withdrawals from assets in the amount of RON 508.1 mn., the overdrafts in the amount of RON 271.9 mn., but also elimination of the impact of value adjustments for loan repayments of RON 187.7 mn.. Dividends were trade receivables of RON 75.8 mn., the addition of paid to shareholders, amounting to RON 40.1 mn.. the profit tax expense of RON 125.8 mn. and the net financial loss of RON 293.8 mn.. The changes in working capital had a positive effect of RON 505.7 mn.. This impact was generated by the negative impact of changes in subsidies receivable in the amount of RON 1,333.7 mn., trade and other receivables in the amount of RON 303.5 mn. and the positive impact of changes in trade and other payables in the amount of RON 354.8 mn., thus In 2022, the net increase in cash and cash equivalents amounted to RON 113.1 mn. The net cash generated by the operating activity was loss of RON (1,180.6) mn. The net loss of the period was RON 240.5 mn.; main adjustments for the depreciation and amortization of RON 476.5 mn., eliminating the impact of the impairment of trade receivables of RON 112.3 mn. and the net finance cost decreasing the cash flow from operations (FFO) in of RON 165.0 mn.. Net cash used in investing activities (885.9) (554.9) (331.0) (203.2) the amount of RON 1,777.4 mn.. Income tax paid and Cash flows from financing activities Proceeds from long term bank borrowings 742.7 217.6 525.1 234.7 Proceeds from overdrafts 271.9 1,900.4 (1,628.5) - Repayment of long term bank loans (187.7) (92.9) (94.8) (385.9) Payment of lease liabilities (26.8) (24.2) (2.6) (15.2) Dividends paid (40.1) (152.3) 112.2 (247.6) interest paid totalled RON 337.5 mn.. For the investment activity, cash was used in the amount of RON 885.9 mn., the highest values being related to payments for the construction of networks in connection with the concession agreements of RON 845.3 mn., these registering an increase in payments for investments of RON 307.5 mn. compared to the comparative period, and as a Changes in working capital had a negative effect, of RON 1,030.0 mn., the most significant impact being generated by the negative change in trade and other receivables, in the amount of RON 1,272.8 mn., in trade and other payables of RON 1,064.8 mn. (out of which, the change in employee benefits of RON 6.5 mn., having a negative impact) and in subsidies receivables in amount of RON 1,280.8 mn.. Income tax paid and interest paid amounted to RON 150.6 result of a larger investment plan made in 2023 vs. mn.. 2022 in the distribution segment. For the investment activity, the cash used was of 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023RON 554.9 mn., the most significant values being related to the payments for the construction and rehabilitation of RON 537.8 mn., these being increased y-o-y with RON 54.0 mn.. The financing activity generated a decrease in cash and cash equivalents of RON 2,262.6 mn., the main factors being the proceeds from long term bank borrowings of RON 217.6 mn., proceeds from overdrafts of RON 1,900.4 mn., reimbursement of loans of RON 92.9 mn. and the dividends paid to the shareholders, of RON 152.3 mn.. 202 203 6.3.2 Consolidated cash flow statement- S-OMFP 2844/2016 The following table presents the consolidated statement of cash flows of Electrica Group for 2023, 2022 and 2021. Table 41. Consolidated cash flow statement (RON mn.) –S-IFRS-EU Cash flows from operating activities Profit for the year Adjustments for: Depreciation Amortization 2023 2022 Variation 2023/2022 2021 620.4 558.8 61.5 (552.9) 16.4 19.9 (3.5) 21.1 707.3 514.2 193.1 459.7 Capitalised costs of intangible non-current assets (18.6) (989.3) 970.7 - Impairment of property, plant and equipment and intangible assets, net (0.0) (0.0) (0.0) (3.9) Loss on disposal of property, plant and equipment and intangible assets (0.1) (0.4) 0.3 Evaluation of fixed assets recognized in profit, net (2.1) - (2.1) 2.7 - (Reversal of impairment)/Impairment of trade and other receivables, net 75.8 112.3 (36.5) 70.6 (Reversal of impairment)/Impairment of assets held for sale - - - Change in provisions, net (12.5) 18.8 (31.3) 0.6 15.7 Net finance cost 293.8 165.0 128.8 26.9 Changes in employee benefits obligations - (4.4) 4.4 5.1 Corporate income tax expense 96.9 105.1 - (79.5) Changes in: Trade receivables Other receivables Prepayments Inventories Trade payables Other payables Employee benefits 1,777.4 500.1 1,277.3 (33.9) (309.2) (1,286.7) 977.5 (391.4) 5.6 (138.3) 144.0 (22.9) 0.9 (8.8) 9.7 (2.2) (1.7) (41.0) 39.3 (2.9) 244.4 494.6 (250.2) 274.8 110.4 722.4 (612.0) 28.5 (6.5) 35.0 32.5 3.2 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023204 205 Deferred revenue Subsidies receivables 2023 2022 Variation 2023/2022 2021 (16.9) 15.1 (32.0) (1,333.7) (1,280.8) (52.9) 4.0 - Net (decrease)/increase in cash and cash equivalents 42.3 113.1 (70.8) (811.5) Cash and cash equivalents at 1 January 334.9 (405.6) 740.5 406.0 2023 2022 Variation 2023/2022 2021 Cash generated from operating activities 505.7 (1,030.0) 1,535.7 (138.9) Overdrafts used for cash management purposes - 627.4 (627.4) - Interest paid Income tax paid (278.5) (149.4) (129.1) (24.1) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 (59.0) (1.2) (57.8) (31.4) The materiality threshold established internally at the Group level for analysis of main indicators (presented below) is worth RON 86.6 mn., representing 5% of EBITDA. Cash and cash equivalents at 31 December 377.2 334.9 42.3 (405.6) Net cash from operating activities 168.3 (1,180.6) 1,348.9 (194.4) Cash flows from investing activities Payments for purchases of property, plant and equipment (10.4) (8.3) (2.1) (10.5) Payments for network construction related to concession agreements (845.3) (537.8) (307.6) (483.8) Payments for purchase of other intangible assets (21.3) (7.8) (13.5) (6.3) Proceeds from sale of property, plant and equipment Interest received Restricted cash Net cash effect from gain of control over the acquired subsidiary Payment for acquisition of associated Payment for acquisition of subsidiaries 0.2 3.3 - (1.9) (4.1) (6.3) 0.6 2.8 - - (0.0) (4.5) (0.4) 0.5 1.5 1.8 - 320.0 (4.1) (25.8) (1.8) - Net cash used in investing activities (885.9) (554.9) (331.0) (203.2) Cash flows from financing activities Proceeds from overdrafts 271.9 1,900.4 (1,628.5) - Repayment of long term bank loans (187.7) (92.9) (94.8) (385.9) Payment of lease liabilities (26.8) (24.2) (2.6) (15.2) Dividends paid (40.1) (152.3) 112.2 (247.6) Net cash from/(used in) financing activities 760.0 1,848.6 (1,088.6) (414.0) (1.9) - of the profit tax expense of RON 96.9 mn. and the net financial loss of RON 293.8 mn.. In 2023, the net increase in cash and cash result of a larger investment plan made in 2023 vs. equivalents amounted to RON 42.3 mn. 2022 in the distribution segment. The net cash generated by the operating activity The financing activity generated a decrease in cash was RON 168.3 mn.. The net profit for the period and cash equivalents of RON 1,088.6 mn. (positive was RON 620.4 mn.; the main adjustments for impact due to lower borrowed cash than in 2022), non-monetary elements of the net profit were: the main factors being withdrawals from long-term the addition of depreciation of tangible and bank loans of RON 742.7 mn., withdrawals from intangible assets in the amount of RON 723.7 mn., overdrafts in the amount of RON 271.9 mn., but also the elimination of the impact of value adjustments loan repayments of RON 187.7 mn.. Dividends were for trade receivables of RON 75.8 mn., the addition paid to shareholders, amounting to RON 40.1 mn.. The changes in working capital had a positive effect of RON 505.7 mn.. This impact was generated by the negative impact of changes in subsidies receivable in the amount of RON 1,333.7 mn., trade and other receivables in the amount of RON 303.5 mn. and the positive impact of changes in trade and other payables in the amount of RON 383.3 mn., thus decreasing the cash flow from operations (FFO) in interest paid totalled RON 337.5 mn.. In 2022, the net increase in cash and cash equivalents amounted to RON 113.1 mn. The net cash generated by the operating activity was loss of RON (1,180.6) mn. The net profit of the period was RON 558.8 mn.; the main net profit’s adjustments for non-monetary elements were: eliminating the NL additional costs amounting to RON 989.3 mn., adding the depreciation and amortization of RON 534.1 mn., eliminating the impact of the impairment of trade receivables of RON 112.3 mn., adding the income tax of RON 105.1 mn. and the net finance cost of RON 165.0 mn. For the investment activity, cash was used in the amount of RON 885.9 mn., the highest values being related to payments for the construction of networks in connection with the concession agreements of RON 845.3 mn., these registering an increase in payments for investments of RON 307.5 mn. compared to the comparative period, and as a Changes in working capital had a negative effect, of RON 1,030.0 mn., the most significant impact being generated by the negative change in trade and other receivables, in the amount of RON 1,425.1 mn., in trade and other payables of RON 1,210.6 mn. (out of which, the change in employee benefits of RON Proceeds from long term bank borrowings 742.7 217.6 525.1 234.7 the amount of RON 1,777.4 mn.. Income tax paid and 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20236.5 mn., having a negative impact) and in subsidies receivables in amount of RON 1,280.8 mn.. Income tax paid and interest paid amounted to RON 150.6 mn. For the investment activity, the cash used was of RON 554.9 mn., the most significant values being related to the payments for the construction and rehabilitation of RON 537.8 mn., these being increased y-o-y with RON 54.0 mn.. The financing activity generated a decrease in cash and cash equivalents of RON 2,262.6 mn., the main factors being the proceeds from long term bank borrowings of RON 217.6 mn., proceeds from overdrafts of RON 1,900.4 mn., reimbursement of loans of RON 92.9 mn. and the dividends paid to the shareholders, of RON 152.3 mn.. 206 207 6.4 Separate statement of the financial position Financial information selected from company’s separate statement of financial position. Table 42. Separate statement of the financial position (RON mn.) 31 December 2023 31 December 2022 Variation 2023/2022 31 December 2021 ASSETS Non-current assets Property, plant and equipment Intangible assets Goodwill 145.1 1.1 1.4 98.9 0.1 - Investments in subsidiaries 2,309.9 2,298.1 Investments in associates Other investments 16.6 7.0 18.8 7.0 Loans granted to subsidiaries – long term 1,279.3 1,276.3 Right of use assets 4.0 0.3 46.1 1.0 1.4 11.8 (2.2) - 2.9 3.8 100.1 0.1 2,285.2 25.8 - 1,276.3 0.5 Total non-current assets 3,764.5 3,699.6 64.9 3,688.0 Current assets Cash and cash equivalents Trade receivables Other receivables Inventories Prepayments Assets held for sale 19.2 1.7 597.8 - 1.0 0.3 105.6 0.8 501.5 - 1.0 0.3 Loans granted to subsidiaries – short term 89.7 45.0 Total current assets 709.7 654.3 (86.5) (0.9) 96.4 - - - 44.6 55.4 5.8 0.9 584.8 - 0.8 0.3 30.0 622.5 TOTAL ASSETS 4,474.2 4,353.8 120.3 4,310.5 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023208 209 31 December 2023 31 December 2022 Variation 2023/2022 31 December 2021 quarter of the gross profit. The materiality threshold established internally at individual level is worth RON 6.0 mn., representing a 3,464.4 3,464.4 103.1 (75.4) 20.3 231.6 224.1 12.4 103.1 (75.4) 11.8 229.4 224.1 38.9 3.980.5 3,996.4 - 3.3 1.3 4.6 216.8 205.5 207.8 0.8 6.6 51.1 0.3 7.3 0.7 0.2 4.7 36.5 0.2 5.8 1.0 - - - 8.5 2.2 - (26.5) (15.9) (100) 3.2 0.2 216.8 (2.3) 0.6 1.9 14.6 0.1 1.5 (0.3) Crucea Power Park S.R.L. 31.07.2021 30% (0.2) Non-current assets The cost of investment, at the acquisition date, total value of RON 12.5 mn. are detailed below: As of 31 December 2023, compared to 31 December 2022, fixed assets increased by RON 64.9 mn., from RON 3,699.6 mn. to RON 3,764.5 mn.. Acquisition date At the end of 2023, property, plant and equipment increased by RON 46.1 mn. due to the merger by Percentage at the acquisition date Net value at the acquisition date absorption between Electrica SA as the absorbing Percentage of the Group from net (30%) (0.07) company and Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed companies. As a result of the merger and the revaluation at fair value of tangible fixed assets consisting of land and buildings, the Company’s tangible fixed assets increased by RON 44.2 mn., plus the increase in investments in subsidiaries Goodwill Investment cost at acquisition date 12.6 12.5 At 31 December 2023, the Company is 40% owned and is accounted for using the asset method in the separate financial statements in accordance with the Company’s policies. recorded in 2023 amounting to RON 11.8 mn.. Other receivables Investments in associates On 28 July 2021 and 7 December 2021, Electrica SA signed four contracts for the sale - purchase of shares in four project companies, whose main activity is the production of electricity from renewable sources. The sale-purchase contracts The cash-pooling receivables comprise Electrica SA’s receivables as at 31 December 2023 as cash- pool leader in the two cash-pooling systems implemented at Group level. The increase in 2023 is due to the liquidity needs of the subsidiaries placed in cash pooling by the Company. mention that in the first stage, the Group receives Cash, restricted cash and short-term investments 30% of the share capital of the three companies, and in subsequent stages, it will acquire the remaining 70% of the share capital, after certain conditions mentioned in the contracts are met. By 31 December 2023, three of the companies in the project have been acquired in a proportion of at least 60%, therefore they are accounted for as subsidiaries, the other one is presented below. At 31 December 2023, cash and cash equivalents decreased by RON 86.5 mn. to RON 19.2 mn. from RON 105.6 mn. at 31 December 2022.. 3,464.4 103.1 (75.4) 12.4 228.2 71.2 319.6 4,123.5 - 0.1 1.1 1.2 120.5 0.4 4.0 44.0 0.4 12.2 4.2 100 0.0 1.1 101.2 (96.6) EQUITY AND LIABILITIES Share capital Share premium Treasury shares reserve Revaluation reserves Legal reserves Other reserves Retained earnings Total equity Liabilities Non-current liabilities Bank borrowings – long term Lease liability – long term Employee benefits Total non-current liabilities Current liabilities Current portion of long-term bank borrowings Credit lines Lease liability – short term Trade payables Other payables Deferred revenue Employee benefits Provisions Total current liabilities 489.1 256.3 232.8 185.8 Total liabilities 493.7 357.5 136.2 186.9 Total equity and liabilities 4,474.2 4,353.8 120.3 4,310.5 Source: Separate financial statements of ELSA as of 31 December 2023 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 210 211 Table 43. Cash, restricted cash and short-term investments 2023-2021 (RON mn.) Dividends (RON mn.) 31 December 2023 31 December 2022 31 December 2021 The company may distribute dividends from the statutory profit, according to the audited individual financial statements prepared in accordance with Romanian accounting regulations. The dividends distributed by the Company in the years 2023, 2022 and 2021 (from previous years’ profits) Bank current accounts Cash and cash equivalents transferred on merger Call deposits 3.2 15.4 0.6 3.6 - 102.0 Total cash and cash equivalents in the separate statement of financial position and in the separate statement of cash 19.2 105.6 3.0 - 2.7 5.7 flow Source: Separate financial statements of ELSA as of 31 December 2023 As of 31 December 2022, the amount of demand deposits consists mainly of Vista Bank’s overnight deposit in the amount of RON 99.6 mn., related to the long-term credit drawn for the issuance of bank guarantee letters. Table 44. Loans granted to subsidiaries 2023-2021 (RON mn.) (RON mn.) 31 December 2023 31 December 2022 31 December 2021 DEER (long term loan granted) * EFSA EPE NTE GEC&I SWE FOTON 1,276.3 80.0 - 7.2 - 2.5 2.9 1,276.3 - 41.6 2.4 0.4 0.6 - 1,276.3 30.0 - - - - - Total loans granted to subsidiaries 1,369.0 1,321.4 1,306.3 Source: Separate financial statements of ELSA as of 31 December 2023 (*)Starting with 31 December 2020 the three distribution companies merged into one single distribution company named Distributie Energie Electrica Romania S.A. („DEER”) Share Capital were as follows: Table 45. Dividends 2023-2021 (RON mn.) (RON mn.) Dividends distributed 2023 40.0 2022 152.8 2021 247.8 Source: Separate financial statements of ELSA as of 31 December 2023 On 27 April 2023, the General Meeting of Shareholders of ELSA approved the distribution of dividends in the amount of RON 40.0 mn, legal reserves in amount of RON 1.3 mn. and other reserves in amount of RON 17.0 mn. The value of dividends per share distributed to the shareholders of the Company were: RON 0.1178 per share (2022: RON 0.4500 per share). Out of the dividends distributed by the Company of RON 40.0 mn (2022: RON 152.8 mn.) the dividends paid were RON 39.9 mn. (2022: RON 152.4 mn.), the difference representing dividends not claimed by shareholders. Provisions Table 46. 2023 Provisions (RON mn.) (RON mn.) Balance at 1 January 2023 Provisions made Provisions utilized Provisions reversed Balance at 31 December 2023 Source: Separate financial statements of ELSA as of 31 December 2023 2021 1.0 0.0 (0.2) (0.1) 0.7 The issued share capital in nominal terms consists of 346,443,597 ordinary shares as at 31 December 2023 (346,443,597 ordinary shares as of 31 December 2022) with a nominal value of RON 10 per share. Ordinary The provisions in amount of RON 0.7 mn. as at 31 December 2023 (31 December 2022: RON 1.0 mn.) refer shares offer the right to dividends and the right to one vote per share in the company’s shareholder mainly to the benefits granted upon the termination of executive managers’ contracts. meetings, except for the 6,890,593 shares redeemed by the Company in July 2014, for the purpose of prices stabilization. All shares confer equal rights in the company’s net assets, except for own shares. ELSA recognizes changes in share capital only after their approval in the General Shareholders Meeting and their registration in the Trade Register. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023212 213 6.5 Separate statement of profit or loss Financial information selected from the company’s separate statement of profit or loss. Profit/(loss) before financing result Table 47. Separate statement of profit or loss (RON mn.) As at 31 December 2023 the operating result is a loss of RON 49.8 mn., mainly due to a decrease in other operating income and an increase in other operating expenses. Revenues Other income Employee benefits 2023 2022 Variation 2023/2022 2021 0.2 1.2 - 5.2 0.2 (4.0) - 0.8 Net finance income During the financial year ended 31 December 2023, the net financial result increased from RON 65.9 mn. in 2022 to RON 67.9 mn.. (30.3) (30.2) 0.1 (39.2) Financial income in 2023 amounts to RON 97.6 mn. and represents income from interest received on loans Depreciation and amortization (1.4) (1.6) Reversal of impairment of trade and other receivables, net Impairment of property, plant and equipment, net Change in provisions for legal cases and non-compete clauses, net 0.6 0.9 0.3 0.1 0.0 3.2 0.2 0.5 0.9 (2.9) (2.3) 0.1 3.8 1.6 granted to subsidiaries. The net financial result is negatively impacted by the financial expenses recorded in 2023 in the amount of RON 29.7 mn. representing interest expenses on loans. Profit before tax Other operating expenses (21.3) (18.5) (2.7) (20.4) In 2023, profit before tax decreased by RON 6.0 mn. to RON 18.1 mn. from RON 24.0 mn. in 2022. Profit/(loss) before financing result (49.8) (41.8) (8.0) (55.6) Income tax benefit/(expense) Finance income Finance costs 97.6 78.3 19.3 377.7 (29.7) (12.4) (17.3) (0.3) Net profit for the year In 2023, the company recorded an income tax benefit of RON 5.9 mn., mainly due to the merger. Share of results of associates (0.0) - (0.0) - As a result of the above factors, the net profit achieved in 2023 is RON 23.9 mn., slightly lower than in 2022 Net finance income 67.9 65.9 2.0 377.4 (RON 24.3 mn.). Profit before tax Income tax benefit/(expense) 18.1 5.9 24.0 0.3 (6.0) 321.8 5.6 0.0 Profit for the year 23.9 24.3 (0.4) 321.8 Earnings per share 0.07 0.07 0.0 0.95 Source: Separate financial statements of ELSA as of 31 December 2023 The materiality threshold established internally at individual level is worth RON 6.0 mn., representing a quarter of the gross profit. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023214 215 6.6 Separate cash flow statement Financial information selected from the cash flow statement of the company. Table 48. Separate statement of cash flow (RON mn.) Indicator 2023 2022 Variation 2023/2022 2021 Cash flows from investing activities Payments for purchases of property, plant and equipment (1.8) (1.9) 0.1 (4.8) Indicator 2023 2022 Variation 2023/2022 2021 Payments for purchases of intangible assets (1.0) (0.2) Proceeds from the sale of property, plant and equipment - 1.2 (0.8) (1.2) - 0.0 Cash flows from operating activities Cash pooling net position (75.4) 81.3 (156.7) (393.6) Profit for the year Adjustments for: Depreciation Amortization Impairment of property, plant and equipment, net Loss/(Gain) from the disposal of tangible assets Reversal of impairement of assets held for sale 23.9 24.3 (0.4) 321.8 Loans granted to subsidiaries (92.3) (151.0) 58.7 (336.3) 0.9 0.5 0.0 - - 1.0 0.6 (0.1) (0.1) 1.1 1.2 (0.0) 0.0 (3.8) Proceeds from loans given to subsidiaries - 135.9 (135.9) 60.0 Payments for shares in associates (0.0) (0.0) (0.0) (25.8) Payments for acquisition of shares in entities - (7.0) 7.0 - Payments for acquisition of subsidiaries (12.4) (4.4) (7.9) (0.1) - - - - 3.1 0.5 0.1 Restricted cash Interest earned Dividends received - - - 320.0 96.3 72.1 24.2 42.2 - - - 329.5 Reversal of impairment of trade and other receivables, net (0.6) (0.1) (0.5) Net finance income (67.9) (65.9) (2.0) (377.4) Net cash from investing activities (86.6) 126.0 (212.6) (8.9) Changes in employee benefits obligations Changes in provisions, net 0.3 (5.0) (0.3) (3.2) 5.2 2.9 5.1 (1.6) Cash flows from financing activities Income tax expense/(benefit) (5.9) (0.3) (5.6) (0.0) Proceeds from overdrafts (2.3) 87.3 (89.6) - Changes in provisions, net (49.9) (48.5) (1.4) (50.2) Changes in: Trade receivables Other receivables Trade payables Other payables Employee benefits (49.9) (48,5) (1,4) (50,2) (0.0) 0.2 (0.2) (0.4) (12.6) (0.5) (12.1) 3.0 1.6 0.2 1.3 0.4 0.8 0.1 1.1 (2.9) (0.5) 0.3 1.2 (0.3) Dividends paid Loans granted (40.1) (153.2) 113.0 (247.6) 116.8 100.0 16.8 - Payment of lease liabilities (0.5) (0.6) 0.1 (1.0) Net cash used in financing activities 73.8 33.6 40.2 (248.6) Net increase in cash and cash equivalents (101.9) 99.9 (201.7) (308.3) Cash and cash equivalents at 1 January 105.6 (114.8) 220.4 193.5 Cash and cash equivalents transferred on merger 15.4 - 15.4 - - Cash generated/(used in) from operating activities (59.4) (47.5) (11.9) (50.5) and cash equivalents Reclassification of overdrafts previously presented as cash - 120.5 (120.5) Interest paid (29.6) (12.2) (17.4) (0.2) Cash and cash equivalents at 31 December 19.2 105.6 (86.5) (114.8) Net cash from/(used in) operating activities (89.1) (59.7) (29.3) (50.7) Source: Separate financial statements of ELSA as of 31 December 2023 The materiality threshold established internally at individual level is worth RON 6.0 mn., representing a quarter of the gross profit. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023216 217 In 2023, the net decrease in cash and cash from loans received in the amount of RON 116.8 amount of RON 66.5 mn. and the impact of the cash subsidiaries, which closed the financial year 2021 equivalents amounted to RON 86.5 mn. mn. representing the credit facility for working pooling activity, resulting in a reduction of RON 132.2 with a loss. capital and issuance of bank letters with Vista Bank mn. The net cash generated by operating activity contract this year, impact reduced by dividends The financing activity generated an increase in was RON (59.4) mn.. The net profit for the period paid to shareholders in the amount of RON 40.1 mn.. In 2022, the value of loans granted to subsidiaries cash and cash equivalents of RON 33.6 mn., mainly was RON 23.9 mn.; the main adjustments for non- RON (gross dividend value per share decreased was RON 151.0 mn., with RON 185.3 mn. less than the from loans received in the amount of RON 100.0 mn. monetary elements of the net profit were: addition from 0.1178 RON/share for dividends related to 2022 previous period. At the same time, the proceeds representing the credit facility for working capital of depreciation of tangible and intangible fixed to 0.45 RON/share for dividends related to 2021). from loans granted to subsidiaries increased by RON and issuing bank letters with Vista Bank contract assets in the amount of RON 1.4 mn., decrease in the 75.9 mn. compared to the previous period, mainly this year and the amounts collected in overdrafts impact of employee benefits in the amount of RON In 2022, the net increase in cash and cash due to the full reimbursement of the intra-group of RON 87.3 mn., reduced impact of dividends paid 5.2 mn., decrease in the change in provisions of RON equivalents amounted to RON 99.9 mn. contract contracted by EFSA during 2021. to shareholders in the amount of RON 153.2 mn. (the 2.9 mn., increase in the impact of income tax by RON value of the gross dividend for one share decreased 5.6 mn., the impact of value adjustments for trade The net cash generated by the operating activity The value of the interest collected was RON 72.1 mn., from RON 0.73/share for dividends for 2020 to RON receivables was insignificant. It was deducted from was RON (47.5) mn. The net profit of the period as a result of the new loans granted to subsidiaries 0.45/share for dividends for 2021). the net financial result of RON 67.9 mn.. was RON 24.3 mn.; the main adjustments for non- in 2022, the higher value of the uses by subsidiaries monetary elements of net profit were: the addition of in the Cash pooling structure, as well as the increase Changes in working capital had an unfavourable depreciation of tangible and intangible assets in the of the ROBOR rate. impact of RON 9.5 mn., the impact being generated amount of RON 1.6 mn., the decrease of the impact by the positive impact of the change in trade and generated by the employee benefits amounting to Compared to 2021, this year no restricted cash was other payables in the amount of RON 3.1 mn. (of RON 5.0 mn., decrease of the change in provisions recorded and no dividends were collected from which, positive impact of RON 1.3 mn. from the of RON 3.2 mn., the impact of value adjustments change in employee benefits), reduced by the for commercial receivables and the impact of the negative impact of trade and other receivables in income tax were insignificant. It was deducted from the amount of RON 12.6 mn.. the net financial result of RON 65.9 mn. In 2023, interest paid was RON 17.4 mn. higher than Changes in working capital had a favorable effect in 2022, mainly representing the interest related of RON 1.0 mn., the impact being generated by the to the overdraft facility under the cash pooling positive impact of the trade payables and other system. payables in the amount of RON 1.3 mn. (of which, positive impact of RON 0.1 mn. from the change in For the investment activity, cash was used in the employee benefits) diminished by the negative amount of RON 86.6 mn., the highest amounts being impact of trade receivables and other receivables, related to interest received in the amount of RON in the amount of RON 0.3 mn. 96.3 mn., loans granted to affiliated entities in the amount of RON 92.3 mn., and the impact of the net In 2022, the interest paid was RON 12.1 mn. higher cash pooling activity of RON 75.4 mn.. than in 2021, representing mainly the interest related In 2023 the amount of loans granted to subsidiaries system. Increase from RON 0.2 mn. at RON 12.2 mn. was RON 92.3 mn., RON 58.7 mn. less than in the in 2022 was due to the higher value of the uses previous period. compared to the previous period, but also to the to the overdraft facility under the cash pooling increase of the ROBOR rate. The amount of interest received was RON 96.3 mn., as a result of new loans granted to subsidiaries For the investment activity was used cash in the in 2023, the higher amount of utilization by amount of RON 126.0 mn., the highest values being subsidiaries of the cash pooling structure, as well related to the interest collected in the amount of as the increase in the ROBOR rate. RON 72.1 mn., loans granted to affiliated entities The financing activity generated an increase in to loans granted to subsidiaries in the amount of cash and cash equivalents of RON 73.8 mn., mainly RON 136.0 mn. of net receipts from deposits in the in the amount of RON 151.0 mn., receipts related 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023218 219 6.7 Restatements – S-IFRS-EU During 2023, the Group reassessed its previous position with the consolidated financial statements, related to the recognition of financial asset from the amendment of the concession agreements. As of 31 December 2022, the Group recognised a financial asset in the amount of RON 951.6 mn. as a result of such amendment Table 51. Statement of cash flow (RON mn.) – S-IFRS-EU Indicator 31 December 2022 as reported previously 31 December 2022 Reclassifications 31 December 2022 as restated in the balance sheet, representing the difference between the net cost with the purchase of the energy for Cash flows from operating activities Profit 558.8 (799.3) (240.5) Other income from initial recognition of financial assets rising from concession (951.6) 951.6 - agreements amendments Income tax (benefit)/expense 105.1 (152.2) (47.2) Changes in: Other receivables Other payables (138.3) 722.4 152.2 (152.2) 13.9 570.2 Net cash flow used in operating activities (1,030.0) - (1,030.0) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 NL and the NL cost included in the regulatory tariff by ANRE, for the period 1 January – 31 December 2022. An equivalent amount was also recognised in the profit or loss as “Other income”. The following table summarise the impact on the Group’s consolidated financial statements: Table 49. Statement of financial position (RON mn.) – S-IFRS-EU Indicator 31 December 2022 as reported previously 31 December 2022 Reclassifications 31 December 2022 as restated Financial assets related to concession arrangements – non current portion Financial assets related to concession arrangements – current portion Retained earnings Deferred tax liabilities Total assets Total equity Total liabilities 761.2 (761.2) 190.3 (190.3) - - 1,353.9 212.6 11,623.3 5,367.2 6,256.1 (799.3) (152.2) 554.6 60.3 (951.5) 10,671.8 (799.3) 4,567.9 (152.2) 6,103.8 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Table 50. Statement of profit or loss (RON mn.) – S-IFRS-EUU Indicator 31 December 2022 as reported previously 31 December 2022 Reclassifications 31 December 2022 as restated Other income 3,792.5 (951.6) 2,841.0 Income tax benefit/(expense) Profit for the year (105.1) 558.8 152.2 47.2 (799.3) (240.5) Earnings/(Loss) per share Basic and diluted earnings/(loss) per share (RON) 1.65 2.35 (0.71) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023220 221 6.8 Risk management For the Electrica Group, year 2023, from a risk management perspective was one of consolidation of previous year’s initiatives and new projects, initiated on the basis of internal needs or at the request of third parties. both having implications for the manifestation and • Technical risks caused by inadequate network materialization of risks. sizing in relation to energy demand, meaning meaning the impossibility of ensuring network Risk factors can be from the following categories: maintenance and energy supply to customers, which can negatively and significantly affect the • Macroeconomic and energy industry- Group’s business. Thus, as a new project developed and completed Compliance with this new reporting requirements specific risks: Global and regional economic in 2023, we mention obtaining certification for the will underpin the reform of risk assessment. implementation of SR EN ISO 50001:2019 “– “Energy management systems. Requirements and user The challenges of 2023 were multiple from guide” at the ELSA level. An important component the perspective of risk management, in the conditions, respectively the economic context • Strategic risks and ensuring the financing of at national and regional international level that projects within the group can be influenced may negatively influence the Group’s activity. both by internal factors, by keeping a high These factors can be: inflation, recession, rating that maintains an attractive share price of this certification was the alignment of the risk sense that the materialization of risks such as changes in fiscal and monetary policy, tighter and implicitly the attention of investors, but management system with the provisions of the liquidity, regulation, operational (IT systems, or lending, higher interest rates, new or rising also external factors, respectively the difficulty certification standard, meaning to introduce new electricity thefts) they had multiple causes and tariffs, currency fluctuations, raw material price of accessing markets in order to raise capital risks related to the new processes carried out by unpredictable effects. the company in the ELSA Risk Register, in order to implement the standard. From the perspective of the applicable legal provisions in force in conjunction with the approach At the same time, during the annual surveillance imposed by the internal requirements regarding audits regarding the quality management of the credit and counterparty risk management, the integrated management system (SMI) at ELSA Business Partner knowledge Policy has been level, including SR EN ISO 27001 regarding the changed and implemented, thus ensuring the information security management system, from necessary conditions to know the business the perspective of risk management activities, the partners, be they customers or suppliers, in order to company continued to meet the requirements of mitigate possible risks of reputation or credit and the provisions certification standards. counterparty. The acceptance of business partners is made Regarding of strengthening the risk management only by applying the measures of knowledge system at the Group level, the permanent of the client according to the legislation in the collaboration with the entities in the group, in field and the internal procedure on combating terms of risk management, has continued by and preventing money laundering and terrorist the involvement in the resolution of some issues financing. Also, specialized platforms for verifying regarding the management of systemic risks at business partners are used in the realization of the Group level during the meetings of the Committee client knowledge activity. for the Supervision of Risks (CpSR). Also, the monitoring of risks within the Group has continued RISK FACTORS through periodic information regarding the risks’ status and evolution within the Group entities. The Group’s activity, performance, reputation, financial situation and market value of its shares In 2023, the internal project (ESG Project) has can be affected by a number of factors of both continued to be implemented within the Group internal and external nature. These factors can regarding the requirements of the new European lead to the materialization of risks that negatively regulations in terms of sustainability – ESG influence the Group’s activity and performance. (Environmental, Social and Governance). Risk Such factors may particularly influence the risks analysis from the perspective of ESG scenarios as described below that the Group has identified and well as the monitoring of the exposures generated for which it seeks to manage them. by the group through the current activity become extremely important from the perspective of a way Risk factors should be viewed from both inside of making business sustainable and sustainable. and outside, the latter being harder to control but (electricity, natural gas), etc. (availability of capital for financing). • Risks arising from political events, war and/ or other international disputes, international sanctions, natural disasters, industrial accidents, etc. all of which may cause interruptions in the Group’s activities. Such events, as outlined above, may damage or disrupt the international economic context and the global/regional economy and may negatively influence the activity of both the Group and the other counterparties (contractual partners). At the same time, the interruption of the activity due to the above mentioned causes can generate significant expenses and substantial recovery time, which negatively influence the activity and financial results. • Regulatory risks, respectively legislative changes with short time to adapt to new requirements but with significant implications especially the market and counterparty/ credit risk area. Regulatory risks may arise as a consequence of international events (e.g. Russia-Ukraine War) that triggers a series of unpredictable market developments, but also restrictions and sanctions at international level that are also reflected at regional and local level. Also, here can be included the risks of non-compliance with international and local sustainability regulations (ESG) and reporting in this regime, with financial impact, meaning possible difficulties in attracting investments but, also, combined with reputational risk. Also as a factor of strategic risk is perceived the volatility of the stock price as a consequence of the company not meeting the expectations regarding profitability, its growth and dividend granting. Thus, the share price can drop significantly, with an impact on investor confidence and reputational implications. MANAGEMENT OF NON-FINANCIAL RISKS Operational risk management Operational risk is the largest category of non- financial risks to occur across all entities in the group. The most important and common sub- categories of operational risk are those in the it area (including cyber and security), risks related to the execution of processes and/or procedures and/or work tasks, but also risks caused in the relationship with customers and/or business processes and/ or practices. For these identified risks, measures to mitigate these risks are established at the level of each entity of the Group and periodic assessments to monitor and control them permanently. Compliance risk management The compliance risk, which includes the legal risk, respectively of the legislative changes, is manifested at the level of each entity in the Electrica Group. In 2023, due to the new international regulations regarding sustainability, which will also be followed by local regulations, they will bring the legislative 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 222 223 risk into view in the next period, due to the Technical risk management possible exposures of non-compliance with these requirements. The technical risk is manifested at the level of Strategic risk management the appropriate grid size in relation to the energy certain entities of the Group and refers to ensuring Market risk Risk description Impact mitigation measures Strategic risk has implications for the entire implicitly ensuring continuity in the electricity supply. and natural gas prices, benchmark interest rates, the measures taken to mitigate the risks aim group due to changes at the organizational and At the group level there is a permanent concern governance level that took place in 2023 within regarding the exposure to this technical risk and such as equity prices, interest rates or exchange at improving the forecast of own technological rates. All of these can impact the Electrica consumption (NL) and the conclusion of bilateral some entities of the Group, but also regarding the the implementation of measures to mitigate it, the Group’s revenues or the value of its holdings. contracts. demand, ensuring its proper functioning and • Market risk arises as a result of changes in energy • At the level of the distribution activity (DEER), market context and adaptation to its requirements. direct implications being customer satisfaction and The Group’s entities aim to adopt strategies that also the reputation at the group level. ensure adequate market positioning and flexibility that ensure timely recalibration in order to achieve Risks and uncertainties present as of 31 December the proposed objectives. 2023 and issues concerning the main risks and uncertainties that could affect the Group’s business and its liquidity are presented in the table below. Table 52. Risks and uncertainties as of 31 December 2023 Risk description Impact mitigation measures Poly-crisis • The current global context, but also the European • A large part of the mentioned factors have one, indicates that a series of crises caused by already manifested themselves, independently or a series of factors (pandemic, inflation, interest together, in recent years, even on the territory of rate, extreme weather phenomena, earthquakes, Romania. wars, etc.) can become interdependent and extremely viral through the impact which they • The concern of the Electrica SA management is can show in the economic environment. to build the optimal resilience mechanisms for the specific activity in which the company and • Until now, there is no system that allows the its holdings carry out their activity. Among the integrated management of all scenarios that can measures taken: the transition to an integrated be taken into consideration for analysis. group (including the production of renewables in the portfolio) and the testing of unfavorable development scenarios through analyzes of specific risk scenarios. • At Group level, market risk can manifest itself • Market risk management policies, procedures at the distribution level (DEER) through price and tools are implemented at the supply activity increases in the market, i.e. volatility in the price level to manage and control exposures in the of purchased energy (with financial impact), electricity and gas markets. These measures termination of contracts by suppliers and relate to: increasing the effectiveness of bottlenecks in supply chains. At the level of the consumption forecasting by profiling hourly supply activity (EFSA) it is manifested by the sales forecast with both consumption forecast risk of lack of energy sales offers on the forward and real consumption as accurately as possible, markets (volume risk) resulting in higher prices calculation formulas and algorithms, which on these markets as well as the appearance in state the effective way of adjustment of each the portfolio of excess exposures (excess long input data for determining the consumption positions / deficit short positions) at hourly, daily forecast, applying hedging strategy, identifying and weekly, band, peak and off-peak levels, in a market trend in Pricing, monitoring sources of fluctuating bullish / bearish trend. information on the evolution of prices in the region for the products of interest. • Electrica SA started the process and successfully completed, in Q3, the certification for the implementation of ISO 50001 Energy Management Systems for improving service delivery and resource efficiency. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023224 225 Risk description Impact mitigation measures Risk description Impact mitigation measures Credit and counterparty risk Liquidity risk • The management monitors and examines the • The Company’s ability to continue its activities • For the supply activity (EFSA) cash-flow analysis, • Credit risk represents the risk of financial losses when a counterparty/client does not meet its contractual obligations to pay invoices when they are due. • In the supply business, counterparty risk arises when a counterparty fails to meet its obligations in accordance with the agreed terms. This risk leads to the materialization of other new risks, i.e. replacement risk or price risk. • In the distribution activity (DEER), the counterparty risk manifests itself in the possible non-fulfilment by the contracting party of the contractual conditions of payment or delivery of services and/or delivery of goods, works (including maintenance). current exposure, credit limits and counterparty ratings, established provisions. • The measures taken by the subsidiaries to mitigate this risk are adapted to the risks identified regarding counterparties. • Thus, for supply, the aim is to mitigate this risk by diversifying energy sources, reducing the level of contracted quantities per contract, limiting exposure by entering multiple contracts, reducing trading limits with counterparties with which EFSA has EFET contracts and which have a low rating from a risk management perspective, questioning partners on the credit limits granted. • For distribution, the measures that DEER is pursuing relate to the inclusion in contracts (energy, construction) of clauses covering specific activities, insurance/reinsurance by type of contract, prevention of entering contracts with unsound suppliers, efficient and transparent internal communication on incidents and their reporting. • The current market context implies a significant pressure on the ability of counterparties in the energy market to ensure delivery on time or to pay related compensations. Liquidity risk • Liquidity risk represents the risk that Electrica will • Electrica carefully monitors, through the treasury not be able to meet its financial obligations when structures, the impact and effects on the they are due. companies’ activity and financial results and has adequate resources to continue its operational activity. • Also, the Group depends on receipts from the Ministry of Energy and the National Agency for Payments and Social Inspection, as such any action depends on the above entities, being unable to take concrete actions and measures. is dependent on the ability of its subsidiaries to projections and forecasts are performed continue their activities. In particular, regarding (implementation of SAP Cash Management and government subsidy collection, the supply Liquidity Planner modules). subsidiary has material uncollected amounts from the compensation and capping scheme in • At the distribution level (DEER), frequent and force, for which there is no certainty as to when careful monitoring of debts, payment of they will be collected, which may also affect obligations within due dates, limitation of the activity of DEER (the Group’s distribution payments before due date and analyses on subsidiary) and ELSA. attracting external financing resources and priority collection of overdue receivables. • The subsidiaries’ ability to continue operations is dependent on the successful completion of new loan agreements and the receipt of subsidies for the supply subsidiary. Conformity (Legal and regulatory) risk • The energy and natural gas markets are • Electrica SA makes efforts to optimize operational regulated by local and European legislation. efficiency in accordance with current and future • These regulations may be modified or interpreted regulations. differently by the local authorities and may affect • The impact of these regulations is close to the the operational profit margins of Electrica SA maximum range used in the evaluation with holdings. immediate consequences in profitability at the • This risk is also supported by the legislative group level. history of recent years, which contains a series • At Group level, each subsidiary is therefore of laws that significantly changed energy and pursuing a series of measures to mitigate the natural gas prices, capping elements, etc. negative effects of these risks generated by legislative changes. Thus, the impact of the • At Group level, compliance risk, which includes expected regulatory changes is assessed, and, the two components (legal and regulatory), if necessary, an agile adjustment of the strategy has been identified as the risk of unpredictable is made and optimal actions are identified to and immediately applicable primary and/or eliminate/minimise the negative impact. secondary legislation. From this also derives the risk that changes in the regulatory environment will affect the strategy, operations and financial results of the subsidiaries and therefore ELSA, defining new directions and new compliance requirements that Group companies will have to comply with. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023226 227 Risk description Impact mitigation measures Table 53. Credit risk and expected credit losses for trade receivables as of 31 December 2023 Operational risk (RON mn.) 31 December 2023 • Electrica may record direct or indirect losses • The company has implemented an operational resulting from a wide range of factors associated monitoring system, documented by policies and with processes, service providers, technology procedures, which ensures the escalation and and infrastructure, internal governance and remediation of potential operational problems. from external factors, such as regulatory or legal requirements and generally accepted standards • In order to implement the best practices in the regarding the best practices in the field. field, SE Electrica S.A. SE has certification and • Violation or failure of security and information Technology, Security Techniques, Information technology systems may entail the risk of Security Management Systems. The extension of financial loss, interruption of operations or the certification to the level of the other entities in damage to the company’s reputation. the Group is further analyzed. implemented the standard ISO 27001: Information Expected credit loss rates (“ECL”) 2% 7% 14% 37% Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Gross value Lifetime ECL Net trade Credit receivables impaired 2,229.3 (35.3) 2,194.0 255.1 (16.9) 238.2 47.6 25.9 (6.7) (9.6) 41.0 16.3 51.0 No No No No Yes Past due more than 90 days 92% 622.7 (571.7) Source: Electrica FINANCIAL RISK MANAGEMENT The Group is exposed to the following risks resulting Trade receivables from the use of financial instruments: credit risk, liquidity risk and market risk. The Group’s credit risk in respect of receivables was concentrated in the past around state-controlled These risks are further explained and detailed. companies and in the recent years refers to clients Credit risk that are facing financial difficulties in their industries due to specific changes in circumstances in their industry sector. The Group has set up a policy Credit risk is the risk that the Group will register a regarding risk management and it has taken into financial loss if a customer or counterparty to a account the insurance of the trade receivables. Also financial instrument fails to meet its contractual the electricity supply contracts include termination obligations, and arises principally from the Group’s clauses in certain circumstances. receivables from customers, cash and cash equivalents, restricted cash and bank deposits. The Group establishes an allowance for impairment The Group’s exposure to credit risk is mainly losses, calculated based on the expected loss rates. that represents the amount of expected credit influenced by the individual characteristics of each customer. In the past, the Group had a high credit Impairment Total 3,180.6 (640.2) 2,540.5 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Table 54. Credit risk and expected credit losses for trade receivables as of 31 December 2022 (RON mn.) 31 December 2022 Expected credit loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired Neither past due nor impaired Past due 1-30 days 3% 4% 1,951.7 (60.3) 1,891.3 491.0 (19.3) 471.6 Past due 31-60 days 16% 66.4 (10.5) 55.9 Past due 61-90 days 35% 27.3 (9.7) 17.6 No No No No Past due more than 90 days 95% 582.4 (552.9) 29.5 Yes risk mainly from State-owned companies. The following table provides information on the Total 3,118.6 (652.7) 2,466.0 Cash and bank deposits are placed in financial trade receivables as of 31 December 2023, 2022 and Source: Consolidated financial statements of Electrica Group as of 31 December 2022 exposure to credit risk and expected credit losses for institutions that are considered to have to have low 2021. risk of default. The carrying amount of financial assets represents the maximum credit exposure. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 228 229 Table 55. Credit risk and expected credit losses for trade receivables as of 31 December 2021 Table 56. Contractual maturities of financial liabilities (RON mn.) (RON mn.) 31 December 2021 Contractual cash flows Expected credit loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired Financial liabilities (RON mn.) Carrying amount Total less than 1-2 2-5 1 year years years More than 5 years 31 December 2023 Neither past due nor impaired Past due 1-30 days 2% 5% 1,080.1 (16.6) 1,063.5 228.5 (10.6) 217.9 Past due 31-60 days 15% 36.7 (5.3) Past due 61-90 days 38% 15.4 (5.9) 31.4 9.5 No No No No Bank overdrafts 2,851.2 2,851.2 2,851.2 - - - Lease liability 43.2 43.2 14.1 9.9 4.0 15.2 Long term bank borrowings 1,317.6 1,317.6 523.3 258.9 475.9 59.5 Trade payables 1,671.5 1,671.5 1,671.5 - - - Past due more than 90 days 98% 964.7 (942.4) 22.3 Yes Total 5,883.5 5,883.5 5,060.0 268.8 479.9 74.8 Total 2,325.4 (980.8) 1,344.6 Source: Consolidated financial statements of Electrica Group as of 31 December 2021 31 December 2022 Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by transferring cash or another financial asset. The Group’s liquidity management policy is to maintain, as far as possible, sufficient liquidity to meet its obligations when they are due, under both normal and stressed conditions, to avoid unacceptable losses. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows on financial liabilities. The Group also monitors the level of expected cash inflows on trade receivables together with expected cash outflows on trade and other payables. In addition, the Group maintains overdrafts facilities. Exposure to liquidity risk Bank overdrafts 2,571.0 2,571.0 2,571.0 - - - Lease liability 53.7 53.7 19.2 10.8 10.7 13.0 Long term bank borrowings 760.7 760.7 113.5 354.5 200.5 92.2 Trade payables 1,407.1 1,407.1 1,407.1 - - - Total 4,792.5 4,792.5 4,110.9 365.3 211.2 105.2 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Market risk The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include estimated interest payments. Market risk is the risk that changes in market prices – foreign exchange rates and interest rates – will affect the Group’s income or the value of its financial instruments held. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group has exposure to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Group. The functional currency of all entities belonging to the Group is the Romanian Leu (RON). The currency in which these transactions are primarily denominated is RON. Certain liabilities are denominated in foreign currency (EUR). The Group also holds deposits and bank accounts denominated in foreign currency (EUR). The Group’s policy is to use the local currency in its transactions as far as practically 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023230 231 possible. The Group does not use derivative or hedging instruments. Table 59. Sensitivity analysis Exposure to currency risk The summary of quantitative information on the Group’s exposure to currency risk is given below. Table 57. Exposure to currency risk 2023-2021 (RON mn.) 31 December 31 December 31 December 2023 2022 2021 Denominated Denominated Denominated EUR EUR EUR (RON mn.) Effect Profit before tax Strengthening Weakening 31 December 2023 EUR (5% movement) 31 December 2022 EUR (5% movement) (2.1) (1.0) 2.1 1.0 Source: Consolidated financial statements of Electrica Group as of 31 December 2023 Cash and cash equivalents 0.3 0.3 0.8 Exposure to interest rate risk Lease liability (42.2) (21.0) (19.1) The interest rate profile of the Group’s interest-bearing financial instruments is presented below. Net statement of financial position exposure (41.9) (20.7) (18.3) Table 60. Fixed-rate and variable-rate instruments Source: Consolidated financial statements of Electrica Group as of 31 December 2023 The following significant exchange rates have been applied during the year. Table 58. Average rate and year-end spot rate Average rate Year-end spot rate 2023 2022 2023 2022 EUR/RON 4.9465 4.9315 4.9204 4.9474 (RON mn.) 31 December 31 December 31 December 2023 2022 2021 Fixed-rate instruments Financial assets Call deposits Financial liabilities 154.0 193.2 53.9 Sursa: Situatiile financiare consolidate ale Grupului Electrica la 31 December 2023 Long-term bank borrowings (1,068.9) (651.8) (418.9) Sensitivity analysis A reasonably possible strengthening (weakening) of the EUR against RON at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and profit before tax by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. Lease liability Total Variable-rate instruments Financial liabilities Lease liability (32.3) (37.4) (8.3) (947.2) (495.9) (373.3) (10.9) (16.3) (13.3) Long-term bank borrowings (248.7) (109.0) (209.6) Bank overdrafts Total (2,851.2) (2,571.0) (627.4) (3,110.8) (2,696.3) (850.3) Source: Consolidated financial statements of Electrica Group as of 31 December 2023 and 31 December 2022 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 232 233 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. Table 61. Cash flow sensitivity analysis for variable-rate instruments (RON mn.) Profit before tax 50 bp increase 50 bp decrease 31 December 2023 Variable-rate instruments 31 December 2022 Variable-rate instruments Source: Consolidated financial statements of Electrica Group as of 31 December 2023 (15.6) (13.5) 15.6 13.5 6.9 Description of the main features of internal control and risk management systems in relation to the financial reporting process The internal control represents all measures, • the reliability of financial reporting (accuracy, procedures and policies adopted by ELSA completeness and correctness of the management and their implementation by the information); employees, regarding the organizational structure, applied procedures, methods, techniques and instruments, for 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, • ensuring an environment based on identifying, understanding and controlling risks, environment which will contribute to achieving the organizational goals; • efficient and effective business operations and internal and managerial control, compliance control. use of resources; The internal control activity represents a way of resolutions and follow-up. analysis of ELSA activities, of adopting and applying the internal management, also associated with the The achievement of these goals was performed in knowledge activity, which allows the Company’s 2023 as follows: • applying the BoD and executive management management to coordinate the activities within the organization in an efficient manner. In this respect, through the internal control the monitoring and verification is carried out, in • in order to ensure internal compliance with the competition and state aid rules, several training and practical verification sessions were conducted; accordance with the legislation in force and the • for the implementation by DEER of the specific procedures, in compliance with the legal commitments assumed within the investigation framework that regulates the activities carried out of the Competition Council, ELSA provides, in the checked entities, according to the approved according to the concluded contract, control objectives and themes. consultancy services and conducts trainings aimed at increasing the degree of information Through internal control, the Company’s and awareness of the staff regarding the management ascertains the deviations resulting competition policy; from the established objectives, analyzes the causes and orders the corrective or preventive measures • clear definition and responsibilities segregation for each person involved in the organizational that are required. The internal control and the risk management systems have the following main goals: • protecting organizational resources by preventing and detecting waste, negligence, deviations / irregularities, negligence, abuses, fraud etc.; process; segregation of duties regarding the carrying out the 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, update and implementation of regulations, policies, procedures, forms etc; • compliance with the applicable legislation and • unitary updating at group level the Code of the internal regulations; Ethics and Professional Conduct and subsequent 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023 234 235 policies; • 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 elementse:  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, gifts policy, protocol expenses, and 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;  Control activities meant to prevent/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 communicating to employees their responsibilities for controlling and providing information in an adequate and timely manner, so that all employees may be able to fulfil their duties. Internal communication occurs 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;  Monitoring activities – the Audit and Risk Committee together with the Internal Audit Department assess the efficiency and the effective implementation of the internal control system. The Company’s management monitors the functioning of internal controls by means of periodical analyzes; for instance, the execution of the budget, the monitoring of security incidents. Deficiencies in the implementation or functioning of internal controls are documented into the internal control reports, respectively in internal and external audit reports and briefing notes, and they are presented to the management, with the purpose of issuing the corrective actions. 2023 ANNUAL REPORT2023 ANNUAL REPORT2023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 20232023 DIRECTORS’ REPORTELECTRICA FINANCIAL REPORTING FOR 2023236 237 7. STATEMENTS 238 239 Statements Based on the best available information, we confirm that the consolidated financial statements reviewed and audited for the period ended 31 December 2023 prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS-EU”), provides an accurate and real image regarding the Electrica Group’s financial position, the financial performance and the cash flows, as required by the applicable accounting standards, and that this Report, prepared in accordance with art. 63 of the law no. 24/2017 on issuers of financial instruments and market operations and to annex no. 15 to ASF Regulation no. 5/2018 for the period ended 31 December 2023, comprises accurate and real information regarding the Group’s development and performance. Based on the best available information, we confirm that the consolidated financial statements reviewed and audited for the period ended 31 December 2023 prepared in accordance with OMFP 2844/2016 for the approval of the Accounting Regulations in accordance with the International Financial Reporting Standards adopted by the European Union with subsequent changes, provides an accurate and real image regarding the Electrica Group’s financial position, the financial performance and the cash flows, as required by the applicable accounting standards, and that this Report, prepared in accordance with art. 63 of the law no. 24/2017 on issuers of financial instruments and market operations and to annex no. 15 to ASF Regulation no. 5/2018 for the period ended 31 December 2023, comprises accurate and real information regarding the Group’s development and performance. Chair of the Board of Dir ector s , Dumitru CHIRITA Chief Executive Offi cer, Alexandru-Aurelian CHIRITA Chief Fin ancia l Offi ce r, Stefan Alexandru FRANGULEA 2023 DIRECTORS’ REPORTSTATEMENTS2023 DIRECTORS’ REPORTELECTRICA S.ASTATEMENTSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT240 241 Appendix 1 – Litigations A.1 Electrica Group litigations in 2023: A.1.1 Disputes with ANRE Crt. no. Parties/Case file number Subject matter Court Case status 1 2 3 4 5 6 Plaintiff: ELSA; Defendant: ANRE; 361/2/2015 Cancellation of ANRE Order no. 155/2014 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDTN). Bucharest Court of Appeal The Court dismissed the case on merits. Appealable within 15 days from it’s communication. Plaintiff: ELSA; Defendant: ANRE; 2790/1/2023 (former no. 360/2/2015) Cancellation of ANRE Order no. 156/2014 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDTS). High Court of Cassation and Justice The Court dismissed the case on merits. ELSA filed a recourse, definitively dismissed by court on 14.02.2024. Plaintiff: ELSA; DEER Defendant: ANRE; 7614/2/2018 Action for partial annulment of ANRE Order no. 169/2018 regarding the approval of the Tariff Setting Methodology for the Electricity Distribution Service. High Court of Cassation and Justice Case dismissed on merits, a recourse finally dismissed on 16.05.2023. Plaintiff: ELSA; DEER Defendant: ANRE 7591/2/2018 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. Bucharest Court of Appeal Suspended until the final settlement of case no. 541/36/2018 of the Bucharest Court of Appeal. Plaintiff: ELSA, DEER Defendant: ANRE 434/2/2019 Legal 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 DEER (former SDMN). Bucharest Court of Appeal Plaintiff: ELSA, DEER Defendant: ANRE 435/2/2019* Legal 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 energy for DEER former SDTS). High Court of Cassation and Justice In course of settlement. On 9 June 2020, the court rejected the action as unfounded. An appeal was filed, on 26.04.2023 the recourse of DEER and Electrica was admitted. The High Court of Cassation and Justice quashes the judgment of 17.03.2020 and the sentence and sends the case back to the same court. Retrial in course of settlement. Crt. no. Parties/Case file number Subject matter Court Case status 7 8 9 10 11 12 Plaintiff: ELSA, DEER Defendant: ANRE 436/2/2019 Legal 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 energy for DEER former SDTN). Bucharest Court of Appeal In course of settlement. Plaintiff: DEER Defendant: ANRE 184/2/2015 Plaintiff: DEER Defendant: ANRE 309/2/2020 Plaintiff: DEER Defendant: ANRE 305/2/2020 Plaintiff: DEER Defendant: ANRE 371/2/2015* Plaintiff: DEER Defendant: ANRE 208/2/2015 Contentious administrative litigation – Cancellation of ANRE 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 starting with 1st 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. Judicial action on the cancellation of documents issued by regulatory authorities – Order no. 227/2019 regarding the approval of the tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDMN). Bucharest Court of Appeal On 29.04.2022, the Court dismissed the case. The decision is definitive by non appeal by the plaintiff. Bucharest Court of Appeal On 04.10.2023, the Court dismissed the case. Appealable within 15 days from it’s communication. Action for the cancellation of ANRE’s President Order no. 228/2019 regarding the approval of the of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDTN). High Court of Cassation and Justice Case dismissed on merits, an appeal was filed, definitively dismissed on 14.12.2023. Cancellation of the ANRE’s President Order no. 156/2014 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDTS). Cancellation of the ANRE’s President 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 1st 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. Bucharest Court of Appeal Suspended until the settlement of the case file no. 208/2/2015. Bucharest Court of Appeal A reinstatement request was filed. Attached to case no. 184/2/2015. On 29.04.2022, the Court dismissed the case. The decision is definitive by non appeal by the plaintiff. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT242 243 Crt. no. Parties/Case file number Subject matter Court Case status Crt. no. Parties/Case file number Object Court Case status 13 14 15 Plaintiff: DEER Defendant: ANRE 303/2/2020 Plaintiff: DEER Defendant: ANRE 53/2/2022 Cancellation of the ANRE’s President Order no. 229/2019 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER (former SDTS). Bucharest Court of Appeal Suspended on 02.11.2022. Application for reinstatement. On 07.06.2023 - suspend the file. Application for reinstatement was filed. Cancellation of the ANRE’s President Order no. 119/2021 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive energy for DEER. Bucharest Court of Appeal Suspended until the final settlement of case no. 6176/2/2022. Plaintiff: DEER Defendant: ANRE 6176/2/2022 Action for partial annulment of ANRE Order no. 169/2018 regarding the approval of the Tariff Setting Methodology for the Electricity Distribution Service. High Court of Cassation and Justice Case dismissed on merits. A recourse was filed, in filter proceedings. Source: Electrica A.1.2 Fiscal matter disputes Crt. no. Parties/Case file number Object 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. 13739/3 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 - DGAMC 25091/299/2018 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). 1 2 Court Case status Bucharest Tribunal Action admitted on merits. The Decision was appealed, in course of settlement. District 1 Court In course of settlement. Plaintiff: ELSA Defendant: NAFA - DGAMC 3 2444/2/2021 1. Obligation of NAFA to correct the evidence of tax receivables, held according to art. 153 FPC so that it reflects the decisions given by the courts in the disputes between the parties, through decisions that have come into the power of the judicial work, respectively by: a) Decision no. 1078/17.04.2015 issued by the Bucharest Court of Appeal in case no. 5433/2/2013; b) Decision no. 5154/26.06.2017 issued by Bucharest District 1 Court in case no. 51817/299/2016*; c) Decision no. 624/06.03.2015 issued by the Bucharest Court of Appeal in case no. 7614/2/2013; Obligation of NAFA to draw up those acts or administrative correction operations which: - to reflect Electrica’s right to the reimbursement of RON 5,860,080 representing fiscal obligation unlawfully reinstated in the fiscal evidence; - to reflect Electrica’s right to the reimbursement of RON 817,521 which was not object of the reimbursement made by NAFA on 22 September 2020, arising from the annulment of the fiscal decision in case mentioned in item 1 above, let. a); 2. Obligation of NAFA to pay the legal interests related to the period 12.12.2016 – 21.09.2020, calculated in a percentage of 0.02%/ day of delay for the debt amount of RON 18,687,515 reimbursed on 22.09.2020, in total amount of RON 5,161,491.64; 3. Establishing a 15 days term from the decision so that NAFA-DGAMC to settle the fiscal file as indicated above, imposing late penalties of RON 1,000/ day of delay for exceeding this term, due to Electrica by DGAMC. High Court of Cassation and Justice On 07.06.2023, the Court admits in part the case. Orders the defendant to correct the records of the tax claims concerning the plaintiff in order to highlight the plaintiff’s right to a refund of the amount of RON 5,860,080 and the amount of RON 817,521. Orders the defendant to pay to the applicant the amount of RON 5,161,491.64 as interest. Orders the defendant to pay to the plaintiff the amount of RON 49,083.37 in respect of costs. A recourse was filed, in course of settlement. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 244 245 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status Plaintiff: DEER Defendant: NAFA - DGAMC 359/2/2021 (former 1018/2/2016*) 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). Bucharest Court of Appeal - retrial The court of first instance rejected the action as unfounded. The plaintiff filed an appeal, admitted by the court, which quashes the contested decisions and, re-judging, partially admits the action. Partially annuls Decision no.462/23.11.2015 issued by A.N.A.F–DGSC, regarding point 3. Obliges the defendant A.N.A.F–DGSC to settle on the merits the claim regarding the amount of RON 10,091,323. It sends for retrial to the same court the request regarding the other fiscal obligations retained by the fiscal body, amounting to RON 13,886,492. Final (file no. 1018/2/2016*). In retrial, case no. 1018/2/2016* was registered with a new number, 359/2/2021 - in course of settlement. DGAMG-ANAF rejected by Solution Decision no. 154/02.07.2020, the appeal regarding the amount of RON 10,091,323 (Point 3 of Decision no. 462/2015) reason for which an action for annulment was filed on 22.12.2020 (file no. 641/42/2020). Plaintiff: DEER Defendant: DGAMC – NAFA 641/42/2020 641/42/2020 Plaintiff: DEER Defendant: Galati City Hall - DITVL Galati 263/42/2020 Annulment of the administrative act of the Settlement Decision 154/02.07.2020 for the amount of RON 10,091,323 (point 3 of the Decision no. 462/23.11.2015) Ploiesti Court of Appeal In course of settlement. Cancellation of administrative documents issued by the fiscal bodies within the Galati City Hall - DITVL Galati, respectively Fiscal inspection report, taxation decision and decision to resolve the appeal. According to the Fiscal Inspection Report, the control team determined an additional tax on buildings, together with the related accessories, in a total amount of RON 24,831,293, for the 2012-2015 period. High Court of Cassation and Justice On merits, the Court dismissed the case as unfounded. An appeal was filed, on 31.01.2024 the recourse of DEER was admitted. The High Court of Cassation and Justice quashes the judgment of the sentence and sends the case back to the same court. 4 5 6 Plaintiff: EL SERV Defendant: NAFA 31945/3/2018 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 The case has been suspended until the final settlement of the case no. 5786/2/2018 and following the final settlement of the case, this file has been put back on role. Case no. 5786/2/2018 had as object the cancellation of administrative act NAFA RIF 2017 and decision no. 305/30 May 2017, amounting to RON 46,260,952, the amount by which the fiscal loss of the Company was diminished; RON 7,563,561 established as additional VAT for payment by the refusal to deduct the VAT + related accessories. The claim was dismissed. Plaintiff: EFSA Defendant: NAFA – DGAMC 8709/2/2018* 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 Bucharest Court of Appeal In course of settlement. 7 8 Source: Electrica A.1.3 Other significant litigations (with a value higher than EUR 500 thousand) Crt. no. Parties/Case file number Object Court Case status 1 2 Creditor: ELSA Debtor: Petprod S.A. 47478/3/2012/a1 Bankruptcy, registering to the list of creditors for the amount of RON 2,591,163 Bucharest Tribunal Procedure definitively closed on 12.12.2023. Creditor: ELSA Debtor: CET Braila S.A. 2712/113/2013 Bankruptcy, registering to the list of creditors in amount of RON 3,826,035. Braila Court Ongoing procedure. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 246 247 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status 3 4 5 6 7 Creditor: ELSA, AAAS, BCR SA and others Debtor: Oltchim S.A. 887/90/2013 Creditor: ELSA Debtor: Romenergy Industry SRL 2088/107/2016 Creditor: ELSA Debtor: Transenergo Com S.A. 1372/3/2017 Creditor: ELSA Debtor: Electra Management & Supply SRL 41095/3/2016 Creditor: ELSA Debtor: Fidelis Energy SRL 3052/99/2017 Bankruptcy, remaining amount to be recovered – RON 116,058.538. Valcea Court Ongoing procedure. The amount is registered in the definitive table of receivables updated following the fact that the Decision EU Tribunal from Luxemburg, establishing that Oltchim S.A. benefited from illegal state aid from a numberof Romanian companies, including ELECTRICA S.A, became definitive. Bankruptcy, registering to the list of creditors in amount of RON 2,917,266. Alba Iulia Court of Appeal The procedure was closed on 12.12.2022, the decision being appealed by DEER – finally dismissed on 06.04.2023 Insolvency proceedings. Amount RON 37,088,830. Bucharest Court Bankruptcy. Amount: RON 6,027,537. Bucharest Court Bankruptcy. Amount: RON 11,291,747.90. Iasi Court Ongoing reorganization procedure. On 03.02.2021, the Debtor’s reorganization plan was confirmed, according to which unsecured receivables do not participate in distributions. ELSA’s appeal against the sentence confirming the reorganization plan was definitively dismissed. Ongoing procedure. In case, a request for liability has been filed, representing the object of the associated file no. 41095/3/2016 / a1, in which ELSA has the quality of accessory intervener, case in course of settlement Ongoing procedure. On 26.04.2023, the bankruptcy was ordered. Of the total amount initially recorded at the credential table, the amount of RON 66,066.07, representing ELSA’s debit to Fidelis Energy, was compensatedin the final table consolidated with this amount. Plaintiff: ELSA Defendant: Competition Council 1100/1/2023 Appeal for annulment against civil decision no. 5599 of 22 November 2022, pronounced by ICCJ In file no. 3889/2/2018. Case no. 3889/2/2018 had as object the annulment of Competition Council Decision no. 77/20 December 2017, by which an ELSA charge is set through a fine of RON 10,800,984 and, in the subsidiary, 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, with the retention and full use of all mitigating circumstances applicable to ELSA. High Court of Cassation and Justice On 22.11.2023, the court dismissed the appeal for annulment as inadmissible. Final. Plaintiff: ELSA Defendant: Elite Insurance Company 44380/3/2018 Claims - request for equivalent value of the insurance policy issued to guarantee the obligations of Transenergo Com S.A., in the amount of RON 4,000,000. Bucharest Court Suspended based on art. 307 Civil Procedure Code. A request for the reinstatement of the cause will be filed. Plaintiff: ELSA Defendant: Silver Broker de Asigurare- Reasigurare SRL (former Zurich Broker de Asigurare Reasigurare SRL) 37068/3/2021/a1 37068/3/2021/a2 Insolvency. Receivable – RON 4,065,408 Court of Appeal Following the termination of the case 3310/3/2020, based on art. 75 of Law no. 85/2014, ELSA has filed a request for registration at the credit table in the bankruptcy file of Silver Broker de Asigurare-Reasigurare SRL, case no. 37068/3/2021, the claim being dismissed ELSA filed an appeal, object of case no. 37068/3/2021/a1 and no. 37068/3/2021/a2 (attached to case no. 37068/3/2021/a1). On 24.10.2023, the court dismissed the connexed cases; ELSA filed an appeal. Plaintiff: ELSA Defendant: former directors and administrators of ELSA 35729/3/2019 Claims - claim for damages calculated as a result of the control of the Court of Accounts, amounting RON 322,835,121. Bucharest Court Suspended until the final settlement of case 2229/2/2017. 8 9 10 11 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT248 249 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status Plaintiff: VIR Company International S.R.L. Defendant: DEER 12 7507/105/2017 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 commune, Darvari village; - EUR 155,000, equivalent of the amount of electricity produced by the plant during the technological tests period; - EUR 145,000, green certificates related to the amount of energy produced by the photovoltaic plant during the technological tests period. In addition, it requires to DEER to pay the penalty interest of 5.75%/year for all the amounts of money claimed and court costs. Ploiesti Court of Appeal Creditor: DEER Debtor: Transenergo Com S.A. 1372/3/2017 Insolvency proceedings. Amount: RON 9,274,831. Bucharest Court The court rejects the exceptions of inadmissibility and lack of object of the introductory request invoked by the defendant, as unfounded. Dismisses the introductory request as unfounded. Accepts in part the request made by the defendant regarding the payment of court costs and obliges the plaintiff to the defendant to pay the court costs, respectively to pay the sum of RON 50,000 representing a reduced attorney’s fee. Appealable within 15 days from communication. On 07.07.2022, the court partially admitted the request to increase the expert’s fee for the amount of RON 13,100 and obliges the plaintiff to pay this amount to the expert. Appeal filed by the plaintiff, in course of settlement. Ongoing proceedings. On 3 February 2021, the Debtor’s reorganization plan was confirmed, according to which unsecured receivables do not participate in distributions. The Debit represents the accumulated receivables as a result of the distribution subsidiaries merger. 13 14 Plaintiff: DEER Debtor: ELSA 18976/3/2020 (33763/3/2019) Claims, according to the Court of Accounts Decision, representing payments not owed of RON 20,350,189 made by DEER (former SDMN). Bucharest Court Suspended until the final settlement of case no. 1677/105/2017. Plaintiff: Sinaia City Hall Defendant: DEER 16 3719/105/2020** Plaintiff: Tutu Daniel and Tudori Ionel Dedendant: DEER 15 180/233/2020* Claims - equivalent value of land related to the Galati Center Transformation Station – RON 2,500,000. Galati Tribunal The court of first instance partially admitted the request to compel the defendants to pay the plaintiffs the sum of EUR 241,600 as compensation for the lack of use of the income. Obliges the defendants to pay to the plaintiffs the legal interest regarding the damages established from the moment of the final stay until the actual payment. It finalizes the experts’ fee in the amount of RON 1,600 for expert Bogatu Mirela Dorina and the amount of RON 1,500 for expert Grecu Iulian and obliges the plaintiffs to pay the expert Bogatu Mirela Dorina the amount of RON 600 - the difference between the expert’s fee and to expert Grecu Iulian the amount of. It obliges the defendants to pay the defendant Tutu Daniel the sum of RON 38,605 and the plaintiff Tudori Ionel the sum of RON 12,000 as court costs. Appeal in course of settlement. Action in “Obligation to do” administrative litigation. Sinaia City Hall requests: -mainly: obliging MN to comply with LCD 113/2015 in the sense of executing the works regarding the underground location of the technical-municipal networks for the project “Energy efficiency and lighting extension of the historic area - Sinaia” - in the alternative: in case MN will not execute the works in due time and the City Hall will execute the works in our name and on our behalf, MN will be obliged to pay RON 7,659,402.72 + VAT (RON 9,101,192); - updating the amount requested in subsidiary with the inflation rate and legal interest. Ploiesti Court of Appeal The Court dismissed the case on merits. A recourse was filed. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT250 251 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status Plaintiff: DEER Defendant: Romenergy Industry S.A. 2088/107/2016 Plaintiff: Asirom Vienna Insurance Group S.A. Defendant: DEER 439/111/2017 Plaintiff: Energo Proiect SRL Defendant: DEER, DEER – Oradea Subsidiary 374/1285/2018 Bankruptcy - amount: RON 9,224,595.51. Alba Iulia Court of Appeal The court of first instance admitted the request to close the bankruptcy procedure. The debit represents the accumulated receivables as a result of the distribution subsidiaries merger. The appeal was rejected on 06.04.2023. Final. Recourse claims – for RON 2,842,347, representing the compensation paid by the plaintiff to the insured company SC Ciocorom SRL following a fire that occurred on 7 March 2013. DEER (former SDTN) fault is invoked for the overvoltage after a power outage. Oradea Court of Appeal Case dismissed on merits an on the appeal. With recourse within 30 days from the notification of the decision. The decision is definitive by non appeal by the plaintiff. Claims of RON 2,387,357. Cluj Court of Appeal On merits and in the appeal, the case was dismissed. The Court admits the appeal declared by the plaintiff ENERGO PROIECT S.R.L., cancels the decision and sends the case to a new trial, the same court. Appeal for retrial. First instance. The High Court of Cassation and Justice solved the negative competence conflict between Brasov Court and Bucharest Court, the case being in course of settlement at Brasov Court. Plaintiff: DEER Defendant: ELSA 4469/62/2018 Claims according to the Courts of Account findings – RON 8,951,811 Brasov Court Plaintiff: DEER Defendant: directors and managers 342/62/2020* Plaintiff: EL SERV Defendant: Servicii Energetice Banat S.A. 8776/30/2013 (joint with cu 2982/30/2014) Claims against the former general managers of the company, as a result of the non-fulfilment of some measures ordered by the Court of Accounts for the amount of RON 8,951,812. Bankruptcy - amount admitted to the list of creditors RON 72,180,439.68. Plaintiff: EL SERV Defendant: SEO 2570/63/2014 Bankruptcy - amount admitted to the list of creditors RON 26,533,446. Brasov Court Suspended until the final settlement of case no. 4469/62/2018. Timis Court Ongoing proceedings. Dolj Court Ongoing proceedings. 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Bankruptcy - amount admitted to the list of creditors: RON 15,130,315.27. Constanta Court Ongoing proceedings. Bankruptcy – amount: admitted to the list of creditors RON 73,708,082.90. Bacau Court Ongoing proceedings. Claims – EUR 655,164, equivalent of RON 3,210,305.75. Bucharest Court Ongoing proceedings. Plaintiff: EL SERV Defendant: SED 8785/118/2014 Plaintiff: EL SERV Defendant: SE Moldova 4435/110/2015 Plaintiff: EL SERV Defendant: New Koppel Romania 20376/3/2016 Plaintiff: Integrator S.A. Defendant: EL SERV, SAP Romania 34479/3/2016** Claims – EUR 1,277,435.25 license + EUR 2,650,855.68 maintenance – RON equivalent 19,321,005.11 Bucharest Court of Appeal Plaintiff: EL SERV Defendant: directors and administrators 2013-2014 35815/3/2019 Action in attracting the liability of directors and administrators - measure II.7 of Decision no. 13/27.12.2016 issued by the Romanian Court of Accounts– RON 7,165,549 + legal interest of RON 4,485,340.29. High Court of Cassation and Justice The case was suspended on 12.06.2019 until the jurisdiction was established in case 3O 266/2017 registered with the Karlsruhe Court and declined in favor of the Mannheim Court. The court dismissed the action as prescribed, ordering the plaintiff to pay the judicial costs. Appeal suspended, considering the death of the respondent Popescu Romeo; steps have been initiated to identify the heirs. Case reinstated, appeal dismissed as unfounded. A recourse was filed, definitively dismissed. Plaintiff: EL SERV Defendant: directors and administrators 2010-2014 35828/3/2019 Creditor: EFSA Debtor: Apaterm S.A. Galati 4783/121/2011* Creditor: EFSA Debtor: Ariesmin S.A. Branch 7375/107/2008 Action in attracting the liability of directors and administrators - measure II.8 of Decision no.13/27.12.2016 issued by the Romanian Court of Accounts for the amount of RON 19,611,812 + Legal penalties of RON 14,475,832.43. High Court of Cassation and Justice The court dismissed the action as it has been modifed and specified, as prescribed. Orders the plaintiff to pay the judicial costs. An appeal was filed, dismissed as unfounded. A recourse was filed, in course of settlement. Bankruptcy – registering to the list of creditors for the amount of RON 2,547,551. Galati Court Ongoing proceedings. Bankruptcy - registering to the list of creditors for the amount of RON 20,711,588. Alba Court Ongoing proceedings. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT252 253 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status 32 33 34 35 36 37 38 39 40 Creditor: EFSA Debtor: Zlatmin S.A. Branch 6/107/2003 Creditor: EFSA Debtor: Nitramonia S.A. 1183/62/2004 Bankruptcy - registering to the list of creditors for the amount of RON 9,314,176. Alba Court Ongoing proceedings. Bankruptcy - registering to the list of creditors for the amount of RON 2,321,847 Brasov Court Ongoing proceedings. Creditor: EFSA Debtor: Remin S.A. 32/100/2009 Insolvency proceedings - registering to the list of creditors for the amount of RON 71,443,402. Timisoara Court Ongoing proceedings. Creditor: EFSA Debtor: Oltchim S.A. 887/90/2013 Creditor: EFSA Debtor: Energon Power and Gas S.R.L. 53/1285/2017 Creditor: EFSA Debtor: CUG S.A. 2145/1285/2005 Bankruptcy - receivable RON 16,700,311. Valcea Court Ongoing proceedings. Insolvency proceedings - registering to the list of creditors for the amount of RON 2,421,236. Cluj Specialized Court Case closed on 06.06.2023. Final decision. Bankruptcy - registering to the list of creditors for the amount of RON 7,880,857. Cluj Specialized Court Ongoing proceedings. Creditor: EFSA Debtor: Colterm 4657/30/2021 Inslovency - registered to the list of creditors for the amount of RON 2,520,449.97 Timis Court Ongoing proceedings. Plaintiff: EFSA Defendant: ELSA 6665/3/2019 Plaintiff: UAT Targu Secuiesc Defendant: EFSA 886/119/2022 Claims: request of payment rearding the invoices paid without supporting documents, as it has been stated by the Court of Account – RON 7,025,632. High Court of Cassation and Justice The First Instance court dismissedthe claim of EFSA. The Decision has been appealed and dismissed by the Court. EFSA filed a recourse, definitively dismissed by the Court. Claims – RON 2,718,151.15 Covasna Tribunal In course of settlement. 41 42 43 44 45 46 47 48 Plaintiff: EDPR Romania SRL Parat: EFSA 19662/3/2022 Plaintiff: EFSA Defendant: ARC PARC INDUSTRIAL SRL Called into guarantee: VIBRACOUSTIC ROMANIA SRL 585/1285/2022 Plaintiff: Oradea City Defendant: EFSA 752/111/2023* Claims – RON 3,880,124.69 Bucharest Tribunal The judgment was suspended until the final resolution of file no. 3664/2/2022. Claims: RON 7,294,831.26 Cluj Specialized Court In course of settlement. Claims: RON 4,177,879 Bihor Court In 18th December 2023, the UAT Oradea’s action was dismissed. Appealabale within 10 days from it’s communication. Creditor: EFSA Debtor: UZTEL SA 1223/105/2023 Insolvency proceedings - registering to the list of creditors for the amount of RON 2,466,866.78 Prahova Court Ongoing proceedings. Plaintiff:EFSA Defendant: ARC PARC INDUSTRIAL SRL 253/1285/2023 Plaintiff:EFSA Defendant:Goldterm Mangalia 6408/118/2023 Plaintiff:EFSA Defendant:A6 263/1285/2023 Impex Plaintiff: Ivan Laura Ionela Ivan Cornel Ionut Ivan Vladimir Mihai Defendant: EL SERV 34705/3/2015 Claims: RON 2,800,000 Cluj Specialized Court Solution in favour of EFSA. Receivable recovered. Claims: 4.421.768,10 RON Constanta Court In course of settlement. Claims: 3.547.674, 21 RON Cluj Specialized Court In course of settlement. Civil liability - work accident resulting in employee death (amount of compensation claims – EUR 3 mn.). Bucharest Court Case reinstated. In course of settlement. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT254 255 Crt. no. Parties/Case file number Object Court Case status Crt. no. Parties/Case file number Object Court Case status Liability of the principal for the act of the defendant- work accident resulting in death of an AISE employee (amount of compensation claimed: EUR 510,000) Buzau Court In course of settlement. Insolvency – banckrupcy – RON 1,357,789.92. Dambovita Court Ongoing procedure. The current receivables have been fully recoverd. Plaintiff: ELSA Defendant: Servicii Energetice Banat 57 3661/30/2020 Claims – contractual liability: RON 2,009,233 High Court of Cassation and Justice. Case dismissed on merits. Appeal partially admitted with reference to retrial end 3 request. Recourse rejected on 23.03.2023. Final Insolvency – registration at the list of creditors for the amount of RON 26,283,220.67 Buzau Court The court admitted the request to close the insolvency procedure. Definitive. Amount fully recovered. • Obliging the defendant to leave us in full ownership and possession of the land located in Timisoara, Pestalozzi street no. 3-5, in a total area of 6,089 sqm; • rectification of entries in land registers no. 447675, 408987 and 409003 UAT Timisoara, in the sense of suppressing the inappropriate entries made in them, in order to agree the tabular status with the real legal situation of the real estate, respectively of the deletion of the property right of the tabular owner SERVICII ENERGETICE BANAT S.A. and registration of the property right of Societatea Energetica ELECTRICA S.A. • Litigation value: RON 6,452,900. Timis Tribunal Preliminary proceedings. Creditor: Societatea Electrica Furnizare SA Debtor: Romaero 58 39261/3/2023 Bankruptcy (The debtor’ s request – art 10 Law 85/2014) - registering to the list of creditors for the amount of RON 4,051,759. 70. Bucharest Tribunal In course of settlement. Claims – contractual liability – RON 2,851,297.30 Covasna Court In course of settlement. Source: Electrica Claims - the plaintiff requests moral damages in the amount of EUR 500,000 thousand and RON 370 material damages as a result of the bodily injury by electric shock committed on 12.08.2020. Bistrita Nasaud Tribunal The judgment of 29.06.2023 - partially admits the action, orders DEER to pay the amount of EUR 60,000 as moral damages and RON 150 material damages. With appeal within 30 days of service of the decision. Claims – contractual liability – RON – 2,553,038.40. Bucharest Tribunal In course of settlement. Plaintiff: Cazacu Maria Defendant: DEER 7212/200/2020 Plaintiff: DEER – Defendant: COS Targoviste 1906/120/2013 Plaintiff: Verta Tel SRL Defendant: DEER 4106/3/2021 Plaintiff: DEER Defendant: Getica 95 SRL 1666/114/2021* Plaintiff: DEER Defendant: AEM S.A. 1347/119/2021 Plaintiff: Rebrean Gheorghe Defendant: DEER 1635/112/2022 Plaintiff: DEER Defendant: Electric Planners SRL 25660/3/2022 49 50 51 52 53 54 55 56 Plaintiff: Allsys Energy SA Defendant: DEER 25660/3/2022 Aquisition: Annulament of the decision to terminate 5 frame agreements for MM, BH, BN, SJ, SM subsidiaries. Request for payment of damages – RON 8,597,179.15 . Bucharest Tribunal In course of settlement. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT256 257 A.1.4 Litigations against the Romanian Court of Accounts Crt. no. Parties/ Case file number Object Court Case status 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 Romanian 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 Romanian Court of Accounts, rejecting the objection raised by ELSA against Decision no. 12, regarding the faults and orders mentioned above. In subsidiary, 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. High Court of Cassation and Justice Plaintiff: EL SERV Defendant: Romanian Court of Accounts 2098/2/2017 Litigations with the Romanian Court of Accounts for the annulment of the administrative act – Decision no. 11/27 February 2017. AppealHigh Court of Cassation and Justice 1 2 On 06.07.2023, the Court partially admitted the request formulated by ELSA and partially annulled Conclusion no. 12 / 27.02.2017 and Decision no. 12 / 27.12.2016, issued by the Romanian Court of Accounts, regarding the deviations from point 1, point 2, point 3, point 4 point 5 partially, for rent exceeding the period 17.07.2013-01.09.2013, point 6, point 7 and regarding the correlative measures, the measure from point II.7 being maintained for the rent related to the period 17.07.2013- 01.09.2013. Rejects as unfounded the application end regarding the extension of the implementation deadlines. It notes that the applicant has reserved the right to claim separately the costs incurred in the case. Both parties filed a recourse, in course of settlement. On 31.07.2023, the Court admits the request in part: rejects the exception of illegality as unfounded and admits in part the annulment action as specified. Partially annuls conclusion no. 11/27.02.2017, decision no. 13/27.12.2016 and control report no. 9.100 – 15.553/05.12.2016, respectively with regard to the measures provided for in points I.3, II.7 and II.8. Rejects the annulment action as unfounded. Obliges the defendant to pay the plaintiff the sum of RON 24,801.175 as court costs, according to the provisions of art. 453 para. 2 Civil Code. An appeal was filed – filter proceedings. Crt. no. Parties/ Case file number 3 Plaintiff: DEER Defendant: Romanian Court of Accounts Intervenient: SERV 1677/105/2017 Source: Electrica Object Court Case status Suspension and annulment of the measures imposed by the Decision of Prahova Court of Accounts no. 45/2016, following the Control Report of the Prahova Court of Accounts no. 6618/11 November 2016. Ploiesti Court of Appeal Dismisses the application. A recourse was filed. Preliminary proceedings. A.1.5 Other litigations with significant impact Crt. Parties/Case no. file number Object Court Case status Plaintiff: DEER Defendant: Local Council of Oradea City, RCS&RDS 1 3340/111/2015 Cancellation of Oradea LCD no. 108/17 February 2014 regarding the organization of the public auction for the concession of the 100,000 sqm land area, in order to realize an underground sewerage for the placement of electronic and electrical communications networks. Bihor Court At the request of RCS-RDS, the case was suspended until the case file 2414/2/2016 was settled with Delalina SRL, a file that is in the role of the Bucharest Court of Appeal. The file no. 2414/2/2016 was definitively solved on 22.03.2021, without a request for reinstatement being formulated, following to be ascertained by the court the expiration of the request, DEER no longer having an interest in supporting the request for summons. The Bihor Court found the expiration of the request for summons on 28.03.2023, the solution being final. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 258 259 Crt. Parties/Case no. file number Object Court Case status Crt. Parties/Case no. file number Object Court Case status Plaintiff: Carei City and others Defendant: DEER 2 15600/211/2016* Claims - it is requested to grant compensation in the form of material and moral damages, caused, by interrupting the supply of electricity to the consumers, in the Carei municipality, during 31.12.2014- 02.01.2015. Cluj Specialized Court On 21.04.2021, the court rejects the action of a plaintiff as a result of admitting the exception of lack of capacity to use, rejects the exception of lack of active procedural quality of plaintiffs, invoked by defendants, rejects the exception of lack of passive procedural quality of defendant DEER, rejects the exception of lack of procedural quality liabilities of the defendant Electrica Furnizare SA and admits in part the action in contradiction with the defendant ELECTRICA FURNIZARE SA. Dismisses as unfounded the request for formal proceedings by the applicants in the preceding paragraph in contradiction with DEER. Obliges the defendant ELECTRICA FURNIZARE S.A., to pay the moral damages in favor of the plaintiffs in a differentiated way, in the amount of RON 500 for some of the plaintiffs, RON 750 and RON 1,000 for other plaintiffs, rejecting at the same time the moral damages for other plaintiffs. Appeal filed by Electrica Furnizare. In appeal, the court rejects, as unfounded, the main appeal declared by the appellant Electrica Furnizare SA and rejects, as unfounded, the incidental appeal declared by the respondents TN, and MC. Recourse definitively dismissed. Definitely settled at 20.01.2023 (i) ELSA’s compliance with the obligation of not to do regarding the share capital and the AoA of the EDB and the termination of abusive actions consisting of the requests addressed to the ONRC to change the structure of the share capital and the articles of association of the EDB by increasing the share capital with the value of the land in the Certificates of attestation of the property right held by ELSA on the land used by EDB in order to carry out the activity; (ii) Stating the fact that Electrica does not hold the quality of public authority involved in the privatization process and, consequently, acknowledging the absence of the right of ELSA to request ONRC to modify the constitutive act of the EDB by increasing the share capital with the value of the land owned by ELSA based on CADP on the used land from EDB; (iii) As against to the abusive actions taken in the EDB’s opinion, ELSA’s obligation to pay the damages whose existence and amount will be proved by the deadline provided by law. Bucharest Court of Appeal Case dismissed on merits; appeal definitively dismissed by the court on 07.03.2023. Action for the annulment of Shareholders resolution 5/06.12.2018 (share capital increase for SAPE). Timisoara Court of Appeal Case dismissed on merits; an appeal was filed by ELSA and SAPE, definitively dismissed. At this case was connected the case no. 988/30/2019. Review against the decision 573/29.11.2013, pronounced by the Court of Appeal Timisoara in file no. 949/30/2019. High Court of Cassation and Justice In course of settlement. 3 4 5 Plaintiff: E-Distributie Banat Defendant: ELSA 12857/3/2019 Plaintiff: ELSA, SAPE Defendant: E-Distributie Banat 949/39/2019 Plaintiff: ELSA, Defendant: SAPE, Retele Electrice Banat (former E-Distributie Banat), Ministry of Energy 2981/1/2023 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT260 261 Crt. Parties/Case no. file number Object Court Case status Crt. Parties/Case no. file number Object Court Case status Plaintiff: Grup 4 Instalatii Defendant: DEER 9 375/1285/2021 The obligation of DEER to recognize, to respect the property right of G4Installatii regarding the buildings located in Cluj Napoca, 28A, Ilie Macelaru Street and 2, Uzinei Electrice Street, registered in land book 297841 Cluj Napoca with no. 297841, consisting of land with an area of 10720 sqm and constructions: construction registered in land book with no. 297841-C1, construction of administrative headquarters with an area of 1560 sqm; body A, construction no. 297841- C2 - 512 sqm, building B, construction no. 297841 - C3 - 171 sqm, building C, construction no. 297841 - C4 - 338 sqm, building D, construction no. 297841-C6 - 348 sqm - 110/10 Kw Transformation Station. It is requested the handing over of the above buildings and the rectification of the land book registrations in the sense of: the annulment of the tabulation conclusions by which the DEER property right was registered, the deregistration of the land book property right, the registration of the property right in favor of G4I. High Court of Cassation and JusticeCluj Court of Appeal The court admits the exception of the material incompetence of the Cluj Specialized Tribunal, an exception invoked ex officio and consequently declines the competence to resolve the request for summons in favor of the Cluj Tribunal-Civil Section. Case admitted in part. An appeal was filed, dismissed by the court. A recourse was filed, in course of settlement. With recourse within 30 days of it’s communication. Plaintiff: ELSA Defendant: UAT Bicaz 6 91/188/2020 1.obliging the defendant to leave us in full ownership and possession of the land in the area of 10,524 sqm (from documents 22,265 sqm), located in Bicaz, Neamt county. 2. rectification of the entries from the land book no. 52954 of Bicaz City, in the sense of elimination of inappropriate entries made in it, in order to agree on the tabular status with the real legal situation of the building, respectively the cancellation of the property right of the tabular owner Bicaz City and the registration of the property right of Societatea Energetice Electrice Electrica S.A. 3. Order the defendant to pay the court costs. Bacau Court of Appeal The court of first instance partially annuls the Decision of the Local Council of Bicaz no. 94/25.08.2016, respectively regarding the surface of 10,524 sqm of urban land 3, Bicaz, Energiei street (former Plant), located at the last position of the table in the Annex to HCL no. 94/25.08.2016, following the admission of the exception of illegality, invoked by the plaintiff. Dismisses the action brought by ELSA as unfounded. Admits in part the action in the rectification of the land book. It orders the rectification of the Land Book no. 52954 of the City of Bicaz, regarding the land with an area of 10,524 sqm, located in Bicaz, 3, Energiei street, Neamt County (former Uzinei), in the sense of deleting the property right of the defendant Bicaz city, as a result of the partial annulment of HCL no. 94/25.08.2016, regarding this land. Rejects as unfounded the applicant’s request to order the rectification of the Land Book no. 52954 of the City of Bicaz, regarding the land with an area of 10,524 sqm, located in Bicaz, 3, Energiei street, Neamt County (former Uzinei), in the sense of registering the ELSA property right over the above mentioned land. ELSA filed an appeal, dismissed by the court. The decision was appealed, the recourse being definitively dismissed on 09.01.2023. Plaintiff: DEER Defendant: ANARC (ANCOM) and Telekom Romania Communications SA 7407/2/2020 Appeal against Decision no. 1177 / 13.11.2020 of the ANARC President. It was requested the partial annulment of the ANCOM decision and the complete rejection of the Telekom Romania request. Bucharest Court of Appeal Action dismissed on the merits. With appeal within 15 days from communication. Plaintiff: Valenii de Munte City Hall Defendant: DEER 2848/105/2020 Valenii de Munte City Hall requests the obligation of DEER (Ploiesti) to take over public lighting installations and to pay their equivalent value of RON 466,880. Ploiesti Court of Appeal Action dismissed on the merits. The recourse is accepted, the sentence is quashed and the case is sent to the Prahova Court for retrial. 7 8 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT262 263 Crt. Parties/Case no. file number Object Court Case status Crt. Parties/Case no. file number Object Court Case status Plaintiff: ELSA Defendant: Kaufland Romania SCS, Deva City, through the Mayor and Deva City Council 156/221/2021* 1. obliging the defendants to leave us in full ownership and possession of the land surfaces that overlap with the ELSA land located in Deva municipality, 1, Dorobanti street, Hunedoara county, as follows: (a) Kaufland Romania SCS - land areas of 15 sqm and 50 sqm (part of the Kaufland Deva parking lot), identified by IE 68452, which overlap to the N-W with the land owned by Electrica; (b) Deva Municipality, through the Mayor and the Local Council of Deva Municipality - land areas: (i) 2 sqm (part of the “Playground for children”), identified by IE 71851, which overlaps to the NE with the land in the ownership of Electrica and (ii) of 23 sqm (part of “Calea Zarandului”), identified by IE 75973, which overlaps to the SW with the land owned by Electrica; 2. the delimitation of the above- mentioned properties, by establishing the boundary line according to the property deeds of the parties; 3. rectification of the entries in the land book regarding the above- mentioned land areas, in the sense of eliminating the inappropriate entries made, in order to reconcile the tabular status with the real legal situation of the real estate, respectively of the cancellation of the property right tabular owners and the registration of the property right of the applicant ELSA over these land areas. Hunedoara Tribunal Action admitted in part. ELSA filed an appeal – in course of settlement by Civil Section I of Hunedoara Tribunal (following the settlement of the lack of material competence of the court). Creditor: Eurototal Comp SRL Debtor: DEER 1221/1285/2022 Insolvency – RON 1,255,000 Cluj Court of Appeal The amount has been entirely paid on 3 January 2023 and the creditor waived the trail of the insolvency request, subsequently filing a recourse. Void recourse. Final. Plaintiff: Sinan Mustafa Defendant: DEER SA 10249/211/2023 Action for contractual liability. Requests the payment of the amount of RON 144,978.69 representing the bonus not granted at the end of the mandate contract, and the related legal penalty interest. Court Cluj- Napoca In course of settlement. 10 11 12 13 Plaintiff: Nine Alexandru Defendant: DEER SA 1777/62/2023 Claims - Requests the payment of the amount of 84,925 euro (419,002.96 RON) representing, damages revocation of mandate contract, Brasov Court In course of settlement. Creditor: Eurototal Comp SRL Debtor: DEER 14 724/1285/2023 Insolvency : 209.335,28 RON Cluj Commercial Court The creditor waived the trail of the insolvency request. On 11.01.2024, the Court takes note of the renunciation of the creditor EUROTOTAL COMP S.R.L., on judging the request to open insolvency proceedings against DEER. It states that the appeal filed by the debtor DEER has remained without object. Take note of the parties’ manifestation of will to waive the appeal. Definitive. Plaintiff: ELSA Defendant: DEER 1697/242/2019 15 • Obliging the defendant to leave us in full ownership and possession of the land area of 7,695 square meters, located in the place. Somesul Rece, Gilau commune, Cluj county, registered in CF no. 52997 – Gilau Commune (old land registry no. 561/Somesul Rece); • - rectification of entries in the land registry, in the sense of suppressing inappropriate entries made in it, registered under no. 34516/21.05.2017, to agree the tabular status with the real legal situation of the immovable property, namely the deletion of the ownership right of the SDEE TN tabular owner over the land surface and the registration of the ownership right of the claimant ELSA over this land surface. Litigation value: RON 93,226.62. Huedin Court In course of settlement. 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT264 265 Crt. Parties/Case no. file number Object Court Case status Crt. Parties/Case no. file number Object Court Case status 1. Obliging the defendants to leave us in full ownership and possession of the land area of 2,339 square meters, located in the town of Dej, str. Avram Iancu no. 20, Cluj county, registered in land register no. 52907 – Dej, Cadastre and Real Estate Office Cluj (old Land Registry no. 19335), no. topo. 938a) Defendant DERR: - mainly, the land area of 1700.92 sq m, the area registered in the Land Register no. 52907 – Dej, OCPI Cluj; - in the alternative, the land area of 1,452.12 square meters, in the situation where «the transfer of ownership» of the land area of 248.8 square meters by this defendant to the defendant EFSA will be proven; b) Defendant (F.I.S.E.) ELECTRICA SERV S.A. - land area of 638 sq m; c) Defendant EFSA - land area of 248.8 square meters; 2. Rectification of the entries in the land register regarding the land registered in land register 52907 – Dej, Office of Cadastre and Real Estate Cluj (old Land Register no. 19335), no. topo 938, in the sense of suppressing inappropriate entries made within it, registered under no. 33747/2006, in order to reconcile the tabular status with the real legal situation of the immovable property, respectively of the deletion of the property right of the DEER tabular owners under the name under which it was entered in the Land Register) and F.I.S.E. ELECTRICA SERV S.A. on the land area of 2,339 square meters, located in the town of Dej, str. Avram Iancu no. 20, Cluj county and the registration of the property right of the claimant ELSA over this area of land. Litigation value: RON 329,875. 1. obliging the defendant to leave us in full ownership and possession of the land area of 46.99 square meters, located in Romani, Romanii de Jos village, Schitului str., no. 2A, Valcea county», which constitutes an undivided part of the total area of 93.98 sqm (94 sqm registered), registered in the land register no. Plaintiff: ELSA Defendant: DEER, EFSA, FISE 16 4658/117/2019 Plaintiff: ELSA Defendant: Gidazi Prod Com Hidroelectrica S.A. 17 3450/241/2019 Cluj Court Case dismissed on merits. Appel filed by ELSA, dismissed by the court. With recourse within 30 days of communication. Valcea Tribunal On the merits, the court partially admitted the summons and ordered the partial cancellation of the asset sale purchase contract authenticated under no. 335/29.07.2016 by BNP Berevoianu Radu Costin, regarding the area of 94 square meters from measurements, intra-village land with cadastral number 36276 36276 – Horezu (old CF no. 1190); 2. rectification of entries in the land register regarding the land registered in land register no. 36276 – Horezu (old CF no. 1190), in the sense of suppressing inappropriate entries made within it, registered under no. 41348/04.08.2016, to reconcile the tabular status with the real legal situation of the immovable property, respectively the deletion of the property right of the tabular owner GIDAZI PROD COM SRL; 3. (supplementary request) ascertaining the partial absolute nullity of the sale-purchase contract authenticated under no. 335/29.07.2016 by BNP Berevoianu Radu Costin, regarding the sale of the land area of 46.99 sqm. Litigation value: RON 1,715.53. 1. forcing the defendant to leave us in full ownership and possession of the land with an area of 20.50 square meters which is an integral part of the land with an area of 348 square meters identified with no. Cadastral 2177, registered in CF no. 39932 of the city of Targu Jiu, Jud. Gorj, land located in Targu Jiu, General Gheorghe Magheru str., Gorj county. 2. Rectification of CF Litigation value: RON 12,767. Request for penalties for not preparing the CADP documentation regarding the land in Ghelari for which ELSA obtained a court decision. Horezu (old cadastral number 1298). Orders the deletion of the property right registered in the name of the defendant GIDAZI PROD COM SRL from the Land Register no. 36276 Horezu, on the land building with an area of 94 square meters. Reject the rest of the request. ELSA and Hidroelectrica filed an appeal, On appeal, the court orders the partial cancellation of the sale-purchase contract authenticated under no. 335/29.07.2016 regarding the area of 46.99 square meters, mentioned in the Certificate of attestation of the right of ownership over the lands series M03 no. 11429/26.04.2010. Order the deletion from the land register no. 36276 Horezu of the property right registered in the name of the defendant GIDAZI PRODCOM SRL regarding the area of 46.99 square meters, mentioned in the Certificate of attestation of the right of ownership over the lands series M03 no. 11429/26.04.2010. Maintain the rest of the appealed sentence. With recourse within 30 days of communication. Targu Jiu Court Suspended, until the resolution of the exception of illegality which is the subject of file 14904/318/2023. Timisoara Court In course of settlement Complaint against the director of the Trade Registry - regarding the rejection of the request for correction of an error regarding the shareholding. Timis Tribunal Preliminary proceedings. 18 19 20 Plaintiff: ELSA Defendant: Romanian State – Ministry of Finance 9439/318/2021 Plaintiff: ELSA Defendant: E-Distributie Banat 27688/325/2023 Plaintiff: Retele Electrice Banat Defendant: National Trade Registry - Timis Trage Registry Main intervenient: ELSA 6209/30/2023 2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONS2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT266 267 Crt. Parties/Case no. file number Object Court Case status Appendix 2 – Details of the main investments of Electrica Group during 2023 Between 1 January 2023 and 31 December 2023, the most significant investments made by the Group are as 21 22 23 24 Plaintiff: FISE Defendant: E-Distributie Muntenia Intervenient: ELSA 2275/93/2021 Plaintiff: ELSA Defendant: Romanian State, represented by the Ministry of Transport, Insfrastructure and Telecon, by CNAIR, Craiova Local Council – Comission for applying Law 255/2010 3411/63/2023 Plaintiff: ELSA Defendant: E-Distributie Dobrogea 17971/212/2023 Plaintiff: ELSA Defendant: E-Distributie Banat 22327/325/2023 Source: Electrica Tancabesti land diassembly Ilfov Tribunal Amicably resolved. follows: 1. Partial annulment of the Decision establishing compensations no. 3 of 02.11.2022, adopted by the Craiova Local Council - Commission for the application of Law no. 255/2010, regarding the amount established as compensation for the expropriated land area of 169 sqm, located in Teilor Street no. 160, no. cadastral / land register 216717 (currently transcribed in CFE 248543 UAT Craiova); 2. Obliging the defendant, the Romanian State, represented by the Ministry of Transport and Infrastructure, through CNAIR, to pay to the underwriter the real value of the entire land area of 174 square meters expropriated in reality, composed of: (i) the land area of 169 square meters which makes object of Annex no. 2 at H.G. no. 327/2021, position no. 35 and of the expropriation decision no. 942/28.05.2021, position 35 and (ii) the land area of 5 square meters, de facto expropriated, with which the Romanian State registered in the land register (no. 248543 Craiova), in addition to the area that is the subject of the expropriation decision no. 942/28.05.2021. Dolj Tribunal In course of settlement. Obliging EDD to draw up the documentation for the certificate of ownership and hand it over to ELSA. Constanta Court In course of settlement. Obliging EDB to draw up the documentation for the certificate of ownership and hand it over to ELSA. Timisoara Court In course of settlement. DESCRIPTION Value (RON mn.) MUNTENIA NORD Modernization and integration in SCADA of 110/20 kV Potlogi Substation Modernization of secondary substations fed from UGC 20kV Blocks 1, Blocks 2, IPL, Trainica 1, Trainica 2, Pucioasa city, Dambovita County Modernization of the 110 kV Hipodrom Substation, replacement of power transformers Trafo 1 (110/20/6kV) & Trafo 2 (110/6kV) Implementation of an integrated resource planning system-Workforce Management (WFM) WFM - IT tool for planning and monitoring in the field the resources (humans, vehicles, devices, materials, equipment) involved in business processes: operation, maintenance, investment works with own construction teams, network access, measurement. Voltage level improvement in localities Baldana, Tartasesti, Gulia, Commune Tartasesti, Dambovita County Modernization of LV OHL and connections – meters in the area of PTA 3161, PTA 3251, PTA 3320, Iazu locality, Cojasca Commune, Dambovita County Modernization and integration in SCADA of 110/20 kV Zatna Substation, Braila County Modernization of network and connections Homocea, Vrancea County Modernization and consolidation of the hardware infrastructure and software of the SAP system [SAP-DEER] 2022_batch1 - OBJECT 2+OBJECT 1 Modernization and integration in SCADA of 110/20 kV Buzau Sud Substation Modernization of distribution network in village Lunca Pripor, Nehoiu City, Buzau County Network switching over from 6 kV to20 kV, Floresti locality Improving technical conditions of supply for consumers in locality Plopeni SDEE Ploiesti network modernization, for blocks of flats in Ploiesti Nord neighbourhood, Prahova County - STAGE II 7.97 7.39 7.39 7.09 6.54 6.40 5.51 5.43 5.40 5.02 4.61 4.37 4.36 3.95 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 DIRECTORS’ REPORTAPPENDIX 1 – LITIGATIONSELECTRICA S.A2023 ANNUAL REPORT 268 269 DESCRIPTION Value (RON mn.) DESCRIPTION Value (RON mn.) MUNTENIA NORD Modernization and integration in SCADA of 110/20 kV Potlogi Substation Modernization of secondary substations fed from UGC 20kV Blocks 1, Blocks 2, IPL, Trainica 1, Trainica 2, Pucioasa city, Dambovita County Modernization of the 110 kV Hipodrom Substation, replacement of power transformers Trafo 1 (110/20/6kV) & Trafo 2 (110/6kV) Implementation of an integrated resource planning system-Workforce Management (WFM) WFM - IT tool for planning and monitoring in the field the resources (humans, vehicles, devices, materials, equipment) involved in business processes: operation, maintenance, investment works with own construction teams, network access, measurement. Voltage level improvement in localities Baldana, Tartasesti, Gulia, Commune Tartasesti, Dambovita County Modernization of LV OHL and connections – meters in the area of PTA 3161, PTA 3251, PTA 3320, Iazu locality, Cojasca Commune, Dambovita County Modernization and integration in SCADA of 110/20 kV Zatna Substation, Braila County Modernization of network and connections Homocea, Vrancea County Modernization and consolidation of the hardware infrastructure and software of the SAP system [SAP-DEER] 2022_batch1 - OBJECT 2+OBJECT 1 Modernization and integration in SCADA of 110/20 kV Buzau Sud Substation Modernization of distribution network in village Lunca Pripor, Nehoiu City, Buzau County Network switching over from 6 kV to20 kV, Floresti locality Improving technical conditions of supply for consumers in locality Plopeni SDEE Ploiesti network modernization, for blocks of flats in Ploiesti Nord neighbourhood, Prahova County - STAGE II Modernization of seondary Substations PTZ in Gaestisti: PTZ 5016 Blocuri Gaesti, PTZ 5031 Blocuri Gaesti, PTZ 5185 Blocuri Gaesti, PTZ 5136 CTA Gaesti, PTZ 6128 IGO Titu, PTZ 5103 Fca de Gheata, PTAB 5211 13 Decembrie, PA 5002 PTTR, PTZ 514 F-ca de paine 6, PTZ 5127 F-ca de Branza si US 5230 Mogosani Network modernization in CA Rosetti Commune,Buzau County, villages: Cotu Ciorii sand Balteni - vol 1; Lunca - vol 2; Balhacu, CA Rosetti and Vizireni- vol 3 ELA ENERGY network reinforcement Improving technical conditions of supply and the voltage level for consumers in Fulga Commune, Prahova County 7.97 7.39 7.39 7.09 6.54 6.40 5.51 5.43 5.40 5.02 4.61 4.37 4.36 3.95 3.84 3.80 3.74 3.54 Modernization of the central heating boiler of the Galati branch headquarters - headquarters str. Nicolae Balcescu no. 35A, Galati Municipality Implementation of Intelligent Energy Metering Systems (SMI) 2023 SR Buzau mun Buzau -27369 pcs Modernization of 20/6 kV Ploiesti Vest Substation, integration in SCADA system and grounding compensation with BSRC (adjustable arc suppression coil), Prahova County Voltage level improvement for consumers in Odobesti Commune, Dambovita County, localities: Ziduri, Crovu, Brancoveanu and Miulesti Modernization of the 110 kV Substations: Filesti, SNG, Tecuci, Ionasesti - replacement of 110/6kV power transformers - 4 pcs Improving technical conditions of supply and the voltage level for consumers in Salciile village, Prahova County Network modernization in Tataru and Maicanesti localities, Maicanesti Commune, Vrancea County Voltage level improvement and modernization of LV OHL and connections for consumers from the area of PTA 3038 & PTA 3128 Varnita area, Prahova County Improving technical conditions of supply for consumers in Rizanesti area, Valenii de Munte City Modernization of OHL 20kV by replacing insulation and conductors (OHL 20kV Urleasca - SR Ramnicelu, OHL 20kV Lacu Sarat - SRPD 1-4, OHL 20kV Romanu - T. Vladimirescu and OHL 20 kV Gropeni - Tichilesti) Modernization of Plopeni 20/6 kV substation; mounting neutral point treatment 6 kV Network modernization in area of PTA 5776 no.1 and PTA 5778 CIA, Sendreni locality, Galati County Voltage level improvement & modernization of secondary substations (PT) and OHL in PTA 1104 Ciorani+PTA 1067 Cioranii de Jos area, Ciorani Commune, Prahova County Improving technical conditions of supply and the voltage level for consumers supplied with electricity from PTA 3023 Palanca, Palanca village, Rafov Commune, Prahova County Achievement of smart distribution network in a homogeneous area of consumers from Tiglina 1, Tiglina 2, Tiglina 3 - Micro 16, Tiglina 4 neighborhoods in Galati Municipality, Galati County Modernization of 0.4 kV distribution network in Munteni locality, areas supplied by PTA1, PTA2, PTA3 Munteni, Galati County Modernization of 0.4 kV distribution network in Zidari neighbourhood, Rm Sarat Municipality, Buzau County Modernization of LV OHL and power injection in PTA 1,2,3 and 4 Zavoaia, Zavoaia locality, Braila County 3.34 3.25 3.19 3.06 2.99 2.93 2.80 2.76 2.67 2.56 2.52 2.40 2.37 2.35 2.33 2.11 2.11 2.05 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 270 271 DESCRIPTION Value (RON mn.) DESCRIPTION Value (RON mn.) Modernization of LV OHL and connections, Fantanele locality, Cojasca Commune, Dambovita County SMI (Smart metering systems) Targoviste Branch Modernization of 20/6 kV Slanic Substation and neutral point treatment, Prahova County Modernization of 0.4 kV OHL and connections for consumers in Movila Miresii locality Installation of grounding compensation with BSRC (adjustable arc suppression coil) in 20/6 kV Columbia Substation Increasing the power supply reliability of consumers from Radu Negru and Buzaului neighbourhood, Braila Municipality Voltage level improvement for users in PT6156, 6061, 6060,6129.6222,6062 area Racari locality, Dambovita County Voltage level improvement for users in Cranguri locality, Dambovita County SMI (Smart metering systems) Muntenia Nord area SMI (Smart metering systems) Focsani Branch TRANSILVANIA SUD Modernization and consolidation of the hardware and software of the SAP system [SAP-DEER] Batch1 Implementation of an integrated resource planning system - Workforce Management Modernization of the 20 kV UGC in the area of the 220/110/20 kV Alba Iulia Substation, Alba Iulia Municipality, Alba County Modernization of 20 kV network in the area of Bulevardul Revolutiei 1989, Alba Iulia Municipality, Alba County Modernization of 20 kV network in the area of Piata Iuliu maniu, Alba Iulia Municipality, Alba County Modernization of 20 kV network in Lipoveni neighbourhood, Alba Iulia Municipality, Alba County Modernization of 20 kV network in Maieri neighbourhood, Alba Iulia Municipality, Alba County Modernization of distribution network, Bran locality- Stage 2, PT4 area, Brasov County Modernization of distribution network, Bran locality- Stage 3, PA1, PT5, PT7 area, Bran area, Brasov County Increasing the power supply reliability 6kV and 20 kV busbars in 110/20/6 kV Brasov Centru Substation, Brasov County 2.02 1.98 1.95 1.95 1.94 1.80 1.61 1.60 1.59 1.57 2.63 2.20 3.64 4.60 3.13 3.23 5.23 4.30 7.77 1.53 Increasing the power supply reliability 6kV and 20 kV busbars in 110/20/6 kV Bartolomeu Substation, Brasov County Increasing the power supply reliability for 20 kV OHL Prejmer-Ozun, Covasna County Increasing the power supply reliability for 20 kV OHL Bixad locality, Covasna County Modernization of 20/0.4 kV Secondary Substations, Ludus city, Mures County Back-up supply of 20 kV busbars - Sanpaul Substation, Mures County Modernization of the 20 kV UGC in the area COR MV-LV Tg Mures, by replacing the 20 kV cables on the Bulevard and Tudor 4 - Platou Cornesti lines, Tg Mures Municipality, Mures County Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Cugir, Teius, Lupsa, Sebes Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Bartolomeu, Ghimbav, Harman, Hoghiz, Prejmer Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Cic, Tarnaveni, Mureseni, Reghin, Raciu Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Aeroport, Aurel Vlaicu, Cartisoara, Orlat, Dumbrava Modernization of 0.4 kV OHL in the central area of Reghin Municipality, area PT 14, 55/15, 71, 65, Mures County Modernization of 0.4 kW network and connections, Gheorghe Doja Street (Piata Victoriei-Piata garii section) and Piatra de Moara, Targu Mures city, Mures County Modernization of 0.4 kV network and connections streets Budiului, Bega(partia) & Mestecanisului (partial), Targu Mures City, Mures County Modernization of 0.4 kW network in Hipodrom 1,2,3 area, Sibiu Municipality, Sibiu County Modernization of 0.4 kV network in Dumbraveni locality, Sibiu County Modernization of 0.4 kV network in Richis village, Biertan Commune, Sibiu County Modernization of 0.4 kV network in Dealu Frumos village, Merghindeal Commune, Sibiu County Modernization of 0.4 kV network in Mosna Commune, Sibiu County Voltage level improvement and modernization of LV OHL, Carpinis locality, Garbova Commune, Alba County Modernization of 0.4 kV network and securing connections, Dumbrava Rosie str., Miraslau, Rovine, Valea Alba, loc. Brasov, Brasov County 1.53 3.85 3.32 5.81 1.63 2.02 2.15 1.42 1.67 1.53 1.53 2.17 1.71 3.42 11.55 1.90 1.54 3.37 2.05 2.46 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 272 273 DESCRIPTION Value (RON mn.) DESCRIPTION Value (RON mn.) Increasing the power supply reliability & modernization of 20 kV, 0.4 kV UGC, Racadau, Brasov County Voltage level improvement and network modernization in the area of PT5 Bod & PT1 Bod, Commune Bod, Brasov County Modernization of LV network in Odorheiu Secuiesc locality, Rakoczi Ferencz street, Harghita County Voltage level improvement and modernization of 0.4 kV OHL and connections, Cetatuia locality, Harghita County Voltage level improvement and modernization of 20 kV OHL, 0.4 kV OHL and connections in Singeorgiu de Mures and Cotus localities, Mures County, Volume I- Cotus and Tofalau villages Modernization of 0.4 kV network and connections, Cuza Voda, Tusnad, and Cardinal Iuliu Hossu streets, Targu Mures Municipality, Mures County Voltage level improvement and modernization of 0.4 kV OHL and connections, Batos locality, Mures County Voltage level improvement and modernization of MV & LV network in Miercurea Sibiului area, Sibiu CountySibiului, jud. Sibiu Network extension in Alba Iulia city, streets: Viadana, Mogos, Sadu and Apuseni, Alba County Network extension in Vama Buzaului village, Dalghias point, Brasov County Increasing the capacity of 20 kV network in Drumul Poienii – Schei area, Brasov city, Brasov County Reinforcement works -power increasing, Campu Frumos Industrial Park, Covasna County Site release works for the achievement of the objective “Rehabilitation of the infrastructure of the major urban public transport network in the Municipality of Alba Iulia - Batch 1 Site release works for the achievement of the objective “Rehabilitation of the infrastructure of the major urban public transport network in the Municipality of Alba Iulia - Batch 2 Modernization of distribution network in Sacele Municipality by switching from OHL (MV&LV) to UGC (MV&LV), replacing existing UGC with paper insulation by UGC with reticular polyethylene insulation (XLPE), restoring connections and meters relocation (Stage 1) Modernization of LV network by switching from 0.4 kV OHL to 0.4 kV UGC, modernization and securing connections in streets Fabricii, Tigaretei, Tutunului and Salciilor, Sf. Gheorghe Municipality, Covasna County Release of site for d Modernization of County Road DJ106B:A1 Ocna Sibiului Loamnes-Sorostin-Tapu TRANSILVANIA NORD Modernization and consolidation of the hardware infrastructure and software of the SAP system [SAP-DEER] Batch 1 7.09 9.99 2.25 2.80 1.38 2.64 2.16 7.29 2.94 1.71 4.03 1.95 2.21 2.48 2.03 1.86 1.94 2.63 Modernization of switching equipment related to MV OHL for the Cluj-Napoca Distribution Branch, Cluj County Modernization of pole mounted substations, SDEE TN- Distribution Branch Cluj Napoca, Cluj County, Vol2 - area of network operation center Gherla Modernization of MV OHL Juc Geaca between R Gadalin and R Geaca Network modernization in Cluj-Napoca Municipality, Mihail Kogalniceanu Street and adjacent streets area, Cluj County, Closure of the 20 kV loop between Jucu-Valcele and Jucu Geaca, construction of PTAb 20/0.4 kV - 250 kVA and power injection in Caian Vama Increasing reliability of power supply in Floresti locality, Cluj County – Vol. 5 Modernization of the Distributor Abator and construction of Distributors Cimitir & Poligon Systematization of distributor exits from the 110/20/10 KV Campului Substation and modernization of distributors Manastur 9, Manastur 10 and UAC Cartier Manstur, Cluj-Napoca Municipality, Cluj County Increasing electricity supply reliability in Floresti locality, Cluj County – Vol. 6 Modernization Iazuri Distributor Extension of the distribution network in Valea Ierii Commune, Composesoratul Muntele Baisorii area - Requested by Valea Ierii City Hall Modernization of 20 KV OHL Beius - Budureasa Modernization of LV OHL and power injection in Serghis locality, Bihor County Modernization of MV UGC in the area Nufarul and Rogerius Neighbourhood, Oradea Improvement of the electricity distribution service in 110/20kV CET 2 Oradea Substation Construction of MV UGC to increase the electricity supply reliability in Matei Corvin area, Oradea Municipality, Bihor County Modernization of LV OHL, branches reconstruction - PTA2, Sinteu locality, Bihor County Modernization of 20 KV OHL Salonta-Avicola Cefa, Bihor County Switch to 20kV of metal cabin secondary substations in Baia Mare town-20 PTs Modernization of LV networks, Baia Mare town, historical center area, stage 2 Increase in distribution capacity and modernization of the Pietrosul Substation Installation of photovoltaic panel systems to cover the electricity own consumption of the administrative offices and Substations in Maramures County, belonging to DEER SA - Baia Mare Branch 2.73 1.41 2.70 1.42 1.57 1.86 2.55 2.05 1.27 1.90 1.77 1.53 3.33 6.23 1.79 2.38 4.85 2.12 7.38 1.29 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 274 275 DESCRIPTION Value (RON mn.) commissioning of investments, are the following: During 2023, the largest transfers from tangible assets in progress to tangible assets, representing mainly Modernization and switchover to 20 kV of PTZ 7 and PTA 64, Sighetu Marmatiei, Maramures County Switchover to 20 kV PTM no. 13,42,52,53 Sighetu Marmatiei town Modernization of OHL 20 KV Craidorolt, Satu Mare County Increasing electricity supply reliability of OHL 20 kV Halmeu- feeder Turt, Satu Mare County Modernization MV OHL Axis Lechinta Teaca, BN Power injection Zalau, Ortelec - Cimitirului Street, Salaj County Modernization of SCADA equipment and communications in PA/PTs Zalau Modernization of 0.4 kV OHL Faget Modernization of S-axis 20KV Almas Source: Electrica 2.77 1.77 1.68 3.36 1.84 1.36 1.26 1.52 1.32 DESCRIPTION Value (RON mn.) MUNTENIA NORD Modernization of LV OHL and connections – meters in the area of PTA 3161, PTA3 251, PTA 3320, Iazu locality, Cojasca Commune, Dambovita County Achievement of smart distribution network in a homogeneous area of consumers from Tiglina 1, Tiglina 2, Tiglina 3 - Micro 16, Tiglina 4 neighbourhoods in Galati Municipality, Galati County Voltage level improvement in localities Baldana, Tartasesti, Gulia, Commune Tartasesti, Dambovita County Implementation of an integrated resource planning system - Workforce Management (WFM) WFM - IT tool for planning and monitoring in the field the resources (humans, vehicles, devices, materials, equipment) involved in business processes: operation, maintenance, investment works with own construction teams, network access, easurement. Modernization and integration in SCADA of 110/20 kV Potlogi Substation Network modernization in Lunca Pripor village, Buzau County Modernization and integration in SCADA of 110/20 kV Zatna Substation, Braila County Modernization and integration in SCADA of 110/20/6 kV Buzau Est Substation Network modernization in CA Rosetti Commune, Buzau County, villages: Cotu Ciorii sand Balteni - vol 1; Lunca - vol 2; Balhacu, CA Rosetti and Vizireni- vol 3 Improving technical conditions of supply and the voltage level for consumers in Fulga Commune, Prahova County Modernization and consolidation of the hardware infrastructure and software of the SAP system [SAP-DEER] 2022_batch1 - OBJECT 2+OBJECT 1 Voltage level improvement for consumers in Odobesti Commune, Dambovita County, localities: Ziduri, Crovu, Brancoveanu and Miulesti Network switchover from 6 kV to20 kV, Floresti locality Modernization of 20/6 kV Ploiesti Vest Substation, integration in SCADA system and grounding compensation with BSRC (adjustable arc suppression coil), Prahova County Network modernization in Tataru and Maicanesti localities, Maicanesti Commune, Vrancea County Modernization of the 110 kV Substations: Filesti, SNG, Tecuci, Ionasesti - replacement of 110/6kV power transformers - 4 pcs Modernization of OHL 20kV by replacing insulation and conductors (OHL 20kV Urleasca - SR Ramnicelu, OHL 20kV Lacu Sarat - SRPD 1-4, OHL 20kV Romanu - T. Vladimirescu and OHL 20 kV Gropeni - Tichilesti) Modernization of network and connections Homocea, Vrancea County Voltage level improvement and modernization of LV OHL and connections for consumers from the area of PTA 3038 & PTA 3128 Varnita area, Prahova County 7.78 7.10 7.08 7.07 5.55 4.68 4.21 4.00 3.79 3.70 3.69 3.38 3.36 3.15 3.12 3.10 3.00 2.95 2.86 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 276 277 DESCRIPTION Value (RON mn.) DESCRIPTION Value (RON mn.) Improving technical conditions of supply for consumers in Rizanesti area, Valenii de Munte City Improving technical conditions of supply and the voltage level for consumers supplied with electricity from PTA 3023 Palanca, Palanca village, Rafov Commune, Prahova County Replacement of neutral point treatment in 110/20 kV Vanatori and Liesti Substations Network modernization in area of PTA 5776 no.1 and PTA 5778 CIA, Sendreni locality, Galati County Voltage level improvement & modernization of secondary substations (PT) and OHL in PTA 1104 Ciorani+PTA 1067 Cioranii de Jos area, Ciorani Commune, Prahova County Modernization of the 110 kV Hipodrom Substation, replacement of power transformers Trafo 1 (110/20/6kV) & Trafo 2 (110/6kV) Modernization of 0.4kV OHL and consumer connections from the Movila Miresii locality Modernization of 0.4 kV distribution network in Zidari neighbourhood, RM Sarat Municipality, Buzau County Modernization of secondary substations fed from UGC 20kV Blocks 1, Blocks 2, IPL, Trainica 1, Trainica 2, Pucioasa city, Dambovita County Modernization of Plopeni 20/6 kV Subtation; mounting neutral point treatment 6 kV Modernization of the 20/6kV Grup Scolar Sinaia Substation Achievement of technical conditions for coexistence with the existing electrical networks necessary to obtain the site approval for the Galati ring-road, between Braimii lei street (DN25) and Calea Prutului Street (E87), Galati Municipality Voltage level improvement for users in PT 6156, 6061, 6060,6129.6222,6062 area Racari locality, Dambovita County Increasing the power supply reliability of 20 kV OHL Zahar II and 20 kV Tartasesti Derivation, 110/20 kV Mavrodin Substation SDEE Ploiesti network modernization, for blocks of flats in Ploiesti Nord neighbourhood, Prahova County - STAGE II Modernization of 0.4 kV distribution network in Munteni locality, the areas supplied by PTA1, PTA2, PTA3 Munteni, Galati County Modernization of network and connections Sihlea locality, Sihlea Commune, Vrancea County TRANSILVANIA SUD Modernization of 0.4 kW network in Hipodrom 1,2,3 area, Sibiu Municipality, Sibiu County Modernization of the 20 kV UGC in the area of the 220/110/20 kV Alba Iulia Substation, Alba Iulia Municipality, Alba County Modernization of 20 kV network in the area of Bulevardul Revolutiei 1989, Alba Iulia Municipality, Alba County Modernization of 20 kV network in the area of Piata Iuliu Maniu, Alba Iulia Municipality, Alba County Modernization of 20 kV network in Lipoveni neighbourhood, Alba Iulia Municipality, Alba County 2.81 2.76 2.75 2.59 2.49 2.48 2.46 2.19 2.13 2.10 2.00 1.85 1.84 1.79 1.76 1.69 1.50 4.06 4.12 4.79 3.24 3.43 Modernization of 20 kV network in Lipoveni neighbourhood, Alba Iulia Municipality, Alba County Back-up supply of 20 kV busbars - Sanpaul Substation, Mures County Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Cugir, Teius, Lupsa, Sebes Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Sf. Gheorghe, Campu Frumos, Covasna, Capeni Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Cic, Tarnaveni, Mureseni, Reghin, Raciu Modernization of LV OHL and connection, Hodac locality, Mures County Modernization of 0.4 kV network and connections streets Budiului, Bega (partial) & Mestecanisului (partial), Targu Mures City, Mures County Modernization of 0.4 kV network in Dealu Frumos village, Merghindeal Commune, Sibiu County Voltage level improving and modernization of 20 kV OHL, 0.4 kV OHL and connections in Singeorgiu de Mures and Cotus localities, Mures County, Volume I- Cotus and Tofalau villages Implementation of an integrated resource planning system - Workforce Management Modernization of distribution network, Bran locality- Stage 2, PT4 area, Brasov County Modernization of distribution network, Bran locality- Stage 2, PT4 area, Brasov County Increasing the power supply reliability for 20 kV OHL Prejmer-Ozun, Covasna County Increasing the power supply reliability for 20 kV OHL Bixad locality, Covasna County Modernization of 20/0.4 kV secondary Substations, Ludus city, Mures County Modernization of the 20 kV UGC in the area COR MV-LV Tg Mures, by replacing the 20 kV cables on the Bulevard and Tudor 4 -Platou Cornesti lines, Tg Mures Municipality, Mures County Modernization of internal services of (AC) and (DC in the Substations managed by SDEE TS – Substations St. Bartolomeu, Ghimbav, Harman, Hoghiz, Prejmer Modernization of internal services of (AC) and (DC) in the Substations managed by SDEE TS – Substations Aeroport, Aurel Vlaicu, Cartisoara, Orlat, Dumbrava Decentralization of MV OHL, LV OHL conductor replacement, modernization of connections, Daisoara locality, Brasov County Modernization of 0.4 kW network and connections, Gheorghe Doja Street (Piata Victoriei-Piata garii section) and Piatra de Moara, Targu Mures city, Mures County Modernization of 0.4 kV network in Dumbraveni locality, Sibiu County Modernization of 0.4 kV network in Richis village, Biertan Commune, Sibiu County Modernization of 0.4 kV network in Mosna Commune, Sibiu County Modernization of 0.4 kV network in Merghindeal Commune, Sibiu County 5.38 3.79 2.60 1.65 1.73 2.47 1.73 2.21 2.06 2.20 4.28 2.68 3.96 3.42 5.83 2.03 1.59 1.59 2.83 2.18 10.00 2.29 4.00 1.94 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 278 279 DESCRIPTION Value (RON mn.) DESCRIPTION Value (RON mn.) Voltage level improvement and modernization of LV OHL, Carpinis locality, Garbova Commune, Alba County Modernization of 0.4 kV network and securing connections, Dumbrava Rosie str., Miraslau, Rovine, Valea Alba, loc. Brasov, Brasov County Increasing the power supply reliability and modernization of 20 kV, 0.4 kV UGC, Racadau, Brasov County Voltage level improvement and network modernization in the area of PT5 Bod & PT1 Bod, Commune Bod, Brasov County Modernization of LV network in Odorheiu Secuiesc locality, Rakoczi Ferencz street, Harghita County Voltage level improvement and modernization of 0.4 kV OHL and connections, Cetatuia locality, Harghita County Modernization of 0.4 kV network and connections, Cuza Voda, Tusnad and Cardinal Iuliu Hossu streets, Targu Mures Municipality, Mures CountyMures, jud. Mures Voltage level improvement and modernization of 0.4 kV OHL and connections, Batos locality, Mures County Voltage level improvement and modernization of MV & LV network in Miercurea Sibiului area, Sibiu County Network extension in Alba Iulia city, streets: Viadana, Mogos, Sadu and Apuseni, Alba County Network extension in Vama Buzaului village, Dalghias point, Brasov County Increasing the capacity of 20 kV network in Drumul Poienii – Schei area, Brasov city, Brasov County Reinforcement works -power increasing, Campu Frumos Industrial Park, Covasna County Site release works for the achievement of the objective “Rehabilitation of the infrastructure of the major urban public transport network in the Municipality of Alba Iulia - Batch 1 Site release works for the achievement of the objective “Rehabilitation of the infrastructure of the major urban public transport network in the Municipality of Alba Iulia - Batch 2 Modernization of LV network by switchover from 0.4 kV OHL to 0.4 kV UGC, connections modernization and securing in streets Fabricii, Tigaretei, Tutunului and Salciilor, Sf. Gheorghe Municipality, Covasna County Release of site for Modernization DJ106B:A1 Ocna Sibiului Loamnes-Sorostin-Tapu TRANSILVANIA NORD Security Operations Center (SOC) implementation and standardization of Security Technologies used Modernization of switching equipment related to MV OHL for the Cluj-Napoca Distribution Branch, Cluj County Modernization of pole mounted substations, SDEE TN- Distribution Branch Cluj Napoca, Cluj County, Vol2 - area of network operation center Gherla Modernization of MV OHL Juc Geaca between R Gadalin and R Geaca 1.98 2.59 6.36 8.21 2.36 2.45 3.14 1.69 4.60 2.82 1.85 4.55 1.95 2.05 2.42 1.54 1.93 1.62 2.84 1.56 3.00 Modernization of Substations PTz CT1, PTz CT8 and UGC 20 kV between PTz CT1, PTZ CT8, Dej city, Cluj County Network modernization in Cluj-Napoca Municipality, Mihail Kogalniceanu Street and adjacent streets area, Cluj County, Modernization of the existing MV &LV UGC a on streets Dragalina and Mamaia in Cluj-Napoca Municipality Closure of the 20 kV loop between Jucu-Valcele and Jucu Geaca, construction of PTAb 20/0.4 kV - 250 kVA and power injection in Caian Vama Increasing reliability of power supply in Floresti town, Cluj County – Vol. 5 Modernization of the Distributor Abator and construction of Distributors Cimitir & Poligon Systematization of distributor exits from the 110/20/10 KV Campului Substation and modernization of distributors Manastur 9, Manastur 10 and UAC Cartier Manstur, Cluj-Napoca Municipality, Cluj County Network modernization on B-dul 1 Decembrie 1918, Cluj-Napoca Municipality, Cluj County - Stage 1- The section between PTAB Hotel Napoca and G. Muzicescu street Modernization of pole mounted secondary Substations - Oradea Branch Network modernization in Sacadat locality Modernization of LV OHL and power injection in Serghis locality, Bihor County Increasing the power supply reliability in Stana de Vale, Coada Lacului area Modernization of MV UGC in the area Nufarul and Rogerius Neighbourhoods, Oradea Construction of UGC between OHL 20 kV vadu Crisului – Bauxita Cornet and Suncuius-Recea to increase power supply reliability Improvement of the electricity distribution service in 110/20kV CET 2 Oradea Substation Construction of MV UGC to increase power supply reliability in Matei Corvin area, Oradea Municipality, Bihor County Power injection in Lorau locality, Bihor County Modernization of LV OHL, branches reconstruction - PTA2, Sinteu locality, Bihor County Modernization of 20 KV OHL Salonta-Avicola Cefa, Bihor County Switchover to 20kV the metal cabin secondary substations in Baia Mare locality -20 pcs Modernization of LV networks, Baia Mare town, historical center area, stage 2 Installation of photovoltaic panel systems to cover the electricity own consumption of the administrative offices and Substations in Maramures County, belonging to DEER SA - Baia Mare Branch Modernization and switchover to 20 kV of PTZ 7 and PTA 64, Sighetu Marmatiei, Maramures County Extension of public distribution network in Grosii Tiblesului, Valea Tiblesului (Bradului) area, Maramures County Modernization of OHL 20 KV Craidorolt, Satu Mare County 1.28 2.67 2.05 1.62 3.55 2.59 1.28 1.27 1.60 1.50 2.13 1.51 1.76 3.48 6.90 1.86 1.85 5.26 4.87 3.81 1.40 2.83 1.29 1.81 2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 20232023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 280 281 DESCRIPTION Value (RON mn.) Appendix 3 – Applicable regulatory framework Increasing power supply reliability of OHL 20 kV Halmeu- feeder Turt, Satu Mare County Modernization of secondary substations PTA Reteag Poieni, PTA Reteag Moara, modernization of connection Reteag Poieni and LV OHL and connections in PTA in Reteag Poieni, PTA Reteag Sat, PTA Reteag SMA and Reteag Moara, area, Reteag locality, Bistrita Nasaud County Secondary substation modernizaton and power transformers replacement in Bistrita Branch, Bistita Nasaud County Modernization and relocation of pole mounted transformer PTA Negrilesti, PTA Negrilesti 2, PTA Negrilesti 3 and modernization of LV OHL and connections in area of PTA Negrilesti, PTA Negrilesti 2, PTA Negrilesti 3, PTA Negrilesti 4, Negrilesti locality, Satu Mare County Modernization MV OHL Axis Lechinta Teaca, BN Power injection Zalau, Ortelec - Cimitirului str., Salaj County Modernization of 0.4 kV OHL Faget Source: Electrica 3.62 1.50 1.32 2.43 2.00 1.40 1.52 A.3.1 - Applicable legal framework compared to 2023 vs 2022: A.3.1.1 Distribution activity 2022 2023 Distribution activity Distribution activity ANRE has issued documents for the regulatory framework that requires additional efforts from distribution operators in order to comply with the new requirements: ANRE has issued documents for the regulatory framework that requires additional efforts from distribution operators in order to comply with the new requirements: Regulations regarding tariffs: Regulations regarding tariffs: • The distribution rates approved for the year 2022 were approved by ANRE Order no. 119/24 November 2021, the regional average tariffs for DEER having the following increases compared to the tariffs of 2021: MN +8.1%; TN +10.4%; TS +7.4% - in force from 1 January 2022 • As a result of GEO 27/2022, the distribution tariffs for the year 2022 were modified starting on 1 April 2022 to cover the additional costs related to the NL from the year 2021. By ANRE Order no. 28/23 March 2022, the regional average tariffs for DEER were approved, with the following increases compared to the tariffs of 2021: MN +24%; TN +17%; TS +20%. This tariff increase will allow the recovery of the amount of RON 363 mn. (RON 353 mn. recognized 2021 NL loss to which inflation was applied) representing the difference between the effective average purchase cost of energy for own technological consumption (NL) and the ex-ante price established by ANRE related to the year 2021 in the period 1 April 2022-31 December 2022, which will favorably impact the net result related to the distribution segment in the remaining period of 2022. • ANRE decision no. 610/2022 regarding the approval of the model for the publication of costs regarding the operation, maintenance and development of electric transmission and distribution networks - in force from 1 May 2022. OD will publish quarterly on their own internet webpages, both the realized and the budgeted costs. • The distribution rates approved starting with 1st of April 2023 were approved by ANRE Order no. 27/2023, the regional average tariffs for DEER having the following increases compared to the tariffs from 1st of April 2022: MN +26.1%, TN +21.5%, TS +10.9%; - effective from 1st of April 2023. • The specific tariffs applicable starting from 1st of April 2023 are composed of the main component and a component related to additional costs with NL, the latter was not subject to the 7% limitations imposed for tariff increases, being recognized as a distinct component of tariffs related to capitalized costs recognized with additional NL for the year 2022, amortized over a period of 5 years from the date of capitalization and remunerated with 50% of the regulated rate of return approved by ANRE, according to GEO no. 119/2022. • ANRE Order no. 1/2023 for the modification and completion of some orders of the ANRE - effective from January 17, 2023 • The methodology for establishing distribution tariffs - is modified and provides for the granting of the RRR incentive of 2% for investments from EU funds only if they have not benefited from the PCI incentive • The project was developed as a result of ANRE’s obligation to present to ACER, by January 24, 2023, the methodology and criteria used to evaluate investments, in the sense of alignment with Regulation (EU) 2022/869: • energy infrastructure projects and high risk assessment • the specific risks to which offshore networks for energy from renewable sources are exposed 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 DIRECTORS’ REPORTAPPENDIX 2 – MAIN INVESTMENTS DURING 2023ELECTRICA S.A2023 ANNUAL REPORT282 283 2022 2023 2022 2023 • ANRE order no. 129/2022 for the approval of the Methodological Norms for the recognition in tariffs of additional costs with the purchase of electricity to cover own technological consumption compared to the costs included in the regulated tariffs - in force from 19 October 2022 • ANRE order no. 67/2023 approving the tariff for the purchase of system services for the transport and system operator Compania Nationala de Transport al Energei Electrice „Transelectrica” - S.A. - effective from June 1, 2023 Decrease compared to January 1, 2023 tariffs by 14.1% • the quarterly capitalization of the additional costs with NL compared to the costs included in the regulated tariffs, • the capital costs related to the year 2022 are recognized in a distinct component related to the additional cost with NL applicable starting on 1 April 2023, outside the 7% limitations imposed for tariff increases. • the recognized NL price for 2022 will be equal to the reference price calculated as an average among network operators, increased by 5% • the additional cost with NL capitalized in 2023 will be included in the separate NL component applicable in the year 2024 • MF order no. 3900/2022 regarding the approval of the Accounting Specifications in application of the provisions of art. III of the Government Emergency Ordinance no. 119/2022 - in force from 20 October 2022 Capitalized amounts are recorded in accounting through accounting item 208 „Other intangible assets”/ distinct analytical account = 721 „Income from the production of intangible assets”, as follows: • on 30 September 2022, for the amounts corresponding to the period 1 January 2022 – 30 September 2022; • on 31 December 2022, for the amounts corresponding to the period 1 October 2022 – 31 December 2022; • on 31 March 2023, for the amounts corresponding to the period 1 January 2023 – 31 March 2023; • on 30 June 2023, for the amounts corresponding to the period 1 April 2023 – 30 June 2023; • on 31 August 2023, for the amounts corresponding to the period 1 July 2023 – 31 August 2023; • The amortization of the amounts corresponding to the recognized assets is recorded in the accounting starting with the 1st of the month following each of the periods. • Draft Decision on the approval of the principles for establishing binomial tariffs for the distribution service provided by concessionary electricity distribution operators - public consultation • ODCs have the obligation: • to simulate the application of binomial tariffs for the period 1 January 2022 - 31 December 2022; • to publish on its own websites, within 60 days, information regarding the implementation project of binomial tariffs from 01.01.2024; • ANRE order no. 79/2023 regarding the modification and completion of the Methodology for establishing tariffs for the electricity distribution service, approved by ANRE Order no. 169/2018 - effective from July 10, 2023 • The changes take into account the definition of the year 2024 as a transition period from RP4 to RP5 and the establishment of the target income for the year 2024 according to the Methodological Norms that complete the Methodology (Annex 1^1) • For DEER, in 2024: single regulated revenue, zonal distribution tariffs, single NL targets on total DEER. • For all DOs: • The 2024 NL target is established using the reduction gradient 2023 compared to 2022 applied to 2023 • The 2024 NL reference price is calculated as a weighted average considering 75% the price approved by MACEE and 25% the DAM price in May 2023. • The regulated rate of return for 2024 remains at 6.39% • The inflation rate used to calculate the 2024 tariffs is equal to 4.6% (forecasted by CNP for the year 2024). • The inflation corrections related to RP4 will be calculated in 2024 and will be added to the target income of 2025 • ANRE Order no. 82/2023 regarding the modification and completion of ANRE orders - effective from August 15, 2023 • Energy technical norm regarding the determination of own technological consumption in public interest electric networks - NTE 013/16/00, approved by ANRE Order no. 26/2016 • it is stipulated that the determination of the quotas assigned to the producers and the transport operator from the amount of NL related to the additional transit of electricity from the 110 kV electrical networks, should be carried out by the DO • The methodology for establishing tariffs for the electricity distribution service, approved by ANRE Order no. 169/2018 • DO recovers from the TSO the counter value of the amount of NL related to the additional transit of electricity, for the quotas assigned to producers and TSOs. • to notify consumers in order to declare/update the contracted power and inform them about the operator maintaining the power at the approved level for a limited period of three years, if it is not used; • to make available to network users and their suppliers, upon request, the data necessary for the calculation of the bill based on the binomial rate, for the entire period of the simulation. • to ensure the adaptation of IT systems to the new pricing system by 31.12.2023; • the monitoring data of the simulation of the application of the binomial tariff for the electricity distribution service are transmitted to ANRE by the ODC until 15 February 2023. • the amount of NL related to the additional transit of electricity from the 110 kV electrical networks, determined according to ANRE regulations, is taken into account in the annual correction of the regulated NL at the request of the operator, by reducing the amount of NL realized. • the revenues recorded from the recovery from the TSO of the counter value of the amount of NL related to the additional transit of electricity from the 110 kV electrical networks are not taken into account when determining the corrections of the regulated income. • ANRE Order no. 104/2023 regarding the modification and completion of the Methodological Norms regarding the recognition in tariffs of the additional costs with the purchase of electricity to cover NL compared to the costs included in the regulated tariffs, approved by ANRE Order no. 129/2022 – effective from December 1, 2023 • Introduction of provisions regarding the method of determining additional costs with NL for the period September 1, 2023 – March 31, 2025, respectively: • the introduction of the obligation to transmit by DO/TSO the forecasts of the quantities of electricity in the balance sheet, broken down by quarters; • the cost with NL for quarter 1 2023 is calculated as the product of the price and quantity of NL quarter 1 2023, used to calculate the rates April 1, 2023; • the cost with NL for quarters 2-4 of 2023 included in the tariffs, is calculated as the difference between the cost with NL 2023 used in the tariffs on April 1, 2023 and the cost with NL quarter 1 2023 • realized costs recognized ex-ante, based on the costs realized in the first 3 quarters and the estimated costs for the 4th quarter (determined on the basis of the quantity and price of NL included in the tariffs) • recalculation of capital costs as a result of the adjustment of additional capitalized costs due to: a) the final closing of each year (differences resulting from the recalculation of additional capitalized costs due to differences resulting from NL quantity or price); b) the differences between the inflations used to determine the capital costs included annually in the component and the actually realized inflations (adjustment of depreciation and profitability as a result of the use of forecasted inflation rates different from those actually realized, which are carried out in the year following the publication of the inflations realized by to the competent institutions). 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT284 285 2022 2023 2022 2023 c) the inflation correction related to NL costs included in the regulated tariffs according to the Methodology for setting tariffs, which leads to the adjustment of the capitalized NL value). • The differences in capital costs mentioned in points a), b) and c above will be included in the related component of the additional costs with NL from the tariffs of the following year(s). • Completing/amending some existing provisions regarding: • the transmission by October 31 of each year of the values achieved for the first 3 quarters of each yeathe transmission of the annual values of the current year, broken down by quarters, until the deadline of February 15 of the following year • ANRE transmits to TSO/DSO the recognized annual values of capitalized costs for the previous year until March 15 of the year following the year of capitalization of additional costs. • the method of recognizing capital costs so that they are applicable for the entire period September 1, 2023 - March 31, 2025. • ANRE order no. 109/2023 approving the average tariff for the electricity transmission service, the components of the transmission tariff for introducing electricity into networks (T_G) and extracting electricity from networks (T_L) and the regulated price for reactive electricity , practiced by the National Electric Energy Transport Company “Transelectrica” - S.A. and ANRE Order no. 116/2023 approving the tariff for the purchase of system services for the transport and system operator Compania Nationala de Transport al Energei Electrice “Transelectrica” - S.A - effective from January 1, 2024 With the following deviations compared to the tariffs from April 1, 2023: T_L: 1%. T_G: -5.4%, respectively compared to June 1, 2023: T_S +38.1% • The electricity distribution service tariffs for the year 2024 were approved by ANRE Order no. 115/2023, the average tariffs for DEER having the following increases compared to the tariffs from April 1, 2023:: MN +7.6%, TN +5.8%, TS +6.9%; - effective from January 1, 2024. • MF Order no. 5378/2023 regarding the approval of some accounting clarifications in application of the provisions of art. III paragraph (1) from Government Emergency Ordinance no. 119/2022 for the amendment and completion of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market in the period April 1, 2022-March 31, 2023, as well as for the modification and completion of some normative acts in the field of energy - effective from December 20, 2023. • Correlation of the period of application of GEO 27/2022: Amounts capitalized according to art. III paragraph (1) from GEO no. 119/2022 for the amendment and completion of the GEO no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period April 1, 2022-March 31, 2023, as well as for the modification and completion of some normative acts in the field of energy, with subsequent additions, are recorded in the accounting through the accounting article 208 «Other intangible assets»/ distinct analytical = 721 «Income from the production of intangible assets», as follows: f) on December 31, 2023, for the amounts corresponding to the period September 1, 2023-December 31, 2023; g) quarterly, on the last day of each quarter, for the corresponding amounts, during the period January 1, 2024-March 31, 2025. Investment Procedure Investment Procedure • ANRE order no. 98/2022 - for the approval of the • ANRE Order no. 1/2023 for the modification and Procedure regarding the substantiation and approval of the development and investment plans of the transport and system operator and of the electricity distribution operators - in force from 12 July 2022 • The elaboration of the 10-year development plans of the investment plans for the period or annually is carried out on the basis of an internal OR procedure. The 2023-2033 plan is submitted to ANRE until 1 July 2023. The 10-year development plan considers: • analyses regarding the evolution of production and consumption, evaluation of the need for vehicle recharging points, of the dispatchable consumption potential in the area; • studies regarding the digitization and integration of flexibility services required in RED in the medium and long term; • analysis of the measures and programs intended to ensure the cyber security of IT systems; and includes: • estimated values regarding the impact of delays or non-realization of the investments contained in the previous edition of the development plan; • the stage of implementation of the new obligations regarding network digitization, flexibility services, integration of dispatchable consumption and distributed production from renewable sources; • presentation and argumentation of the way of correlation and compliance of the Plan with the medium and long-term Energy Strategy of Romania and with the National Plan regarding energy and climate Regulation (EU) 2018/1999; completion of some orders of the ANRE - effective from January 17, 2023 • Methodology for the evaluation of investments in projects of common interest (PCI) approved by ANRE Order no. 139/2015 is amended as follows: • expanding the scope of the Methodology for DO investments (in addition to TSOs) • granting a 1% RRR incentive for PCI • expanding the scope of the type of PCI from electric transmission networks to: a) electric transmission and distribution networks; b) offshore networks for energy from renewable sources; c) projects that integrate innovative technical solutions and which, although they have low capital costs, involve significant operating costs. • ANRE Order no. 6/2023 for the completion of the Procedure regarding the substantiation and approval of the investment plans of TSOs and DOs, approved by ANRE Order no. 98/2022 - effective from February 13, 2023 • provides for the submission by DO to ANRE of the Development Plan for the period 2024-2033, by 1st of July 2023 • Modifications consider the recognition of DO investments in energy storage and production for control and NL: • the inclusion in the category of justifiable investments of energy production facilities from renewable sources for NL supply and control consumption in the station; 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT286 287 2022 2023 2022 2023 • The benefits pursued, in total and by voltage levels, will reduce the approved costs for each year of the regulatory period and for the entire period, according to the Tariff Methodology; • In the situation where the OR does not own or partially owns motor vehicles, the DSO has the right to request from ANRE the agreement for the establishment in the reference year of a regulatory period; a) The value of the investment plan from own sources must be equal to the minimum forecasted depreciation for the period, and not annually. • the inclusion of electricity storage facilities in the category of necessary investments; • the possibility for DO to own storage facilities, by way of exception from the provisions of the Energy Law (art. 46^1 par. (1)), only with prior approval by ANRE; • establishing the method of calculating the economic efficiency of investments in production/ storage, with a view to recognition by ANRE (Annex no. 8). • ANRE Order no. 80/2023 for the modification and completion of the Methodology for evaluating the financing conditions of investments for the electrification of localities or for the expansion of electricity distribution networks approved by ANRE Order no. 36/2019, with subsequent amendments and additions - effective from July 20, 2023 • obligation for the DO to return to the public authority and/or the user/group of users, the financing quota paid by them and to take ownership of the network elements related to the returned quota, in the situation where the respective network is located in the urban area of the locality. The deadline for the refund of the financing quota is January 31 of the calendar year following the one in which the network was put into operation. • the ineffective share of the work of electrification/ extension of the electricity network, resulting from the recalculation based on the value without VAT from the minutes of reception of the commissioning, returned by the DO to the public authority and/or the user/group of users, is recognized in the regulated income of the DO of the year following the restitution, based on supporting documents regarding the amount and proof of the restitution. • for the electrification or expansion of electrical distribution network carried out through co- financing, the deadline for the recalculation of the efficiency ratio of the works has been extended to 30 days from the completion of the works and the signing of the acceptance minutes upon completion of the works and acceptance of the commissioning. • for the works carried out in the outskirts of the localities, the maximum term of 90 days was specified in which the DO and the co-financing participants, respectively the local authority and/ or the user/group of users pay the regularization amounts in correlation with the recalculated investment efficiency rate. 90 days before the expiration of the 5-year term from the network’s commissioning, ODC recalculates the investment efficiency rate resulting from the subsequent connection of other users and returns to the financing co-participants the difference between the co-financing rate that was due to them initially and the co-financing rate resulting from the efficiency recalculation. • for the implementation of local electrification works/ network extension, in the case of co-financing, DO together with the public authority in its own name and/or as a representative of the users, as the case may be, or together with the user/group of users through an authorized representative tripartite contract for the execution of works with a certified economic operator, in compliance with the legal provisions in force. • The modifications and additions apply to the public authority/user/group of users who submitted an application for the development of the electrical distribution network for the electrification of the locality or for the expansion of the electrical distribution network, after the date of entry into force of Law no. 248/2022 regarding the approval of GEO no. 143/2021 for the amendment and completion of the Electricity and Natural Gas Law no. 123/2012, as well as for the modification of some normative acts, with subsequent modifications, respectively 25.07.2022. • Draft Order for the approval of the Procedure regarding the approval of the investments of the transport and system operator and the distribution operators, which consist of electricity production installations from renewable energy sources located in their own electrical transformation stations - public debate • For the ANRE to approve an installation for the production of electricity from renewable sources in the premises of an own electrical transformation station, the following conditions must be met: • the electricity produced is consumed exclusively to supply the own consumption of the power station where the installation is located; • TSO/DSO includes technical measures for managing the energy produced, so that it cannot be discharged into the public network. • The ex-ante presentation of the cost-benefit analysis is required, as well as the analysis, every year after PIF, of the level of benefits achieved in relation to the costs included in the network tariffs. In the event that the realized benefits are lower than the realized capital and operational costs, the profitability related to the investment, recognized for the respective year, is reduced accordingly, so that the capital and operational costs related to the investment do not exceed the realized benefits. b) The approved investments are included in the investment plan of the TSO/DSO in the endowment category, derogation for the investments made in 2023 and approved are considered additional investments to the investment plan for the year 2023, in the endowment category and are reported until May 31, 2024 in a table dedicated to this type of investment. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT288 289 2022 2023 2022 2023 Licenses and authorizations Licenses and authorizations Smart metering regulations (SM): Smart metering regulations (SM): • ANRE order no. 24/2022 regarding the amendment of the Regulation for granting licenses and authorizations in the electricity sector, approved by ANRE Order no. 12/2015 – in force starting from 25 March 2022 • the removal of the legal ban on issuing a single license to the electricity market operator on the electricity market in Romania; • ANRE Decision no. 491/30.03.2022 regarding the granting of the License to the market operator of the Romanian Commodity Exchange (BRM) was published. • Draft order regarding the approval of the Regulation for the granting of licenses and authorizations in the electricity sector - public consultation - phase II • renaming the types of licenses granted by ANRE, in accordance with the provisions of art. 10 para. (2) from the Energy Law; • taking over within the regulation of all exceptional situations provided by law in which it is allowed to provide some services and activities in the field of electricity without the license issued by ANRE, in accordance with the provisions of art. 10 para. (4^2), para. (5), para. (6) and para. (6^2) from the Energy Law; b) the explicit specification of the situation regarding modification of the license for the commercial exploitation of the energy capacities by including in its contents some energy capacities over which the applicant can have a provisional exploitation right, until the date when the license holder obtains the definitive exploitation right, in the case of the transfer of the right of ownership/use of the respective energy capacities. • ANRE Order no. 66/2023 regarding the approval of the Regulation for the authorization of electricians in the field of electrical installations, respectively of project verifiers and quality technical and extrajudicial experts in the field of technological electrical installations - effective from May 1, 2023 • the proof of the qualifications of an authorized electrician in the field of electrical installations, an authorized project verifier or a quality technical expert and authorized extrajudicial in the field of technological electrical installations will be achieved by the issuance by the competent authority of an authorization, a nominal and non-transferable document; • the method of submission of documents by applicants will be realized by uploading them on the ANRE portal or in the PCUe platform and eliminating the possibility of submitting them directly to the ANRE registry or by post; • modification of the procedure for organizing the examination for the authorization of electricians, respectively the interview for the authorization of project verifiers, as well as quality technical and extrajudicial experts in the field of technological electrical installations; • ANRE decision no. 1315/2022 amending the calendar for the implementation of smart electricity metering systems at the national level for the period 2019-2028 approved by ANRE decision no. 778/2019 – effective from 3 August 2022 ODCs have the obligation that within a maximum of 18 months from the approval of the decision:: • to update the cost-benefit analyzes for the implementation of intelligent electricity metering systems, taking into account the changes from the new European legislative package transposed into national legislation with an impact on the structure and level of costs and benefits involved in the process; • to re-evaluate the degree of implementation of the smart electricity metering systems in the concession areas and to submit to ANRE, if necessary, proposals to modify the implementation calendar of the smart electricity metering systems for the concession area, correlated with the results of cost-benefit analyses. • ANRE Order no. 13/2023 approving the contract - framework for the provision of electricity in the universal service regime, the general conditions for the provision of electricity in the universal service regime and the invoice model applicable to household customers - effective from April 1, 2023 Provisions regarding the SMI in the framework contract for universal service electricity supply framework – • DO have the obligation to invoice monthly the distribution service to end customers with meters integrated in the SM based on the recorded data; • DO have the obligation to ensure the meter reading and to communicate monthly the measured data for customers who have meters integrated in the SMI in case the connection to the communication system is interrupted; • for final customers who have meters integrated in SM, regularization invoices are not issued. Technical regulations a) Network connection Technical regulations a) Network connection • ANRE issued orders for connection in order to • ANRE Order no. 4/2023 for the modification and • it is proposed to facilitate obtaining the qualification harmonize with the provisions of GEO no. 143/2021: of licensed electrician, by completing the list of acceptable professional qualifications (CPA) with a new qualification (CPA 4.1) which is applicable to qualified workers in the field of energy, electrotechnical, electromechanical or electrical installations for constructions, having also the diploma baccalaureate in a field other than these. • ANRE Order no. 95/2023 regarding the modification of the General Conditions associated with the license for aggregation activity, approved by ANRE Order no. 196/2020 – effective from October 25, 2023 Updating definitions: • aggregate entity - entity resulting from the voluntary aggregation of electricity producers and/or final customers (consumers) of electricity and/or owners of electricity storage facilities, which manages a UA; • aggregate unit - the portfolio of places of production (UC) and/or consumption (CC) and/or storage facilities (ISC) managed by an EA, which meets the condition that the sum of the maximum simultaneous electrical powers approved to be absorbed/ debited (registered in the ATR/ the related UC/CC/ISC connection certificates) to be at least 1 MW and the condition that there is the technical ability to respond to the dispatcher’s instructions (the ability of the UA and its components to be controllable). i. domestic connection - In the case of domestic customers, upon commissioning of the completed connection works, DSO will reimburse the applicant the effective value of the design and execution of the connection, up to an average value of a connection, established according to a methodology approved by ANRE. The assets resulting from the connection works become the property of the distribution operator from the moment of commissioning, at the amount reimbursed to the household customer, being recognized by ANRE as part of the regulated assets base. ii. non-domestic connection - In the case of non- domestic customers, the cost of the connection works, including those for the design of the connection/connection, is fully borne by the customers. The assets resulting from the connection works enter the DSO heritage from the moment of commissioning, without being recognized by ANRE as part of the regulated assets base. iii. Issued orders: • ANRE order no. 17/02.03.2022 - Order for the amendment and completion of the Regulation regarding the connection of users to the public interest electrical networks, approved by ANRE Order no. 59/2013 in force starting from 4 March, 2022 completion of ANRE orders in the field of connection to the public interest electric network of users - effective from February 3, 2023 • the modification and completion of the following regulations, in the sense of including the possibility of household customers, PFA, individual businesses, family businesses and public institutions whose places of consumption are connected to LV, as well as prosumers, to purchase the metering group or the protection block and measure fully equipped, including the meter in compliance with the technical specifications provided by TSO/DSO: • Connection Regulation • The procedure regarding the connection to LV networks of household customers - ANRE Order no. 18/2022 • Connection framework contracts - ANRE Order no. 105/2022 • The procedure regarding the connection to the networks of the prosumers - ANRE Order no. 19/2022 • TSO/DSO is obliged to reimburse the user the value of these equipments at the terms established in the connection contracts; the reimbursement is made on the basis of the supporting documents presented by the user, without being limited to: tax invoice, compliance certificates, warranty certificates, etc. • the obligation of the DO to mount the meter is maintained, the deadlines in force stipulated in the connection contracts being maintained. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT290 291 2022 2023 2022 2023 • ANRE Order no. 18/02.03. 2022 - Order approving the Procedure for the connection to low-voltage public interest electricity networks of consumption sites belonging to domestic customers - in force from 7 March 2022 - repeals ANRE Order no. 17/2021 domestic customers - in force from 7 March 2022 - repeals ANRE Order no. 17/2021 • ANRE Order no. 21/09.03.2022 - Order amending and supplementing the Methodology for establishing the tariffs for the connection of users to the electricity networks of public interest, approved by ANRE Order no. 11/2014 - in force since 11 March 2022 • ANRE order no. 11/2023 for the modification and completion of the Methodology for issuing location notices by network operators, approved by ANRE no. 25/2016 - effective from March 13, 2023 • the definition of „risk analysis” was introduced as technical-economic documentation for the analysis of the impact of non-compliance with the regulated coexistence conditions. This is drawn up by a quality and extrajudicial technical expert in the field of technological electrical installations, who holds a license/certificate issued by ANRE, or by a qualified expert in the prevention and reduction of technological risks • ANRE Order no. 22/09.03.2022 - Order amending • clarifications were made regarding the use of the and supplementing ANRE Order no. 141/2014 approving the specific tariffs and specific indices used to set the tariffs for connecting users to the public interest electricity grids - in force since 11 March 2022 • ANRE Order no. 23/09.03.2022 - Order on the approval of the average values used by the distribution operator for the reimbursement to household customers of the cost of design and execution works of a connection - in force since 11 March 2022 • ANRE Order no. 63/2022 amending ANRE Order no. 95/2018 on the approval of mandatory clauses in contracts for the provision of services in order to carry out connection works to electricity networks of public interest - in force since 31 March 2022 • clarification of the applicability of the Binding Clauses in conjunction with the amendment of Art. 44, para. (4) of the Connection Regulation, introduced by ANRE Order no. 160/2020. It introduces the possibility for the approved economic operator to constitute a guarantee of good performance of the contract in favour of the RO, through a guarantee instrument issued by non-banking financial institutions. • contracts for the provision of services for the execution of connection works to the electricity grids of public interest concluded before the date of entry into force of the Order shall be updated by the conclusion by the parties of an additional act within 30 days from the date of entry into force of the Order. • ANRE Order no. 137/2021 Order for the approval of the Procedure for the determination of the available capacity in the electricity networks for the connection of new electricity generation facilities - in force since 1 March 2022: • rules for determining the available capacity in RET/ RED at 110 kV voltage level; • rules for publication of data on available capacities; • deadlines and periodicity of publication of data on available capacities by grid operators: monthly from 1 April 2022; bi-monthly from 1 July 2022. favorable location notice conditional on the issuance of the building permit. • through the changes made, it will allow the use of the coexistence study drawn up in the approval phase of the urban planning documentation and in the procedure for issuing the site approval. • ANRE Order no. 21/2023 regarding the modification and completion of the Methodology for the exchange of data between the transport operator and the system, distribution operators and significant network users approved by ANRE Order no. 233/2019 - effective from April 4, 2023 • the introduction of electricity storage facilities connected individually to the electrical network, with a response in providing active power distinctly from electricity production facilities; • detailing the relevant system users who are the subject of information transmission to DO and TSO; • detailing the method of transmitting data from relevant system users, directly and indirectly, to DO and TSO. • in accordance with the provisions of the norm for connecting storage facilities, it is necessary to specify: • communication path, redundancy and data exchange for storage facilities. These storage installations can be linked with the electricity production installation or they can be operated independently. • how the programmed and planned data exchange is carried out until the provisions of ANRE Order no. 127/2021, with subsequent amendments and additions. • ANRE Order no. 60/2023 for the modification and completion of the Methodology for establishing user connection rates to public interest electrical networks, approved by ANRE Order no. 11/2014 – effective from April 21, 2023 • ANRE Order for the purpose of harmonization with the provisions of the ANRE regulatory framework in which the legislative amendments of GEO no. 143/2021 were transposed, namely with the provisions of ANRE Orders no. 17/2022, no. 18/2022 and no. 19/2022. • completion of the list of normative acts, with ANRE Order no. 105/2022, within which the two types of strengthening works are defined: specific and general. • if general strengthening works are needed to • ANRE Order no. 82/2022 - amending and supplementing ANRE Order no. 74/2014 approving the framework content of the technical connection permits - in force from 20 June 2022; • ANRE Order no. 83/2022 - modification and completion of ANRE Order no. 5/2014 for the approval of the framework content of the connection certificates - in force from 20 June 2022; • ANRE Order no. 105/2022 approving the framework contracts for connection to the electricity networks of public interest - will repeal ANRE Order no. 164/2020 - in force from 5 August 2022. • ANRE Order no. 81/2022 - Order amending and supplementing the Regulation on the connection of users to the electricity networks of public interest, approved by ANRE Order no. 59/2013 - in force from 17 June 2022 • requires the OR to complete the value of the costs of carrying out the general reinforcement works and the method of payment to the first user and the other users respectively, in the connection contract it concludes with the new user; • introduction of the possibility for the OR to conclude a contract for the design and/or execution of reinforcement works for the creation of the technical conditions necessary for the connection of several consumption and/or production sites, with a specific certified designer and/or constructor chosen by the user; • the responsibility of the RO/economic operator to obtain the agreement/authorisation for the execution of the connection installation, in the case of the direct conclusion between the user and the approved economic operator designated by the user of the contract for the design and/or execution of the connection installation as such: • for the connection installation which will be owned by the user, the document shall be obtained by the user or, where appropriate, by the designated approved economic operator; • for the connection facility which will become the property of the RO, the document shall be obtained by the OR. • ANRE Order no. 103/2022 for the approval of the Procedure for the connection to the electricity grids of public interest of recharging points for electric vehicles - in force from 4 August 2022 connect a production site or a consumption and production site, the calculation method currently provided in the Methodology is maintained. Thus, the users will bear the costs of the general strengthening works established on the basis of the general estimate, but no more than a calculation value, established taking into account the power approved for discharge into the network for the respective place of production/consumption and production , as well as the specific rates approved by ANRE. • ANRE order no. 70/2023 for the modification and completion of some ANRE orders in the field of connection to the public interest electric network of users – effective from May 31, 2023 • Regulation regarding the connection of users to the public interest electrical networks approved by ANRE Order no. 59/2013: • in the case of existing power plants/generating units from renewable sources for which the retrofitting projects lead to an increase of up to 15% of their total installed power compared to the value recorded in the valid connection certificate, the issuance of the technical connection approval is carried out within the maximum 3 months from the date of registration of the connection request and the complete documentation at the DO/ TSO, with the exception of the case where there are justified concerns in terms of safety or there is a technical incompatibility with the system components. • Procedures regarding the connection to the electric networks of public interest of places of consumption and production belonging to prosumers approved by ANRE Order no. 19/2022: • description of the rules for connecting to an existing place of consumption/place of consumption and production of electricity production facilities from renewable sources of prosumers and demonstration projects, with installed powers of no more than 10.8 kW for three- phase or equivalent connections of this power for connections other than three-phase ones. • according to GEO no. 163/2022, “in case of a decision approving the connection of the distribution operator or in the absence of a decision on his part, within one month from the notification, the installation or the aggregate production unit can be connected”, the period between the date of the notification regarding the installation of generating units at a place of consumption/consumption and production or the. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT292 293 2022 2023 2022 2023 • the connection of a new consumption site, consisting of one or more recharging points for electric vehicles; • connection of a new consumption/consumption and production site with electric vehicle charging points, with/without storage facilities; • installation of one or more electric vehicle charging points at an existing consumption site/site of consumption and production with/without storage facilities. • applies in conjunction with the provisions of the Connection Regulation, the Domestic Connection Procedure and the Prosumer Connection Procedure in force. • establishes, for certain stages or actions in the connection process, shorter deadlines, similar to those provided for the connection of prosumers. • when installing one or more recharging points for electric vehicles at an existing point of consumption, without exceeding the approved power, the existing ATR/CfR is not updated, and no additional work is carried out in the existing electrical installations upstream of the boundary point. • the obligation of the SB to draw up its own procedures, within 30 days of publication in the Official Gazette, for the organisation of the connection activity for the categories of users to whom the document is addressed and to make available to interested parties all relevant information on the connection process. • Order no. 133/2022 amending and supplementing some orders of ANRE in the field of connection to the electricity grid of public interest users - in force since 21 October 2022 • Connection Regulation: (i) deletion of the provision that connection facilities financed by non-household final customers become part of the DO’s assets at the time of commissioning; (ii) addition of the definition of prosumer • ATR framework content: (i) deletion of the provision according to which connection facilities financed by non-household customers enter into the ownership of the TO at the time of commissioning; (ii) addition of the categories of users connected to the LV to whom the TO reimburses the costs of the design and execution of the connection up to an average value • Domestic connection procedure: (i) the categories of users connected to the LV to which the procedure applies must be completed and included in the contracting parties provided for in the framework contracts; (ii) the documents required for the conclusion of the connection contract must include the certificate issued to the user by the trade register no later than 30 days before the date of submission of the certificate, in the case of users other than domestic customers; connection of demonstration projects and the date of putting under voltage is a maximum of 1 month • ANRE order no. 108/2023 for the modification of the annex to the Procedure regarding the determination of the available capacity in the electrical networks for the connection of new electricity production installations, approved by ANR Order no. 137/2021 and regarding the repeal of ANRE Order no. 4/2011 for the approval of the Procedure regarding the appointment of a license holder to take over the development of the electricity distribution service - effective from December 21, 2023 • amendment of Order 137/2021 - starting with January 1, 2024, the TSO will publish on the website the data related to the capacities available in electric transport network and electrical distribution network at the voltage level 110kV monthly instead of weekly • abrogation of Order 4/2011 considering the provisions of art. 46 para. (2) and (2^2) of the Energy Law, the substitute DO of the initial provider of the distribution service for situations such as the impossibility of performing the service or the sale of the electricity distribution network is established/identified by the legislator • ANRE Draft Order for the amendment and completion of ANRE Order no. 102/2015 for the approval of the Regulation on the establishment of solutions for connecting users to electric networks of public interest - public debate • addition to the list of situations in which the connection solution is established by the solution sheet: • of consumption places owned by authorized natural person users, individual businesses, family businesses and public institutions that connect to the low voltage network, regardless of the requested power; • of the places of consumption and production belonging to prosumers who own electricity production units from renewable sources with an installed power of no more than 400 kW per place of consumption; • of the local public authorities that have the capacity to produce electricity from renewable sources made, partially or totally, from structural funds, and that benefit from the suppliers with whom they have an electricity supply contract, on request, from the financial regularization service . • the introduction of the provision according to which the solution study must also contain connection options with the operational limitation of the maximum power that can be discharged into the network in situations/operating regimes with N-1 elements in operation that have the effect of overloading the network and , consequently, (iii) the connection contract must include the average value of the connection, excluding VAT; (iv) inclusion of the obligation for the user or the approved economic operator designated to design and execute the connection to obtain the consent/authorisation to carry out the connection, if the contract for the design and execution of the connection is concluded directly by the user with the designated approved economic operator; (v) the introduction of a maximum limit of 5 years from the commissioning of the connection for the duration of the connection contract, linked to the legal provision on the reimbursement of the actual value of the connection design and execution works, up to the average value of a connection. • Connection procedure for prosumers: (i) inclusion of the possibility of programming the existing meter at the delimitation point of a consumption site for the measurement of electricity in both directions, when installing renewable energy production facilities in the user’s facilities; (ii) inclusion of an exemption from the application of the provisions of the procedure, concerning the electricity metering units required in the prosumers’ facilities, in the sense of not making the installation of such equipment conditional on the installation of power to the user’s facility, given the difficulties for the DOs to purchase such metering units. • Connection framework contracts - additions to the RO obligations in order to comply with the derogatory provisions of the Connection Procedure for prosumers. • BRML Order no. 77/2022 for the approval of the official list of fixed means of measurement subject to legal metrological control - published in Official Gazette no. 332/5 April 2022 - enters into force within 90 days from the date of publication in MO (4 July 2022) • For active and reactive electricity meters the metrological verification will be done every 15 years. • ANRE Order no. 124/2022 for the approval of the Rules for congestion management through the market- based use by network operators of the flexibility of resources in the distribution networks and those in the transmission network, of the Rules applicable to the purchase of reactive electricity for voltage regulation in stationary mode by the transmission and system operator and of the Rules applicable to the purchase of reactive electricity for voltage regulation in stationary mode by concessionary distribution operators and for the amendment and completion of ANRE Order no. 127/2021 for the approval of the Regulation on terms and conditions for balancing service providers and frequency stabilisation reserve providers and the Regulation on terms and conditions for balancing parties - in force from 19 October, and Art. 1, 3 and 4 shall apply from 1 May 2024 the impossibility of the network elements remaining in operation and of the network as a whole to operate for an unlimited time under these conditions. • the introduction of the provision according to which in the solution sheet or, as the case may be, in the solution study, it must be highlighted whether in the connection solution the electrical networks for which strengthening works have been executed or are being executed to create the technical conditions required to connect several production/consumption and production sites (general strengthening works), financed by users who benefit from the same strengthening works and whose utility installations are energized before the user’s own utility installations. It is also stipulated that, in this case, the data on which the participation quotas due to the users who financed the strengthening works are calculated are to be specified in the solution sheet or in the solution study. • the elimination of the phrase dispatchable/non- dispatchable with regard to generating units/power plants, taking into account the provisions of ANRE Order no. 127/2021. • ANRE Draft order for the amendment and completion of ANRE Order no. 95/2018 regarding the approval of the mandatory clauses in the contracts for the provision of services in order to carry out the connection works to the electric grids of public interest - public debate • the proposed amendment refers to the price that TSO/DSO pays to the economic operator certified by ANRE for the provision of services for connection works to public interest electrical networks; • the provision according to which the price of the contract, initially estimated, is fixed is replaced by a provision that orders the updating of this price, corresponding to the effective consideration of the services performed for the realization of the connection installation. The price of the contract, initially estimated, represents the costs for making the connection installation established by the TSO/ DSO through the connection tariff or, if the contract is concluded by the TSO/DSO with a specific designer and/or certified builder, chosen by the user, the price is the agreed following the negotiation between the economic operator and the user. • the price update will be carried out through an addendum to the contract. • it is proposed to include a provision according to which the provisions of the order should apply including to users for whom, on the date of entry into force of the order, ORs have concluded contracts for the provision of services in order to carry out connection works to the public interest electrical networks, but for which the installations connection were not put into operation. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT294 295 2022 2023 2022 2023 • Within 12 months the RO shall prepare and submit to ANRE a proposal on: • a technical qualification procedure related to the participation in congestion management in their networks; • specifications of the products introduced in short- term energy tenders for congestion management; • ANRE Draft Order for the approval of the Procedure regarding the rules for the connection to the public interest electrical networks of equipment and aggregates for irrigation, of the new pressurization stations, as well as for economic operators that carry out activities included in CAEN code 01 Agriculture, hunting and services annexes and CAEN code 10 Food industry - public debate • specifications of the products included in long-term capacity tenders for congestion management; • the minimum information to be included in the register for flexibility resources, as well as the optional ones, and the access rules for neighbouring ROs; • a reasoned choice between organising a common platform for all ROs to purchase electricity for congestion management or a separate platform for each RO; • option of whether or not to combine any common platform with the Register for flexibility resources. • Within 12 months the ROs shall jointly develop a methodology to establish how they will operate, collaborate, share information, and establish the rights and responsibilities of each during the period in which the OTS continues to identify and manage grid congestion on the 110 kV grids under the responsibility of the ODs. • Within 16 months from the date of entry into force of this Order, the DSO and the OTS shall develop their own operational procedures for the implementation of the provisions of Annex 1 to the Order. • Draft Order amending and supplementing the Methodology for issuing site permits by network operators, approved by Order of the President of the National Energy Regulatory Authority no. 25/2016 - public consultation • the definition of „risk analysis” has been introduced as technical-economic documentation analysing the impact of non-compliance with regulated coexistence conditions. It is drawn up by a quality and extra-judicial technical expert in the field of technological electrical installations, who holds a credential/certificate issued by ANRE, or by a qualified expert in technological risk prevention- reduction. • clarifications have been made regarding the use of the favourable site opinion conditional to the issue of the building permit. • through the changes made, will allow the use of the coexistence study prepared during the approval phase of the urban planning documentation and in the procedure for issuing the site permit. • the rules are addressed to the connection to the electrical networks of public interest of the equipment and aggregates for irrigation, of the new pressure stations, as well as of the places of consumption belonging to the economic operators that carry out activities included in the CAEN code 01 Agriculture, hunting and related services and CAEN code 10 Food industry; • the rules apply to the connection to the electrical networks of new places of consumption; • DSO has the obligation to ensure, under conditions of economic efficiency, the financing and realization of the design and execution works of the connection installations of the places of consumption, with a length of up to 2,500 meters, when the connection solution provides for the same voltage level at the point delimitation and at the connection point; in the event that the connection installations of the places of consumption are longer than 2,500 meters and when the connection solution provides for the same voltage level at the delimitation point and at the connection point, the financing of the difference in their length that exceeds the length of 2,500 meters is ensured by users; • if in the area where the places of consumption are located, there is only an electric network with a voltage level different from that of the demarcation point provided in the connection solution, DSO are obliged to ensure the financing and realization of the design and execution works of the connection installations consumption places with a length of up to 2,500 meters, excluding the transformer station/ electrical station, as the case may be, which is financed by the users; if in the area where the places of consumption are located there is only an electric network with a voltage level different from that of the demarcation point provided in the connection solution and the installations for connecting the places of consumption are longer than 2,500 meters, DSO has the obligation ensure the financing and realization of the design and execution works of the connection installations for a length of up to 2,500 meters, and the financing of the difference in their length compared to the length of 2,500 meters and of the transformer station/electrical station, as the case may be, is ensured by users; • the term for making the connection, including the reception and commissioning of the connection installation, is a maximum of 120 days from the date of obtaining the agreement/authorization for the connection installation; • the connection installation becomes the property of DSO through the handover-acceptance report, on the date of its commissioning, in accordance with the provisions of the connection contract; • the user whose place of consumption is supplied by a connection installation made in accordance with the provisions of the procedure, has the obligation to use the place of consumption and to keep its destination for a period of 15 years from the date of commissioning of the connection installation ; • DSO verifies the fulfilment of the user’s obligation to use the place of consumption and to keep its destination at least once every year during the period of 15 years from the date of commissioning of the connection installation; • if the user does not comply with the obligation to use the place of consumption and to keep its destination for a period of 15 years from the date of commissioning of the connection installation, he is obliged to return to DSO the value of the design and execution works of the connection installation borne by the operator, proportional to the unused period, gradually. Prosumers Prosumers • ANRE Order no. 15/23.02.2022 - Methodology for establishing the rules for the trading of electricity produced in power plants from renewable sources with an installed electrical power of no more than 400 kW per place of consumption belonging to prosumers - in force since 1 May 2022 • The distribution operators ensure the purchase, installation, sealing, verification, reading and, if necessary, replacement of the electricity metering groups located in the users’ installations, according to ANRE regulations. • Consumers owning electricity generating units from RES with an installed capacity of 400 kW or less per consumption site may sell the electricity produced and delivered to the electricity grid to electricity suppliers with whom they have concluded electricity supply contracts, according to ANRE regulations. • At the request of prosumers producing electricity in electricity generating units with an installed capacity per place of consumption:: • up to 200 kW - electricity suppliers with whom they have electricity supply contracts are obliged to make a quantitative compensation in the bill of consumers between the electricity produced and delivered to the grid and the electricity consumed and to report in the bills of consumers the difference between the quantity of electricity delivered and consumed, if the amount of • ANRE Draft Order for the modification and completion of the Methodology for establishing the rules for the commercialization of electricity produced in power plants from renewable sources with an installed power of no more than 400 kW per place of consumption belonging to prosumers, approved by ANRE Order no. 15/2022 – public debate – phase II Draft order proposes: • clarification on how to apply the quantitative compensation between the electricity consumed and the electricity produced and delivered in the electricity network by the prosumers who own RES electricity production units with an installed electric power of no more than 200 kW per point of consumption • detailing the method of settlement of the electricity produced and delivered in the electricity network at one or more places of production and consumption where they have the capacity of prosumers with the electricity consumed from the same electricity network at other places of production and consumption/places of consumption of them, a facility that was introduced by GEO no. 163/2022.. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT296 297 2022 2023 2022 2023 energy produced and delivered to the grid is greater than the amount of electricity consumed, consumers may use the reported amount of electricity for a maximum period of 24 months from the date of the invoice. • between 200 kW and 400 kW - electricity suppliers are obliged to purchase the electricity produced and delivered at a price equal to the weighted average price recorded in the PZU in the month in which the energy was produced and to make the financial adjustment between the electricity delivered and the electricity consumed from the grid in the bill of the consumers. • Quantitative compensation for prosumers with installations up to 200 kW per place of consumption will be granted until 31 December 2030, and after this period these prosumers can sell the electricity produced under the conditions provided for prosumers with installed capacities between 200 kW and 400 kW per place of consumption. • ANRE Order no. 19/02.03.2022 Order approving the Procedure for the connection of consumption and production sites belonging to prosumers to the electricity networks of public interest - in force since 7 March 2022 - repealed ANRE Order no. 15/2021 • harmonisation with the provisions of GEO no. 143/2021 • ANRE Order no. 104/2022 amending and supplementing the Procedure for the connection to the public electricity networks of consumption and production sites belonging to prosumers, approved by ANRE Order no. 19/2022 - in force since 4 August 2022 • introduction of the provision according to which, as an exception to the rules laid down in the Procedure that do not provide for the issuance of ATRs or those that do not provide for the issuance of ATRs prior to the construction of the electricity production plant, in the case of prosumers accessing financing programmes for the installation of power plants for the production of electricity from renewable sources, the DSO shall issue ATRs prior to the construction of the electricity production plant, in compliance with the provisions of the regulatory acts specific to the respective financing programmes. • ANRE Order no. 95/2022 - Order amending and supplementing ANRE Order no. 15/2022 approving the Methodology for establishing the rules for the trading of electricity produced in power plants from renewable sources with an installed electrical power of no more than 400 kW per place of consumption belonging to prosumers - in force since 1 July 2022. • clarifies the application of the quantitative compensation between the electricity consumed and the electricity produced and delivered to the electricity grid by prosumers owning electricity production units from renewable energy sources with an installed electrical power of 200 kW or less per consumption site, given that, after the approval of ANRE Order no. 15/2022, GEO no. 27/2022 came into force, which establishes the billing of electricity consumed by prosumers in the period 1 April 2022 - 31 March 2023. • Draft Order approving the Methodology for establishing the rules for quantitative compensation between electricity produced from renewable sources in mobile units equipped with electricity generation systems during regenerative braking and delivered to the national electricity system and electricity consumed from the national electricity system by prosumers - public consultation • OD to whose grids mobile units generating electricity during regenerative braking are connected certifies the quality of prosumer, in order to apply the mechanism of quantitative compensation according to legal provisions; • In addition, in order to certify the status of prosumer, the DSO also verifies compliance with the following requirements: (i) the main activity of the prosumer - legal entity is not the production of electricity; (ii) the electricity produced during the recovery break must come from renewable energy sources and be delivered to the NES; (iii) the electricity metering system at the interface with the NES is realized either with smart meters or with meters that allow at least remote reading, integrable in smart electricity metering systems, having communication systems compatible with those of the concessionaire distribution operator to whose networks the electricity installations are connected. • The concessionaire DSO shall carry out monthly meter reading of electricity from renewable sources produced and delivered to the SEN/consumed from the SEN, in case the remote reading of electricity meters is not possible for technical reasons, it shall be determined on the basis of historical measured data, • The concessionaire DSO is obliged to store the collected measured/determined data, as appropriate, for a period of at least 36 calendar months. c) Storage – N/A c) Storage • ANRE Order no. 3/2023 regarding the approval of the Technical Norm “Technical requirements for connection to public interest electrical networks for electricity storage facilities and the notification procedure for connecting electricity storage facilities” - effective from January 20, 2023 The norm was developed by the TSO, it establishes technical requirements for connected storage installations: 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT298 299 2022 2023 2022 2023 • individually to the public electricity network, classified in categories A, B, C and D in a similar way to electricity production facilities; • within the electricity production sites; • within the places of electricity consumption. • ANRE Order no. 99/2023 for the approval of the Regulation on granting the transmission and system operator and the distribution operators the right to own, develop, manage or operate electricity storage facilities that represent fully integrated network components - effective from November 6, 2023 • the situations in which the energy storage facilities (ISE) that can be owned by TSOs/DSO represent fully integrated network components (CRCI) are established. • an ISE can be considered CRCI for the following purposes that ensure the reliability of the transmission/distribution network and safety in the supply of electricity: a) ensuring the maintenance of critical equipment under voltage in the electrical stations of the TSO/ DSO in the event of an interruption of their power supply system, thus allowing the TSO/DSO to manage its networks safely; b) ensuring the continuity of the electricity supply [in specific situations of planned/unplanned interruptions of the electrical stations, until the resumption of normal activity; c) providing services that do not aim to stabilize the frequency for: i. synchronization between different parts of the transport/distribution system; ii. reduction of reactive power fluctuations through rapid injections of reactive current; iii. ensuring inertia for the stability of the local transport/distribution network; iv. the provision of restoration services, respectively the ability to start with own sources and the ability to operate in isolated mode • a CRCI cannot be used by the TSO/DSO to buy or sell electricity on the electricity markets: for the purpose of system balancing or congestion management or to cover the own technological consumption of the electricity network. • each TSO/DSO must develop/update the list of critical equipment in electrical substations for which the right to own, develop, manage or operate a CRCI is requested. The list of critical equipment is drawn up and updated whenever necessary according to the internal procedure of each TSO/DSO and is sent to ANRE for information. Distribution service performance standard Distribution service performance standard • ANRE Order no. 13/2023 approving the contract - framework for the provision of electricity in the universal service regime, the general conditions for the provision of electricity in the universal service regime and the invoice model applicable to household customers - effective from April 1, 2023 Provisions related to the Standard distributed in the contract - universal service electricity supply framework - the compensations and penal interest that the household customer is entitled to receive for the supplier’s non-compliance with the obligations stipulated in the Performance Standard for the activity of supplying electricity and for the non-compliance by the distribution operator with the performance indicators stipulated in the Performance Standard for the electricity distribution service, in force. • ANRE Order no. 64/2022 amending and supplementing the Performance Standard for the electricity distribution service, approved by ANRE Order no. 46/2021 - in force from 31 March 2022: • domestic customers, the index reading period can be longer than one month, but must not exceed 3 months, for non-compliance compensation is granted 10 lei • non-household customers, the index reading period can be longer than one month, but must not exceed 6 months, for non-compliance is granted compensation 10 lei • prosumers, the periodicity of reading the index of the measurement group is a calendar month - compensation 10 lei regardless of voltage level • OD does not compensate users whose metering units are located on their property and who have not allowed DSO access to read the metering unit index within the interval specified in the bills issued by the electricity suppliers, with prior notification/approval no more than three times to the users. • The DSO is obliged to provide access to historical consumption data of users benefiting from smart metering systems, in accordance with the provisions of the framework conditions for the implementation schedule of smart metering systems at national level - if the DO does not meet the deadlines for a period of one month, it is obliged to pay the user compensation in the amount of 30 lei to JT. • change DSO timetable for installation of quality analysers • Transformer substations monitored according to each stage include also transformer substations that fully supply users integrated in smart metering systems. • by 31.12.2023 will monitor at least 50% of the number of substations and at least 20% of the number of transformer substations, • until 31.12.2025 will monitor at least 75% of the number of substations and at least 60% of the number of transformer substations, • by 31.12.2026 will fully (100%) monitor the number of substations and at least 80% of the number of transformer substations, • from 01.01.2028 will fully (100%) monitor transformer substations. • OD have the obligation to submit to ANRE, by 30 June 2022, the implementation programme for monitoring the continuity and quality of electricity with analysers installed in electricity stations and transformer substations. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT300 301 2022 2023 2022 2023 Commercial regulations Commercial regulations • ANRE Order no. 82/2021 amending and supplementing the Regulation on the supply of electricity to end customers, approved by ANRE Order no. 235/2019 and repealing ANRE Order no. 130/2015 approving the Procedure for the supply of electricity to own consumption sites DSO - in force from 1 July 2021 (except for the provisions of art. I points 25-27, 33 and 34 which enter into force on 1 July 2022): • in case of change of electricity supplier, customers can communicate to the new supplier the self- quoted index at the date of transmission of the notification of change of supplier; the supplier has the obligation to retrieve and transmit to the DSO the index self-quoted by the final customer; the self-quoted index is taken into account by the DSO when determining the electricity consumption in the process of change of supplier; • if the end-customer does not transmit the self- read index, the DSO is obliged to read the metering equipment index in the period between the date of transmission of the supplier change notification and the date of the actual supplier change; • The DSO is obliged to create and maintain in the database, for each place of consumption, for each of the months of January to December, information on the estimated active electricity consumption, determined as appropriate, based on: (i) the electricity consumption recorded at the place of consumption during the same period of the previous year or the electricity consumption determined taking into account the most recent readings made by the OD; (ii) the specific consumption profile, determined by the DSO for the respective category of final customer if for the place of consumption there is no consumption history. • OD has the obligation to allow free access to the data in the database to all electricity suppliers and to inform them on how to access the data; • until 1 November 2021, the ODs are obliged to make available to electricity suppliers the consumption data provided for in the order and to publish on their websites information on how to access this data; • from 1 January 2022, in the case of consumption places for which consumption agreements are concluded, the billing of the distribution service will be carried out by the DO, on the basis of these agreements, if for these consumption places there is no index read by the DO or by the final customer. • ANRE Order no. 90/2022 - Order amending and supplementing ANRE Order no. 52/2021 approving the Methodology for monitoring the system for the promotion of electricity production from renewable energy sources - in force since 27 June 2022 • ANRE Order no. 5/2023 for the approval of the Regulation for the supply of electricity to final customers - effective from 6 February 2023 • the need to correlate the provisions of the Electricity Supply Regulation to final customers with the provisions of Law no. 123/2012 of electricity and natural gas, as amended and supplemented by GEO no. 143/2021, and Annex 1 to Directive (EU) 2019/944. • elimination of the provisions that refer to the activity of the DO in the relationship with the supplier and its obligations regarding its own activity • detailing the way in which DO ensures unrestricted, free and guaranteed access to the information in the database regarding the places of consumption connected to the electrical distribution network in the license area; • the introduction of the notion of an active client, the quality of an active client is certified, by the DSO/TSO, for: • participation in flexibility or energy efficiency programs, to which the customer’s place of consumption is connected; • the production of electricity, by the DSO/TSO to which the place of consumption and production is connected; • elimination of the obligation to conclude the consumption agreement by the customer at the conclusion of the electricity supply contract; • the customer’s possibility to ask the supplier to change the monthly values from the consumption agreement for a determined period, these being applied by the DO and the supplier starting with the 1st of the month following the one in which he received the new values; • the consumption data from the consumption agreement can be modified by the DO at any time during the execution of the electricity supply contract, including the data from the consumption agreement modified by the customer, in order to adapt to the actual consumption achieved; • DO has the obligation to verify the necessity of changing the data related to the consumption convention with the same frequency with which the reading of the index of the measurement group takes place. If the DO modifies the data in the consumption agreement, it transmits the modified values to the supplier; • the introduction of the obligation of the DO to ensure the reading of the index of the measurement group at a time interval of maximum 3 months in the case of places of consumption belonging to household customers, except for those integrated in the SMI; • regulating the legal aspects related to data reporting by electricity suppliers who have concluded/ purchase contracts for electricity produced by prosumers, with whom they have concluded contracts for the supply of electricity as final consumers, on the manner and format of reporting, respectively frequency of data reporting. • in the event that the DO has not performed the reading within the time frame established by the legal provisions in force, in order to issue the regularization invoice, the latest self-read index and communicated by the client is used after the most recent index read and communicated by the DO. The regularization period cannot be longer than 3 years; • ANRE Order no. 91/2022 - Order approving the Regulation on the last instance supply of electricity - in force from 24 June 2022 • Consumption sites that are not disconnected for non-payment of electricity consumption/withdrawal and do not have a supply contract in force/are not in the portfolio of an FUI, are taken over by the LR (the supplier with the highest market share in the grid area where the consumption sites are located); • within a maximum of 3 working days from the date of entry into force of the order, each concessionaire DSO shall communicate to the LR the list of consumption sites in its network area that are in the situations described above; • the market shares shall be established and published by ANRE on the basis of the quantities of electricity delivered, in the period from 1 September 2021 to 28 February 2022, to customers in each network area, by each of the suppliers who are also suppliers of last resort; • within a maximum of 5 working days from the date of communication of the designation decision, LR and DSO concessionaires with whom the supplier does not have electricity distribution contracts, shall conclude such contracts. • elimination of the conditions for concluding the distribution contract directly by the end customer; specifying that the conclusion of the distribution contract must be carried out by the final customer with the DO only if the place of consumption has several suppliers at the same time or is the subject of participation in the aggregation by an independent aggregator; • ANRE Order no. 13/2023 approving the contract - framework for the provision of electricity in the universal service regime, the general conditions for the provision of electricity in the universal service regime and the invoice model applicable to household customers - effective from April 1, 2023 Provisions with impact on DO in the contract - universal service electricity supply framework - regulates the way in which the contracts in force are applied under the conditions of entry into force of the order and also provides that the price from the universal service offer is applied for a period of minimum 3 months. Provisions with impact on DO: • the reading interval of the measurement group index is at most 3 months; • regularization of electricity consumption is done for a maximum of 3 months and is included in the first invoice issued after reading the index by the distribution operator (DO); • communication through the invoice of the time interval for reading the index of the measurement group by the DO representative; • invoicing based on the data established by the electricity consumption convention for the invoicing periods in which the index of the metering group is not read and the household customer does not transmit the self-read index; • Draft Order for the amendment of the Procedure regarding the establishment of electricity consumption in the flat-rate system, approved by ANRE Order no. 190/2020 - public debate • the drawing up by NO on the date of ascertaining the situation in which the electricity consumption cannot be determined by measurement of a Finding Note, this has the role of recording the technical problems identified at the measurement group, it is not necessary to sign it by the end customer ; • PV drawn up by NO is sent by him both to the final customer and to the electricity supplier within a maximum of 5 working days from the date of drawing up; based on the minutes, the supplier has 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT302 303 2022 2023 2022 2023 the obligation to issue the invoice; • it is not necessary for the final customer to sign the PV, but he can dispute both the PV and the invoice issued by the supplier within a maximum of 20 days from the communication; • the elimination of the option of determining the consumption of electricity in a flat system based on the average consumption resulting from the consumption history of the last 3 years, established for a period of time equal in duration and similar in terms of consumption conditions to that in which the measurement group did not work; in the situation where there is no consumption history of the last 3 years, the average consumption is established based on the consumption history related to a period of 2 years respectively or 1 year, as the case may be, because it is no longer applicable considering that the recalculation is based on the average daily consumption of the new meter; • introduction of the model of the assessment note drawn up by the NO; • the introduction of the finding report model in the situation where the meter is/is not subject to metrological verification in an authorized metrology laboratory. Compliance Regulation Compliance Regulation • ANRE Order no. 90/2023 for the modification and completion of some orders issued by ANRE - effective from October 5, 2023 • Period of appointment of compliance agents nominated by DSO/OI and approved by ANRE: minimum 2 calendar years and maximum 4 calendar years • By December 10 of each year, the compliance agent submits to ANRE a report on the measures taken and his conclusions regarding the fulfilment/observance by the OD/OI of the compliance program and the provision of the resources necessary to carry out the activity by the DSO/OI; • Until November 15, 2023, DSO/OI, which are part of vertically integrated economic operators, have the obligation to submit the nominations of compliance agents to ANRE for approval. Annual Report and sanctions Annual Report and sanctions – N/A • ANRE Order no. 1/19.01.2022 - Order for the repeal of ANRE Order no. 32/2016 on the approval of the Methodology for the preparation of the Annual Report by licensees in the electricity and thermal energy sector and on the amendment of some ANRE orders - in force since 21 January 2022 • eliminates the obligation for licensees to draw up the Annual Activity Report. • ANRE Order no. 32/2016 is repealed - the information in the annexes of the Annual Report Methodology shall be submitted to ANRE in accordance with the provisions of other orders. • ANRE Order no. 12/23.02.2022 - Order approving the Procedure for the establishment and individualization of fines related to the turnover resulting from the control activity - in force from 1 March 2022 • It aims to establish the rules necessary for establishing and individualizing the contravention penalties related to turnover provided for in the Law on Electricity and Natural Gas no. 123/2012, art. 95 para. (2) and (3). • ANRE Order no. 13/23.02.2022 - Order approving the Procedure for the establishment and individualization of contraventional sanctions related to turnover, by ANRE’s Regulatory Committee, following investigation actions - in force since 28 February 2022. • Its purpose is to establish and individualize sanctions in case of committing the offences provided for in art. 93 para. (1) and art. 194 of the Law on Electricity and Natural Gas no. 123/2012, with subsequent amendments and additions, hereinafter referred to as the Law, for which sanctions are provided from the turnover of the year preceding the application of the sanction. • ANRE Order no. 100/2022 amending and supplementing the Regulation on the organisation and conduct of energy investigation activities regarding the functioning of the wholesale energy market, approved by ANRE Order no. 25/2017 - in force from 4 August 2022 • application of some of the legal provisions in force and by the members of the Regulatory Committee of ANRE; • extending the scope of investigations into breaches of the transparency requirements laid down in the ANRE regulations as well as in European regulations; • introduction of amendments, clarifications and additions concerning the competence to establish and individualize sanctions, depending on the nature and timing of their occurrence; the draft order also includes provisions for the situation where, during the investigation action, no contraventions are found. • ANRE Order no. 101/2022 amending and supplementing the Procedure for the establishment and individualization of fines based on turnover, by ANRE’s Regulatory Committee, following investigative actions, approved by ANRE Order no. 13/2022 - in force from 4 August 2022 • to complete the Procedure with the situations in which the Regulatory Committee establishes and individualizes the sanctions by reference to the turnover of the investigated legal entity, and for the contraventions for which the investigation team, 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT304 305 2022 2023 2022 2023 The deadline for making the connection is 120 days from the date of obtaining the agreement/authorization for the connection installation. The assets resulting from the connection works become the property of the DSO from the time of installation of the connection installation. The applicant, a future non-domestic final customer, has the obligation to use the place of consumption and to keep its destination for a period of at least 15 years from the PIF date, otherwise he is obliged to return to DSO the value of the design and execution of the connection installation, proportionally with the remaining unused period, gradually, in accordance with ANRE regulations. as investigating agents, applies the provisions of art. 12 para. (2) of the OG no. 2/12 July 2001 on the legal regime of contraventions, approved with amendments and additions by Law no. 180/2002, with subsequent amendments and additions, proposing to sanction the investigated market participant with a fine in relation to its turnover; • correlation with the provisions of ANRE Order no. 25/2017, as amended and supplemented. • ANRE Order no. 120/2022 on the amendment and completion of the Regulation on the detection, notification and sanctioning of violations of regulations issued in the field of energy applicable to the investigation activities carried out by ANRE, approved by ANRE Order no. 62/2013 - in force from 5 October 2022 • Completion and amendment of the Regulation, in accordance with the legal provisions in force, as a result of the amendments made to the Law, i.e. by Order 25/2017 and Order 13/2022. • ANRE Order no. 143/2022 amending and supplementing the Regulation on the detection, notification and sanctioning of violations of regulations issued in the field of energy applicable to the control activities carried out by ANRE, approved by ANRE Order no. 62/2013, with subsequent amendments and additions - in force from 28 December 2022 • amendment and completion of the Regulation provides that the documents preceding the control action, during the control action or resulting from the completion of the control action, such as, but not limited to: the control warrant, the control notice, the control report, the referral note, the sanction warrant, the sanction invitation, etc. can be drawn up and communicated both in written and electronic format. Primary legislation: Primary legislation: • Energy Law no. 123/2012 - amended by GEO no. 143/2021 - in force since 31 December 2021, approved and amended by Law no. 248/2022, in force starting with 25 July 2022, providing among others: • the possibility of concluding directly negotiated bilateral transactions; • obligation for the DSO to ensure the reading of the metering group index for domestic end customers at a maximum interval of 3 months; • the role of the DSO as a neutral market facilitator in the purchase of electricity to cover NL, according to transparent, non-discriminatory and market-based procedures, in compliance with ANRE regulations; • domestic connection - In the case of domestic customers, upon commissioning of the connection works carried out, the DSO will reimburse the applicant the actual value of the design and execution works of the connection, up to an average • Law no. 158/2023 for the amendment and completion of the Electricity and Natural Gas Law no. 123/2012 - effective from June 3, 2023 For the supply of equipment and aggregates for irrigation, as well as for economic operators that carry out activities included in CAEN code 01 Agriculture, hunting and related services and CAEN code 10 Food industry, DSO has the obligation to ensure the financing and realization of the design and execution works of the installation connection of the final non-domestic customer, whose length will be up to 2,500 meters located on the territory of the administrative-territorial unit for which the public distribution service has the concession. For connection installations that exceed the length of 2,500 meters, the financing of the difference from the network falls under the responsibility non-domestic end customer. The counter value of the design and execution works of the connection installation will be recognized in the tariff by ANRE. • value of a connection, established according to a methodology approved by ANRE. The assets resulting from the connection works become the property of the distribution operator from the moment of commissioning, through the effect of this law, at the value reimbursed to the household customer, being recognised by ANRE as part of the regulated asset base. • non-household connection - In the case of non- household customers, the cost of the connection work, including the design of the connection/ connection, is borne entirely by the customer. The assets resulting from the connection works: • between 1 January and 24 July 2022, it enters the distribution operator’s patrimony from the moment of commissioning, based on GEO no. 143/2021, without being recognized by ANRE as part of the regulated asset base; • starting with 25 July 2022, it does not enter the patrimony of the distribution operator, based on Law no. 248/2022 and ANRE Order no. 133/2022, they are transferred only for exploitation to the distribution operator; • in case the final customers do not have SM, DSO provides them with individual conventional meters that accurately measure their real consumption. DSO ensures that end customers can easily read their conventional meters, either directly or indirectly, through an online interface or other appropriate interface that does not involve physical connection to the meter. • ANRE has the obligation to issue the regulations provided in the Law within the terms expressly provided from the date of entry into force of the Law (60 days or 6 months). • Law no. 259/29.10.2021 for the approval of GEO no. 118/2021 on the establishment of a compensation scheme for the consumption of electricity and natural gas for the cold season 2021-2022, as well as for the completion of Government Ordinance no. 27/1996 on the granting of facilities to people living or working in some localities in the Apuseni Mountains and in the „Danube Delta” Biosphere Reserve • For the period 1 November 2021 - 31 March 2022, a support scheme for the payment of electricity and gas bills has been established for several categories of final customers. • In order to regularize the amounts related to the support scheme, the electricity/natural gas distribution operators have the obligation, in the period April-June 2022, in addition to the readings established according to the regulations in force, to carry out the meter index reading of the final customers who benefited from the support scheme and to communicate to the electricity/natural gas suppliers their measurement data. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT306 307 2022 2023 2022 2023 • Exempting certain categories of small consumers (SMEs, PFAs) from the payment of distribution tariffs, transmission tariffs, green certificates, contribution for high-efficiency cogeneration and excise duties. • Emergency Ordinance no. 3/2022 amending and supplementing Government Emergency Ordinance no. 118/2021 for domestic customers increases the maximum consumption limit from 1500 kWh to 1900 kWh (380kWh/month) - in force from 26 January 2022 • for household customers in the period 1 February 2022 - 31 March 2022 the final invoiced price of electricity is capped at 0.8 RON/kWh, VAT included, (compared to 1 RON/kWh), of which the energy price component is a maximum of 0.336 RON/kWh (compared to 0.525 RON/kWh); • for non-household customers in the period 1 February 2022 - 31 March 2022 the final invoiced price of electricity is capped at a maximum of 1 RON/kWh, VAT included, of which the energy price component is a maximum of 0.525 RON/kWh • OD have the obligation, during the period April- June 2022, in addition to the readings established according to the regulations in force, to carry out meter index readings on domestic customers and to transmit their measurement data to the electricity/ natural gas suppliers. • Emergency Ordinance no. 27/2022 on measures applicable to final customers in the electricity and natural gas market in the period 1 April 2022 - 31 March 2023 - in force since 22 March 2022, approved by Law no. 206/11 July 2022, amended by GEO no. 192/2022 • to cover the additional costs related to NL 2021, ANRE modifies the regulated tariffs, applicable from 1 April 2022. • The resulting tariffs will not change between 1 April 2022 and 31 March 2023. • additional costs financed from bank loans made during the period of the GEO to cover the NL are capitalized, with a duration of 5 years and RRR = 50% x RRR RP4. • electricity costs purchased for NL after the date of entry into force of the GEO will be recognized in the regulated tariffs, according to ANRE methodologies. • transmission and distribution tariffs will be adjusted to reflect costs incurred up to 31 March 2023 for a period of up to 5 years after 31 March 2023. • the producers in the Romanian state portfolio are obliged to respond within 5 working days with partial or total sales offers to the requests for energy purchase addressed by the OTSs and ODs, individually or in aggregate, directly or through the dedicated platforms of the organized market. Failure to comply with the provision shall be sanctioned with a fine of RON 100.000 ÷ 400.000. • The provisions of the GEO apply until 31 March 2025. • Emergency Ordinance no. 119/2022 amending and supplementing GEO no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market during the period 1 April 2022-31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy - in force since 1 September 2022, approved and amended by Law no. 357/16 December 2022 • additional costs for the purchase of electricity, made between 1 January 2022 and 31 August 2023, to cover the NL, compared to the costs included in the regulated tariffs (and not only the loans), are capitalised quarterly, RRR = 50% of the RRR applicable to each period; • electricity generators are obliged to sell available electricity with delivery until 31 December 2022, through direct negotiated contracts starting from 1 September 2022, only to electricity suppliers with end customers in their portfolio, intended exclusively for their consumption, OD, OTS and consumers who have benefited from the provisions of GEO 81/2019. • Emergency Ordinance no. 153/2022 amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market during the period 1 April 2022-31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy and amending Government Emergency Ordinance no. 119/2022 amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy - in force since 11 November 2022 • for the period from 1 January 2023 to 31 March 2025, the centralised electricity purchase mechanism is established • OPCOM is designated as the single buyer, it buys electricity from the designated producers and sells the purchased electricity to electricity suppliers who have contracts with end customers, electricity transmission system operators and electricity distribution operators, to cover their own technological consumption of the networks operated by them. • OD can buy from OPCOM by annual/monthly mechanism 75% of the quantity of NL forecast and validated by ANRE at the price of 450 lei/MWh, and producers can sell to OPCOM annual/monthly mechanism 80% of the quantity produced forecast and validated by ANRE and Transelectrica at the price of 450 lei/MWh. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT308 309 2022 2023 2022 2023 Alignment with the European legislation - EU Regulation no. 943/2019: Alignment with the European legislation - EU Regulation no. 943/2019: Electricity market functioning Electricity market functioning • ANRE Order no. 128/2021 - Order approving the Rules • ANRE Order no. 12/2023 for the approval of the for the suspension and restoration of market activities and the applicable Settlement Rules - in force from 1 October 2022: • to determine the situations and conditions under which the OTS can suspend market activities with mitigating impact on PZU and PI energy market coupling; • identification of the market activities that can be suspended and the procedure for their suspension and reinstatement: steps, role and responsibilities of the OTS/designated electricity market operator/ factors involved; • communication procedure detailing the tasks and Regulation regarding the organized framework for trading on the organized future electricity markets administered by the Electric Energy and Natural Gas Market Operator OPCOM S.A., which aims to simplify the organized framework for trading electricity on the markets organized by future electricity, through the trading platforms managed by S.C. OPCOM S.A – effective from 28 March 2023 Provides rules that refer to: • the types of products that can be traded on the standardized and flexible term product markets; • the method of establishing offers for the sale or purchase of electricity; actions to be carried out by each party • the way of organizing auctions/trading sessions; • suspension during the period of collapse and • the way of establishing transactions and contracting restoration from collapse of the SEN of all wholesale market contracts (including transactions concluded on the DAM and IM), and the sale/purchase to be carried out at a single restoration price, i.e. the settlement procedure applicable in these situations and the procedure for making payments and contesting the settlement. • the order will apply from 1 October 2022, the date from which ANRE Order no. 23/2016 is repealed. • ANRE Order no. 65/2022 approving the Regulation on the organised framework for electricity contracting by large end customers - in force since 1 April 2022 • expanding market participation by accepting OTS and ODs, their participation in the market is exclusively for the purchase of NL; • application of the regulation inclusive of producers to whom the measures of GEO No 27/2022 apply; • use of standard or EFET-type contracts; • reduction of the average power per settlement interval from 10 MW to 5 MW, for a better profiling of the final customers’ offers; • the possibility for the initiator to choose to vary the contracted power per settlement interval by a maximum of 0.5 MW per settlement interval; • minimum delivery duration of one month; the traded energy; • the way of managing and publishing information on participants, offers and concluded transactions. • ANRE Order no. 20/2023 for the approval of the Regulation on the organization and operation of the organized electricity market, administered by the Romanian Stock Exchange - S.A. – effective from April, 5 2023 Provides rules that refer to: • Introduction of a chapter on organized market segments • The introduction of new products, namely flexible products and products derived from the field of electricity, settled by physical delivery • Description of the trading mechanisms used • Expanding market transparency information • Introduction of requirements regarding the use of a liquidity provider Upon entry into force of the order, ANRE Order no. 117/2022 for the approval of the Regulation on the organization and operation of the electricity futures contract market organized by the company Romanian Stock Exchange S.A., and within 30 days of approval, BRM publishes the operational procedures according to the Regulation entered into force. • the option of full/partial trading of the initiator offer. • ANRE Order no. 17/2023 for approval of the • ANRE Order no. 73/2022 - amending ANRE Order no. 65/2022 approving the Regulation on the organised framework for the contracting of electricity by large end customers - in force since 12 May 2022 • the possibility of introducing initiating offers also by producers participating in the market; methodology for monitoring the wholesale electricity market - effective from April, 3 2023 • the scope and scope of the methodology for monitoring the wholesale electricity market have been extended to include ANRE’s monitoring obligations as a result of the changes brought about by the entry into force of Law 123/2012, and the • deletion of the specification that large end-use electricity customer includes transmission system operator and distribution system operators that purchase, individually or in aggregation, electricity to cover their own technological consumption in the networks they operate, in order to avoid resale by operators of electricity purchased on this market, based on the license they hold. They can participate in the market from the position of final customer, which, according to the definition in the Energy Law, is any natural or legal person who buys electricity for their own consumption. • ANRE Order no. 3/2022 approving the Regulation on the organization and operation of the online platform for changing supplier (POSF) and for contracting the supply of electricity and natural gas - in force since 28 August 2022 • The online platform (POSF) is unique at national level, end customers and economic operators involved in changing supplier and contracting supply are obliged to use this platform exclusively. • Implementation of the platform starts on 28 August 2022. increased complexity of the types of data/indicators required by the relevant European institutions (ACER/ CEER); • update definitions/abbreviations used, reference documents referred to in the regulatory proposal and economic operators to which the provisions of the monitoring methodology apply; • taking into account the amendments made to Law no. 123/2012, the system of specific indicators for the markets on which electricity is traded (structure indicators, market efficiency/performance assessment indicators, market participant behaviour indicators) has been adapted and completed for each of the monitoring entities with responsibilities in the field (ANRE, NEMO and TSO). • for a clearer understanding of how to report and therefore for accurate, complete and timely reporting, additional details have been provided on the data required on the monthly templates submitted by market participants. • ANRE Order no. 18/2023 for approval of the methodology for monitoring the retail electricity market - effective from April, 4 2023 • Duration of the switching process 24 hours • the scope and coverage of the methodology for • The customer is obliged to register the self-quoted index in POSF • The customer uploads the self-read index at the initiation of the supplier change process and a second self-read index at the date of the actual supplier change. If the end customer does not upload the index at the effective supplier changeover date, the DSO is obliged to register in the POSF, within 5 days from the effective supplier changeover date by the end customer, the index read by the DSO or provided by the smart metering system. • The regulation details: the organization and operation of the POSF, the content of the POSF database, the data required to create an access account in the POSF, the rights and obligations of POSF users, the rules on the conclusion of the supply contract, the actual procedure for changing supplier. monitoring the retail electricity market have been extended to include ANRE’s monitoring obligations as a result of the amendments to Law 123/2012 and the increased complexity of the types of data/indicators frequently requested by the relevant European institutions (ACER/CEER); • the system of indicators allows for a European approach to monitoring the retail electricity market, as they are developed in line with the public documents developed by CEER on the proper functioning of retail electricity markets in Europe, working tools for regulators in member countries. • for a clearer understanding of how to report and therefore for accurate, complete and timely reporting, the data aspects required on the monthly templates submitted by retail market participants have been detailed. • ANRE is the administrator and operator of the online platform for end-customers to change their electricity and/or gas supplier (POSF). • ANRE order no. 88/2023 for the amendment of ANRE Orders regarding the electricity market – effective from September 26, 2023 • During the period between the date of entry into force of the Order and 28 August 2022, all economic operators are obliged to comply with any ANRE requests for the realization and implementation of the POSF. • ANRE Order no. 109/2022 amending and supplementing ANRE Order no. 3/2022 approving the Regulation on the organisation and operation of the online platform for changing the electricity and natural gas supplier and for contracting the supply of electricity and natural gas - in force since 24 August 2022 • ANRE order no. 127/2021 for the approval of the Regulation on the clauses and conditions for the balancing service providers and for the frequency stabilization reserve providers and the Regulation on the clauses and conditions for the parties responsible for balancing and for the modification and repeal of some ANRE orders, applies from on April 1, 2024. • ANRE order no. 128/2021 for the approval of the rules for suspending and restoring market activities and the applicable settlement rules, applies from April 1, 2024. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT310 311 2022 2023 2022 2023 • ANRE Draft Order regarding the repeal of ANRE Order no. 97/2013 for the approval of the rules regarding the purchase of electricity to cover own technological consumption related to electrical networks - public debate • Considering the fact that the provisions included in the ANRE Order no. 97/2013, regarding the acquisition by TSOs and DOs for NL coverage related to the electrical networks they operate, were taken over within ANRE Orders no. 213/2020, respectively no. 127/2021, with subsequent amendments and additions, it is proposed to repeal ANRE Order no. 97/2013, with subsequent amendments and additions. • Draft order for the amendment of the Regulation regarding the organized trading framework on the organized future electricity markets administered by the Electric Energy and Natural Gas Market Operator OPCOM S.A. approved by ANRE Order no. 12/2023 - public debate • Taking into account the approval of ANRE Order no. 95/2023 in which aggregation can be done cumulatively (producers, consumers and owners of storage facilities), it is proposed to eliminate art. 11 paragraph 2 of ANRE Order no. 12/2023: Art. 11. — (2) The aggregation of market participants is carried out separately for the production activity, respectively for consumption. • to change the date of application of the Regulation from 28 August 2022 to 10 October 2022; by way of derogation, the provisions relating to the registration in the POSF of the information that ORs and suppliers are obliged to register in accordance with the Regulation shall apply from 28 August 2022 • ANRE Order no. 79/2022 - approving the Regulation on the organization and functioning of the electricity futures market organized by Bursa Romana de Marfuri S.A. - in force since 10 June 2022 • This draft order aims to establish an organized framework for electricity trading on the Electricity Futures Market, through electronic trading platforms managed by Bursa Romana de Marfuri S.A (BRM). • ANRE Order 117/2022 for the approval of the Regulation for the organization and functioning of the forward electricity contracts market organized by Bursa Romana de Marfuri S.A. - in force since 1 October 2022, exception art. 2 • repeals Order No. 79/2022, introducing new products for trading: (i) multiple of a day, i.e. the entire period of at least 2 consecutive delivery days starting at the earliest on the second calendar day following the day a transaction is closed; the product is tradable only with delivery in the band; (ii) 1 week; the product is tradable only with delivery in the band; (iii) balance of the month, i.e. the period made up of the remaining delivery days of a current calendar month, starting on the second calendar day following the day a transaction is closed; the product is tradable only with delivery in the band. • art. 2 - The BRM shall update, by 1 October 2022, the operational procedures necessary to implement the Regulation • ANRE Order no. 92/2022 - order amending and supplementing the Regulation on the calculation and settlement of imbalances of the parties responsible for balancing - single imbalance price, approved by ANRE Order no. 213/2020 and amending some ANRE orders - in force since 1 July 2022. • new articles on how to allocate additional costs/ revenues from balancing the system; • it is proposed to reduce from 6 months to 2 months the period in which the participant can request a reasoned correction of the settlement from the posting of the information note for settlement on the dedicated IT platform; • implementation of the 400 kW installed capacity limit for prosumers, from which the supplier no longer assumes responsibility for balancing; • the order applies from 1 July 2022 in which the calculations for the settlement of imbalances of the PRE for the delivery month June 2022 are made. • ANRE Order no. 121/2022 amending some ANRE orders on the electricity market - in force since 1 October 2022 • ANRE Order no. 127/2021 shall enter into force on the date of publication and shall apply from 1 October 2023, with the exception of: (i) for the period 1 May 2023-1 September 2023, the balancing party imbalance settlement operator shall, starting from May 2023, perform monthly simulations for the calculation of the balancing party imbalance settlement resulting from the application of the provisions of the Regulation on terms and conditions for balancing parties (ii) technical amendments to the Technical Qualification Procedure for the provision of system services, approved by ANRE Order no. 89/2021, which apply from the date of entry into force • ANRE Order no. 128/2021 applies from 1 October 2023, to align with the provisions of ANRE Order no. 127/2021. • Order no. 134/2022 approving the General General Rules on Organised Electricity Futures Markets - in force from 3 November 2022 • to simplify the organised framework for electricity contracting, by drawing up a framework regulation with general provisions, on the basis of which each electricity market operator will draw up specific rules for the organisation and management of its own markets; • ensure the creation of a general framework with requirements applicable to all electricity market operators to ensure transparency and non- discrimination. On the basis of these general rules, operators shall draw up their specific conditions of participation. • Regulation (EU) 2022/1854 of 6 October 2022 on emergency action to tackle high energy prices: • reduce consumption by a target 5% during peak hours • 180 Euro/MWh threshold for solar, nuclear, hydro, wind and lignite production mainly; revenues above this threshold will be collected by the state • solidarity mechanism -33% of profits in fiscal year 2022, if there is an increase of more than 20% compared to the 2018-2021 average • The funds obtained on the last two points will be redirected to domestic consumers, companies in difficulty, reduced tariffs or social aid. • Draft Order approving the methodology for monitoring the wholesale electricity market - public consultation • the scope and scope of the methodology for monitoring the wholesale electricity market have been extended to include ANRE’s monitoring obligations as a result of the changes brought about by the entry into force of Law 123/2012, and the 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT312 313 2022 2023 A.3.1.2. Supply activity increased complexity of the types of data/indicators required by the relevant European institutions (ACER/ CEER); • update definitions/abbreviations used, reference documents referred to in the regulatory proposal and economic operators to which the provisions of the monitoring methodology apply; • taking into account the amendments made to Law no. 123/2012, the system of specific indicators for the markets on which electricity is traded (structure indicators, market efficiency/performance assessment indicators, market participant behaviour indicators) has been adapted and completed for each of the monitoring entities with responsibilities in the field (ANRE, OPEE and OTS). • for a clearer understanding of how to report and therefore for accurate, complete and timely reporting, additional details have been provided on the data required on the monthly templates submitted by market participants. • Draft Order approving the methodology for monitoring the retail electricity market - public consultation • the scope and coverage of the methodology for monitoring the retail electricity market have been extended to include ANRE’s monitoring obligations as a result of the amendments to Law 123/2012 and the increased complexity of the types of data/indicators frequently requested by the relevant European institutions (ACER/CEER); • the system of indicators allows for a European approach to monitoring the retail electricity market, as they are developed in line with the public documents developed by CEER on the proper functioning of retail electricity markets in Europe, working tools for regulators in member countries. • for a clearer understanding of how to report and therefore for accurate, complete and timely reporting, the data aspects required on the monthly templates submitted by retail market participants have been detailed. Source: Electrica 2022 2023 In 2022, with an impact on the electricity and gas supply activity, the following regulations were adopted: In 2022, with an impact on the electricity and gas supply activity, the following regulations were adopted: a. Primary legislation: a. Primary legislation: • GEO no. 118/2021 on the establishment of a • GEO No 27/2022 on measures applicable to final compensation scheme for electricity and natural gas consumption for the 2021-2022 cold season, approved with amendments and additions by Law no. 259/2021: • The planned support scheme will be applied for the period November 2021 – March 2022 and was established in the context of rising prices on the electricity and natural gas markets at international level, as well as the effects of these increases for the Romanian population; • the following consumer support schemes are provided: • compensation for household customers if they fall within the maximum consumption limits set for the entire period of application (i.e. 1,500 kWh for electricity, 1,000 m3 for natural gas), respectively monthly and within the reference price of 0.68 lei/ kWh for electricity, respectively 125 lei/MWh for natural gas; the amount of compensation is 0.291 lei/kWh for electricity, respectively 33% of the bill for natural gas; • exemption from payment of regulated tariffs, other contributions and excise duty for SMEs, individual medical practices and other liberal professions, microenterprises, licensed natural persons, sole proprietorships, family enterprises (i.e. regulated feed-in/withdrawal tariffs, distribution tariff, system service tariff, transmission tariff, green certificates, contribution for high efficiency cogeneration and excise duty – for electricity; transmission cost, distribution tariff and excise duty – for natural gas); • capping of the final invoiced price to a maximum of 1 leu/kWh, of which the electricity price component of max. 0.525 lei/kWh for electricity, respectively a maximum of 0.37 lei/kWh, of which the gas price component of max. 0,250 lei/kWh for natural gas for household customers, public and private hospitals, public and private educational establishments and nurseries, non-governmental organisations, religious establishments, public and private social service providers; • suspension of bill payments – on request, only for vulnerable consumers, for a period of min. 1 month and max. 6 months; • Mechanisms are also provided for the settlement of amounts related to support schemes from the state budget to electricity and gas suppliers. customers in the electricity and natural gas market for the period from 1 April 2022 to 31 March 2023, as well as for amending and supplementing certain regulatory acts in the field of energy: • the period of application of the support scheme (capping) is 1 year, i.e. 1 April 2022 - 31 March 2023. • for electricity the final invoiced price is: maximum 0.68 lei/kWh (VAT included) for household customers with average monthly consumption (achieved at the place of consumption in 2021) less than or equal to 100 KWh, maximum 0.8 lei/kWh (VAT included) for household customers with average monthly consumption between 100 kWh and 300 KWh inclusive, maximum 1 leu/kWh (VAT included) for non-household customers (the framing of household customers is made according to the average monthly consumption achieved in 2021, the capped prices will apply for the entire period regardless of the amount consumed. In the case of household customers who were not initially included in the cap but whose consumption in 2022 is included, suppliers issue regularisation invoices in February 2023 using the capped price for the period in which they consumed). • customers connected after 1 January 2022 will be billed with a ceiling: domestic electricity customers at 0.68 lei/kWh (with minimum ceiling), domestic gas customers at 0.31 lei/kWh (category ceiling), non-household electricity customers at 1 leu/kWh (category ceiling) and non-household gas customers at 0.37 lei/kWh (regardless of consumption); • customers who do not fall under the ceiling will have monthly adjustable prices, the variable being a correction component for the purchase price, so that the cost of purchase (with PE within 5%) is passed on to the final customers. The exception is only the first two months of the application period, when the price is not adjustable. At the request of final customers, suppliers may also conclude supply contracts under conditions other than those laid down in the article referring to uncapped customers. • the subscription is included in the ceiling; if the price in the current contracts concluded with final customers is lower than the ceiling price, the contractual price shall apply. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT314 315 2022 2023 2022 2023 • GEO no. 2/2022 on the establishment of social protection measures for employees and other professional categories in the context of prohibition, suspension or limitation of economic activities, caused by the epidemiological situation generated by the spread of SARS-CoV-2 coronavirus, as well as for the modification and completion of some normative acts: • for natural gas the final invoiced price is: maximum 0.31 lei/kWh (VAT included) for household customers, maximum 0.37 lei/kWh (VAT included) for non- household customers whose annual consumption of natural gas in 2021 at the place of consumption is no more than 50,000 MWh and for thermal energy producers; • The ordinance provides for amendments and • the supply component is 73 lei/MWh for the additions to GEO No 118/2021 as follows: • extending the scope of the ceiling by including in the category of beneficiaries also public cultural institutions and cultural establishments subordinated to central and local public administration authorities; • prohibition to disconnect or interrupt, until 30.06.2022, the electricity supply for non-payment of household customers; • provision, in the case of invoices that do not comply with the legal provisions on the application of support schemes (compensation, exemption, capping), for their automatic reissue within a maximum of 15 days from the date of issue. For invoices already issued, the deadline for their reissue is 15 days after the entry into force of this GEO, i.e. until 3 February 2022 (inclusive). The execution of the payment obligation for invoices in the process of being recalculated is also suspended until new invoices are issued. • GEO no. 3/2022 amending and supplementing GEO no. 118/2021: • the following amendments and additions to GEO no. 118/2021 are provided for, with application from 1 February to 31 March 2022: • increasing the consumption margin for compensation from 300 kWh/month (+10%) to 500 kWh/month (+10%) for electricity and from 200 mc/ month to 300 mc/month for natural gas; • change the price cap for household customers (from 1 leu/kWh to 0.8 lei/kWh for electricity and from 0.37 lei/kWh to 0.31 lei/kWh for natural gas) and introduce a price cap for all non-household customers (1 leu/ kWh for electricity and 0.37 lei/kWh for natural gas); • the cap still concerns both the final price and the electricity/natural gas purchase component: for household customers – 0.8 lei/kWh final price for electricity, of which 0.336 lei/kWh electricity price component; 0.31 lei/kWh final price for natural gas, of which 0.200 lei/kWh natural gas price component; for non-household customers: 1 leu/kWh final price for electricity, of which 0.525 lei/kWh electricity price component; 0.37 lei/kWh final price for natural gas, of which 0.250 lei/kWh gas price component; • recovery of the capped amounts will be made according to the thresholds indicated above, in conjunction with the period of application: from 1 November 2021 to 31 January 2022, by the difference electricity supply activity and 12 lei/MWh for the natural gas supply activity, and for customers taken over as a last resort it is 80 lei/MWh for the electricity supply activity and 13.5 lei/MWh for the natural gas supply activity (the GEO establishes the value of the supply component, without specifying that it is a maximum). • for the purchase of electricity and natural gas, the monthly imbalance must not exceed 5% of the value of the energy delivered monthly to the end customers in the portfolio, what exceeds this threshold will not be recognized and settled; the purchase made for last resort supply does not have the balancing cost limited to 5%; there is the obligation to set up storage deposits of at least 30% of the amount of natural gas required for the consumption of final customers from the own portfolio between April 1 and October 31, 2022. • the recovery of the capping amounts is carried out in full, provided that the limit of 5% of the cost with imbalances is respected; the losses recorded from the application of the support scheme between November 1, 2021 and March 31, 2022 can also be recovered (a supply cost of 73 lei/MWh is accepted and we limit the cost of imbalances to 5% of the purchase cost) - so that the recovery either at a high level, it is necessary to invoice all consumption, including in the FUI regime, until the beginning of May. • the supplier has the obligation to notify the customers about the changes arising from the application of the GEO provisions with the first invoice sent after the entry into force (the fine is between 100 thousand and 400 thousand lei). • Law no. 206/2022 for the approval of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period April 1, 2022—March 31, 2023, as well as for the amendment and completion of some normative acts in the field of energy. • GEO no. 119/2022 - Emergency Ordinance for amending and supplementing the Government’s Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market • during the period April 1, 2022—March 31, 2023, as well as for the amendment and completion of between the average monthly purchase price and the threshold of 525 lei/MWh for electricity and 250 lei/MWh for natural gas. From 1 February, recovery will be made: for household customers – by the difference between the average monthly purchase price and the threshold of 336 lei/MWh for electricity and 200 lei/MWh for natural gas; for non-household customers – by the difference between the average monthly purchase price and the threshold of 525 lei for electricity and 250 lei/MWh for natural gas. • GEO no. 27/2022 on the measures applicable to final customers in the electricity and natural gas market during the period 1 April 2022-31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy: • the period of application of the support (capping) scheme is 1 year, i.e. 1 April 2022 – 31 March 2023. • for electricity the final invoiced price is: maximum 0.68 lei/kWh (VAT included) for household customers with an average monthly consumption (at the place of consumption in 2021) less than or equal to 100 kWh, maximum 0.8 lei/kWh (VAT included) for household customers with an average monthly consumption between 100 kWh and 300 kWh inclusive, maximum 1 leu/kWh (VAT included) for non-household customers (household customers are included according to the average monthly consumption in 2021, the capped prices will apply for the whole period regardless of the quantity consumed. In the case of household customers who were not initially included in the cap but whose consumption in 2022 is included, suppliers issue regularisation invoices in February 2023 using the capped price for the period in which they consumed). • for natural gas the final price invoiced is: maximum 0.31 lei/kWh (VAT included) for domestic customers, maximum 0.37 lei/kWh (VAT included) for non- household customers whose annual consumption of natural gas in 2021 at the place of consumption is no more than 50,000 MWh and for thermal energy producers; • Customers connected after 1 January 2022 will be billed with a ceiling: domestic electricity customers at 0.68 lei/kWh (with minimum ceiling), domestic gas customers at 0.31 lei/kWh (category ceiling), non-household electricity customers at 1 leu/kWh (category ceiling) and non-household gas customers at 0.37 lei/kWh (regardless of consumption); • customers who do not fall under the cap will have monthly adjustable prices, the variable being a correction component for the purchase price, so that the cost of the purchase (with PE within 5%) is passed on to the end customers. The exception is only the first two months of the application period, when the price is not adjustable. At the request of some normative acts in the field of energy for 85% of the average monthly consumption at the place of consumption in 2021, in the case of small and medium-sized enterprises (SMEs), of economic operators in the field of the food industry, of public institutions; maximum 1 leu/kWh (VAT included) for the full consumption of public and private hospitals, public and private educational institutions, nurseries, public and private social service providers. In order to benefit from the facilities provided by this GEO starting from September 1, 2022, the previously mentioned non-domestic customers have the obligation to submit to the electricity supplier a request accompanied by a declaration on their own responsibility, within a maximum of 30 days from the date of entry into force of this GEO. Beneficiaries falling under the provisions of the GEO who did not submit the request accompanied by a declaration on their own responsibility in September 2022, as well as those established after September 1, 2022, benefit from the provisions of this GEO starting from the 1st of the month following their submission to supplier. • the capped final billed price for natural gas is: maximum 0.31 lei/kWh (including VAT) in the case of domestic customers (it also applies to the consumption places of domestic customers connected starting from January 1, 2022 or for domestic customers) that have no history in 2021 with the supplier, by reference to the monthly consumption achieved); a maximum of 0.37 lei/ kWh (including VAT) in the case of non-domestic customers whose annual natural gas consumption achieved in 2021 at the place of consumption is no more than 50,000 MWh, as well as in the case of heat energy producers (also applies in the case of places of consumption of non-household customers connected starting from January 1, 2022); • the compensation values, for each supplier, are determined by ANRE, within 30 days from the date of receipt of the settlement requests, submitted and registered at ANPIS (domestic customers), respectively ME (non-domestic customers) and, in a copy, to ANRE; • the maximum value of the weighted average price of electricity at which ANRE calculates the amounts to be settled from the state budget for electricity suppliers is 1,300 lei/MWh; • starting from September 1, 2022, during the period of application of the provisions of this emergency ordinance, electricity producers, aggregated electricity production entities, traders, suppliers that carry out trading activity and aggregators that transact quantities of electricity and /or natural gas on the wholesale market pay a contribution to the Energy Transition Fund calculated according to the methodology in this GEO; 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT316 317 2022 2023 2022 2023 final customers, suppliers may also conclude supply contracts under conditions other than those laid down in the article referring to uncapped customers. • the subscription is included in the cap; if the price in the current contracts with end customers is lower than the capped price, the contract price applies. • the supply component is 73 lei/MWh for the electricity supply activity and 12 lei/MWh for the natural gas supply activity and for the customers taken over in the last resort it is 80 lei/MWh for the electricity supply activity and 13.5 lei/MWh for the natural gas supply activity (the GEO sets the value of the supply component, without specifying that it is a maximum). • for the purchase of electricity and natural gas, the monthly imbalance must not exceed 5% of the value of the energy delivered monthly to the end customers in the portfolio, which exceeds this threshold will not be recognized and settled; the purchase made for supply in last resort does not have balancing costs limited to 5%; the obligation to establish between 1 April and 31 October 2022 storage deposits of at least 30% of the quantity of natural gas required for the consumption of end customers in its portfolio appears • the recovery of the capping amounts is fully realized under the condition of respecting the limit of 5% of the cost with imbalances; the losses registered from the application of the support scheme in the period 1 November 2021 – 31 March 2022 can also be recovered (a supply cost of 73 lei/MWh is accepted and we have the limit of the cost with imbalances at 5% of the purchase cost) – for the recovery to be at a high level it is necessary to invoice all the consumption, including in the SoLR regime, until the beginning of May. • the supplier has the obligation to notify the customers about the changes resulting from the application of the provisions of the GEO with the first invoice sent after the entry into force (the fine is between RON 100 th. And RON 400 th.). • Fines: between 1-5% of turnover for non-compliance with the cap and cost limits; between RON 20 th. And RON 400 th. For non-compliance with the provisions for supply as a last resort; between RON 100 th. And 400 RON th. If we do not inform end customers, if we do not keep differentiated/segmented monthly customer records, if we do not identify customers for the application of the cap or if we do not submit the documents requested by ANRE. • GEO no. 42/2022 amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy: • bilateral contracts concluded on the wholesale market through direct negotiation are reported to ANRE by the contracting parties within 2 working days from the date of conclusion; • the successive sale of certain quantities of electricity or natural gas by traders and/or suppliers with trading activities, with the obvious purpose of increasing the price, is sanctioned by ANRE, with a fine of 5% of the turnover; • GEO no. 153/2022 — Emergency Ordinance for amending and supplementing the Government’s Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period April 1, 2022—March 31, 2023, as well as for the amendment and completion of some normative acts in the field of energy and the amendment of the Government Emergency Ordinance no. 119/2022 for the amendment and completion of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period April 1, 2022— March 31, 2023, as well as for the amendment and completion of some normative acts in the field of energy. • for the period January 1, 2023-March 31, 2025, the mechanism for the centralized purchase of electricity is established; • The mechanism provides - OPCOM, as the sole acquirer, buys electricity from producers (electricity producers with an installed power greater than or equal to 10 MW) and sells the purchased electricity to electricity suppliers who have signed contracts with customers final, to the electricity transport and system operator and electricity distribution operators, to cover own technological consumption; the price paid by OPCOM to electricity producers, for the quantities of electricity sold by them, is 450 lei/MWh and OPCOM’s selling price to economic operators is also 450 lei/MWh (OPCOM has the right to charge market participants tariffs/ commissions at the level of costs registered by organizing the mechanism for the centralized purchase of electricity); in order to carry out the transactions, OPCOM organizes an annual procurement procedure, as well as an additional procurement procedure, each month, for the quantities of electricity delivered in the following month; the annual and monthly amounts of electricity constitute firm obligations of electricity producers and economic operators and are evenly distributed over all the settlement intervals of each month (contracts are concluded by signing, within a maximum of 3 working days). • the deadline for submission of documents for the • Law no. 357/2022 — Law on the approval of the recovery of amounts capped by the application of GEO 118/2021 is extended from 15 May to 15 July 2022 • ANRE publishes reporting templates for the settlement of the capped amounts, templates that are to be filled in for each category of customers benefiting from the cap (average unit costs must be calculated for both regulated network tariffs and charges); a fine of 50 thousand lei has been introduced for failure to comply with the instructions for uploading the templates and for failure to comply with the deadlines for rectifying the data uploaded on the IT platform and for resubmitting claims/ statements for settlement; • in the category of non-household natural gas customers who benefit from the cap are also thermal energy producers without exception. • Law no. 206/2022 for the approval of Government Emergency Ordinance no. 27/2022 on measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy • The main new elements are the following: • a single invoice form will be introduced, drawn up by joint Order of ANRE and ANPC; • final electricity customers, who do not benefit from capping, are charged the minimum price between the price in the current supply contract and the final price resulting from the application of the GEO. • final gas customers are charged the minimum of the contract price, the final capped price and the price resulting from the application of the GEO. • GEO no. 112/2022 on the establishment of some measures to stimulate investments financed by non-reimbursable external funds in the field of energy efficiency, renewable energy resources for large enterprises and small and medium enterprises, green energy from renewable sources for local public authorities, as well as some measures in the field of smart specialization, and for the modification and completion of some normative acts • regulates the general framework for establishing energy efficiency/renewable energy measures for large enterprises and SMEs with funding from non- reimbursable external funds allocated under the Large Infrastructure Operational Programme; • amends and completes GEO 27/2022 with provisions on the elaboration and approval by ANRE in consultation with ANPC of the mandatory minimum content of natural gas/electricity bills so that the bills contain correct, transparent, clear, legible and easy to understand information, which will allow household customers to adjust their own Government’s Emergency Ordinance no. 119/2022 for the amendment and completion of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during • the period April 1, 2022—March 31, 2023, as well as for the amendment and completion of some normative acts in the field of energy • the final capped invoiced price of electricity supplied to household customers between January 1, 2023 and March 31, 2025 is: • 0.68 lei/kWh, including VAT, for consumption between January 1, 2023 and March 31, 2025 by the following categories of customers: a) household customers whose monthly consumption is between 0 and 100kWh inclusive; b) household customers who use devices, appliances or medical equipment necessary to carry out treatments, based on an application and a declaration on their own responsibility submitted in writing to Electrica Furnizare S.A., following that the capped final billed price will apply from the first date of the month following the one in which the mentioned documents were submitted, c) household customers who have at least 3 dependent children up to 18 years old, respectively 26 years old, if they follow a form of education, based on a application and a written declaration submitted to Electrica Furnizare S.A., with the final invoiced price being applied from the first of the month following the one in which the mentioned documents were submitted, d) domestic customers, single-parent families, who have at least one child up to the age of 18, respectively 26 years old if he/she follows a form of education, on the basis of an application and a self-responsible declaration submitted in writing to Electrica Furnizare S.A following that the final invoiced price will apply from the first day of the month following the one in which the mentioned documents were submitted. • 0.80 lei/kWh, including VAT, for consumption between January 1, 2023 and March 31, 2025 by household customers whose monthly consumption at the point of consumption is between 100.01 and 255 kWh. Electricity consumption between 255 and 300 kWh/ month is invoiced at the price of 1.3 lei/kWh, including VAT. If the consumption exceeds 300 kWh/month, the entire consumption is invoiced at the price of 1.3 lei/ kWh, including VAT. • 1.3 lei/kWh, including VAT, for household consumers who are not provided for above. • the ceilings in terms of electricity prices applicable to non-domestic final customers, are: • maximum 1 leu/kWh, for 85% of the average monthly consumption achieved at the place of consumption (application and declaration on the 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT318 319 2022 2023 2022 2023 consumption and compare the commercial supply conditions, i.e. suppliers are obliged to implement in the information system the provisions on the unit bill starting with consumption in April 2023. • Law no. 248/2022 approving Government Emergency Ordinance no. 143/2021 amending and supplementing the Electricity and Natural Gas Law no. 123/2012 and amending some normative acts Approves GEO 143/2022 with amendments and additions regarding: • definition of renewable energy, definition of economic efficiency, definition of prosumer (completed with mobile unit equipped with electricity generation systems during regenerative braking); • ANRE’s obligations to promote the comparator, provide access to an application programming interface (API) for software developers, publish aggregated data within 30 days; • generators are obliged to trade at least 40% of their annual electricity production through contracts on electricity markets other than DAM, PI and PE (except for generation capacities commissioned after 1 June 2020); • the supplier has the obligation to ensure at least 40% of the electricity necessary to cover the consumption of the final customers in the portfolio from its own production or through the purchase by forward contracts on the electricity markets, other than DAM, PI and PE; • prosumers, natural and legal persons and local public administration authorities that own power plants producing energy from renewable sources are exempted from the obligation of annual and quarterly purchase of green certificates for their own final consumption; prosumers can also request quantitative compensation of regenerative energy resulting from regenerative braking; • in the case of household customers, authorised natural persons, sole proprietorships, family businesses and public institutions connecting to the low voltage grid, the distribution operator will reimburse the applicant within 5 years, the actual cost of the design and execution of the connection, up to an average value of a connection, established according to a methodology approved by ANRE, the recovery of the costs of connection of household customers is made with accelerated depreciation over a period of 5 years, through distribution tariffs; • In the case of non-household customers, the value of the connection work is borne in full by them, the resulting assets do not become the property of the distribution operator but are only transferred to the operator for exploitation; personal responsibility of the legal representative) for: SMEs, Regional Operators (Law no. 51/2006), Transport Company with The Bucharest Metro «Metrorex» – S.A., as well as the airports, which are subordinated/coordinated or under the authority of the Ministry of Transport and Infrastructure, the economic operators in the field of the food industry, identified by CAEN code 10, as well as those in the field of agriculture and fishing, identified by CAEN code 01 and 03, local public authorities and institutions, decentralized public services of ministries and other central bodies, companies and commercial companies of county, municipal or local interest, autonomous governments and all public and private entities that provide a public service, institutes national research and development; • maximum 1 leu/kWh, for the full consumption of public and private hospitals, public and private educational units, nurseries and public and private providers of social services provided in the Nomenclature of social services; • a maximum of 1 leu/kWh, including VAT, for 85% of the monthly consumption made at the place of consumption of public institutions, other than those previously provided for, as well as for the places of consumption belonging to the cults officially recognized in Romania; • non-household customers who do not fall into one of the above categories pay the price capped at a maximum of 1.3 lei/kWh, including VAT. • GEO no. 192/2022 — Emergency Ordinance for amending and supplementing the Government’s Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period April 1, 2022— March 31, 2023, as well as for the amendment and completion of some normative acts in the field of energy. • benefit from the final invoiced electricity price of a maximum of 0.68 lei/kWh for household customers whose place of consumption is occupied by persons who use devices, appliances or medical equipment powered from the electrical network, necessary for carrying out medical treatments based on confirmation from the specialist doctor and of a request submitted to the supplier; for the month of January 2023, instead of the medical confirmation, a self-responsible declaration is submitted; the capped final invoiced price is applied from the first day of the month following the one in which the previously provided documents were submitted; • capping also applies to places of consumption used on the basis of a rental contract, the following documents are submitted to the supplier by the household customer: the application regarding the application of the capped price, the copy of • GEO no. 119/2022 – Emergency Ordinance amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy • the period of application of the support (capping) scheme is 1 September 2022-31 August 2023, • the final capped invoiced price for electricity is: maximum 0.68 lei/kWh, (VAT included) for household customers whose average monthly consumption at the place of consumption in 2021 was between 0-100 kWh inclusive; maximum 0.80 lei/kWh (VAT included) for household customers whose average monthly consumption at the place of consumption in 2021 was between 100.01-300 kWh – for a monthly consumption which is maximum 255 kWh; maximum 1 leu/kWh (VAT included) for 85% of the average monthly consumption at the place of consumption in 2021 for small and medium-sized enterprises (SMEs), economic operators in the food industry, public institutions; maximum 1 leu/kWh (VAT included) for the full consumption of public and private hospitals, public and private education units, nurseries, public and private social service providers. In order to benefit from the facilities provided for by this GEO, starting from 1 September 2022, the above-mentioned non-household customers are obliged to submit to their electricity supplier a request accompanied by a declaration on their own responsibility, within a maximum of 30 days from the date of entry into force of this GEO. Beneficiaries who fall within the provisions of the GEO and who have not submitted their application accompanied by a declaration on their own responsibility in September 2022, as well as those established after 1 September 2022, shall benefit from the provisions of this GEO starting from the 1st of the month following their submission to the supplier. • the final capped invoiced price for natural gas is: maximum 0.31 lei/kWh (VAT included) for household customers (also applies to consumption sites of household customers connected from 1 January 2022 or for household customers who have no history with the supplier in 2021, based on monthly consumption); maximum 0.37 lei/kWh (VAT included) for non- household customers whose annual consumption of natural gas in 2021 at the consumption site is 50,000 MWh, as well as in the case of thermal energy producers (also applies to the consumption places of non-household customers connected as of 1 January 2022); • the values and tranches foreseen for the capping scheme may be modified by Government decision, depending on the developments on the domestic and international electricity and natural gas markets the rental contract, the tenant’s self-responsible declaration that he falls under one among the categories benefiting from Ceilings or medical confirmation, as the case may be. • the ceiling on electricity is applied to all places of consumption of a household customer, depending on the consumption made at each of them. • the annual and monthly centralized procurement mechanisms (MACEE) are modified in terms of the transmission of forecasts and purchased quantities, guarantees, payments, etc. • Law no. 5/2023 — Law on the amendment and completion of Law no. 220/2008 for the establishment of the system for the promotion of energy production from renewable energy sources • is amended and supplemented Law no. 220/2008 regarding the trading of green certificates after the expiration of the accreditation period, the recovery of improperly issued green certificates, etc. • Law no. 15/2023 - Law on the approval of the Government Emergency Ordinance no. 3/2022 for the amendment and completion of the Government Emergency Ordinance no. 118/2021 regarding the establishment of a compensation scheme for the consumption of electricity and natural gas for the cold season 2021—2022, as well as for completing Government Ordinance no. 27/1996 regarding the granting of facilities to people who live or work in some localities in the Apuseni Mountains and in the „Danube Delta” Biosphere Reserve • GEO no. 3/2022 is approved. • GEO no. 32/2023 – Emergency Ordinance for amending and supplementing Government Emergency Ordinance no. 166/2022 regarding some measures to provide support to categories of vulnerable people for the compensation of the energy price, partially supported by external non-reimbursable funds. GEO 166/2022 is amended/supplemented with the following specifications: • if several beneficiaries of the support are domiciled or reside at a place of consumption, it will be granted only once per place of consumption, regardless of whether or not it is the holder of the supply contract, provided that the place of consumption coincides with the domicile or the residence of the beneficiary of support, respectively with the address mentioned in the document that certifies the inclusion in one of the beneficiary categories; • to make a payment by means of energy cards, the beneficiaries must present the following documents: the energy card valid on the date on which the payment is made, the identity document of the beneficiary, in original; supporting documents proving the current and/or outstanding debt to 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT320 321 2022 2023 2022 2023 Ministry of Finance according to GEO no. 186/2022), are used to replenish the account – the Energy Transition Fund (according to the provisions of GEO no. 27/2022 regarding the measures applicable to end customers from the electricity and natural gas market in the period 1 April 2022- 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy, approved with amendments and additions by Law No. 206/2022, with subsequent amendments and additions.) and will be used for payment by ME/ANPIS of compensations to suppliers. • GEO no. 90/2023 – Emergency ordinance for the approval of some measures to reduce budget expenditures for the year 2023 in order to fit into the budget deficit target assumed by the Convergence Program, as well as for the modification and completion of some normative acts. • is amended/supplemented art. 9 para. 10 and 12 of GEO 27/2022, with subsequent amendments and additions, specifying that the payments are made from the Energy Transition Fund and from other legally constituted sources (ANRE will transmit the values related to the compensations to the National Agency for Payments and Social Inspection, respectively the Ministry of Energy, and they make the payment to suppliers of the amounts representing the value of compensation for consumption made from the Energy Transition Fund and from other legally constituted sources). and on the geopolitical developments in Romania’s neighbourhood; • the electricity and gas supply component is 73 lei/ MWh for electricity supply and 12 lei/MWh for gas supply; • the amounts of compensation for each supplier shall be determined by ANRE within 30 days from the date of receipt of the settlement requests submitted and registered with ANPIS (domestic customers) and ME (non-domestic customers) respectively, and copied to ANRE; • the maximum value of the weighted average electricity price at which ANRE calculates the amounts to be settled from the state budget for electricity suppliers is 1,300 lei/MWh; • Starting from 1 September 2022, during the period of application of the provisions of this Emergency Ordinance, electricity generators, aggregated electricity generating entities, traders, suppliers carrying out trading activities and aggregators trading quantities of electricity and/or natural gas on the wholesale market shall pay a contribution to the Energy Transition Fund calculated according to the methodology of this GEO; • bilateral contracts concluded on the wholesale market by direct negotiation are reported to ANRE by the contracting parties within 2 working days from the date of conclusion; • the successive sale of quantities of electricity or natural gas by traders and/or suppliers with trading activities, with the deliberate aim of increasing the price, is sanctioned by ANRE with a fine of 5% of the turnover; • GEO no. 153/2022 – Emergency Ordinance for amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as for amending and supplementing certain regulatory acts in the field of energy and amending Government Emergency Ordinance no. 119/2022 amending and supplementing Government Emergency Ordinance No. 27/2022 on the measures applicable to final customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy • for the period from 1 January 2023 to 31 March 2025, the centralised electricity purchase mechanism shall be established • The mechanism provides – OPCOM, as the single buyer, buys electricity from producers (electricity producers with an installed capacity of 10 MW or more) and sells the purchased electricity to electricity suppliers that have contracts with end the energy supplier that must be issued after 1 January 2023 and for energy consumption after 1 February 2022 or, as the case may be, the debt validation certificate obtained from the homeowners association. • Law no. 206/2023 – Law on the approval of the Government Emergency Ordinance no. 153/2022 for the amendment and completion of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period 1 April 2022— 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy and the amendment of the Government Emergency Ordinance no. 119/2022 for the amendment and completion of the Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period 1 April 2022— 31 March 2023, as well as for the amendment and completion of some normative acts in the field of energy • GEO no. 153/2022 is approved (GEO no. 27/2022, GEO no. 119/2022 and GEO no. 153/2022 are amended), with modifications regarding the recognized average purchase price (it drops from 1300 lei/MWh to 900 lei /MWh), the regularization of non-domestic final customers, who did not benefit from capping in 2021, but who, depending on the consumption achieved in 2022, have the right to benefit (the deadline for regularization is the second semester of 2023), the application of the minimum price between the price resulting from the application of the GEO, the capped price and the contract price, the application of the adjustment component (failure to fulfil the obligations listed above is sanctioned with a fine of between 1% and 5% of the turnover). • Law no. 237/2023 – Law on the integration of renewable and low-carbon hydrogen in the industry and transport sectors • has as its object the establishment of measures for fuel suppliers and for industrial hydrogen consumers, in order to integrate hydrogen from renewable sources and with low carbon emissions in the industry and transport sectors. • Ordinance no. 30/2023 – Ordinance for the establishment of budgetary measures regarding the use of the solidarity contribution established by the Government’s Emergency Ordinance no. 186/2022 on some measures to implement Council Regulation (EU) 2022/1.854 of 6 October 2022 on an emergency intervention to address the problem of high energy prices • the amounts corresponding to the solidarity contribution collected in 2023 (in the account of the customers, electricity transmission and system operators and electricity distribution operators to cover their own technological consumption; the price paid by OPCOM to electricity producers for the quantities of electricity sold by them is 450 lei/MWh and the OPCOM sales price to economic operators is also 450 lei/MWh (OPCOM has the right to charge market participants tariffs/commissions at the level of the costs incurred through the organisation of the centralised electricity purchase mechanism); OPCOM organises an annual purchase procedure and an additional purchase procedure each month for the quantities of electricity to be delivered in the following month; the annual and monthly quantities of electricity are binding obligations of the electricity producers and economic operators and are distributed evenly over all the settlement intervals of each month (the contracts are concluded by signing within a maximum of 3 working days). • GEO no. 163/2022 – Emergency Ordinance for the completion of the legal framework for the promotion of the use of energy from renewable sources, as well as for the modification and completion of some normative acts • completes the legal framework established by Law no. 220/2008, by laying down rules on: financial support for electricity from renewable sources, self- consumption of this type of electricity, the use of energy from renewable sources in the heating and cooling and transport sectors, regional cooperation between Romania and Member States and third countries, guarantees of origin for energy from renewable sources, applicable administrative procedures, regulations and codes, information and training of both relevant stakeholders and consumers on the practical, including technical and financial, aspects of the development and use of energy from renewable sources, sustainability and greenhouse gas emission reduction criteria for biofuels, bioliquids and biomass fuels. Defines new notions: prosumers acting collectively, renewable energy community, etc. • the central public administration authorities and ANRE may apply taxes and tariffs to renewable energy consumers in one or more of the following cases: if self-produced renewable electricity is effectively supported through support schemes, as of 1 December 2026, if the installed capacity of the prosumers’ power plants exceeds 8% of the total installed capacity of the national electricity generation capacity or if self-produced renewable electricity is produced in installations with a total installed capacity of electricity above 30 kW. • GEO no. 166/2022 – Emergency Ordinance on some measures for granting support to vulnerable categories of people to compensate for the price of energy, partly supported by non-reimbursable external funds 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT322 323 2022 2023 2022 2023 • - people with low incomes (pensioners of the public pension system whose monthly income is less than or equal to RON 2,000, people with serious, severe or medium disability, whose own monthly income is less than or equal to RON 2,000 and other categories) will receive from the state this year an aid of RON 1,400, money that they can use to pay bills or debts for electricity, centralized thermal energy, gas, gasoline, firewood and others. The support for paying energy bills will be RON 1,400, which will be granted in two equal instalments of RON 700 each, in February and September 2023. • Law no. 357/2022 – Law on the approval of Government Emergency Ordinance no. 119/2022 for the modification and completion of Government Emergency Ordinance no. 27/2022 on the measures applicable to final customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as for the modification and completion of some normative acts in the field of energy • GEO no. 119/2022 is approved for the modification and completion of GEO no. 27/2022 with some amendments; the electricity price cap is extended until 31 March 2025; • the final capped invoiced price of electricity supplied to household customers between 1 January 2023 and 31 March 2025 is: • 0.68 lei/kWh, VAT included, for consumption during the period 1 January 2023 – 31 March 2025 by the following categories of customers: a) household customers whose monthly consumption is between 0 and 100kWh inclusive; b) household customers who use medical devices, appliances or equipment necessary for treatments, based on an application and a declaration on their own responsibility submitted in writing to Electrica Furnizare S.A., and the capped final invoiced price will be applied from the date of the fifth of the month following the month in which the mentioned documents have been submitted, c) domestic customers who have at least 3 children under 18 years of age, respectively 26 years of age, in case they follow a form of education, on the basis of a request and a declaration on their own responsibility submitted in writing to Electrica Furnizare S.A., following that the final invoiced price will be applied from the date of the fifth of the month following the month in which the mentioned documents were submitted, d) single- parent families, who have at least one child under 18 years of age, respectively 26 years of age in case the child is attending a form of education, on the basis of an application and a declaration on their own responsibility submitted in writing to Electrica Furnizare S.A., the final billed price will apply from the first day of the month following the one in which the mentioned documents were submitted. • 0.80 lei/kWh, VAT included, for consumption during the period 1 January 2023 – 31 March 2025 by household customers whose monthly consumption at the place of consumption is between 100.01 and 255 kWh. Electricity consumption between 255 and 300 kWh/month is invoiced at a price of 1.3 lei/kWh, VAT included. If consumption exceeds 300 kWh/month, the entire consumption is invoiced at the price of 1.3 lei/kWh, VAT included. • 1.3 lei/kWh, VAT included, for household consumers not covered above. • the ceilings for electricity prices applicable to non- household final customers are: • maximum 1 leu/kWh, for 85% of the average monthly consumption at the place of consumption (application and affidavit of the legal representative) for: SMEs, Regional Operators (Law no. 51/2006), Bucharest Metro Transport Company “Metrorex” – S.A., as well as airports, which are under the subordination/coordination or authority of the Ministry of Transport and Infrastructure, economic operators in the field of food industry, identified by CAEN code 10, as well as those in the field of agriculture and fishing, identified by CAEN codes 01 and 03, local public authorities and institutions, deconcentrated public services of ministries and other central bodies, companies and commercial companies of county, municipal or local interest, autonomous companies and all public and private entities providing a public service, national research and development institutes; • maximum 1 leu/kWh, for the full consumption of public and private hospitals, public and private education units, nurseries and public and private providers of social services as listed in the Nomenclature of Social Services; • maximum 1 leu/kWh, VAT included, for 85% of the monthly consumption made at the place of consumption of public institutions, other than those mentioned above, as well as for places of consumption belonging to officially recognized cults in Romania; • non-household customers who do not fall into one of the above categories pay a price capped at a maximum of 1.3 lei/kWh, including VAT. • As regards the price of natural gas to non-household customers, the beneficiaries of the price capped at a maximum of 0.37 lei/kWh, including VAT, include non- household customers in industrial parks regulated by Law no. 186/2013, as well as those in closed distribution systems defined under Law no. 123/2012. In addition, the consumption limit of 50,000 MWh will refer to the year prior to the current year (not to 2021); for consumption places of non-household 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT324 325 2022 2023 2022 2023 customers connected after 1 January 2022, the cap will apply only within the limit of an annual consumption of no more than 50,000 MWh. • the principle is maintained that, when billing electricity and natural gas, suppliers must apply the lower of (i) the maximum capped final price, (ii) the contract price or (iii) the final price calculated in accordance with the provisions of Articles 5 and 6, only in the case of natural gas. • GEO no. 192/2022 – Emergency Ordinance amending and supplementing Government Emergency Ordinance no. 27/2022 on the measures applicable to end customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023, as well as amending and supplementing certain regulatory acts in the field of energy: • the final invoiced price for electricity of maximum 0.68 lei/kWh is applied to household customers whose place of consumption is inhabited by persons who use medical devices, appliances or equipment supplied from the electricity grid, necessary for medical treatment on the basis of a confirmation from the medical specialist and a request submitted to the supplier; for January 2023, instead of the medical confirmation, a declaration on own responsibility is submitted; the final invoiced price capped is applied from the date of the fifth of the month following the month in which the documents mentioned above were submitted; • the capping also applies to places of consumption used on the basis of a rental contract, the following documents must be submitted to the supplier by the household customer: the application for the application of the capped price, the copy of the rental contract, the tenant’s affidavit that he/she falls into one of the categories benefiting from the capping or the medical confirmation, as the case may be. • The electricity cap applies to all consumption points of a household customer according to the consumption at each of them. • the annual and monthly centralised purchasing mechanisms (MACEE) are modified with regard to the transmission of forecasts and quantities purchased, guarantees, payments, etc. b. Secondary legislation: b. Secondary legislation: During the reporting period, changes and additions to the regulatory framework were made in the following areas of activity and regulation: During the reporting period, changes and additions to the regulatory framework were made in the following areas of activity and regulation: • ANRE Order no. 64/2022 – amending and supplementing the Performance Standard for the electricity distribution service, approved by Order no. 46/2021 of the President of the National Energy Regulatory Authority. • the reading interval of the metering group index is set by contract and can be longer than one month, but must not exceed 3 months for household customers and 6 months for non-household end customers, for consumers it is one calendar month, for users benefiting from smart metering systems OD is obliged to provide access to historical consumption data (failure to comply with these deadlines leads to the payment of compensation); • sets a timetable for monitoring substations and transformer points – final implementation deadline is 01.01.2028 • ANRE Order no. 131/2022 – Order approving the Performance Standard for the natural gas distribution service • is established: the level of general performance indicators for the following activities (i.e. registration and settlement of complaints/claims/requests from users regarding the gas distribution service, access/contracting of the gas distribution service, compliance with the conditions for delivery/take- back of gas; connection to the gas distribution system; restoration of land and/or property affected by the execution of works on the gas distribution system objectives; the interruption/limitation/ resumption of the natural gas distribution service), the compensations that the distribution operators are obliged to pay in case of non-compliance with their obligations under this Order; the specific performance indicators of the distribution operators’ activities; the way of reporting by the distribution operators of the information on the quality and performance of their activities; the way of evaluating the activities of the distribution operators. • ANRE Order no. 3/2022 approving the Regulation on the organization and operation of the online platform for changing the electricity and gas supplier and for contracting the supply of electricity and natural gas: • application deadline – 28 August 2022; • initiated in order to achieve the objective set by the European legislation on the change of supplier within 24 hours, starting from 2026; • ANRE is the administrator and operator of the platform where data will be uploaded by • ANRE order no. 5/2023 — Order for the approval of the Regulation for the supply of electricity to final customers, as well as for the modification and completion of some orders of the ANRE president: • enters into force on 06 February 2023 (with the exception of some provisions that have other application dates); • the Regulation on the supply of electricity to final customers is approved; • the framework contract for the provision of the electricity distribution service concluded between the concessionaire distribution operator and the supplier (approved by ANRE Order no. 90/2015) is amended/completed, the Methodology for setting tariffs for the electricity distribution service by operators, other than concessionaire distribution operators (approved by ANRE Order no. 102/2016); • is repealed ANRE Order no. 235/2019 for the approval of the Regulation for the supply of electricity to final customers, ANRE Order no. 171/2020 for the approval of the Electricity Supply Conditions by the suppliers of last resort, ANRE Order no. 181/2018 for the approval of the Procedure regarding the regime of financial guarantees established by final customers at the disposal of electricity suppliers and for the amendment of the Regulation on the supply of electricity to final customers, ANRE Order no. 85/2015 for the approval of the tripartite framework agreement concluded between the supplier, the network operator and the final customer of the network contract and of the multiparty framework agreement concluded between the final customer, suppliers and the network operator, ANRE Order no. 96/2015 for the approval of the Regulation regarding the activity of informing final customers of electricity and natural gas; • through the Regulation on the supply of electricity to final customers, new notions were introduced regarding the supply contract with dynamic prices (obligation to make an offer/contract with dynamic prices for EFSA) and active customers with new obligations for the supplier (existing condition of the energy supply contract both for the place of consumption and for the place of consumption and production); • the main provisions amended/supplemented by the new Regulation are: • to the vulnerable client, they included among the facilities granted and the deferment of the payment of the invoice, upon request, for a period of at least 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT326 327 2022 2023 2022 2023 • end customers, suppliers, network operators, aggregators, etc. (including the standard offers of suppliers), which will mediate the process of changing supplier through the necessary administrative and technical steps and through which customers will be able to contract a new supplier; • The regulation also details the rules on the conclusion of the supply contract, i.e. the actual procedure for changing the supplier, which will replace the current procedure. • ANRE Order no. 91/2022 – for the approval of the Regulation on the last instance supply of electricity • - The Regulation for the designation of the last instance suppliers of electricity – Ord. ANRE no. 188/2020, the Regulation on the taking over by suppliers of last resort of consumption places of final customers who have not ensured the supply of electricity from any other source – Ord. ANRE no. 242/2020 and the Framework Contract for the supply of electricity to final customers taken over by the supplier of last resort. • - the introduction of the obligation for the SoLR with the largest market share in a network area to take over consumption places which, at the date of entry into force of ANRE Order No 91/2022, do not have a supply contract and are not disconnected; • - introduction of an alternative system for nominating SoLRs that automatically takes over customers on a monthly rotation basis. Thus, for this purpose, the list of the SoLRs is established in descending order of market share, each SoLR in the list being nominated in turn, on a monthly basis, to automatically take over customers who are without a supplier in that month. For periods when no support measures are imposed by primary legislation, the nomination system implies the obligation for the SoLR to transmit the last resort price at least 7 days before the month for which the nomination is made, so that the SoLR Nomination List is known, within a timeframe that allows the transmission of the takeover request; • - the introduction of automatic takeover by the nominated SoLR of non-household customers with a power approved by the technical connection notice/ connection certificate of no more than 1 MVA, in the event of termination of the electricity supply contract by the current supplier; • - Limiting the period of time a customer can be in the portfolio of an SoLR to 12 months for household and non-household customers up to 1 MVA and 6 months for non-household customers above 1 MVA. 30 days prior to the date of termination of the contractual relationship, the SoLR shall notify customers of the termination of the electricity supply, or, if applicable, the extension of the supply 3 months (submission to the provider with whom he has access to medical documents for people who require life support by electrical devices for the insurance continuity of supply); • the acceptance of household customers was extended with new categories; • to the standard offers for non-households, the definition of microenterprise from L123 has been aligned (categorization by consumption, not by turnover/number of employees). The obligation to display standard offers at the single points of contact has disappeared. In the information of the offer, the unit value of the taxes / commissions / fees / contributions will be entered. It is no longer mandatory to include the main conditions from the contract in the offer, but new elements are introduced, to be included in the offer; • a place of consumption can be supplied by several suppliers without being conditioned by the power of 1 MW. • the minimum elements of the tripartite/ multipartite convention are specified without imposing a framework convention; • in the contract, the unit value of the taxes / commissions / fees / contributions will be entered in the same way as in the offer. A new price element appears – Final invoiced price = supply price + all fees, taxes unit). At the conclusion of the contract, the supplier’s web page must contain links to POSF; • when invoicing, there are explicit mentions of normative acts incident to the period of application (i.e. capping). For all household customers (including eligible household – competitive) and SoLR customers, the billing period is monthly. For all household customers, for consumption made starting from 01 April 2023, the invoice model for SU is respected. All invoices for consumption registered starting from 01 April will contain a minimum set of information. New clauses for payment scheduling. • ANRE order no. 9/2023 — Order regarding the establishment of the mandatory quota for the purchase of green certificates for the year 2022 • the mandatory rate for 2022 was set at the level of 0.4934314 CV/MWh (compared to 0.5014313 CV/ MWh the estimated rate for 2022 and 0.449792 CV/MWh the mandatory rate for 2021); • enters into force on 01 March 2023. • ANRE order no. 10/2023 — Order for the approval of the Methodology regarding the determination of the minimum stock level of natural gas that the holders of the natural gas supply licenses have the obligation to constitute in the underground storage warehouses • the Methodology regarding the determination of the minimum natural gas stock level that the holders of period, specifying the period for which it will supply electricity. If, at the end of the period, customers have not succeeded in concluding a contract on the competitive market, they may continue to benefit from the services of an SoLR if they so request. • ANRE Order no. 110/2022 – amending and supplementing the Regulation on the last resort supply of natural gas, approved by Order of the President of the National Energy Regulatory Authority no. 173/2020 • in order to ensure the supply under the LR regime to final customers who do not have supply from any other source, ANRE shall designate a number of at least 7 SoLRs, whose cumulative market share, calculated for the competitive market by the equal weight of the number of consumption places of final customers and the quantity of natural gas sold to them in the last 12 months, shall be at least 70%. The shares on the competitive market of the suppliers designated as SoLR at the time of the analysis shall be taken into account, except for those for which a decision has been issued stating the termination of the applicability of the SoLR designation decision; • if a supplier has been designated as an SoLR by selection based on availability and eligibility, it may resign from the SoLR status, upon request, if the following cumulative conditions are met: a) at least 1 year has passed since the date of designation, b) at the date it wishes to resign, it does not have in its portfolio any clients taken over in the SoLR; • if a supplier has been designated as an SoLR by selection based on eligibility and capability, it may renounce the SoLR status, upon request, if the following cumulative conditions are met: a) at least 1 year has passed since the date of designation, b) the list of designated SoLRs contains at least 7 suppliers whose cumulative market share is at least 70%, c) at the date it wishes to renounce, it does not have in its portfolio customers taken over in the SoLR; • For consumption sites with an annual consumption less than or equal to 28,000 MWh, the SoLR shall decide at its discretion whether to extend the period for ensuring the supply of natural gas under the LR regime to the consumption sites of customers taken over after the minimum period has been reached and shall notify the customers taken over at least 30 days before the end of the supply of natural gas under the LR regime. The notification may contain attached an offer to supply natural gas on a competitive basis; • the activity of supplying natural gas under the LR regime for final customers whose consumption places are automatically taken over is carried out in compliance with the framework contract for the supply of gas under the LR regime: a) without the need to sign the contract with the SoLR, for the consumption site with an annual the natural gas supply licenses are obliged to set up in the underground storage warehouses is approved – Natural gas suppliers, for the quantities delivered to final customers (PET direct customer) who have opted for the purchase of natural gas directly from natural gas producers, fulfil their obligation regarding the establishment of the minimum stock of natural gas by: • storing natural gas in one’s own name, by concluding contracts for underground natural gas storage with one of the holders of the license to operate underground natural gas storage systems; and/or • the conclusion, by 31 May of each year, of sales- purchase contracts whose object is natural gas quantities from underground natural gas storage facilities, stored by another natural gas supplier; and/or • concluding mandate contracts with another supplier, in order to store natural gas. • ANRE order no. 14/2023 — Order regarding the modification and completion of some orders of the president of the National Energy Regulatory Authority and repealing the Order of the president of the National Energy Regulatory Authority no. 96/2015 for the approval of the Regulation on the activity of informing end customers of electricity and natural gas • amendment of the Regulation regarding the supply of natural gas to final customers, approved by Order of the President of ANRE no. 29/2016; definitions were introduced for each of the components of the final invoiced price; it has been stipulated that in the case of vulnerable customers it is possible to pay the invoice in installments, upon request, for a period of at least 3 months or agreed upon by the parties; the provisions of the Regulation were correlated with those of Order 3/2022 – POSF; the mandatory information to be included in the invoice has been updated, establishing the essential priority information that must be included on the first page of the invoice, so that the end customer knows the invoiced consumption and how much he has to pay for it, and on the second page of the invoice to detail this priority information; • amendment of ANRE Order no. 106/2014 regarding the methods of informing end customers by natural gas suppliers regarding the commercial conditions of natural gas supply; the provisions related to the content of the standard offer have been completed/ detailed, in the sense of detailing the final price per component; a provision was included according to which it must be specified whether the price of natural gas within the standard offer is fixed or variable; • the repeal of ANRE Order no. 96/2015, regarding the provision of information to final natural gas customers by supplier 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT328 329 2022 2023 2022 2023 consumption less than or equal to 28,000 MWh; if the taken-over customer requests the SoLR to sign and send the contract for the supply of natural gas under the LR regime concluded with the SoLR, the SoLR is obliged to send it to the customer within a maximum of 5 working days; b) on the basis of a supply contract concluded and signed with the SoLR, for the place of consumption with an annual consumption of more than 28,000 MWh; during the period between the date of takeover by the SoLR and the date of signing of the LR contract, between the customer taken over and the SoLR, the SoLR is allowed to provide the activity of supply of natural gas under LR for the places of consumption of the customer taken over without the existence of a contract signed with the latter, in compliance with the framework contract for the supply of natural gas under LR; • The SoLR has the right to ask the final customer with an annual consumption of more than 28,000 MWh to provide a financial guarantee, after the date of transmission of the takeover information/after receipt of the customer’s request for takeover under the LR regime; The amount of the financial guarantee is set by order and must be provided within 5 working days from the date of receipt of the request. The client may be given the option of opting for payment in advance. • termination of the obligation to supply natural gas under the LR regime: on the date from which the contract for the supply of natural gas under the competitive regime concluded by the customer taken over with a competitive supplier takes effect, on the expiry of the duration provided for the situations under Article 24 para. (2) (i.e. minimum 12 months from the date of takeover, one month from the date of takeover, date of termination of the suspension of the NG supply licence of the FA, duration established by ANRE, etc.), in case of non- payment of invoices, in case of non-constitution of the financial guarantee (for final customers with annual consumption higher than 28,000 MWh)/non- payment of the advance invoice/daily invoice, in case of disagreement on the resumption by the SoLR, in case of non conclusion of the SoLR contract (when this obligation exists); • throughout the period of application of the provisions of the support scheme, the SoLR does not transmit the values of the price components for the supply of gas under the LR regime for the following calendar month (CU_ach-FUI_estimated, CU_fz-FUI_ estimated, CU_tr-FUI); • by derogation, for the period of application of the provisions of the support scheme, ANRE establishes and publishes on the website the SoLR ranking in ascending order of market share for the last month, calculated by the equal weighting of the number • ANRE order no. 13/2023 — Order for the approval of the framework contract for the supply of electricity in the universal service regime, the general conditions for the supply of electricity in the universal service regime and the invoice model applicable to household customers • the following is approved: The framework contract for the supply of electricity in the universal service regime – annex no. 1, General conditions for the supply of electricity in the universal service regime – annex no. 2, Electricity bill model – annex no. 3; • the main provisions: the general conditions for the supply of electricity in the universal service regime are published by the suppliers on their own website and are made available to household customers, in printed format, upon their request; invoices issued by electricity suppliers to household customers for electricity consumption made starting from April 2023 will respect the invoice model (the color, type and size of the font can be set by the suppliers); the price of electricity from the universal service offer is valid for a period of at least 3 months; until 31 March 2024, the electricity suppliers who have universal service customers in their portfolio communicate to these customers the electricity supply contracts issued pursuant to this order; electricity suppliers have the obligation to publish on their website the framework contract and the general conditions for the supply of electricity in the universal service regime within 5 days from the date of entry into force of this order and to communicate to household customers from the portfolio the access link to the contract and to the general conditions for the provision of electricity in the universal service regime, with the first invoice issued after the entry into force of this order. • is repealed ANRE Order no. 88/2015 • ANRE order no. 15/2023 — Order on the approval of the Natural Gas Market Monitoring Methodology • the modification and completion of the Methodology for monitoring the natural gas market, by integrating all aspects regarding the monitoring of the wholesale market, which appeared once REMIT came into force; the responsibilities according to REMIT, specific to the owners of the administration of centralized markets and TSOs, were included; provisions were introduced regarding the forms that each license holder must report separately, with their clear identification – updating and creating new reporting forms; • is repealed ANRE Order no. 5/2013 for the approval of the Natural Gas Market Monitoring Methodology • ANRE order no. 16/2023 — Order for the amendment and completion of the Regulation on the last resort supply of natural gas, approved by the Order of the President of the National Energy Regulatory Authority no. 173/2020 • amending and supplementing the Regulation on the of consumption places of final customers and the quantity of natural gas sold to them. Starting from September 2022, each SoLR will be allocated one calendar month, in order of ranking; • in the event of any of the above (i.e. FA loses supplier status, suspension of FA licence, etc.) during the period of application of the provisions of the support scheme, the consumption places will be taken over by an SoLR nominated by ANRE from the SoLRs designated on the basis of: a) the criterion of the month of allocation, b) the criterion of the takeover capacity, by verifying the fulfilment of the condition that the total number of consumption places taken over should not be higher than 30% of the number of consumption places of the final customers in their own portfolio, which ensure the supply of natural gas in a competitive regime, c) the criterion of the takeover availability; • The SoLR that has the obligation to take over, at the request of the final customer, the consumption site with an annual consumption of more than 28,000 MWh is the SoLR of the respective calendar month, established by ANRE through the SoLR Classification; • The SoLR nominated to automatically take over the consumption place with an annual consumption less than or equal to 28,000 MWh is the SoLR of the respective calendar month established by ANRE through the SoLR ranking. By exception, in the case where the supply contract has been terminated due to unilateral termination by the customer, it is taken over on request by the SoLR of the respective calendar month; • for customers with an annual consumption of more than 28,000 MWh, in case of termination of the contract with the FA/SoLR, if the final customer does not find a supplier, the customer has the right to request any SoLR among those designated by ANRE to ensure the supply under the LR regime. • ANRE Order no. 4/2022 amending and supplementing ANRE Order no. 143/2020 on the obligation to offer natural gas on centralized markets to natural gas producers whose annual production in the previous year exceeds 3,000,000 MWh: • the quantitative allocation for tender for each of the standardised products for the period from 1 January to 31 December 2022 has been adjusted. • ANRE Order no. 65/2022 – for the approval of the Regulation on the organized framework for electricity contracting by large end customers • simplification of the organised electricity contracting framework for large end customers (with an annual consumption of more than 70,000 MWh) established by ANRE Order no. 55/2012: elimination of the obligation to use the framework contract, extension of market participation by accepting OTS and OD last resort supply of natural gas: • the provisions relating to the natural gas distribution contract that SoLR is obliged to conclude with the distribution operators have been amended so that they are consistent with the provisions of ANRE Ord. No. 3/2022 – POSF; Annex no. 5 was modified, respectively the model of the takeover request, so that it is consistent with the provisions of Ord. ANRE no. 29/2022 – Regulation on the supply of natural gas to final customers; Annex no. 6 was introduced – The method of appointing the SoLR for places of consumption with an annual consumption of more than 28,000 MWh of each PET for the situation where they have not ensured the supply of natural gas to cover the consumption requirement, fully or partially, during the period of application of the support scheme; a mechanism was created through which, during the application of the support scheme approved by GEO 27/2022, for consecutive periods of 12 months starting from 01 April 2023 – 31 March 2024, ANRE appoints SoLR, among those already appointed, for the places of consumption with an annual consumption greater than 28,000 MWh of each PET where thermal energy is produced; the deadlines for requesting the activation of the advance payment option by the end customer were changed and a deadline for the transmission of the supply contract by SoLR was introduced. • ANRE order no. 19/2023 — Order for the amendment of the green certificate invoicing procedure, approved by the Order of the president of the National Energy Regulatory Authority no. 187/2018 • updating the aspects related to data reporting by electricity suppliers that invoice electricity to final consumers, regarding the mode and format of reporting carried out through the ANRE Portal, structured on information regarding the monthly billing of green certificates and information regarding the annual regularization of the counter value of green certificates; • ANRE order no. 22/2023 – 27/2023 — Order regarding the approval of specific tariffs for the electricity distribution service and the price for reactive electricity at Societatea E-Distributie Banat — S.A., Societatea E-Distributie Dobrogea — S.A., Societatea E-Distributie Muntenia — S.A., Societatea Delgaz Grid — S.A., Societatea Distributie Energie Oltenia — S.A., Societatea Distributie Energie Electrica Romania — S.A. • there are increases in all specific tariffs for the electricity distribution service, the biggest increases being at Distributie Energie Electrica Romania SA – Muntenia Nord of about 30%; • the tariffs for low voltage for Distributie Energie Electrica Romania are higher by 8.3% - 31.2% compared to the first quarter of 2023 (at DEER there 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT330 331 2022 2023 2022 2023 exclusively for the purchase of NL, reduction of the average power per settlement interval from 10 MW to 5 MW, the possibility for the initiator to opt for the variation of the contracted power per settlement interval with a maximum of 0.5 MW per settlement interval, minimum delivery duration of one month, elimination of the public negotiation phase. • ANRE Order no. 66/2022 – for the approval of the Methodology for determining the level of minimum natural gas stocks that holders of natural gas supply licenses are obliged to build up between April 2022 and October 2022 • the quantities of natural gas representing the minimum stocks to be stored by each supplier in the period April 2022 – October 2022 represent at least 30% of the quantity of natural gas required for the consumption of final customers in its own portfolio for the period 1 November 2022 – 31 March 2023 (reporting templates are established with the quantity broken down by each month and category of consumers and monitoring templates with the level of fulfilment of the natural gas storage obligation). • ANRE Order no. 73/2022 amending the Regulation on the organised framework for electricity contracting by large end customers, approved by Order of the President of the National Energy Regulatory Authority no. 65/2022 • the possibility of introducing initiating offers also by the producers participating in the market. • deletion of the clarification that large end-use customers of electricity include transmission system operators and distribution system operators that purchase electricity individually or in aggregation to cover their own technological consumption, they can participate in the market as end-use customers. • ANRE Order no. 72/2022 approving the Regulation on natural gas storage in the natural gas transmission system • The regulation covers: the methods of natural gas storage (storage of natural gas in the natural gas transmission system, in the natural gas transmission pipeline, in ring pressure distribution systems and in above ground metallic tanks), the calculation of the energy of natural gas in the transmission pipelines related to ST and the monitoring of ST. • ANRE Order no. 79/2022 – for the approval of the Regulation for the organization and functioning of the forward electricity contracts market, organized by Bursa Romana de Marfuri – S.A. • establishes the organized framework for electricity trading on the forward electricity contracts market, through electronic trading platforms managed by Bursa Romana de Marfuri – S.A. (simple competitive were increases for all categories, respectively the lowest increase was 8.3% at LV – Transilvania South and the biggest increase of 33.7% in HV-Muntenia Nord); • the new rates are applicable from 01 April 2023; • ANRE order no. 28/2023 — Order on the approval of the average tariff for the electricity transmission service, the components of the transmission tariff for introducing electricity into networks (T_G) and extracting electricity from networks (T_L) and the regulated price for electricity reactive, practiced by the National Electric Energy Transport Company „Transelectrica” — S.A • the new rates are applicable from 01 April 2023; • the average tariff for the electricity transmission service is 31.20 lei/MWh – 11% increase; • the transport tariff – the component of introducing electricity into the network – TG is 4.04 lei/MWh – 59.7% increase; • the transport tariff – the component of electricity extraction from the network – TL- is 27.44 lei/MWh – 7.3% increase. • ANRE order no. 17/2023 — Order on the approval of the Electricity Retail Market Monitoring Methodology • - updating the Methodology by updating the methodological principles underlying the activity of monitoring the electricity retail market with the requirements of the regulatory framework in force and, considering the multitude of changes; proposes ways to evaluate the level of efficiency and competition on the electricity retail market, to identify the elements that can lead to a decrease in performance in the supply activity, to evaluate the behavior of suppliers in the relationship with end customers and to identify those practices or behaviors that raises suspicions of violation of competition principles. • - is repealed ANRE Order no. 167/2019 regarding the approval of the Methodology for monitoring the electricity retail market and ANRE Order no. 205/2018 regarding the approval of the Electricity Market Monitoring Methodology for final customers served by last resort suppliers. • ANRE order no. 18/2023 — Order regarding the approval of the Methodology for monitoring the wholesale electricity market • - modifying and completing the Methodology by updating the methodological principles and updating the system of indicators used in the monitoring activity; the scope and scope of the methodology were extended in order to include the monitoring obligations of ANRE as a result of the amendments made to the Electricity and Natural Gas Law no. 123/2012 and the increase in the complexity trading mechanism – for the launch of trading of the standard product, the participant submits to the BRM an initiating order, double competitive trading mechanism – the launch of trading of the standard products is also initiated by the BRM so that there are available for trading at any time consecutive forward contracts for: the first 6 calendar months, the first 5 calendar quarters, the first 3 calendar semesters, the first 2 calendar years). • ANRE Order no. 92/2022 – amending and supplementing the Regulation on the calculation and settlement of imbalances of balancing parties – single imbalance price, approved by Order of the President of the National Energy Regulatory Authority no. 213/2020, and amending some orders of the President of the National Energy Regulatory Authority • redistribution has been reintroduced, i.e. the rules for calculating the additional costs/revenues from balancing the system, how to allocate their value to each balancing party (PRE) and issues related to the information note on settlement, billing and payments are provided. • reduction from 6 months to 2 months of the period in which the participant can request, with a reasoned justification, the correction of the settlement, from the posting on the dedicated IT platform of the information note for settlement, which will lead to an increase in the degree of accountability of the participants in the balancing market. • ANRE Order no. 117/2022 – Order for the approval of the Regulation for the organization and functioning of the forward electricity contracts market, organized by Bursa Romana de Marfuri – S.A. • The Regulation establishes the framework for the trading of electricity on the electricity futures market, through electronic trading platforms managed by the Romanian Commodities Exchange Company – S.A. • BRM organizes trading sessions for standard products in terms of the following features: daily delivery profile (in-band delivery, peak load delivery, off-peak load delivery), average power per contract settlement interval of 0.1 MW or multiple of 0.1 MW, electricity delivery period (multiple of day, 1 week, balance of the month – i.e. the period made up of the remaining delivery days within a calendar month in progress, starting on the second calendar day following the day of the conclusion of a transaction, 1 month, 1 quarter, 1 semester, 1 calendar year). • Repeals ANRE Order No 79/2022 • ANRE Order no. 121/2022 – Order amending some orders of the President of the National Energy Regulatory Authority on the electricity market • modification of ANRE Order no. 127/2021 by: changing of the types of data/indicators requested by the competent European institutions (ACER/CEER); the system of specific indicators for the markets on which electricity is traded was adapted and completed (structure indicators, market efficiency/ performance evaluation indicators, market participants’ behavior indicators) for each of the monitoring entities with responsibilities in the field (ANRE, OPEE and TSO); the aspects related to the data requested on the monthly models sent by the market participants were additionally detailed; the reporting deadlines for market participants, OPEE and TSOs were specified; the submission of market participants/OPEE/TSO reports and OPEE/TSO reports in text format has been completely eliminated. • - is repealed ANRE Order no. 67/2018 for the approval of the Methodology for monitoring the wholesale electricity market. • ANRE order no. 20/2023 — Order regarding the approval of the Regulation on the organization and operation of the organized electricity market, administered by the Romanian Stock Exchange — S.A. • the Regulation on the organization and operation of the organized electricity market, administered by Societatea Bursa Romana de Marfuri – S.A. is approved, and this simplifies the organized framework for electricity trading on the organized future electricity markets, through the trading platforms managed by Societatea Bursa Romana de Marfuri – S.A.; a chapter on organized market segments is introduced; new products are introduced, namely flexible products and products derived from the field of electricity, settled by physical delivery; market transparency information is expanded; requirements are introduced regarding the use of a liquidity provider. • the order enters into force on 05 April 2023; is repealed ANRE Order no. 117/2022. • ANRE order no. 56/2023 – Order for the amendment and completion of the Regulation for the issuance of green certificates, approved by the Order of the President of the National Energy Regulatory Authority no. 4/2015 • the amendment of the Regulation on issuing green certificates, approved by ANRE Order no. 4/2015 so that: in the case of producers from renewable energy sources (E-SRE) using biomass as a renewable energy source as fuel or raw material, green certificates (GC) are issued only for E-SRE produced from biomass accompanied of certificates of origin regardless of the weight of the energy content of the biomass accompanied by certificates of origin in the total energy content of the fuel used in the respective power plant; in situations of alienation of an accredited power plant, the green certificates deferred from trading according to the provisions of 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT332 333 2022 2023 2022 2023 the deadline for the application of the Order from 1 October 2022 to 1 October 2023; extending the deadline for changing the configuration of the existing PE platform, as required by the Regulation on terms and conditions for balancing service providers and frequency stabilisation reserve providers, from 9 months to 1 year and 6 months; deletion of some definitions (RFP, OD connector and adjustment required) and deletion of the term daily offer and replacement with balancing energy offer; modification of the parameters of the variable characteristics of the balancing energy offer for the standard RRFm product; replacement of the term system services with balancing services; • amendment of ANRE Order No 128/2021 by extending the application deadline from 1 October 2022 to 1 October 2023. • ANRE Order no. 134/2022 – Order for the approval of the General Rules on organised electricity forward markets • the general rules on organised forward electricity markets are approved. The organised forward electricity market comprises the following segments: standardised forward products market, flexible forward products market, electricity derivatives market settled by physical delivery. • electricity market operators shall draw up/update their own specific regulations for the organisation and management of the markets and submit them to ANRE for approval within 90 days from the date of entry into force of this Order. • ANRE Order no. 138/2022 – Order supplementing the Order of the President of the National Energy Regulatory Authority no. 143/2020 on the obligation to offer natural gas on centralized markets to natural gas producers whose annual production in the previous year exceeds 3,000,000 MWh • ANRE Order no. 143/2020 is supplemented: with the periods for which the quantities of natural gas are determined, namely 1 January 2023 – 31 December 2023 and 1 January 2024 – 31 December 2024; with clarifications on the application of the provisions of Article 12 of GEO no. 27/2022, in accordance with Annex no. 5 thereto. The quantitative share allocated for tendering purposes for each of the products is as follows (for the period 1 January 2023 – 31 December 2023): Clu = 35%, Ctrim = 20%, Csem = 5%, Csez = 25%, Can = 15%. • ANRE Order no. 14/2022 on the establishment of the mandatory green certificates purchase quota for 2021: • the mandatory quota for 2021 has been set at 0.449792 hp/MWh (compared to 0.4505 hp/MWh estimated quota for 2021 and 0.45074 hp/MWh mandatory quota for 2020). the law can be transferred to the new holder of the respective power plant, in order to be traded by him; the amounts of biomass provided in the certificates of origin issued by the relevant ministries under the law and which ex-ceed the biomass consumption of the ESRE producer in the period provided in the certificates of origin can be carried over and used in subsequent periods of time, with the exception of those in the certificates of origin is-sued as a result of final court rulings that provide for the biomass use period. • ANRE order no. 59/2023 – Order regarding the approval of the Procedure for the recovery of improperly issued green certificates and for the amendment of the Regulation for the issuance of green certificates, approved by the Order of the President of the National Energy Regulatory Authority no. 4/2015 • the Procedure for the recovery of improperly issued green certificates is approved, which establishes the recov-ery mechanism for improperly issued green certificates – the TSO develops its own procedure for the recovery of improperly issued GCs, including those related to the recovery interest; • if the accredited E-SRE producer, who benefited from improper green certificates, does not hold green certifi-cates and no longer meets the conditions for issuing green certificates for trading, the recovery of improperly issued green certificates is carried out by purchasing green certificates from the anonymous centralized spot market of green certificates (after its registration in this market component of the green certificates market). • ANRE order no. 57/2023 – Order for the amendment and completion of the Regulation on the organization and operation of the green certificates market, approved by the Order of the President of the National Energy Regulatory Authority no. 77/2017 • amending the Regulation on the organization and operation of the market of green certificates, so that, in situa-tions of disposal of an accredited power plant, the green certificates held in the account of the selling producer at the date of disposal, including those postponed from trading according to the provisions of the law, can be transferred to the new owner of the respective power plant, in order to trade them by him, if provisions to this effect are included in the alienation contract concluded between the parties; • the inclusion of a new category of ANRE license holders, represented by economic operators who own electricity storage facilities that are not located in the facilities of an electricity producer, as participants in the PCV as economic operators with an obligation to purchase GC; • the inclusion of a new transaction session on PCSCV for each quarter of analysis, respectively on the 18th • ANRE Order no. 15/2022 for the approval of the Methodology for establishing the rules for the marketing of electricity produced in power plants from renewable sources with an installed electrical power not exceeding 400 kW per place of consumption belonging to consumers: • shall enter into force on 1 May 2022 and repeals ANRE Order no. 50/2021 approving the rules for the trading of electricity produced in power plants from renewable sources with an installed electrical power of up to 100 kW belonging to prosumers • suppliers must notify prosumers with whom they already have contracts (with P<100kW) about the change in the applicable legal framework and the possibility to benefit from the quantitative compensation mechanism on request; at the request of prosumers, suppliers must send signed contracts within 10 days; • for the application on demand of the quantitative compensation mechanism, the installed electrical power of the power plant producing electricity from renewable sources shall not exceed 200 kW per place of consumption; the quantitative compensation shall be made at the price of active electricity, and any surplus shall be carried forward for a maximum of 24 months – after this period, the unused quantity shall enter into the financial regularization process. • for the application on demand of the financial regularization mechanism, the installed electrical power of the power plant producing electricity from renewable sources is more than 200 kW, but not more than 400 kW per consumption site; for financial compensation, the reference is the weighted average price recorded on the market for the following day for the month in which the electricity in question was produced and delivered. • ANRE Order no. 90/2022- on the modification and completion of the Order of the President of the National Energy Regulatory Authority no. 52/2021 for the approval of the Monitoring Methodology of the system for the promotion of electricity production from renewable energy sources • determines the mode, format and frequency of data reporting: information on electricity sale- purchase contracts concluded with prosumers owning renewable energy power plants, i.e. the amount of electricity benefiting from quantitative compensation (Pi< 200 kW), information on electricity sale-purchase contracts concluded with prosumers owning renewable energy power plants, i.e. the quantity of electricity benefiting from financial balancing (Pi 200 kW and 400 kW), information on directly negotiated bilateral electricity sale-purchase contracts concluded with prosumers. work-ing day of the month following each quarter, in order to enable the completion of the purchase of GC by eco-nomic operators with the obligation to purchase GC, for each analysis quarter, according to the published list. • ANRE order no. 58/2023 – Order for the modification and completion of the Methodology for establishing the mandatory annual quota for the purchase of green certificates, approved by the Order of the President of the Nation-al Energy Regulatory Authority no. 96/2022 • the modification of the Methodology for establishing the mandatory annual quota for the purchase of green cer-tificates for the regulation of the situation of an economic operator who has a final decision by which a court es-tablished/establishes, as the case may be, the recovery by the respective economic operator of a sum of money related to some GCs that he purchased in a previous period, including the accessories to it, by applying an al-gorithm; • amending the Methodology by including provisions regarding the obligation to purchase green certificates for a new category of ANRE license holders, represented by economic operators who own electricity storage facili-ties that are not located in the facilities of an electricity producer. • ANRE order no. 63/2023 – Order on the approval of the Rules necessary for the adoption of the Hydrogen Code • establishes the guidelines for the transformation or conversion of the natural gas distribution system in order to prepare it for the injection of quantities of hydrogen produced by using renewable energy sources. • ANRE order no. 67/2023 – Order regarding the approval of the tariff for the purchase of system services for the transport and system operator Compania Nationala de Transport al Energei Electrice “Transelectrica” — S.A. • the tariff for the purchase of system services practiced by the National Electric Power Transport Company “Tran-selectrica” – S.A., valid from 1 June 2023, is 6.64 lei/MWh, down 14% compared to the previous tariff. • ANRE order no. 68/2023 – Order on the approval of regulated income, corrected regulated income and transport tariffs for the activity of natural gas transport through the National Transport System • the capacity reservation rates related to firm and interruptible long-term and short-term transport services for the group of entry/exit points (gr) are approved, as well as the volumetric rate for the use of the National Transport System, for the period of 1 October 2023 —30 September 2024. The order enters into force on 1 June 2023. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT334 335 2022 2023 2022 2023 • ANRE Order no. 94/2022 – amending some orders of the President of the National Energy Regulatory Authority in the field of promotion of electricity from renewable energy sources • ANRE order no. 70/2023 – Order for the modification and completion of some orders of the president of the Na-tional Energy Regulatory Authority in the field of connecting users to the public interest electric network: • modification of the threshold of installed electric power in power plants from renewable energy sources belonging to prosumers, from 100 kW to 400 kW per consumption place (modification of ANRE Order no. 179/2018) • amend the Regulation on the organization and functioning of the green certificates market – ANRE Order no. 77/2017, in order to specify the two main categories of economic operators participating in the green certificates market, accredited producers of electricity from renewable energy sources and economic operators with the obligation to purchase green certificates. • ANRE Order no. 95/2022 – amending and supplementing the Order of the President of the National Energy Regulatory Authority no. 15/2022 approving the Methodology for establishing the rules for the sale of electricity produced in power plants from renewable sources with an installed electrical power of no more than 400 kW per place of consumption belonging to prosumers • amends ANRE Order no. 15/2022 in order to clarify the average purchase price of energy produced and delivered by consumers, in accordance with the provisions of GEO 27/2022, with subsequent amendments and additions, the billing method and the elements highlighted in the invoices; • for energy consumed by consumers as customers, we have clarifications regarding the final price charged; • for the sale-purchase contract of electricity produced in renewable energy power plants with an installed electrical capacity of not more than 200 kW per place of consumption and delivered to the electricity grid – the contract price is the price of active electricity used by the electricity supplier in the supply contract concluded with the consumer as a consumer, during the billing period, established according to the methodology; • for the sale-purchase contract of electricity produced in power plants from renewable energy sources with an installed electrical power of more than 200 kW, but not more than 400 kW per consumption site and delivered to the electricity grid – the contract price is equal to the weighted average price recorded on the market for the following day in the month in which the electricity was produced and delivered to the electricity grid, published by OPCOM. • is modified the ANRE Ord. no. 59/2013 – Regulation regarding the connection of users to public interest electric-ity networks; • is modified the ANRE Ord. no. 19/2022 – The procedure regarding the connection to the electricity networks of public interest of the places of consumption and production belonging to the prosumers. An opportunity is provided for prosumers who purchase the electricity metering group or the fully equipped metering and protec-tion block including the electricity metering meter to make it available to the distribution operator. A new chap- ter is introduced regarding the rules for connecting to a place of consumption place of consumption and exist-ing production of installations for the production of electricity from renewable sources of prosumers and demonstration projects, with an installed electric power lower than or equal to 10,8 kW times equivalent for connections other than three-phase connections, as an exception to the prosumer connection rules. The notion of aggregate generating units appears, which means the sum of the generating units belonging to several prosumers that are connected to the electrical grid through a single connection facility. The order enters into force on 31 May 2023. • ANRE order no 71/2023 – Order regarding the approval of the regulated tariff for electricity exchanges with the perimeter countries, practiced by Compania Nationala de Transport al Energiei Electrice “Transelectrica” — S.A. • is approved the regulated tariff for electricity exchanges with peripheral countries of 3.0 euro/ MWh, exclusive of VAT, applied by the National Electric Power Transport Company “Transelectrica” – S.A., tariff applied to all im-port, export and transit transactions of electricity, programmed with the electric energy systems of the perime-ter countries. • the order enters into force on 15 June 2023. • ANRE order no. 75/2023 – Order amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 regarding the approval of the contribution for high-efficiency cogeneration and some provisions re-garding its invoicing method. • the contribution for high-efficiency cogeneration is approved at the value of 0.00219 lei/kWh, exclusive of VAT; • the order enters into force on 1 July 2023. • ANRE Order no. 96/2022 – for the approval of the Methodology for establishing the mandatory annual quota for the purchase of green certificates • ANRE order no. 76/2023 – Order regarding the amendment of the annex to the Order of the President of the Na-tional Energy Regulatory Authority no. • methodology establishes: how to calculate the estimated annual mandatory quota of green certificates for the following year, how to calculate the number of green certificates for the non- fulfilment of the estimated annual mandatory quota of green certificates, for each quarter of analysis, by economic operators with the obligation to purchase green certificates, how to calculate the mandatory annual quota of green certificates for the analysis year, how to calculate the number of green certificates related to the non-fulfilment of the mandatory quota of green certificates for the analysis year by economic operators with green certificate purchasing obligation. • provisions have been introduced to exempt from the legal quarterly and annual obligation to purchase green certificates for prosumers and producers who own renewable electricity production units • increasing the period for reporting errors in reporting the quantities of electricity billed/supplied from 15 working days to 18 working days from the date of the decision. • ANRE Order no. 118/2022 – Order amending and supplementing the Methodology for establishing the mandatory annual quota for the purchase of green certificates, approved by Order of the President of the National Energy Regulatory Authority no. 96/2022 • provisions have been introduced exempting from the quarterly and annual legal obligation to purchase green certificates prosumers and producers who own renewable electricity production units for their own final consumption, supplied at the place of production from renewable electricity production; • the way of collecting the data needed to establish the estimated annual mandatory green certificate purchase quota/annual mandatory green certificate purchase quota and the degree of non-compliance with the legal quarterly/annual green certificate purchase obligations has been specified, with the establishment of reporting templates applicable in general, but also with the establishment of specific reporting templates for the third quarter of the 2022 analysis year and for the 2022 analysis year. • ANRE Order no. 141/2022 – Order on the establishment of the estimated mandatory quota for the purchase of green certificates for 2023 • the estimated mandatory green certificates purchase fee for economic operators who have the obligation to purchase green certificates for the year 2023 is set at 0.4943963 green certificates/MWh. • ANRE Orders no. 27 – 31/2022 – for the modification of the Annex to ANRE Orders no. 118 – 123/2021 on the approval of the specific tariffs for the electricity distribution service and the price for reactive electricity, • 139/2022 for the approval of the tariffs charged by the designated Operator of the electricity market. • the tariffs charged by the designated operator of the electricity market corresponding to the services provided for the performance of the activities, valid from 1 July to 31 December 2023 are: Administration tariff – category A of participants – 14.648 lei/ participant/year, Administration tariff – category A Participant B – 24.414 lei/participant/year, Transaction rate- 0.29 lei/MWh. • ANRE order no. 77/2023 – Order for the amendment of the Regulation regarding the organized framework for trading standardized products on the centralized natural gas markets administered by the Romanian Stock Exchange — S.A. (Romanian Commodities Exchange — S.A.), approved by Order of the President of the National Energy Regula-tory Authority no. 95/2021 • the Regulation on the organized framework for the trading of standardized products on the centralized natural gas markets administered by the Romanian Commodities Exchange Company is amended by amending the standardized products traded on the basis of the counterparty mechanism, in accordance with its specific rules. • ANRE order no. 78/2023 – Order for the amendment of the Regulation on the operation of the centralized market for electricity from renewable sources supported by green certificates, approved by the Order of the President of the National Energy Regulatory Authority no. 160/2019 • the Regulation on the operation of the centralized market for electricity from renewable sources supported by green certificates is amended by changing the definition of the participant in the centralized market for electrici-ty from renewable sources supported by green certificates and it is specified that the contracts contain provi-sions that must comply with a set of principles (the designated participant concludes the contract in his own name and fully assumes all rights and obligations regarding the traded electricity, the contract contains individ-ual rights and obligations regarding the delivery of GCs of the members of the aggregate entity who traded GCs during the auction session following to which the contract is concluded, etc.). • ANRE order no. 81/2023 – Order regarding the amendment of the Order of the President of the National Energy Regulatory Authority no. 10/2023 for the approval of the Methodology regarding the determination of the level of the minimum stock of natural gas that the holders of the licenses for the supply of natural gas have the obligation to constitute in the underground storage warehouses: • the maximum deadline for concluding sales- purchase contracts whose object is quantities of 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT336 337 2022 2023 2022 2023 for Delgaz Grid – S.A/Societatea Distributie Energie Electrica Romania – S.A/Societatea Distributie Energie Oltenia – S.A/Societatea E-Distributie Banat – S.A/ Societatea E-Distributie Dobrogea – S.A./Societatea E-Distributie Muntenia – S.A. • The new tariffs are applicable from 1 April 2022; • Low voltage tariffs for Electrica Romania Energy Distribution are 17%- 25% higher than in the first quarter of 2022 (there were increases for all categories, respectively the lowest of 9.1% at IT – Transilvania Nord and the highest of 30.2% at MT- Muntenia Nord). • ANRE Order no. 33/2022 - for the modification of Annex no. 1 to the Order of the President of the National Energy Regulatory Authority no. 124/2021 on the approval of the average tariff for the electricity transmission service, the components of the transmission tariff for the introduction of electricity into the grid (TG) and for the extraction of electricity from the grid (TL), the tariff for the system service and the regulated price for reactive electricity, charged by the National Electricity Transmission Company “Transelectrica” – S.A. • the new tariffs are applicable from 1 April 2022; the average tariff for the electricity transmission service is higher by 17.3%, the transmission tariff – the component for feeding electricity into the grid is higher by 69.8% (TG is – 2.53 RON/MWh), the transmission tariff – the component for withdrawing electricity from the grid is higher by 13.8% (TL is – 25.57 RON/MWh) compared to the first quarter of 2022. • ANRE Order no. 67/2022 – on the application in April 2022 of the provisions of Article 23 of the Methodology for determining and monitoring the contribution for high-efficiency cogeneration, approved by the Order of the President of the National Energy Regulatory Authority no. 117/2013 • During April 2022, ANRE shall analyse the amount of the contribution for cogeneration, and if it varies by more than +/- 2.5% compared to the value in force, by 30 April 2022, the new value of the contribution for 2022 shall be approved by ANRE order. • ANRE Order no. 69/2022 amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 on the approval of the contribution for efficient cogeneration and of some provisions on its billing • Starting from 1 May, the contribution for efficient cogeneration is 0.02044 RON/kWh, excluding VAT. • ANRE Order no. 130/2022 – Order amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 on the approval of the contribution for efficient cogeneration and of some provisions on its billing natural gas origi-nating from underground natural gas storage depots, stored by another natural gas supplier from 31 May to 31 October is extended. • the provisions relating to the change in the CC and PET end customer portfolios are completed as a result of the exercise by the end customers of the right to change the natural gas supplier or as a result of the termination of the natural gas supply contracts and the transfer of the quantities of natural gas stored and of reserved and unused capacity. • ANRE order no. 88/2023 – Order for the modification of some orders of the president of the National Energy Regu-latory Authority regarding the electricity market • ANRE order no. 127/2021 for the approval of the Regulation on the clauses and conditions for balancing service providers and for frequency stabilization backup providers and the Regulation on the clauses and conditions for the parties responsible for balancing (published in M.O. no. 1196 of 17 December 2021) enters in force on the date of publication and applies from 1 April 2024 (on 1 April 2024 ANRE Order no. 61/202 and ANRE Order no. 21/2020 are repealed and a number of articles from ANRE Orders no. 213/2020 and no. 152/2020 are repealed ). • ANRE order no. 128/2021 for the approval of the rules for suspending and restoring market activities and appli-cable settlement rules (published in M.O. no. 1187 of 15 December 2021) applies from 1 April 2024. • ANRE order no. 95/2023 – Order on the modification of the General Conditions associated with the license for aggregation activity, approved by the Order of the President of the National Energy Regulatory Authority no. 196/2020. • the General Conditions associated with the license for aggregation activity are modified, approved by ANRE Order no. 196/2020, by changing the definitions of aggregate entity and aggregate unit in the sense that pro-ducers, final consumers and owners of storage facilities can be aggregated in the same entity. • ANRE order no. 94/2023 – Order for the approval of the Regulation on the designation of the designated operator of the electricity market • the Regulation on the designation of the designated operator of the electricity market is approved, which es-tablishes the terms, criteria and transparent and non-discriminatory procedures regarding the designa-tion/withdrawal of the designation of the designated operator of the electricity market. • ANRE order no. 97/2023 – Order amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 regarding the approval of the contribution for high-efficiency cogeneration and some • Starting from 1 November 2022, the contribution for provisions re-garding its invoicing method: efficient cogeneration is 0.00333 RON/kWh, excluding VAT, with a percentage decrease of 83% compared to the previous value, i.e. a decrease of 0.01711 RON/ KWh. • ANRE Order no. 140/2022 – Order approving the tariffs and financial contributions charged by the National Energy Regulatory Authority in 2023 • for the holders of the electricity supply license, the annual bonus contribution is established on the basis of a percentage rate of 0.1% applied to the turnover achieved by them in 2022 from the commercial activities covered by the electricity supply license, but not less than RON 3,125. The basis for calculating the financial contribution levied by ANRE is the net turnover, defined and calculated in accordance with the accounting regulations in force, which includes the revenues recorded from the activity of electricity supply – including those corresponding to green certificates and the contribution of efficient cogeneration, to which is added the revenues recorded from the application of the measures of the compensation scheme for electricity consumption and those related to the compensation granted for the implementation of the measures applicable to final customers in the electricity market. • the annual tariff for carrying out activities in the natural gas sector on the basis of a license – Supply of natural gas is 0.168 RON/MWh. • ANRE Order no. 139/2022 – Order approving the tariffs charged by the Designated Electricity Market Operator • the tariffs charged by OPCOM for the services rendered for the performance of activities in 2023 are approved: Management tariff – category A participants – 21,574 RON/participant/year, Management tariff – category B participants – 35,956 RON/participant/year, Trading tariff – 0.48 RON/MWh. • ANRE Order no. 142/2022 – Order amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 on the approval of the contribution for efficient cogeneration and of some provisions on its billing. • from 1 January 2023 the contribution for efficient cogeneration is approved at the amount of 0.00 RON/kWh. • ANRE Order no. 144/2022 – Order approving the tariff for the acquisition of system services for the transmission and system operator National Power Transmission Company “Transelectrica” – S.A. • the tariff for the purchase of system services charged by the National Power Transmission Company “Transelectrica” – S.A., valid from 1 January 2023 is 7.73 RON/MWh. • the contribution for high-efficiency cogeneration at the value of 0.0099 lei/kWh, exclusive of VAT, is approved starting on 1 November 2023 (increasing compared to the period 01.07.2023 – 31.10.2023 when the contribu-tion for high-efficiency cogeneration had the value of 0.00219 lei/kWh – Order no. 75/2023. • ANRE Order no. 96/2023 – Order amending and supplementing the Order of the President of the National Energy Regulatory Authority no. 179/2015 approving the Procedure for technical inspections and overhauls of natural gas utilisation installations: • ANRE Order No 179/2015 is amended and supplemented as follows: it specifies the obligations of final customers regarding the inspection and verification of installations; it specifies the penalties applicable for failure to comply with the provisions of the Procedure on technical inspections and inspections of natural gas utilisation installations; when changing the natural gas supplier, the old supplier is obliged to send the new supplier the information related to the technical inspection and inspection of the natural gas utilisation installation related to the respective consumption site. • ANRE Order no. 100/2023 – Order approving the Methodology for setting the tariffs charged by designated electricity market operators: • the Methodology for setting the tariffs charged by designated electricity market operators that carry out single day-ahead and/or intra-day market coupling in the Romania offer area is approved; • the tariffs set in accordance with the methodology shall apply from 1 January 2024. • ANRE Order no. 118/2023 – Order approving the tariffs and financial contributions charged by the National Energy Regulatory Authority in 2024: • for holders of electricity supply licences, the annual monetary contribution is established on the basis of a percentage rate of 0.1% applied to the turnover achieved by them in 2023 from the commercial activities covered by the electricity supply licence, but not less than a minimum monetary contribution of RON 3,125. The basis for calculating the monetary contribution charged by ANRE is the net turnover, defined and calculated in accordance with the accounting regulations in force, which includes the revenues recorded from the activity of electricity supply – including those corresponding to green certificates and the contribution for high efficiency cogeneration, plus the revenues recorded from the application of the compensation scheme measures for electricity consumption and those related to compensation granted for the implementation of measures applicable to final customers in the electricity market; 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT338 339 2022 2023 2022 2023 2024 is 9.17 lei/MWh, an increase of 38.1% compared to the tariff for 2023. • ANRE Order no. 117/2023 – Order amending the Order of the President of the National Energy Regulatory Authority no. 123/2017 on the approval of the contribution for high efficiency cogeneration and some provisions on the way it is billed: • - from 1 January 2024, the contribution for high- efficiency cogeneration is approved at the amount of 0,0168 lei/kWh (excluding VAT). Source: Electrica • ANRE Order no. 143/2022 – Order amending and supplementing the Regulation for the detection, notification and sanctioning of violations of regulations issued in the field of energy applicable to the control activities carried out by the National Energy Regulatory Authority, approved by the Order of the President of the National Energy Regulatory Authority no. 62/2013 • inspection control actions are carried out on the basis of the annual control programme, unannounced control action is carried out without prior notification of the persons, etc. • the annual monetary contribution charged for the performance of activities in the natural gas sector on the basis of natural gas supply licence is 0.168 lei/ MWh. • ANRE Order no. 107/2023 – Order on the establishment of the estimated mandatory quota for the purchase of green certificates for 2024: • The estimated mandatory quota for the purchase of green certificates by economic operators who are obliged to purchase green certificates for the year 2024 is set at 0.4944765 green certificates/MWh. • ANRE Order no. 109/2023 – Order approving the average tariff for the electricity transmission service, the components of the transmission tariff for the introduction of electricity into the networks (T_G) and the extraction of electricity from the networks (T_L) and the regulated price for reactive electricity, charged by the National Electricity Transmission Company “Transelectrica” – S.A.: • the new tariffs are applicable from 1 January 2024; • the average tariff for the electricity transmission service is higher by 1.5%, the transmission tariff – the component for feeding electricity into the grid is lower by 5.4% (TL is 3.82 lei/MWh), the transmission tariff – the component for withdrawing electricity from the grid is higher by 1% (TL is 27.72 lei/MWh) compared to the tariffs for 2023. • ANRE Order no. 110/2023-115/2023 – Order approving the specific tariffs for the electricity distribution service and the price for reactive electricity at Societatea Retele Electrice Banat – S.A., Societatea Retele Electrice Dobrogea – S.A., Societatea Retele Electrice Muntenia – S.A., Societatea Delgaz Grid – S.A., Societatea Distributie Energie Oltenia – S.A., Societatea Distributie Energie Electrica Romania – S.A.: • there are increases in most of the specific tariffs for the electricity distribution service, the highest increases being at IT – Distributie Energie Electrica Romania SA – Muntenia Nord of 11.2%; • low voltage tariffs for Distributie Energie Electrica Romania are higher by between 3.8% - 7.9% compared to 2023 (there were increases for all categories respectively the lowest of 1.2% at MT – Transilvania Sud and the highest of 11.2% at IT- Muntenia Nord); • The new tariffs are applicable from 1 January 2024. • ANRE Order no. 116/2023 – Order approving the tariff for the purchase of system services for the transmission and system operator National Power Transmission Company “Transelectrica” – S.A.: • the tariff for the purchase of system services charged by the National Power Transmission Company “Transelectrica” – S.A., valid from 1 January 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT340 341 A.3.2. Changes to the legal framework in 2023/2024 up 2023 2024 to the date of approval of the financial statements2023/2024 The following are the relevant legislative changes that took place at Group level in the period between the end of the financial year 2022 and the date of the published report, respectively in the period between the end of the financial year 2023 and the date of this report. A.3.2.1. Distribution segment 2023 2024 • The methodology for establishing the distribution tariffs - is modified and provides for the granting of the RRR incentive of 2% for investments from EU funds only if they have not benefited from the PCI incentive • The project was developed as a result of ANRE’s obligation to present to ACER, until 24 January 2023, the methodology and criteria used for the evaluation of investments, in the sense of alignment with Regulation (EU) 2022/869: • energy infrastructure projects and high risk assessment • the specific risks to which offshore networks for energy from renewable sources are exposed Regulations regarding tariffs: • ANRE Order no. 6/2023 for completing the Procedure regarding the substantiation and approval of TSO and DSO investment plans, approved by ANRE Order no. 98/2022 - effective from 13 February 2023 • The amendment proposals consider the recognition of DO investments in energy storage and production for internal consumption from stations and NL: • the inclusion in the category of justifiable investments of energy production facilities from renewable sources for NL supply and internal consumption from the stations; • the inclusion of electricity storage facilities in the category of necessary investments; • the possibility for DO to own storage facilities, by way of exception from the provisions of the Energy Law (art. 46^1 par. (1)), only with prior approval by ANRE; • establishing the method of calculating the economic efficiency of investments in production/storage, with a view to recognition by ANRE (Annex no. 8). • ANRE order no. 1/2023 for the modification and completion of some orders of the president of the National Energy Regulatory Authority effective from 17 January 2023 • Methodology for the evaluation of investments in projects of common interest (PCI) approved by ANRE Order no. 139/2015 is amended as follows: • expanding the scope of the Methodology for DO investments (in addition to TSOs) • granting a 1% RRR incentive for PCI • expanding the scope of the type of PCI from electrical transmission networks, to: a) electrical transmission and distribution networks; b) offshore networks for energy from renewable sources; c) projects that integrate innovative technical solutions and that, although they have low capital costs, involve significant operating costs. Technical regulations - Network connection Technical regulations - Network connection • ANRE Order no. 3/2023 regarding the approval of the Technical Norm „Technical requirements for connection to public interest electrical networks for electricity storage facilities and the notification procedure for connecting electricity storage facilities” - effective from 20 March 2023 • The norm was developed by the TSO, it establishes technical requirements for connected storage facilities: • individually to the public electricity network, classified in categories A, B, C and D similarly to electricity production facilities; • within the electricity production sites; • within the places of electricity consumption. • ANRE Order no. 106/2023 for the amendment and completion of ANRE Order no. 239/2019 for the approval of the Technical Norm regarding the delimitation of protection and safety zones related to energy capacities - effective from January 10, 2024 • the order changes involve NO in evaluating the position of the building-type objective in relation to the safety zone of the overhead power lines with nominal voltages higher than 1kV. • assures the applicants of location approvals the facilitation of the location of the building-type objective outside the safety zone of the overhead power lines, the size of which is calculated with the formula from point 2.3 of Annex no. 6 to the Norm, without the need to carry out a risk analysis • ANRE Order no. 4/2023 for the modification and completion of some orders of the president of the National Energy Regulatory Authority in the field of connecting users to the public interest electrical network - effective from 3 February 2023 • the modification and completion of the following regulations, in the sense of including the possibility for household customers, PFA, individual businesses, family businesses and public institutions whose places of consumption are connected to LV, as well as prosumers, to purchase the measuring group or the fully equipped protection and measuring block, including the meter in compliance with the technical specifications made available by DSO/TSO: • Connection Regulation • The procedure regarding the connection to LV networks of household customers - ANRE Order no. 18/2022 • Connection framework contracts - ANRE Order no. 105/2022 • The procedure regarding the connection to the networks of prosumers - ANRE Order no. 19/2022 • The DSO/TSO is obliged to reimburse the user the value of these equipments at the terms established • Draft order for the approval of the Methodology regarding the allocation of the electricity network capacity for the connection of electricity production sites, as well as for the modification and completion of some orders of the president of the National Energy Regulatory Authority in the field of connecting users to the public interest electricity network - public consultation 1. Approval of the Methodology regarding the allocation of electrical network capacity for the connection of electricity production sites • The methodology provides for the mechanism for allocating the available capacity of the electrical network, necessary for the connection of new production sites with power ≥ 1 MW, through auctions organized by the TSO. a. The mechanism will replace the current mechanism for the participation of producers in the general network strengthening works and will ensure: i. the sums required by OR for the development of the relay in order to connect the new production sites 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT342 343 2023 2024 2023 2024 • in the connection contracts; reimbursement is made ii. a competitive environment for producers who on the basis of supporting documents presented by the user, without being limited to: tax invoice, compliance certificates, warranty certificates, etc. • the obligation of the DSO to install the meter is maintained, the deadlines in force stipulated in the connection contracts being maintained. • Draft order for the amendment and completion of ANRE President’s Order no. 239/2019 for the approval of the Technical Norm regarding the delimitation of protection and safety zones related to energy capacities - public consultation • clarifications regarding the use of the formula for calculating the size of the safety zone Z(sig), established in point 2.3 of Annex no. 6 from Norm; • the restriction regarding the application of the provisions of the Norm in the regulated passage corridor of the LEA, respectively in the area located between the limit of the safety zone and the limit of the regulated passage corridor, and their application only in the safety zone of the LEA, whose width is calculated with formula from point 2.3 of Annex no. 6 from Norm; • the conditions under which the risk analysis will be required were specified, depending on the positioning of the objectives in relation to the safety zone and respectively in the area located between the limit of the safety zone and the limit of the standard passageway; • provisions were established regarding the placement of photovoltaic panels on the roof of buildings. are going to develop production sites iii. securing the producers’ capacities for subsequent connection to the network, by paying the sums resulting from the auctions b. Tenders will be organized annually by the TSO, for a period of 10 years, in order to allocate the available capacity in the RET and in the RED at the voltage level of 110 kV and MV c. The methodology provides for the stages preceding tenders, their organization, as well as the rules for allocating capacities in various situations d. The starting price is determined based on the value of the development work, and the winners enter into capacity allocation contracts. e. The sums resulting from the auctions must be paid by the producers in no more than 4 months, and non-compliance with the deadlines attracts penalties. • The methodology will enter into force starting from 01.01.2025. 2. Amendment of the Regulation regarding the connection of users to public interest electric networks: a. OR will require the establishment of financial guarantees, of 5% of the connection tariff, by applicants with production/consumption sites and production sites ≥ 1 MW, regardless of the need for strengthening works. b. The guarantee must be established before the ATR • Draft Order regarding the modification and is issued. c. The connection certificate will include the certification of the quality of active customer for users with consumption/consumption and production sites d. Appendix no. 5 is revised to avoid the transfer to the ownership of users of installations with a voltage of 220 kV or higher, if the upper voltage of the transformer station exceeds 110 kV. 3. Modifying the framework content of the ATR and the connection contract, by revising the provisions regarding the financial guarantees that are constituted in favor of the OR, in accordance with the proposals for revising the Regulation from point 2. completion of the Methodology for data exchange between the transport operator and the system, distribution operators and significant network users approved by ANRE Order no. 233/2019 – public consultation • the introduction of electricity storage facilities connected individually to the electrical network, with a response in providing active power distinctly from electricity production facilities; • detailing the relevant system users who are the subject of information transmission to DO and TSO; • detailing the method of transmitting data from relevant system users, directly and indirectly, to DO and TSO. • In addition to the draft order from phase I and in accordance with the provisions of the norm for connecting storage facilities, it is necessary to specify: • communication path, redundancy and data exchange for storage facilities. These storage facilities can be linked to the electricity production facility or can be operated independently. • how the scheduled and planned data exchange is carried out until the provisions of ANRE Order no. 127/2021, with subsequent amendments and additions. • Draft Order for the amendment and completion of ANRE Order no. 102/2015 for the approval of the Regulation on the establishment of solutions for connecting users to electric networks of public interest - public consultation • addition to the list of situations in which the connection solution is determined by the solution sheet: • of consumption places owned by authorized natural person users, individual businesses, family businesses and public institutions that connect to the low voltage network, regardless of the requested power; • of the places of consumption and production belonging to prosumers who own electricity production units from renewable sources with an installed power of no more than 400 kW per place of consumption; • of the local public authorities that have the capacity to produce electricity from renewable sources made, partially or totally, from structural funds, and that benefit from the suppliers with whom they have an electricity supply contract, on request, from the financial regularization service . • the introduction of the provision according to which the solution study must also contain connection options with the operational limitation of the maximum power that can be discharged into the network in the situations/operation regimes with N-1 elements in operation that have the effect of overloading the network and, consequently, the impossibility of the network elements remaining in operation and of the network as a whole to function for an unlimited time under these conditions. • the introduction of the provision according to which in the solution sheet or, as the case may be, in the solution study, it must be highlighted whether in the connection solution electrical networks were considered for which strengthening works were executed or are being executed to create the technical conditions necessary to connect several production/consumption and production sites (general strengthening works), financed by users who benefit from the same strengthening works and whose utility installations are energized before the user’s own utility installations. It is also provided that, in this case, the data on which the participation quotas due to the users who financed the strengthening works are calculated are to be specified in the solution sheet or, as the case may be, in the solution study. • elimination of the phrase dispatchable/non- dispatchable with regard to generating units/power plants considering the provisions of ANRE Order no. 127/2021. 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT344 345 2023 2024 2023 2024 Annual Report and sanctions Annual Report and sanctions • Draft Order for the amendment and completion of the Procedure regarding the establishment and individualization of contraventional sanctions related to the turnover resulting from the control activity - public consultation • the amendment and completion of the Procedure takes into account the latest administrative changes in the organization of ANRE, but also its completion in the sense of regulating a new situation, that of the supervisory control action • in the case of a surveillance-type control action, the notification note shall take the place of the control report provided for in art. 2(1). Commercial Regulations • ANRE Order no. 5/2023 for the approval of the Regulation for the supply of electricity to final customers - effective from 6 February 2023 • the need to correlate the provisions of the Electricity Supply Regulation to final customers with the provisions of Law no. 123/2012 of electricity and natural gas, as amended and supplemented by GEO no. 143/2021, and Annex 1 to Directive (EU) 2019/944. • elimination of the provisions that refer to the activity of the DO in the relationship with the supplier and its obligations regarding its own activity • detailing the way in which DO ensures unrestricted, free and guaranteed access to the information in the database regarding the places of consumption connected to the electrical distribution network in the license area; • the introduction of the notion of an active client, the quality of an active client is certified, by the DSO/TSO, for: • participation in flexibility or energy efficiency programs, to which the customer’s place of consumption is connected; • the production of electricity, by the DSO/TSO to which the place of consumption and production is connected; • elimination of the obligation to conclude the consumption agreement by the customer at the conclusion of the electricity supply contract; • the customer’s possibility to ask the supplier to change the monthly values from the consumption agreement for a determined period, these being applied by the DO and the supplier starting with the 1st of the month following the one in which he received the new values; • the consumption data from the consumption agreement can be modified by the DO at any time during the execution of the electricity supply contract, including the data from the consumption agreement modified by the customer, in order to adapt to the actual consumption achieved; • DO has the obligation to verify the necessity of changing the data related to the consumption convention with the same frequency with which the reading of the index of the measurement group takes place. If the DO modifies the data in the consumption agreement, it transmits the modified values to the supplier; • the introduction of the obligation of the DO to ensure the reading of the index of the measurement group at a time interval of maximum 3 months in the case of places of consumption belonging to household customers, except for those integrated in the SMI; • in the event that the DO has not performed the reading within the time frame established by the legal provisions in force, in order to issue the regularization invoice, the latest self-read index and communicated by the client is used after the most recent index read and communicated by the DO. The regularization period cannot be longer than 3 years; • elimination of the conditions for concluding the distribution contract directly by the end customer; specifying that the conclusion of the distribution contract must be carried out by the final customer with the DO only if the place of consumption has several suppliers at the same time or is the subject of participation in the aggregation by an independent aggregator; • Draft Order approving the contract - framework for the provision of electricity in the universal service regime, the general conditions for the provision of electricity in the universal service regime and the invoice model applicable to household customers - public consultation Through the draft order, the following are proposed: 1. the contract - universal service electricity supply framework - regulates the way in which the contracts in force are applied under the conditions of entry into force of the order and also provides that the price from the universal service offer is applied for a period of minimum 3 months. Provisions with impact on DO: • the reading interval of the index of the measurement group is at most 3 months; • regularization of electricity consumption is done for a maximum of 3 months and is included in the first invoice issued after reading the index by the distribution operator (DO); • communication through the invoice of the time interval for reading the index of the measurement group by the DO representative; • invoicing based on the data established by the electricity consumption convention for 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT346 347 2023 2024 2023 2024 the invoicing periods in which the index of the measurement group is not read and the household customer does not transmit the self- read index; • the compensations and punitive interest that the household customer is entitled to receive for the supplier’s non-compliance with the obligations set forth in the Performance Standard for the activity of electricity supply and for the distribution operator’s non-compliance with the performance indicators provided for in the Performance Standard for the electricity distribution service, in force. 2. the general conditions for the provision of electricity in the universal service regime - are proposed to be approved separately from the framework contract, so that they can be published on the supplier’s website and do not require printing and physical attachment. 3. the invoice model applicable to household customers - the invoices issued for electricity consumption registered starting from 1 April 2023 must comply with the Invoice Model in Annex 3 which contains the information provided in the Regulation, respectively information from the invoice and information from the annex to the invoice. Electricity market functioning • Draft Order for the approval of the Regulation regarding the organized framework for trading on the organized future electricity markets administered by the Electric Energy and Natural Gas Market Operator OPCOM S.A., which aims to simplify the organized framework for trading electricity on the markets organized by future electricity, through the trading platforms managed by S.C. OPCOM S.A. – public consultation This draft order provides rules that refer to: • the types of products that can be traded on the standardized and flexible term product markets; • the method of establishing offers for the sale or purchase of electricity; • the way of organizing auctions/trading sessions; • the way of establishing transactions and contracting the traded energy; • the way of managing and publishing information on participants, offers and concluded transactions. • Draft Order for the approval of the Regulation on the organization and operation of the organized electricity market, administered by the Romanian Stock Exchange - S.A. – public consultation It provides rules that refer to: • Introduction of a chapter on organized market segments • The introduction of new products, namely flexible products and products derived from the field of electricity, settled by physical delivery • Description of the trading mechanisms used • Expanding market transparency information • Introduction of requirements regarding the use of a liquidity provider • Upon entry into force of the order, ANRE Order no. 117/2022 for the approval of the Regulation on the organization and operation of the electricity futures contract market organized by the company Romanian Stock Exchange S.A., and within 30 days of approval, BRM publishes the operational procedures according to the Regulation entered into force. Source: Electrica A.3.2.2. Supply segment 2023 2024 • Law no. 5/2023 - Law on the modification and • ANRE order no. 1 — Order for the approval of the completion of Law no. 220/2008 on the establishment of the system for the promotion of energy production from renewable energy sources. • modifies and completes Law no. 220/2008 regarding the trading of green certificates after the expiry of the accreditation period, the recovery of green certificates issued unduly, etc. • Law no. 15/2023 - Law on the approval of Government Emergency Ordinance no. 3/2022 for the modification and completion of Government Emergency Ordinance no. 118/2021 on the establishment of a compensation scheme for the consumption of electricity and natural gas for the cold season 2021-2022, as well as for the completion of Government Ordinance no. 27/1996 on the granting of facilities to persons living or working in some localities in the Apuseni Mountains and in the “Danube Delta” Biosphere Reserve • GEO no. 3/2022 is approved. • ANRE Order no. 3/2023 - Order for the approval of the Technical Standard on the technical requirements for connection to the electricity grids of public interest for electricity storage facilities and the notification procedure for the connection of electricity storage facilities • enter into force on 20 January 2023. • establishes the procedure and stages of the Methodology regarding the determination of the level of the minimum natural gas stock required to be established in the underground storage warehouses during the period April 1, 2024—October 31, 2024. • the methodology is approved, which aims to establish the method by which the level of the minimum natural gas stock that the holders of the natural gas supply license are obliged to establish in the underground storage warehouses during the period April 1, 2024-October 31, 2024 is determined • holders of natural gas supply licenses fulfil their obligation regarding the establishment of the minimum stock of natural gas by: storing natural gas in their own name, by concluding storage contracts; the conclusion of sales-purchase contracts whose object is quantities of natural gas stored by another supplier; concluding mandate contracts with another supplier. • the quantities of natural gas representing the minimum stock to be stored represent 90% of the storage capacity of the SI at the national level. The minimum natural gas stock of supply license holders is broken down for each holder depending on the weight of the amount of natural gas sold to end customers by the respective supplier in the gas year 2022/2023 in the total amount of natural gas sold to end customers nationally. notification process for the connection of storage facilities, as well as the content of the tests for verifying the compliance of storage facilities with • ANRE Order no. 2 - Order amending and supplementing the Regulation on the organised framework for trading on the organised forward electricity markets 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT348 349 2023 2024 2023 2024 the technical requirements for connection to the electricity grids of public interest. • The technical connection requirements apply to: new electricity storage facilities individually connected; new electricity storage facilities installed in an existing or new production site; new electricity storage facilities installed in an existing or new consumption site. administered by the Operator of the Electricity and Natural Gas Market OPCOM - S.A., approved by Order of the President of the National Energy Regulatory Authority no. 12/2023. • the main amendments/completions to the Regulation on the organised framework for trading on the organised forward electricity markets administered by OPCOM are: • in the case of aggregated participation, the aggregator communicates to the PO the list of aggregated participants and the PO includes it, as an annex, in the Participation Agreement for bilateral electricity contract markets; • the party terminating a contract concluded on PCCB-LE-flex shall send a notification to the PO and the PO shall publish this information on its website and exclude that contract from the calculation of the corresponding market indices. • ANRE order no. 4/2023 – order for amending and completing some orders of the President of the National regulatory Authority for Energy in the field of connection of users to the electricity network of public interest. • Amend and supplement the following normative acts: Regulation on the connection of users to electrical networks of public interest (approved by ANRE order no. 59/2013), the framework of the technical connection notices (approved by ANRE order no. 74/2014). Procedure on connection to the public interest low voltage power networks of the consumption places belonging to household customers (approved by ANRE order no. 18/2022), procedure on connection to the public interest power networks of the consumption and production sites belonging to prosumers (approved by ANRE order no. 19/2022), Framework contracts for connection to public interest electricity networks (approved by ANRE order no. 105/2022). • ANRE order no. 5/2023 — order for the approval of the Regulation for the supply of electricity to final customers, as well as for the modification and completion of some orders of ANRE President: • it enters into force on 6 February 2023 (with the addition of provisions that have other dates of application); • The Regulation for the supply of electricity to final customers is approved; • The framework contract for the provision of the electricity distribution service concluded between the concessionaire distribution operator and the supplier (approved by ANRE order no. 90/2015) is amended/completed. The methodology for setting tariffs for the electricity distribution service by operators other than concessionaire distribution operators (approved by ANRE order no. 102/2016); • The ANRE order no. 235/2019 for the approval of the Regulation for the supply of electricity to final customers is repealed, ANRE order no. 171/2020 for the approval of the conditions for the supply of electricity by the suppliers of last resort, ANRE order no. 181/2018 for the approval of the procedure regarding the financial guarantees regime established by the final customers at the disposal of the electricity suppliers and for the amendment of the Regulation for the supply of electricity to final customers, ANRE order no. 85/2015 for the approval of the tripartite framework convention concluded between the supplier, The network operator and the final customer, holder of the network contract and the multi-party framework agreement concluded between the final customer, suppliers and the network operator, ANRE order no. 96/2015 for the approval of the Regulation on the activity of informing the final customers of electricity and natural gas; • By the Regulation for the supply of electricity to final customers, new notions regarding the supply contract with dynamic prices (binding offer/contract with dynamic prices for EFSA) and active customers with new obligations for the supplier were introduced (conditioning the existence of supply contract for both the place of consumption and the place of consumption and production); • The main provisions amended/supplemented by the new regulation are: • At the vulnerable customer, they included among the facilities granted and the payment of the invoice, upon request, for a period of minimum 3 months (submission to the supplier with whom he has a check of medical documents for people who need to keep alive by electrical appliances to ensure continuity in supply); • the acceptance of household customers has been extended with new categories; • To the standard offers for non-households, the definition of micro-enterprise in L123 (categorization by consumption not by turnover/ no. employees). The obligation to display standard offers at single points of contact has disappeared. In the information in the offer, the unit value of taxes/fees/taxes/contributions will be included. It is no longer mandatory to pass into the offer the main conditions of the contract, but new elements are introduced, to be included in the offer; • The supply of a place of consumption can be made by several suppliers without being conditioned by the power of 1 MW. • the minimum elements of the tripartite/multi- party convention are specified without a framework convention being imposed; • in the contract will be passed the same as in the offer the unit value of taxes/fees/taxes/ contributions. A new price element appears - the final billed price = supply price + all taxes, taxes... unit). At the conclusion of the contract, the supplier’s website must contain links to POSF; • when invoicing, explicit mentions of normative acts incident during the period of application (i.e. capping) appear. For all household customers (including eligible – competitive household) and SoLR customers, the billing period is monthly. For 2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORK2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT350 351 2023 2024 Appendix 4 – Corporate Governance all household customers, for the consumption achieved starting with 1 April 2023, the invoice model for SU is observed. All invoices for the consumption registered starting 1 April will contain a minimum set of information. New terms for payment installment. • ANRE order no. 9/2023 — order on establishing the mandatory quota for the purchase of green certificates for 2022 • - The mandatory quota for 2022 was set at the level of 0.4934314 GC/MWh (compared to 0.5014313 GC/MWh the estimated quota for 2022 and 0.449792 GC/MWh the mandatory quota for 2021); • it shall enter into force on 1 march 2023. • ANRE order no. 10/2023 — Order for approval of the methodology for determining the level of the minimum natural gas stock that holders of natural gas supply licenses have the obligation to set up in underground storage warehouses • The methodology for determining the level of the minimum natural gas stock that the holders of the a supply licenses are approved Natural gas is required to establish it in underground storage warehouses - natural gas suppliers, for the quantities delivered to final customers (PET direct client) who have opted for the purchase of natural gas directly from natural gas producers, fulfil their obligation to establish the minimum natural gas stock by: • storage of natural gas in its own name, by concluding contracts for underground storage of natural gas with one of the holders of the license to operate the underground storage systems of natural gas; and/or • conclusion, by may 31 of each year, of sale-purchase contracts covering quantities of natural gas from underground storage of natural gas stored by another natural gas supplier; and/or • signing mandate contracts with another supplier, in order to store natural gas. Source: Electrica A.4.1. The Board of Directors of ELSA’s subsidiaries All the Boards of Directors of ELSA’s subsidiaries were composed of nonexecutive directors (5 members in the case of DEER and EFSA and 3 members in the case of FISE and EPE) and the composition of these were as follows: The distribution subsidiary DEER – 1 January 2023 – date of the report 01 January – present Anna-Maria Vasile – Chair Andrei–Gabriel Benghea–Malaies Niculina – Cristina Somlea Oana Babagianu Constantin Cristian Olaru Source: Electrica The end date of the mandates of DEER’s directors at the date of this report is 31 March 2024. The supply subsidiary EFSA – 1 January 2023 – date of the report 01 January – 30 April 01 May – 31 July 01 August – present Mihai Ioanitescu – Chair Ioana – Andreea Lambru - Chair Ioana – Andreea Lambru - Chair Maria Patrascoiu Mirela Ionescu Mirela Ionescu Liviu Mitroi Marius Lungu Marius Lungu Alexandru – Costin Dumitrescu Alexandru – Costin Dumitrescu Adrian Bazavan Adrian – Marian Marin Adrian – Marian Marin Dragos – Stefan Roibu Source: Electrica The end date of the mandates of EFSA’s directors at the date of this report is 31 March 2024. The energy services subsidiary SERV – 1 January 2023 – date of the report 01 January - 31 July 01 August – present Alexandru – Aurelian Chirita - Chair Alexandru – Aurelian Chirita - Chair Bogdan Costas Mihnea Barbulescu Source: Electrica Ramona Moldovan Oana – Marie Arat 2023 DIRECTORS’ REPORTAPPENDIX 4 – CORPORATE GOVERNANCEELECTRICA S.A2023 ANNUAL REPORT2023 DIRECTORS’ REPORTAPPENDIX 3 – APPLICABLE REGULATORY FRAMEWORKELECTRICA S.A2023 ANNUAL REPORT352 353 The end dates of the mandates of SERV’s directors at the date of this report is 31 March 2024. The electricity production subsidiary EPE – 1 January 2023 – 31 December 2023 (the effective date of the merger whereby the company was absorbed by ELSA) 1 January – 30 April 01 May – 31 July 09 August – 31 December Alexandru – Aurelian Chirita - Chair Alexandru – Aurelian Chirita - Chair Alexandru – Aurelian Chirita - Chair Mihai Ioanitescu Mihai Ioanitescu Mihai Ioanitescu Alina Camelia Mustatea Ioana – Andreea Lambru Ioana – Andreea Lambru Name Period (day month year) Function Anamaria Cristina Andro Anamaria Cristina Andro 07 July 2023 – 31 December 2023 01 January 2024 – present Source: Electrica Diana Moldovan 01 January 2022 - 31 January 2023 EPE is an absorbed company in the merger between ELSA as absorbing company and EPE, GECI and EEV 1 as absorbed companies, the effective date of the merger being 31 December 2023. Gabriela Dobrescu 01 January 2022 - 31 January 2023 A.4.2. Executive management of ELSA’s subsidiaries Robert Moraru 01 February 2023 - =28 July 2023 The tables below show the subsidiaries’ executive managers with delegated management duties by Board of Ionel Boja 01 August 2023 – 31 December 2023 Directors of ELSA subsidiaries in 2023, as well as until the date of this report, as follows: The distribution subsidiary DEER– until the date of the report Ionel Boja 01 January 2024 – present Mandate until the date (for acting executive managers at the date of the report) (day month year) 31 January 2025 31 January 2025 Financial Division Manager (interim) Financial Division Manager Business Support Division Manager Asset Management Division Manager Commercial Division Manager Commercial Division Manager (interim) Commercial Division Manager Name Period (day month year) Function Mandate until the date (for acting executive managers at the date of the report) (day month year) Mihaela Rodica Suciu 29 September 2022 – present  General Manager  05 October 2026 Mihaela Rodica Suciu 01 January 2022 – 04 April 2022 suspended Network Development Manager  31 December 2024 Valentin Branescu 01 January 2022 – 31 January 2023 Sinan Mustafa 01 January 2022 – 31 January 2023 Sinan Mustafa 15 October 2022 – 31 January 2023 Vasile Farcas 01 January 2022 – 31 January 2023 Dragos Eduard Staicu 01 January 2022 – 31 January 2023 Lucian Penes 04 July 2022 – 06 July 2023 Deputy General Manager Deputy General Manager Energy Management Manager Network Operations Manager Integration Division Manager Financial Division Manager Gabriel Gheorghe 01 February 2023 – present Strategy and Planning Manager 31 January 2025 Gabriel Adrian Margin 01 February 2023 – 12 September 2023 Technical Division Manager Gabriel Adrian Margin 13 September 2023 – 31 December 2023 Technical Division Manager (interim) Mihaela Rodica Suciu 01 January 2024 – present Technical Division Manager (interim) by the date of completion of the selection procedure Source: Electrica 2023 DIRECTORS’ REPORTAPPENDIX 4 – CORPORATE GOVERNANCE2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 4 – CORPORATE GOVERNANCEELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT354 355 The supply subsidiary EFSA – until the date of the report Nume Period (day month year) Function Mandate until the date (for acting executive managers at the date of the report) (day month year) Darius-Dumitru Mesca 1 October 2019 - present General Manager 31 May 2024 Claudiu - Daniel Radulescu 20 May 2022 – 06 October 2023 Deputy General Manager Dumitru Chirita 27 October 2023 - present Deputy General Manager 31 May 2024 Ruxandra-Madalina Rusu 20 May 2022 – present Financial Division Manager 31 May 2024 Paul-Ferdoschi 20 May 2022 – present Sales Division Manager 31 May 2024 Mihai Beu 20 May 2022 – present George-Marian Fertu 13 October 2022 - present Source: Electrica Portfolio Management Division Manager Operations Division Manager 31 May 2024 31 May 2024 The energy services subsidiary SERV – until the date of the report Nume Period (day month year) Function Mandate until the date (for acting executive managers at the date of the report) (day month year) Calin Ionel Dobra 18 October 2022 - present General Manager 31 May 2024 Deputy General Manager 31 May 2024 Nitu Violeta Florentina Mircea Nicolae Cotoros 07 December 2023 - present 03 April 2023 – 03 October 2023 Magdalena Necula 16 October 2023 - present Vasile Ionel Bujorel Oprean 01 December 2017- 16 December 2023 Source: Electrica Financial Manager Assumption of duties and responsibilities of Financial Manager on the basis of an individual labor agreement Property Management and Product Development Manager The electricity production subsidiary EPE – until the date of the report The Board of Directors did not appoint executive managers within the subsidiary during the period from its establishment until the dissolution of the company following the merger by absorption by ELSA. A.4.3. Number of shares owned by the managers of Electrica Group As table below shows the situation of ELSA shares held by the executive managers of the companies in the Group, currently on the position, which were mentioned in this chapter, a situation valid both on 31 December 2023, as well as on 13 February 2024: Name Number of shares Weight in the share capital (%) Anamaria Cristina Andro 1000 0.00029 Source: Electrica According to information held by ELSA, there is no contract, understanding or family relationship between the executive managers of the Group companies mentioned in this chapter, currently on the position, 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, currently on the position, 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, with the exception of the following disputes registered in the records of the Litigation Department of DEER: Item no. Adverse party Procedural quality Subject of the action File no. The Court Procedural status Term of court 1 2 Sinan Mustafa claimant Sinan Mustafa claimant action in tort (moral damages) contractual liability action (bonus on termination of mandate and related interest) 6165/211/2022 Cluj-Napoca Court of Law in progress 10 April 2024 10249/211/2023 Cluj-Napoca Court of Law in progress 16 January 2024 29 February 2024 Source: Electrica With the exception of one situation, i.e. EFSA’s Deputy General Manager is party to a dispute for the working group. 2023 DIRECTORS’ REPORTAPPENDIX 4 – CORPORATE GOVERNANCE2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 4 – CORPORATE GOVERNANCEELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 356 357 A.4.4. General Meetings of Shareholders of ELSA subsidiaries Corporate approvals at GMS/BoD level in the case of ELSA’s subsidiaries are regulated through their articles of association, as well as through the implemented corporate policies. ELSA, as majority shareholder of its subsidiaries, voted in their GMS in 2023 on various topics, amongst which the most important are related to: • revenue and expenses budgets, financial statements, financial part of the individual annual investment plan, distribution of the annual result; • modification of the general debt limit for DEER (temporary) and EFSA; • total ceiling of short and medium term financing, valid for facilities contracted by Electrica Furnizare SA during 2023, as well as within 6 months from 22 November 2023, regarding financing contracted by Electrica Furnizare SA from banking institutions (commercial banks or international financial institutions - IFIs) for financing current activities, including for refinancing purposes, with Electrica guarantee; • total ceiling of short, medium and long term financing available for facilities contracted by Distributie Energie Electrica Romania SA during 2023, as well as within 6 months from 22 November 2023, which can be contracted by Distributie Energie Electrica Romania SA from banking institutions (commercial banks or international financial institutions - IFIs) to cover additional costs related to its own technological consumption, as well as to finance working capital and investment projects, including for refinancing purposes, with Electrica’s guarantee; • setting KPIs for the Board members; • appointment of the financial auditor for 3 years in the case of DEER, EFSA and SERV and of the auditors in the case of EPE; • amendments/additions/guarantees related to facilities contracted from commercial banks or international financial institutions in the case of DEER and EFSA; • topics related to the merger in the capacity of EPE as the absorbed company, together with GECI and EEV by ELSA as the absorbing company; • the opportunity to purchase in batches the services of printing, printing and distribution of electricity/ natural gas invoices and other documents and computerised archiving of documents resulting from the distribution of disconnection notices for a period of two years for EFSA; • appointment of the directors in the Board of Directors of the subsidiaries. Starting with the end of 2019/beginning of 2020, a unitary policy was implemented within the Group’s subsidiaries, regarding the organization and conduct of the General Meetings of Shareholders of the Electrica Group companies, whose objectives are for each company to obtain the corporate approvals in the competence of the GMS in a timely manner, in order to carry out in good conditions the operational activity, in compliance with all legal and statutory provisions, implementation of a unitary system of convening, organizing, carrying out the GMS meetings in Electrica Group, as well as better tracking of the implementation of GMS resolutions. 2023 DIRECTORS’ REPORTAPPENDIX 4 – CORPORATE GOVERNANCE2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 4 – CORPORATE GOVERNANCEELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT 358 359 Appendix 5 – Table list Table 1. Company details Table 2. Key financial data for 2023 – 2021 - S-IFRS-EU Table 3. Key financial data for 2023 – 2021 - S-OMFP 2844/2016 Table 4. ELSA’s subsidiaries Table 5. ELSA’s associates Table 6. Long term investments owned by ELSA Table 7. The key drivers of changes in the electricity market Table 8. Ownership structure Table 9. BSE Shares and Global Depositary Receipts (GDRs) on LSE Table 10. Members of the BoD in 2023 Table 11. Participation of the BoD members at the BoD meetings and of the committees meetings in 2023 Table 12. ELSA’s Executive management during 2023, appointed on the basis of mandate contracts Table 13. ELSA’s compliance with the provisions of the BSE Corporate Governance Code Table 14. Operating segments Table 15. The electricity distribution tariffs approved by ANRE starting with 1 April 2023 Table 16. Number of users and volume of installations as of 31 December 2023 Table 17. Degree of attrition of the installations Table 18. Investment program approved by ANRE for 2019-2023 (RON mn.) Table 19. Investments planned 2023 vs achieved 2023(RON mn.) Table 20. The synthetic structure of investments achieved by distribution subsidiary in 2023 (RON mn.) Table 21. PIF plan vs achieved 2023 (RON mn.) Table 22. RAB evolution 2014-2023 (RON mn.) Table 23. Number of employees evolution 2023 – 2019 Table 24. Group’s employment by age, 2023 - 2021 Table 25. Consolidated statement of the financial position 2023-2021 (RON mn.) – S-IFRS-EU Table 26. Cash and cash equivalents 2023-2021 – S-IFRS-EU Table 27. Number of shares 2023 - 2021 – S-IFRS-EU Table 28. Revaluation reserves 2023-2021 (RON mn.) – S-IFRS-EU Table 29. Legal reserves 2023-2021 (RON mn.) – S-IFRS-EU Table 30. Consolidated statement of the financial position 2023-2021 (RON. mn) – S-OMFP 2844/2016 Table 31. Cash and cash equivalents 2023-2021 – S-OMFP 2844/2016 Table 32. Number of shares 2023 - 2021 – S-OMFP 2844/2016 Table 33. Revaluation reserves 2023-2021 (RON mn.) – S-OMFP 2844/2016 14 18 20 57 57 58 65 76 79 95 108 116 123 144 146 149 151 152 153 154 156 156 162 163 174 177 178 178 179 180 183 183 184 Table 34. Legal reserves 2023-2021 (RON mn.) – S-OMFP 2844/2016 Table 35. Consolidated statement of profit or loss (RON mn.) – S-IFRS-EU Table 36. Electricity, natural gas and goods purchased 2023-2021 (RON mn.) – S-IFRS-EU Table 37. Consolidated statement of profit or loss (RON mn.) – S-OMFP 2844/2016 Table 38. NL - intangible assets 2023 (RON mn.) – S-OMFP 2844/2016 Table 39. Electricity, natural gas and goods purchased 2023-2021 (RON mn.) – S-OMFP 2844/2016 Table 40. Consolidated cash flow statement (RON mn.) –S-IFRS-EU Table 41. Consolidated cash flow statement (RON mn.) –S-IFRS-EU Table 42. Separate statement of the financial position (RON mn.) Table 43. Cash, restricted cash and short-term investments 2023-2021 (RON mn.) Table 44. Loans granted to subsidiaries 2023-2021 (RON mn.) Table 45. Dividends 2023-2021 (RON mn.) Table 46. 2023 Provisions (RON mn.) Table 47. Separate statement of profit or loss (RON mn.) Table 48. Separate statement of cash flow (RON mn.) Table 49. Statement of financial position (RON mn.) – S-IFRS-EU Table 50. Statement of profit or loss (RON mn.) – S-IFRS-EU Table 51. Statement of cash flow (RON mn.) – S-IFRS-EU Table 52. Risks and uncertainties as of 31 December 2023 Table 53. Credit risk and expected credit losses for trade receivables as of 31 December 2023 Table 54. Credit risk and expected credit losses for trade receivables as of 31 December 2022 Table 55. Credit risk and expected credit losses for trade receivables as of 31 December 2021 Table 56. Contractual maturities of financial liabilities (RON mn.) Table 57. Exposure to currency risk 2023-2021 Table 58. Average rate and year-end spot rate Table 59. Sensitivity analysis Table 60. Fixed-rate and variable-rate instruments Table 61. Cash flow sensitivity analysis for variable-rate instruments 185 186 188 192 194 195 199 203 207 210 210 211 211 212 214 218 218 219 222 227 227 228 229 230 230 231 231 232 2023 DIRECTORS’ REPORTAPPENDIX 5 – TABLE LIST2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 5 – TABLE LISTELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT360 361 Figure 33: Competitive Market, 2023 Figure 34: Volume of electricity supplied on the retail market (TWh) Figure 35: Evolution of consumer numbers (ths.) Figure 36: Consumers structure with split on electricity volumes supplied in 2023 Figure 37: Consumers structure with split on revenues in 2023 Figure 38: PRE Electrica Furnizare Members Figure 39: Frequency index 2021-2023 Figure 40: PCB capacitors in operation at the end of 2023 compared to 2022 Figure 41: The quantity of waste (in tons) generated and the treatment methods Figure 42: Revenue for 2023 and comparative information (RON mn.) – S-IFRS-EU Figure 43: EBITDA and EBITDA margin for 2023 and comparative information (RON mn. and %) – S-IFRS-EU Figure 44: EBIT and EBIT margin for 2023 and comparative information (RON mn. and %) – S-IFRS-EU Figure 45: Net profit and Net profit margin for 2023 and comparative information (RON mn. and %) – S-IFRS-EU Figure 46: Analysis of net regulated result - OMFP 1802/2014 - OMFP 2844/2016 - IFRS-EU for distribution segment 2023 (RON mn.) – S-IFRS-EU Figure 47: Revenue for 2023 and comparative information (RON mn.) – S-OMFP 2844/2016 Figure 48: EBITDA and EBITDA margin for 2023 and comparative information (RON mn. and %) – S-OMFP 2844/2016 Figure 49: EBIT and EBIT margin for 2023 and comparative information (RON mn. and %) – S-OMFP 2844/2016 Figure 50: Net profit and Net profit margin for 2023 and comparative information (RON mn. and %) – S-OMFP 2844/2016 Figure 51: Analysis of net regulated result –OMFP 1802/2014 – OMFP 2844/2016 - for distribution segment 2023 (RON mn.) – S-OMFP 2844/2016 159 159 159 160 160 161 165 167 167 187 189 189 190 191 193 196 196 197 198 Appendix 6 – Figures list Figure 1: Consolidated revenue of Electrica Group (RON mn.) - S-IFRS-EU Figure 2: EBITDA (RON mn.) and EBITDA margin (%)- S-IFRS-EU Figure 3: Consolidated net profit (RON mn.) - S-IFRS-EU Figure 4: Net debt (RON mn.) - S-IFRS-EU Figure 5: Consolidated revenue of Electrica Group (RON mn.) - S-OMFP 2844/2016 Figure 6: EBITDA (RON mn.) and EBITDA margin (%) - S-OMFP 2844/2016 Figure 7: Consolidated net profit (RON mn.) - S-OMFP 2844/2016 Figure 8: Net debt (RON mn.) - S-OMFP 2844/2016 Figure 9: Romanian electricity distribution map Figure 10: Evolution of the number of users (mn.) Figure 11: Quantity distributed (TWh) Figure 12: Revenues - distribution segment (RON mn.) - S-IFRS-EU Figure 13: EBITDA – distribution segment (RON mn.) - S-IFRS-EU Figure 14: Net Profit – distribution segment (RON mn.) - S-IFRS-EU Figure 15: Net debt/(cash) – distribution segment (RON mn.) - S-IFRS-EU Figure 16: Revenues - distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 17: EBITDA – distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 18: Net Profit – distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 19: Net debt/(cash) – distribution segment (RON mn.) - S-OMFP 2844/2016 Figure 20: Revenues - supply segment (RON mn.) Figure 21: EBITDA - supply segment (RON mn.) Figure 22: Net profit - supply segment (RON mn.) Figure 23: Net debt/(Cash) - supply segment Figure 24: Ownership structure as of 31 December 2023 Figure 25: Evolution of the adjusted closing price of ELSA’s shares vs BET-TR index during 2023 and January 2024 Figure 26: Monthly trading volume and weighted average monthly closing price of shares on BSE (in RON) and GDRs on LSE (in USD) during 2023 and January 2024 Figure 27: Gross dividends distributed (2014-2022) (RON mn.) Figure 28: Gross dividend per share (RON) and dividend yield (%) Figure 29: The geographical coverage of the companies in the Electrica Group in 2023 Figure 30: The structure of CAPEX achievements for distribution operator within the Group, in 2023 (RON mn.) Figure 31: Market share of distribution segment in 2022 Figure 32: Total market shares, 2023 19 19 19 19 21 21 21 21 22 22 22 23 23 24 24 24 24 24 24 25 25 25 25 77 80 81 84 85 144 155 158 159 2023 DIRECTORS’ REPORTAPPENDIX 6 – FIGURES LIST2023 DIRECTORS’ REPORTELECTRICA S.AAPPENDIX 6 – FIGURES LISTELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT362 363 Glossary ANRE Romanian Energy Regulatory Authority ASF BPS BoD BRP BSE BTA CAPEX CGC CMC Romanian Financial Supervisory Authority (Autoritatea de Supraveghere Financiara) Basis points Board of Directors Balance Responsible Party Bucharest Stock Exchange Business Transfer Agreement Capital Expenditure Corporate Governance Code Competitive Market Component CMBC (EA/CN) CMNG-AN CMNG-PA Centralized Market for Bilateral Contracts (Extended Auction/Continuous Negotiation) Centralized Market for Bilateral Natural Gas Contracts – Auction and Negotiation Centralized Market for Bilateral Natural Gas Contracts – Public Auction CMNG – OTC Centralized Market for Bilateral Natural Gas Contracts – OTC CMUS CNTEE CSR DAM Centralized Market for Universal Service The National Transmission System Operator Corporate Social Responsibility Day Ahead Market DAM-NG Day Ahead Market – Natural Gas DEER DSO DMS EEA EBIT Distributie Energie Electrica Romania Distribution System Operator Distribution Management System European Economic Area Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortization EDN EGMS EFSA ELSA ERM EU Electrical Distribution Network Extraordinary General Meeting of Shareholders Electrica Furnizare SA Electrica SA Enterprise Risk Management European Union EUR FCA The monetary unit of several member states of the European Union Financial Conduct Authority – United Kingdom FPM-LT Medium and Long-Term Flexible Products Market GC GDP GDR GEO GMS HV IAS IFRIC IFRS IM-NG IMS IPO IR ISIN KPI kV LOC LR LSH LV MV MVA MWh MKP NAFA NES NL NRC OMPF 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 Intraday Market for Natural Gas Integrated Management System Initial Public Offering Investor Relations International Securities Identification Number Key Performance Indicators KiloVolt Land Ownership Certificate Last Resort Labor 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 2023 DIRECTORS’ REPORTGLOSSARY2023 DIRECTORS’ REPORTELECTRICA S.AGLOSSARYELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT364 365 OGMS OHS OHSAS OPCOM PCB RAB RM RON RRR SAD SAPE SCADA SDEE SDMN SDTN SDTS SED SEM SEO SoLR SPO TWh TSO UM US USD VAT Ordinary General Meeting of Shareholders Occupational Health and Safety Occupational Health and Safety Assessment Series Romanian Gas and Electricity market operator Polychlorinated Biphenylsor Regulated Asset Base Retail Market Romanian monetary unit Regulated Rate of Return Distribution Automation System Societatea de Administrare a Participatiilor in Energie Supervisory Control And Data Acquisition Societatea de Distributie a Energiei Electrice SA Societatea de Distributie a Energiei Electrice Muntenia Nord SA Societatea de Distributie a Energiei Electrice Transilvania Nord SA Societatea de Distributie a Energiei Electrice Transilvania Sud SA Servicii Energetice Dobrogea SA Servicii Energetice Muntenia SA Servicii Energetice Oltenia SA Supplier of last resort Secondary Public Offering TeraWatt hour Transmission and system operator Unit of Measurement Universal Service United States Dollar Value Added Tax 2023 DIRECTORS’ REPORTGLOSSARY2023 DIRECTORS’ REPORTELECTRICA S.AGLOSSARYELECTRICA S.A2023 ANNUAL REPORT2023 ANNUAL REPORT366 367 EXPLANATIONS Regarding the Differences between Consolidated Financial Statements OMFP 2844/2016 vs IFRS-EU 368 369 Explanations Regarding the Differences Between the Consolidated Financial Statements OMFP 2844/2016 vs IFRS-EU and Regarding the Restatement of the IFRS 2022 Financial Statements Electrica announced the information in this chapter through the current report BSE:IRIS code 09C80 from 25 March 2024 and LSE:RNS Code 2225I from 25 March 2024. In the consolidated financial statements prepared in accordance with IFRS-EU for the year 2023, Electrica Group has restated the consolidated financial statements for the year 2022, as a result of the consultations that took place during 2023 and finalized at the beginning of 2024 with the global financial auditors, also considering the complexity of the case under analysis, the auditors concluded that, in the absence of finalization of the consultation phase on IFRS 14 “Deferred charges related to regulated activities”, which specifies the treatment of capitalized costs from regulated activities, the arguments offered by the Company’s management aligned with the opinion of external financial consultants for the inclusion of these additional costs related to NL in other IFRS standards in force (IFRS 9 or IFRIC 12), are not sufficient. Electrica Group published on 20 September 2023 an announcement regarding the above consultations, the status and possible impact on the published consolidated financial statements (BSE:IRIS code C96A2 from 20 September 2023 and LSE:RNS Code 1027N from 20 September 2023). 2022 Context: Until 31 December 2021, the consolidated financial statements prepared in accordance with OMFP no. 2844/2016 were equivalent to IFRS-EU. Starting from December 31, 2022, according to the Order of the Ministry of Public Finances (OMFP) no. 3900/2022, a new clause was provided regarding the regulatory accounts to cover the additional expenses of the network losses (“NL”) for the actual energy costs compared to the ANRE ex-ante prices recognized in the distribution tariffs, by constituting intangible assets for these additional expenses. This amendment to the financial regulations of OMFP 3900/2022, was a result of the electricity prices context of 2022, which determined ANRE to issue, for the Distribution Operators, a new methodology regarding additional costs with NL during the period 1 January 2022 – 31 March 2025. The calculation of the capitalized amounts is carried out in compliance with the legislation specific to the entities that are the subject of GEO 119/2022, with subsequent additions and changes. According to ANRE regulations, the capitalized costs as intangible assets are recorded in the accounting record and therefore in the annual financial statements according to the instructions issued by the Ministry of Finance. ANRE will determine the recognized annual amounts of capitalized costs based on the recognized quantities and prices for NL. Revenue from the production of intangible fixed assets represents additional own technological consumption calculated as the difference between the net cost of acquisition and the cost of own technological consumption included in the regulatory tariff. In the set of audited consolidated financial statements prepared in accordance with IFRS-EU as at and for 31 December 2022, these expenses had a different applicable financial treatment, based on the amendment of the concession contracts regarding the recognition of additional costs (actual costs vs. recognized ex- ante in tariffs) with the purchase of electricity to cover NL for the distribution segment. On January 20, 2023, the Ministry of Energy, as grantor, amended the concession contract with Electrica Group for the distribution segment to reflect that in the event of early termination of the concession contract for any reason, the new concessionaire would reimburse the Group for the amount of unrecovered capitalized costs at the time of termination of the concession contract with the purchase of electricity for its own technological consumption compared to the costs included in the regulated tariffs. Based on the amendments to the concession contracts, the additional cost of purchasing electricity to cover the distribution operators’ NL was recognized as a financial asset - part of the concession contract. These amounts are guaranteed by the concession contract, which has been amended according to legal provisions. The resulting financial assets have been presented in the consolidated financial statements at fair value determined as the net present value of the additional electricity purchase costs incurred by the distribution subsidiary for NL. 2023 Context: In the audited annual consolidated financial statements for the year 2023, prepared in accordance with OMFP no. 2844/2016, for the approval of the Accounting Regulations in accordance with the International Financial Reporting Standards adopted by the European Union as amended, the Group has recorded for the year 2023, intangible assets and income from the production of intangible assets in the amount of RON 19 million, thus the balance of intangible assets as at 31.12.2023 is RON 771 million (31.12.2022: RON 951 million). The auditor’s opinion for annual consolidated financial statements for the year 2023, prepared in accordance with OMFP no. 2844/2016 is unqualified – clean report. In the audited annual consolidated financial statements for the year 2023, prepared in accordance with International Financial Reporting Standards as adopted by the European Union as amended (IFRS-EU), the Group has reassessed its previous position on the consolidated financial statements relating to the recognition of the financial asset recognized as a result of the amendment to the concession agreements, for which a financial asset in the amount of RON 951 million, representing the difference between the cost of energy purchase for NL and the cost of NL included in the regulatory tariff by ANRE, for the period 1 January - 31 December 2022, was recognized and comparatives were restated in the current year financial statements. See note 5 in the IFRS-EU consolidated financial statements. The auditor’s opinion for the annual consolidated financial statements for the year 2023, prepared in accordance with IFRS-EU is unqualified – clean report. It is worth mentioning that in 2023, the additional capitalized NL on the distribution segment was RON 19 million vs. RON 989 million as it was in the previous year, as the Group managed to significantly reduce the additional electricity procurement costs for NL on the distribution segment following the implementation of MACEE. In conclusion, for the annual consolidated financial statements for the year 2023 prepared in accordance with OMFP 2844/2016, the Group recognizes intangible assets in correspondence with revenue from the production of intangible assets as a result of the additional difference in NL for the distribution subsidiary, the assets being amortized over a period of 5 years, while in the audited annual consolidated financial statements for the year 2023, prepared in accordance with IFRS-EU, the recovery of revenue related to NL capitalized in the previous period is recovered in the year in question, without recognizing intangible assets, the revenue being included in the Group’s turnover. Therefore, the significant difference in the income statement from 2023 between the set of financial statements according to OMFP 2844/2016 and IFRS-EU is the amortization of intangible assets in the first set, which does not have a correspondence in the second set, thus there will be differences between the results of the two sets of annual consolidated financial statements. In regard to the financial position, the difference will be the unamortized value of the intangible asset recognized on the OMFP 2844/2016 set. Therefore, in order to comply with both local and international reporting standards and regulations, the Group will prepare two sets of annual consolidated financial statements, one prepared in accordance with OMFP 2844/2016 and one in accordance with IFRS-EU. EXPLANATIONS REGARDING THE DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS OMFP 2844/2016 VS IFRS-EUEXPLANATIONS REGARDING THE DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS OMFP 2844/2016 VS IFRS-EU2023 ANNUAL REPORT2023 ANNUAL REPORT370 371 2023 SEPARATE FINANCIAL STATEMENTS as at and for the year ended 31 December 2023 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 372 373 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. 2. 3. 4. 5. Merger by absorption into Electrica S.A. Reporting entity and general information Basis of accounting Functional and presentation currency Use of judgments and estimates Accounting policies 6. 7. 8. 9. Basis of measurement Changes in significant accounting policies Significant accounting policies Adoption of new and revised standards Performance for the year 10. Other income and operating expenses 11. Net finance income 12. Earnings per share Employee benefits 13. Short-term employee benefits 14. Post-employment and other long-term employee benefits 15. Employee benefit expenses 374 376 377 378 380 382 384 387 388 388 389 389 389 398 401 401 402 402 403 406 Long-term bank loans 16. Bank borrowings and overdrafts Income tax 17. Income tax Assets 18. Trade receivables 19. Other receivables 20. Cash and cash equivalents 21. Property, plant and equipment 22. Intangible assets 23. Investments in subsidiaries 24. Investments in associates 25. Loans granted to subsidiaries Equity and liabilities 26. Capital and reserves 27. Trade payables 28. Other payables 29. Provisions Financial instruments 30. Financial instruments - fair values and risk management Other information 31. Related parties 32. Contingencies 33. Commitments 34. Subsequent events 407 408 409 411 412 412 415 416 417 419 423 425 425 426 426 431 435 436 437 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORT2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORT374 375 Note 31 December 31 December 2023 2022 Note 31 December 31 December 2023 2022 ASSETS Non-current assets Property, plant and equipment Intangible assets Goodwill Investments in subsidiaries Investments in associates Other investments Loans granted to subsidiaries – long term Right of use assets Total non-current assets Current assets Cash and cash equivalents Trade receivables Other receivables Inventories Prepayments Loans granted to subsidiaries – short term Assets held for sale Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares reserve Pre-paid capital contributions in kind from shareholders Revaluation reserves Legal reserves Other reserves Retained earnings Total equity (Continued on next page) 21 22 22 23 24 25 20 18 19 25 26 26 26 26 26 26 26 145,084,285 98,939,502 1,112,707 1,446,450 126,189 - 2,309,928,230 2,298,128,361 16,637,710 7,000,000 18,821,421 7,000,000 1,279,262,987 1,276,325,000 4,013,286 248,087 3,764,485,655 3,699,588,560 19,154,241 105,631,939 1,747,406 795,526 597,845,163 501,493,067 2,836 1,014,231 89,659,699 279,655 - 1,023,678 45,034,523 279,655 Liabilities Non-current liabilities Lease liability – long term Employee benefits Long-term bank borrowings Total non-current liabilities Current liabilities Current portion of long-term bank borrowings Bank overdrafts Lease liability – short term Trade payables Other payables Deferred revenue Employee benefits Provisions Total current liabilities Total liabilities 14 16 20 27 28 13,14 29 3,271,217 1,326,142 54,049 1,095,651 - 100,000,000 4,597,359 101,149,700 216,768,248 205,520,079 207,830,772 797,944 6,645,430 215,561 4,744,726 51,096,530 36,474,707 285,152 7,254,982 725,084 173,187 5,840,131 1,041,676 489,093,450 256,320,760 493,690,809 357,470,460 709,703,231 654,258,388 Total equity and liabilities 4,474,188,886 4,353,846,948 4,474,188,886 4,353,846,948 The accompanying notes are an integral part of these separate financial statements. 3,464,435,970 3,464,435,970 103,049,177 103,049,177 (75,372,435) (75,372,435) 7,366 7,366 20,258,665 11,806,704 231,595,694 229,435,101 224,105,807 224,105,807 12,417,834 38,908,798 3,980,498,078 3,996,376,488 Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 SEPARATE STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 20232023 ANNUAL REPORTSEPARATE STATEMENT OF FINANCIAL POSITION2023 ANNUAL REPORTELECTRICA S.AAS AT 31 DECEMBER 2023ELECTRICA S.A 376 377 Other income Employee benefits Depreciation and amortization Reversal of impairment of trade and other receivables, net Reversal of impairment/(Impairment) of property, plant and equipment, net Change in provisions for legal cases and non-compete clauses, net Other operating expenses Loss before finance result Finance income Finance costs Net finance income Share of results of associates Profit before tax Income tax benefit Profit for the year Earnings per share Basic and diluted earnings per share (RON) Note 10 15 21,22 18,19 21 29 10 11 11 24 17 12 2023 2022 Note 2023 2022 1,442,602 5,179,621 (30,295,203) (30,156,958) (1,448,001) (1,586,304) 568,609 853,836 101,380 4,840 322,045 3,196,438 (21,247,445) (18,538,612) (49,803,557) (41,799,595) 97,634,651 78,298,886 (29,737,518) (12,440,801) 67,897,133 65,858,085 Profit for the year 23,940,836 24,304,885 Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of property, plant and equipment Tax related to revaluation of property, plant and equipment Effect of the merger on the revaluation of property, plant and equipment Effect of the merger in deferred tax on the revaluation of tangible fixed assets Re-measurements of the defined benefit liability Tax related to re-measurements of the defined benefit liability 26 17 26 17 14 17 6,988,472 (1,138,457) 2,701,689 (62,344) (25,755) 4,121 - - - - 1,621,494 (259,439) Other comprehensive income, net of tax 8,467,726 1,362,055 (38,825) (13,044) Total comprehensive income 32,408,562 25,666,940 18,054,751 24,045,446 5,886,085 259,439 23,940,836 24,304,885 0.07 0.07 The accompanying notes are an integral part of these separate financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea The accompanying notes are an integral part of these separate financial statements. 25 March 2024 Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 SEPARATE STATEMENT OF PROFIT OR LOSSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTSEPARATE STATEMENT OF COMPREHENSIVE INCOME2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 378 - - , 8 8 4 6 7 3 6 9 9 3 , , , 8 9 7 8 0 9 8 3 , , 6 3 8 0 4 9 3 2 , , 1 8 3 8 2 8 5 , , 5 4 3 9 3 6 2 , , 2 6 5 8 0 4 2 3 , , 6 3 8 0 4 9 3 2 , - ) 4 3 6 1 2 ( , , 2 0 2 9 1 9 3 2 , , ) 3 4 3 9 9 9 9 3 ( , - - , ) 3 4 3 9 9 9 9 3 ( , , ) 9 2 6 7 8 2 8 ( , , ) 3 4 3 9 9 9 9 3 ( , , ) 3 4 3 9 9 9 9 3 ( , , ) 1 9 3 0 6 1 2 ( , 9 9 3 7 3 , , ) 1 3 8 7 8 2 8 ( , , 8 7 0 8 9 4 0 8 9 3 , , , 4 3 8 7 1 4 2 1 , - - - - - - - - - - , 7 0 8 5 0 1 4 2 2 , , 7 0 8 5 0 1 4 2 2 , - - - - - - - , 1 0 1 5 3 4 9 2 2 , , 1 9 3 0 6 1 2 , - , 4 0 7 6 0 8 1 1 , , 4 1 0 0 5 8 5 , , 5 4 3 9 3 6 2 , - - - - , 0 6 3 9 8 4 8 , 2 0 2 - - ) 9 9 3 7 3 ( , , 4 9 6 5 9 5 1 3 2 , , 5 6 6 8 5 2 0 2 , 6 6 3 7 , - - - - - - - - - - - 6 6 3 7 , , ) 5 3 4 2 7 3 5 7 ( , , 7 7 1 9 4 0 3 0 1 , , 0 7 9 5 3 4 4 6 4 3 , , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - , ) 5 3 4 2 7 3 5 7 ( , , 7 7 1 9 4 0 3 0 1 , , 0 7 9 5 3 4 4 6 4 3 , , y t i u q e l a t o T d e n i a t e R s g n i n r a e r e h t O s e v r e s e r l a g e L s e v r e s e r n o i t a u l a v e R s n o i t u b i r t n o c s e v r e s e r m o r f d n k n i i l s r e d o h e r a h s l a t i p a C s e r a h s e v r e s e r y r u s a e r T e r a h S i m u m e r p d e b i r c s b u S n i d i a p d n a l a t i p a c e r a h s e t o N , 5 8 8 4 0 3 4 2 , , 5 8 8 4 0 3 4 2 , , 5 5 0 2 6 3 1 , , 5 5 0 2 6 3 1 , - - , 0 4 9 6 6 6 5 2 , , 0 4 9 6 6 6 5 2 , 379 , ) 2 5 8 8 9 7 2 5 1 ( , , ) 2 5 8 8 9 7 2 5 1 ( , - - - - - - - - - - , 0 0 4 8 0 5 3 2 1 4 , , , 7 8 0 1 2 6 9 1 3 , , 2 6 3 3 1 2 1 7 , , 6 2 2 6 5 1 8 2 2 , , ) 2 5 8 8 9 7 2 5 1 ( , , ) 2 5 8 8 9 7 2 5 1 ( , - - - , 8 8 4 6 7 3 6 9 9 3 , , , ) 5 7 8 8 7 2 1 ( , , ) 5 4 4 2 9 8 2 5 1 ( , , 5 4 4 2 9 8 2 5 1 , , 3 4 9 0 9 5 - , 8 9 7 8 0 9 8 3 , , 7 0 8 5 0 1 4 2 2 , , 5 7 8 8 7 2 1 , - - , 1 0 1 5 3 4 9 2 2 , , 7 4 6 7 9 3 2 1 , - - - - - - - ) 3 4 9 0 9 5 ( , , 4 0 7 6 0 8 1 1 , - - - - - - - - 6 6 3 7 , 6 6 3 7 , - - - - - - - - - - - - - - - - - - - - - - - - , ) 5 3 4 2 7 3 5 7 ( , , 7 7 1 9 4 0 3 0 1 , , 0 7 9 5 3 4 4 6 4 3 , , y t i u q e l a t o T d e n i a t e R s g n i n r a e r e h t O s e v r e s e r l a g e L s e v r e s e r n o i t a u l a v e R s n o i t u b i r t n o c s e v r e s e r m o r f d n k n i i l s r e d o h e r a h s l a t i p a C s e r a h s e v r e s e r y r u s a e r T e r a h S i m u m e r p d e b i r c s b u S n i d i a p d n a l a t i p a c e r a h s e t o N l a e u g n a r F u r d n a x e A n a l f e t S r e c i f f O l a i c n a n i F f e i h C . s t n e m e t a t s l i a c n a n fi e t a r a p e s e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T r e c i f f O e v i t u c e x E f e i h C a t i r i h C n a i l e r u A - u r d n a x e A l 4 2 0 2 h c r a M 5 2 , ) 5 3 4 2 7 3 5 7 ( , , 7 7 1 9 4 0 3 0 1 , , 0 7 9 5 3 4 4 6 4 3 , , r e b m e c e D 1 3 t a e c n a l a B 2 2 0 2 y r a u n a J 1 t a e c n a l a B 3 2 0 2 e v i s n e h e r p m o C e m o c n i r a e y e h t r o f t i f o r P e v i s n e h e r p m o c r e h t O e m o c n i r e g r e m f o t c e f f e e h T e v i s n e h e r p m o c l a t o T e m o c n i h t i w s n o i t c a s n a r T e h t f o s r e n w o y n a p m o C d n a s n o i t u b i r t n o C s n o i t u b i r t s i d 4 2 s r e n w o e h t o t s d n e d v D i i 4 2 4 2 s e v r e s e r l a g e l f o p u t e S n o i t a u a v e r l f o r e f s n a r T i d e n a t e r o t e v r e s e r d n a n o i t a c e r p e d i o t e u d s g n n r a e i r e h t o o t r e f s n a r T s e v r e s e r s n o i t c a s n a r t l a t o T e h t f o s r e n w o h t i w y n a p m o C y n a p m o C e h t f o n i s e g n a h c r e h t O y t i u q e , y t r e p o r p l f o s a s o p s d i i t n e m p u q e d n a t n a p l r e g r e m f o t c e f f e e h T ) e g a p t x e n n o d e u n i t n o C ( 3 2 0 2 r e b m e c e D 1 3 t a e c n a l a B e m o c n i e v i s n e h e r p m o C y r a u n a J 1 t a e c n a l a B 2 2 0 2 e v i s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i r a e y e h t r o f t i f o r P y n a p m o C e h t f o s r e n w o h t i w s n o i t c a s n a r T d n a s n o i t u b i r t n o C s n o i t u b i r t s i d 4 2 s r e n w o e h t o t s d n e d v D i i 4 2 4 2 y t i u q e n i s e g n a h c r e h t O s e v r e s e r l a g e l f o p u t e S s e v r e s e r r e h t o o t r e f s n a r T n o i t a u a v e r l f o r e f s n a r T i d e n a t e r o t e v r e s e r d n a n o i t a c e r p e d i o t e u d s g n n r a e i h t i w s n o i t c a s n a r t l a t o T y n a p m o C e h t f o s r e n w o y n a p m o C e h t f o , y t r e p o r p l f o s a s o p s d i i t n e m p u q e d n a t n a p l SEPARATE STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTSEPARATE STATEMENT OF CHANGES IN EQUITY2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 380 381 Cash flows from operating activities Cash flows from investing activities Note 2023 2022 Note 2023 2022 23,940,836 24,304,885 Payments for purchases of property, plant and equipment Profit for the year Adjustments for: Depreciation Amortisation Reversal of impairment of property, plant and equipment, net Reversal of impairment of trade and other receivables, net Net finance income Share of loss of associates Changes in employee benefits obligations Changes in provisions, net Income tax benefit Changes in: Trade receivables Other receivables Trade payables Other payables Employee benefits 19 20 19 16,17 9 22 12 27 15 937,740 510,261 (853,836) (568,609) 1,006,439 579,865 (4,840) (101,380) (67,897,133) (65,858,085) 38,825 219,205 (332,592) (5,886,085) 13,044 (4,977,943) (3,196,438) (259,439) (49,880,842) (48,493,892) (14,127) (12,621,613) 1,560,732 229,663 1,306,130 231,727 (489,743) 428,462 757,931 64,760 Cash flow used in operating activities (59,420,057) (47,500,755) Interest paid (29,647,323) (12,238,993) Net cash used in operating activities (89,067,380) (59,739,748) (Continued on next page) Payments for purchase of intangible assets Payments for purchase of interests in subsidiaries, net Proceeds from the sale of property, plant and equipment Proceeds from loans granted to subsidiaries Payment for acquisition of investment in associate Payment for other long term investments Loans granted to subsidiaries Cash used by subsidiaries under the cash pooling facility Interest received Net cash (used in)/from investing activities Cash flows from financing activities Dividends paid Payment of lease liabilities Repayment / Proceeds from overdrafts Long-term bank borrowings Net cash used in financing activities Net decrease / increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents transferred on merger Reclassification of overdrafts previously presented as cash and cash equivalents Cash and cash equivalents at 31 December The accompanying notes are an integral part of these separate financial statements. (1,779,204) (970,642) (12,376,633) - - (38,825) (1,875,869) (166,015) (4,439,771) 1,179,434 135,945,985 (13,044) - (7,000,000) (92,296,606) (150,980,508) 23,29 (75,423,575) 96,254,223 81,289,620 72,086,815 (86,631,261) 126,026,647 24 (40,136,410) (153,150,278) (479,678) (2,310,693) (552,172) 87,289,418 15 116,768,248 100,000,000 73,841,467 33,587,068 (101,857,173) 99,873,967 105,631,939 (114,783,382) 15,379,476 - 120,541,354 19,154,241 105,631,939 18 18 18 18 Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 SEPARATE STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTSEPARATE STATEMENT OF CASH FLOWS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 382 383 1. Merger by absorption into Electrica S.A. On 23 August 2023 the Extraordinary General Meeting of Shareholders (EGM) of Electrica SA approved in principle the merger by absorption between Societatea Energetica Electrica SA (Electrica SA or ELSA), Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) and Green Energy Consultancy & Investments SRL (GECI) (together “the Companies”) and the participation of the Companies in the merger, with Societatea Energetica Electrica SA as the absorbing company, Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed Investments in subsidiaries Investments in associates Other investments companies, with the effective date of the merger being 31 December 2023. Loans granted to subsidiaries – long term On December 20, 2023, the Extraordinary General Meeting of Shareholders approved the merger by absorption between Electrica SA and the absorbed companies, on the basis of the merger project registered at the Commercial Registry Office of the Bucharest Court and published in the Official Gazette of Romania, Part IV, no. 4953 of 07 November 2023, and voting in favour of the approval of the liquidation and deregistration from the Commercial Register and from the records of the financial administration of the absorbed companies as from the effective date of the merger, i.e. 31 December 2023. On January 3, 2024, the Decision no. 74/03.01.2024 was pronounced, admitting the application registered under no. 620095 dated 27.12.2023 regarding the registration of the merger in the commercial register on 31.12.2023, of the company Societatea Energetica Electrica SA and the deregistration from the commercial Right of use assets Total non-current assets Current assets Cash and cash equivalents Trade receivables Other receivables Inventories Prepayments register of the companies Societatea Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Loans granted to subsidiaries – short term Energy Consultancy & Investments SRL. Therefore, the merger took effect from the effective date, that is 31 December 2023, when Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed Assets held for sale Total current assets companies terminated their existence, being dissolved and deregistered. All the assets and liabilities held Total assets by these companies were transferred by effect of the merger by absorption and by operation of law to Societatea Energetica Electrica S.A., as the absorbing company, without increasing the share capital of Electrica S.A. as a result of the merger and without issuing new shares in the share capital of the absorbing company. The merger of the above four companies was completed and registered with the National Trade Registry Office on January 3, 2024, with an effective date of December 31, 2023. EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares reserve The financial results and Statement of Financial Position of the merged entities are incorporated prospectively as of the effective date of the merger, without modification of the pre-merger information. Pre-paid capital contributions in kind from shareholders Balances transferred from absorbed companies as at 31.12.2023, before merger adjustments ASSETS Non-current assets Property, plant and equipment Intangible assets Fond comercial Note 31 December 31 December 2023 2023 Balances before Merger the merger adjustments 21 22 22 37,391,998 43,554 - - - 1,446,450 Revaluation reserves Legal reserves Other reserves Retained earnings Total equity Liabilities Non-current liabilities Lease liability – long term Employee benefits Deferred tax liabilities Note 31 December 31 December 2023 2023 Balances before Merger the merger adjustments 31,075,528 (33,836,003) - - 9,816,700 1,897,914 - - (9,816,700) - 80,225,695 (42,206,253) 20 15,379,476 365,085 472,595 2,836 58,059 - - - - (8,190,513) - - (44,733,443) - 16,278,052 (52,923,956) 96,503,747 (95,130,209) 128,010 (128,010) - - - 2,639,346 202 - 26 26 - - - - - - 23,977,010 (32,264,841) 26,744,568 (32,392,851) 1,832,791 - 4,751,749 - - - NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 384 385 Note 31 December 31 December 2023 2023 Balances before Merger the merger adjustments 9,816,699 16,401,239 (9,816,699) (9,816,699) As at 31 December 2023, the Company’s subsidiaries are the following: Subsidiary Activity Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord Sole registration code Head Office % shareholding 14476722 Cluj-Napoca 99.99999929% Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% - - 96,570 339,972 - - - Electrica Serv S.A. (“SERV”) Services in the energy sector (maintenance, repairs, construction) Sunwind Energy S.R.L. Electricity generation New Trend Energy S.R.L. Electricity generation Foton Power Energy S.R.L. Electricity generation 17329505 Bucuresti 99.99998095% 42910478 Bucuresti 42921590 Constanta 43652555 Constanta 100% 60% 60% 52,921,740 (52,920,659) - (342) - - - 53,357,940 69,759,179 (52,920,659) (62,737,358) 96,503,747 (95,130,209) Long-term bank borrowings Total non-current liabilities Current liabilities Current portion of long-term bank borrowings Bank overdrafts Lease liability – short term Trade payables Other payables Deferred revenue Employee benefits Provisions Total current liabilities Total liabilities Total equity and liabilities 2. Reporting entity and general information These financial statements are the separate financial statements of Societatea Energetica Electrica S.A. (“Company” or “Electrica SA”) as at and for the year ended 31 December 2023. Electrica was originally incorporated as a company in 1998 by Government Decision no. 365/1998, following the restructuring of the former National Electricity Company (RENEL). On 1 August 2000, following the restructuring of the former National Electricity Company (CONEL) under the Government Decision no. 627/2000, the Company was allocated a new tax registration number. The registered office of the Company is no 9, Grigore Alexandrescu Street, District 1, Bucharest, Romania. The Company has sole registration code 13267221 and Trade Register number J40/7425/2000. As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital. The Company’s shares are listed on the Bucharest Stock Exchange and the global depository receipts (“GDRs”) are listed on the London Stock Exchange. The shares traded on the London Stock Exchange are the global depositary receipts, one global depositary receipt representing four shares. The Bank of New York Mellon is the depositary bank for these securities. As at 31 December 2023, the Company’s subsidiaries are the following: Subsidiary Activity registration Head Office % shareholding Sole Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord code 14476722 Cluj-Napoca 99.99999929% Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% Electrica Serv S.A. (“SERV”) Electrica Producție Energie S.A.(“EPE”) Services in the energy sector (maintenance, repairs, construction) 17329505 Bucuresti 99.99998095% Electricity generation 44854129 Bucuresti 99.9920% Sunwind Energy S.R.L. Electricity generation New Trend Energy S.R.L. Electricity generation 42910478 Constanta 42921590 Constanta Green Energy Consultancy & Investments S.R.L. Servicii Energetice Oltenia S.A. (in bankruptcy) Servicii Energetice Moldova S.A. (in bankruptcy) Servicii Energetice Banat S.A. (in bankruptcy) Servicii Energetice Dobrogea S.A. (in bankruptcy) Electricity generation 29172101 Prahova Services in the energy sector (maintenance, repairs, construction) Services in the energy sector (maintenance, repairs, construction) Services in the energy sector (maintenance, repairs, construction) Services in the energy sector (maintenance, repairs, construction) 29389861 Craiova 29386768 Bacau 29388211 Timisoara 29388378 Constanta 60% 60% 75% 100% 100% 100% 100% *On 31.12.2023 the merger by absorption took place between Societatea Energetica Electrica SA (ELSA) as absorbing company and Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) and Green Energy Consultancy & Investments SRL (GECI) as absorbed companies. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A386 387 As at 31 December 2023, the Company’s associates are the following: Acquisition of shares in associates 2023 between Company and its former subsidiary, Associate Activity registration Head Office as at 31 December Sole % shareholding code 2023 Crucea Power Park S.R.L. Electricity generation 25242042 Constanta 40% As at 31 December 2022, the Company’s associates are the following: Sole % shareholding Electrica Energie Verde 1 S.R.L., Electrica SA became On 15 May 2023, Electrica acquired an additional 10% a producer of electricity from renewable sources of the shares and voting interests in Crucea Power that operates a photovoltaic park in Stanesti, Park S.R.L.. As a result, the Group’s equity interest Giurgiu county, with an installed capacity of MW increased from 30% to 40%. 7.5 (operating capacity limited MW to 6.8). In 2023 the operation of the plant was continuous, with no Merger by absorption within the Group significant events leading to production shutdowns, producing in total MWh 9,599 (2022: MWh 10,466). Associate Activity registration Head Office as at 31 December On 20 December 2023, the Extraordinary General According to Law no. 220/2008 and based on code 2022 Meeting of the Company’s Shareholders (EGMS) the accreditation issued by ANRE, Stanesti park Crucea Power Park S.R.L. Electricity generation 25242042 Constanta Foton Power Energy S.R.L. Electricity generation 43652555 Constanta 30% 30% As at 31 December 2023 and 31 December 2022, the Company’s other long term investments are the following: approved the merger by absorption between receives a number of 6 green certificates (“GC”) for Societatea Energetica Electrica SA (“ELSA”), each MWh produced and delivered, of which until Societatea Electrica Productie Energie SA (“EPE”), 2020, 4 GC were issued for trading and 2 GC were Electrica Energie Verde 1 SRL (“EEV1”) and Green postponed (the amendment is introduced by Law Energy Consultancy & Investments SRL (“GECI”) no. 184/2018). The postponed green certificates will (together the “Companies”) and the participation be reinserted starting from 1 January 2021, in equal of the Companies in the merger, with Societatea monthly tranches until 31 December 2030. Company Activity registration code Sole Head Office % shareholding % shareholding as at 31 as at 31 December 2023 December 2022 Energetica Electrica SA as absorbing company, Electrica Productie Energie SA, Electrica Energie Geopolitical tensions Verde 1 SRL and Green Energy Consultancy & CCP.RO Bucharest S.A. (CCP.RO) Financial brokerage activities, exclusively insurance activities and pension funds (risk management through derivative products on the energy market) 17777754 Bucuresti 8.06% 8.06% 2023. The Company’s main activities interventions in Ukraine by the Russian Federation. As a result of these escalations, economic uncertainties in energy and capital markets have increased, with global energy prices expected to Investments SRL as absorbed companies, with the In February 2022 global geopolitical tensions effective date of the merger being 31 December significantly escalated following military Changes in Company structure during 2023 the project was acquired 60%. Sunwind Energy develops the photovoltaic project “Satu Mare 2”, Acquisition of shares in subsidiaries with an installed capacity of 27 MW. The project is in the “ready-to-build” phase and is located in On 6 February 2023, Electrica completed the the vicinity of Botiz commune, Satu Mare county. acquisition of Green Energy Consultancy & Also, the Financing Contract was signed between Investments S.R.L., having as main object of activity Sunwind Energy SRL as the Beneficiary and the the production of energy from photovoltaic sources. Ministry of Energy as the coordinator of reforms Until 31 December 2022 the company was acquired and/or investments for the National Recovery and 75%. Green Energy Consultancy & Investments Resilience Plan (NRRP). S.R.L. develops the photovoltaic project “Vulturu”, with a designed installed capacity of 12 MWp DC On 31 July 2023, Electrica acquired an additional 30% (peak power at the panels level) and 9.75 MW AC of the shares and voting interests in Foton Power (authorised power for delivery into the grid), located Energy S.R.L.,having as main object of activity the near Vulturu locality, Vrancea county. The project is production of energy from photovoltaic sources. As in the “ready-to-build” phase. a result, the Group’s equity interest increased from 30% to 60%, thus, Foton Power Energy S.R.L. becoming On 24 March 2023, Electrica completed the a subsidiary of Electrica Group. Foton Power Energy acquisition of Sunwind Energy S.R.L, which has S.R.L. develops the photovoltaic project “Bihor 1”, with as its main activity production of energy from a projected installed capacity of 77.5 MW, located photovoltaic sources. Until 31 December 2022 near Oradea. Currently, the core business of the Company, be highly volatile for the foreseeable future. As at according to the Statute is “Activities of business the date of these separate financial statements, and management consulting”, also performing management is unable to reliably estimate the corporate activities at parent company level for its effects on the Groups* financial outlook and cannot subsidiaries. exclude adverse consequence on the business, operations, and financial position. Management Electrica SA is the parent company of one electricity believes it is taking all the necessary measures to distribution company (set up from merger of three support the sustainability and growth of the Group’s electricity distribution companies), one electricity business in the current circumstances and that and natural gas supplier, five companies providing judgements used in these financial statements services in the energy sector (out of which four are remain appropriate. currently in bankruptcy) and five energy production companies (Electrica Energie Verde 1 SRL in which *The Group represents Societatea Energetica Electrica SA has an indirect shareholding of 100% Electrica S.A. together with its subsidiaries. being acquired by Electrica Productie Energie SA), to which two energy production project companies 3. Basis of accounting are being added where the Company doesn’t have control (the shareholding is 40%). Currently, three These separate financial statements have been of the project companies have been merged into prepared in accordance with the Ministry of Public Electrica SA. Finance Order no. 2844/2016 for the approval of the Accounting Regulations in accordance Through the merger that took place on 31 December with International Financial Reporting Standards NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A388 389 (“OMFP no. 2844/2016”). In acceptance of OMFP Judgements, assumptions and estimation If the inputs used to measure the fair value of an in “Note 7 Accounting Policies” (31 December 2022: no. 2844/2016, International Financial Reporting uncertainties Standards are standards adopted under the asset or a liability are categorised into different “Note 6 Significant Accounting Policies”) in certain levels of the fair value hierarchy, then the fair value cases, in accordance with the changes. procedure provided by the European Commission Information about judgements made in applying measurement is entirely categorised on the level of Regulation no. 1606/2002 of the European Parliament accounting policies and assumptions and the lowest level input that is significant to the entire Except the above, the new amendments to existing and of the Council of 19 July 2002 regarding estimation uncertainties that have the most measurement. the application of the international accounting significant effects on the amounts recognised in the standards that are effective starting with 1 January 2023 do not have a significant impact over the standards. The consolidated financial statements separate financial statements is included below: The Company recognises transfers between levels Group’s consolidated financial statements. of Electrica Group prepared in accordance with of the fair value hierarchy at the end of the reporting the Ministry of Public Finance Order no. 2844/2016 • Note 6 h) – estimates regarding the useful lives period during which the change has occurred. 8. Significant accounting policies will be published at least 30 days before the GSM of property, plant and equipment; scheduled on 25 April 2024. Further information about the assumptions used in The Company has consistently applied the following • Note 19 – assumptions regarding the revalued measuring fair values is included in: accounting policies to all periods presented in these These separate financial statements were amount of property, plant and equipment; authorized for issue by the Board of Directors on 05 • Note 19: Property, plant and equipment. March 2023 and will be submitted for shareholders’ • Note 21 –assumptions and estimates separate financial statements. (a) Going Concern approval in the general meeting scheduled on 25 regarding the valuation of shareholdings in the • Note 28: Financial instruments - fair values and April 2023. subsidiaries; risk management. Details of the Company’s accounting policies are • Note 15 – assumptions regarding the recognition 6. Basis of measurement The standalone financial statements have been prepared on the going concern basis. In making this judgement management considers current trading performance and access to finance resources. included in Note 6. The Company has consistently of deferred tax asset; applied the accounting policies to all periods The separate financial statements have been The Company depends upon the trading and presented in these separate financial statements. Measurement of fair values prepared on the historical cost basis, except for the cash generation of its subsidiaries, that have been 4. Functional and presentation currency These separate financial statements are presented in Romanian Lei (RON), which is the functional currency of the Company. All amounts are in RON, if not otherwise stated. 5. Use of judgements and estimates In preparing these separate financial statements, the management has made judgements, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are prospectively recognised. A number of the Company’s accounting policies revaluation model. includes the following assumptions: land and buildings, which are measured based on included in the Groups consolidated forecast which and disclosures require the measurement of fair values for both financial and non-financial assets 7. Changes in significant accounting policies • A continuation of the support scheme until and liabilities. When measuring the fair value of an asset or a Adopting new standards 31 March 2025 according to the applicable legislation but with a more stable flow of repayments of the reimbursement requests for liability, the Company uses observable market data The Group has not adopted new standards issued subsidies as compared with last year, as the as far as possible. Fair values are categorised into by the International Accounting Standards Board mechanism has been operationally improved; different levels in the fair value hierarchy based (IASB) and adopted on the inputs used in the valuation techniques as follows: by the EU applicable on 1 January 2023, so there a limit of RON 4,961,482 thousand, including RON is no significant change in the consolidated thousand 2.736,419 thousand overdraft limits and • The utilization of confirmed debt facilities up to • Level 1: quoted prices (unadjusted) in active statements of the Group. RON 2,225,063 thousand long term loans limit; markets for identical assets or liabilities; • Level 2: inputs other than quoted prices included overdrafts amounting to RON 574,111 thousand in Level 1 that are observable for the asset or The group adopted the Presentation of information which will be drawn during the forecast period liability, either directly (i.e. as prices) or indirectly regarding accounting policy (Amendments to IAS 1 and of which RON 250,000 thousand will be (i.e. derived from prices); and Statement 2 regarding IFRS practice). Although reimbursed during the forecast period. Adoption of new changes to existing standards • The utilization of not yet confirmed facilities, • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). the amendments did not lead to any change in the accounting policies themselves, they had an impact At the date of issuance of these separate financial on the information presented in the consolidated statements the regulatory position may be further financial statements regarding the accounting amended and there may be further laws enacted policies. The management reviewed the accounting which could adversely impact the Groups operating policies and updated the information presented cash flows during the forecast period. Given the NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A390 391 current market uncertainties, the Group is closely recognized when the electricity is injected into the • the foreign currency gain or loss on financial The calculation of defined benefit obligations is monitoring the market context and is continuously network and is being sold on the market. assets and financial liabilities; performed annually by a qualified actuary using the analysing the opportunities for optimisation of projected unit credit method. debt and increase of bank overdrafts and long- Sale of green certificates • impairment losses recognised on financial term loans. In light of the importance of the Group assets (other than trade receivables). Re-measurements of the net defined benefit liability, as the supplier and distributed of electricity on the Electricity suppliers have a legal obligation to which comprise actuarial gains and losses, are Romanian market, having 39.7 % (according to the purchase green certificates from producers of Interest income or expense is recognised using the recognised immediately in other comprehensive latest ANRE report 2022 for the distribution segment) electricity from renewable sources, based on annual effective interest method. as market share on the electricity distribution and targets or quotas set by law, which are applied to income. The Company determines the net interest expense/(income) on the net defined benefit 17.72 % (according to the latest ANRE report October the quantity of electricity purchased and supplied (e) Foreign currency transactions liability for the period by applying the discount rate 2022 for the supply segment) as market share on to final customers. Cost of green certificates is used to measure the defined benefit obligation at the electricity supply market and having as main invoiced to final customers separately from the Transactions in foreign currencies are translated to the beginning of the annual period to the then-net shareholder of Electrica SA the Romanian State, the tariffs for electricity. the functional currency at the exchange rates at the defined benefit liability, considering any changes management believes sufficient financing will be date of the transactions. made available to cover any financing requirements Electricity producers are entitled by the law in force in the net defined benefit liability during the period as a result of contributions and benefit payments. arising from market uncertainty and Group will be to receive a certain number of green certificates for Monetary assets and liabilities denominated in Net interest expense and other expenses related to able to meet its obligations as they fall due. each MWH of electricity produced from renewable foreign currencies are translated to the functional defined benefit plans are recognised in profit or loss. sources and injected into the network. The green currency at the exchange rate at the reporting Based upon the above projections and other certificates can be sold on the spot market, term date, as communicated by the National Bank of When the benefits of a plan are changed or when information, given the measures already market or a combination of both. The selling price Romania. Non-monetary assets and liabilities that a plan is curtailed, the resulting change in benefit implemented and the strategies to reduce the must fall between the minimum and maximum are measured at fair value in a foreign currency that relates to past service or the gain or loss on risks which may occur due to the instability of the values set by Law no. 220/2008 for establishing the are translated to the functional currency at the curtailment is recognised immediately in profit or economic environment, the Board of Directors system for promoting the production of electricity exchange rate when the fair value was determined. loss. The Company recognises gains and losses on has, at the time of approving the consolidated from renewable energy sources, republished, with Foreign currency differences are recognised in profit the settlement of a defined benefit plan when the financial statements, a reasonable expectation that subsequent amendments. Revenue from green or loss. Non-monetary items that are measured settlement occurs. the Group has adequate resources to continue in certificates is recognized in the profit or loss based on historical cost in a foreign currency are operational existence for the foreseeable future. statement when the green certificates are sold on not translated to the functional currency. (iii) Other long-term employee benefits Thus they continue to adopt the going concern the trading market. basis of accounting in preparing the consolidated financial statements. (c) Commissions (f) Employee benefits The Company’s net obligation in respect of long- term employee benefits is the amount of future (i) Short-term employee benefits benefit that employees have earned in return for (b) Revenue The Company assesses its revenue arrangements their service in the current and prior periods. That The Company recognizes the revenue from as principal or agent. If the Company acts in the undiscounted basis and are expensed as the related Re-measurements are recognised in profit or loss in contracts with customers in accordance with IFRS 15. capacity of an agent rather than as the principal in service is provided. A liability is recognised for the the period in which they arise. based on specific criteria to determine if it is acting Short-term employee benefits are measured on an benefit is discounted to determine its present value. a transaction, then the recognised revenue is the amount expected to be paid if the Company has Under the standard, revenue is recognized when or net amount of commission earned by the Company. a present, legal or constructive obligation to pay (iv) Termination benefits as the customer acquires control over the goods this amount as a result of past services provided or services rendered, at the amount which reflects (d) Finance income and finance costs by the employee and the obligation can be reliably Termination benefits are expensed at the earlier the price at which the Company is expected to be entitled to receive in exchange of those goods or The Company’s finance income and finance costs services. Revenue is recognized at the fair value of include: the services rendered or goods delivered, net of VAT, estimated. (ii) Defined benefit plans of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months excises or other taxes related to the sale. • interest income; The Company’s net obligation in respect of defined of the end of the reporting period, then they are Generation and sale of electricity • interest expense; The electricity produced by the Group is mainly • dividend income; sold on the Day Ahead Market and the revenue is benefit plans is calculated separately for each plan discounted. by estimating the amount of future benefits that employees have earned in the current and prior periods, by discounting that amount. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A392 393 (g) Income tax Deferred tax is measured based on the tax rates If significant parts of an item of property, plant (i) Intangible assets that are expected to be applicable to temporary and equipment have different useful lives, then Income tax expense comprises current and differences when they are reversed, using tax rates they are accounted for as separate items (major (i) Recognition and measurement deferred tax. It is recognised in profit or loss except enacted or substantively enacted at the reporting components) of property, plant and equipment. for the items recognised directly in equity or in date. other comprehensive income, in which case it Spare parts, stand-by and servicing equipment and have finite useful lives are measured at Intangible assets that are acquired by the Company will be recognized directly in equity or in other The measurement of the deferred tax reflects the tax are classified as property, plant and equipment if cost less accumulated amortisation and any comprehensive income. consequences that would follow from the manner in they are expected to be used during more than one accumulated impairment losses. (i) Current tax carrying amount of its assets and liabilities at the item of property, plant and equipment. (ii) Subsequent expenditure which the Company expects to recover or settle the period or can be used only in connection with an reporting date. Current tax comprises the expected tax payable or Any gain or loss on disposal of an item of property, Subsequent expenditure is capitalised only when it receivable on the taxable income or loss for the year Deferred tax assets and liabilities are offset only if plant and equipment is recognised in profit or loss. increases the future economic benefits embodied and any adjustment to tax payable or receivable certain criteria are met. in respect of previous years. It is measured using tax rates enacted or substantively enacted at the Unrecognized deferred tax assets are reassessed at (ii) Subsequent expenditure in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in reporting date. Current tax also includes any tax each reporting date and recognized to the extent Subsequent expenditure is capitalised only if it profit or loss as incurred. arising from dividends. that it is probable that the future taxable profits will is probable that the future economic benefits be available against which they can be used. associated with the expenditure will flow to the (iii) Amortization (ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets (i) Recognition and measurement (h) Property, plant and equipment Company. (iii) Depreciation Amortization is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their and liabilities for financial reporting purposes and Depreciation is calculated to write off the cost of estimated useful lives, and is recognised in profit or the amounts used for taxation purposes. Deferred Property, plant and equipment are initially items of property, plant and equipment less their loss. tax is not recognised for: recognised at cost, which includes purchase price estimated residual values using the straight-line and other costs directly attributable to acquisition method over their estimated useful lives and is The estimated useful lives of software and licenses • temporary differences arising from the initial and bringing the asset to the location and condition recognised in profit or loss. Leased assets are are 3-5 years. recognition of assets and liabilities resulting necessary for their intended use. depreciated over the shorter of the lease term and from transactions that are not business their useful lives unless it is reasonably certain that Amortisation method, useful lives and residual combinations and that affect neither accounting After initial recognition, land and buildings the Company will obtain ownership right by the values are reviewed at each reporting date and nor taxable profit or loss; are measured at revalued amounts less any end of the lease term. Land and other non-current adjusted if appropriate. • temporary differences resulting from impairment losses since the most recent valuation. (j) Financial instruments accumulated depreciation and any accumulated assets in progress are not depreciated. investments in subsidiaries, associates and The estimated useful lives of property, plant and jointly controlled entities, to the extent that the The Company used the fair value as deemed equipment are as follows: Company can exercise control over the reversal cost for the tangible assets for the opening of the period of the temporary differences and it is financial position. probable that they will not be reversed in the foreseeable future. Revaluations are performed with sufficient regularity to ensure that the carrying amount does not Deferred tax assets are recognised for unused tax materially differ from the one which would be losses, unused tax credits and deductible temporary determined using the fair value at the end of the differences only to the extent that it is probable that reporting period. future taxable profits will be available to be used for covering them. Deferred tax assets are reviewed at When a building is revalued, the accumulated each reporting date and are reduced to the extent depreciation is eliminated against the gross that it is no longer probable that the related tax carrying amount of that item, and the net amount is benefit will be realised. restated to the revalued amount of the asset. Category Buildings Equipment Vehicles, furniture and office equipment Useful lives (years) 40-60 4-12 The depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are 3-10 directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A394 395 acquisition of financial assets or financial liabilities Loans and receivables comprise trade receivables, shares, net of any tax effects, are recognized as a Irrespective of the above analysis, the Company at fair value through profit or loss are recognised cash and cash equivalents and bank deposits. deduction from equity. considers that default has occurred when a immediately in profit or loss. (i) Financial assets Trade receivables Repurchase and reissue of ordinary shares the Company has reasonable and supportable (treasury shares) information to demonstrate that a more lagging Trade receivables include mainly invoices issued default criterion is more appropriate. financial asset is more than 90 days past due unless All regular way purchases or sales of financial or to be issued to the subsidiaries for the rendered When shares recognized as equity are repurchased, assets are recognised and derecognised on a trade services. date basis. Regular way purchases or sales are the amount of the consideration paid, which (ii) Write-off policy includes directly attributable costs, net of any tax purchases or sales of financial assets that require Cash and cash equivalents effects, is recognized as a deduction from equity. The Company writes off a financial asset when delivery of assets within the time frame established Repurchased shares are classified and presented after the finalization of the bankruptcy proceedings. by regulation or convention in the marketplace. Cash and cash equivalents comprise cash balances in the treasury share reserve. When treasury shares Financial assets written off may still be subject All recognised financial assets are measured and call deposits and deposits with maturities of are sold or reissued subsequently, the amount to enforcement activities under the Company’s subsequently in their entirety at either amortised three months or less from the transaction date that received is recognised as an increase in equity and recovery procedures, taking into account legal cost or fair value, depending on the classification of are subject to an insignificant risk of changes in the resulting surplus or deficit on the transaction is advice where appropriate. Any recoveries made are the financial assets. their fair value, that are used by the Company in the presented within share premium. recognised in profit or loss. Financial assets are initially measured at fair value and subsequently at amortized cost in accordance (ii) Financial liabilities with IFRS 9, as they are held in a business model to management of its short-term commitments. (k) Impairment (iii) Measurement and recognition of expected Impairment of financial assets credit losses collect contractual cash flows and these cash flows All financial liabilities are measured subsequently at The measurement of expected credit losses is a consist solely of payments of principal and interest amortised cost using the effective interest method The Company recognises a loss allowance for function of the probability of default, loss given on the principal amount outstanding. or at fair value through profit or loss. expected credit losses on investments in debt default (i.e. the magnitude of the loss if there instruments that are measured at amortised cost or is a default) and the exposure at default. The The amortized cost of a financial asset is the Financial liabilities that are not (i) contingent at fair value through other comprehensive income. assessment of the probability of default and loss amount at which the financial asset is measured at consideration of an acquirer in a business The amount of expected credit losses is updated at given default is based on historical data adjusted by initial recognition less the principal reimbursements, combination, (ii) held-for-trading, or (iii) designated each reporting date to reflect changes in credit risk forward-looking information as described above. As plus the cumulative amortization using the effective as at fair value, are measured subsequently at since initial recognition of the respective financial for the exposure at default, for financial assets, this interest method, adjusted for any loss allowance. amortised cost using the effective interest method. instrument. is represented by the assets’ gross carrying amount The gross carrying amount of a financial asset is the The effective interest method is a method of at the reporting date. amortized cost of a financial asset before adjusting calculating the amortised cost of a financial liability The Company always recognises lifetime expected for any loss allowance. and of allocating interest expense over the relevant credit losses for trade receivables. The expected For financial assets, the expected credit loss is period. The effective interest rate is the rate that credit losses on these financial assets are estimated estimated as the difference between all contractual Foreign exchange gains and losses exactly discounts estimated future cash payments using a provision matrix based on the Company’s cash flows that are due to the Company in The carrying amount of financial assets that are form an integral part of the effective interest rate, that are specific to the debtors, general economic that the Company expects to receive, discounted at denominated in a foreign currency is determined in transaction costs and other premiums or discounts) conditions and an assessment of both the current the original effective interest rate. that foreign currency and translated at the spot rate through the expected life of the financial liability, as well as the forecast direction of conditions at the at the end of each reporting period. or (where appropriate) a shorter period, to the reporting date, including time value of money where Derecognition of financial assets (including all fees and points paid or received that historical credit loss experience, adjusted for factors accordance with the contract and all the cash flows Loans and receivables The Company derecognizes a financial asset only Other financial liabilities include trade payables. (i) Significant increase in credit risk when the contractual rights to the cash flows from amortised cost of a financial liability. appropriate. These assets are initially recognized at fair value plus any directly attributable transaction (iii) Share capital costs. Subsequent to initial recognition, they are measured at amortized cost using the effective Ordinary shares interest method. The amortised cost is reduced by In assessing whether the credit risk on a financial asset and substantially all the risks and rewards instrument has increased significantly since initial of ownership of the asset to another entity. If the recognition, the Company compares the risk of a Company neither transfers nor retains substantially default occurring on the financial instrument at the all the risks and rewards of ownership and continues the asset expire, or when it transfers the financial impairment losses. Ordinary shares are classified as equity. Incremental reporting date with the risk of a default occurring to control the transferred asset, the Company costs directly attributable to the issue of ordinary on the financial instrument at the date of initial recognizes its retained interest in the asset and an recognition. associated liability for amounts it may have to pay. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A396 397 If the Company retains substantially all the risks Company obtained title deeds in respect of future A contingent asset is a potential asset that appears • the lease term has changed or there is a and rewards of ownership of a transferred financial issuance of shares. The amounts recorded are as a result of previous events and whose existence significant event or change in circumstances asset, the Company continues to recognize the based on the fair value of the land. will be confirmed only by the occurrence or the non- resulting in a change in the assessment of financial asset and also recognizes a collateralized borrowing for the proceeds received. (o) Provisions occurrence of one or more uncertain future events, exercise of a purchase option, in which case the which are not fully controlled by the Company. lease liability is remeasured by discounting the revised lease payments using a revised discount (l) Revaluation reserves A provision is recognised if, as a result of a past A contingent asset is not recognized in the financial rate; event, the Company has a present legal or statements of the Company, but it is shown when an The difference between the revalued amount and constructive obligation that can be estimated input of economic benefits is likely to arise. • the lease payments change due to changes the net carrying amount of property, plant and reliably, and it is probable that an outflow of equipment is recognized as revaluation reserve economic benefits will be required to settle the (q) Leases included in equity. obligation. Provisions are determined by discounting If an asset’s carrying amount is increased as a that reflects current market assessments of the time the expected future cash flows at a pre-tax rate (i) The Company as lessee in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the result of a revaluation, the increase is recognized value of money and the risks specific to the liability. The Company assesses whether a contract is or lease payments change is due to a change in and accumulated in equity under the heading The unwinding of the discount is recognised as contains a lease, at inception of the contract. The a floating interest rate, in which case a revised of revaluation reserve. However, the increase is finance cost. recognized in profit and loss to the extent that Company recognises a right-of-use asset and a discount rate is used); corresponding lease liability with respect to all lease it reverses a revaluation decrease of the same A provision for restructuring is recognised when arrangements in which it is the lessee, except for • a lease contract is modified and the lease amount of the asset previously recognised in profit the Company has approved a detailed and formal short-term leases (with a lease term of 12 months modification is not accounted for as a separate and loss. restructuring plan, and the restructuring either has or less) and leases of low value assets (of less lease, in which case the lease liability is commenced or has been announced publicly. No than USD 5,000). For these leases, the Company remeasured based on the lease term of the If an asset’s carrying amount is decreased as a provisions are provided for future operating losses. recognises the lease payments as an operating modified lease by discounting the revised lease result of a revaluation, the decrease is recognised expense on a straight-line basis over the term payments using a revised discount rate at the in profit or loss, However, the decrease is recognized (p) Contingent assets and liabilities of the lease unless another systematic basis is effective date of the modification. in equity in revaluation reserves if there is any more representative of the time pattern in which credit balance existing in the revaluation reserve in A contingent liability is: economic benefits from the leased assets are Right-of-use assets are depreciated over the respect of that asset. consumed. (a) a possible obligation that arises from past shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of The revaluation reserve is transferred to retained events and whose existence will be confirmed The lease liability is initially measured at the present the underlying asset or the cost of the right-of- earnings in an amount corresponding to the use of only by the occurrence or non-occurrence of value of the lease payments that are not paid at use asset reflects that the Company expects to the asset (as the asset is depreciated) and upon one or more uncertain future events not wholly the commencement date, discounted by using exercise a purchase option, the related right-of- disposal of the asset. within the control of the Company; or the default rate in the lease. If this rate cannot use asset is depreciated over the useful life of the be readily determined, the Company uses its underlying asset. The depreciation starts at the (m) Dividends (b) a present obligation that arises from past incremental borrowing rate. commencement date of the lease. events that is not recognised because: Dividends are recognized as a deduction from The lease liability is presented as a separate line The right-of-use assets are presented as a separate equity in the period in which their distribution is i. it is not probable that an outflow of in the statement of financial position. The lease line in the statement of financial position. approved and recognized as a liability to the extent resources embodying economic benefits will liability is subsequently measured by increasing it is unpaid at the reporting date. Dividends are be required to settle the obligation; or the carrying amount to reflect interest on the lease (ii) Rental income disclosed in the notes to financial statements when liability (using the effective interest method) and by their distribution is proposed after the reporting ii. the amount of the obligation cannot be reducing the carrying amount to reflect the lease Rental income from property, plant and equipment date and before the date of the issuance of the measured with sufficient reliability. payments made. financial statement. other than property investment is recognised as Other income. Rental income is recognised on a Contingent liabilities are not recognized in the The Company remeasures the lease liability (and straight-line basis over the term of the lease. (n) Capital contributions in kind from shareholders financial statements of the Company. They makes a corresponding adjustment to the related are presented in case the output of resources right-of-use asset) whenever: These contributions from a shareholder represent incorporating economic benefits is possible and not pre-paid contributions of land for which the probable. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A398 399 (r) Investment in associates The requirements of IAS 36 are applied to determine • IFRS 17 “Insurance Contracts” including Standards and amendments to the existing whether it is necessary to recognise any impairment amendments to IFRS 17 issued by IASB on 25 standards issued by IASB and adopted by the EU An associate is an entity over which the Company loss with respect to the Company’s investment in June 2020 - adopted by the EU on 19 November but not yet effective has significant influence and that is neither an associate. When necessary, the entire carrying 2021 (effective for annual periods beginning on a subsidiary nor an interest in a joint venture. amount of the investment (including goodwill) is or after 1 January 2023); Significant influence is the power to participate in tested for impairment in accordance with IAS 36 as At the date of authorization of these individual financial statements, the following amendments the financial and operating policy decisions of the a single asset by comparing its recoverable amount • Amendments to IFRS 17 “Insurance contracts” to the existing standards were issued by IASB and investee but is not control or joint control over those (higher of value in use and fair value less costs of - Initial Application of IFRS 17 and IFRS 9 – adopted by the EU and which are not yet effective: policies. disposal) with its carrying amount. Any impairment Comparative Information, adopted by the EU on The results and assets and liabilities of associates including goodwill that forms part of the carrying beginning on or after 1 January 2023); Standards in June 2023: IFRS S1 General are incorporated in these financial statements using amount of the investment. Any reversal of that Requirements for Disclosure of Sustainability- the equity method of accounting, except when the impairment loss is recognised in accordance with • Amendments to IAS 1 “Presentation of Financial related Financial Information and IFRS S2 investment is classified as held for sale, in which IAS 36 to the extent that the recoverable amount of Statements” and IFRS Practice Statement 2 - Climate-related Disclosures, adopted by the EU case it is accounted for in accordance with IFRS 5. the investment subsequently increases. Disclosure of Accounting Policies adopted by the on 31 July 2023 (effective for annual reporting loss recognised is not allocated to any asset, 9 September 2022 (effective for annual periods • The first two IFRS Sustainability Disclosure EU on 2 March 2022 (effective for annual periods periods beginning on or after 1 January 2024). Under the equity method, an investment in an The Company discontinues the use of the equity beginning on or after 1 January 2023); associate is recognised initially in the separate method from the date when the investment ceases The Group has elected not to adopt the statement of financial position at cost and adjusted to be an associate. • Amendments to IAS 8 “Accounting Policies, amendments to existing standards in advance of thereafter to recognise the Company’s share of the profit or loss and other comprehensive income of (s) Subsequent events the associate. Changes in Accounting Estimates and Errors” their effective dates. The Group anticipates that – Definition of Accounting Estimates adopted the adoption of these amendments to existing by the EU on 2 March 2022 (effective for annual standards will have no material impact on the When the Company’s share of losses of an December 2023, which provide additional of initial application. associate exceeds the Company’s interest in that information about conditions prevailing at the • Amendments to IAS 12 “Income Taxes” - Deferred associate (which includes any long-term interests reporting date (adjusting events) are reflected in Tax related to Assets and Liabilities arising New standards and amendments to the existing that, in substance, form part of the Company’s the separate financial statements. Events occurring from a Single Transaction adopted by the EU standards issued by IASB but not yet adopted by Events occurring after the reporting date 31 periods beginning on or after 1 January 2023); financial statements of the Company in the period net investment in the associate), the Company after the reporting date that provide information on on 11 August 2022 (effective for annual periods the EU discontinues recognising its share of further losses. events that occurred after the reporting date (non- beginning on or after 1 January 2023); Additional losses are recognised only to the extent adjusting events), when material, are disclosed At present, IFRS as adopted by the EU do not that the Company has incurred legal or constructive in the notes to the separate financial statements. • International Tax Reform—Pillar Two Model Rules significantly differ from regulations adopted by obligations or made payments on behalf of the When the going concern assumption is no longer – Amendments to IAS 12 (the Amendments) to the International Accounting Standards Board associate. appropriate at or after the reporting period, the financial statements are not prepared on a going clarify the application of IAS 12 “Income Taxes” (IASB) except for the following new standards and (effective for annual periods beginning on or amendments to the existing standards, which An investment in an associate is accounted for concern basis. using the equity method from the date on which the after 1 January 2023). were not endorsed for use in EU as at the date of publication of these consolidated financial investee becomes an associate. On acquisition of 9. Adoption of new and revised standards and As of 31 December 2023, the Company adopted statements (the effective dates stated below is for the investment in an associate, any excess of the interpretations cost of the investment over the Company’s share Disclosure of Accounting Policies (Amendments to IFRS as issued by IASB): IAS 1 and IFRS Practice Statement 2). Management of the net fair value of the identifiable assets and Initial application of new amendments to the reviewed the accounting policies and made • IFRS 14 “Regulatory Deferral Accounts” (effective liabilities of the investee is recognised as goodwill, existing standards effective for the current updates as per “Note 7 Changes in significant for annual periods beginning on or after 1 which is included within the carrying amount of the reporting period accounting policies” in certain instances in line with January 2016) – the European Commission has investment. the amendments. The following amendments to the existing standards decided not to launch the endorsement process of this interim standard and to wait for the final Any excess of the Company’s share of the net fair issued by the International Accounting Standards Except of the above, the adoption of amendments standard;, value of the identifiable assets and liabilities over Board (IASB) and adopted by the EU are effective for to the existing standards has not led to any the cost of the investment, after reassessment, the current reporting period: material changes in the Group’s individual financial • Amendments to IAS 1 “Presentation of Financial is recognised immediately in profit or loss in the period in which the investment is acquired. statements. Statements” - Classification of Liabilities as Current or Non-Current (effective for annual periods beginning on or after 1 January 2024); NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A400 401 • Amendments to IAS 1 “Presentation of Financial statements for a period beginning on or after 1 10. Other income and operating expenses Statements” - Non-current Liabilities with January 2016) can be applied only when a reporting Covenants (effective for annual periods entity is a IFRS First Time Adopter. As the Group is beginning on or after 1 January 2024); not a IFRS First Time Adopter, the management of the Company did not consider any impact coming • Amendments to IFRS 16 “Leases” - Lease Liability out from the application of IFRS 14, further guidance in a Sale and Leaseback (effective for annual being expected in the future. periods beginning on or after 1 January 2024); • Amendments to IFRS 10 “Consolidated Financial new standards and amendments to the existing Statements” and IAS 28 “Investments in standards will have no material impact on the Associates and Joint Ventures” - Sale or individual financial statements of the Company in Contribution of Assets between an Investor the period of initial application. The Company anticipates that the adoption of these and its Associate or Joint Venture and further amendments (effective date deferred indefinitely until the research project on the equity method has been concluded); • Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (applicable for annual periods beginning on or after 1 January 2025, but not yet endorsed in the EU); • Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements (applicable for annual periods beginning on or after 1 January 2024, but not yet endorsed in the EU). The International Accounting Standards Board has been currently working on the development of a new IFRS international financial reporting standard that will align the current standard „IFRS 14 Deferral Accounts Related to Regulated Activities” to the new requirements of the energy market at EU and global level, which is expected to take into account all relevant related subjects, including the proper treatment of own technological consumption expenses. IASB has redeliberated proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities based on the feedback received on previous variants on Exposure Drafts made available for public comment (https://www.ifrs.org/projects/ work-plan/rate-regulated-activities/#current- stage). As debated in exposure drafts, until now there is no approved legislation at IASB level. Currently IFRS 14 (originally issued in January 2014 and applied to an entity’s first annual IFRS financial (a) Other income Revenues from disposal of assets Rental income Revenues from penalties Other Total (b) Other operating expenses Repair and maintenance expenses Legal assistance and consulting fees Insurance premiums Other taxes and duties Consumables Travel and transportation expenses Rent Postage and telecommunication Donations and sponsorships Other third party services Other Total 11. Net finance income Interest income Other finance income Total finance income Interest expense Interest cost for employee benefits (Note 12) Foreign exchange gain / losses, net Total finance costs Net finance income 2023 2,400 723,300 200,318 516,584 1,442,602 2023 1,233,117 1,346,203 790,163 825,175 396,574 321,061 226,979 40,615 - 2022 370,774 626,807 2,183,897 1,998,143 5,179,621 2022 1,363,711 1,279,169 713,938 707,159 449,849 155,015 31,007 61,355 12,357 13,378,867 12,967,398 2,688,691 797,654 21,247,445 18,538,612 2023 2022 96,254,222 78,074,759 1,380,429 224,127 97,634,651 78,298,886 (29,647,324) (12,238,993) (94,252) 4,058 (181,714) (20,094) (29,737,518) (12,440,801) 67,897,133 65,858,085 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A402 403 12. Earnings per share 14. Post-employment and other long-term employee benefits The calculation of basic and diluted earnings per share is based on the following profit attributable to shareholders and weighted-average number of ordinary shares outstanding: Profit attributable to shareholders Profit for the year attributable to the shareholders of the Company Profit attributable to the shareholders of the Company Number of ordinary shares (in number of shares) Number of ordinary shares at 31 December 339,553,004 339,553,004 For the calculation of basic and diluted earnings per share, the own shares repurchased by the Company (6,890,593 shares) were not treated as outstanding shares and are deducted from the total number of issued ordinary shares. Basic and diluted earnings per share (RON) 13. Short-term employee benefits Personnel payables Current portion of defined benefit liability and other long-term employee benefits Social security charges Tax on salaries Total 2023 0.07 2022 0.07 31 December 31 December 2023 6,327,991 115,917 658,028 153,046 2022 4,974,791 127,203 607,823 130,314 7,254,982 5,840,131 Details related to employee benefit expenses are presented in Note 12. In Romania, all employers and employees, as well as other persons, are contributors to the state social security system. The social security system covers state pensions, child benefit, temporary incapacity for work situations, risks of work accidents and professional diseases and other social assistance services, redundancy payments and incentives granted to employers for creating new jobs. The Company provides cash benefits to employees depending on seniority in the form of jubilee bonuses and depending on the years of service at retirement in the form of retirement bonuses. The post- employment and other long-term employee benefits are stipulated in the Collective Labour Contract. In 2023 and 2022, employee benefit obligations were computed by an independent actuary using the projected unit credit method with benefits calculated proportionally to the period of service. 2023 2022 23,940,836 24,304,885 23,940,836 24,304,885 2023 2022 Total Defined benefit liability Other long-term employee benefits - Current portion* - Non-current portion *included in Personnel payables in Note 11 31 December 31 December 2023 673,354 768,705 2022 506,110 716,743 1,442,059 1,222,853 115,917 127,202 1,326,142 1,095,651 (i) Movement in the defined benefit liability and other long-term employee benefits The following tables shows a reconciliation between the opening balances and the closing balances of the defined benefit liability and other long-term employee benefits and their components. There are no plan Defined benefit liability assets. Balance at 1 January Included in profit or loss Current service cost Past service cost Interest cost Included in other comprehensive income Re-measurements gain - Actuarial gain Other Benefits paid Balance at 31 December 2023 506,110 100,462 41,024 141,486 2022 5,599,583 73,919 - 153,412 227,331 209,530 (1,621,494) (183,772) (3,699,310) 673,354 506,110 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A404 405 Other long-term employee benefits Balance at 1 January Included in profit or loss Current service cost Actuarial gain Interest cost Other Benefits paid Balance at 31 December 2023 716,743 53,603 56,830 53,228 2022 601,214 45,335 161,519 28,302 (111,699) 768,705 (119,627) 716,743 Jubilee bonuses based on years of service in the Company Seniority 20 years 30 years 35 years 40 years 45 years No. of gross monthly base salaries 31 December 2023 31 December 2022 1 2 3 4 5 1 2 3 4 5 Retirement bonuses based on years of service in the Company Defined benefits refer to the retirement bonuses granted according to the seniority within the Company and other long-term benefits refer to the jubilee bonuses granted for seniority. (ii) Actuarial assumptions The following are the main actuarial assumptions at the respective reporting date: (a) Macroeconomic assumptions: Seniority Between 8 and 10 years Between 10 and 25 years More than 25 years Termination benefits No. of gross monthly base salaries 31 December 2023 31 December 2022 2 3 4 2 3 4 • inflation. The actuary used information from the National Commission for Strategy and Prognosis: a. Termination benefits for individual lay-offs at the Company’s initiative: Year 2022 2023 2024 2025 2026 2027-2031 Valuation date 31 December 2023 Valuation date 31 December 2022 - - 4.8% 3.5% 3.0% 2.5% 13.9% 7.5% 4.9% 3% 2.5% 2.5% In accordance with the Collective Labour Contract concluded between the Company and the Union, when individual labour contract is terminated at the Company’s initiative, the Company will pay termination benefits to the employees depending on their period of service, as follows: Seniority 1 - 2 years 2 - 5 years 5 - 10 years 10 - 20 years More than 20 years No. of gross monthly average base salary at Company level 2 3 4 5 8 • the discount rate used is based on the yield of the Romanian Government bonds at the reporting date, therefore the weighted average discount rate is 6.00% for the year 2023 (2022: 8.1%); b. Termination benefits for collective lay-offs at the Company’s initiative: • taxes and social charges are those in force as at the reporting date. (b) Company specific assumptions: • Starting with 2023 the gross salaries’ growth was forecasted at the inflation level; • employees’ turnover: based on historical data; • jubilee and retirement bonuses granted based on seniority as per the collective labour contracts, as follows: For collective lay-offs, per the Collective labour contract, the Company will pay termination benefits to the employees depending on their period of service, as follows: Seniority 1 - 3 years 3 - 5 years 5 - 10 years 10 - 20 years More than 20 years No. of gross monthly average base salary at Company level 3 6 7 11 16 The above-mentioned stipulations do not apply to employees with individual labour contract concluded for a determined period. The above provisions do not apply to employees that obtained other higher cumulative salary compensation rights, provided by legal regulations regarding the Company’s reorganization and restructuring. Employees who are re-employed within the Company after layoff are not entitled to the above-mentioned benefits. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A406 407 Sensitivity analysis 16. Bank borrowings and overdrafts Significant actuarial assumptions for the determination of the benefit obligation are the discount rate, expected salary increase and retirement age. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. Discount rate Salary growth Retirement age Increase by 1% Decrease by 1% 2023 (92,376) 2022 (73,009) 2023 92,376 2022 73,009 106,255 86,944 (106,255) (86,944) Increase by 1 year Decrease by 1 year 2023 9,077 2022 6,828 2023 (9,077) 2022 (6,828) As at 31 December 2023, respectively 31 December 2022, the long-term bank borrowings are presented as follows: Lender Vista Bank ERSTE Group Bank and Raiffeisen Bank Total Less: current portion of the long-term bank borrowings Less: accumulated interest Total long-term borrowings, net of current portion Bank Borrowings description: Balance at Balance at 31 December 2023 31 December 2022 125,000,000 100,000,000 91,768,248 216,768,248 100,000,000 216,768,248 - - - - 100,000,000 The sensitivity analysis presented above may not be representative of the actual change in the benefit a) Line of Credit for working capital and for issuing Bank Guarantee Letters granted by Vista Bank obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated. In presenting the above sensitivity analysis, the present value of the benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the benefit obligation liability recognized in the statement of financial position. 15. Employee benefit expenses Average number of employees Number of employees at 31 December Wages and salaries Social security contributions Meal tickets Termination benefit for labour/mandate contracts Total 2023 78 83 2023 2022 72 78 2022 28,631,755 25,026,080 660,494 481,200 521,754 749,695 357,755 4,023,428 30,295,203 30,156,958 The number or employees at 31 December 2023 includes also the 4 employees with mandate agreements (2022: the 5 employees with mandate agreements). Termination benefits represent compensation payments for management in case of mandate contracts termination. Management remuneration is presented within Note 29 – Related parties. On 30 December 2022, Societatea Energetica Electrica S.A., as the borrower, concluded a contract for a line of credit for working capital and for the issuance of Bank Guarantee Letters granted by Vista Bank for a period of 18 months. The main provisions are: Maximum credit amount: 120,000,000 RON; Interest rate: ROBOR 3M +2.95 % p.a.; full refund at maturity. On 31 December 2023, the balance of the loan is 125,000,000 RON. (Outstanding balance as at 31 December 2022: RON 100,000,000). b) Syndicated credit facility granted by Erste Group Bank AG and Raiffeisen Bank SA On 2 November 2021, Electrica S.A., as borrower, entered into a syndicated credit facility with Erste Group Bank AG and Raiffeisen Bank SA. The main provisions are: Maximum loan amount RON 750,000,000; Interest rate: ROBOR 3M+1.16%. On 3 November 2023 the loan was extended for a period of one year and the maximum loan amount was reduced to RON 450,000,000. As at 31 December 2023 the balance of the loan is RON 91,768,248 thousand (31 December 2022: RON 0.0 thousand). Overdrafts As of the date of approval of these individual financial statements by the Board of Directors, the Company has overdraft facilities from ING Bank N.V. with a maximum overdraft limit of up to RON 210,000,000 (maximum overdraft limit of up to 210,000,000 on 31 December 2022). The overdraft facilities are used for financing activities. The balance of overdraft facilities as at 31 December 2023 is RON 205,520,079 (31 December 2022: RON 207,830,772). NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A408 409 17. Income tax (iv) Movement in deferred tax balances In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. The Company considers that the accounting records for taxes due are adequate for all open fiscal years, based on assessment made by management taking into account various factors, including the interpretation of tax legislation and previous experience. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the income tax expense in the period when such a determination is made. (i) Amounts recognised in profit or loss Deferred tax benefit Total benefit related to income tax 2023 5,886,085 5,886,085 2022 259,439 259,439 Balance at 31 December 2023 2023 Net balance at 1 January 2023 Recognised in profit or loss Recognised in other comprehensive income The effect of merger Net Deferred tax assets Deferred tax liabilities Property, plant and equipment Employee benefits Tax loss carried forward Tax (assets)/ liabilities 3,646,188 334,186 1,138,457 5,090,117 10,208,948 - 10,208,948 (1,086,870) (186,543) (4,121) - (1,277,534) (1,277,534) (2,559,318) (6,033,728) - (338,368) (8,931,414) (8,931,414) - - - (5,886,085) 1,134,336 4,751,749 - (10,208,984) 10,208,948 Balance at 31 December 2022 Recognised in other comprehensive income Net Deferred tax assets Deferred tax liabilities (ii) Amounts recognised in other comprehensive income 2022 Net balance at 1 January 2022 Recognised in profit or loss Revaluation of property, plant and equipment Revaluation of property, plant and equipment - merger Re-measurement of defined benefit liability Total 2023 2022 Before tax Tax benefit Net of tax Before tax Tax benefit Net of tax 6,988,472 (1,138,457) 5,850,014 2,701,689 (62,344) 2,639,345 - - - - - - Property, plant and equipment Employee benefits Tax loss carried forward Tax (assets)/ liabilities 3,739,542 (93,354) - 3,646,188 - 3,646,188 (2,275,574) 929,265 259,439 (1,086,870) (1,086,870) (1,463,968) (1,095,350) - (2,559,318) (2,559,318) - - - (259,439) 259,439 - (3,646,188) 3,646,188 (25,755) 4,121 (21,634) 1,621,494 (259,439), 1,362,055 9,664,406 (1,196,680) 5,828,381 1,621,494 (259,439) 1,362,055 (v) Unrecognised deferred tax assets The Company has not recognized deferred tax assets in respect of the entire cumulated tax losses as it is not probable that future taxable profits will be available against which the Company can use the benefits (iii) Reconciliation of effective tax rate Profit before tax Tax using Company’s domestic tax rate Non-deductible expenses Non-taxable income Deductible legal reserve 2023 2022 18,054,751 24,045,446 2,888,760 16% 3,847,271 16% 20% 3,543,775 -12% (2,202,055) -1% (144,566) 9% -7% -1% 2,079,113 (1,700,300) (207,048) Recognition of tax effect of previously unrecognised tax losses Other tax effects The effect of merger Total benefit related to income tax -18% (3,310,837) -18% (3,867,999) 2% 26% 33% 359,259 4,751,749 0% - 108,402 - 5,886,085 -1% 259,439 therefrom. Tax losses 18. Trade receivables Trade receivables, gross Loss allowance Total trade receivables, net Receivables from related parties are presented in Note 29. 2023 2022 310,916,628 337,136,289 31 December 2023 31 December 2022 157,085,125 161,471,282 (155,337,719) (160,675,756) 1,747,406 795,526 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A410 411 Trade receivables, gross, comprise: Electricity receivables from clients in litigation, insolvency or bankruptcy (mainly Oltchim, Transenergo) Late payment penalties from clients in litigation, insolvency or bankruptcy (Oltchim) Other Total trade receivables, gross Considering the events above, as of 31 December 2022 a part of the receivable for Oltchim in amount of RON 420,212,304 was written off as it was not recognised in the final bankruptcy table. The bad debt allowance 31 December 2023 31 December 2022 was also adjusted with the same amount. As of 31 December 2023 and 31 December 2022, the balance of 129,532,963 134,521,414 receivables with Oltchim is RON 98,725,847 bad debt allowance being at the same amount. 26,506,303 26,506,303 PETPROD SRL in amount of RON 2, 591,163 were written off as a result of closing the insolvency procedure of Also, in 2022, receivables for SC ROMENERGY INDUSTRY SRL in amount of RON 2,917,262 and , receivables for the debtor and removing it from the Trade Register. The bad debt allowance was also adjusted with the 1,045,859 443,565 157,085,125 161,471,282 same amount. The reconciliation between the opening balances and the closing balances of the impairment for trade receivables is as follows: Loss allowance Balance as at 1 January Loss allowance recognized Loss allowance used Decrease in loss allowance Trade receivables adjustments - merger Balance as at 31 December The ageing of trade receivables is presented in Note 28. Loss allowances are determined according to IFRS 9 “Financial instruments” based on “expected credit loss” model. A significant part of the loss allowances refers to clients in litigation, insolvency or bankruptcy procedures, many of them being older than five years. The Company will derecognize these receivables together with the related allowances after the finalization of the bankruptcy process. These receivables were treated separately in computing the allowance according to IFRS 9. 2023 2022 160,675,756 582,012,952 - - (5,006,909) (421,235,816) (568,609) 237,481 (101,380) - 155,337,719 160,675,756 19. Other receivables Cash-pooling receivables Interest receivable Other receivables Bad debt allowance Total other receivables, net 31 December 2023 31 December 2022 567,646,476 477,646,009 26,671,583 12,785,701 22,365,439 10,740,216 (9,258,597) (9,258,597) 597,845,163 501,493,067 Oltchim (a state-controlled company) was an important customer of Electrica S.A. until January 2012, when the Company transferred the contract to Electrica Furnizare S.A. In January 2013, Oltchim entered into insolvency procedures and subsequently in May 2019 started the bankruptcy procedures. Due to the uncertainties regarding the recoverability of the amounts owed by this customer, the Company recognized Cash-pooling receivables comprises the receivable of Electrica SA as at 31 December 2023 as cash pool leader in the two cash-pooling systems set up at Group level (Note 23 and Note 29). Interest receivable represents mainly interest to be received from related parties for the loans granted in prior years a bad debt allowance for the entire amount receivable. During 2020, the Company adjusted (Note 29). the uncollected VAT in amount of RON 95,186,215 related to the doubtful receivables from Oltchim, based on the sentence of starting the bankruptcy procedures and the provisions of art. 287 of the Fiscal Code. The reconciliation between the opening balances and the closing balances of the impairment for other As of 2021, the balance of receivables with Oltchim was RON 518,938,151, bad debt allowance was also at the same amount. By decision of the European Court in Luxembourg pronounced on 15 December 2021 (final decision being applicable as of 21 March 2022), in case T565/19, it was partially cancelled the European Commission Decision no. C (2018) 8592 from 2018, which established a series of measures regarding the recovery by Romania of the State aid granted to Oltchim S.A. By its decision, the European court cancelled a series of the measures, including the amounts considered state aid with which Electrica was registered in the table of receivables. Following the decision, the company remained registered in the table of receivables with the amount of RON 116,058,538. Following the evolution of the bankruptcy process, on 06 April 2022, the updated table of receivables was published in BPI Tabel Oltchim, which still recognizes only the guaranteed receivables, which in the case of the company the estimated amount that remains to be recovered from the sales of assets of Oltchim SA in the completion of the bankruptcy process is RON 116,058,538 (including VAT), comprised of the base in the amount of RON 98,725,847 and respectively the VAT in the amount of RON 17,332,691. receivables is as follows: Loss allowance Balance as at 1 January Loss allowance recognized Loss allowance used Decrease in loss allowance Balance as at 31 December 2023 9,258,597 2022 11,046,264 - - - 9,258,597 - - (1,787,667) 9,258,597 In 2022, the allowance related to Electrica Serv S.A. in amount of RON 1,787,667, representing a legal interest, was reversed as a result of favorable court decision. The related receivables, in amount of RON 2,183,897 was cashed. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A412 413 20. Cash and cash equivalents Bank current accounts Bank current accounts transferred on merger Call deposits Total cash and cash equivalents in the separate statement of financial position Overdrafts used for cash management purposes 31 December 2023 31 December 2022 3,179,760 3,614,591 15,379,476 - 595,005 102,017,348 19,154,241 105,631,939 - - Land and land improvement Buildings Equipment Vehicles, furniture and office equipment Construction in progress Total - - - - (417,907) (1,115,590) - - - - - (417,907) (1,115,590) 1,900,668 22,122,136 1,015,452 2,134,443 27,172,699 Accumulated depreciation of disposals Gross book value netted off against the accumulated depreciation at revaluation Balance at 31 December 2023 Total cash and cash equivalents in the separate statement of cash flow 19,154,241 105,631,939 Net carrying amounts As at 31 December 2022, call deposits amount consists mainly of Vista Bank overnight deposit in amount of RON 99,650,000, related to long term loan whithdrawn for the issuance of Bank Guarantee Letters (please see note 14). 21. Property, plant and equipment The reconciliation between the initial balance and the final balance of property, plant and equipment in 2023 and 2022: was as follows: Land and land improvement Buildings Equipment Vehicles, furniture and office equipment Construction in progress Total 31 December 2022 31 December 2023 67,128,750 24,357,056 843,484 1,218,796 5,391,418 98,939,504 73,330,925 32,339,490 28,859,117 2,179,345 8,375,408 145,084,286 On 31 December 2023 Electrica SA as the absorbing company and Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed companies merged by absorption. As a result of the merger, the tangible fixed assets of the Company increased by 44,217,291 RON, following the acquisition of the assets of Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL. As at 31 December 2023, the buildings and land include the administrative headquarter of the Company and the corresponding land, the plots of land over which the Company has obtained title deeds and the land and buildings acquired in 2020 from the subsidiary Servicii Energetice Muntenia S.A.. As at 31 December 2023, the Company performed the revaluation at fair value of tangible assets consisting Revaluation recognized in other comprehensive income, net 3,894,400 3,094,072 Revaluation recognized in profit or loss, net 853,836 - 67,128,750 27,001,451 16,395,755 1,830,851 7,525,861 119,882,668 of land and buildings. The revaluation was performed by an independent authorized valuer Darian DRS S.A.. - - 268,243 284,820 1,295,154 1,848,217 Following the revaluation performed, the gain from the increase in value on the land and buildings was 1,453,939 5,260,226 34,735,163 1,079,126 1,688,837 44,217,291 charged to Other Comprehensive Income in amount of RON 6,988,472 and in Profit or Loss in amount of RON - - - - - - - - - - - 6,988,472 853,836 (1,115,590) (417,907) 853,836. Measurement of fair value The Company’s land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value measurements of the Company’s land and buildings as at 31 December 2023 were performed by Darian DRS S.A. an independent valuer not related to the Company. Darian DRS S.A. is member of the National Association of Authorised Romanian Valuers and has appropriate qualifications and recent (1,115,590) - - - (417,907) 73,330,925 34,240,158 50,981,253 3,194,797 10,509,851 172,256,985 experience in the fair value measurement of properties in the relevant locations. The valuation conforms to - - - 2.644.395 15.552.271 612.055 2.134.443 20.943.164 performed on 31 December 2023 and the previous one performed on 31 December 2020. 371,863 370,710 195,167 - 6,617,062 208,230 - - 937,740 6,825,292 The following table shows the valuation techniques used in measuring fair values (Level 3), as well as the significant unobservable inputs used. International Valuation Standards and was based on recent market transactions on arm’s length terms for similar properties, whenever possible and discounted cash-flows method. There were no significant changes to the valuation technique in the period between the current revaluation Gross carrying amount Balance at 31 December 2022 Additions Additions - merger Gross book value netted off against the accumulated depreciation at revaluation Disposals Balance at 31 December 2023 Accumulated depreciation and impairment losses Balance at 31 December 2022 Depreciation Depreciation - merger (Continued on next page) NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A414 415 Category Valuation technique Significant unobservable inputs Land Market approach The fair value is estimated based on selling price per square meter of land of similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties, and best use). The market price is mainly based on recent transactions. • Adjustment for liquidity, location, size. Buildings Market approach and discounted cash-flows (DCF) method Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase/ (decrease) if: • Adjustment for liquidity, location or size would be lower/ (higher) Buildings were evaluated using the following methods, depending on the best use and the availability and credibility of available market information: Market approach The market approach is based on the selling price per square meter for buildings with similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties, and best use)., adjusted liquidity, location, size etc. The DCF method The valuation model based on the DCF method estimates the present value of net cash flows to be generated by a building taking into account occupancy rate and annual rent. The discount rate estimation considers, inter alia, the quality of a building and its location. • Adjustment for • Adjustment for liquidity, location, size. liquidity, location or size would be lower/ (higher) • Occupancy rates were higher/(lower) • Yield rates were lower/ (higher) • Annual rent per sqm was higher/(lower) • Occupancy rates (90%) • Yield rates (between 9% and 10%) • Annual rent per sqm (between 2 and 10 EUR/sqm), depending on location; 22. Intangible assets Intangible assets include mainly licenses and costs of implementation of the accounting system SAP and licenses for various software, as follows: Gross carrying amount Balance at 31 December 2022 Additions Additions - merger Goodwill Disposals Software and licenses Goodwill Construction in progress Total 1,961,005 4,235 122,345 - - - - - 1,446,450 - - 1,961,005 993,912 - - - 998,147 122,345 1,446,450 - Balance at 31 December 2023 2,087,585 1,446,450 993,912 4,527,947 Accumulated depreciation and impairment losses Balance at 31 December 2022 Amortisation Amortisation - merger Accumulated amortization of disposals Balance at 31 December 2023 Net carrying amounts At 31 December 2022 At 31 December 2023 1,834,816 55,183 78,791 - 1,968,790 126,189 118,795 - - - - - - - - 1,834,816 55,183 78,791 - 1,968,790 126,189 1,446,450 993,912 2,559,157 On 31 December 2023 Electrica SA as the absorbing company and Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed companies merged by absorption. As a result of the merger, the intangible fixed assets of the Company increased by 122,345 RON, following the acquisition of the assets of Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A416 417 23. Investments in subsidiaries Merger by absorption within the Group The investments in subsidiaries are presented as follows: On 20 December 2023, the Extraordinary General Meeting of the Company’s Shareholders (EGMS) approved the merger by absorption between Societatea Energetica Electrica SA (“ELSA”), Societatea Electrica 31 December 2023 31 December 2022 Productie Energie SA (“EPE”), Electrica Energie Verde 1 SRL (“EEV1”) and Green Energy Consultancy & Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Serv S.A. Electrica Energie Productie S.A. Sunwind Energy S.R.L. New Trend Energy S.R.L. Green Energy Consultancy & Investments S.R.L. Foton Power Energy S.R.L. Servicii Energetice Oltenia S.A. (in bankruptcy) Servicii Energetice Moldova S.A. (in bankruptcy) Servicii Energetice Banat S.A. in bankruptcy) Gross value Impairment Net Gross value Impairment Net 1,741,959,406 227,181,073 - - 1,741,959,406 1,741,959,406 227,181,073 227,181,073 - - 1,741,959,406 227,181,073 481,803,770 (164,368,925) 317,434,846 481,803,770 (164,368,925) 317,434,846 - 5,128,655 5,588,029 - 12,636,221 - - - - - - 124,990 5,128,655 4,393,567 5,588,029 5,588,029 - 1,446,450 12,636,221 - - - - - - 82,033,220 (82,033,220) 106,162,492 (106,162,492) 43,761,094 (43,761,094) - - - - 82,033,220 (82,033,220) 106,162,492 (106,162,492) 43,761,094 (43,761,094) 23,822,124 (23,822,124) 124,990 4,393,567 5,588,029 1,446,450 - - - - - Servicii Energetice Dobrogea S.A. (in bankruptcy) 23,822,124 (23,822,124) Investments SRL (“GECI”) (together the “Companies”) and the participation of the Companies in the merger, with Societatea Energetica Electrica SA as absorbing company, Electrica Productie Energie SA, Electrica Energie Verde 1 SRL and Green Energy Consultancy & Investments SRL as absorbed companies, with the effective date of the merger being 31 December 2023. 24. Investments in associates On 28 July 2021 and on 7 December 2021, Electrica SA concluded four agreements for the sale-purchase of shares in four project companies having as main object of activity the production of electricity from renewable sources. The sale-purchase agreements concluded, mention the fact that in the first stage Electrica SA acquires 30% of the share capital of the four companies, remaining that in the following stages, to acquire the remaining 70% of the share capital after the conditions provided in the sale-purchase agreements will be fulfilled. By the end of 31 December 2022, two of the project companies were acquired by 60% (please see note 21), therefore they are accounted as subsidiaries, the other ones are as follows: • Crucea Power Park S.R.L. develops the wind project “Crucea Est”, with a projected installed capacity of 121 MW and a projected electricity storage capacity of 60 MWh (15 MW x 4h), located outside the Crucea area, Constanta County. The estimated purchase price for the “Crucea Est” wind project is 70 thousand EUR/MW for the aforementioned capacity, totalling the amount of 8,470 thousand EUR. On 28 July 2021, Electrica SA paid the amount of EUR 2,541 thousand representing 30% of the project value, respectively 30% of the shares of Crucea Power Park SRL. On 15 May 2023, Electrica acquired a further 10% of the shares and voting interests in Crucea Power Park S.R.L. As a result, the Group’s shareholding increased from 30% to 40%. Total 2,730,076,085 (420,147,855) 2,309,928,230 2,718,276,215 (420,147,855) 2,298,128,361 Considering the holding percentage of 40%, as at 31 December 2023, the entity is accounted for using the equity method in these separate financial statements as provided in the Company’s accounting policies in * On 31.12.2023 the merger by absorption took place between Societatea Energetica Electrica SA (ELSA) as note 6. The cost of the investments at acquisition date, totalling the amount of RON 12,500,195 is detailed as absorbing company and Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) follows: and Green Energy Consultancy & Investments SRL (GECI) as absorbed companies. ** On 31 July 2023, Electrica acquired an additional 30% of the shares and voting interests in Foton Power Energy S.R.L.,having as main object of activity the production of energy from photovoltaic sources. As a result, the Group’s equity interest increased from 30% to 60%, thus, Foton Power Energy S.R.L. becoming a subsidiary of Electrica Group. Changes in Company’s subsidiaries structure in 2023 On 6 February 2023, Electrica completed the acquisition of Green Energy Consultancy & Investments S.R.L., having as main object of activity the production of energy from photovoltaic sources. Until 31 December 2022 the company was acquired 75%. On 24 March 2023, Electrica completed the acquisition of Sunwind Energy S.R.L, which has as its main activity production of energy from photovoltaic sources. Until 31 December 2022 the project was acquired 60%. On 31 July 2023, Electrica acquired an additional 30% of the shares and voting interests in Foton Power Energy S.R.L.,having as main object of activity the production of energy from photovoltaic sources. As a result, the Company’s equity interest increased from 30% to 60%, thus, Foton Power Energy S.R.L. becoming a subsidiary of Electrica Group. Acquisition date Percentage ownership and voting rights at acquisition date Net assets at acquisition date Company’s share of net assets Goodwill Cost of investment at acquisition date Crucea Power Park S.R.L. 31.07.2021 30% (241,682) (72,505) 12,572,700 12,500,195 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A418 419 Summarised financial information in respect of each of the Company’s associates is set out below: 25. Loans granted to subsidiaries Crucea Power Park S.R.L. Crucea Power Park S.R.L. a) Loans granted to subsidiaries – long term Non-current assets Current assets Non-current liabilities Current liabilities Net assets Reconciliation to carrying amounts: Opening net assets at acquisition date Additions net assets/liabilities Loss for the period Closing net assets 31.12.2023 9,198,685 1,186,505 (10,375,714) (45,159) (35,683) (245,780) 293,181 (83,084) (35,683) 31.12.2022 8,519,924 1,141,674 (9,885,796) (43,649) (267,847) (245,780) - (22,067) (267,847) Reconciliation of the financial information summarized above with the net value of the investments in the associated entities from the separate financial statements: Net assets Share in associates % Company’s share of net assets Goodwill Carrying amount of interest in associate Crucea Power Park S.R.L. Crucea Power Park S.R.L. 31.12.2023 31.12.2022 (35,683) (267,847) 40% (14,274) 16,651,984 16,637,710 30% (80,354) 12,572,700 12,492,346 Distributie Energie Electrica Romania S.A. Total loans granted to subsidiaries – long term Loans granted to subsidiaries 31 December 2023 31 December 2022 1,276,325,000 1,276,325,000 1,276,325,000 1,276,325,000 The Company has entered into loan agreements as lender, as follows: • Loans granted in 2017: • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Muntenia Nord S.A. (currently Distributie Energie Electrica Romania S.A.) concluded in November 2017. Main provisions are: maximum loan amount: RON 150,000,000; Purpose of the loan: to finance the investment program of 2017; Interest rate: 2.79% per annum; Maturity: 84 months; Period allowed for disbursements: 12 months; Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months of the period of use. As at 31 December 2023, the outstanding balance is of RON 150,000,000 (31 December 2022: RON 150,000,000); • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. (currently Distributie Energie Electrica Romania S.A.) concluded in November 2017. Main provisions are: maximum loan amount: RON 200,000,000; Purpose of the loan: to finance the investment program of 2017; Interest rate: 2.79% per annum; Maturity: 84 months; Period allowed for disbursements: 12 months; Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months of the period of use. As at 31 December 2023, the outstanding balance is of RON 200,000,000 (31 December 2022: 200,000,000); • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Transilvania Sud S.A. (currently Distributie Energie Electrica Romania S.A.) concluded in November 2017. Main provisions are: maximum loan amount: RON 160,000,000; Purpose of the loan: to finance the investment program of 2017; Interest rate: 2.79% per annum; Maturity: 84 months; Period allowed for disbursements: 12 months; Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months of the period of use. As at 31 December 2023, the outstanding balance is of RON 160,000,000 (31 December 2022: RON 160,000,000). The share loss in amount of RON 38,825 for the period was recognized in the separate statement of profit and loss for the year ended as at 31 December 2023 (31.12.2022: 13,044 RON). • Loans granted in 2018: • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Muntenia Nord S.A. (currently Distributie Energie Electrica Romania S.A.) concluded in April 2018. Main provisions are: maximum loan amount: RON 230,000,000; Purpose of the loan: to finance the investment program of 2018; Interest rate: 4.7% per annum; Maturity: 84 months; Period allowed for disbursements: 12 months; Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months of the period of use. As at 31 December 2023, the outstanding balance is of RON 230,000,000 (31 December 2022: RON 230,000,000); • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. (currently Distributie Energie Electrica Romania S.A.) concluded in April 2018. Main provisions are: maximum loan amount: RON 160,000,000; Purpose of the loan: to finance the investment program of NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A420 421 2018; Interest rate: 4.7% per annum; Maturity: 84 months; Period allowed for disbursements: 12 months; 31 December 2023, the outstanding balance • Intragroup loan agreement with Electrica Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months is RON 676,500 (31 December 2022: RON Furnizare S.A. concluded in December 2023. of the period of use. As at 31 December 2023, the outstanding balance is of RON 160,000,000 (31 600,0000). December 2022: RON 160,000,000); • Intragroup loan agreement with Societatea de Distributie a Energiei Electrice Transilvania Sud S.A. • Intragroup loan agreement with Sunwind Energy S.R.L. concluded in November 2022. (currently Distributie Energie Electrica Romania S.A.) concluded in April 2018. Main provisions are: Main provisions are: maximum loan amount: maximum loan amount: RON 130,000,000, Purpose of the loan: to finance the investment program of RON 147,300,000, The purpose of granting 2018, Interest rate: 4.7% per annum, Maturity: 84 months, Period allowed for disbursements: 12 months, this loan is financing the investment works Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months necessary for the completion and operation of the period of use. As at 31 December 2023, the outstanding balance is of RON 130,000,000 (31 December 2022: RON 130,000,000). • Loans granted in 2021: • Intragroup loan agreement with Distributie Energie Electrica Romania S.A. concluded in October 2021. Main provisions are: maximum loan amount: RON 246,325,000, The purpose of granting this loan is the partial repayment of loans contracted from BRD in 2016 to finance the investment plan for the year 2016 which reached the maturity in October 2021, Interest rate: 3.51% per annum, Maturity: 96 months until 12.10.2029, Period allowed for disbursements: 12 months, Repayment in full at maturity; Reimbursement allowed in advance, but not earlier than the 12 months of the period of use. As at 31 December 2023, the outstanding balance is RON 246,325,000 (31 December 2022: RON 246,325,000). • Loans granted in 2023: • Intragroup loan agreement with FOTON POWER ENERGY SRL concluded in October 2023. Main provisions are: maximum loan amount: RON 3,640,108, the maturity date and the duration of the contract, including the period of use, not exceeding 10.10.2024. As at 31 December 2023, the outstanding balance is RON 2,937,987. b) Loans granted to subsidiaries – short term Electrica Furnizare S.A. Electrica Energie Productie S.A. Sunwind Energy S.R.L. New Trend Energy S.R.L. Green Energy Consultancy & Investments S.R.L. Total loans granted to subsidiaries – short term • Short-term loans granted in 2022 and 2023: Loans granted to subsidiaries 31 December 2023 31 December 2022 80,000,000 - - 41,594,188 2,475,699 7,184,000 - 600,000 2,400,000 440,335 89,659,699 45,034,523 • Intragroup loan agreement with Sunwind Energy S.R.L. concluded in September 2022. Main provisions are: maximum loan amount: RON 1,200,000, The purpose of granting this loan is financing the costs that are the responsibility of ELSA according to the Sale and Purchase Agreement, Interest rate: ROBOR 3M + 1.16 % per annum, Maturity: 12 months until 25.09.2024, Repayment in full at maturity. As at of the “Satu Mare 2” (Botiz) photovoltaic power plant, Interest rate: ROBOR 3M + 1.16 % per annum, Maturity: 12 months until 27.10.2023, Repayment in full at maturity. As at 31 December 2023 and 31 December 2022, the outstanding balance is nil. • Intragroup loan agreement with Sunwind Energy S.R.L. concluded in April 2023. Main provisions are: maximum loan amount: RON 1,800,000, The purpose of granting this loan is financing the costs that are the responsibility of ELSA according to the Sale and Purchase Agreement, Interest rate: ROBOR 3M + 2,95 % per annum, Maturity: 12 months until 06.04.2024, Repayment in full at maturity. As at 31 December 2023, the outstanding balance is RON 1,799,199. • Intragroup loan agreement with New Trend Energy S.R.L. concluded in June 2022. Main provisions are: maximum loan amount: RON 2,400,000, The purpose of granting this loan is financing for the payment of the land set- aside fee and the related bank commissions and the partial financing of the costs for issuing a Bank Letter of Guarantee having as beneficiary the company Distributie Energie Electrica Romania SA, Interest rate: ROBOR 3M + 1.16 % per annum, Maturity: 12 months until 13.06.2024, Repayment in full at maturity. As at 31 December 2022, the outstanding balance is RON 2,400,000. During 2023 the parties agree to supplement the loan granted by Electrica SA to New Trend Energy SRL up to the total cumulative amount of 8,517,600 Ron. Expiry date and duration of the contract, including the period of use, not exceeding 13.06.2024. As at 31 December 2023, the balance of the loan granted is RON 7,184,000. Main provisions are: maximum loan amount: 100.000.000 RON, The purpose of granting this loan is to finance short-term working capital needs, Interest rate: ROBOR 3M + 1,16 % per annum, Maturity: 02 November 2024. As of 31 December 2023, the balance of the loan granted is 80,000,000 RON. c) Cash pooling system at Group level On 20 December 2019, between ING Bank N.V., Electrica SA and its subsidiaries were concluded two agreements for the implementation of two cash pooling schemes, as follows: • a first system involving Electrica SA, as cash pool leader and its distribution subsidiaries (Societatea de Distributie a Energiei Electrice Muntenia Nord S.A., Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. and Societatea de Distributie a Energiei Electrice Transilvania Sud S.A., currently Distributie Energie Electrica Romania S.A.), as participants; The credit facility offered by the pool leader to each participant is up to the amount of RON 180,000,000; The credit facility offered by each participant to the pool leader is up to the amount of RON 50,000,000; Interest rate: ROBOR 1M + 0.83% p.a and ROBOR 3M + 2.95% and Bank Rate : ROBOR 1M + 2.25%; . However, if the amounts drawn by the participants are covered both by the internal liquidity of Electrica SA, and by drawing from the credit line granted to Electrica SA, the amount of interest due by the participants to Electrica SA will be calculated using a weighted interest rate, calculated on the basis of the ROBOR Internal Rate 1M +0.83% p.a. and the ROBOR Bank Rate 1M + 2.25% p.a. The initial due date was 20.12.2020, the convention being automatically extended at the maturity of the bank facility agreement until 27.02.2025; • a second system involving Electrica SA, as cash pool leader and its subsidiaries, Electrica Furnizare S.A., Electrica Serv S.A., Servicii Energetice Muntenia S.A (currently absorbed by Electrica Serv S.A.), Electrica Energie Verde NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A422 423 1 SRL (starting with 30 December 2020) as of the participants is nil. In case the balance of the 26. Capital and reserves participants; master bank account of Electrica SA is not sufficient The credit facility offered by the participants to cover the negative balance of the current bank to the pool leader is up to the amount of RON accounts of the participants, the bank will make (a) Share capital, share premium, gains and losses referring to share issue 180,000,000 for Electrica Furnizare S.A.; RON available the necessary funds from the overdraft The issued share capital in nominal terms consists of 346,443,597 ordinary shares as at 31 December 2023 10,000,000 for Electrica Energie Verde 1 SRL; facility that will be signed between the bank and (31 December 2022: 346,443,597) with a nominal value of RON 10 per share. As of 4 July 2014, after the Initial RON 50,000,000 for Electrica Serv S.A.. As at 30 Electrica SA. Public Offering (“IPO”), the Company’s shares are listed on the Bucharest Stock Exchange and the Global As of 31 December 2023, the credit facility has an outstanding balance of RON 205,520,079 (31 December 2022: RON 207,830,772). For the amounts drawn/transferred to the cash pooling systems between Electrica SA and the other participants, please refer to Note 29. November 2020 was in place the convention in amount to RON 2,000,000 with Servicii Energetice Muntenia S.A. which was absorbed by Electrica Serv S.A. being integrated in the conventions limits applicable for Electrica SERV S.A. *On 31.12.2023 the merger by absorption took place between Societatea Energetica Electrica SA (ELSA) as absorbing company and Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) and Green Energy Consultancy & Investments SRL (GECI) as absorbed companies. Through internal agreements concluded by Electrica SA with each of the participants, subsequently amended by additional agreements, the internal interest rate was set at ROBOR 1M + 0.83% and ROBOR 3M + 2.95% and the Bank rate at ROBOR 1M + 2.25%; In the case where the amounts drawn by the participants are covered both from Electrica SA’s internal liquidity and by drawing on the credit line granted to Electrica SA, the amount of interest owed by the participants to Electrica SA will be calculated using a weighted interest rate calculated on the basis of the Internal Rate ROBOR 1M + 0.83% and the Bank Rate ROBOR 1M + 2.25%; The initial due date was 20.12.2020, the convention being automatically extended at the maturity of the bank facility agreement until 27.02.2025; Through which the bank will automatically transfer all available amounts existing at the end of each day in the current bank accounts of the participants to the master bank account of Electrica SA. In case the current bank accounts of the participants have a negative balance at the end of the day, the bank will transfer the necessary amounts from the master bank account of Electrica SA to the current bank accounts of the participants, so as at the end of each day the balance of the current bank accounts Depositary Receipts are listed on the London Stock Exchange. The shares owned by the Company’s shareholders that are traded on the London Stock Exchange are the global depositary receipts (GDRs). A global depositary receipt represents four shares. The Bank of New York Mellon is the depositary bank for these securities. The GDRs’ weight in Electrica’s total share capital diminished following the Initial Public Offering, reaching a level of 0.7842% at the end of 2021 as compared to 10.17% at 4 July 2014. The holders of ordinary shares are entitled to receive dividends as declared, and are entitled to one vote per share in the shareholders’ meetings of the Company, except for the 6,890,593 shares purchased by the Company in July 2014 in order to stabilize the price. All shares rank equal and confer equal rights to the net assets of the Company, except for treasury shares. The Company recognizes changes in share capital only after their approval in the General Shareholders Meeting and their registration by the Trade Register. The contributions made by the shareholders which are not yet registered with the Trade Register at year end are recognized as pre-paid capital contributions from shareholders. After IPO privatization, the Company recognized an increase of share capital of RON 1,771,887,440 and a share premium of RON 171,128,062. The transaction costs of RON 68,078,885 were deducted from the share premium. Following the SPO that took place in November 2019, the share capital of Electrica SA was increased by in kind and cash contribution, with the amount of RON 5,036,680, from the amount of RON 3,459,399,290 to the amount of RON 3,464,435,970, by issuing a number of 503,668 new nominative and dematerialized shares with a nominal value of 10 RON/share. The costs generated by the secondary public offering are in amount of RON 963,601. Also, the Company recorded gains referring to share issue of RON 2,185,519, resulting from the difference between the contribution value of the plots of land and their value recorded as pre-paid capital contributions in kind from shareholders. (b) Treasury shares reserve In July 2014, the Company purchased 5,206,593 ordinary shares and 421,000 Global Depositary Receipts, equivalent to 1,684,000 shares (totalling 6,890,593 shares). The total amount paid for acquiring the shares and Global Depositary Receipts was RON 75,372,435. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A424 425 (c) Revaluation reserves The reconciliation between opening and closing balance of the revaluation reserve is as follows: Balance at 1 January Revaluation of property, plant and equipment Revaluation of property, plant and equipment – merger Deferred tax liability arising on revaluation of property, plant and equipment Deferred tax liability arising on revaluation of property, plant and equipment – merger Release of revaluation reserve to retained earnings corresponding to depreciation and disposals of property, plant and equipment Balance at 31 December (d) Legal reserves 2023 2022 11,806,704 12,397,647 6,988,472 2,701,689 (1,138,457) (62,344) - - - - (37,399) (590,943) 20,258,665 11,806,704 The Legal reserves are set up as 5% of the gross profit for the year, until the total legal reserves reach 20% of the paid-up nominal share capital of the Company, according to the legislation. These reserves are deductible for income tax purposes and are not distributable. As at 31 December 2023, the legal reserves were in amount of RON 231,595,694 (31 December 2022: RON 229,435,101). (e) Dividends The dividends distributed by the Company in 2023 and 2022 (from the statutory profits of preceding years) were as follows: The total amount of dividends to be distributed to shareholders in 2023 was of RON 39,999,343 (2022: RON 152,798,852). The value of dividends per share distributed to the shareholders of the Company were: RON 0.1178 per share (2022: RON 0.45 per share). When calculating the dividend per share, the Company’s repurchased own shares (6,890,593 shares) were not considered as outstanding shares and are deducted from the total number of issued ordinary shares. Out of the dividends declared by the Company of RON 39,999,343 (2022: RON 152,798,852), the dividends paid were RON 40,136,410 (2022: RON 152,446,574), the difference representing dividends paid to shareholders for previous periods. 27. Trade payables Suppliers of goods and services Capital expenditure suppliers Suppliers – related parties (Note 29) Total Payables to related parties are detailed in Note 29. 28. Other payables 31 December 2023 31 December 2022 5,580,512 46,698 1,018,220 6,645,430 4,368,115 128,823 247,788 4,744,726 Cash-pooling payables Dividends payable Other payables to the state budget Other liabilities 31 December 2023 31 December 2022 Current Non-current Current Non-current 47,764,297 1,581,577 11,730 1,738,926 51,096,530 - - - - - 33,187,405 1,716,675 7,304 1,563,323 36,474,707 - - - - - 2023 2022 Total Distributed dividends 39,999,343 152,798,852 Cash-pooling payables comprises the payable of Electrica as at 31 December 2023 as cash pool leader in the two cash-pooling systems set up at Group level (Note 23 and Note 29). On 27 April 2023, the General Shareholders Meeting of the Company approved the net distributable profit of Other liabilities include mainly guarantees and sundry creditors. Dividends payable represent the dividends 2022 as follows: • Dividends to be distributed to shareholders: RON 39,999,343; • Legal reserve (5% from 2022 pre-tax profit): RON 1,278,875; • Other reserves: RON 16,973,333. uncollected by the shareholders. In August 2020, the VAT group was established at the Electrica level in accordance with the provisions of Article 269 (9) of the Tax Code and the rules for its application, National Agency for Fiscal Administration (“NAFA”) Order No. 3006/2016 on the approval of the Procedure for the implementation and administration of the single tax group. The members of the VAT group are Electrica SA and its subsidiaries. The On 20 April 2022, the General Shareholders Meeting of the Company approved the net distributable profit of representative of the group is Electrica Furnizare S.A., having all the reporting and VAT record obligations 2021 as follows: stipulated by the legal regulations in force for the whole group. • Dividends to be distributed to shareholders: RON 152,798,852; • Legal reserve (5% from 2021 pre-tax profit): RON 16,128,587; • Other reserves: RON 152,892,445. NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A29. Provisions Balance at 1 January 2023 Provisions recognized Provisions utilized Provisions reversed Balance at 31 December 2023 Balance at 1 January 2022 Provisions recognized Provisions utilized Provisions reversed Balance at 31 December 2022 426 427 Litigations and other risks The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In the past, the Company had a high credit risk mainly from State-owned companies (see Note 16). 1,041,676 25,997 (228,598) (113,991) 725,084 Cash and bank deposits are placed in financial institutions, which are considered to have good creditworthiness. The carrying amount of financial assets represents the maximum credit exposure. Trade receivables The Company establishes an allowance for impairment that represents the amount of expected credit losses, calculated based on the expected loss rates. 4,238,114 Impairment The provisions balance consists of: a) provisions in amount of RON 499,488 as at 31 December 2023 (31 December 2022: RON 702,088) referring to the benefits granted upon the termination of executive directors’ and management key personnel contracts in the form of a non-compete clause and b) provision in amount of RON 225.,598 as at 31 December 2023 (31 December 2022: RON 339,589) referring to various litigations. 30. Financial instruments - fair values and risk management (a) Accounting classifications and fair values 304,330 (1,872,108) (1,628,660) 1,041,676 The following table provides information about the exposure to credit risk and expected credit losses for trade receivables for customers as at 31 December 2023: Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total 31 December 2023 Expected loss rates (“ECL”) Gross value Lifetime ECL Net trade receivables Credit impaired 0% 0% 0% 0% 1,743,932 945 - - - - - - 1,743,932 945 - - 100% 155,340,248 (155,337,719) 2,529 157,085,126 (155,337,719) 1,747,406 No No No No Yes According to IFRS 9, financial assets are measured at amortized cost as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Allowances for impairment are referring mainly to Oltchim in amount of RON 98,725,847 (31 December 2022: RON 98,725,847), Transenergo Com in amount of RON 37,084,601 (31 December 2022: RON 37,088,264) and to Fidelis Energy in amount of RON 11,154,320 (31 December 2022: RON 11,220,386). Please see Note 16. The Company doesn’t have real Group guarantees, only corporate guarantees disclosed on note 31 An analysis of trade receivables from the point of view of the credit risk and expected credit losses for trade Commitments. receivables for customers as at 31 December 2022, is as follows: The Company assessed that the carrying amount is a reasonable approximation of the fair value for the 31 December 2022 financial assets and financial liabilities. (b) Financial risk management The Company has exposure to the following risks arising from financial instruments: • credit risk; • liquidity risk; • market risk. These risks are further explained and detailed. (i) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from the Company’s receivables from customers, cash-pooling debtors, cash and cash equivalents, restricted cash and bank deposits. Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total Expected loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired 0% 0% 0% 0% 708,385 56,677 - - - - - - 708,385 56,677 - - 100% 160,706,221 (160,675,756) 30,464 161,471,282 (160,675,756) 795,526 No No No No Yes NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A428 429 (ii) Liquidity risk Exposure to currency risk Liquidity risk is the risk that the Company might encounter difficulty in meeting the obligations associated The summary of the quantitative data about the Company’s exposure to currency risk is as follows: with its financial liabilities that are settled by delivering cash or another financial asset. The Company has significant cash and cash equivalents so that no liquidity risk is experienced. The Company aims to maintain the level of its cash and cash equivalents at an amount in excess of in RON expected cash outflows on financial liabilities. The Company also monitors the level of expected cash Cash and cash equivalents inflows on trade receivables together with expected cash outflows on trade and other payables. Exposure to liquidity risk Lease liability Net statement of financial position exposure 31 December 2023 31 December 2022 denominated in EUR denominated in EUR 334,404 (2,113,186) (1,778,782) 263,291 (267,657) (4,366) The following table presents the contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest accrued. The following significant exchange rates have been applied during the year: Financial liabilities Carrying amount Total less than 1 year 1-2 years 2-5 years more than 5 years Contractual cash flows 205,520,079 205,520,079 205,520,079 6,645,430 6,645,430 6,645,430 - - - - RON EUR 1 Sensitivity analysis Average rate Year-end spot rate 2023 4.9464 2022 4.9315 2023 4.9746 2022 4.9474 A reasonable possible appreciation (depreciation) of the EUR against RON at 31 December would have 4,069,161 4,069,161 797,944 530,385 1,028,021 1,712,811 affected the measurement of financial instruments denominated in a foreign currency, the profit before tax 216,234,670 216,234,670 212,963,453 530,385 1,028,021 1,712,811 and the equity, respectively, by the amounts shown below. The analysis assumes that all other variables, especially the interest rates, remain constant and ignores the impact of forecasted sales and purchases. 207,830,772 207,830,772 207,830,772 4,744,726 4,744,726 4,744,726 - - 269,610 269,610 215,561 54,049 212,845,108 212,845,108 212,791,059 54,049 - - - - - - - - Efect 31 December 2023 EUR (5% movement) 31 December 2022 EUR (5% movement) Interest rate risk Profit before tax Appreciation Depreciation (88,939) 88,939 (218) 218 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 The Company exposures to interest rates on financial assets and financial liabilities are detailed below. risk management is to manage and control market risk exposures within acceptable parameters, while The Company is exposed to the interest rate benchmark ROBOR, which is the interest rate on the Romanian optimizing the return. Currency risk The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Company. The functional currency of the Company is the Romanian Leu (RON). The currencies in which these transactions are primarily denominated are RON and EUR. The Company also has deposits and bank accounts denominated in foreign currency (EUR). The Company’s policy is to use the local currency in its transactions as far as practically possible. The Company does not use derivative or hedging instruments. interbank market. The Company does not have in place hedging contracts for interest rate. 31 December 2023 Bank overdrafts Trade payables Lease liability Total 31 December 2022 Bank overdrafts Trade payables Lease liability Total (iii) Market risk NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A430 431 Exposure to interest rate risk The interest rate profile of the Company’s interest-bearing financial instruments is as follows: 31. Related parties (a) Main shareholders Fixed-rate instruments Financial assets Call deposits Total Variable-rate instruments Financial assets Cash pooling receivables (Note 23, Note 29) Financial liabilities Cash pooling payables (Note 23, Note 29) Bank overdrafts (Note 18) Lease liability Total 31 December 2023 31 December 2022 As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital. (b) Management and administrators’ compensation - - 102,017,348 102,017,348 Management compensation 2023 2022 4,324,861 5,905,346 567,646,476 477,646,009 of mandate contracts for executive directors. Executive management compensation refers to both the managers with mandate contract and those with labour contract, concluded with Electrica SA. This also includes the benefits in the event of the termination Compensations granted to the members of the Board of Directors were as follows: (47,764,297) (33,187,405) (205,520,079) (207,830,772) (4,069,161) (269,610) Members of Board of Directors 2023 2022 2,616,568 2,537,558 310,292,939 236,358,222 Electrica SA’s Board of Directors comprises 7 members. According to the remuneration policy approved Fair value sensitivity analysis for fixed-rate instruments The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable-rate instruments A reasonably possible change of 50 basis points in interest rates at the reporting date would have increased (decreased) profit before tax by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant. by the General Meeting of Shareholders that took place 20 April 2022, the annual number of paid sessions is limited to twelve for Board of Directors meetings and to six for each of the committees. Additional committee meetings can be organized only in exceptional situations, upon the Chairs’ decision, who are responsible to efficiently organize the agenda and activity. However, only one such additional meeting shall be remunerated, for each committee. No loans were granted to managers and administrators in 2023 and 2022. (c) Transactions with the Group companies (i) Balance of receivables and payables from/ to Group companies: Trade Receivables/Trade Payables Effect 31 December 2023 Variable-rate instruments 31 December 2022 Variable-rate instruments Profit before tax 50 bp increase 50 bp decrease 1,551,465 (1,551,465) Distributie Energie Electrica Romania S.A. 1,181,791 (1,181,791) Electrica Serv S.A. Electrica Furnizare S.A. Electrica Productie Energie S.A. Sunwind Energy S.R.L. Total Receivables from Payables to 31 December 2023 31 December 2022 31 December 2023 31 December 2022 1,197,710 197,031 471,687 - 1,575,132 1,199,088 - 3,894 848 17,091 867,776 133,353 - 1,784 23,389 222,615 - 3,248,423 1,396,967 1,018,220 247,788 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 432 433 As at 31 December 2023 and 31 December 2022, receivables from electricity distribution subsidiaries include (ii) Transactions with subsidiaries: mainly other services reinvoiced. Loans granted/interest receivable: Distributie Energie Electrica Romania S.A. 1,276,325,000 1,276,325,000 19,183,225 17,937,449 Loans granted to Interest receivable from 31 December 2023 31 December 2022 31 December 2023 31 December 2022 Electrica Furnizare S.A. Electrica Energie Productie S.A. Sunwind Energy S.R.L. New Trend Energy S.R.L. Foton Power Energy S.R.L. 80,000,000 - 230,533 - 41,594,188 - 1,657,848 2,475,699 600,000 189,908 12,370 7,184,000 2,400,000 316,550 102,784 2,937,987 - 43,847 - 3,753 Green Energy Consultancy & Invest-ments S.R.L. - 440,335 - Total 1,368,922,686 1,321,359,523 19,964,063 19,714,204 Cash-pooling system 31 December 2023: Amount drawn by participants Amount contributed to by participants Net position Interest receivable/ (payable) 31 December 2023 31 December 2023 31 December 2023 31 December 2023 350,786,382 216,860,094 - - - - - 350,786,382 5,470,721 216,860,094 1,518,731 - - (47,764,297) (47,764,297) (281,932) 567,646,476 (47,764,297) 519,882,179 6,707,520 Amount drawn by participants Amount contributed to by participants Net position Interest receivable/ (payable) 31 December 2022 31 December 2022 31 December 2022 31 December 2022 311,393,113 163,250,006 3,002,890 - - - 311,393,113 1,859,586 163,250,006 1,018,277 3,002,890 17,849 Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Energie Verde 1 S.R.L. Electrica Serv S.A. Total Cash-pooling system 31 December 2022: Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Energie Verde 1 S.R.L. Electrica Serv S.A. Total Sales/Purchases Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Serv S.A. Electrica Energie Productie S.A. Green Energy Consultancy & Investments S.R.L. Electrica Energie Verde 1 S.R.L. Sunwind Energy S.R.L. Total Reimbursements / Borrowings Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Energie Productie S.A. Sunwind Energy S.R.L. New Trend Energy S.R.L. Green Energy Consultancy & Investments S.R.L. Foton Power Energy S.R.L. Total Interest income for loans Distributie Energie Electrica Romania S.A. Electrica Furnizare S.A. Electrica Energie Productie S.A. Sunwind Energy S.R.L. New Trend Energy S.R.L. Green Energy Consultancy & Investments S.R.L. Sales in 2023 Sales in 2022 Purchases in 2023 Purchases in 2022 1,886,897 208,879 15,859 185,938 2,967,606 1,314,408 543,221 689,704 497,076 91,439 32,365 6,599 3,272 8,782 3,339 - - - 1,829,184 27,056 - - - - - - - - 5,485,254 1,535,408 2,388,264 902,698 Borrowings granted in 2023 Borrowings granted in 2022 Reimbursements in 2023 Reimbursements in 2022 - - 80,000,000 100,000,000 - 47,540,173 1,875,699 600,000 4,784,000 2,400,000 2,698,920 440,335 2,937,987 - 92,296,606 150,980,508 - - - - - - - - - 130,000,000 5,945,985 - - - 135,945,985 Interest income 2023 Interest income 2022 47,972,160 47,972,160 230,533 3,370,918 177,538 213,766 135,945 43,847 1,406,254 1,711,863 12,370 102,784 3,753 - - (33,187,405) (33,187,405) (244,477) Foton Power Energy S.R.L. 477,646,009 (33,187,405) 444,458,604 2,651,235 Total 52,144,707 51,209,184 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A434 435 Cash pooling system – interest income/(expense) Distributie Energie Electrica Romania S.A. Electrica Energie Verde 1 S.R.L. Electrica Serv S.A. Electrica Furnizare S.A. Total Interest income/ (expense) 2023 27,404,262 203,426 Interest income/ (expense) 2022 18,136,075 464,479 32. Contingencies (a) Contingent Assets Litigation with National Agency of Fiscal Administration (“NAFA”) In May 2017, after the revision of Electrica’s tax record, the tax authorities issued an enforcement order for additional interest and penalties of RON 39,248,818 as a result of certain tax record allocations for prior (2,816,408) (2,553,799) periods. Electrica SA filed a complaint with the tax authorities against the enforcement order and also filed 18,961,026 10,664,680 a legal action to suspend the enforced payment by the resolution of the above mentioned complaint. These additional interest and penalties are related to the prior enforcement orders received by Electrica SA in the 43,752,306 26,711,435 prior years of RON 72,460,387. (d) Transactions with companies in which the state has control or significant influence In February 2018, Electrica SA 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 The Company had sale and purchase transactions mainly with the following companies: Company. Supplier ANCOM Others Total Client Oltchim CET Braila Total Client Oltchim CET Braila Total Purchases (without VAT) Balance (including VAT) 2023 567,684 245,147 812,831 2022 31 December 2023 31 December 2022 567,684 142,640 710,324 141,921 1,437 143,358 141,921 497 142,418 Sales Balance, gross Allowance (without VAT) (including VAT) (including VAT) Balance, net 2023 - - - 31 December 2023 98,725,847 (98,725,847) 3,118,411 (3,118,411) 101,844,258 (101,844,258) - - - Sales Balance, gross Allowance (without VAT) (including VAT) (including VAT) Balance, net Also, in April 2019, Electrica SA obtained another favourable decision pronounced by the Bucharest Court of Appeal in one of the disputes with NAFA, whereby the court obliges NAFA to correct the evidence of the tax receivables so that it reflects the extinction by prescription of the amount of RON 16,915,950 representing income tax as well as all the related accessories. Moreover, in November 2019, Electrica SA obtained one more favourable decision pronounced by the Bucharest Court of Appeal in one of the disputes with NAFA, whereby the court obliges NAFA to cancel the administrative documents issued regarding the accessory fiscal obligations in the amount of RON 39,248,818 and ordered the refund/ compensation of the amount and the correction of the tax record. Against this decision, NAFA filed an appeal, registered to the High Court of Cassation and Justice, with the Court term on 23 March 2022, which was finalized in favor of Electrica. Following this final decision, the Bucharest District 1 Court reinstated another case for which, on 22 December 2022, annulled the enforceable title for the amount of RON 39,248,818 and of all subsequent enforcement acts issued in connection with the forced execution and also obliged NAFA to pay the litigation costs in the amount of RON 19,326. Against this decision, NAFA filed an appeal on 23 February 2023. Thus, until 31 December 2023, the Company did not recognize a provision in this respect, taking into account that management’s best estimate is that the Company shall be able to obtain a favourable final Court decision in this case. (b) Contingent Liabilities 2022 - - - 98,725,847 3,118,411 101,844,258 31 December 2022 Other litigations and claims (98,725,847) (3,118,411) (101,844,258) The Company is involved in a series of litigations and claims (ie. with SAPE, ANRE, NAFA, Court of Accounts, claims for damages, claims over land titles, labour related litigations etc.). As summarised in Note 27, the Company set-up provisions for the litigations or claims for which the management assessed as probable the outflow of resources embodying economic benefits due to low chances of favourable outcomes of those litigations or disputes. The Company does not present information in the financial statements and did not set-up provisions for items for which the management assessed as remote the possibility of outflow of economic benefits. The Company discloses, if the case, information on the most significant items of litigations or claims for which the Company did not set-up provisions as they relate to possible obligations that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A436 437 events not wholly within the control of the Company (ie. litigations for which different inconsistent sentences (b) Guarantees and pledges were issued by the Courts, or litigations which are in early stages and no preliminary ruling was issued so far). Fiscal environment Tax audits are frequent in Romania, consisting of detailed verifications of the accounting records of taxpayers. Such audits sometimes take place after months, even years, from the date liabilities are The Company has a facility for issuing bank guarantee letters in the amount of RON 185,000,000 contracted from Unicredit Bank and which is used at Group level, out of which the used amount as of 31 December 2023 is RON 139,314,062 (31 December 2022: RON 133,660,068). The maturity of the facility is on 31 December 2031. Also, the Company issued parenting guarantees for Electrica Furnizare S.A. in total amount of RON 247.549.722 (31 December 2022: RON 367,234,402). established. Consequently, companies may be found liable for significant taxes and fines. Moreover, tax (c) Audit fees legislation is subject to frequent changes and the authorities sometimes demonstrate inconsistency in interpretation of the law. Income tax statements may be subject to revision and corrections made by tax authorities, generally for a five-year period after they are filled in. The company was the subject of fiscal inspections until 31 March 2013. The Company may incur expenses related to tax adjustments related to previous years as a result of tax authorities inspections and disputes. The Company’s management considers that adequate reserves were established in the separate financial statements for all the significant fiscal obligations, however a risk that the tax authorities could take different positions still persists. (c) Transfer prices According to the fiscal legislation, the fiscal assessment for a transaction with affiliates is based on the market price concept for that transaction. Based on this concept, the transfer prices must be adjusted in order to reflect the market prices that would have been established between the entities having no affiliation relation and are acting independently, based on “normal market conditions”. Likely, verifications of the transfer prices may be done in the future by the fiscal authorities, in order to establish if these prices are respecting the principle of the “normal market conditions” and that the tax base for Romanian taxpayer is not distorted. 33. Commitments (a) Contractual commitments Contractual commitments as at 31 December 2023 and 31 December 2022 are as follows: Purchase of property, plant and equipment, intangible assets and other maintenance and repairs services 5,955,625 - 31 December 2023 31 December 2022 Purchase of investments Total 45,121,884 289,635,733 51,077,509 289,635,733 The audit fees for the individual financial statements were in amount of RON 524,318 (EUR 106,000) for the year 2023, of which: • fee for the statutory standalone audit for the year ended 31.12.2023 is RON 24,732; • fee for the statutory standalone audit of the financial statements prepared for the special purpose of the merger as at 30.09.2023 is RON 242,374;. • fee for the statutory standalone audit of the financial statements prepared voluntarily as at 30.06.2023 is RON 217.642; • Analysis and verification services on Societatea Energetica Electrica SA transactions reported through current reports in accordance with the provisions of art.108 of Law no. 24/2017 is RON 39,571. 34. Subsequent events There were no significant subsequent events at the date of signing the financial statements as at 31.12.2023. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 NOTES TO THE SEPARATE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A438 439 INDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS 440 441 Deloitte Audit S.R.L. The Mark Tower, 82-98 Calea Griviței, Sector 1, 010735 Bucharest, Romania T: +40 21 222 16 61 F: +40 21 222 16 60 www.deloitte.ro INDEPENDENT AUDITOR’S REPORT To the Shareholders, SOCIETATEA ENERGETICA ELECTRICA S.A. Report on the Audit of the Financial Statements Opinion 1. We have audited the separate financial statements of Societatea Energetica Electrica S.A. (“the Company”), with registered office in Bucharest, District 1, Street Grigore Alexandrescu, No. 9, identified by unique tax registration code 13267221, which comprise the statement of financial position as at December 31, 2023, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information. 2. The separate financial statements as at December 31, 2023 are identified as follows: • Net assets / Equity • Net profit for the financial year RON 3,980.498.078 23,940,836 RON 3. In our opinion, the accompanying separate financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023, and its financial performance and its cash flows for the year then ended in accordance with Ministry of Public Finance Order no. 2844/2016, with subsequent amendments, for the approval of accounting regulations conforming with International Financial Reporting Standards . Basis for Opinion 4. We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation (EU) No. 537/2014 of the European Parliament and the Council (herein after referred to as “the Regulation”) and Law 162/2017 on the statutory audit of annual financial statements and annual consolidated financial statements and on amending other pronouncements (herein after referred to as “the Law 162/2017”. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), in accordance with ethical requirements relevant for the audit of the financial statements in Romania including the Regulation and the Law 162/2017 and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter 5. We draw attention to Note 3 to the separate financial statements which states that Company is the parent company of Electrica Group and that consolidated financial statements of Electrica Group prepared in accordance with International Financial Reporting Standards as adopted by EU have not yet been published. Notes 3 to the separate financial statements explain when consolidated financial statements will be published. Our opinion is not modified in respect of this matter. Key Audit Matters 6. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms, and their related entities (collectively, the "Deloitte organization"). DTTL (also referred to as "Deloitte Global") and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. 1 Key audit matters Going Concern How our audit addressed the key audit matter As presented in Note 8 the separate financial statements have been prepared on the going concern basis. The key judgement leading to this conclusion are set out in that note. We have assessed managements valuation of the going concern assumption by performing the following procedures: • We have obtained the cash flow forecasts and critically challenged the management and the Board of Directors and Audit Committee on the assumptions used; • We considered whether at the date of this report additional information exist from the Romanian authorities with respect to the capping mechanism; • We have assessed the Company’s subsidiaries and Company’s position on the existing debt facilities, covenant compliance and newly negotiated debt facilities, during 2024 until the date of this report; • We assessed the adequacy of the disclosure of the basis of going concern assumption, including the key judgements adopted; In particular the subsidiaries of the Company operate in the electricity distribution and supply industry which is currently affected by the compensation and ceiling laws on sales to end customers. The Romanian authorities regulatory position is under review and there may be further laws enacted which could adversely impact the subsidiaries of the Company’s operating cash flows. In the forthcoming twelve months the subsidiaries will need to obtain additional financing and given the position of the Group and its significance to the Romanian economy management expect that all necessary financing will be made available. The ability of the Company to continue as a going concern is dependent on the ability of its subsidiaries to continue as a going concern. The ability of the subsidiaries of the Company to continue as a going concern is dependent on successful completion of the new financing and on stabilizing of the regulatory regime on energy prices as described in note 8, which provides an appropriate margin to support servicing of the subsidiaries of the Company and Company’s short and long term financings. In view of the significant judgements the application and disclosures of the basis of the going concern assumption are considered a Key Audit Matter. Other information 7. The administrators are responsible for the preparation and presentation of the other information. The other information comprises the Administrators’ report and the Remuneration Report, but does not include the separate financial statements and our auditor’s report thereon, or the non-financial information declaration, which is being presented in a separate report. Our opinion on the separate financial statements does not cover the other information and, unless otherwise explicitly mentioned in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the separate financial statements for the year ended December 31, 2023, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Other responsibilities of reporting with respect to other information – Administrators’ report With respect to the Administrators’ report, we read it and report if this has been prepared, in all material respects, in accordance with the provisions of Ministry of Public Finance Order no. 2844/2016, with subsequent amendments, for the approval of accounting regulations conforming with International Financial Reporting Standards . On the sole basis of the procedures performed within the audit of the separate financial statements, in our opinion: a) the information included in the Administrators’ report and the Remuneration Report, for the financial year for which the separate financial statements have been prepared is consistent, in all material respects, with these separate financial statements; 2 INDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORT 442 443 b) the Administrators’ report has been prepared, in all material respects, in accordance with the provisions of Ministry of Public Finance Order no. 2844/2016, with subsequent amendments, for the approval of accounting regulations conforming with International Financial Reporting Standards; Moreover, based on our knowledge and understanding concerning the Company and its environment gained during the audit on the separate financial statements prepared as at December 31, 2023, we are required to report if we have identified a material misstatement of this Administrators’ report and the Remuneration report. We have nothing to report in this regard. Other reporting responsibilities with respect to other information – Remuneration report With respect to the Remuneration report, we read it to determine if it presents, in all material respects, the information required by article 107, paragraphs (1) and (2) of Law 24/2017 regarding the issuers of financial instruments and market operations, republished. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements 8. Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Ministry of Public Finance Order no. 2844/2016, with subsequent amendments , for the approval of accounting regulations conforming with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 9. In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. 10. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Separate Financial Statements 11. Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. 12. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • • • • Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 13. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 14. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 16. We were appointed by the General Meeting of Shareholders on April 27, 2023 to audit the separate financial statements of Societatea Energetica Electrica S.A. for the financial year ended December 31, 2023. The uninterrupted total duration of our commitment is 6 of years, covering the financial years ended December 31, 2018 and December 31, 2023. We confirm that: • • Our audit opinion is consistent with the additional report submitted to the Audit Committee of the Company that we issued the same date we issued this report. Also, in conducting our audit, we have retained our independence from the audited entity. No non-audit services referred to in Article 5 (1) of EU Regulation no. 537/2014 were provided. The engagement partner on the audit resulting in this independent auditor’s report is Razvan Ungureanu. Report on compliance with Law no. 162/2017 on the statutory audit of annual financial statements and annual consolidated financial statements and on amending other pronouncements (“Law 162/2017”), and Commission Delegated Regulation (EU) 2018/815 on the European Single Electronic Format Regulatory Technical Standard (“ESEF”) We have undertaken a reasonable assurance engagement on the compliance with Law 162/2017, and Commission Delegated Regulation (EU) 2018/815 applicable to the separate financial statements included in the annual financial report of Societatea Energetica Electrica S.A. as presented in the digital files which contain this audit report (“Digital Files”). (I) Responsibilities of Management and Those Charged with Governance for the Digital Files prepared in compliance with ESEF Management is responsible for preparing the Digital Files that comply with ESEF. This responsibility includes:   the design, implementation and maintenance of internal controls relevant to the application of ESEF; ensuring consistency between the Digital Files and the separate financial statements to be submitted in accordance with Ministry of Finance Order 2844/2016 for the approval of accounting regulations conforming with International Financial Reporting Standards, with subsequent amendments. Those charged with governance are responsible for overseeing the preparation of the Digital Files that comply with ESEF. 3 4 INDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORT 444 445 (II) Auditor’s Responsibilities for the Audit of the Digital Files Our responsibility is to express a conclusion on whether the separate financial statements included in the annual financial report complies in all material respects with the requirements of ESEF based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing and Assurance Standards Board. Our firm applies International Standard on Quality Management 1 (“ISQM1”), and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about compliance with ESEF. The nature, timing and extent of procedures selected depend on the auditor’s judgment, including the assessment of the risks of material departures from the requirements set out in ESEF, whether due to fraud or error. A reasonable assurance engagement includes:    obtaining an understanding of the Company’s process for preparation of the digital files in accordance with ESEF, including relevant internal controls; reconciling the digital files with the audited separate financial statements of the Company to be submitted in accordance with Ministry of Finance Order 2844/2016 for the approval of accounting regulations conforming with International Financial Reporting Standards, with subsequent amendments; evaluating if the separate financial statements contained in the annual report have been prepared in a valid XHTML format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. In our opinion, the separate financial statements for the year ended 31 December 2023 included in the annual financial report in the Digital Files comply in all materials respects with the requirements of ESEF. Razvan Ungureanu, Audit Partner For signature, please refer to the original Romanian version. Registered in the Electronic Public Register of Financial Auditors and Audit Firms under AF 4866 On behalf of: DELOITTE AUDIT SRL Registered in the Electronic Public Register of Financial Auditors and Audit Firms under FA 25 The Mark Building, 84-98 and 100-102 Calea Griviței, 9th Floor, District 1 Bucharest, Romania March 5, 2024 5 INDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 SEPARATE FINANCIAL STATEMENTS2023 ANNUAL REPORT 446 447 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016) as at and for the year ended 31 December 2023 prepared in accordance with OMFP no. 2844/2016 Free translation from Romanian, which is the official and binding version 448 449 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 Notes to the consolidated financial statements Basis of preparation 1. 2. 3. 4. Reporting entity and general information Basis of accounting Functional and presentation currency Use of judgments and estimates Accounting policies 5. 6. 7. Basis of measurement Accounting policies Disclosure for the additional set of the consolidated financial statements Performance for the year 8. Operating segments 9. Revenue 10. Electricity, natural gas and merchandise purchased 11. Other income and expenses 12 Net finance result 13. Earnings per share Employee benefits 14 Short-term employee benefits 15. Post-employment and other long-term employee benefits 16. Employee benefit expenses 450 452 453 454 456 458 465 466 466 468 468 482 482 486 486 486 487 488 488 489 492 Income taxes 17. Income taxes Assets 18. Trade receivables 19. Other receivables 20. Cash and cash equivalents 21. Inventories 22. Property, plant and equipment 23. Intangible assets 24. Investments in associates Equity and liabilities 25. Capital and reserves 26. Trade payables 27. Other payables 28. Provisions 29. Bank borrowings and overdrafts Financial instruments 30. Financial instruments - Fair values and risk management Other information 31. Related parties 32. Contingencies 33. Commitments 34. Subsequent events 493 495 496 497 497 498 501 503 504 506 507 507 508 513 518 520 521 522 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016) 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016) 2023 ANNUAL REPORT2023 ANNUAL REPORT450 451 Note 31 December 31 December 2023 2022 Note 31 December 31 December 2023 2022 Non-current assets Intangible assets related to concession arrangements Intangible assets from the capitalization of own technological consumption Other intangible assets Goodwill Property, plant and equipment Investments in associates Other investments Deferred tax assets Other non-current assets Right of use assets Total non-current assets Total active imobilizate Current assets Trade receivables Subsidies receivable Other receivables Cash and cash equivalents Inventories Prepayments Current income tax receivable Assets held for sale Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares reserve Pre-paid capital contributions in kind from shareholders Revaluation reserve Legal reserves Retained earnings Total equity attributable to the owners of the Company Non-controlling interests Total equity (Continued on next page) 23 23 23 22 24 17 18 11 19 20 21 25 25 25 25 25 25 6,220,530 5,675,866 770,934 27,822 24,663 594,994 16,638 7,000 32,404 51,954 40,993 951,557 12,854 12,040 499,390 18,824 7,000 30,180 2,393 52,152 Liabilities Non-current liabilities Lease liability – long term Deferred tax liabilities Employee benefits Other payables Long-term bank borrowings Total non-current liabilities Current liabilities Current portion of long-term bank borrowings 7,787,932 7,262,256 Lease liability – short term Bank overdrafts Trade payables Other payables Deferred revenue Employee benefits Provisions Current tax liabilities Total current liabilities Total liabilities 17 15 27 29 29 29 26 27 14,15 28 29,143 244,666 151,358 37,161 794,348 34,462 212,555 117,269 72,432 647,193 1,256,676 1,083,911 523,294 14,052 2,851,221 1,671,478 1,035,084 7,837 120,548 41,167 13,924 6,278,605 7,535,281 113,520 19,211 2,571,037 1,407,097 867,536 24,750 114,174 53,701 1,129 5,172,155 6,256,066 Total equity and liabilities 13,542,830 11,623,312 The accompanying notes are an integral part of these consolidated financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 2,540,442 2,614,535 93,832 377,215 115,659 12,935 - 280 2,466,002 1,280,788 127,253 334,887 113,972 13,874 24,000 280 5,754,898 4,361,056 13,542,830 11,623,312 3,464,436 103,049 (75,372) 7 159,536 449,363 1,906,981 6,008,000 (451) 3,464,436 103,049 (75,372) 7 92,117 429,583 1,353,942 5,367,762 (516) 6,007,549 5,367,246 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (OMFP 2844/2016)AS AT 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF FINANCIAL POSITION (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AAS AT 31 DECEMBER 2023ELECTRICA S.A452 453 Note 2023 2022 Note 2023 2022 9,816,593 18,617 3,498,553 10,009,896 989,291 2,840,963 Profit for the year Other comprehensive income (9,057,976) (10,506,809) Items that will not be reclassified to profit or loss 9 11 10 23 16 22,23 18,19 11 12 12 24 17 Revenue Capitalised costs of intangible non-current assets Other income Electricity, natural gas and merchandise purchased Construction costs related to concession agreements Employee benefits Repairs, maintenance and materials Depreciation and amortization Impairment for trade and other receivables, net Other operating expenses Operating profit Finance income Finance costs Net finance cost Share of results of associates 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 (976,436) (962,065) (95,218) (723,721) (75,820) (431,399) 1,011,128 3,425 (297,220) (293,795) (593,490) (823,422) (88,229) (533,987) (112,311) (352,971) 828,931 9,718 (174,713) (164,995) (39) (13) 717,294 (96,914) 620,380 620,494 (114) 620,380 663,923 (105,078) 558,845 558,954 (109) 558,845 Revaluation of property, plant and equipment Tax related to revaluation of property, plant and equipment Re-measurements of the defined benefit liability Tax related to re-measurements of the defined benefit liability 22 17 15 17 Other comprehensive income, net of tax Total comprehensive income Total comprehensive income attributable to: - owners of the Company - non-controlling interests Total comprehensive income The accompanying notes are an integral part of these consolidated financial statements. 620,380 558,845 85,510 (13,699) (11,918) 1,907 61,800 - - 9,503 (1,479) 8,024 682,180 566,869 682,294 (114) 682,180 566,978 (109) 566,869 Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea Earnings per share Basic and diluted earnings per share (RON) 13 1.83 1.65 25 March 2024 The accompanying notes are an integral part of these consolidated financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 CONSOLIDATED STATEMENT OF PROFIT OR LOSS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A- - - - - , 6 4 2 7 6 3 5 , ) 6 1 5 ( , 2 6 7 7 6 3 5 , , 2 4 9 3 5 3 1 , 3 8 5 9 2 4 , 7 1 1 2 9 , l a t o T y t i u q e - n o N s t s e r e t n i g n i l l o r t n o c l a t o T y t i u q e d e n i a t e R s g n i n r a e s e v r e s e r e v r e s e r l a g e L n o i t a u l a v e R l a t i p a c i d a p - e r P y r u s a e r T l s r e d o h e r a h s s n o i t u b i r t n o c s e r a h s m o r f d n k n i i e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c e t o N 454 9 7 1 9 7 1 - - ) 9 9 9 9 3 ( , - ) 9 9 9 9 3 ( , ) 9 9 9 9 3 ( , ) 0 2 8 9 3 ( , 9 7 1 ) 9 9 9 9 3 ( , ) 9 9 9 9 3 ( , 0 8 3 0 2 6 , ) 4 1 1 ( 4 9 4 0 2 6 , 4 9 4 0 2 6 , 0 0 8 1 6 , - 0 0 8 1 6 , ) 1 1 0 0 1 ( , 0 8 1 2 8 6 , ) 4 1 1 ( 4 9 2 2 8 6 , 3 8 4 0 1 6 , - - - - - - - - ) 7 5 0 2 ( , , 9 4 5 7 0 0 6 , - - - ) 1 5 4 ( ) 7 5 0 2 ( , ) 7 5 0 2 ( , 2 9 3 4 , ) 0 8 7 9 1 ( , 0 8 7 9 1 , - - - ) 2 9 3 4 ( , , 0 0 0 8 0 0 6 , , 1 8 9 6 0 9 1 , , 3 6 3 9 4 4 6 3 5 9 5 1 , 7 ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , , 6 3 4 4 6 4 3 , - 1 1 8 1 7 , 1 1 8 1 7 , - - - - 7 - - - - - - - - - - - - - - - - - - - - - - - - - - - ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , - - - - - - - - - , 6 3 4 4 6 4 3 , 1 e v i s n e h e r p m o c l a t o T t i f o r p 3 2 0 2 y r a u n a J 1 t a e c n a l a B e m o c n i e v i s n e h e r p m o C e v i s n e h e r p m o c r e h t O t i f o r p r a e y e h t r o f t i f o r P s r e n w o h t i w s n o i t c a s n a r T y n a p m o C e h t f o d n a s n o i t u b i r t n o C s n o i t u b i r t s i d 5 2 f o s r e n w o e h t o t s d n e d v D i i p i h s r e n w o n i s e g n a h C s t s e r e t n i s t s e r e t n i p i h s r e n w o n i s e g n a h c l a t o T y n a p m o C e h t h t i w s n o i t c a s n a r t l a t o T y n a p m o C e h t f o s r e n w o 5 2 5 2 y t i u q e n i s e g n a h c r e h t O s e v r e s e r l a g e l f o p u t e S n o i t a u a v e r l f o r e f s n a r T i d e n a t e r o t e v r e s e r d n a n o i t a c e r p e d i o t e u d s g n n r a e i , y t r e p o r p l f o s a s o p s d i i t n e m p u q e d n a t n a p l 455 ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , - - - - - - ) 7 0 4 ( ) 7 0 4 ( 4 2 0 8 , - 4 2 0 8 , 4 2 0 8 , 5 4 8 8 5 5 , ) 9 0 1 ( 4 5 9 8 5 5 , 4 5 9 8 5 5 , 9 6 8 6 6 5 , ) 9 0 1 ( 8 7 9 6 6 5 , 8 7 9 6 6 5 , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , - - - - - - - - - - - ) 8 7 1 1 2 ( , 8 7 1 1 2 , - 2 1 7 0 1 , - - - ) 2 1 7 0 1 ( , 7 - - - - - - - - - - - - - - - - - - - - - ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , - - - - - - - , 6 3 4 4 6 4 3 , , 2 8 5 3 5 9 4 , - , 2 8 5 3 5 9 4 , 8 2 2 0 5 9 , , 5 0 4 8 0 4 9 2 8 2 0 1 , l a t o T y t i u q e - n o N s t s e r e t n i g n i l l o r t n o c l a t o T y t i u q e d e n i a t e R s g n i n r a e s e v r e s e r e v r e s e r l a g e L n o i t a u l a v e R l a t i p a c i d a p - e r P y r u s a e r T l s r e d o h e r a h s s n o i t u b i r t n o c s e r a h s m o r f d n k n i i e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c e t o N , 6 4 2 7 6 3 5 , ) 6 1 5 ( , 2 6 7 7 6 3 5 , , 2 4 9 3 5 3 1 , 3 8 5 9 2 4 , 7 1 1 2 9 , 7 ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , , 6 3 4 4 6 4 3 , r e c i f f O l a i c n a n i F f e i h C l a e u g n a r F u r d n a x e A n a l f e t S . s t n e m e t a t s l i a c n a n fi d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T r e c i f f O e v i t u c e x E f e i h C a t i r i h C n a i l e r u A - u r d n a x e A l 4 2 0 2 h c r a M 5 2 i y r a d s b u s i f o n o i t i i s u q c A t u o h t i w d e r i u q c a s t s e r e t n i g n i l l o r t n o c - n o n h t i w l o r t n o c f o e g n a h c r e b m e c e D 1 3 t a e c n a l a B 3 2 0 2 ) e g a p t x e n n o d e u n i t n o C ( 2 2 0 2 y r a u n a J 1 t a e c n a l a B e m o c n i e v i s n e h e r p m o C e v i s n e h e r p m o c r e h t O r a e y e h t r o f t i f o r P t i f o r p e v i s n e h e r p m o c l a t o T t i f o r p s r e n w o h t i w s n o i t c a s n a r T d n a s n o i t u b i r t n o C s n o i t u b i r t s i d y n a p m o C e h t f o 5 2 f o s r e n w o e h t o t s d n e d v D i i 5 2 5 2 y t i u q e n i s e g n a h c r e h t O s e v r e s e r l a g e l f o p u t e S n o i t a u a v e r l f o r e f s n a r T i d e n a t e r o t e v r e s e r d n a n o i t a c e r p e d i o t e u d s g n n r a e i h t i w s n o i t c a s n a r t l a t o T y n a p m o C e h t f o s r e n w o y n a p m o C e h t , y t r e p o r p l f o s a s o p s d i i t n e m p u q e d n a t n a p l i y r a d s b u s i f o n o i t i i s u q c A r e b m e c e D 1 3 t a e c n a l a B 2 2 0 2 g n i l l o r t n o c - n o n h t i w s t s e r e t n i CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 2023RAPORT ANUAL 2023CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (OMFP 2844/2016)RAPORT ANUAL 2023ELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 456 457 Note 2023 2022 Note 2023 2022 Revaluation of property, plant and equipment recognized in profit or lox, net 22 (2,081) Cash flows from operating activities Profit for the year Adjustments for: Depreciation Amortisation Capitalised costs of intangible non-current assets Reversal of impairment of property, plant and equipment and intangible assets, net Loss on disposal of property, plant and equipment and intangible assets Impairment of trade and other receivables, net Change in provisions, net Net finance cost Changes due to employee benefits Share of loss of associates Income tax expense Changes in: Trade receivables Subsidies receivable Other receivables Prepayments Inventories Trade payables Other payables Provisions and employee benefits Deferred revenue Cash used in operating activities Interest paid Income tax paid Net cash flow used in operating activities (Continued on next page) 620,380 558,845 22 23 23 22,23 16,391 707,330 (18,617) - 19,915 514,203 (989,291) (5) - 22,23 18,19 28 12 24 17 (82) (393) 75,820 (12,534) 293,795 - 39 96,914 1,777,355 112,311 18,779 164,995 (4,358) 13 105,078 500,092 (309,158) (1,286,734) (1,333,747) (1,280,788) Cash flows from investing activities Payments for purchases of property, plant and equipment Payments for network construction related to concession agreements Payments for purchase of other intangible assets Proceeds from sale of property, plant and equipment Interest received Acquisition of investments in associates Payments for acquisition of subsidiaries, net of cash acquired Payments for non-controlling interest acquired without change in control Net cash flow used in investing activities Cash flows from financing activities Proceeds from long-term bank borrowings Proceeds from overdrafts Repayment of long-term bank loans Payment of lease liabilities Dividends paid Net cash generated from financing activities (10,391) (8,295) 23 (845,331) (537,782) (21,313) 232 3,270 (4,149) (6,308) (1,924) (7,829) 614 2,847 (3) (4,452) - (885,914) (554,900) 742,658 271,943 (187,730) (26,762) (40,136) 759,973 42,328 334,887 - 377,215 217,561 1,900,371 (92,925) (24,163) (152,291) 1,848,553 113,057 (405,572) 627,402 334,887 24 29 29 25 20 20 20 5,636 939 (1,687) 244,355 110,399 28,545 (16,913) 505,724 (138,335) (8,840) (41,014) 494,611 722,407 (6,454) 15,088 Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Reclassification of overdrafts previously presented as cash and cash equivalents Cash and cash equivalents at 31 December The accompanying notes are an integral part of these consolidated financial statements. (1,029,967) TThe non-cash transactions are disclosed in Note 20. (278,462) (58,993) (149,397) (1,232) 168,269 (1,180,596) Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 CONSOLIDATED STATEMENT OF CASH FLOWS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF CASH FLOWS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A458 459 1. Reporting entity and general information (a) General information about the Group These financial statements are the consolidated financial statements of Societatea Energetica Electrica S.A. (“the Company” or “Electrica SA”) and its subsidiaries (together “the Group”) as at and for the year ended 31 December 2023. The registered office of the Company is no. 9, Grigore Alexandrescu Street, District 1, Bucharest, Romania. The Company has sole registration code 13267221 and Trade Register registration number J40/7425/2000. As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital. The Company’s shares are listed on the Bucharest Stock Exchange and the global depository receipts (“GDRs”) are listed on the London Stock Exchange. The shares traded on the London Stock Exchange are the Subsidiary Activity registration Head Office % shareholding code Sole Electrica Producție Energie S.A.(“EPE”) Electrica Energie Verde 1 SRL* (“EEV1” – formerly Long Bridge Milenium SRL) Electricity generation 44854129 Bucuresti 99.9920% Electricity generation 19157481 Bucuresti 100%* Sunwind Energy S.R.L. Electricity generation New Trend Energy S.R.L. Electricity generation 42910478 Constanta 42921590 Constanta Green Energy Consultancy & Investments S.R.L. Electricity generation 29172101 Prahova Foton Power Energy S.R.L. Electricity generation 43652555 Constanta 60% 60% 75% 30% global depositary receipts, one global depositary receipt representing four shares. The Bank of New York * Indirect ownership - Electrica Energie Verde 1 SRL is 100% owned by the subsidiary Electrica Furnizare S.A. Mellon is the depositary bank for these securities. As at 31 December 2023 the Company’s subsidiaries are the following: ** On 31.12.2023 the merger by absorption took place between Societatea Energetica Electrica SA (ELSA) as absorbing company and Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) and Green Energy Consultancy & Investments SRL (GECI) as absorbed companies. Sole As at 31 December 2023 and 31 December 2022, the Company’s associates are the following: Subsidiary Activity registration Head Office % shareholding Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord code 14476722 Cluj-Napoca 99.99999929% Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% Electrica Serv S.A. (“SERV”) Services in the energy sector (maintenance, repairs, construction) Sunwind Energy S.R.L. Electricity generation New Trend Energy S.R.L. Electricity generation Foton Power Energy S.R.L. Electricity generation 17329505 Bucuresti 99.99998095% 42910478 Bucuresti 42921590 Constanta 43652555 Constanta 100% 60% 60% As at 31 December 2022 the Company’s subsidiaries are the following: Subsidiary Activity registration Head Office % shareholding Sole Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord code 14476722 Cluj-Napoca 99.99999929% Associate Activity registration code Sole Head Office % shareholding % shareholding as at 31 as at 31 December 2023 December 2022 Crucea Power Park S.R.L. Electricity generation 25242042 Constanta 40% 30% Changes in Group structure during 2023 31 December 2022 the project was acquired 60%. Sunwind Energy develops the photovoltaic project Acquisition of shares in subsidies “Satu Mare 2”, with an installed capacity of 27 MW. The project is in the “ready-to-build” phase and is located IOn 6 February 2023, Electrica completed the in the vicinity of Botiz commune, Satu Mare county. acquisition of Green Energy Consultancy & Also, the Financing Contract was signed between Investments S.R.L., having as main object of activity Sunwind Energy SRL as the Beneficiary and the Ministry the production of energy from photovoltaic sources. of Energy as the coordinator of reforms and/or Until 31 December 2022 the company was acquired investments for the National Recovery and Resilience 75%. Green Energy Consultancy & Investments S.R.L. Plan (NRRP). develops the photovoltaic project “Vulturu”, with a designed installed capacity of 12 MWp DC (peak power On 31 July 2023, Electrica acquired an additional 30% of at the panels level) and 9.75 MW AC (authorised power the shares and voting interests in Foton Power Energy for delivery into the grid), located near Vulturu locality, S.R.L.,having as main object of activity the production Vrancea county. The project is in the “ready-to-build” of energy from photovoltaic sources. As a result, the phase. Group’s equity interest increased from 30% to 60%, thus, Foton Power Energy S.R.L. becoming a subsidiary Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% On 24 March 2023, Electrica completed the acquisition of Electrica Group. Foton Power Energy S.R.L. develops Electrica Serv S.A. (“SERV”) Services in the energy sector (maintenance, repairs, construction) 17329505 Bucuresti 99.99998095% of Sunwind Energy S.R.L, which has as its main activity the photovoltaic project “Bihor 1”, with a projected production of energy from photovoltaic sources. Until installed capacity of 77.5 MW, located near Oradea NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A460 461 Acquisition of shares in associates and serves over 3.93 million users. It invoices the amendment is introduced by Law no. 184/2018). The Regarding the costs of electricity purchased for own electricity distribution service to electricity suppliers postponed green certificates will be reinserted starting technological consumption (“NL”): IOn 15 May 2023, Electrica acquired an additional 10% (mainly to Electrica Furnizare S.A. subsidiary) which from 1 January 2021, in equal monthly tranches until 31 of the shares and voting interests in Crucea Power Park further invoices the electricity consumption to final December 2030. S.R.L.. As a result, the Group’s equity interest increased consumers. from 30% to 40%. Electrica Furnizare S.A. is active on both the (b) Regulations in the energy sector Merger by absorption within the Group competitive market and as the supplier of last resort Regulatory environment for approx. 3.4 million clients. Electrica Furnizare S.A. On 20 December 2023, the Extraordinary General holds an electricity supply license that covers the The activity in the energy sector is regulated by the • ANRE has the right to correct the projection of distribution tariffs for a regulatory period or for one year, if there have been significant variations in prices on the electricity market, which lead to an important change in distribution service costs; Meeting of the Company’s Shareholders (EGMS) entire territory of Romania, which was extended in 2021 Romanian Energy Regulatory Authority. • at the justified request of the Distribution approved the merger by absorption between for a period of 10 years. At the same time, Electrica Operator, the regulated revenue of year t + 1 Societatea Energetica Electrica SA (“ELSA”), Societatea Furnizare S.A. ensures the supply of electricity for Some of the main responsibilities of ANRE are to may include a cost adjustment of regulated Electrica Productie Energie SA (“EPE”), Electrica Energie household customers in a universal service regime. At approve prices and tariffs and to issue substantiation network losses (“NL”) forecast for year t + 1, by Verde 1 SRL (“EEV1”) and Green Energy Consultancy & the same time, it also holds a license for carrying out methodologies used to set regulated prices and tariffs. changing the reference price, depending on Investments SRL (“GECI”) (together the „Companies”) the activity of natural gas supply, valid until 2032. In and the participation of the Companies in the merger, 2023, Electrica Furnizare S.A. was designated supplier Electricity distribution with Societatea Energetica Electrica SA as absorbing of last resort („FUI”) for electricity in May and October, the evolution of prices on the electricity market and the result of the analysis of the evolution of tariffs for the current regulatory period. company, Electrica Productie Energie SA, Electrica and for natural gas it was nominated supplier of last In 2019, a new regulatory period began, governed Energie Verde 1 SRL and Green Energy Consultancy resort in April and November 2023. by the provisions of ANRE Order no. 169/2018 for the In 2022, according to the Government’s emergency & Investments SRL as absorbed companies, with the approval of the Methodology for establishing the tariffs ordinance (GEO) no. 119/2022, the additional costs for effective date of the merger being 31 December 2023. Through the acquisition of the new subsidiary Electrica for the electricity distribution service (IV regulatory purchased electricity (determined as the difference Group’s main activities S.R.L.) as of 31 August 2020, establishment of a new legal entity Electrica Productie Energie S.A. and also Energie Verde 1 S.R.L. (formerly Long Bridge Milenium period: 2019-2023). The following items are considered by ANRE 1 January 2022 and 31 August 2023, in order to cover between the realized costs and the costs included in the approved distribution tariffs), made between The activities of the Group include operation and the five shares sales and purchase agreements in when setting the target revenue for one year the own technological consumption, compared construction of electricity distribution networks and five project companies having as main activity the of the regulatory period: controllable and non- to the costs included in the tariffs regulated (and electricity and natural gas supply to final consumer production of energy from renewable sources the controllable operating and maintenance costs; not only borrowings), are capitalized quarterly and as well as energy production from renewable sources. Group entered on the electricity generation segment, costs of electricity purchased for own technological remunerated with 50% of the regulated rate of The Group is the electricity distribution operator in particular from renewable sources. Currently, one consumption (related to distribution network); return (RRR) approved by ANRE, applicable during and the main electricity supplier in Muntenia Nord of the project companies has been absorbed through regulated depreciation charge; the return on the the amortization period of the respective costs and area (Prahova, Buzau, Dambovita, Braila, Galati and merger by the parent company where a photovoltaic regulated assets base (“RAB”); revenues from reactive are recognized as a distinctive component in the Vrancea counties), Transilvania Nord area (Cluj, park with a capacity of 12 MW is being developed. energy and revenues from other activities, as well as regulated tariffs, called the component related to Maramures, Satu Mare, Salaj, Bihor and Bistrita corrections from previous periods. Nasaud counties) and Transilvania Sud area (Brasov, Through the merger that took place on 31 December additional costs with NL. Also, ANRE elaborated the Methodological norms regarding the recognition in Alba, Sibiu, Mures, Harghita and Covasna counties), 2023 between the parent company and its former Starting with 13 May 2020, the regulated rate of return the tariffs of the additional costs with the acquisition of operating with transformation station and 0.4 kV to 110 subsidiary, Electrica Energie Verde 1 S.R.L., Electrica („RRR”) of RAB is 6.39% to which is added: electricity for covering the network losses compared to kV power lines. SA became a producer of electricity from renewable sources that operates a photovoltaic park in Stanesti, The Company’s distribution subsidiary, Distributie Giurgiu county, with an installed capacity of MW Energie Electrica Romania S.A. which resulted 7.5 (operating capacity limited MW to 6.8). In 2023 from the merger through absorption of the three the operation of the plant was continuous, with no distribution subsidiaries Societatea de Distributie a significant events leading to production shutdowns, Energiei Electrice Transilvania Nord S.A., Societatea producing in total MWh 9,599 (2022: MWh 10,466). de Distributie a Energiei Electrice Muntenia Nord S.A. According to Law no. 220/2008 and based on the and Societatea de Distributie a Energiei Electrice accreditation issued by ANRE, Stanesti park receives Transilvania Sud S.A. now operates electric lines in a number of 6 green certificates (“GC”) for each MWh 18 counties, from three geographical areas of the produced and delivered, of which until 2020, 4 GC country, representing 40.7% of the Romanian territory, were issued for trading and 2 GC were postponed (the • 1% incentive for new investments in RED, approved by ANRE; • 2% incentive for investments in the electricity distribution network financed from own funds in projects in which European non-reimbursable funds are also attracted, if the investments are performed and put into function by operators after 1 February 2021, approved by ANRE; • 1% incentive for investments in projects of common interest (PIC), approved by ANRE. the costs included in the regulated tariffs, the purpose of these norms is to establish the substantiation of additional costs with the purchase of electricity to cover the NL, as well as the conditions for their recognition in the regulated income, based on which the distribution tariffs are established. Law no. 357/2022 regarding the approval of GEO no. 119/2022 provides for the capitalization of additional costs with the purchase of electricity made between 1 January 2022 and 31 March 2025. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A462 463 According to the Government’s Emergency Ordinance changes, except the capitalised costs with own Competitive market (“GEO”) no. 153/2022 during the period 1 January 2023 – technological consumption. The difference between • The obligation to store natural gas was calculated by ANRE according to two criteria: 31 March 2025 is established the centralized electricity the purchase price of electricity for own technological Transactions on the competitive wholesale market the obligation of all suppliers to store a quantity purchasing mechanism, OPCOM being designated consumption versus the ex-ante purchase price are transparent, public, centralised and non- of gas that covers 90% of Romania’s storage the sole purchaser. The distribution operators (“OD”) recognized by ANRE in the related regulated tariffs discriminatory. Participants to the wholesale market capacity and the market share that each will buy from OPCOM through an annual/monthly 2022 related to the purchase of electricity and can trade electricity based on the bilateral contracts supplier has had it in 2022; mechanism at least 75% of the quantity forecasted natural gas, made between 1 January 2022 and 31 concluded on the dedicated markets. and validated by National Authority for Energy March 2025, in order to cover the own technological • The obligation of natural gas producers to sell Regulation (“ANRE”) at the price of 450 RON/MWh, consumption (NL) for economic operators for energy The following support mechanisms have been put in at the price of 150 RON/MWh the necessary and the producers will sell to OPCOM through annual/ transport and distribution services are capitalised. place: monthly mechanism 80% of the quantity forecasted These are recognized as a distinctive component in quantities to the suppliers of domestic customers/heat energy producers. and validated by ANRE and Transelectrica at the price the regulated tariffs, named component related to • compensation of household consumers for part of 450 RON/MWh. additional network losses costs. Also, law no. 357/2022 of the costs incurred by the electricity invoices • The mechanism provides - OPCOM, as sole In 2023 ANRE amended the Methodology for setting the capitalization of additional costs with the purchase (electricity producers with an installed power tariffs for the electricity distribution service, by ANRE of electricity made between 1 January 2022 and 31 • capping the selling price for household and equal to or greater than 10 MW) and sells the regarding the approval of GEO no. 119/2022 provides for (1 November 2021 until 31 March 2022); acquirer, buys electricity from producers Order no. 79/2023 (Order) and defined 2024 as the March 2025. transition period from the fourth regulatory period (PR4) to the fifth regulatory period (PR5). Thus, for DEER, Electricity and natural gases supply in 2024 the zonal distribution tariffs established on non-household consumers (1 November 2021 – purchased electricity to electricity suppliers 31 March 2025); that have contracts with final customers, the transmission system operator electricity and • exemption (1 November 2021 until 31 January distribution system operators electricity to the basis of a single regulated revenue and single NL The regulatory framework has undergone significant 2022) of several types of non-household cover their own technological consumption; the targets for the total DEER are maintained. changes over the past decade, including the consumers from payment of regulated tariffs price paid by OPCOM to electricity producers, Tariff adjustments the separation of supply and distribution activities, the liberalization of electricity and natural gas markets, and other taxes/contributions. for the quantities of electricity sold by them is 450 RON/MWh and the sale price of OPCOM implementation of the support scheme for renewable The amounts compensated will be received from the to the economic operators is also 450 RON/ Annually, ANRE makes revenue corrections due to: energy, the support of electricity prosumers and the National Agency for Payments and Social Inspection MWh (OPCOM has the right to charge market change in the quantities of electricity distributed capping of prices to final customers. for household consumers and a from the Ministry of participants tariffs/commissions at the level of compared to the forecast; change in quantities and Energy for non-household consumers. (for further costs recorded by organizing the centralized acquisition price for the regulated own technological In 2022 the electricity market was completely details please refer to Note 18). consumption compared to the forecast; the annual liberalized for all categories of customers and the electricity purchase mechanism); In order to carry out the transactions, OPCOM shall organize change in controllable operating and maintenance price was established by suppliers through free market Over 2023, several changes have been brought to the an annual procurement procedure as well as an costs, realized and accepted against the forecast; mechanisms, both for universal service offers and for legislation, having a significant impact on the supply of additional procurement procedure each month annual change in uncontrollable operating and the offers related to the competitive market. electricity, as follows: maintenance costs compared to the forecast; changes in revenues from reactive energy compared Regulated market to the forecast; failure to meet/exceeding the • Price capped for electricity for household and electricity quantities are firm obligations of non-domestic customers according to GEO no. electricity producers and economic operators for the quantities of electricity to be delivered in the following month; annual and monthly approved investments programme; revenues Starting with 1 November 2021, in the context of the 27/2022, with subsequent amendments and and are evenly distributed across all settlement generated from other operations made by the increase in prices for the electricity and natural gas additions distribution operator and the quantity of electricity markets at international and national level, the energy intervals each month (contracts are concluded by signing, within maximum 3 working days. recovered from recalculations. crisis, as well as the effects caused by these increases • The limitation of the average purchase price among the population, in Romania, a series of support considered for determining the amounts to The categories of customers to whom the electricity The regulator establishes through the regulated measures for electricity and natural gas customers be recovered from the state budget initially to price capped applies in 2023: income and tariffs for the following year taking into have been applied, by establishing compensation and 1,300 RON/MWh; and currently at 900 RON/MWh account the justified corrections presented above, capping schemes between 1 November 2021 and 31 (according to Law no. 206/2023, which approves • household customers (tranche <100 KWh/ which are added algebraically to the income for the March 2025. following year. The group does not recognize assets and liabilities resulting from regulation in relation to these deficits or surpluses, as the differences are recovered or returned through the annual tariff GEO 153/2022), except of the purchase intended month - maximum price 0.68 lei/KWh, tranche for supply as a last resort, where this limitation 100-300 KWh/month - with the distinct estimate does not apply; of the volume exceeding 255 KWh/month - respectively the price level capped at 0.800 lei/ KWh and with a maximum price of 1.3 lei/KWh. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A464 465 • non-household customers - divided separately it started injecting electricity into the network), for a According to EGO 119/2022 and ANRE regulations, the The Group actively reviews and implements policies into the category of customers benefiting period of 15 (fifteen) years, 6 (six) green certificates capitalised costs of intangible non-current assets are and strategies to recover from the loss generated by from capping for 85% of consumption with for each MWh of electricity produced and delivered recorded in the accounting records and therefore on the increase in energy price, strategies which mainly a price capped at 1 leu/KWh, category of to the grid, out of which, for the period 1 July 2013 – 31 the annual financial statements according to OMFP aim in revising the method of generating the selling customers benefiting from capping for 100% of December 2020, according to Law 23/2014 and Law 2844/2016 with the instructions developed by the price for final consumers, concluding agreements consumption, price capped at 1 leu/KWh and the 184/2018, 2 (two) green certificates were postponed Ministry of Finance. ANRE will determine the recognized with specific clauses ensuring new financing facilities, rest of the companies at a maximum price of from trading. Those two GC postponed from trading annual amounts of the capitalized costs based on closely monitoring suppliers and consumers payment 1.300 lei/KWh. are to be recovered in equal monthly tranches starting the quantities and prices recognized for NL, and by 15 terms, monitoring daily cash flow and forecasted from 1 January 2021 until 31 December 2030. March of the year immediately following the year of cash flow. The Group continues to closely monitor the The categories of customers to whom the natural gas capitalization of the additional costs, ANRE will transmit macroeconomic outlook and as additional information price capped applies in 2023: The green certificates issued by Transelectrica for the to the distribution operators the recognized annual will be available, their effects on the activity of Group production made by the Stanesti photovoltaic park, amounts of the capitalized costs for the previous companies and over the financial results will be • household customers – the maximum price is during the validity period of the accreditation decision year. The computation of the capitalized amounts is analyzed. capped at 0.310 lei/KWh; issued by ANRE, can be traded, according to GEO carried out in compliance with the legislation specific 24/2017, until 31 March 2032, respectively including the to the entities that are the subject of GEO 119/2022, with Geopolitical tensions • non-household customers - the maximum period after the expiration of the validity period of the subsequent additions and changes. price is capped at 0.370 lei/KWh for an annual accreditation decision (31 January 2028 in the case of In February 2022 global geopolitical tensions consumption of up to 50 GWh. the Stanesti photovoltaic park). The changes brought by EGO 119/2022 are changes the significantly escalated following military interventions recuperation of the additional cost of NL by splitting it in Ukraine by the Russian Federation. As a result The compensated amounts are settled by the National Increase in Energy price impact in current operating expenses (“OPEX”) and capitalised of these escalations, economic uncertainties in Agency for Payments and Social Inspection („ANPIS”) costs (“CAPEX”), there is a portion of unit costs energy and capital markets have increased, with for household consumers and by the Ministry of Energy The regulatory framework in the electricity sector has recuperated at cost at 450 RON/MWh (ex-ante tariffs global energy prices expected to be highly volatile for non-household consumers. undergone significant changes in the last decade, recognition) and for the difference above this level for the foreseeable future. As at the date of these regarding the total liberalization of the electricity and of 450 RON/MWh up to the effective average price, consolidated financial statements, management Green certificates natural gas market, the implementation of the support recognized by ANRE, there is a linear depreciation over is unable to reliably estimate the effects on the Electricity suppliers have a legal obligation to purchase consumers, the limitation of prices for final consumers of Return (RRR). These changes are also applicable to consequence on the business, operations, and scheme for renewable energy, the support of electricity 5 years stipulated with return at 50% of Regulated Rate Groups financial outlook and cannot exclude adverse green certificates from producers of electricity from and the capitalization of additional costs with own the year 2023. For the supply segment, both in 2023 and in 2022 the and growth of the Group’s business in the current financial position. Management believes it is taking all the necessary measures to support the sustainability renewable sources, based on annual targets or technological consumption. quotas set by law, which are applied to the quantity of electricity purchased and supplied to final consumers. As a result, for the distribution segment, effect of retail prices for electricity was covered as circumstances and that judgements used in these The cost of green certificates is invoiced to final Romanian Regulatory Authority for Energy – ANRE grants received from the state authorities, as a result financial statements remain appropriate. consumers separately from the tariffs for electricity. (https://www.anre.ro/) has to adopt similar measures of the application of the mechanism of capping the Electricity generation Green certificates through its Order 129/12.10.2022 approving the prices for electricity and natural gas, as a result of the 2 Basis of accounting Methodological Norms regarding the recognition in application of Ordinance 27/2022, with subsequent the tariffs of the additional costs with the acquisition of amendments and additions. The implementation These annual consolidated financial statements electricity for covering the network losses compared to method of these schemes and the settlement have been prepared in accordance with OMFP no. the costs included in the regulated tariffs, carried out mechanism of the amounts granted as support to 2844/2016. The consolidated financial statements were Producers of electricity from renewable energy sources between 1 January 2022 – 31 March 2025. clients, ex post from the state budget to the electricity authorized for issue by the Board of Directors on 05 (RES) have the right, according to Law no. 220/2008, suppliers, have generated constraints in terms of cash March 2024 and will be submitted for shareholders’ to receive a certain number of green certificates, This change in energy sector has generated last flow, as well as uncertainties regarding the recovery approval in the meeting scheduled on 25 April 204. depending on the technology used (for example: year a new reporting requirement for an accounting the full amount of the respective amounts by the hydraulic, wind, solar, geothermal, biomass, bioliquids, treatment in place to cover own technological suppliers. In this context, EFSA has adapted its medium These consolidated financial statements are not in biogas), for each MWh produced and delivered to the consumption and it was updated in the OMFP and long-term strategy, so as to manage the impact compliance with IFRS-EU. network and for a certain period of time, depending on 2844/2016 i.e. it now allows the capitalization of of these measures on the company’s activities in a the degree of novelty of the group/power plant. such additional costs related to own technological responsible and sustainable manner in the context Starting with the consolidated financial statements consumption („NL”) as intangible asset which has to of a regulatory framework that has seen numerous as at and for the year ended 31 December 2022 Starting from February 2013, the Stanesti photovoltaic be depreciated linearly over next 5 years (please see successive and major changes in the recent period. the Group’s financial statements prepared in park has the right to receive (the month from which note 6 and 23). accordance with the Order of Ministry of Public NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A466 467 Finances 2844/2016 included the capitalization of Revenue recognition The control or regulation referred to in condition (a) (b) Assumptions and estimation uncertainties the additional costs with the purchase of electricity could be by contract or otherwise (such as through a made between 1 January 2022 and 31 March 2025, in The Group assesses its revenue arrangements regulator). The activities of the electricity distribution Information about assumptions and estimation order to cover the own technological consumption based on specific criteria to determine if it is acting operators, including distribution tariffs, are regulated uncertainties that may result in a material adjustment (NL) for economic operators for energy transport and as a principal or an agent. The Group has identified by ANRE. in the subsequent twelve-month period is included in distribution services, which is capitalized quarterly, that it acts in the capacity of an agent in case of the following notes: the first asset (intangible asset) being registered on transactions as Balancing Responsible Party (“BRP”) The concession contracts are concluded for a period 30 September 2022. Order of the Ministry of Public and thus recognises revenue as the net amount of of 49 years and may be extended for a period equal • Note 6 d) – assumptions regarding recognition Finance (OMFP) no. 3900/2022 was issued and brings the commission earned by the Group. The Group to no more than half of that period. As a price for the of revenue from supply and distribution of additional accounting specifications to the accounting concluded that it is acting as a principal in all other concession, the operators pay an annual royalty fee electricity to consumers based on estimates for regulations in force at OMFP no. 2844/2016, which revenue arrangements. recognized in the distribution tariff of 1/1000 of the electricity delivered and for which no reading provided for the financial-accounting treatment revenues from electricity distribution. According to the was performed yet; applied to the additional costs not recovered Service Concession Arrangements concession contracts, the operators use the assets through the tariff related to the own technological representing the distribution network owned by them • Notes 18 and 30 – assumptions and estimates consumption of the distribution operators (OD). The distribution subsidiaries (as operators) that located in the above-mentioned territory for electricity about measurement of the allowance for trade The Group has consistently applied the accounting December 2020 concluded concession contracts with grantor will buy at the end of the term of concession (ECL), respectively in determining the loss rates; policies to all periods presented in these consolidated the Ministry of Economy (as grantor) in 2005, updated contract the ownership right of the „relevant assets”, financial statements. Details of the Group’s accounting by subsequent addendums. These contracts concern that are mainly the electricity distribution networks, at • Note 22 - assumptions regarding the revalued policies are included in Note 6. the operation of electricity distribution service in the a price equal to the value of the regulated assets base value of tangible assets; merged into one single distribution operator as of 31 distribution. According to the concession contracts, the receivables at the level of expected credit losses established territory (Transilvania Nord, Transilvania at the end of the concession. 3 Functional and presentation currency Sud, Muntenia Nord), on the risk and responsibility • Notes 28 and 32 – recognition and measurement These consolidated financial statements are regulations applicable to the operation, modernization, expenditure in relation to the development and presented in Romanian Lei (RON), which is the rehabilitation and development of energy distribution maintenance of the infrastructure. The construction • Note 18 – assumptions and estimates of functional currency of all Group companies. All networks specified in the Electricity Law, the terms and works are either outsourced by the Group to sub- amounts to be received from the state following amounts have been rounded to the nearest thousand, conditions of the licenses for electricity distribution contractors, or performed internally. Significant the application of the compensation and unless otherwise indicated. and the regulations issued by ANRE. The distribution management judgment is involved in accounting for capping scheme. of the operators and taking into account the Within the arrangements, the Group incurs significant of provisions and contingencies; operator resulting from the merger of the three the concession arrangements under IFRIC 12, including 4 Use of judgements and estimates distribution operators within the Group, Distributie those in respect of the recognition of revenue based Measurement of fair values Energie Electrica Romania concluded addendums to on the separation of construction or upgrade services In preparing these consolidated financial statements, the concession agreements signed with the Ministry from operation services. management has made judgements, estimates of Economy for the operation of electricity distribution A number of the Group’s accounting policies and disclosures require the measurement of fair values, for and assumptions that affect the application of the service in all three areas. The concessionaires act as service suppliers (they both financial and non-financial assets and liabilities. Group’s accounting policies and the reported amounts build, modernize and maintain the distribution of assets, liabilities, income and expenses. Actual IFRIC 12 “Service Concession Arrangements” deals with network). This results in revenues and expenditures When measuring the fair value of an asset or a liability, results may differ from these estimates. Estimates public-to-private service concession arrangements. being recognized in the profit and loss account the Group uses market observable data as far as and underlying assumptions are reviewed on an IFRIC 12 applies to public-to-private service concession (related to the construction and modernization of possible. Fair values are categorised into different ongoing basis. Revisions to estimates are recognised arrangements if: infrastructure), as well as of a margin resulting from levels in a fair value hierarchy based on the inputs rendering the construction services established by used in the valuation techniques as follows: (a) the grantor controls or regulates what services the the Group. Starting with 30 June 2023, the Group operator must provide with the infrastructure, to reassessed the margin applied and a margin of 4.35% • Level 1: quoted prices (unadjusted) in active whom it must provide them, and at what price; and is applied for period 01 January 2023 – 31 December markets for identical assets or liabilities, which Information about judgements made in applying 2023, based on the Group’s experience in working the Group can access; accounting policies that have the most significant (b) the grantor controls - through ownership, with external contractors. Until 31 December 2022, the effects on the amounts recognised in the consolidated beneficial entitlement or otherwise - any margin applied was 3%, as presented in the annual • Level 2: inputs other than quoted prices included financial statements is included below. significant residual interest in the infrastructure at consolidated financial statements as at and for the in Level 1 that are observable for the asset or the end of the term of the arrangement. year ended 31 December 2022. liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); prospectively. (a) Judgements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A468 469 • Level 3: inputs for the asset or liability that including RON 2,736,419 thousand overdraft limits (b) Basis of consolidation are not based on observable market data and RON 2,225,063 thousand long term loans (unobservable inputs). limit; (i) Subsidiaries investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. If the inputs used to measure the fair value of an • The utilization of not yet confirmed facilities, Subsidiaries are entities controlled by the Group. The asset or a liability might be categorised in different overdrafts amounting to RON 574,111 thousand Group controls an entity when it is exposed to, or has (c) Business combinations levels of the fair value hierarchy, then the fair value which will be drawn during the forecast period rights to, variable returns from its involvement with measurement is categorised in its entirety in the same and of which RON 250,000 thousand will be the entity and has the ability to affect those returns Acquisitions of businesses are accounted for using level of the fair value hierarchy as the lowest level input reimbursed during the forecast period. through its power over the entity. Subsidiaries are the acquisition method. The consideration transferred that is significant to the entire measurement. included in the consolidation perimeter from the in a business combination is measured at fair value, At the date of issuance of these consolidated financial date that control commences until the date on which which is calculated as the sum of the acquisition-date The Group recognises transfers between levels of the statements the regulatory position may be further control ceases. fair value hierarchy at the end of the reporting period amended and there may be further laws enacted during which the change has occurred. which could adversely impact the Groups operating (ii) Loss of control cash flows during the forecast period. Given the fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition- Further information about the assumptions made in current market uncertainties, the Group is closely On the loss of control, the Group derecognizes the related costs are recognised in profit or loss as measuring fair values is included in the following notes: monitoring the market context and is continuously assets and liabilities of the subsidiary, any non- incurred. • Note 30 – Financial instruments; and increase of bank overdrafts and long-term loans. equity related to the subsidiary. Any surplus or deficit (d) Revenue In light of the importance of the Group as the supplier arising on the loss of control is recognized in profit or analysing the opportunities for optimisation of debt controlling interests and the other components of • Note 22 – Property, plant and equipment. and distributed of electricity on the Romanian market, loss. If the Group retains any interest in the previous Revenue is recognized when or as the customer 5 Basis of measurement having 39.7 % (according to the latest ANRE report 2022 for the distribution segment) as market share on the electricity distribution and 17.72 % (according subsidiary, then such interest is measured at fair acquires control over the goods or services rendered, value at the date that control is lost. Subsequently at the amount which reflects the price at which the that retained interest is accounted for as an equity- Group is expected to be entitled to receive in exchange The consolidated financial statements have been to the latest ANRE report October 2022 for the supply accounted investee or as an available-for-sale of those goods or services. Revenue is recognized prepared on the historical cost basis except for the segment) as market share on the electricity supply financial asset depending on the level of influence at the fair value of the services rendered or goods land and buildings which are measured based on the market and having as main shareholder of Electrica retained. delivered, net of VAT, excises or other taxes related to revaluation model. 6 Accounting policies (a) Going concern SA the Romanian State, the management believes sufficient financing will be made available to cover any financing requirements arising from market uncertainty and Group will be able to meet its obligations as they fall due. (iii) Non-controlling interests the sale. Supply and distribution of electricity The Group measures any non-controlling interests in the subsidiary at their proportionate share of the The revenue from supply and distribution of electricity subsidiary’s identifiable net assets. to consumers is recognized when electricity is The consolidated financial statements have been Based upon the above projections and other delivered to consumers (consumed by consumers), prepared on the going concern basis. In making this information, given the measures already implemented Changes in the Group’s interest in a subsidiary that based on meter readings and based on estimates judgement management considers current trading and the strategies to reduce the risks which may occur do not result in a loss of control are accounted for as for electricity delivered and for which no reading performance and access to finance resources. The due to the instability of the economic environment, equity transactions. Adjustments to non-controlling was performed yet. The invoicing of electricity sales Group has prepared a forecast that includes the the Board of Directors has, at the time of approving interests are based on a proportionate amount of the is performed on a monthly basis. Monthly electricity following assumptions: the consolidated financial statements, a reasonable net assets of the subsidiary. expectation that the Group has adequate resources to invoices are based on meter readings or on estimated consumptions based on the historical data of each • A continuation of the support scheme until continue in operational existence for the foreseeable (iv) Transactions eliminated on consolidation consumer. Electricity supplied to consumers which is 31 March 2025 according to the applicable future. Thus they continue to adopt the going concern not yet billed as at the reporting date is accrued on legislation but with a more stable flow of basis of accounting in preparing the consolidated Intra-group balances and transactions, and any the basis of recent average consumption or based repayments of the reimbursement requests for financial statements. subsidies as compared with last year, as the mechanism has been operationally improved; unrealized income and expenses arising from intra- on subsequent meter readings. Differences between group transactions, are eliminated in preparing the estimated and actual amounts are recorded in consolidated financial statements. subsequent periods. • The renewal of confirmed debt facilities is planned up to a limit of RON 4,961,482 thousand, Unrealized gains arising from transactions with equity- Revenues from electricity distribution and supply also accounted investees are eliminated against the include the cost of green certificates recharged by the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A470 471 Group to final consumers (see paragraph (k)). certificates can be sold on the spot market, term (e) Other income (ii) Defined benefit plans market or a combination of both. The selling price The Group acts in the capacity of an agent in case of must fall between the minimum and maximum values Revenues from the subsidies The Group’s net obligation in respect of defined transactions as Balancing Responsible Party (“BRP”). set by Law no. 220/2008 for establishing the system for benefit plans is calculated separately for each plan Thus, in its quality as an agent, the Group recognizes promoting the production of electricity from renewable Revenues from subsidies are recognised in profit or by estimating the amount of future benefit that revenue for the commission earned in exchange for energy sources, republished, with subsequent loss on a systematic basis over the periods in which employees have earned in the current and prior facilitating the transfer of goods or services. Any holder amendments. Revenue from green certificates is the Group recognises as expenses the related costs periods, discounting that amount. of a production/supply/distribution license must be recognized in the profit or loss statement when the for which the grants are intended to compensate, established as a Balancing Responsible Party or must green certificates are sold on the trading market. as a result of the application of the electricity price The calculation of defined benefit obligations is delegate this responsibility to a Balancing Responsible cap. These subsidies are recoverable from the performed annually by a qualified actuary using the Party. By delegating this responsibility to a BRP, there is Service concession arrangement National Agency for Payments and Social Inspection projected unit credit method. the benefit of imbalance aggregation in the meaning for household consumers and from the Ministry of of Balancing Market cost reduction by comparison Revenue related to construction or upgrade services Energy for non-household consumers, as a result of Re-measurements of the net defined benefit liability, with the case where the producer/supplier/distributor under service concession arrangement is recognised the application of the electricity and natural gas price which comprise actuarial gains and losses, are would act itself as a Balancing Responsible Party. based on the stage of completion of the work ceiling mechanism and are applicable for period 1 recognised immediately in other comprehensive performed, consistent with the accounting policy on November 2021 – 31 March 2025. Starting with April income. The Group determines the net interest Electrica Furnizare S.A. acts as BRP for a large number recognising revenue on construction contracts, as 2022, the revenues from subsidies are recorded as expense/(income) on the net defined benefit liability of participants, electricity producers as well as follows: electricity suppliers and distribution operators. For the difference between the income calculated at for the period by applying the discount rate used the contract price and the income invoiced to the to measure the defined benefit obligation at the the settlement of imbalances, BRP Electrica is using • Revenue in respect of variations to contracts customer at the capped price. beginning of the annual period to the then-net defined the “method of internal redistribution of payments”, and incentive payments is recognised when benefit liability, taking into account any changes in the ensuring benefits of imbalance aggregation for all there is an enforceable right to payment and (f) Finance income and finance costs net defined benefit liability during the period as a result the participants included in the BRP. BRP Electrica it is highly probable it will be agreed by the of contributions and benefit payments. Net interest provides the transmission of physical notifications to customer. Variable consideration is assessed The Group’s finance income and finance costs include: expense and other expenses related to defined benefit CNTEE Transelectrica SA and its role is to balance the on a contract by contract basis according to plans are recognised in profit or loss. differences between the electricity contracted and the the facts, circumstances and terms of each • interest income; electricity measured at the level of the entire BRP. project and only recognised to the extent that it is highly probable not to significantly reverse • interest expense; Generation and sale of electricity in the future. Revenue in respect of claims is recognised only if it is highly probable not to The electricity produced by the Group is mainly sold on reverse in future periods. the Day Ahead Market and the revenue is recognized • foreign currency gains or losses on financial curtailment is recognised immediately in profit or assets and financial liabilities; loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on when the electricity is injected into the network and is • If the outcome of a construction contract can • impairment losses recognised on financial settlement occurs. being sold on the market. be estimated reliably, then contract revenue is recognised in profit or loss in proportion to the assets (other than trade receivables). (iii) Other long-term employee benefits Sale of green certificates stage of completion of the contract. The stage of Interest income or expense is recognised using the Electricity suppliers have a legal obligation to purchase of work performed. Otherwise, contract revenue green certificates from producers of electricity from is recognized only to the extent of contract costs (g) Employee benefits renewable sources, based on annual targets or incurred that are likely to be recoverable. quotas set by law, which are applied to the quantity of (i) Short-term employee benefits electricity purchased and supplied to final customers. • Contract expenses are recognized as incurred completion is assessed with reference to surveys effective interest method. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they Cost of green certificates is invoiced to final customers unless they create an asset related to future Short-term employee benefits are measured on an arise. separately from the tariffs for electricity. contract activity. An expected loss on a contract undiscounted basis and are expensed as the related is recognised immediately as expense. service is provided. A liability is recognised for the (iv) Termination benefits Electricity producers are entitled by the law in force to receive a certain number of green certificates for each MWH of electricity produced from renewable sources and injected into the network. The green amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as Termination benefits are expensed at the earlier of a result of past service provided by the employee and when the Group can no longer withdraw the offer of the obligation can be estimated reliably. those benefits and when the Group recognises costs NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A472 473 for a restructuring. If benefits are not expected to can be used. Deferred tax assets are reviewed at each (i) Green certificates loss when consumed and presented in “Repairs, be settled wholly within 12 months of the end of the reporting date and are reduced to the extent that it is maintenance and materials”. reporting period, then they are discounted. no longer probable that the related tax benefit will be Electricity supply realised. (k) Property, plant and equipment (h) (h) Income tax Electricity suppliers have a legal obligation to purchase Deferred tax is measured at the tax rates that are green certificates from producers of electricity from (i) Recognition Income tax expense comprises current and deferred expected to be applied to temporary differences when renewable sources, based on annual targets or tax. It is recognised in profit or loss except to the extent they reverse, using tax rates enacted or substantively quotas set by law, which are applied to the quantity of Property, plant and equipment are stated initially at that it relates to a business combination or items enacted at the reporting date. The measurement of electricity purchased and supplied to final customers. cost, which includes purchase price and other costs recognised directly in equity or in other comprehensive deferred tax reflects the tax consequences that would directly attributable to acquisition and bringing the income. (i) Current tax follow from the manner in which the Group expects, The cost of green certificates is accrued in the profit or asset to the location and condition necessary for their at the reporting date, to recover or settle the carrying loss based on the quantitative quota determined by intended use. amount of its assets and liabilities. Deferred tax assets the regulator representing the quantity of the green and liabilities are offset only if certain criteria are met. certificates that the Group has to purchase for the year After initial recognition, land and buildings are Current tax comprises the expected tax payable or and based on the price of green certificates acquired measured at revalued amounts less any accumulated receivable on the taxable income or loss for the year Unrecognized deferred tax assets are reassessed at on the centralized market. The obligation for covering depreciation and any accumulated impairment and any adjustment to tax payable or receivable each reporting date and recognized to the extent that the annual acquisition quota is accrued in profit or losses since the most recent valuation. The other in respect of previous years. It is measured using it has become probable that the future taxable profits loss. tax rates enacted or substantively enacted at the will be available against which they can be used. reporting date. Current tax also includes any tax Electricity generation arising from dividends. In such a circumstance, the Group shall recognise and items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated impairment losses. Revaluations of land and buildings are made with sufficient regularity (ii) Deferred tax based on taxable profit (tax loss), tax bases, unused receive a certain number of green certificates for each materially from the one that would be determined measure its current or deferred tax asset or liability Electricity producers are entitled by the law in force to to ensure that the carrying amount does not differ Deferred tax is recognised in respect of temporary applying this interpretation. and injected into the network. When a building is revalued, the accumulated differences between the carrying amounts of assets depreciation is eliminated against the gross carrying and liabilities for financial reporting purposes and the The Group assesses whether it is probable (more Green certificates are recognized as inventories when amount of that item, and the net amount is restated to amounts used for taxation purposes. Deferred tax is than 50% chances) that a tax authority will accept an the producer has the right to receive as a result of the revalued amount of the asset. tax losses, unused tax credits and tax rates determined MWH of electricity produced from renewable sources using the fair value at the end of the reporting period. not recognised for: uncertain tax treatment. energy produced and delivered into the network, at • temporary differences on the initial recognition Thus, the Group shall reflect the effect of uncertainty account is done at the time of their sale. equipment have different useful lives, then they are of assets or liabilities in a transaction that is not for each uncertain tax treatment by using either of the accounted for as separate items (major components) a business combination and that affects neither following methods, depending on which method the (j) Inventories of property, plant and equipment. nil nominal value. Recognition in the profit and loss If significant parts of an item of property, plant and accounting nor taxable profit or loss; entity expects to better predict the resolution of the • temporary differences related to investments in uncertainty: Inventories consist mainly of spare parts that do not Properties in the course of construction for production, meet the recognition criteria for property, plant and supply or administrative purposes, or for purposes subsidiaries, associates and joint arrangements (a) the most likely amount - the single most likely equipment, consumables, goods for resale, other not yet determined, are carried at cost, less any to the extent that the Group is able to control amount in a range of possible outcomes. The most inventories and the natural gas storage. recognised impairment loss. Cost includes professional the timing of the reversal of the temporary likely amount may better predict the resolution of fees and, for qualifying assets, borrowing costs differences and it is probable that they will not the uncertainty if the possible outcomes are binary Inventories are measured at the lower of cost and net capitalised in accordance with the Group’s accounting reverse in the foreseeable future; and or are concentrated on one value. realizable value. policy. Depreciation of these assets, determined on the same basis as other property assets, commences • taxable temporary differences arising on the (b) the expected value - the sum of the The cost of inventories is based on the weighted when the assets are ready for their intended use. initial recognition of goodwill. probability-weighted amounts in a range of average cost method. The cost of inventories includes Deferred tax assets are recognised for unused tax predict the resolution of the uncertainty if there is a to bringing the inventories to their current place and classified as property, plant and equipment if they possible outcomes. The expected value may better all the acquisition costs and other expenses related Spare parts, stand-by and servicing equipment are losses, unused tax credits and deductible temporary range of possible outcomes that are neither binary condition. differences to the extent that it is probable that future nor concentrated on one value. taxable profits will be available against which they Consumables used for the repairs and maintenance property, plant and equipment. of the electricity network are included in profit and are expected to be used during more than one period or can be used only in connection with an item of NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A474 475 Any gain or loss on disposal of an item of property, (ii) Amortization concessionaire free of charge together with the assets statements according to the instructions developed plant and equipment is recognised in profit or loss. part of RAB. The amortization method used is selected on the by the Ministry of Finance. ANRE will determine the recognized annual amounts of the capitalized costs (ii) Subsequent expenditure basis of the expected pattern of consumption of In the case of non-household customers, the value based on the quantities and prices recognized for NL. Subsequent expenditure is capitalised only if it is in the asset, and is applied consistently from period design/construction of the connection/connection, is (i) Recognition and measurement the expected future economic benefits embodied of the connection works, including those for the probable that the future economic benefits associated to period, unless there is a change in the expected entirely borne by the customers. Assets resulting from with the expenditure will flow to the Group.Depreciation pattern of consumption of those future economic connection work: benefits. The Group determined that the amortization The computation of the capitalized amounts is carried out in compliance with the legislation specific to the Depreciation is calculated to write off the cost of items method that reflects appropriately the expected • In the period from 1 January 2022 to 24 July 2022, entities that are the subject of GEO 119/2022, with of property, plant and equipment less their estimated pattern of consumption of the expected future they enter the distribution operator’s assets from subsequent additions and changes. residual values using the straight-line method over economic benefits is correlated with the amortisation the time of commissioning, on the basis of GEO their estimated useful lives and is recognised in of the regulated asset base “RAB”. no. 143/2021, without being recognised by ANRE According to the legislation in force, the following profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless (c) Connection fees it is reasonably certain that the Group will obtain as part of the regulated asset base. intangible assets will be created for the NL difference (in correspondence with “Capitalised costs of • From 25 July 2022 they do not become part of intangible non-current assets”): ownership by the end of the lease term. Land and According to art. 25 paragraph (1) of Law no. 123/2012 the distribution operator’s assets, on the basis of construction in progress are not depreciated. on electricity and natural gas, as subsequently Law no. 248/2022 and ANRE Order no. 133/2022, • The first intangible asset - for the NL cost The estimated useful lives of property, plant and public interest is a mandatory service provided under operator for operation. and September 2022 will be recorded on 30 equipment are as follows: regulatory conditions, which the transmission and September 2022; amended and supplemented, access to power grids of they are only transferred to the distribution difference recorded between January 2022 Category Buildings Equipment Motor vehicles and office equipment system operator as well as the distribution operators Starting with 2021, according to ANRE Order no. Useful lives (years) must ensure. 160/2020 amending ANRE Order no.59/2013, the • The second intangible asset - for the NL cost connection installations that are financed by the difference recorded between October 2022 and 45-70 At the request of a new or pre-existing customer, the customers will remain in their ownership and are December 2022 will be recorded on 31 December 3-25 3-10 distribution operators are obliged to communicate the being exploited by the network operator. However, 2022; technical and economic conditions for the connection according to ANRE Order no. 17/2021 for the connection network and to cooperate with the applicant to choose installations of all household consumers and of the • The third intangible asset - for the NL cost the most advantageous technical and economic non-household with lengths less than 2.5 km, the difference recorded between January 2023 and solution. Afterwards, a connection contract is distribution operator has the obligation to finance March 2023 will be recorded on 31 March 2023; Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. of the connection installation is carried out by a construction supplier certified by ANRE. Intangible asset in a service concession arrangement The Group collects cash from customers, which is (d) Intangible assets related to the capitalization of June 2023 will be recorded on 30 June 2023; own technological consumption (“NL”) • The fifth intangible asset - for the NL cost • The fourth intangible asset - for the NL cost difference recorded between April 2023 and concluded between the distribution operator and the them and these will remain in the ownership of the customer at a regulated tariff. The actual construction network operator. (i) Recognition and measurement used only to pay for the construction of the connection The difference between the purchase price of difference recorded between July 2023 and station, and the Group must then use this asset to electricity for own technological consumption versus August 2023 will be recorded on 31 August 2023. The Group recognises an intangible asset arising from a service concession arrangement when it has a right Order no. 59/2013, with subsequent amendments, in the related regulated tariffs 2022 related to the • The sixt intangible assets - for the NL cost these assets remain in the ownership of the network purchase of electricity and natural gas, made between difference recorded between September 2023 connect customers to the network. According to ANRE the ex-ante purchase price recognized by ANRE to charge for use of the concession infrastructure. An intangible asset received as consideration for operator. 1 January 2022 and 31 August 2023, in order to cover and December 2023 will be recorded on 31 the own technological consumption (NL) for economic December 2023. providing construction or upgrade services in a service concession arrangement is measured at fair value on initial recognition with reference to the fair value of the services provided. Subsequent to initial recognition, the intangible asset is measured at cost, less accumulated amortization and accumulated impairment losses. The Group recognizes the assets at nil value, net of operators for energy transport and distribution the amount of the deferred income representing the services are capitalised. contributions from customers. The assets financed • Quarterly, on the last day of each quarter, for the corresponding amounts, between 1 January 2024 from connection fees received from the new users of According to ANRE regulations, the capitalised costs and 31 March 2025. the distribution network are not included in the RAB. of intangible assets are recorded in the accounting At the end of the concession contract, the assets built records and therefore on the annual financial from the connection tariff will be transferred to the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A476 477 Currently, in the financial statements are recognized controlling interest (NCI) plus the fair value of previous The amortized cost of a financial asset is the amount Cash and cash equivalents only the intangible assets mentioned above. equity interests minus the net of the acquisition-date at which the financial asset is measured at initial In the future, the following additional intangible assets liabilities assumed. the cumulative amortization using the effective interest call deposits and deposits with maturities of three will be recognized if it is the case quarterly until 31 method of any difference between that initial amount months or less from the set-up date that are subject to March 2025. (ii) Amortization Goodwill arising on the acquisition of subsidiaries and the maturity amount, adjusted for any loss an insignificant risk of changes in their fair value and is measured at cost less accumulated impairment allowance. The gross carrying amount of a financial are used by the Group in the management of its short- losses. asset is the amortized cost of a financial asset before term commitments. amounts of the identifiable assets acquired and the recognition minus the principal reimbursements, plus Cash and cash equivalents comprise cash balances, The capitalized costs are amortized through the (g) Financial instruments straight-line method over a period of 5 years from the adjusting for any loss allowance. Foreign exchange gains and losses (ii) Financial liabilities date of capitalization. Financial assets and financial liabilities are recognised All financial liabilities are measured subsequently at in the Group’s statement of financial position when the The carrying amount of financial assets that are amortised cost using the effective interest method or (e) Other intangible assets Group becomes a party to the contractual provisions denominated in a foreign currency is determined in at fair value through profit or loss. (i) Recognition and measurement of the instrument. Financial assets and financial liabilities are initially that foreign currency and translated at the spot rate at the end of each reporting period. Other intangible assets that are acquired by the Group measured at fair value. Transaction costs that are Loans and receivables and have finite useful lives are measured at cost less directly attributable to the acquisition or issue of Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held-for-trading, or (iii) valued as at fair value, are measured subsequently at amortised accumulated amortization and any accumulated financial assets and financial liabilities (other than These assets are initially recognised at fair value plus cost using the effective interest method. impairment losses. financial assets and financial liabilities at fair value any directly attributable transaction costs. Subsequent (ii) Subsequent expenditure from the fair value of the financial assets or financial cost using the effective interest method. The amortised calculating the amortised cost of a financial liability liabilities, as appropriate, on initial recognition. cost is reduced by impairment losses. Loans and and of allocating interest expense over the relevant Subsequent expenditure is capitalised only when it Transaction costs directly attributable to the receivables comprise trade receivables, cash and period. The effective interest rate is the rate that through profit or loss) are added to or deducted to initial recognition, they are measured at amortised The effective interest method is a method of increases the future economic benefits embodied acquisition of financial assets or financial liabilities cash equivalents and deposits. in the specific asset to which it relates. All other at fair value through profit or loss are recognised expenditure, including expenditure on internally immediately in profit or loss. Trade receivables generated goodwill and brands, is recognised in profit exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) or loss as incurred. (i) Financial assets Trade receivables include mainly unsettled invoices through the expected life of the financial liability, or (iii) Amortization All regular way purchases or sales of financial assets of electricity and services, late payment penalties and cost of a financial liability. are recognised and derecognised on a trade date accrued revenue for electricity delivered and services Amortization is calculated to write off the cost of basis. Regular way purchases or sales are purchases rendered until the end of the year,but invoiced after Other financial liabilities include bank borrowings, bank intangible assets less their estimated residual values or sales of financial assets that require delivery of the end of the year. using the straight-line method over their estimated assets within the time frame established by regulation overdrafts, financing for network construction related to concession agreements and trade payables. issued until reporting date for supply and distribution (where appropriate) a shorter period, to the amortised useful lives and is generally recognised in profit or loss. or convention in the marketplace. All recognised Other receivables from capping schemes The estimated useful lives of software and licenses are their entirety at either amortised cost or fair value, The compensation of household consumers for part 3-5 years. depending on the classification of the financial assets. of the costs incurred by the electricity invoices was Ordinary shares financial assets are measured subsequently in (iii) Share capital applicable between 1 November 2021 until 31 March Amortization methods, useful lives and residual values Financial assets are initially measured at fair value 2022. are reviewed at each reporting date and adjusted if and subsequently at amortized cost, as they are held Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary appropriate. (f) Goodwill in a business model to collect contractual cash flows The exemption was applicable between 1 November shares, net of any tax effects, are recognised as a and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. 2021 until 31 January 2022 for several types of non- deduction from equity. household consumers from payment of regulated tariffs and other taxes/contributions. Goodwill is measured as the value of the consideration transferred (fair value) plus the amount of any non- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A478 479 Repurchase and reissue of ordinary shares (treasury has reasonable and supportable information to (h) Revaluation reserve shares) demonstrate that a more lagging default criterion is obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will more appropriate. The difference between the revalued amount and the be required to settle the obligation. Provisions are When shares recognised as equity are repurchased, net carrying amount of property, plant and equipment determined by discounting the expected future cash the amount of the consideration paid, which includes (ii) Write-off policy is recognised as revaluation reserve included in equity. flows at a pre-tax rate that reflects current market directly attributable costs, net of any tax effects, is assessments of the time value of money and the risks recognised as a deduction from equity. Repurchased The Group writes off a financial asset after the If an asset’s carrying amount is increased as a specific to the liability. The unwinding of the discount is shares are classified as treasury shares and are finalization of the bankruptcy proceedings. Financial result of a revaluation, the increase is recognised recognised as finance cost. presented in the treasury share reserve. assets written off may still be subject to enforcement and accumulated in equity under the heading When treasury shares are sold or reissued taking into account legal advice where appropriate. recognised in profit and loss to the extent that it the Group has approved a detailed and formal subsequently, the amount received is recognised Any recoveries made are recognised in profit or loss. reverses a revaluation decrease of the same amount restructuring plan, and the restructuring either has as an increase in equity and the resulting surplus or of the asset previously recognised in profit and loss. commenced or has been announced publicly. Future deficit on the transaction is presented within share (iii) Measurement and recognition of expected credit operating losses are not provided for. activities under the Group’s recovery procedures, of revaluation reserve. However, the increase is A provision for restructuring is recognised when premium. (iv) Impairment losses If an asset’s carrying amount is decreased as a result The measurement of expected credit losses is a or loss. However, the decrease is recognized in equity function of the probability of default, loss given default in revaluation reserves if there is any credit balance A contingent liability is: of a revaluation, the decrease is recognised in profit (l) Contingent assets and liabilities Impairment of financial assets (i.e. the magnitude of the loss if there is a default) existing in the revaluation reserve in respect of that The Group recognizes a loss allowance for expected probability of default and loss given default is based and the exposure at default. The assessment of the asset. (a) a possible obligation that arises from past events and whose existence will be confirmed only by credit losses on investments in debt instruments on historical data adjusted by forward-looking The revaluation reserve is transferred to retained the occurrence or non-occurrence of one or more that are measured at amortized cost or at fair value information as described above. As for the exposure at earnings in an amount corresponding to the use of the uncertain future events not wholly within the through other comprehensive income. The amount of default, for financial assets, this is represented by the asset (as the asset is depreciated) and upon disposal control of the Group; or expected credit losses is updated at each reporting assets’ gross carrying amount at the reporting date. of the asset. date to reflect changes in credit risk since initial recognition of the respective financial instrument. For financial assets, the expected credit loss is (i) Dividends estimated as the difference between all contractual (b) a present obligation that arises from past events that is not recognised because: The Group always recognizes lifetime expected credit cash flows that are due to the Group in accordance Dividends are recognized as a deduction from equity i. it is not probable that an outflow of resources losses for trade receivables. The expected credit with the contract and all the cash flows that the Group in the period in which their distribution is approved embodying economic benefits will be required losses on these financial assets are estimated using a expects to receive, discounted at the original effective and recognised as a liability to the extent it is unpaid to settle the obligation; or provision matrix based on the Group’s historical credit interest rate. loss experience, adjusted for factors that are specific at the reporting date. Dividends are disclosed in the notes to financial statements when their distribution is ii. the amount of the obligation cannot be to the debtors, general economic conditions and an Derecognition of financial assets proposed after the reporting date and before the date measured with sufficient reliability. assessment of both the current as well as the forecast of the issuance of the financial statements. direction of conditions at the reporting date, including The Group derecognises a financial asset only when Contingent liabilities are not recognized in the time value of money where appropriate. the contractual rights to the cash flows from the asset (j) Pre-paid capital contributions in kind from Group’s financial statements, but disclosed unless expire, or when it transfers the financial asset and shareholders the possibility of an outflow of resources embodying (i) Significant increase in credit risk substantially all the risks and rewards of ownership economic benefits is remote. of the asset to another entity. If the Group neither These contributions from a shareholder represent In assessing whether the credit risk on a financial transfers nor retains substantially all the risks and pre-paid contributions of land for which the Company A contingent asset is a possible asset that arises from instrument has increased significantly since initial rewards of ownership and continues to control the obtained title deeds in respect of future issuance of past events and whose existence will be confirmed recognition, the Group compares the risk of a default transferred asset, the Group recognises its retained shares. The amounts recorded are based on the fair only by the occurrence or non-occurrence of one or occurring on the financial instrument at the reporting interest in the asset and an associated liability for value of the land. more uncertain future events not wholly within the date with the risk of a default occurring on the financial amounts it may have to pay. If the Group retains control of the Group. instrument at the date of initial recognition. substantially all the risks and rewards of ownership of (k) Provisions Irrespective of the above analysis, the Group considers recognise the financial asset and also recognises a A provision is recognised if, as a result of a past financial statements, but disclosed when an inflow of that default has occurred when a financial asset collateralised borrowing for the proceeds received. event, the Group has a present, legal or constructive economic benefits is probable. a transferred financial asset, the Group continues to A contingent asset is not recognized in the Group’s is more than 90 days past due unless the Group NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A480 481 (m) Leases by discounting the revised lease payments profit or loss and other comprehensive income of the (p) Subsequent events using an unchanged discount rate (unless the associate. (i) The Group as lessee lease payments change is due to a change in Events occurring after the reporting date 31 a floating interest rate, in which case a revised When the Group’s share of losses of an associate December 2023, which provide additional The Group assesses whether a contract is or contains discount rate is used); exceeds the Group’s interest in that associate (which information about conditions prevailing at the a lease, at inception of the contract. The Group includes any long-term interests that, in substance, reporting date (adjusting events) are reflected recognises a right-of-use asset and a corresponding • a lease contract is modified and the lease form part of the Group’s net investment in the in the consolidated financial statements. Events lease liability with respect to all lease arrangements modification is not accounted for as a separate associate), the Group discontinues recognising occurring after the reporting date that provide in which it is the lessee, except for short-term leases lease, in which case the lease liability is its share of further losses. Additional losses are information on events that occurred after the (with a lease term of 12 months or less) and leases of remeasured based on the lease term of the recognised only to the extent that the Group has reporting date (non-adjusting events), when low value assets (of less than USD 5,000). For these modified lease by discounting the revised lease incurred legal or constructive obligations or made material, are disclosed in the notes to the leases, the Group recognises the lease payments payments using a revised discount rate at the payments on behalf of the associate. consolidated financial statements. When the going as an operating expense on a straight-line basis effective date of the modification. concern assumption is no longer appropriate at or over the term of the lease unless another systematic An investment in an associate is accounted for after the reporting period, the financial statements basis is more representative of the time pattern in Right-of-use assets are depreciated over the shorter using the equity method from the date on which the are not prepared on a going concern basis. which economic benefits from the leased assets are period of lease term and useful life of the underlying investee becomes an associate. On acquisition of the consumed. asset. If a lease transfers ownership of the underlying investment in an associate, any excess of the cost of asset or the cost of the right-of-use asset reflects the investment over the Group’s share of the net fair The lease liability is initially measured at the present that the Group expects to exercise a purchase option, value of the identifiable assets and liabilities of the value of the lease payments that are not paid at the related right-of-use asset is depreciated over the investee is recognised as goodwill, which is included the commencement date, discounted by using the useful life of the underlying asset. The depreciation within the carrying amount of the investment. Any default rate in the lease. If this rate cannot be readily starts at the commencement date of the lease. The excess of the Group’s share of the net fair value of determined, the Group uses its incremental borrowing right-of-use assets are presented as a separate line in the identifiable assets and liabilities over the cost of rate. the consolidated statement of financial position. the investment, after reassessment, is recognised immediately in profit or loss in the period in which the The lease liability is presented as a separate line in the (ii) Rental income investment is acquired. consolidated statement of financial position. The lease liability is subsequently measured by increasing the Rental income from property, plant and equipment When necessary, the entire carrying amount of carrying amount to reflect interest on the lease liability other than investment property is recognised as Other the investment (including goodwill) is tested for (using the effective interest method) and by reducing income. Rental income is recognised on a straight-line impairment as a single asset by comparing its the carrying amount to reflect the lease payments basis over the term of the lease. made. (n) Investment in associates The Group remeasures the lease liability (and makes a recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the corresponding adjustment to the related right-of-use An associate is an entity over which the Group has carrying amount of the investment. Any reversal of that asset) whenever: significant influence and that is neither a subsidiary impairment loss is recognised to the extent that the nor an interest in a joint venture. Significant influence is recoverable amount of the investment subsequently • the lease term has changed or there is a the power to participate in the financial and operating increases. significant event or change in circumstances policy decisions of the investee but is not control or resulting in a change in the assessment of joint control over those policies. exercise of a purchase option, in which case the The Group discontinues the use of the equity method from the date when the investment ceases to be an lease liability is remeasured by discounting the The results and assets and liabilities of associates associate. revised lease payments using a revised discount are incorporated in these consolidated financial rate; statements using the equity method of accounting, (o) Segment reporting except when the investment is classified as held for • the lease payments change due to changes sale. Under the equity method, an investment in an Segment results that are reported to the Company’s in an index or rate or a change in expected associate is recognised initially in the consolidated Board of Directors (the chief operating decision maker) payment under a guaranteed residual value, statement of financial position at cost and adjusted include items directly attributable to a segment as well in which cases the lease liability is remeasured thereafter to recognise the Group’s share of the as those that can be allocated on a reasonable basis. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A482 483 7 Disclosure for the additional set of the consolidated financial statements There are varying levels of integration between the Electricity supply, Electricity distribution and External The Company also issues a set of consolidated financial statements prepared in accordance with IFRS-EU. Until 31 December 2021, the consolidated financial statements prepared in accordance with OMFP no. 2844/2016 were equivalent to IFRS-EU. Starting with 31 December 2022, according to Order of Ministry of electricity network maintenance segments. This integration includes electricity distribution and shared electricity network maintenance services. Inter-segment pricing policy is determined on an arm’s length basis. All assets are allocated to reportable segments, except for investments in associates and deferred tax Public Finances (OMFP) no. 3900/2022 that has included a new clause related to the regulatory accounts to assets. cover for own technological consumption network additional expenses for actual energy costs as compared with the ex-ante ANRE prices recognised in distribution tariffs. On the additional set of the consolidated financial statement in accordance with IFRS-EU, these expenses have a different accounting treatment (please see the voluntary set of financial statements in accordance with IFRS-EU). 8 Operating segments (a) Basis for segmentation The following summary describes the operations of each reportable segment: Reportable segments Operations Electricity and natural gas supply Buying and supplying electricity and natural gas to final consumers (includes Electrica Furnizare S.A.) Electricity distribution Operation, maintenance and construction of electricity networks operated by the Group (includes Distributie Energie Electrica Romania S.A. and the activity performed by Electrica Serv S.A within the distribution network). Electricity generation Production of electricity from renewable sources (Sunwind Energy S.R.L., New Trend Energy S.R.L., and Foton Power Energy S.R.L and the activity carried out by Electrica S.A. in the electricity production segment). External electricity network maintenance Repairs, maintenance and other services for electricity networks owned by other distributors (Electrica Serv S.A., without the activity performed in the electricity distribution segment). Headquarter Consulting activities for business and management, the parent company also carrying out corporate activities in relation to its subsidiaries (Electrica S.A. but without the activity carried out in the electricity production segment) The Board of Directors of the Company reviews management reports of each segment. Segment earnings before interest, tax, depreciation and amortisation (“Adjusted EBITDA”) is used to measure performance because management believes that such information is one of the most relevant in evaluating the results of the segments. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A484 485 d e t a d i l o s n o C s n o i t a n m i i l e l a t o t , 3 9 5 6 1 8 9 , - , 3 9 5 6 1 8 9 , - d n a s t n e m t s u d a j , ) 9 2 4 4 9 9 1 ( , , ) 9 2 4 4 9 9 1 ( , n o i t a d i l o s n o C ) 5 9 7 3 9 2 ( , ) 1 2 7 3 2 7 ( , 1 8 0 2 , - - - 4 9 2 7 1 7 , 1 2 7 3 1 , , 3 5 5 8 9 4 3 , ) 0 6 0 1 7 ( , 0 2 2 1 , , 3 9 3 8 6 5 3 , 7 1 6 8 1 , - - 7 1 6 8 1 , - - 2 2 2 2 2 2 , 1 7 3 6 1 8 9 , , 9 2 4 4 9 9 1 , , 0 0 8 0 1 8 1 1 , 6 2 8 8 3 , 2 8 1 6 6 , 8 0 0 5 0 1 , 0 1 2 2 2 , 9 0 1 8 1 , 8 9 8 7 6 , ) 8 4 4 1 ( , 4 6 4 5 8 6 , 9 7 4 3 , ) 3 9 6 1 6 3 ( , 4 5 5 2 1 , ) 3 7 2 2 2 7 ( , ) 1 2 4 8 ( , - - 3 0 9 7 , 6 7 1 6 , 9 7 0 4 1 , 5 3 3 3 , ) 2 3 2 4 ( , ) 1 4 3 2 ( , , 0 5 9 2 4 5 2 , , 2 9 6 6 2 2 7 , , 3 1 5 8 6 8 1 , 2 8 9 4 5 1 , , 3 6 4 1 1 4 4 , 8 5 5 3 5 , , 0 5 2 0 8 2 7 , , 1 0 2 1 9 3 3 , 7 1 6 8 1 , - 2 2 9 8 4 5 , 8 2 7 9 2 1 , ) 6 8 7 9 0 2 ( , ) 9 2 2 0 6 1 ( , ) 6 5 9 5 9 6 ( , ) 5 5 5 5 1 ( , r e t r a u q d a e H l e b a t r o p e r k r o w t e n s t n e m g e s e c n a n e t n a m i r o f l a t o T y t i c i r t c e e l l a n r e t x E y t i c i r t c e l E y t i c i r t c e l E d n a y t i c i r t c e l E n o i t a r e n e g n o i t u b i r t s i d l y p p u s s a g l a r u t a n d e d n e r a e Y 3 2 0 2 r e b m e c e D 1 3 s t n e m g e s e l b a t r o p e r t u o b a n o i t a m r o f n I ) b ( 5 9 1 3 4 , , 1 2 2 1 5 8 2 , , 2 4 6 7 1 3 1 , - - - 5 1 2 7 7 3 , - ) 5 6 0 2 6 9 ( , 3 9 9 0 5 7 , - - , 0 3 8 2 4 5 3 1 , , ) 5 6 4 5 4 3 3 ( , , 4 7 2 4 3 6 2 , , ) 7 0 5 4 3 9 1 ( , , 1 7 2 4 6 8 2 , , ) 6 8 2 3 1 9 1 ( , 6 4 8 2 , 7 4 1 8 4 7 , 1 8 9 1 , 0 0 0 0 1 , 5 8 4 6 2 7 , 1 8 6 9 , 5 5 0 3 , 5 7 7 3 , 3 4 9 5 2 1 , 5 8 8 1 6 , 6 8 9 6 0 2 , 0 4 1 2 , 5 5 0 1 4 , 8 6 7 6 1 2 , , 4 7 8 0 0 1 1 , , 2 7 6 5 1 7 4 , , 5 3 2 4 4 6 2 , - 4 9 9 - 9 7 9 2 5 , , 2 5 3 2 6 7 6 1 , , 6 2 7 5 6 5 4 , 9 6 6 1 8 4 , 8 6 6 9 0 1 , 0 4 4 3 7 3 , 8 9 8 3 , 1 9 6 7 8 1 , 9 9 9 8 , 9 9 2 9 1 , 8 8 3 2 1 , , 0 4 9 9 8 3 0 1 , , 2 5 0 3 0 7 5 , , 4 8 1 4 8 7 1 , , 5 7 8 2 6 6 2 , 3 0 1 6 6 1 , 0 4 1 4 8 1 , , 9 1 8 0 2 5 1 , , 6 8 4 9 2 1 3 , 8 6 0 2 1 , 0 8 1 1 2 , 3 1 8 6 , - 4 7 8 0 0 9 , 0 0 0 0 0 2 , - 9 2 5 4 7 7 , , 6 0 7 9 6 8 1 , 4 5 8 7 2 2 1 , 7 2 0 1 , 9 5 1 - 1 4 , 8 2 7 2 3 7 1 , 1 2 7 3 1 , ) 5 9 1 9 4 ( , , 2 0 2 8 6 7 1 , ) 0 2 8 5 7 ( , - 9 6 5 ) 9 8 3 6 7 ( , 0 8 3 0 2 6 , 1 2 7 3 1 , 3 4 2 9 1 , 6 1 4 7 8 5 , 1 6 1 6 2 8 ) 2 8 6 1 ( , ) 8 8 2 0 3 ( , ) 7 7 7 1 3 9 ( , ) 1 0 3 2 3 ( , - 9 4 7 9 , 1 5 1 2 , ) 4 6 2 ( 6 3 0 6 8 4 , 3 0 4 8 9 , ) 4 2 5 4 9 7 ( , ) 8 8 6 4 0 1 ( , t e n , , 4 6 6 4 5 4 1 , 1 7 4 5 0 3 , I * A D T B E d e t s u d A j t e n , s t e s s a ) 2 1 2 9 ( , ) 8 3 3 7 6 ( , t n e m r i a p m i f o l a s r e v e R / ) t n e m r i a p m I ( f o x a t e r o f e b ) s s o l ( / t i f o r p t n e m g e s s a l d e t a u c a c l d n a d e n i f e d s i s t n e m g e s g n i t a r e p o r o f ) A D T B E I l y e m a n r o n o i t a s i t r o m a d n a i n o i t a c e r p e d , x a t , t s e r e t n i e r o f e b i s g n n r a E ( A D T B E I d e t s u d A j * g n i t a r e p o e h t n i s t e s s a i l e b g n a t n i d n a t n e m p u q e i d n a t n a p l , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e r / t n e m r i a p m i d n a n o i t a z i t r o m a , i n o i t a c e r p e d ) i r o f d e t s u d a j t n e m g e s g n i t a r e p o n e v g i a A D T B E I l e t a u c a c l o t d e s u d o h t e m e h T . d e n i f e d l y m r o f i n u t o n s i A D T B E I , r e v o e r o M . t n e m g e s g n i t a r e p o e h t n i e m o c n i e c n a n i f t e n ) i i i d n a l e a s r o f l d e h s t e s s a f o t n e m r i a p m i ) i i , t n e m g e s f o e s o p r u p e h t r o f n o p u d e i l e r e b , h c u s s a , t o n n a c e t o n i s h t n i d e t n e s e r p A D T B E I e h t , e c n e u q e s n o c a s A . p u o r G e h t y b d e s u t a h t m o r f y l t n a c i f i n g s i r e f f i d i y a m s e n a p m o c r e h t o y b i s e n a p m o c r e h t o f o A D T B E I o t n o s i r a p m o c l - n o n e b g n a t n i e u n e v e r t n e m g e S e m o c n i r e h t O i f o s t s o c d e s i l a t i p a C s t e s s a t n e r r u c , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e R i n o i t a c e r p e d d n a n o i t a z i t r o m A x a t e r o f e b t i f o r p t n e m g e S ) t s o c ( / e m o c n i e c n a n i f t e N e u n e v e r t n e m g e s - r e t n I s e u n e v e r l a n r e t x E i l e b g n a t n i i d n a t n e m p u q e d n a t n a p l l s e b a v e c e r i r e h t o d n a e d a r t f o x a t r e t f a t i f o r p t n e m g e S e r u t i d n e p x e l a t i p a C s t i f e n e b e e y o p m l E s t e s s a t n e m g e S ¬ l s e b a v e c e r i r e h t o d n a e d a r T i l s t n e a v u q e h s a c d n a h s a C l - t r o h s d n a s e b a y a p r e h t o d n a e d a r T s t i f e n e b e e y o p m e m r e t l s t f a r d r e v o k n a B y t i l i b a i l e s a e L i s g n w o r r o b k n a B d e t a d i l o s n o C s n o i t a n m i i l e l a t o t , 6 9 8 9 0 0 0 1 , - , 6 9 8 9 0 0 0 1 , - d n a s t n e m t s u d a j , ) 8 0 2 5 7 6 1 ( , , ) 8 0 2 5 7 6 1 ( , n o i t a d i l o s n o C , 3 6 9 0 4 8 2 , ) 0 2 0 1 2 1 ( , 0 8 1 5 , , 3 0 8 6 5 9 2 , - - - , 6 9 8 9 0 0 0 1 , , 8 0 2 5 7 6 1 , , 4 0 1 5 8 6 1 1 , 2 7 4 5 2 , 2 1 6 5 5 , 4 8 0 1 8 , 5 9 2 2 4 , r e t r a u q d a e H l e b a t r o p e r k r o w t e n s t n e m g e s e c n a n e t n a m i r o f l a t o T y t i c i r t c e e l l a n r e t x E y t i c i r t c e l E y t i c i r t c e l E d n a y t i c i r t c e l E n o i t a r e n e g n o i t u b i r t s i d l y p p u s s a g l a r u t a n d e d n e r a e Y 2 2 0 2 r e b m e c e D 1 3 , 4 5 0 7 1 8 1 , , 0 9 1 3 5 1 8 , , 2 7 5 9 7 5 1 , 5 0 5 9 5 1 , , 6 2 6 6 9 3 3 , 4 2 8 2 3 , , 4 1 0 6 8 1 8 , , 4 5 9 4 5 7 2 , e u n e v e r t n e m g e s - r e t n I s e u n e v e r l a n r e t x E e u n e v e r t n e m g e S e m o c n i r e h t O i f o s t s o c d e s i l a t i p a C s t e s s a t n e r r u c 1 9 2 9 8 9 , - - 1 9 2 9 8 9 , - 1 9 2 9 8 9 , - l - n o n e b g n a t n i 5 ) 7 8 9 3 3 5 ( , - - 3 2 9 3 6 6 , ) 4 5 3 3 4 ( , ) 5 9 9 4 6 1 ( , ) 4 1 5 4 2 ( , 5 - - - - - 3 0 6 5 2 , 7 5 8 5 6 , ) 6 8 5 1 ( , 4 7 6 1 8 6 , ) 9 9 3 2 ( , 6 2 5 9 , 7 7 3 9 5 3 , 0 7 1 5 1 3 , ) 8 3 3 6 0 2 ( , 1 6 3 1 1 , ) 2 8 4 2 ( , ) 9 4 0 2 5 1 ( , ) 8 6 1 3 6 ( , ) 1 0 4 2 3 5 ( , ) 8 4 3 1 1 ( , ) 0 8 4 2 ( , ) 6 1 0 6 0 5 ( , ) 7 5 5 2 1 ( , , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e R i n o i t a c e r p e d d n a n o i t a z i t r o m A x a t e r o f e b t i f o r p t n e m g e S ) t s o c ( / e m o c n i e c n a n i f t e N i l e b g n a t n i i d n a t n e m p u q e d n a t n a p l , 7 9 8 2 6 3 1 , ) 3 4 8 8 1 ( , ) 3 7 6 8 3 ( , , 3 1 4 0 2 4 1 , ) 2 1 4 2 ( , 8 8 4 4 1 , , 2 4 4 7 1 0 1 , 5 9 8 0 9 3 , I * A D T B E d e t s u d A j t e n , s t e s s a ) 1 1 3 2 1 1 ( , - 2 0 1 ) 3 1 4 2 1 1 ( , 4 0 2 - 7 7 1 9 1 , ) 4 9 7 1 3 1 ( , t n e m r i a p m i f o l a s r e v e R / ) t n e m r i a p m I ( 5 4 8 8 5 5 , ) 4 5 3 3 4 ( , 5 1 6 5 2 , 4 8 5 6 7 5 , ) 3 7 6 ( ) 2 2 4 3 2 8 ( , 7 8 3 5 2 6 , - - 3 2 3 2 , 4 6 0 3 2 6 , 2 4 3 1 , ) 4 1 6 8 2 ( , ) 8 0 8 4 9 7 ( , ) 5 5 0 0 3 ( , , 2 1 3 3 2 6 1 1 , , ) 2 1 7 3 7 3 2 ( , , 5 5 2 3 9 5 2 , , ) 6 3 5 3 4 0 1 ( , 8 7 3 5 2 6 3 1 2 , , 9 9 3 3 8 7 3 1 , , 3 1 4 6 3 6 3 , 0 4 9 8 1 4 , 7 5 5 0 9 , 7 8 8 4 3 3 , - 0 3 6 5 0 1 , 7 5 2 9 2 2 , 3 2 6 5 , , 9 3 2 1 6 4 2 , , 7 3 0 1 7 5 2 , 3 7 6 3 5 , 3 1 7 0 6 7 , - - - , ) 5 4 8 3 3 0 1 ( , 0 0 0 0 0 1 , 3 1 7 0 6 6 , - - 3 1 7 0 6 6 , - 9 6 2 4 0 4 3 5 , ) 3 8 9 ( 8 8 0 2 1 , 0 3 8 3 3 , 9 6 4 8 , 9 9 3 4 4 , 8 3 1 9 0 2 , , 5 8 6 0 5 4 3 , , 9 9 8 1 6 3 2 , - 3 1 3 2 4 , - 8 9 0 2 7 7 , , 1 0 8 9 8 5 1 , f o x a t e r o f e b ) s s o l ( / t i f o r p t n e m g e s s a l d e t a u c a c l d n a d e n i f e d s i s t n e m g e s g n i t a r e p o r o f ) A D T B E I l y e m a n r o n o i t a s i t r o m a d n a i n o i t a c e r p e d , x a t , t s e r e t n i e r o f e b i s g n n r a E ( A D T B E I d e t s u d A j * g n i t a r e p o e h t n i s t e s s a i l e b g n a t n i d n a t n e m p u q e i d n a t n a p l , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e r / t n e m r i a p m i d n a n o i t a z i t r o m a , i n o i t a c e r p e d ) i r o f d e t s u d a j t n e m g e s g n i t a r e p o n e v g i a A D T B E I l e t a u c a c l o t d e s u d o h t e m e h T . d e n i f e d l y m r o f i n u t o n s i A D T B E I , r e v o e r o M . t n e m g e s g n i t a r e p o e h t n i e m o c n i e c n a n i f t e n ) i i i d n a l e a s r o f l d e h s t e s s a f o t n e m r i a p m i ) i i , t n e m g e s f o e s o p r u p e h t r o f n o p u d e i l e r e b , h c u s s a , t o n n a c e t o n i s h t n i d e t n e s e r p A D T B E I e h t , e c n e u q e s n o c a s A . p u o r G e h t y b d e s u t a h t m o r f y l t n a c i f i n g s i r e f f i d i y a m s e n a p m o c r e h t o y b . i s e n a p m o c r e h t o f o A D T B E I o t n o s i r a p m o c 4 6 6 2 1 6 , 8 5 0 9 , 2 5 1 8 0 3 , 9 9 0 1 6 2 , ) 3 6 9 1 6 6 ( , ) 9 1 6 2 0 1 ( , x a t r e t f a t i f o r p t n e m g e S s t i f e n e b e e y o p m l E e r u t i d n e p x e l a t i p a C t e n , l s e b a v e c e r i r e h t o d n a e d a r t f o 3 1 9 0 6 9 , , 3 3 6 6 7 0 9 , , 3 8 0 1 4 1 4 , , 8 7 6 9 7 5 2 , 6 2 8 9 6 , 9 1 9 8 4 1 , , 7 7 3 6 2 0 1 , , 4 9 8 5 6 3 2 , l - t r o h s d n a s e b a y a p r e h t o d n a e d a r T s t i f e n e b e e y o p m e m r e t l s t f a r d r e v o k n a B y t i l i b a i l e s a e L i s g n w o r r o b k n a B l s e b a v e c e r i s t e s s a t n e m g e S r e h t o d n a e d a r T i l s t n e a v u q e h s a c d n a h s a C 0 8 1 4 1 , 0 0 2 7 , 0 8 3 1 2 , 9 4 - - 6 0 0 8 , ) 1 7 1 ( 3 4 7 6 4 1 , 5 6 2 5 , 9 8 8 4 , 1 0 1 6 1 , NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 486 487 9 Revenue Rental income refers mainly to the subsidies, following by rental of the electricity poles by the distribution subsidiary to telecom operators. During 2023, the Group recognized subsidies on the supply segment recognized subsidies of RON 3,306,839 thousand, out of which RON 2,614,535 thousand outstanding receivable from the Ministry of Energy following the application of the electricity and natural gas price capping and compensation mechanism, approved by Order no.118/2021 with subsequent amendments and GEO no.27/2022, the latter being amended by GEO Electricity distribution and supply Supply of natural gas Construction revenue related to concession agreements (Note 23) Repairs, maintenance and other services rendered Proceeds from sale of green certificates Re-connection fees Consulting services Sales of merchandise Total 2023 8,457,651 191,339 1,018,912 74,077 3,212 14,362 106 56,934 2022 8,991,986 322,320 611,294 45,937 3,741 3,824 - 30,794 9,816,593 10,009,896 In respect to the timing of the revenue recognition, most of the Group’s services provided are transferred to the customer over time, only a small part amounting to RON 2,921 thousand (2022: RON 2,694 thousand) being transferred at a point in time (e.g. metering services provided by the distribution companies, no.119/2022. (b) Other operating expenses Utilities Other taxes and duties IT services Fines and penalties Printing and distribution of invoices services providing periodic data analysis to the customer for certain taxes collected on behalf of them). Meters reading expenses 10 Electricity, natural gas and merchandise purchased Electricity purchased Green certificates purchased Natural gas purchased Cost of merchandise Total 2023 8,238,811 543,359 221,255 54,551 2022 9,380,690 609,107 493,847 23,165 9,057,976 10,506,809 The cost of electricity and natural gas purchased includes the cost of the green certificates purchased by the supply subsidiary which has a legal obligation to purchase green certificates from producers of electricity from renewable sources, based on annual targets or quotas set by law, which are applied to the quantity of electricity purchased and supplied to final customers. The cost of green certificates is then invoiced to final customers separately from electricity tariffs. 11 Other income and expenses (a) Other income Subsidies related to electricity supply (Note 18) Rental income Late payment penalties from customers Other Total 2023 3,306,839 92,332 71,075 28,307 2022 2,687,131 92,486 52,110 9,236 3,498,553 2,840,963 Bank fees Security services Advertising and publicity expenses Penalties to State budgets Cash collection services Postage and telecommunication services Call centre services Rent Other Total 12. Net finance income/(cost) Interest income Other finance income Total finance income Interest expense Interest cost for employee benefits (Note 15) Foreign exchange losses, net Total finance costs Net finance cost 2023 63,138 51,549 51,151 48,404 36,341 29,831 26,635 19,795 14,654 14,482 13,148 12,047 12,461 11,448 26,315 2022 56,643 46,950 34,929 12,948 44,092 39,748 10,836 17,549 7,440 2,135 14,632 18,998 10,929 21,010 14,132 431,399 352,971 2023 3,270 155 3,425 2022 2,847 6,871 9,718 (280,463) (156,985) (10,043) (6,714) (297,220) (293,795) (7,354) (10,374) (174,713) (164,995) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A488 489 13 Earnings/(loss) per share 15 Post-employment and other long-term employee benefits The calculation of basic and diluted earnings/(loss) per share has been based on the following profit The Group provides cash benefits to employees depending on seniority in the form of jubilee bonuses and attributable to Company’s shareholders and weighted-average number of ordinary shares outstanding: depending on the years of service at retirement in the form of retirement bonuses. The post-employment Profit/(Loss) attributable to shareholders Profit for the year attributable to the owners of the Company Profit attributable to shareholders of the Company Number of ordinary shares (in number of shares) Number of ordinary shares at 31 December 2023 620,494 620,494 2022 558,954 558,954 2023 2022 339,553,004 339,553,004 and other long-term employee benefits are stipulated in the Collective Labour Contracts. In 2023 and 2022, employee benefit obligations were computed by an independent actuary using the projected unit credit method with benefits calculated proportionally to the period of service. Defined benefit liability Other long-term employee benefits Total - Current portion* - Non-current portion *included in Personnel payables in Note 14 31 December 2023 31 December 2022 55,839 108,923 164,762 13,404 151,358 41,675 87,762 129,437 12,168 117,269 For the calculation of basic and diluted earnings per share, treasury shares (6,890,593 shares) were not treated as outstanding ordinary shares and were deducted from the number of issued ordinary shares. (i) Movement in the defined benefit liability and other long-term employee benefits The following tables shows a reconciliation from the opening balances to the closing balances for the defined benefit liability and other long-term employee benefits and its components. There are no plan Basic and diluted earnings/(loss) per share (RON) 14 Short-term employee benefits Personnel payables Current portion of defined benefit liability and other employee benefits Social security charges Tax on salaries Total For details of the related employee benefit expenses, see Notes 16. 2023 1.83 2022 1.65 31 December 31 December 2023 70,598 12,871 31,192 5,887 2022 70,105 11,548 27,301 5,220 120,548 114,174 assets. Defined benefit liability Balance at 1 January Included in profit or loss Current service cost Past service cost Interest cost Included in other comprehensive income Remeasurements loss - Actuarial loss Other Benefits paid Balance at 31 December In Romania, all employers and employees, as well as other persons, are contributors to the State social Other long-term employee benefits security system. The social security system covers pensions, child benefit, temporary inability to work situations, risks of work accidents and professional diseases and other social assistance services, redundancy payments and incentives granted to employers for creating new job. Balance at 1 January Included in profit or loss Current service cost Past service cost Actuarial (gain)/ loss Interest cost Other Benefits paid Balance at 31 December 2023 41,675 4,904 - 3,278 2022 79,078 4,893 (23,367) 3,100 11,918 (9,503) (5,936) 55,839 2023 87,761 7,580 - 16,637 6,764 (9,819) 108,924 (12,526) 41,675 2022 88,356 7,786 (353) (4,509) 4,256 (7,775) 87,761 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A490 491 Defined benefits refer to the retirement bonuses granted according to the seniority within the Group and Termination benefits other long-term benefits refer to the jubilee bonuses granted for seniority. (ii) Actuarial assumptions The following were the main actuarial assumptions at each reporting date: (a) Macroeconomic assumptions: a. Termination benefits for individual lay-offs at the Group’s initiative In accordance with the Collective Labour Contracts concluded between the Group and the Unions, when individual labour contract are terminated at the Group’s initiative, the Group pays termination benefits to the employees depending on their period of service, as follows: • inflation. The actuary used information from the National Commission for Strategy and Prognosis: Period of service Year 2023 2024 2025 2026 2027+ Valuation date 31 December 2023 Valuation date 31 December 2022 10.4% 4.8% 3.5% 3% 2.5% 7.5% 4.9% 3% 2.5% 2.5% • the discount rate used is based on the yield of the Romanian Government bonds at the reporting date, therefore the weighted average discount rate is 6% for the year 2023 (2022: 8.1%); • taxes and social charges are those in force as at the reporting date. (b) Group specific assumptions: • For the year 2023 were taken into consideration the salaries’ growth rates budgeted by the Group. Starting with the year 2024, salaries’ growth is forecasted at the inflation rate; • Employees’ turnover: based on historical data; • Jubilee and retirement bonuses granted based on seniority as per the collective labour contracts, as 1 – 2 years 2 – 5 years 5 – 10 years 10 – 20 years More than 20 years No of gross monthly base salaries 31 December 2023 31 December 2022 2 3 4 5 8 2 3 4 5 8 b. Termination benefits for collective lay-offs at the Group’s initiative: For collective lay-offs, according to the Collective Labour Contracts, the Group pays termination benefits to the employees depending on their period of service, as follows: Period of service 1 – 3 years 3 – 5 years 5 – 10 years 10 – 20 years More than 20 years No of gross monthly base salaries 31 December 2023 31 December 2022 3 6 7 11 16 3 6 7 11 16 follows: Jubilee bonus based on years of service in the Group Seniority 20 years 30 years 35 years 40 years 45 years No of gross monthly base salaries The above mentioned stipulations do not apply to employees with individual labour contract concluded for a determined period. The above stipulations do not apply to employees that obtained other higher cumulative salary compensation rights, provided by legal regulations regarding the Group’s reorganization 31 December 2023 31 December 2022 and restructuring. Employees who are re-employed within the Group after lay-off are not entitled to the 1 2 3 4 5 1 2 3 4 5 above-mentioned benefits. Retirement bonus based on years of service in the Group Seniority Between 8 and 10 years Between 10 and 25 years More than 25 years No of gross monthly base salaries 31 December 2023 31 December 2022 2 3 4 2 3 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 492 493 (iii) Sensitivity analysis 17 Income taxes Significant actuarial assumptions for the determination of the benefit obligation are the discount rate, In determining the amount of current and deferred tax, the Group takes into account the impact of expected salary increase and retirement age. The sensitivity analysis below has been determined based on uncertain tax positions and whether additional taxes and interest may be due. This assessment relies reasonably possible changes of the respective assumptions occurring at the end of the reporting period, on estimates and assumptions and may involve a series of judgments about future events. The Group while holding all other assumptions constant. Discount rate Salary growth Retirement age Increase by 1% Decrease by 1% 2023 (11,301) 2022 (9,237) 2023 12,675 2022 8,611 13,195 9,415 (11,930) (10,049) Increase by 1 year Decrease by 1 year 2023 1,135 2022 812 2023 (1,135) 2022 (812) The sensitivity analysis presented above may not be representative of the actual change in the benefit obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated. In presenting the above sensitivity analysis, the present value of the benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the benefit obligation liability recognized in the statement of financial position. 16 Employee benefit expenses Average number of employees Number of employees at 31 December Wages and salaries* Social security contributions Meal tickets Termination benefits Total employees benefits for the year Capitalised employee benefit expenses Total employees benefits in the statement of profit or loss 2023 7,676 7,960 2023 911,995 27,163 46,583 1,015 986,756 (24,691) 962,065 2022 7,760 7,874 2022 790,425 20,694 33,187 267 844,573 (21,151) 823,422 * Wages and salaries includes also current service cost, defined benefits and other long-term employee benefits Management remuneration is disclosed in Note 31 b) Related parties. considers that the accounting records for taxes due are adequate for all open tax years, based on assessment made by management taking into account various factors, including the interpretation of tax legislation and previous experience. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period when such a determination is made. (i) Amounts recognised in profit or loss Current tax expense Deferred tax expense Total expense related to income tax (ii) Amounts recognised in other comprehensive income 2023 Tax 2022 2,576 102,502 105,078 2023 78,819 18,095 96,914 2022 Tax Revaluation of property, plant and equipment Remeasurement of defined benefit liability Total Before tax (expense)/ Net of tax Before tax (expense)/ Net of tax benefit benefit 85,510 (13,699) 71,811 - - - (11,918) 1,907 (10,011) 9,503 (1,479) 8,024 73,592 (11,792) 61,800 9,503 (1,479) 8,024 (iii) Reconciliation of effective tax rate Profit before tax Tax using Company’s domestic tax rate Non-deductible expenses Non-taxable income Deduction of legal reserves Other tax effects Recognition of tax effect of previously unrecognised tax losses Income tax expense 2023 2022 717,294 663,923 16% 114,767 16% 106,230 2% -4% 0% -1% 0% 17,338 (25,426) (3,165) (5,622) (978) 4% -3% -1% 0% -1% 28,843 (22,083) (3,388) (137) (4,387) 14% 96,914 16% 105,078 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.ADeferred tax assets have not been recognised in respect of the certain tax losses generated by the Company, because it is not probable that future taxable profit will be available against which the entity generating it can use the benefits therefrom. 494 495 (iv) Movement in deferred tax balances (v) Unrecognised deferred tax assets 2023 Net balance at 1 January 2023 Recognised in profit or loss Recognised in other comprehensive income Net Deferred tax assets Deferred tax liabilities Balance at 31 December 2023 Property, plant and equipment 36,980 8,837 13,699 59,516 208,015 21,679 - 229,694 - - 59,516 229,694 (21,101) (4,236) (1,907) (27,244) (27,244) (30,930) (6,068) 5,370 1,712 (4,521) (15,267) - - - (25,560) (25,560) (4,356) (4,356) (19,788) (19,788) - - - - 182,375 18,095 11,792 212,262 (76,948) 289,210 - - - - 44,544 (44,544) Tax losses 18 Trade receivables Trade receivables, gross Bad debt allowance Total trade receivables, net Trade receivables from related parties are presented in Note 31. 182,375 18,095 11,792 212,262 (32,404) 244,666 Trade receivables, gross, comprise: Balance at 31 December 2022 2022 Net balance at 1 January 2023 Recognised in profit or loss Recognised in other comprehensive income Net Deferred tax assets Property, plant and equipment 39,838 (2,858) 187,500 20,515 - - 36,980 208,015 - - Electricity distribution and supply Late payment penalties receivable Customers with judicial execution titles Repairs, maintenance and other services Other Total trade receivables, gross 2023 318,176 2022 337,136 31 December 2023 31 December 2022 3,180,660 (640,218) 2,540,442 3,118,691 (652,689) 2,466,002 31 December 2023 31 December 2022 2,603,238 2,482,266 89,346 333,682 20,904 133,490 80,658 347,667 11,850 196,250 3,180,660 3,118,691 (23,940) 1,360 1,479 (21,101) (21,101) (24,732) (6,198) (95,972) 89,904 (4,299) (222) - - - (30,930) (30,930) (6,068) (6,068) (4,521) (4,521) 78,395 102,501 1,479 182,375 (62,620) 244,995 - - - - 32,440 (32,440) Following the adoption of the Order no. 118/2021 with subsequent amendments and GEO no. 27/2022, the latter one being amended by GEO no. 119/2022, concerning the capping and compensation mechanism, part of the receivables due to the subsidiary Electrica Furnizare S.A. for the sale of electricity and gas to final consumers will be recovered from the Romanian State through National Agency for Payments (domestic consumers) and Social Inspection and Ministry of Energy (non-household consumers). Electricity distribution and supply On 31 December 2023, the amounts estimated to be received from the Ministry of Energy for non-household consumers are 10,130 thousand RON (31 December 2022: 20,480 thousand RON) and from the National 78,395 102,501 1,479 182,375 (30,180) 212,555 Agency for Payments and Social Inspection for household consumers are 36,496 thousand RON (31 December 2022: 21,043 thousand RON). The receivables are booked under the caption “Electricity distribution and supply”. Grants to be received As at 31 December 2023, the estimated amount for subsidies to be received from the Ministry of Energy is RON 2,595,554 thousand (31 December 2022: RON 1,280,788 thousand) and from County Agency for Intangible assets related to concession agreements Employee benefits Impairment of trade receivables Tax loss carried forward Other items Tax liabilities/(assets) before set-off Set off of tax Net tax liabilities/(assets) Intangible assets related to concession agreements Employee benefits Impairment of trade receivables Tax loss carried forward Other items Tax liabilities/(assets) before set-off Set off of tax Net tax liabilities/(assets) Deferred tax liabilities 36,980 208,015 - - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A496 497 Payments and Social Inspection is RON 18,981 thousand. From the total amount of subsidies to be received, The reconciliation between the opening balances and the closing balances of the impairment for other RON 1,528,679 thousand represent uncollected claims submitted to the state authorities and RON 1,085,856 receivables is as follows: thousand claims not yet submitted to the state authorities as at 31 December 2023. According to the legal provisions and regulations adopted regarding the recovery of these subsidies, the amounts should be recovered within 40 days after submission of the required documentation to the National Agency for Payments and Social Inspection or the Ministry of Energy, as the case may be. The amounts should be recovered within 40 days of submission of the required documentation to the National Agency for Payments and Social Inspection or the Ministry of Energy, as appropriate. Claims are Loss allowance Balance as at 1 January Decrease in loss allowance Balance as at 31 December 2023 20,480 (253) 20,227 2022 20,124 356 20,480 recorded under the line “Electricity distribution and supply”. 20 Cash and cash equivalents The reconciliation between the opening balances and the closing balances of the impairment for trade receivables in the form of lifetime expected credit losses is as follows: Lifetime expected credit losses Balance as at 1 January Loss allowance recognized Decrease in loss allowance Amounts written off Balance as at 31 December 2023 652,689 111,271 (35,198) (88,544) 640,218 2022 980,858 146,203 (34,248) (440,124) 652,689 The aging of trade receivables is presented in Note 30. The Group has identified 5 clusters of customers based on shared risk characteristics: 3 separate clusters for the distribution subsidiaries and 2 clusters (households and non-households) for the supply subsidiary. Bank current accounts Call deposits Cash in hand Total cash and cash equivalents in the consolidated statement of financial position 31 December 2023 31 December 2022 223,213 153,997 5 377,215 141,656 193,219 12 334,887 In the context of the consolidated statement of cash flows, non-cash activity includes the netting of trade receivables and trade payables in the amount of RON 160,104 thousand in 2023 (31 December 2022: RON 53,106 thousand). 21 Inventories As at 31 December 2023 and 31 December 2022, inventories are as follows: A significant part of the bad debt allowances refers to clients in litigation, insolvency or bankruptcy procedures, many of them being older than five years. The Group will derecognize these receivables together with the related allowances after the finalization of the bankruptcy process. The amounts written- Spare parts off in 2022 relates to Oltchim (please see Note 18 from prior year financial statements). Consumables and other materials The Group has considered all the information available without undue costs (including forward looking Natural gas information) that may affect the credit risk of its receivables since original recognition, thus recording a bad Other inventories 31 December 2023 31 December 2022 35,057 50,060 25,536 13,692 (8,686) 29,589 53,527 23,319 17,004 (9,467) 115,659 113,972 Allowance for impairment of inventories Total inventories Inventories include mainly spare parts, consumables and the natural gas storage (applicable only for the supply subsidiary) that was set up according to ANRE’s regulations. Spare parts refer mainly to items such as cables, conductors, sockets, switches which are used for the distribution network. As at 31 December 2023, the remaining quantity of natural gas stored is of MWh 143,870 (31 December 2022: MWh 107,472), amounting to RON 25,536 thousand (31 December 2022: RON 23,319 thousand). debt allowance in amount of RON 111,271 thousand. 19 Other receivables VAT receivable Receivables from EU funds Other receivables Lifetime expected credit losses Total other receivables, net 31 December 2023 31 December 2022 12,762 45,194 56,103 (20,227) 93,832 13,024 13,932 120,777 (20,480) 127,253 Other receivables include mainly guarantees from energy suppliers and receivables to be recovered from state authorities in respect to medical leave indemnities. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A498 499 22 Property, plant and equipment The movements in property, plant and equipment in 2023 and 2022 are as follows: Land and land improvements Buildings Equipment Vehicles, furniture and office equipment Construction in progress Total 252,798 202,557 91,801 96,950 29,188 673,297 Net carrying amounts At 1 January 2022 At 31 December 2022 At 31 December 2023 Land and land improvements Buildings Equipment Vehicles, furniture and office equipment Construction in progress Total 252,798 189,079 251,835 185,217 47,213 44,132 301,483 216,466 39,873 5,775 2,089 455 10,554 505,419 16,117 499,390 36,718 594,994 Gross carrying amount Balance at 31 December 2021 Reclassification of assets held for sale Balance at 1 January 2022 Additions Transfer from construction in progress Disposals Acquisition of subsidiary Balance at 31 December 2022 Additions Transfer from construction in progress Disposals Effect of revaluation recognised in other comprehensive income Effect of revaluation recognised in profit or loss Decrease in gross value through reversal of accumulated depreciation Balance at 31 December 2023 1,024 4,115 - - - 5,139 Tangible assets include mainly land, buildings and equipment. 253,822 206,672 91,801 96,950 29,188 678,433 As at 31 December 2023, the Group carried out a revaluation to fair value of property, plant and equipment 1,179 - 85 1,133 1,977 2,386 804 269 5,475 9,435 (3,778) 95 (3,276) (1,093) (1,844) (838) (9) (7,060) consisting of land, land improvements and buildings. The revaluation was carried out by an independent chartered valuer Darian DRS S.A. As a result of the revaluation, the gain recorded in the Consolidated Statement of Comprehensive Income was RON 85,510 thousand and the gain recorded in the Consolidated Statement of Profit or Loss was RON 25 - - - 3,875 3,900 2,081 thousand. 251,835 206,712 94,320 97,185 34,751 684,803 763 - (576) 936 124 - 46,999 38,511 2,462 (381) - (23,907) 239 1,862 371 110 21,872 24,181 - 2,096 Measurement of fair value The Group’s land, land improvements and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent (5,236) (1,308) (1,271) (8,391) accumulated impairment losses. The fair value measurements of the Group’s land, land improvements and - - - - - - - - - 85,510 2,081 (23,907) buildings as at 31 December 2023 were performed by Darian DRS S.A., an independent valuer not related to the Group. Darian DRS S.A. is member of the National Association of Authorised Romanian Valuers and has appropriate qualifications and recent experience in the fair value measurement of properties in the relevant locations. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm’s length terms for similar properties, whenever possible and discounted cash-flows method. 301,483 221,995 91,185 96,358 55,352 766,373 There were no significant changes to the valuation technique in the period between the current revaluation performed on 31 December 2023 and the previous one performed on 31 December 2020. Accumulated depreciation and impairment losses Balance at 1 January 2022 Depreciation Accumulated depreciation of disposals Impairment loss Balance at 31 December 2022 Depreciation Accumulated depreciation of disposals Cancellation of accumulated depreciation Balance at 31 December 2023 - - - - - - - - - 44,588 91,175 18,634 167,875 13,478 8,022 7,378 (1,778) (5) - 4,515 (594) - - - - 19,915 (2,372) (5) 21,495 50,188 95,096 18,634 185,413 7,450 6,499 2,442 - (5,375) (1,635) (23,416) - - - - - 16,391 (7,010) (23,416) 5,529 51,312 95,903 18,634 171,378 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A500 501 The following table shows the valuation techniques used in measuring fair values (Level 3), as well as the 23 Intangible assets significant unobservable inputs used. Category Valuation technique Significant unobservable inputs Land and land improvements Market approach The fair value is estimated based on selling price per square meter of land of similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties and best use). The market price is mainly based on recent transactions. • Adjustment for liquidity, location, size. Buildings Buildings were evaluated using the following methods, depending on the best use and the availability and credibility of available market information: The income approach: The income approach is based on the determination of the reproducible annual flow, derived from the rental of the property and a determination of the capitalization rate and implicitly the multiplier factor. Market approach The market approach is based on the selling price per square meter for buildings with similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties, and best use), adjusted for liquidity, location, size etc. The cost approach It was applied for fixed assets where it was not possible to apply the market or income approach, as is the case with rural housing. The cost approach assumes that the maximum value of a good for an informed buyer is the amount needed to buy or build a new good with equivalent utility. When the good is not new, all the forms of depreciation that can be attributed to the good must be deducted (deducted) from the current new cost, until the evaluation date. • Adjustment for liquidity, location, size. Office space rent • Occupancy rates (between 85% and 90%) • Capitalisation rates (between 7% and 8%) • Annual rent per sqm (between 15 and 20 EUR/sqm), depending on location; Commercial space rent • Occupancy rates (between 80% and 90%) • Capitalisation rates (between 7% and 8%) • Annual rent per sqm (between 10 and 60 EUR/sqm), depending on location Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase/ (decrease) if: • Adjustment for liquidity, location or size would be lower/ (higher) The estimated fair value would increase/ (decrease) if: • Adjustment for liquidity, location or size would be lower/(higher) • Occupancy rates were higher/(lower) • Yield rates were lower/(higher) • Annual rent per sqm was higher/(lower) Intangible assets include mainly intangible assets related to distribution service concession agreements recorded in accordance with IFRIC 12 “Service Concession Arrangements”, as well as licenses and costs of SAP ERP implementation, customer management and billing system and other software, as follows: Intangible assets related to concession agreements Intangible assets from capitalization Software and licenses Intangible assets in progress Total Gross book value Balance at 1 January 2022 Additions Transfers from intangible assets in progress Disposals Additions Transfers from tangible assets in progress Disposals 10,132,347 - 193,401 611,294 989,291 7,694 - - - - - - - - 2 (1,006) 200,091 680 (11,106) 210,424 1,909 140 (2) - 2,047 994 (680) 10,327,657 1,608,419 - (1,006) 11,935,070 1,059,282 - - (11,106) 2,361 12,983,246 Balance at 31 December 2022 10,743,641 989,291 1,018,912 18,617 20,759 Balance at 31 December 2023 11,762,553 1,007,908 Accumulated amortization and impairment losses Balance at 1 January 2022 Amortization Accumulated amortization of disposals Balance at 31 December 2022 Amortization Accumulated amortization of disposals Balance at 31 December 2023 Net carrying amounts At 1 January 2022 At 31 December 2022 At 31 December 2023 4,617,790 449,987 - 186,327 37,734 3,960 - - (1,005) 5,067,777 37,734 189,282 474,246 199,240 6,171 - - (10,490) 5,542,023 236,959 184,963 - - - - - - - 4,804,117 491,681 (1,005) 5,294,793 679,657 (10,490) 5,963,960 5,514,557 5,675,864 6,220,530 - 951,557 770,934 7,074 10,809 25,461 1,909 2,047 2,361 5,523,540 6,640,277 7,019,286 The Group applies IFRIC 12 for the accounting of the transactions under these concession contracts. (See further details in Notes 4, 6(d) and 6(l)). For the year ended 31 December 2023, the Group has recognized construction revenue related to the concession agreements of RON 1,018,912 thousand (2022: RON 611,294 thousand) and construction costs of RON 976,436 thousand (2022: RON 593,490 thousand). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A502 503 The main information related to the current concession contracts agreements and the intangible assets During 2023, capitalized costs with own technological consumption were RON 18,617 thousand, related to the amounts recognized for each network distribution area is summarized below: Muntenia Nord distribution area, as shown in the table below: Network distribution areas Contract date Concession period (years) Contract expiry date Concession period remaining (years) Renewal option Muntenia Nord area Transilvania Nord area Transilvania Sud area 2005 2005 2005 49 49 49 2054 2054 2054 33 33 33 Yes Yes Yes Total Net carrying amount at 31 December 2023 Net carrying amount at 31 December 2022 2,197,712 1,968,811 2,007,855 1,890,409 2,014,963 1,816,644 6,220,530 5,675,864 The concession contracts can be prolonged for a period up to half of the initial established period of 49 years. The investments in relation to the development and modernization of the infrastructure incurred in 2023 refers mainly to: • Modernization of the current transformer points and stations, current underground and overhead power lines in amount of RON 484,220 thousand (2022: RON 139,487 thousand); • Investments related to improvements for electricity distribution network in amount of RON 81,660 thousand (2022: RON 79,132 thousand). • Significant construction works of new transformer stations, new underground and overhead power lines in amount of 2023: RON 144,980 thousand (2022: RON 148,404 thousand); • Acquisition of own car fleet, including utilities vehicles and specialized vehicles in amount of RON 0 thousand; (2022: RON 58,256 thousand); • Modernization and inclusion in SCADA (which is an automatic control system which monitors the equipment) of transformers points and stations, in amount of RON 24,880 thousand (2022: RON 164 thousand); During 2022 and 2023, the additional expenses for actual energy costs as compared with the ex-ante ANRE prices recognised in distribution tariffs are capitalised as intangible assets. These costs will be recuperated in tariffs in 5 years. Network distribution areas Net carrying amount at 31 December 2022 Intangible asset 01 Oct-31 Dec 2023 (gross value) Amortisation during 2023 Net carrying amount at 31 December 2023 Muntenia Nord area Transilvania Nord area Transilvania Sud area Total 374,613 329,937 247,007 951,557 24 Investments in associates 18,617 - - 78,045 65,965 55,230 18,617 199,240 315,185 263,972 191,777 770,934 On 28 July 2021 and on 7 December 2021, Electrica SA concluded four agreements for the sale-purchase of shares in four project companies having as main activity the production of electricity from renewable sources. The sale-purchase agreements concluded, mention the fact that in the first stage the Group acquires 30% of the share capital of the four companies, remaining that in the following stages, to acquire the remaining 70% of the share capital after the conditions provided in the sale-purchase agreements will be fulfilled. By the end of 31 December 2023, three of the project companies were acquired by at least 60% (please see Note 1), therefore they are accounted as subsidiaries, the other one is as follows: • Crucea Power Park SRL. develops the wind project „Crucea Est”, with a projected installed capacity of 121 MW and a projected electricity storage capacity of 60 MWh (15 MW x 4h), located outside the Crucea area, Constanta County. The estimated purchase price for the „Crucea Est” wind project is 70 thousand EUR/MW for the aforementioned capacity, totalling the amount of 8,470 thousand EUR. On 28 July 2021, Electrica SA paid the amount of EUR 2,541 thousand representing 30% of the project value, respectively 30% of the shares of Crucea Power Park SRL. On 15 May 2023, Electrica acquired a further 10% of the shares and voting interests in Crucea Power Park S.R.L. As a result, the Group’s shareholding increased from 30% to 40%. Considering the holding percentage of 40%, as at 31 December 2023, the entity is accounted for using the equity method in these consolidated financial statements as provided in the Group’s accounting policies in Note 6. The cost of the investments at acquisition date, totalling the amount of RON 12,500 thousand, is detailed as The capitalised costs with own technological consumption are recognized for each network distribution follows: area, the first asset being recorded on 30 September 2022 and the second one on 31 December 2022, is summarized below: Network distribution areas Muntenia Nord area Transilvania Nord area Transilvania Sud area Total Intangible asset 01 Jan-30 Sep 2022 (gross value) Intangible asset 01 Oct-31 Dec 2022 (gross value) Amortisation during 2022 Net carrying amount at 31 December 2022 Acquisition date Percentage ownership and voting rights at acquisition date 302,413 258,513 193,881 754,807 87,321 84,342 62,820 234,483 15,121 12,919 9,694 37,734 374,613 329,937 247,007 951,557 Net assets at acquisition date Group’s share of net assets Goodwill Cost of investment at acquisition date Crucea Power Park S.R.L. 31.07.2021 30% (242) (73) 12,573 12,500 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A504 505 Summarised financial information in respect of the Group’s associate is set out below: The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per Crucea Power Park S.R.L. 31.12.2023 share in the shareholders’ meetings of the Company, except for the 6,890,593 treasury shares purchased by the Company in July 2014 in order to stabilize the price. All shares rank equally and confer equal rights to the net assets of the Company’s, except for treasury shares. Non-current assets Current assets Non-current liabilities Current liabilities Net assets Reconciliation to carrying amounts: Opening net assets at acquisition date Additions net assets/liabilities Loss for the period Closing net assets 31.12.2023 Reconciliation of the financial information summarized above with the net accounting value of the participation in the associated entity recognized in the consolidated financial statements: 9,199 1,187 (10,376) (45) (36) (246) 293 (83) (36) The Company recognizes changes in share capital only after their approval in the General Shareholders Meeting and their registration by the Trade Register. The contributions made by the shareholders which are not yet registered with the Trade Register at year end are recognized as pre-paid capital contributions from shareholders. The share premium resulted at IPO was RON 171,128 thousand. The transaction costs of RON 68,079 thousand were deducted from the share premium. Following the SPO that took place in November 2019, the share capital of Electrica SA was increased by in kind and in cash contribution, with the amount of RON 5,037 thousand, from the amount of RON 3,459,399 thousand to the amount of RON 3,464,436 thousand, by issuing a number of 503,668 new nominative and dematerialized shares with a nominal value of 10 RON/share. The costs generated by the secondary public offering were in amount of RON 964 thousand. Also, the Company recorded gains referring to share issue of RON 2,186 thousand, resulting from the difference between the contribution value of the plots of land and their value recorded as pre-paid capital contributions in kind from shareholders. Closing net assets of associates 31.12.2023 Group’s share in associates % Group’s share of net assets as at 31.12.2023 Goodwill Carrying amount of interest in associate 31.12.2023 Crucea Power Park S.R.L. (b) Treasury shares reserve (36) 40% (14) 16,652 16,638 In July 2014, the Company purchased 5,206,593 ordinary shares and 421,000 Global Depositary Receipts, equivalent to 1,684,000 shares (totalling 6,890,593 shares). The total amount paid for acquiring the shares and Global Depositary Receipts was RON 75,372 thousand. (c) Revaluation reserve The reconciliation between opening and closing balance of revaluation reserve is as follows: The share loss in amount of RON 39 thousand for the period was recognized in the consolidated statement of profit and loss for the year ended as at 31 December 2023. 25 Capital and reserves (a) Share capital and share premium The issued share capital in nominal terms consists of 346,443,597 ordinary shares as at 31 December 2023 (31 December 2022: 346,443,597) with a nominal value of RON 10 per share. As of 4 July 2014, after the Initial Public Offering (“IPO”), the Company’s shares are listed on the Bucharest Stock Exchange and the Global Depositary Receipts are listed on the London Stock Exchange. The shares owned by the Company’s shareholders that are traded on the London Stock Exchange are the global depositary receipts (GDRs). A global depositary receipt represents four shares. The Bank of New York Mellon is the depositary bank for these securities. The GDRs’ weight in Electrica’s total share capital diminished following the Initial Public Offering, reaching a level of 0.7842% at the end of 2021 as compared to 10.17% at 4 July 2014. Balance at 1 January Revaluation reserve for tangible fixed assets Deferred tax relating to the revaluation reserve Release of revaluation reserve to retained earnings corresponding to depreciation and disposals of property, plant and equipment Balance as at 31 December 2023 2022 92,117 85,510 (13,699) 102,829 - - (4,392) (10,712) 159,536 92,117 As at 31 December 2023, the Group has revalued its land, land improvements and buildings to fair value. The previous revaluation was carried out on 31 December 2020 (see note 22). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A506 507 (d) Legal reserves Electricity suppliers are mainly state-owned electricity producers, as detailed in Note 31, but also other Legal reserves are set up as 5% of the gross profit for the year in the statutory individual financial statements of the companies within the Group, until the total legal reserves reach 20% of the paid-up Other suppliers include suppliers of services, materials, consumables, etc. participants to the electricity market. nominal share capital of each company, according to the legislation. These reserves are deductible for income tax purposes and are not distributable. 27 Other payables Balance at 1 January 2022 Set-up of legal reserves Balance at 31 December 2022 Set-up of legal reserves Balance at 31 December 2023 (e) Dividends Legal reserves 408,405 21,178 429,583 19,780 449,363 VAT payable Liabilities towards the State Other liabilities Total 31 December 2023 31 December 2022 Current Non-current Current Non-current 588,814 33,372 412,898 - - 565,075 11,733 37,161 290,728 1,035,084 37,161 867,536 - - 72,432 72,432 Other liabilities include mainly guarantees, sundry creditors, connection fees, habitat tax and cogeneration contribution. Other non-current liabilities refer to guarantees from customers related to electricity supply. 28 Provisions Romanian companies may distribute dividends from statutory profits, according to the separate financial statements prepared in accordance with Romanian accounting regulations. The dividends declared by the Company in 2023 and 2022 (from the statutory profits of previous years) are as follows: To the owners of the Company Total 2023 39,999 39,999 2022 152,799 152,799 On 27 April 2023 the General Shareholders Meeting of the Company approved dividend distribution of RON 39,999 thousand (2022: RON 152,799 thousand). The dividend per share distributed is RON 0.1178 per share (2022: RON 0.45 per share). When calculating the dividend per share, the Company’s repurchased own shares (6,890,593 shares) were not considered as outstanding shares and are deducted from the total number of issued ordinary shares. Distribution of dividends Balance at 1 January 2023 Provisions recognized Provisions utilised Provisions reversed Balance at 31 December 2023 As at 31 December 2023, provisions refer mainly to benefits upon the termination of executive directors’ mandate contracts in the form of a non-compete clause amounting to RON 710 thousand (31 December 2022: RON 1,839 thousand) and for various claims and litigations involving the Group companies in amount of RON 40,457 thousand (31 December 2022: RON 51,862 thousand) of which the most significant was for the Out of the dividends declared by the Company of RON 39,999 thousand (2022: RON 152,799 thousand), distribution segment amounting to RON 24,345 thousand for a dispute with ANCOM. the dividends paid were of RON 39,894 thousand (2022: RON 152,447 thousand) the remaining difference represents dividends uncollected by the shareholders. 26 Trade payables Electricity suppliers Capital expenditure suppliers Other suppliers Total 31 December 2023 31 December 2022 1,005,761 453,014 212,703 970,815 243,715 192,567 1,671,478 1,407,097 For the supply segment, starting with July 2022, from the amendment of the Performance Standard 82/2021, the compensations are calculated daily or weekly and paid to the customers. Thus, for the provision recognised until 31 December 2022, amounting to RON 11,020 thousand, a reversal of RON 8,770 thousand was recorded during 2023 and an additional provision of RON 1,482 thousand was set up for the period January-December 2023. Tax related Other 1,084 - - - 1,084 52,617 7,924 (229) (20,229) 40,083 Total 53,701 7,924 (229) (20,229) 41,167 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A508 509 29 Bank borrowings and overdrafts Drawings and repayments of borrowings during the year ended 31 December 2023 were as follows: Currency Interest rate Maturity year Amount (RON thousand) Balance at 1 January 2023 Drawings of borrowings during the period, out of which: EBRD Exim Bank Romania Vista Bank CEC Bank ERSTE Group Bank and Raiffeisen Bank Total drawings Accumulated interest Payment of interest out of which paid in 2022 Reimbursements, out of which: BRD BRD BRD Banca Transilvania Unicredit Bank BCR EBRD Exim Bank Romania Balance at 31 December 2023 Floating rate (2.1% + interbank rate + ROBOR spread) ROBOR 3M+1.65% ROBOR 3M+2.95% ROBOR 3M+2.85% ROBOR 3M +1.16% 3.99% 3.85% 3.85% 4.59% 3.85% ROBOR 3M+1% Floating rate (1.15% + interbank rate + ROBOR spread) ROBOR 3M+1.65% RON RON RON RON RON RON RON RON RON RON RON RON RON 760,713 180,000 245,890 25,000 200,000 91,768 742,658 11,125 (9,124) 187,730 20,800 14,286 11,425 17,857 9,600 18,950 11,478 83,334 1,317,642 2028 2024 2024 2026 2024 2026 2028 2028 2027 2026 2028 2031 2024 As at 31 December 2023, respectively 31 December 2022, the bank borrowings is as follows: Lender Borrower Banca Transilvania Distributie Energie Electrica Romania (formerly SDEE Transilvania Sud S.A.) UniCredit Bank BRD BRD BRD Distributie Energie Electrica Romania (formerly SDEE Transilvania Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Muntenia Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Transilvania Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Transilvania Sud S.A.) Balance at 31 December 2023 Balance at 31 December 2022 62,508 80,367 29,103 38,793 62,400 83,200 64,286 78,571 51,467 62,904 Lender Borrower BCR EBRD EBRD Distributie Energie Electrica Romania (formerly SDEE Muntenia Nord S.A.) Distributie Energie Electrica Romania Distributie Energie Electrica Romania CEC Bank Electrica Furnizare S.A. Exim Bank Romania Distributie Energie Electrica Romania Vista Bank Societatea Energetica Electrica S.A. ERSTE Group Bank and Raiffeisen Bank Total Societatea Energetica Electrica S.A. Less: current portion of the long-term bank borrowings Less: accumulated interest Total long-term borrowings, net of current portion Balance at 31 December 2023 Balance at 31 December 2022 90,542 109,785 189,971 182,773 200,000 167,825 125,000 91,768 202,983 - - 4,110 100,000 - 1,317,642 760,713 (512,169) (104,400) (11,125) 794,348 (9,120) 647,193 Bank Borrowings description: loan amount: RON 60,000 thousand; Interest rate: a) Investment loan granted by Banca Transilvania On 18 July 2019, Societatea de Distributie a Energiei Electrice Transilvania Sud S.A., currently Distributie Energie Electrica Romania S.A., as a borrower, concluded with Banca Transilvania an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the investment plan. Main provisions are: Maximum loan amount: RON 125,000 thousand; fixed, 3.85% per annum; Reimbursements: quarterly instalments until 13.11.2026; Grace period: 12 months. As at 31 December 2023, the outstanding balance is of RON 29,103 thousand, of which RON 28,800 thousand principal and RON 303 thousand accrued interest. (Outstanding balance as at 31 December 2022: RON 38,793 thousand). c) Investment loan granted by BRD – Groupe Societe Generale Interest rate: fixed, 4.59% per annum; Reimbursements: On 29 October 2019, Societatea de Distributie a Energiei quarterly instalments until 30.06.2027; Grace period: Electrice Muntenia Nord S.A., currently Distributie 12 months. As at 31 December 2023, the outstanding Energie Electrica Romania S.A., as borrower, concluded balance is of RON 62,508 thousand, of which RON with BRD – Groupe Societe Generale an investment 62,500 thousand principal and RON 8 thousand credit agreement with the purpose of financing accrued interest. (Outstanding balance as at 31 investments in the electricity distribution network, December 2022: RON 80,367 thousand). according to the investment plan. Main provisions b) Investment loan granted by Unicredit Bank On 13 November 2019, Societatea de Distributie a Energiei Electrice Transilvania Nord S.A., currently Distributie Energie Electrica Romania S.A., as borrower, concluded with Unicredit Bank an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the investment plan. Main provisions are: Maximum are: Maximum loan amount: RON 130,000 thousand; Interest rate: fixed, 3.99% per annum; Reimbursements: quarterly instalments until 28.10.2026; Grace period: 12 months. As at 31 December 2023, the outstanding balance is of RON 62,400 thousand. (Outstanding balance as at 31 December 2022: RON 83,200 thousand). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 510 511 d) Investment loan granted by BRD – Groupe Societe annum; Reimbursements: quarterly instalments until the European Investment Bank an investment credit The main provisions are: The maximum value of the Generale 2028; Grace period: 12 months. As at 31 December contract, representing the second part of the Approved loan RON 180,000 thousand; Interest rate: agreed On 25 June 2020, Societatea de Distributie a Energiei Electrice Transilvania Nord S.A., currently Distributie Energie Electrica Romania S.A., as a borrower, concluded with BRD – Groupe Societe Generale an 2023, the outstanding balance is RON 90,542 thousand, Credit in the amount of EUR 210,000 thousand for the individually for each tranche drawn; Repayments: of which RON 90,011 thousand principal and RON 531 purpose of financing investments in the electricity 14 quarterly instalments until 31.01.2028; Grace thousand accrued interest. (Outstanding balance as distribution network according to the 2021-2023 period: 18 months. Maximum credit amount: 180,000 at 31 December 2022: RON 109,785 thousand). investment plan. The main provisions are: Maximum thousand RON; Interest rate: ROBOR 3M + 2.10%. As at investment credit agreement with the purpose of g) Investment loan granted by the European Bank for financing investments in the electricity distribution Reconstruction and Development (“EBRD”) network, according to the approved investment plan for 2020. Main provisions are: Maximum loan amount: RON 100,000 thousand; Interest rate: fixed, 3.85% per annum; Reimbursements: quarterly instalments until On 2 July 2021, Societatea de Distributie Energie Electrica Romania SA, as a borrower, concluded with the European Bank for Reconstruction and 2028; Grace period: 12 months. As at 31 December 2023, Development a credit agreement for investments the outstanding balance is of RON 64,286 thousand. (Outstanding balance as at 31 December 2022: RON 78,571 thousand). in order to finance investments in the electricity distribution network according to the 2021-2023 investment plan. The main provisions are: The value of the loan: EUR 90,000 thousand; Interest rate 19 December 2023, the value of the loan increased and Repayments will be agreed individually for each to 240,000 thousand RON. As at 31 December 2023, tranche drawn. On 31 December 2023, the outstanding the outstanding balance is RON 182,775 thousand, of balance is Nil as no withdraw was made from the loan. which RON 180,000 thousand principal and RON 2,775 The loan agreement is guaranteed by Electrica SA. thousand accrued interest. The loan agreement is j) Loan for financing current activity granted by guaranteed by Electrica SA. Eximbank Romania m) Multicredit facility for multiple financing by On 22 December 2022, Distributie Energie Electrica Romania S.A., as a borrower, concluded with Eximbank accessing cash and non-cash products granted by CEC BANK SA (“CEC”) e) Investment loan granted by BRD – Groupe Societe Interest rate: agreed individually for each tranche The main provisions are: Maximum loan amount: borrower, concluded a Facility Agreement Multicredit. Generale drawn; Repayments: 17 half-yearly instalments until 31.07.2031; Grace period: 24 months. As at 31 250,000 thousand RON; Interest rate: ROBOR 3M +1.65 % The main provisions are: The maximum value of the p.a.; Repayments: 6 equal quarterly instalments; Grace loan RON 150,000 thousand; Interest rate: ROBOR maximum value of the loan RON 195,136 thousand; Romania a credit agreement for a period of 24 months. On 4 August 2023, Electrica Furnizare S.A., as the December 2023, the outstanding balance is RON period: 6 months. On 25 June 2020, Societatea de Distributie a Energiei Electrice Transilvania Sud S.A., currently Distributie Energie Electrica Romania S.A. as a borrower, concluded with BRD – Groupe Societe Generale an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the approved investment plan 189,970 thousand, of which RON 183,657 thousand principal and RON 6,313 thousand accrued interest. The loan agreement is guaranteed by Electrica SA. (Outstanding balance as at 31 December 2022: RON 202,983 thousand. for 2020. Main provisions are: Maximum loan amount: h) Investment loan granted by the European RON 80,000 thousand; Interest rate: fixed, 3.85% per Investment Bank (“EIB”) annum; Reimbursements: quarterly instalments until 2028; Grace period: 12 months. As at 31 December 2023, the outstanding balance is RON 51,467 thousand, of which RON 51,429 thousand principal and RON 39 thousand accrued interest. (Outstanding balance as at 31 December 2022: RON 62,904 thousand). On 14 July 2021, Societatea de Distributie Energie Electrica Romania SA, as a borrower, concluded with the European Investment Bank an investment credit contract, representing the first part of the Approved Credit in the amount of EUR 210,000 thousand for the purpose of financing investments in the electricity f) Investment loan granted by Banca Comerciala distribution network according to the 2021-2023 Romana (“BCR”) On 17 September 2020, Societatea de Distributie a Energiei Electrica Muntenia Nord S.A., currently Distributie Energie Electrica Romania S.A., as a borrower and Electrica SA as a guarantor, concluded with Banca Comerciala Romana S.A. an investment investment plan. The main provisions are: Maximum value of the loan: EUR 120,000 thousand; Interest rate and Repayments will be agreed individually for each tranche drawn. On 31 December 2023, the outstanding balance is Nil as no withdraw was made from the loan. The loan agreement is guaranteed by Electrica SA. credit agreement with the purpose of financing i) Investment loan granted by the European investments in the electricity distribution network, Investment Bank (“EIB”) according to the approved investment plan for 2020. Main provisions are: Maximum loan amount: Ron 155,000 thousand; Interest rate: ROBOR 3M+1% per On 7 December 2021, Societatea de Distributie Energie Electrica Romania SA, as a borrower, concluded with On 31 December 2023, the outstanding balance is RON 167,825 thousand. The loan benefits from a guarantee in the name and account of the state and is 3M+2.85%; full repayment at maturity; Maturity date: 03 August 2026. As at 31 December 2023, the outstanding balance is RON 200,000 thousand. The loan agreement is guaranteed by Electrica SA. guaranteed by Electrica SA. (Outstanding balance as n) Syndicated credit facility granted by Erste Group at 31 December 2022: RON 4,110 thousand). Bank AG and Raiffeisen Bank SA k) Line of Credit for working capital and for issuing On 2 November 2021, Electrica S.A., as borrower, entered Bank Guarantee Letters granted by Vista Bank into a syndicated credit facility with Erste Group Bank AG and Raiffeisen Bank SA. The main provisions are: Maximum loan amount RON 750,000 thousand; Interest rate: ROBOR 3M+1.16%. On 3 November 2023 the loan was extended for a period of one year and the maximum loan amount was reduced to RON 450,000,000. As at 31 December 2023 the balance of the loan is RON 91,768 thousand, of which principal RON 91,768 thousand and accrued interest RON 619 thousand (31 December 2022: RON 0.0 thousand). On 30 December 2022, Societatea Energetica Electrica S.A., as the borrower, concluded a contract for a line of credit for working capital and for the issuance of Bank Guarantee Letters granted by Vista Bank for a period of 18 months. The main provisions are: Maximum credit amount: 100,000 thousand RON; Interest rate: ROBOR 3M +2.95 % p.a.; full refund at maturity. On 31 December 2023, the balance of the loan is 125,000 thousand RON. (Outstanding balance as at 31 December 2022: RON 100,000 thousand). l) Investment loan granted by the European Bank for Reconstruction and Development (“EBRD”) On 17 March 2023, Societatea de Distributie Energie Electrica Romania SA, as a borrower, concluded with the European Bank for Reconstruction and Development a credit agreement for working capital. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A512 513 Overdrafts 30 Financial instruments - fair values and risk management Until the authorization for issue of these Consolidated Financial Statements by the Board of Directors, the (a) Accounting classifications and fair values Group has overdrafts from various banks (ING Bank N.V., Raiffeisen Bank, Banca Comerciala Romana, Banca Transilvania, BNP Paribas, Intesa Sanpaolo Bank, BRD – Groupe Societe Generale S.A., Alpha Bank and UniCredit) with a total overdraft limit of up to RON 2,963,947 thousand (Total overdraft limit as at 31 December 2022: RON 2,743,542 thousand). The overdraft facilities are used for financing activities. The outstanding balance of the overdraft facilities as at 31 December 2023 is of RON 2,851,221 thousand (31 December 2022: RON 2,571,037 thousand). Lender (overdrafts) Borrower ING Bank N.V Alpha Bank BCR BRD Societatea Energetica Electrica S.A. Electrica Furnizare S.A. Electrica Furnizare S.A. Electrica Furnizare S.A. Banca Transilvania Electrica Furnizare S.A. ING Bank N.V Electrica Furnizare S.A. Raiffeisen Bank Electrica Furnizare S.A. UniCredit Bank Electrica Furnizare S.A. BNP Paribas Electrica Furnizare S.A. BCR Distributie Energie Electrica Romania S.A Banca Transilvania Distributie Energie Electrica Romania S.A ING Bank N.V Distributie Energie Electrica Romania S.A Intesa San Paolo Distributie Energie Electrica Romania S.A Raiffeisen Bank Distributie Energie Electrica Romania S.A Total overdrafts Financial Covenants Balance at 31 December 2023 Balance at 31 December 2022 206,986 213,702 378,887 218,817 187,194 170,602 369,274 302,399 28,830 210,593 159,544 49,682 135,815 218,895 209,138 147,497 227,311 216,570 185,528 169,600 343,001 300,294 - 208,412 158,965 49,855 135,096 219,770 Financial assets are measured at amortised cost as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. The Group assessed that the carrying amount is a reasonable approximation of the fair value for the financial assets and financial liabilities. (b) Financial risk management The Group has exposure to the following risks arising from financial instruments: • credit risk; • liquidity risk; • market risk. These risks are further explained and detailed. (i) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, cash and cash equivalents, restricted cash and bank deposits. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In the past, the Group had a high credit risk mainly from State-owned companies. 2,851,221 2,571,037 Cash and bank deposits 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. The financial covenants specified in the agreements with BRD – Groupe Societe Generale, Unicredit Bank, Banca Trade receivables Comerciala Romana, European Bank for Reconstruction and Development and European Investment Bank have The Group’s credit risk in respect of receivables was concentrated in the past around state-controlled been fulfilled as at 31 December 2023. Pledged Assets On 31 December 2023, for several overdrafts the Group has pledges (guarantees) for trade receivables amounts, as specified on contracts. Bank Guarantees The maximum limit of the facility for issuing bank guarantees (credit facility for issuing guarantee instruments and multi-product lines) RON 3,110,456 thousand, of which non-cash uses RON 1,104,986 thousand. 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 has implemented a policy on credit risk management and is also considering securing trade receivables. Also, the electricity supply contracts include termination clauses in certain circumstances. The Group establishes an allowance for impairment that represents the amount of expected credit losses, calculated based on the expected loss rate. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A514 515 Impairment Exposure to liquidity risk The following table provides information about the exposure to credit risk and expected credit losses for trade The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts receivables for customers as at 31 December 2023: are gross and undiscounted. 31 December 2023 Contractual cash flows Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total Expected credit loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired 2% 7% 14% 37% 92% 2,229,339 (35,330) 2,194,009 255,100 (16,875) 238,225 47,635 25,927 (6,670) (9,640) 622,659 (571,703) 40,965 16,287 50,956 3,180,660 (640,218) 2,540,442 No No No No Yes The Group performed a sensitivity analysis and a 5% increase in the expected credit loss rates would not lead a material impact on the results of the Group. 31 December 2022 Expected credit loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired 3% 4% 16% 35% 95% 1,951,656 (60,310) 1,891,346 490,985 (19,342) 471,643 66,365 27,259 (10,488) (9,671) 582,426 (552,878) 55,877 17,588 29,548 No No No No Yes Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total Financial liabilities Carrying amount Total less than 1 year 1-2 years 2-5 years more than 5 years 31 December 2023 Bank overdrafts Lease liability 2,851,221 2,851,221 2,851,221 - - - 43,195 43,195 14,052 9,920 3,980 15,243 Long term bank borrowings 1,317,642 1,317,642 523,294 258,923 475,905 59,520 Trade payables Total 31 December 2022 Bank overdrafts Lease liability Trade payables Total (iii) Market risk 1,671,478 1,671,478 1,671,478 - - - 5,883,536 5,883,536 5,060,045 268,843 479,885 74,763 2,571,037 2,571,037 2,571,037 - - - 53,673 53,673 19,211 10,795 10,645 13,022 760,713 760,713 113,520 354,471 200,505 92,217 1,407,097 1,407,097 1,407,097 - - - 4,792,520 4,792,520 4,110,865 365,266 211,150 105,239 Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect the Group’s income or the value of its financial instruments held. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Group. The functional The following table provides information about the exposure to credit risk and expected credit losses for trade Long-term bank borrowings receivables for customers as at 31 December 2022: 3,118,691 (652,689) 2,466,002 currency of all entities belonging to the Group is the Romanian Leu (RON). Details of the main movements in the allowances for doubtful debts are disclosed in Note 18. (ii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows on financial liabilities. The Group also monitors the level of expected cash inflows on trade receivables together with expected cash outflows on trade and other payables. In addition, the Group maintains overdrafts (refer to Note 29). The currency in which these transactions are primarily denominated is RON. Certain liabilities are denominated in foreign currency (EUR). The Group also has deposits and bank accounts denominated in foreign currency (EUR). The Group’s policy is to use the local currency in its transactions as far as practically possible. The Group does not use derivative or hedging instruments. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A516 517 Exposure to currency risk Exposure to interest rate risk The summary of quantitative data about the Group’s exposure to currency risk is as follows: The interest rate profile of the Group’s interest-bearing financial instruments is as follows: in thousands of RON Cash and cash equivalents Lease liability Net statement of financial position exposure 31 December 2023 31 December 2022 denominated in EUR denominated in EUR 347 (42,231) (41,844) 277 (21,004) (20,727) The following significant exchange rates have been applied during the year: RON EUR 1 Sensitivity analysis Average rate Year-end spot rate 2023 4.9465 2022 4.9315 2023 4.9746 2022 4.9474 Fixed-rate instruments Financial assets Call deposits Financial liabilities Long-term bank borrowings Lease liability Total Variable-rate instruments Financial liabilities A reasonably possible strengthening (weakening) of the EUR against RON at 31 December would have affected Lease liability 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. Long-term bank borrowings Bank overdrafts Total 31 December 2023 31 December 2022 153,997 193,219 (1,068,912) (32,312) (947,227) (651,752) (37,378) (495,911) (10,883) (248,730) (16,295) (108,961) (2,851,221) (2,571,037) (3,110,834) (2,696,293) Effect 31 December 2023 EUR (5% movement) 31 December 2022 EUR (5% movement) Interest rate risk Profit before tax Strengthening Weakening Fair value sensitivity analysis for fixed-rate instruments (2,092) (1,036) 2,092 1,036 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. For financing purposes, the Group uses both medium and long-term bank loans and short-term loans in the form of overdraft facilities (please see Note 29). The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings (please see Note 29), as the long-term borrowings are contracted mainly at fixed rates, while the overdraft facilities bear variable rates. The Group does not have in place hedging contracts for interest rate. The Groups exposures to interest rates on financial assets and financial liabilities are detailed below. The Group is exposed to the interest rate benchmark ROBOR, which is the interest rate on the Romanian interbank market. 31 December 2023 Variable-rate instruments 31 December 2022 Variable-rate instruments Profit before tax 50 bp increase 50 bp decrease (15,554) 15,554 (13,481) 13,481 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 518 519 31 Related parties (a) Main shareholders Supplier 2023 2022 31 December 2023 31 December 2022 Purchases (without VAT) Balance (including VAT) As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share Electrocentrale Bucuresti capital. (b) Management and administrators’ compensation Executive Management compensation 2023 36,623 2022 34,726 ANRE Transgaz Others Total - 16,763 7,638 5,945 191,862 10,458 8,029 7,768 - 12 1,850 1,513 - 14 986 1,168 5,585,186 6,299,475 635,845 426,562 Executive management compensation refers to both the managers with mandate contract and those with supply of electricity, of which the most important transactions are the following: The Group also makes sales to companies in which the State has control or significant influence representing labour contract, from both the subsidiaries and Electrica SA. This also includes the benefits in the event of the termination of mandate contracts for executive directors. Compensations granted to the members of the Board of Directors were as follows: Members of Board of Directors 2023 4,151 2022 3,063 Electrica SA’s Board of Directors comprises 7 members. According to the remuneration policy approved by the General Meeting of Shareholders that took place on 20 April 2022, the annual number of paid sessions is limited to twelve for Board of Directors meetings and to six for each of the committees. Additional committee meetings can be organized only in exceptional situations, upon the Chairs’ committee decision, who are responsible to efficiently organize the agenda and activity. However, only one such additional meeting shall be remunerated, for each committee. No loans were granted to directors or administrators in 2023 and 2022. (c) Transactions with companies in which the state has control or significant influence The Group has transactions with companies in which the State has control or significant influence in the ordinary course of business, related mainly to the acquisition of electricity, transport and system services and sale of electricity. Significant purchases and balances are mainly with energy producers/suppliers, as follows: Supplier OPCOM Transelectrica Nuclearelectrica Hidroelectrica Complexul Energetic Oltenia OMV Petrom SA SNGN Romgaz SA Purchases (without VAT) Balance (including VAT) 2023 2022 31 December 2023 31 December 2022 2,879,757 2,727,101 671,172 799,117 44,631 1,107,474 - 52,689 968,470 866,763 581,598 478,813 261,123 197,490 212,746 170,242 107,671 37 132,693 - 9,081 23,981 185,856 93,013 42,493 45,257 26,349 7,445 Sales Balance, gross Allowance (without VAT) (including VAT) (including VAT) Balance, net Client OPCOM Transelectrica C.N.C.F CFR S.A. SNGN Romgaz SA Hidroelectrica CN Romarm CFR Electrificare Transgaz CN Remin SA C.N.C.A.F MINVEST SA Oltchim CET Braila Termoelectrica 2023 37,429 157,861 114,009 32,762 288,923 25,158 19,043 1,684 923 - - 14 - 2,174 44,220 33,841 - 32,882 4,279 2,347 544 71,347 26,802 115,426 3,378 1,206 County Agency for Payments and Social Inspection 18,981 18,981 Ministry of Energy/ National Agency for Payments and Social Inspection 3,287,858 2,605,684 31 December 2023 - - 5 - - - - - 71,216 26,802 115,426 3,361 1,206 - - 2,174 44,220 33,836 - 32,882 4,279 2,347 544 131 - - 17 - 18,981 2,605,684 Others Total 211,691 9,173 364 8,809 4,196,336 3,008,780 218,380 2,790,400 (*) In the 12-month period ended 31 December 2023, Electrica Furnizare S.A. recognised subsidies amounting to RON 3,306,839 thousand, to be received from the Ministry of Energy/National Agency for Payments and Social Inspection, as a result of the application of the price cap mechanism for electricity and natural gas according to the legislation in force. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A520 521 Balance, gross (including VAT) Allowance Balance, net 31 December 2022 - - 9 - - - - 71,148 26,802 115,943 3,361 1,206 - 522 22,630 112,754 2,245 16,429 648 2,089 764 132 - - 3 - 1,322,311 10,754 Client OPCOM Transelectrica SNGN Romgaz SA Hidroelectrica CN Romarm CFR Electrificare Transgaz CN Remin SA C.N.C.A.F MINVEST SA Oltchim CET Braila Termoelectrica Sales (excluding VAT) 2022 326,640 314,253 86,353 68,716 17,386 10,332 11,580 704 - - 5 - 22,630 112,754 2,253 16,429 648 2,089 764 71,279 26,802 115,943 3,365 1,206 Ministry of Energy/ National Agency for Payments and Social Inspection 2,687,131 1,322,311 127,686 11,277 Others Total 32 Contingencies Contingent liabilities Fiscal environment Tax inspection report for SDEE Muntenia Nord S.A (currently Distributie Energie Electrica Romania S.A.) The subsidiary SDEE Muntenia Nord S.A. (currently Distributie Energie Electrica Romania S.A.) was subject to a tax audit performed by the Local Taxes Department of Galati City Hall that referred to the building taxes paid for the period 2012-2016. The tax audit was finalized in December 2019, when the fiscal inspection report was communicated to the subsidiary. The fiscal report established additional payment obligations for the subsidiary representing building tax for the period 01.01.2012-31.12.2015 in the total amount of RON 24,831 thousand, of which principal in amount of RON 12,051 thousand and related late penalties computed as of October 2019, in amount of RON 12,780 thousand. The amount of late charges was recalculated to RON 13,021 thousand between the tax inspection report date and principal debt payment date. Litigious actions were started in order to challenge the tax inspection report. The Group recognised an expense in amount of RON 12,051 thousand during the year ended 31 December 2019 in accordance with IFRIC 23 „Uncertainty over Income Tax Treatments”. At the same time, for the late penalties in the amount of RON 13,021 thousand, a letter of bank guarantee was established in the amount of RON 13,021 thousand valid until 14 August 2024, in order to mitigate the associated risks. Other litigations and claims The Group is involved in a series of litigations and claims (ie, with ANRE, NAFA, Court of Accounts, claims for damages, claims over land titles, labour related litigations etc.). As summarised in Note 28, the Group set-up provisions for the litigations or claims for which the management assessed as probable the outflow of resources embodying economic benefits due to low chances of favourable outcomes of those litigations or disputes. The Group does not present information in the financial statements and did not set-up provisions for items for which the management assessed as remote the possibility of outflow of 3,650,786 1,709,750 218,991 1,490,759 economic benefits. The Group discloses if the case information on the most significant items of litigations or claims for which the Group did not set-up provisions as they relate to possible obligations that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group (ie, litigations for which different inconsistent sentences were issued by the Courts, or litigations which are in early stages and no preliminary ruling was issued so far). Tax audits are frequent in Romania, consisting of detailed verifications of the accounting records of taxpayers. Such audits sometimes take place after months, even years, from the date liabilities are established. (a) Contractual commitments Consequently, companies may be found liable for significant taxes and fines. Moreover, tax legislation is subject 33 Commitments to frequent changes and the authorities demonstrate inconsistency in interpretation of the law. Contractual commitments as at 31 December 2023 and 31 December 2022 are as follows: Income tax returns may be subject to revision and corrections by tax authorities, generally for a five-year period after they are completed. The Group may incur expenses related to previous years’ tax adjustments as a result of controls and litigations with tax authorities. The management of the Group believes that adequate provisions were recorded in the consolidated financial statements for all significant tax obligations; however, a risk persists that the tax authorities might have different positions. Purchase of electricity Purchase of green certificates Purchase of property, plant and equipment and intangible assets Purchase of investments Total 31 December 2023 31 December 2022 707,797 172,979 626,617 45,122 802,252 129,246 446,937 289,636 1,552,515 1,668,071 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A522 523 (b) Investment program The investment program at Group level estimated to be approved for the year 2024 is as follows: Distribution activity Supply activity Maintenance activity Production activity Other Total 2024 865,480 53,290 10,300 588,130 16,600 1,533,790 The capital expenditures actually incurred may differ from the ones planned. (c) Guarantees and pledges At 31 December 2023 and 31 December 2022, the Group has guarantees on its bank accounts opened at ING Bank N.V., Raiffeisen Bank, Banca Comerciala Romana, Banca Transilvania, Intesa Sanpaolo Bank and Alpha Bank for the overdrafts contracted (please see Note 29), and also on its bank accounts opened at BRD – Group Societe Generale, Unicredit Bank, Banca Transilvania, Banca Comerciala Romana, Vista Bank and CEC Bank for the long- term borrowings contracted (please see Note 29). At 31 December 2023, the Group has outstanding bank letters of guarantee of RON 1,193,823 thousand (31 December 2022: RON 952,008 thousand) issued in favour of its suppliers. (d) Audit fees The audit fees for the consolidated financial statements were in amount of 1,075 thousand RON, and during the year 2023, non-audit services fees were in amount of 174 thousand RON (limited review of the interim consolidated financial statements). The audit fees for the individual financial statements is mentioned in the annual individual financial statements of Electrica S.A.. 34 Subsequent events On 15 February 2024, the subsidiary Distributie Energie Electrica Romania (DEER) has obtained approval for EUR 171 million in non-reimbursable European funding through the Modernisation Fund (FM), representing 80% of the eligible expenditure for seven new investment projects in the electricity distribution network, projects with an estimated value of approximately EUR 266 million (with VA). Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A524 525 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016) 526 527 Deloitte Audit S.R.L. The Mark Tower, 82-98 Calea Griviței, Sector 1, 010735 Bucharest, Romania T: +40 21 222 16 61 F: +40 21 222 16 60 www.deloitte.ro INDEPENDENT AUDITOR’S REPORT To the Shareholders, SOCIETATEA ENERGETICA ELECTRICA S.A. Report on the Audit of the Consolidated Financial Statements Opinion 1. We have audited the consolidated financial statements of Societatea Energetica Electrica S.A.and its subsidiaries (“the Group”), with registered office in Bucharest, District 1, Street Grigore Alexandrescu, No. 9 , identified by unique tax registration code 13267221, which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information. 2. The financial statements as at December 31, 2023 are identified as follows: • Net assets / Equity RON 6,008,000 thousand • Net profit for the financial year RON 620,380 thousand 3. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Ministry of Public Finance Order no. 2844/2016, with subsequent amendments. Basis for Opinion 4. We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation (EU) No. 537/2014 of the European Parliament and the Council (herein after referred to as “the Regulation”) and Law 162/2017 on the statutory audit of annual financial statements and annual consolidated financial statements and on amending other pronouncements (herein after referred to as “the Law 162/2017”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), in accordance with ethical requirements relevant for the audit of the financial statements in Romania including the Regulation and the Law 162/2017 and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter 5. We draw attention to Note 7 of the consolidated financial statements, which describes that the Group prepares two sets of consolidated financial statements, one under statutory regulations, namely Ministry of Finance Order 2844/2016 with subsequent amendments and one under International Financial Reporting Standards as adopted by the European Union (“IFRS”). These consolidated financial statements are prepared under OMF 2844/2016 with subsequent amendments, which differs from IFRS as summarized in Note 7. Consequently these consolidated financial statements do not comply with IFRS. Our audit report is not modified in respect of this matter. Key Audit Matters 6. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms, and their related entities (collectively, the "Deloitte organization"). DTTL (also referred to as "Deloitte Global") and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. 1 Key audit matters Going Concern As presented in Note 6 the consolidated financial statements have been prepared on the going concern basis. The key judgement leading to this conclusion are set out in that note. In particular the Group operates in the electricity distribution and supply industry which is currently affected by the capping laws on sales to end customers. The Romanian authorities regulatory position is under review and there may be further laws enacted which could adversely impact the Group’s operating cash flows. In the forthcoming twelve months the Group will need to obtain additional financing and given the position of the Group and its significance to the Romanian economy management expects that all necessary financing will be made available. The ability of the Group to continue as a going concern is dependent on the successful extension of the existing debt facilities, drawdown of new financing and on stabilizing of the regulatory regime on energy prices as described in note 6 which provides an appropriate margin to support servicing of the Group’s short and long term financings. In view of the significant judgements, the application and disclosures of the basis of the going concern assumption are considered a Key Audit Matter. Valuation of Retail accrued revenue, related to electricity supplied to households The Group recognizes at the end of each reporting period accrued revenue from the energy supply activity, related to the household population. If the actual meter readings are not available at the end of the reporting period, energy supplied to households is estimated based on internal information related to historical patterns of consumption. The degree of estimation uncertainty reduces from one period to another, however judgement is inherent in the valuation of the accrued revenue related to the household population. Because of the significance of the estimations around the accrued revenue related to the households and the inability of relying on the effectiveness of the controls, we consider the valuation of retail accrued revenue, related to households a key audit matter. How our audit addressed the key audit matter We have assessed managements valuation of the going concern assumption by performing the following procedures: • We have obtained the cash flow forecasts and critically challenged the management and the Board of Directors and Audit Committee on the assumptions used; • We considered whether at the date of this report additional information exist from the Romanian authorities with respect to the capping mechanism; • We have assessed the Group’s position on the existing debt facilities, covenant compliance and newly negotiated debt facilities, during 2024 until the date of this report; • We assessed the adequacy of the disclosure of the basis of going concern assumption, including the key judgements adopted; The group has a number of IT systems across the businesses and we were not able to rely on the effectiveness of IT controls within the revenue cycle. The audit procedures adopted were substantive in nature and included the following: • • • • Obtaining an understanding of the accounting policies used in the preparation of the consolidated financial statements, with respect to revenue recognition; Testing the reconciliation made by the Group between the quantity of electricity purchased for supply purposes and the quantity of electricity delivered from the supply activity; Testing the acquired electricity for supply purposes through a combination of direct confirmations received from the electricity producers and other supporting documents; Testing the revenues related to electricity supplied to final customers through a combination of direct confirmations and other supporting documents; • Performing analytical procedures on all electricity sales. 2 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORT 528 529 Other information 7. The administrators are responsible for the preparation and presentation of the other information. The other information comprises the Administrators’ Consolidated report and the Remuneration report, but does not include the consolidated financial statements and our auditor’s report thereon, or the non-financial information declaration, which is being presented in a separate report. Our opinion on the financial statements does not cover the other information and, unless otherwise explicitly mentioned in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements for the year ended December 31, 2023, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Other reporting responsibilities with respect to other information – Administrators’ consolidated report With respect to the Administrators’ consolidated report, we read it and report if this has been prepared, in all material respects, in accordance with the provisions of Ministry of Public Finance Order no. 2844/2016, with subsequent amendments. On the sole basis of the procedures performed within the audit of the consolidated financial statements, in our opinion: a) the information included in the Administrators’ consolidated report and the Remuneration report for the financial year for which the consolidated financial statements have been prepared, is consistent, in all material respects, with the consolidated financial statements; b) the Administrators’ consolidated report has been prepared, in all material respects, in accordance with the provisions of Ministry of Public Finance Order no. 2844/2016, with subsequent amendments. Moreover, based on our knowledge and understanding concerning the Group and its environment gained during the audit on the financial statements prepared at December 31, 2023, we are required to report if we have identified a material misstatement of this Administrators’ consolidated report and the Remuneration report. We have nothing to report in this regard. Other reporting responsibilities with respect to other information – Remuneration report With respect to the Remuneration report, we read it to determine if it presents, in all material respects, the information required by article 107, paragraphs (1) and (2) of Law 24/2017 regarding the issuers of financial instruments and market operations, republished. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements 8. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Ministry of Public Finance Order no. 2844/2016, with subsequent amendments and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 9. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 10. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements 11. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 12. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • • • • • • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 13. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 14. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 16. We were appointed by the General Meeting of Shareholders on April 27, 2023 to audit the financial statements of Societatea Energetica Electrica S.A. for the financial year ended December 31, 2023. The uninterrupted total duration of our commitment is 6 of years, covering the financial years ended December 31, 2018 to December 31, 2023. 3 4 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORT 530 531 We confirm that: • Our audit opinion is consistent with the additional report submitted to the Audit Committee of the Company that we issued the same date we issued this report. Also, in conducting our audit, we have retained our independence from the audited entity. • No non-audit services referred to in Article 5 (1) of EU Regulation no. 537/2014 were provided. The engagement partner on the audit resulting in this independent auditor’s report is Răzvan Ungureanu. Răzvan Ungureanu, Audit Partner For signature, please refer to the original signed Romanian version. Registered in the Electronic Public Register of Financial Auditors and Audit Firms under AF 4866 On behalf of: DELOITTE AUDIT SRL Registered in the Electronic Public Register of Financial Auditors and Audit Firms under FA 25 The Mark Building, 84-98 and 100-102 Calea Griviței, 9th Floor, District 1 Bucharest, Romania March 5, 2024 5 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (OMFP 2844/2016)2023 ANNUAL REPORT 532 533 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU) as at and for the year ended 31 December 2023 prepared in accordance with International Financial Reporting Standards as adopted by the European Union Free translation from Romanian, which is the official and binding version 534 535 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 Notes to the consolidated financial statements Basis of preparation 1. 2. 3. 4. Reporting entity and general information Basis of accounting Functional and presentation currency Use of judgments and estimates Accounting policies 5. 6. 7. 8. 9. Restatements Basis of measurement Changes in significant accounting policies Accounting policies Adoption of new and revised standards Performance for the year 10. Operating segments 11. Revenue 12. Electricity, natural gas and merchandise purchased 13. Other operating income and expenses 14 Net finance result 15. Earnings per share 536 538 539 540 542 544 551 552 552 554 556 556 556 570 572 576 576 577 578 578 Employee benefits 16 17 18 Short-term employee benefits Post-employment and other long-term employee benefits Employee benefit expenses Income taxes 19. Income taxes Assets 20. Trade receivables 21. Other receivables 22. Cash and cash equivalents 23. Inventories 24. Property, plant and equipment 25. Intangible assets 26. Investments in associates Equity and liabilities 27. Capital and reserves 28. Trade payables 29. Other payables 30. Provisions 31. Bank borrowings and overdrafts Financial instruments 32. Financial instruments - Fair values and risk management Other information 33. Related parties 34. Contingencies 35. Commitments 36. Subsequent events 579 579 583 583 585 587 588 588 589 592 593 595 597 597 597 598 603 608 610 611 612 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU) 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU) 2023 ANNUAL REPORT2023 ANNUAL REPORT536 537 Note 31 December 2023 31 December 2022 (restated)* Note 31 December 2023 31 December 2022 (restated)* ASSETS Non-current assets Intangible assets related to concession arrangements Other intangible assets Goodwill Property, plant and equipment Investments in associates Other investments Deferred tax assets Other non-current assets Right of use assets Total non-current assets Current assets Trade receivables Subsidies receivable Other receivables Cash and cash equivalents Inventories Prepayments Current income tax receivable Assets held for sale Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Treasury shares reserve Pre-paid capital contributions in kind from shareholders Revaluation reserve Legal reserves Retained earnings Total equity attributable to the owners of the Company Non-controlling interests Total equity *please see Note 5 (Continued on next page) 25 25 24 26 19 20 13 21 22 23 27 27 27 27 27 27 6,220,530 5,675,866 27,822 24,663 594,994 16,638 7,000 32,404 51,954 40,993 12,854 12,040 499,390 18,824 7,000 30,180 2,393 52,152 7,016,998 6,310,699 2,540,442 2,614,535 93,832 377,215 115,660 12,935 - 280 2,466,002 1,280,788 127,253 334,887 113,972 13,874 24,000 280 5,754,899 4,361,056 12,771,897 10,671,755 3,464,436 103,049 (75,372) 7 159,536 449,363 1,259,396 5,360,415 (451) 5,359,964 3,464,436 103,049 (75,372) 7 92,117 429,583 554,634 4,568,454 (516) 4,567,938 Liabilities Non-current liabilities Lease liability – long term Deferred tax liabilities Employee benefits Other payables Long-term bank borrowings Total non-current liabilities Current liabilities Current portion of long-term bank borrowings Lease liability – short term Bank overdrafts Trade payables Other payables Deferred revenue Employee benefits Provisions Current tax liabilities Total current liabilities Total liabilities Total equity and liabilities *please see Note 5 19 16 29 31 31 31 28 29 16,17 30 29,143 121,318 151,358 37,161 794,348 1,133,328 523,294 14,052 2,851,221 1,671,478 1,035,084 7,837 120,548 41,167 13,924 6,278,605 7,411,933 34,462 60,306 117,269 72,432 647,193 931,662 113,520 19,211 2,571,037 1,407,097 867,536 24,750 114,174 53,701 1,129 5,172,155 6,103,817 12,771,897 10,671,755 The accompanying notes are an integral part of these consolidated financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IFRS-EU)AS AT 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF FINANCIAL POSITION (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AAS AT 31 DECEMBER 2023ELECTRICA S.A 538 539 Note 2023 2022 (restated)* Note 2023 2022 (restated)* Profit/(Loss) for the year 772,103 (240,463) 9,816,593 3,498,553 10,009,896 2,840,963 (9,057,976) (10,506,809) (976,436) (962,065) (95,218) (524,481) (75,820) (431,399) 1,191,751 3,425 (297,220) (293,795) (593,490) (823,422) (88,229) (496,253) (112,311) (352,971) (122,626) 9,718 (174,713) (164,995) 11 5,13 25 18 24,25 20,21 13 14 14 26 5,19 Revenue Other income Electricity, natural gas and merchandise purchased Construction costs related to concession agreements Employee benefits Repairs, maintenance and materials Depreciation and amortization Impairment for trade and other receivables, net Other operating expenses Operating profit Finance income Finance costs Net finance cost Share of results of associates Profit/(Loss) before tax Income tax (expense)/benefit Profit/(Loss) for the year Profit/(Loss) for the year attributable to: - owners of the Company - non-controlling interests Profit/(Loss) for the year Earnings/(Loss) per share Basic and diluted earnings/(loss) per share (RON) 15 2.27 (0.71) *please see Note 5 The accompanying notes are an integral part of these consolidated financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of property, plant and equipment Tax related to revaluation of property, plant and equipment Re-measurements of the defined benefit liability Tax related to re-measurements of the defined benefit liability Other comprehensive income, net of tax Total comprehensive income/(loss) Total comprehensive income/(loss) attributable to: - owners of the Company - non-controlling interests 24 19 17 19 85,510 (13,699) (11,918) 1,907 - - 9,503 (1,479) 61,800 8,024 833,903 (232,439) 834,017 (114) 833,903 (232,330) (109) (232,439) (39) (13) Total comprehensive income/(loss) *please see Note 5 897,917 (125,814) 772,103 772,217 (114) 772,103 (287,634) 47,171 (240,463) (240,354) (109) (240,463) The accompanying notes are an integral part of these consolidated financial statements. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 CONSOLIDATED STATEMENT OF PROFIT OR LOSS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF PROFIT OR LOSS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A, 8 3 9 7 6 5 4 , ) 6 1 5 ( , 4 5 4 8 6 5 4 , 4 3 6 4 5 5 , 3 8 5 9 2 4 , 7 1 1 2 9 , l a t o T y t i u q e - n o N s t s e r e t n i g n i l l o r t n o c y t i u q e l a t o T i d e n a t e R i s g n n r a e s e v r e s e r e v r e s e r l a g e L n o i t a u a v e R l l a t i p a c i d a p - e r P y r u s a e r T l s r e d o h e r a h s s n o i t u b i r t n o c s e r a h s m o r f d n k n i i e v r e s e r e r a h S e r a h S i m u m e r p l a t i p a c e t o N 540 ) 9 9 9 9 3 ( , - ) 9 9 9 9 3 ( , ) 9 9 9 9 3 ( , 9 7 1 9 7 1 - - 3 0 1 2 7 7 , ) 4 1 1 ( , 7 1 2 2 7 7 , 7 1 2 2 7 7 0 0 8 1 6 , - 0 0 8 1 6 , ) 1 1 0 0 1 ( , 3 0 9 3 3 8 , ) 4 1 1 ( 7 1 0 4 3 8 , 6 0 2 2 6 7 , - - - - - ) 0 2 8 9 3 ( , 9 7 1 ) 9 9 9 9 3 ( , ) 9 9 9 9 3 ( , - - - ) 7 5 0 2 ( , , 4 6 9 9 5 3 5 , - - - ) 1 5 4 ( - - 2 9 3 4 , ) 0 8 7 9 1 ( , 0 8 7 9 1 , ) 7 5 0 2 ( , ) 7 5 0 2 ( , - - - ) 2 9 3 4 ( , , 5 1 4 0 6 3 5 , , 6 9 3 9 5 2 1 , 3 6 3 9 4 4 , 6 3 5 9 5 1 , 7 ) 2 7 3 5 7 ( , , 9 4 0 3 0 1 , 6 3 4 4 6 4 3 , - 1 1 8 1 7 , 1 1 8 1 7 , - - - - 7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ) 2 7 3 5 7 ( , , 9 4 0 3 0 1 , 6 3 4 4 6 4 3 , 3 2 0 2 y r a u n a J 1 t a e c n a l a B e m o c n i e v i s n e h e r p m o C r a e y e h t r o f t i f o r P t i f o r p e v i s n e h e r p m o c r e h t O t i f o r p e v i s n e h e r p m o c l a t o T f o s r e n w o h t i w s n o i t c a s n a r T y n a p m o C e h t d n a s n o i t u b i r t n o C s n o i t u b i r t s i d 7 2 e h t f o s r e n w o e h t o t s d n e d v D i i 7 2 7 2 s r e n w o h t i w s n o i t c a s n a r t l a t o T y n a p m o C e h t f o p i h s r e n w o n i s e g n a h c l a t o T s t s e r e t n i p i h s r e n w o n i s e g n a h C s t s e r e t n i y n a p m o C e v r e s e r n o i t a u a v e r l f o r e f s n a r T y t i u q e n i s e g n a h c r e h t O s e v r e s e r l a g e l f o p u t e S o t i e u d s g n n r a e d e n a t e r o t i i t n e m p u q e d n a t n a p l , y t r e p o r p l i f o s a s o p s d d n a n o i t a c e r p e d i 541 ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , - - - - - - ) 7 0 4 ( ) 7 0 4 ( - - - ) 8 7 1 1 2 ( , 8 7 1 1 2 , - - 2 1 7 0 1 , - - - ) 2 1 7 0 1 ( , 4 2 0 8 , - 4 2 0 8 , 4 2 0 8 , ) 3 6 4 0 4 2 ( , ) 9 0 1 ( ) 4 5 3 0 4 2 ( , ) 4 5 3 0 4 2 ( , ) 9 3 4 2 3 2 ( , ) 9 0 1 ( ) 0 3 3 2 3 2 ( , ) 0 3 3 2 3 2 ( , , 2 8 5 3 5 9 4 , - , 2 8 5 3 5 9 4 , 8 2 2 0 5 9 , 5 0 4 8 0 4 , 9 2 8 2 0 1 , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , ) 8 9 7 2 5 1 ( , - - - - - - - - - - 7 - - - - - - - - - - - - - - - - - - - - - ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , - - - - - - - , 6 3 4 4 6 4 3 , l a t o T y t i u q e - n o N s t s e r e t n i g n i l l o r t n o c l a t o T y t i u q e i s g n n r a e s e v r e s e r e v r e s e r i d e n a t e R l a g e L n o i t a u a v e R l l a t i p a c i d a p - e r P y r u s a e r T l s r e d o h e r a h s s n o i t u b i r t n o c s e r a h s m o r f d n k n i i e v r e s e r e r a h S e r a h S i m u m e r p l a t i p a c e t o N , 8 3 9 7 6 5 4 , ) 6 1 5 ( , 4 5 4 8 6 5 4 , 4 3 6 4 5 5 , 3 8 5 9 2 4 , 7 1 1 2 9 , 7 ) 2 7 3 5 7 ( , 9 4 0 3 0 1 , , 6 3 4 4 6 4 3 , 2 2 0 2 r e b m e c e D 1 3 t a e c n a l a B s t s e r e t n i g n i l l o r t n o c 5 e t o N e e s e s a e p * l * ) d e t a t s e r ( r e c i f f O l a i c n a n i F f e i h C l a e u g n a r F u r d n a x e A n a l f e t S . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T r e c i f f O e v i t u c e x E f e i h C a t i r i h C n a i l e r u A - u r d n a x e A l 4 2 0 2 h c r a M 5 2 f o e g n a h c t u o h t i w d e r i u q c a s t s e r e t n i g n i l l o r t n o c - n o n l o r t n o c 3 2 0 2 r e b m e c e D 1 3 t a e c n a l a B ) e g a p t x e n n o d e u n i t n o C ( 2 2 0 2 y r a u n a J 1 t a e c n a l a B e m o c n i e v i s n e h e r p m o C * ) d e t a t s e r ( r a e y e h t r o f s s o L s s o l e v i s n e h e r p m o c r e h t O s s o l e v i s n e h e r p m o c l a t o T e h t f o s r e n w o h t i w s n o i t c a s n a r T y n a p m o C s n o i t u b i r t s i d d n a s n o i t u b i r t n o C h t i i w y r a d s b u s i f o n o i t i i s u q c A 7 2 e h t f o s r e n w o e h t o t s d n e d v D i i 7 2 7 2 f o s r e n w o h t i w s n o i t c a s n a r t l a t o T y n a p m o C e h t y n a p m o C e v r e s e r n o i t a u a v e r l f o r e f s n a r T y t i u q e n i s e g n a h c r e h t O s e v r e s e r l a g e l f o p u t e S o t i e u d s g n n r a e d e n a t e r o t i - n o n h t i i w y r a d s b u s i f o n o i t i i s u q c A i t n e m p u q e d n a t n a p l , y t r e p o r p l i f o s a s o p s d d n a n o i t a c e r p e d i CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 542 543 Note 2023 2022 (restated)* Note 2023 2022 (restated)* 772,103 (240,463) Payments for network construction related to concession agreements Cash flows from investing activities Payments for purchases of property, plant and equipment Cash flows from operating activities Profit/(Loss) for the year Adjustments for: Depreciation Amortisation 24 25 Reversal of impairment of property, plant and equipment and intangible assets, net 24,25 Revaluation of property, plant and equipment recognized in profit or loss, net 24 Gain on disposal of property, plant and equipment and intangible assets 24,25 Impairment of trade and other receivables, net Change in provisions, net Net finance cost Changes due to employee benefits Share of loss of associates Income tax expense/(benefit) 20,21 30 14 26 19 Changes in: Trade receivables Subsidies receivable Other receivables Prepayments Inventories Trade payables Other payables Provisions and employee benefits Deferred revenue Cash used in operating activities Interest paid Income tax paid 16,391 508,090 - (2,081) (82) 75,820 (12,534) 293,795 - 39 125,814 1,777,355 19,915 476,469 (5) - (393) 112,311 18,779 164,995 (4,358) 13 (47,171) 500,092 (309,158) (1,286,734) (1,333,747) (1,280,788) 5,636 939 (1,688) 244,355 110,400 28,545 (16,913) 505,724 (278,462) (58,993) 13,914 (8,840) (41,014) 494,611 570,158 (6,454) 15,088 (1,029,967) (149,397) (1,232) 25 26 31 31 27 22 22 22 (10,391) (845,331) (21,313) 232 3,270 (4,149) (6,308) (1,924) (8,295) (537,782) (7,829) 614 2,847 (3) (4,452) - (885,914) (554,900) 742,658 271,943 (187,730) (26,762) (40,136) 759,973 42,328 334,887 - 377,215 217,561 1,900,371 (92,925) (24,163) (152,291) 1,848,553 113,057 (405,572) 627,402 334,887 Payments for purchase of other intangible assets Proceeds from sale of property, plant and equipment Interest received Acquisition of investments in associates Payments for acquisition of subsidiaries, net of cash acquired Payments for non-controlling interest acquired without change in control Net cash flow used in investing activities Cash flows from financing activities Proceeds from long-term bank borrowings Proceeds from overdrafts Repayment of long-term bank loans Payment of lease liabilities Dividends paid Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Reclassification of overdrafts previously presented as cash and cash equivalents Cash and cash equivalents at 31 December *please see Note 5 The accompanying notes are an integral part of these consolidated financial statements. The non-cash transactions are disclosed in Note 22. Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea Net cash flow from/(used in) operating activities 168,269 (1,180,596) *please see Note 5 (Continued on next page) 25 March 2024 CONSOLIDATED STATEMENT OF CASH FLOWS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTCONSOLIDATED STATEMENT OF CASH FLOWS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 544 545 1 Reporting entity and general information (a) General information about the Group Subsidiary Activity Sole registration code Head Office % shareholding These financial statements are the consolidated financial statements of Societatea Energetica Electrica S.A. (“the Company” or “Electrica SA”) and its subsidiaries (together “the Group”) as at and for the year ended 31 December 2023. The registered office of the Company is no. 9, Grigore Alexandrescu Street, District 1, Bucharest, Romania. The Electrica Producție Energie S.A.(“EPE”) Electrica Energie Verde 1 SRL* (“EEV1” – formerly Long Bridge Milenium SRL) Electricity generation 44854129 Bucuresti 99.9920% Electricity generation 19157481 Bucuresti 100%* Company has sole registration code 13267221 and Trade Register registration number J40/7425/2000. Sunwind Energy S.R.L. Electricity generation As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital. The Company’s shares are listed on the Bucharest Stock Exchange and the global depository receipts (“GDRs”) are listed on the London Stock Exchange. The shares traded on the London Stock Exchange are the global depositary receipts, one global depositary receipt representing four shares. The Bank of New York Mellon is the depositary bank for these securities. New Trend Energy S.R.L. Electricity generation Green Energy Consultancy & Investments S.R.L. Electricity generation 29172101 Prahova Foton Power Energy S.R.L. Electricity generation 43652555 Constanta 42910478 42921590 Constanta Constanta 60% 60% 75% 30% Indirect ownership - Electrica Energie Verde 1 SRL is 100% owned by the subsidiary Electrica Furnizare S.A. * ** On 31.12.2023 the merger by absorption took place between Societatea Energetica Electrica SA (ELSA) as absorbing company and Societatea Electrica Productie Energie SA (EPE), Electrica Energie Verde 1 SRL (EEV1) and Green Energy Consultancy & Investments SRL (GECI) as absorbed companies. As at 31 December 2023 the Company’s subsidiaries are the following: As at 31 December 2023 and 31 December 2022, the Company’s associates are the following: Subsidiary Activity Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord Sole registration code Head Office % shareholding 14476722 Cluj-Napoca 99.99999929% Associate Activity registration code Sole Head Office % shareholding % shareholding as at 31 as at 31 December 2023 December 2022 Crucea Power Park S.R.L. Electricity generation 25242042 Constanta 40% 30% Changes in Group structure during 2023 is in the «ready-to-build» phase and is located in Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% the vicinity of Botiz commune, Satu Mare county. Electrica Serv S.A. (“SERV”) Services in the energy sector (maintenance, repairs, construction) Sunwind Energy S.R.L. Electricity generation New Trend Energy S.R.L. Electricity generation Foton Power Energy S.R.L. Electricity generation 17329505 Bucuresti 99.99998095% 42910478 42921590 43652555 Constanta Constanta Constanta 100% 60% 60% As at 31 December 2022 the Company’s subsidiaries are the following: Subsidiary Activity Sole registration code Head Office % shareholding Distributie Energie Electrica Romania S.A. (“DEER”) Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord Electrica Furnizare S.A. (“EFSA”) Electricity and natural gas supply 28909028 Bucuresti 99.9998444099934% Electrica Serv S.A. (“SERV”) Services in the energy sector (maintenance, repairs, construction) 17329505 Bucuresti 99.99998095% Acquisition of shares in subsidiaries Also, the Financing Contract was signed between Sunwind Energy SRL as the Beneficiary and the On 6 February 2023, Electrica completed the Ministry of Energy as the coordinator of reforms acquisition of Green Energy Consultancy & and/or investments for the National Recovery and Investments S.R.L., having as main object of activity Resilience Plan (NRRP). the production of energy from photovoltaic sources. Until 31 December 2022 the company was acquired On 31 July 2023, Electrica acquired an additional 30% 75%. Green Energy Consultancy & Investments of the shares and voting interests in Foton Power S.R.L. develops the photovoltaic project “Vulturu”, Energy S.R.L.,having as main object of activity the with a designed installed capacity of 12 MWp DC production of energy from photovoltaic sources. As (peak power at the panels level) and 9.75 MW AC a result, the Group’s equity interest increased from (authorised power for delivery into the grid), located 30% to 60%, thus, Foton Power Energy S.R.L. becoming near Vulturu locality, Vrancea county. The project is a subsidiary of Electrica Group. Foton Power Energy in the “ready-to-build” phase. S.R.L. develops the photovoltaic project “Bihor 1”, with On 24 March 2023, Electrica completed the near Oradea. acquisition of Sunwind Energy S.R.L, which has as its main activity production of energy from Acquisition of shares in associates photovoltaic sources. Until 31 December 2022 the project was acquired 60%. Sunwind Energy On 15 May 2023, Electrica acquired an additional 10% develops the photovoltaic project «Satu Mare 2», of the shares and voting interests in Crucea Power with an installed capacity of 27 MW. The project Park S.R.L.. As a result, the Group’s equity interest 14476722 Cluj-Napoca 99.99999929% a projected installed capacity of 77.5 MW, located NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A546 547 increased from 30% to 40%. S.A. subsidiary) which further invoices the electricity by Law no. 184/2018). The postponed green Regarding the costs of electricity purchased for own consumption to final consumers. certificates will be reinserted starting from 1 January technological consumption (“NL”): Merger by absorption within the Group 2021, in equal monthly tranches until 31 December On 20 December 2023, the Extraordinary General competitive market and as the supplier of last resort Meeting of the Company’s Shareholders (EGMS) for approx. 3.4 million clients. Electrica Furnizare (b) Regulations in the energy sector approved the merger by absorption between S.A. holds an electricity supply license that covers Societatea Energetica Electrica SA (“ELSA”), the entire territory of Romania, which was extended Regulatory environment Electrica Furnizare S.A. is active on both the 2030. Societatea Electrica Productie Energie SA (“EPE”), in 2021 for a period of 10 years. At the same time, Electrica Energie Verde 1 SRL (“EEV1”) and Green Electrica Furnizare S.A. ensures the supply of The activity in the energy sector is regulated by the • at the justified request of the Distribution Energy Consultancy & Investments SRL (“GECI”) electricity for household customers in a universal Romanian Energy Regulatory Authority. (together the „Companies”) and the participation service regime. At the same time, it also holds a of the Companies in the merger, with Societatea license for carrying out the activity of natural gas Energetica Electrica SA as absorbing company, supply, valid until 2032. In 2023, Electrica Furnizare Some of the main responsibilities of ANRE are to approve prices and tariffs and to issue Electrica Productie Energie SA, Electrica Energie S.A. was designated supplier of last resort („FUI”) for substantiation methodologies used to set regulated Verde 1 SRL and Green Energy Consultancy & electricity in May and October, and for natural gas prices and tariffs. • ANRE has the right to correct the projection of distribution tariffs for a regulatory period or for one year, if there have been significant variations in prices on the electricity market, which lead to an important change in distribution service costs; Operator, the regulated revenue of year t + 1 may include a cost of electricity purchased for own technological consumption (“NL”) forecast for year t + 1, by changing the reference price, depending on the evolution of prices on the electricity market and the result of the analysis of the evolution of tariffs for the current Investments SRL as absorbed companies, with the it was nominated supplier of last resort in April and effective date of the merger being 31 December November 2023. 2023. Group’s main activities Through the acquisition of the new subsidiary Electrica Energie Verde 1 S.R.L. (formerly Long Bridge Milenium S.R.L.) as of 31 August 2020, establishment The activities of the Group include operation and of a new legal entity Electrica Productie Energie electricity and natural gas supply to final consumer agreements in five project companies having as well as energy production from renewable as main activity the production of energy from sources. The Group is the electricity distribution renewable sources the Group entered on the operator and the main electricity supplier in electricity generation segment, in particular from Muntenia Nord area (Prahova, Buzau, Dambovita, renewable sources. Currently, one of the project Braila, Galati and Vrancea counties), Transilvania companies has been absorbed through merger by Nord area (Cluj, Maramures, Satu Mare, Salaj, Bihor the parent company where a photovoltaic park with and Bistrita Nasaud counties) and Transilvania a capacity of 12 MW is being developed. Sud area (Brasov, Alba, Sibiu, Mures, Harghita and Covasna counties), operating with transformation Through the merger that took place on 31 December subsidiary, Electrica Energie Verde 1 S.R.L., Electrica The Company’s distribution subsidiary, Distributie SA became a producer of electricity from renewable Energie Electrica Romania S.A. which resulted sources that operates a photovoltaic park in from the merger through absorption of the three Stanesti, Giurgiu county, with an installed capacity distribution subsidiaries Societatea de Distributie a of MW 7.5 (operating capacity limited MW to 6.8). Energiei Electrice Transilvania Nord S.A., Societatea In 2023 the operation of the plant was continuous, de Distributie a Energiei Electrice Muntenia Nord S.A. with no significant events leading to production and Societatea de Distributie a Energiei Electrice shutdowns, producing in total MWh 9,599 (2022: Transilvania Sud S.A. now operates electric lines MWh 10,466). According to Law no. 220/2008 and in 18 counties, from three geographical areas of based on the accreditation issued by ANRE, Stanesti the country, representing 40.7% of the Romanian park receives a number of 6 green certificates territory, and serves over 3.93 million users. It (“GC”) for each MWh produced and delivered, of invoices the electricity distribution service to which until 2020, 4 GC were issued for trading and 2 electricity suppliers (mainly to Electrica Furnizare GC were postponed (the amendment is introduced Electricity distribution regulatory period. In 2019, a new regulatory period began, governed In 2022, according to the Government’s emergency by the provisions of ANRE Order no. 169/2018 for ordinance (GEO) no. 119/2022, the additional the approval of the Methodology for establishing costs for purchased electricity (determined as the tariffs for the electricity distribution service (IV the difference between the realized costs and the The following items are considered by ANRE when setting the target revenue for one year costs included in the approved distribution tariffs), made between 1 January 2022 and 31 August 2023, in order to cover the own technological consumption, compared to the costs included in of the regulatory period: controllable and non- the tariffs regulated (and not only borrowings), are controllable operating and maintenance costs; capitalized quarterly and remunerated with 50% costs of electricity purchased for own technological of the regulated rate of return (RRR) approved by consumption (related to distribution network); ANRE, applicable during the amortization period regulated depreciation charge; the return on the of the respective costs and are recognized as a regulated assets base (“RAB”); revenues from distinctive component in the regulated tariffs, reactive energy and revenues from other activities, called the component related to additional costs with NL. Also, ANRE elaborated the Methodological norms regarding the recognition in the tariffs of the Starting with 13 May 2020, the regulated rate of additional costs with the acquisition of electricity return („RRR”) of RAB is 6.39% to which is added: for covering the network losses compared to the • 1% incentive for new investments in RED, approved by ANRE; costs included in the regulated tariffs, the purpose of these norms is to establish the substantiation of additional costs with the purchase of electricity • 2% incentive for investments in the electricity to cover the NL, as well as the conditions for their distribution network financed from own funds in recognition in the regulated income, based on projects in which European non-reimbursable which the distribution tariffs are established. Law no. funds are also attracted, if the investments are 357/2022 regarding the approval of GEO no. 119/2022 performed and put into function by operators provides for the capitalization of additional costs after 1 February 2021, approved by ANRE; with the purchase of electricity made between 1 January 2022 and 31 March 2025. • 1% incentive for investments in projects of common interest (PCI), approved by ANRE. station and 0.4 kV to 110 kV power lines. 2023 between the parent company and its former as well as corrections from previous periods. construction of electricity distribution networks and S.A. and also the five shares sales and purchase regulatory period: 2019-2023). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A548 549 According to the Government’s Emergency differences are recovered or returned through the Competitive market Ordinance (“GEO”) no. 153/2022 during the period annual tariff changes, except the capitalised costs of gas that covers 90% of Romania’s storage capacity and the market share that each 1 January 2023 – 31 March 2025 is established the with own technological consumption. The difference Transactions on the competitive wholesale market supplier has had it in 2022; centralized electricity purchasing mechanism, between the purchase price of electricity for own OPCOM being designated the sole purchaser. The technological consumption versus the ex-ante are transparent, public, centralised and non- discriminatory. Participants to the wholesale distribution operators (“OD”) will buy from OPCOM purchase price recognized by ANRE in the related market can trade electricity based on the bilateral through an annual/monthly mechanism at least 75% regulated tariffs 2022 related to the purchase of contracts concluded on the dedicated markets. of the quantity forecasted and validated by National electricity and natural gas, made between 1 January Authority for Energy Regulation (“ANRE”) at the price 2022 and 31 March 2025, in order to cover the costs The following support mechanisms have been put in of 450 RON/MWh, and the producers will sell to of electricity purchased for own technological place: OPCOM through annual/monthly mechanism 80% of consumption (“NL”) for economic operators for the quantity forecasted and validated by ANRE and energy transport and distribution services are Transelectrica at the price of 450 RON/MWh. capitalised. These are recognized as a distinctive component in the regulated tariffs, named In 2023 ANRE amended the Methodology for setting component related to additional network losses tariffs for the electricity distribution service, by costs. Also, law no. 357/2022 regarding the approval ANRE Order no. 79/2023 (Order) and defined 2024 of GEO no. 119/2022 provides for the capitalization as the transition period from the fourth regulatory of additional costs with the purchase of electricity period (PR4) to the fifth regulatory period (PR5). made between 1 January 2022 and 31 March 2025. Thus, for DEER, in 2024 the zonal distribution tariffs established on the basis of a single regulated Electricity supply revenue and single NL targets for the total DEER are maintained. Tariff adjustments The regulatory framework has undergone significant changes over the past decade, including the liberalization of electricity and natural gas markets, the separation of supply and distribution activities, Annually, ANRE makes revenue corrections the implementation of the support scheme for due to: change in the quantities of electricity renewable energy, the support of electricity distributed compared to the forecast; change in prosumers and the capping of prices to final quantities and acquisition price for the regulated customers. own technological consumption compared to the forecast; the annual change in controllable In 2022 the electricity market was completely operating and maintenance costs, realized and liberalized for all categories of customers and the accepted against the forecast; annual change price was established by suppliers through free in uncontrollable operating and maintenance market mechanisms, both for universal service costs compared to the forecast; changes in offers and for the offers related to the competitive revenues from reactive energy compared to the market. forecast; failure to meet/exceeding the approved investments programme; revenues generated from Regulated market other operations made by the distribution operator and the quantity of electricity recovered from Starting with 1 November 2021, in the context of the recalculations. increase in prices for the electricity and natural gas markets at international and national level, • The obligation of natural gas producers to sell at the price of 150 RON/MWh the necessary quantities to the suppliers of domestic customers/heat energy producers; • The mechanism provides - OPCOM, as sole acquirer, buys electricity from producers (electricity producers with an installed power equal to or greater than 10 MW) and sells the purchased electricity to electricity suppliers that have contracts with final customers, the • compensation of household consumers for part of the costs incurred by the electricity invoices (1 November 2021 until 31 March 2022); • capping the selling price for household and transmission system operator electricity and non-household consumers (1 November 2021 – distribution system operators electricity to 31 March 2025); • exemption (1 November 2021 until 31 January 2022) of several types of non-household consumers from payment of regulated tariffs and other taxes/contributions. The amounts compensated will be received from the National Agency for Payments and Social Inspection for household consumers and a from the Ministry of Energy for non-household consumers (for further details please refer to Note 20). Over 2023, several changes have been brought to the legislation, having a significant impact on the supply of electricity, as follows: • Price capped for electricity for household and non-domestic customers according to GEO no. 27/2022, with subsequent amendments and additions cover their own technological consumption; the price paid by OPCOM to electricity producers, for the quantities of electricity sold by them is 450 RON/MWh and the sale price of OPCOM to the economic operators is also 450 RON/ MWh (OPCOM has the right to charge market participants tariffs/commissions at the level of costs recorded by organizing the centralized electricity purchase mechanism); In order to carry out the transactions, OPCOM shall organize an annual procurement procedure as well as an additional procurement procedure each month for the quantities of electricity to be delivered in the following month; annual and monthly electricity quantities are firm obligations of electricity producers and economic operators and are evenly distributed across all settlement intervals each month (contracts are concluded by signing, within maximum 3 working days). • The limitation of the average purchase price price capped applies in 2023: The categories of customers to whom the electricity considered for determining the amounts to be recovered from the state budget initially to 1,300 RON/MWh; and currently at 900 RON/MWh (according to Law no. 206/2023, which approves GEO 153/2022), except of the purchase intended • household customers (tranche <100 KWh/ month - maximum price 0.68 lei/KWh, tranche 100-300 KWh/month - with the distinct estimate of the volume exceeding 255 KWh/month - respectively the price level capped at 0.800 lei/ KWh and with a maximum price of 1.3 lei/KWh; • non-household customers - divided separately into the category of customers benefiting from capping for 85% of consumption with The regulator establishes through the regulated the energy crisis, as well as the effects caused by for supply as a last resort, where this limitation income and tariffs for the following year taking into these increases among the population, in Romania, does not apply; account the justified corrections presented above, a series of support measures for electricity and which are added algebraically to the income for natural gas customers have been applied, by the following year. The group does not recognize establishing compensation and capping schemes assets and liabilities resulting from regulation between 1 November 2021 and 31 March 2025. in relation to these deficits or surpluses, as the • The obligation to store natural gas was calculated by ANRE according to two criteria: the obligation of all suppliers to store a quantity NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A550 551 a price capped at 1 leu/KWh, category of 6 (six) green certificates for each MWh of electricity year. The computation of the capitalized amounts effects on the activity of Group companies and over customers benefiting from capping for 100% of produced and delivered to the grid, out of which, is carried out in compliance with the legislation the financial results will be analyzed. consumption, price capped at 1 leu/KWh and the for the period 1 July 2013 – 31 December 2020, specific to the entities that are the subject of GEO rest of the companies at a maximum price of according to Law 23/2014 and Law 184/2018, 2 (two) 119/2022, with subsequent additions and changes. Geopolitical tensions 1.300 lei/KWh. green certificates were postponed from trading. Those two GC postponed from trading are to be The changes brought by EGO 119/2022 are changes In February 2022 global geopolitical tensions The categories of customers to whom the natural recovered in equal monthly tranches starting from 1 the recuperation of the additional cost of NL by significantly escalated following military gas price capped applies in 2023: January 2021 until 31 December 2030. splitting it in current operating expenses (“OPEX”) interventions in Ukraine by the Russian Federation. • household customers – the maximum price is capped at 0.310 lei/KWh; • non-household customers - the maximum price is capped at 0.370 lei/KWh for an annual consumption of up to 50 GWh. The green certificates issued by Transelectrica for of unit costs recuperated at cost at 450 RON/MWh uncertainties in energy and capital markets have the production made by the Stanesti photovoltaic (ex-ante tariffs recognition) and for the difference increased, with global energy prices expected to be park, during the validity period of the accreditation above this level of 450 RON/MWh up to the effective highly volatile for the foreseeable future. As at the decision issued by ANRE, can be traded, according average price, recognized by ANRE, there is a linear date of these consolidated financial statements, to GEO 24/2017, until 31 March 2032, respectively depreciation over 5 years stipulated with return management is unable to reliably estimate the including the period after the expiration of the at 50% of Regulated Rate of Return (RRR). These effects on the Groups financial outlook and cannot and capitalised costs (“CAPEX”), there is a portion As a result of these escalations, economic The compensated amounts are settled by the National Agency for Payments and Social Inspection („ANPIS”) for household consumers and by the Ministry of Energy for non-household consumers. validity period of the accreditation decision (31 January 2028 in the case of the Stanesti photovoltaic park). changes are also applicable for the year 2023. exclude adverse consequence on the business, operations, and financial position. Management For the supply segment, both in 2023 and in 2022 believes it is taking all the necessary measures to the effect of retail prices for electricity was covered support the sustainability and growth of the Group’s Green certificates Electricity suppliers have a legal obligation to purchase green certificates from producers of electricity from renewable sources, based on annual targets or quotas set by law, which are applied to the quantity of electricity purchased and supplied to final consumers. The cost of green certificates is invoiced to final consumers separately from the tariffs for electricity. Electricity generation Green certificates Producers of electricity from renewable energy sources (RES) have the right, according to Law no. 220/2008, to receive a certain number of green certificates, depending on the technology used (for example: hydraulic, wind, solar, geothermal, biomass, bioliquids, biogas), for each MWh produced and delivered to the network and for a certain period of time, depending on the degree of novelty of the group/power plant. Starting from February 2013, the Stanesti photovoltaic park has the right to receive (the month from which it started injecting electricity into the network), for a period of 15 (fifteen) years, Increase in Energy price impact as grants received from the state authorities, as business in the current circumstances and that a result of the application of the mechanism of judgements used in these financial statements The regulatory framework in the electricity capping the prices for electricity and natural gas, remain appropriate. sector has undergone significant changes in the as a result of the application of Ordinance 27/2022, last decade, regarding the total liberalization with subsequent amendments and additions. of the electricity and natural gas market, the The implementation method of these schemes 2 Basis of accounting implementation of the support scheme for renewable energy, the support of electricity consumers, the limitation of prices for final and the settlement mechanism of the amounts granted as support to clients, ex post from the state budget to the electricity suppliers, have consumers and the capitalization of additional costs generated constraints in terms of cash flow, as well with own technological consumption. As a result, for the distribution segment, as uncertainties regarding the recovery the full amount of the respective amounts by the suppliers. In this context, EFSA has adapted its medium and Romanian Regulatory Authority for Energy – ANRE long-term strategy, so as to manage the impact (https://www.anre.ro/) has to adopt similar of these measures on the company’s activities in a measures through its Order 129/12.10.2022 approving responsible and sustainable manner in the context the Methodological Norms regarding the recognition of a regulatory framework that has seen numerous in the tariffs of the additional costs with the successive and major changes in the recent period. acquisition of electricity for covering the network losses compared to the costs included in the The Group actively reviews and implements policies regulated tariffs, carried out between 1 January 2022 and strategies to recover from the loss generated – 31 March 2025. by the increase in energy price, strategies which mainly aim in revising the method of generating ANRE will determine the recognized annual amounts the selling price for final consumers, concluding of the capitalized costs based on the quantities and agreements with specific clauses ensuring new prices recognized for NL, and by 15 March of the year financing facilities, closely monitoring suppliers and immediately following the year of capitalization consumers payment terms, monitoring daily cash of the additional costs, ANRE will transmit to the flow and forecasted cash flow. The Group continues distribution operators the recognized annual to closely monitor the macroeconomic outlook and amounts of the capitalized costs for the previous as additional information will be available, their These annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“IFRS-EU”). The consolidated financial statements were authorized for issue by the Board of Directors on 25 March 2024 and will be submitted for shareholders’ approval in the meeting scheduled on 25 April 2024. Starting with the year ended 31 December 2022, the Company also issues a primary set of the consolidated financial statements prepared in accordance with OMFP no. 2844/2016 (statutory financial statements). Until 31 December 2021, the consolidated financial statements prepared in accordance with OMFP no. 2844/2016 were equivalent to IFRS-EU. Starting with 31 December 2022, according to Order of Ministry of Public Finances (OMFP) no. 3900/2022 that has included a new clause related to the regulatory accounts to capitalise the additional expenses for actual energy costs as compared with the ex-ante ANRE prices recognised in distribution tariffs for own NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A552 553 technological consumption network, which are (a) Judgements recognised as intangible assets (please see the (a) the grantor controls or regulates what revenues and expenditures being recognized services the operator must provide with the in the profit and loss account (related to the primary set of financial statements in accordance Information about judgements made in applying infrastructure, to whom it must provide them, construction and modernization of infrastructure), with OMFP no. 2844/2016). Also, according to ANRE accounting policies that have the most significant and at what price; and regulations issued in 2022, the capitalised costs effects on the amounts recognised in the as well as of a margin resulting from rendering the construction services established by the Group. of intangible non-current assets for the period consolidated financial statements is included below. (b) the grantor controls - through ownership, Starting with 30 June 2023, the Group reassessed 01 January 2022 – 31 March 2025 are recorded in the accounting records on the annual financial Revenue recognition statements according to the instructions developed beneficial entitlement or otherwise - any the margin applied and a margin of 4.35% is applied significant residual interest in the infrastructure for period 01 January 2023 – 31 December 2023, at the end of the term of the arrangement. based on the Group’s experience in working with by the Ministry of Finance OMFP no. 2844/2016 with The Group assesses its revenue arrangements external contractors. Until 31 December 2022, the subsequent amendments (Romanian GAAP). based on specific criteria to determine if it is acting The control or regulation referred to in condition margin applied was 3%, as presented in the annual as a principal or an agent. In applying IFRS 15, the (a) could be by contract or otherwise (such as consolidated financial statements as at and for the The Group has consistently applied the accounting Group has identified that it acts in the capacity through a regulator). The activities of the electricity year ended 31 December 2022. policies to all periods presented in these of an agent in case of transactions as Balancing distribution operators, including distribution tariffs, consolidated financial statements. Details of the Responsible Party (“BRP”) and thus recognises are regulated by ANRE. (b) Assumptions and estimation uncertainties Group’s accounting policies are included in Notes 7 revenue as the net amount of the commission and 8. earned by the Group. The Group concluded that The concession contracts are concluded for a Information about assumptions and estimation it is acting as a principal in all other revenue period of 49 years and may be extended for a uncertainties that may result in a material Other matters – format in accordance with the arrangements. period equal to no more than half of that period. adjustment in the subsequent twelve-month period European Securities and Markets Authority As a price for the concession, the operators pay an is included in the following notes: (“ESMA”) Service Concession Arrangements annual royalty fee recognized in the distribution tariff of 1/1000 of the revenues from electricity Due to the technical limitations of the software used The distribution subsidiaries (as operators) that distribution. According to the concession contracts, to present the consolidated financial statements in merged into one single distribution operator as of the operators use the assets representing the the European single electronic format (“ESEF”), the 31 December 2020 concluded concession contracts distribution network owned by them located in the tables included in the footnotes are displayed in a with the Ministry of Economy (as grantor) in 2005, above-mentioned territory for electricity distribution. linear, logical, and understandable manner. updated by subsequent addendums. These According to the concession contracts, the grantor 3 Functional and presentation currency These consolidated financial statements are presented in Romanian Lei (RON), which is the functional currency of all Group companies. All amounts have been rounded to the nearest thousand, unless otherwise indicated. 4 Use of judgements and estimates In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. contracts concern the operation of electricity distribution service in the established territory (Transilvania Nord, Transilvania Sud, Muntenia will buy at the end of the term of concession contract the ownership right of the „relevant assets”, that are mainly the electricity distribution networks, Nord), on the risk and responsibility of the operators at a price equal to the value of the regulated assets and taking into account the regulations applicable base at the end of the concession. to the operation, modernization, rehabilitation and development of energy distribution networks Within the arrangements, the Group incurs specified in the Electricity Law, the terms and significant expenditure in relation to the conditions of the licenses for electricity distribution development and maintenance of the infrastructure. and the regulations issued by ANRE. The distribution The construction works are either outsourced by the • Note 20 – assumptions and estimates of operator resulting from the merger of the three Group to sub-contractors, or performed internally. amounts to be received from the state following distribution operators within the Group, Distributie Significant management judgment is involved in the application of the compensation and Energie Electrica Romania concluded addendums accounting for the concession arrangements under capping scheme. to the concession agreements signed with the IFRIC 12, including those in respect of the recognition Ministry of Economy for the operation of electricity of revenue based on the separation of construction Measurement of fair values distribution service in all three areas. or upgrade services from operation services. IFRIC 12 “Service Concession Arrangements” The concessionaires act as service suppliers (they disclosures require the measurement of fair values, deals with public-to-private service concession build, modernize and maintain the distribution for both financial and non-financial assets and arrangements. IFRIC 12 applies to public-to-private network) and the revenues related to the liabilities. A number of the Group’s accounting policies and service concession arrangements if: construction or improvement of infrastructure is recorded according to IFRS 15. This results in • Note 8 d) – assumptions regarding recognition of revenue from supply and distribution of electricity to consumers based on estimates for electricity delivered and for which no reading was performed yet; • Notes 20 and 32 – assumptions and estimates about measurement of the allowance for trade receivables at the level of expected credit losses (ECL), respectively in determining the loss rates; • Note 24 - assumptions regarding the revalued value of tangible assets; • Notes 30 and 34 – recognition and measurement of provisions and contingencies; NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A554 555 When measuring the fair value of an asset or a liability, the Group uses market observable data as far as Consolidated statement of financial position possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities, which the Group can access; • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Financial assets related to concession arrangements – non current portion Financial assets related to concession arrangements – current portion Retained earnings Deferred tax liabilities Total assets Total equity Total liabilities 31 December 2022 as reported previously 31 December 2022 reclassifications 31 December 2022 as restated 761,246 (761,246) 190,311 1,353,942 212,555 11,623,312 5,367,246 6,256,066 (190,311) (799,308) (152,249) (951,557) (799,308) (152,249) - - 554,634 60,306 10,671,755 4,567,938 6,103,817 The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Consolidated statement of profit or loss Further information about the assumptions made in measuring fair values is included in the following notes: • Note 32 – Financial instruments; • Note 24 – Property, plant and equipment. 5 Restatements Other income Income tax benefit/(expense) 31 December 2022 as reported previously 3,792,520 (105,078) 31 December 2022 reclassifications 31 December 2022 as restated (951,557) 152,249 2,840,963 47,171 Profit for the year 558,845 (799,308) (240,463) During 2023, the Group reassessed its previous position with the consolidated financial statements, related to the recognition of financial asset from the amendment of the concession agreements, described in Note Earnings/(Loss) per share 4. As of 31 December 2022, the Group recognised a financial asset in the amount of RON 951,557 thousand as a result of such amendment in the balance sheet, representing the difference between the net cost with the purchase of the energy for NL and the NL cost included in the regulatory tariff by ANRE, for the period 1 January – 31 December 2022. An equivalent amount was also recognised in the profit or loss as „Other Basic and diluted earnings/(loss) per share (RON) Consolidated statement of cash flows income”. 1.65 2.35 (0.71) The following table summarise the impact on the Group’s consolidated financial statements: Cash flows from operating activities Profit Other income from initial recognition of financial assets rising from concession agreements amendments Income tax (benefit)/expense Changes in: Other receivables Other payables 31 December 2022 as reported previously 31 December 2022 reclassifications 31 December 2022 as restated 558,845 (799,308) (240,463) (951,557) 951,557 - 105,078 (152,249) (47,171) (138,335) 722,407 152,249 (152,249) 13,914 570,158 Net cash flow used in operating activities (1,029,967) - (1,029,967) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A556 557 6 Basis of measurement Group has prepared a forecast that includes the implemented and the strategies to reduce the controlling interests are based on a proportionate following assumptions: risks which may occur due to the instability of the amount of the net assets of the subsidiary. The consolidated financial statements have been prepared on the historical cost basis except for the • A continuation of the support scheme until land and buildings which are measured based on 31 March 2025 according to the applicable the revaluation model. 7 Changes in significant accounting policies Adopting new standards The Group has not adopted new standards issued by the International Accounting Standards Board legislation but with a more stable flow of repayments of the reimbursement requests for subsidies as compared with last year, as the mechanism has been operationally improved; • The renewal of confirmed debt facilities is planned up to a limit of RON 4,961,482 thousand, including RON 2,736,419 thousand overdraft limits (IASB) and adopted by the EU applicable on 1 limit; January 2023, so there is no significant change in economic environment, the Board of Directors has, at the time of approving the consolidated financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. (b) Basis of consolidation (iv) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the the consolidated statements of the Group. • The utilization of not yet confirmed facilities, The Group controls an entity when it is exposed Adoption of new changes to existing standards which will be drawn during the forecast period involvement with the entity and has the ability to overdrafts amounting to RON 574,111 thousand to, or has rights to, variable returns from its (c) Business combinations and of which RON 250,000 thousand will be affect those returns through its power over the Subsidiaries are entities controlled by the Group. extent that there is no evidence of impairment. and RON 2,225,063 thousand long term loans (i) Subsidiaries The group adopted the Presentation of information reimbursed during the forecast period. regarding accounting policy (Amendments to IAS 1 and Statement 2 regarding IFRS practice). Although the amendments did not lead to any change in the accounting policies themselves, they had an impact on the information presented in the consolidated financial statements regarding the accounting At the date of issuance of these consolidated financial statements the regulatory position may laws enacted which could adversely impact the Groups operating cash flows during the forecast policies. The management reviewed the accounting period. Given the current market uncertainties, the policies and updated the information presented in „Note 8 Accounting Policies” and Note 9 “Adoption of new and revised standards” (31 December 2022: „Note 6 Significant Accounting Policies” and Note 7 “Adoption of new and revised standards”) in certain cases, in accordance with the changes. Group is closely monitoring the market context and is continuously analysing the opportunities for optimisation of debt and increase of bank overdrafts and long-term loans. In light of the importance of the Group as the supplier and distributed of electricity on the Romanian market, having 39.7 % (according to the latest ANRE report Except the above, the new amendments to existing 2022 for the distribution segment) as market share standards that are effective starting with 1 January on the electricity distribution and 17.72 % (according 8 Accounting policies (a) Going concern The consolidated financial statements have been prepared on the going concern basis. In making this judgement management considers current trading performance and access to finance resources. The market and having as main shareholder of Electrica SA the Romanian State, the management believes sufficient financing will be made available to cover any financing requirements arising from market uncertainty and Group will be able to meet its obligations as they fall due. Based upon the above projections and other information, given the measures already entity. Subsidiaries are included in the consolidation perimeter from the date that control commences until the date on which control ceases. Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity On the loss of control, the Group derecognizes the interest issued by the Group in exchange for control assets and liabilities of the subsidiary, any non- of the acquiree. Acquisition-related costs are controlling interests and the other components recognised in profit or loss as incurred. of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in (d) Revenue profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the (iii) Non-controlling interests The Group recognize the revenues from contracts with customers in accordance with IFRS 15. Under the standard, Revenue is recognized when or as the customer acquires control over the goods or services rendered, at the amount which reflects the price at which the Group is expected to be entitled to receive in exchange of those goods or services. Revenue is recognized at the fair value of The Group measures any non-controlling interests the services rendered or goods delivered, net of VAT, in the subsidiary at their proportionate share of the excises or other taxes related to the sale. subsidiary’s identifiable net assets. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Adjustments to non- Supply and distribution of electricity The revenue from supply and distribution of electricity to consumers is recognized when 2023 do not have a material impact over the to the latest ANRE report October 2022 for the supply level of influence retained. Group’s consolidated financial statements. segment) as market share on the electricity supply be further amended and there may be further (ii) Loss of control NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A558 559 electricity is delivered to consumers (consumed by Generation and sale of electricity the facts, circumstances and terms of each (g) Finance income and finance costs consumers), based on meter readings and based project and only recognised to the extent that on estimates for electricity delivered and for which The electricity produced by the Group is mainly it is highly probable not to significantly reverse The Group’s finance income and finance costs no reading was performed yet. The invoicing of sold on the Day Ahead Market and the revenue is in the future. Revenue in respect of claims is include: electricity sales is performed on a monthly basis. recognized when the electricity is injected into the recognised only if it is highly probable not to Monthly electricity invoices are based on meter network and is being sold on the market. reverse in future periods. readings or on estimated consumptions based on the historical data of each consumer. Electricity supplied to consumers which is not yet billed as at the reporting date is accrued on the basis of recent average consumption or based on subsequent meter readings. Differences between estimated and actual amounts are recorded in subsequent periods. Revenues from electricity distribution and supply also include the cost of green certificates recharged by the Group to final consumers (see paragraph (k)). The Group acts in the capacity of an agent in case of transactions as Balancing Responsible Party (“BRP”). Thus, in its quality as an agent, the Group recognizes revenue for the commission earned in exchange for facilitating the transfer of goods or services. Any holder of a production/supply/ distribution license must be established as a Balancing Responsible Party or must delegate this responsibility to a Balancing Responsible Party. By delegating this responsibility to a BRP, there is the benefit of imbalance aggregation in the meaning of Balancing Market cost reduction by comparison with the case where the producer/supplier/distributor would act itself as a Balancing Responsible Party. Electrica Furnizare S.A. acts as BRP for a large number of participants, electricity producers as well as electricity suppliers and distribution operators. For the settlement of imbalances, BRP Electrica is using the “method of internal redistribution of payments”, ensuring benefits of imbalance aggregation for all the participants included in the BRP. BRP Electrica provides the transmission of physical notifications to CNTEE Transelectrica SA and its role is to balance the differences between the electricity contracted and the electricity measured at the level of the entire BRP. Sale of green certificates Electricity suppliers have a legal obligation to purchase green certificates from producers of electricity from renewable sources, based on annual targets or quotas set by law, which are applied to the quantity of electricity purchased and supplied to final customers. Cost of green certificates is invoiced to final customers separately from the tariffs for electricity. Electricity producers are entitled by the law in force to receive a certain number of green certificates for each MWH of electricity produced from renewable sources and injected into the network. The green certificates can be sold on the spot market, term • If the outcome of a construction contract can be estimated reliably, then contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract. The stage of completion is assessed with reference to surveys of work performed. Otherwise, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. • Contract expenses are recognized as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognised immediately as expense. (e) Other income market or a combination of both. The selling price Revenues from the subsidies must fall between the minimum and maximum values set by Law no. 220/2008 for establishing the system for promoting the production of electricity from renewable energy sources, republished, with subsequent amendments. Revenue from green certificates is recognized in the profit or loss statement when the green certificates are sold on the trading market. Service concession arrangement Revenue related to construction or upgrade services under service concession arrangement is recognised based on the stage of completion of the work performed, consistent with the accounting policy on recognising revenue on construction contracts, as follows: Revenues from subsidies are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate, as a result of the application of the electricity price cap. These subsidies are recoverable from the National Agency for Payments and Social Inspection for household consumers and from the Ministry of Energy for non-household consumers, as a result of the application of the electricity and natural gas price ceiling mechanism and are applicable for period 1 November 2021 – 31 March 2025. Starting with April 2022, the revenues from subsidies are recorded as the difference between the income calculated at the contract price and the income invoiced to the customer at the capped price. • Revenue in respect of variations to contracts and incentive payments is recognised when (f) Repairs and maintenance there is an enforceable right to payment and Repair and maintenance expense is recorded as the it is highly probable it will be agreed by the operating expense base on an accrual basis. customer. Variable consideration is assessed on a contract by contract basis according to • interest income; • interest expense; • foreign currency gains or losses on financial assets and financial liabilities; • impairment losses recognised on financial assets (other than trade receivables). Interest income or expense is recognised using the effective interest method. Income from financial assets is initially recognised at fair value plus or minus transaction costs that are directly attributable to its acquisition or issue. (h) Employee benefits (i) Short-term employee benefits Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (ii) Defined benefit plans The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A560 561 Re-measurements of the net defined benefit liability, (i) Current tax in which the Group expects, at the reporting date, to (j) Green certificates which comprise actuarial gains and losses, are recover or settle the carrying amount of its assets recognised immediately in other comprehensive Current tax comprises the expected tax payable or and liabilities. Deferred tax assets and liabilities are Electricity supply income. The Group determines the net interest expense/(income) on the net defined benefit receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable liability for the period by applying the discount rate in respect of previous years. It is measured using offset only if certain criteria are met. Unrecognized deferred tax assets are reassessed at purchase green certificates from producers of Electricity suppliers have a legal obligation to used to measure the defined benefit obligation at tax rates enacted or substantively enacted at the each reporting date and recognized to the extent electricity from renewable sources, based on annual the beginning of the annual period to the then-net reporting date. Current tax also includes any tax defined benefit liability, taking into account any arising from dividends. changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. (iii) Other long-term employee benefits The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re- measurements are recognised in profit or loss in the period in which they arise. (ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and that it has become probable that the future taxable targets or quotas set by law, which are applied to profits will be available against which they can be the quantity of electricity purchased and supplied to used. final customers. The Group applies IFRIC 23 „Uncertainty over Income The cost of green certificates is accrued in the profit Tax Treatments”. IFRIC 23 clarifies how to apply or loss based on the quantitative quota determined the recognition and measurement requirements by the regulator representing the quantity of the in IAS 12 when there is uncertainty over income tax green certificates that the Group has to purchase treatments. for the year and based on the price of green certificates acquired on the centralized market. The In such a circumstance, the Group shall recognise obligation for covering the annual acquisition quota and measure its current or deferred tax asset or is accrued in profit or loss. liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax Electricity generation losses, unused tax credits and tax rates determined applying this interpretation. Electricity producers are entitled by the law in force to receive a certain number of green certificates for The Group assesses whether it is probable (more each MWH of electricity produced from renewable than 50% chances) that a tax authority will accept sources and injected into the network. an uncertain tax treatment. Thus, the Group shall reflect the effect of uncertainty when the producer has the right to receive as a for each uncertain tax treatment by using either of result of energy produced and delivered into the Green certificates are recognized as inventories • taxable temporary differences arising on the the following methods, depending on which method network, at nil nominal value. Recognition in the initial recognition of goodwill. the entity expects to better predict the resolution of profit and loss account is done at the time of their the uncertainty: sale. (iv) Termination benefits Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary (a) the most likely amount - the single most likely (k) Inventories Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the end of the reporting period, then they are discounted. differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (i) Income tax Deferred tax is measured at the tax rates that are expected to be applied to temporary differences Income tax expense comprises current and deferred when they reverse, using tax rates enacted or tax. It is recognised in profit or loss except to the substantively enacted at the reporting date. The extent that it relates to a business combination measurement of deferred tax reflects the tax or items recognised directly in equity or in other consequences that would follow from the manner comprehensive income. amount in a range of possible outcomes. The most likely amount may better predict the resolution of the uncertainty if the possible outcomes are binary or are concentrated on one value. Inventories consist mainly of spare parts that do not meet the recognition criteria for property, plant and equipment, consumables, goods for resale, other inventories and the natural gas storage. (b) the expected value - the sum of the Inventories are measured at the lower of cost and probability-weighted amounts in a range of possible outcomes. The expected value may better predict the resolution of the uncertainty if there is a range of possible outcomes that are neither binary nor concentrated on one value. net realizable value. The cost of inventories is based on the weighted average cost method. The cost of inventories includes all the acquisition costs and other expenses related to bringing the inventories to their current place and condition. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A562 563 Consumables used for the repairs and maintenance Spare parts, stand-by and servicing equipment subsequently amended and supplemented, access • From 25 July 2022 they do not become part of of the electricity network are included in profit and are classified as property, plant and equipment if to power grids of public interest is a mandatory the distribution operator’s assets, on the basis of loss when consumed and presented in “Repairs, they are expected to be used during more than one service provided under regulatory conditions, which Law no. 248/2022 and ANRE Order no. 133/2022, maintenance and materials”. period or can be used only in connection with an the transmission and system operator as well as the they are only transferred to the distribution item of property, plant and equipment. distribution operators must ensure. operator for operation. (l) Property, plant and equipment (i) Recognition and measurement plant and equipment is recognised in profit or loss. distribution operators are obliged to communicate 160/2020 amending ANRE Order no.59/2013, the Any gain or loss on disposal of an item of property, At the request of a new or pre-existing customer, the Starting with 2021, according to ANRE Order no. Property, plant and equipment are stated initially at (ii) Subsequent expenditure cost, which includes purchase price and other costs directly attributable to acquisition and bringing the Subsequent expenditure is capitalised only if it asset to the location and condition necessary for is probable that the future economic benefits their intended use. associated with the expenditure will flow to the After initial recognition, land and buildings are measured at revalued amounts less any (iii) Depreciation accumulated depreciation and any accumulated Group. impairment losses since the most recent valuation. Depreciation is calculated to write off the cost of The other items of property, plant and equipment items of property, plant and equipment less their are measured at cost less any accumulated estimated residual values using the straight-line depreciation and any accumulated impairment method over their estimated useful lives and is losses. Revaluations of land and buildings are made recognised in profit or loss. Leased assets are with sufficient regularity to ensure that the carrying depreciated over the shorter of the lease term and amount does not differ materially from the one that their useful lives unless it is reasonably certain that would be determined using the fair value at the end the Group will obtain ownership by the end of the of the reporting period. When a building is revalued, lease term. Land and construction in progress are the accumulated depreciation is eliminated against not depreciated. the gross carrying amount of that item, and the net amount is restated to the revalued amount of the asset. The estimated useful lives of property, plant and equipment are as follows: the technical and economic conditions for the connection installations that are financed by the connection network and to cooperate with the customers will remain in their ownership and are applicant to choose the most advantageous being exploited by the network operator. However, technical and economic solution. Afterwards, according to ANRE Order no. 17/2021 for the a connection contract is concluded between connection installations of all household consumers the distribution operator and the customer at and of the non-household with lengths less than 2.5 a regulated tariff. The actual construction of km, the distribution operator has the obligation to the connection installation is carried out by a finance them and these will remain in the ownership construction supplier certified by ANRE. of the network operator. The Group collects cash from customers, which (n) Intangible asset in a service concession is used only to pay for the construction of the arrangement connection station, and the Group must then use this asset to connect customers to the network. (i) Recognition and measurement According to ANRE Order no. 59/2013, with subsequent amendments, these assets remain in the ownership of the network operator. The Group recognises an intangible asset arising from a service concession arrangement when it has a right to charge for use of the concession The Group recognizes the assets at nil value, net of infrastructure. An intangible asset received as the amount of the deferred income representing the consideration for providing construction or upgrade contributions from customers. The assets financed services in a service concession arrangement is from connection fees received from the new users of measured at fair value on initial recognition with the distribution network are not included in the RAB. reference to the fair value of the services provided. At the end of the concession contract, the assets Subsequent to initial recognition, the intangible built from the connection tariff will be transferred to asset is measured at cost, less accumulated If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Properties in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, determined on the same basis as other property assets, commences when the assets are ready for their intended use. Category Buildings Equipment Motor vehicles and office equipment Useful lives (years) the concessionaire free of charge together with the amortization and accumulated impairment losses. 45-70 3-25 3-10 assets part of RAB. In the case of non-household customers, the value of the connection works, including those for the design/construction of the connection/connection, is entirely borne by the customers. Assets resulting from connection work: (ii) Amortization The amortization method used is selected on the basis of the expected pattern of consumption of the expected future economic benefits embodied in the asset, and is applied consistently from period to period, unless there is a change in the Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (m) Connection fees According to art. 25 paragraph (1) of Law no. 123/2012 on electricity and natural gas, as • In the period from 1 January 2022 to 24 July 2022, expected pattern of consumption of those future they enter the distribution operator’s assets from economic benefits. The Group determined that the the time of commissioning, on the basis of GEO amortization method that reflects appropriately the no. 143/2021, without being recognised by ANRE expected pattern of consumption of the expected as part of the regulated asset base. future economic benefits is correlated with the amortisation of the regulated asset base “RAB”. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A564 565 (o) Other intangible assets (q) Financial instruments consist solely of payments of principal and interest The exemption was applicable between 1 November (i) Recognition and measurement Financial assets and financial liabilities are on the principal amount outstanding. 2021 until 31 January 2022 for several types of non- household consumers from payment of regulated Other intangible assets that are acquired by the position when the Group becomes a party to the amount at which the financial asset is measured Group and have finite useful lives are measured contractual provisions of the instrument. at initial recognition minus the principal Cash and cash equivalents at cost less accumulated amortization and any reimbursements, plus the cumulative amortization accumulated impairment losses. Financial assets and financial liabilities are initially using the effective interest method of any difference Cash and cash equivalents comprise cash recognised in the Group’s statement of financial The amortized cost of a financial asset is the tariffs and other taxes/contributions. (ii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. (iii) Amortization Amortization is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. The estimated useful lives of software and licenses are 3-5 years. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (p) Goodwill Goodwill is measured as the value of the consideration transferred (fair value) plus the amount of any non-controlling interest (NCI) plus the fair value of previous equity interests minus the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed (measured in accordance with IFRS 3). Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial between that initial amount and the maturity amount, adjusted for any loss allowance. The balances, call deposits and deposits with maturities of three months or less from the set-up date that gross carrying amount of a financial asset is the are subject to an insignificant risk of changes in amortized cost of a financial asset before adjusting their fair value and are used by the Group in the for any loss allowance. management of its short-term commitment. liabilities, as appropriate, on initial recognition. Foreign exchange gains and losses (ii) Financial liabilities Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity shares of another enterprise. For this purpose, a financial asset is any asset that is (a) cash; (b) a contractual right to receive cash or another financial asset from another enterprise; (c) a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable; or (d) an equity share of another enterprise. (i) Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Financial assets are initially measured at fair value and subsequently at amortized cost in accordance with IFRS 9, as they are held in a business model to collect contractual cash flows and these cash flows The carrying amount of financial assets that are All financial liabilities are measured subsequently at denominated in a foreign currency is determined in amortised cost using the effective interest method that foreign currency and translated at the spot rate or at fair value through profit or loss. at the end of each reporting period. Loans and receivables Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held-for-trading, or (iii) valued These assets are initially recognised at fair as at fair value, are measured subsequently at value plus any directly attributable transaction amortised cost using the effective interest method. costs. Subsequent to initial recognition, they are measured at amortised cost using the effective The effective interest method is a method of interest method. The amortised cost is reduced by calculating the amortised cost of a financial liability impairment losses. Loans and receivables comprise and of allocating interest expense over the relevant trade receivables, cash and cash equivalents and period. The effective interest rate is the rate that deposits. Trade receivables exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) Trade receivables include mainly unsettled through the expected life of the financial liability, invoices issued until reporting date for supply and or (where appropriate) a shorter period, to the distribution of electricity and services, late payment amortised cost of a financial liability. penalties and accrued revenue for electricity delivered and services rendered until the end of the Other financial liabilities include bank borrowings, year,but invoiced after the end of the ye. bank overdrafts, financing for network construction related to concession agreements and trade Other receivables from capping schemes: payables. The compensation of household consumers for part of the costs incurred by the electricity invoices was applicable between 1 November 2021 until 31 March 2022. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A566 567 (iii) Share capital (i) Significant increase in credit risk Derecognition of financial assets (s) Dividends Ordinary shares In assessing whether the credit risk on a financial The Group derecognises a financial asset only Dividends are recognized as a deduction from instrument has increased significantly since initial when the contractual rights to the cash flows from equity in the period in which their distribution is Ordinary shares are classified as equity. Incremental recognition, the Group compares the risk of a the asset expire, or when it transfers the financial approved and recognised as a liability to the extent costs directly attributable to the issue of ordinary default occurring on the financial instrument at the asset and substantially all the risks and rewards it is unpaid at the reporting date. Dividends are shares, net of any tax effects, are recognised as a reporting date with the risk of a default occurring of ownership of the asset to another entity. If the disclosed in the notes to financial statements when deduction from equity. on the financial instrument at the date of initial Group neither transfers nor retains substantially all their distribution is proposed after the reporting recognition. the risks and rewards of ownership and continues to date and before the date of the issuance of the premium. (iv) Impairment appropriate. Any recoveries made are recognised in profit or loss. If an asset’s carrying amount is increased as a Repurchase and reissue of ordinary shares (treasury shares) When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. shares and are presented in the treasury share (ii) Write-off policy reserve. When treasury shares are sold or reissued finalization of the bankruptcy proceedings. subsequently, the amount received is recognised Financial assets written off may still be subject to as an increase in equity and the resulting surplus or enforcement activities under the Group’s recovery deficit on the transaction is presented within share procedures, taking into account legal advice where The Group writes off a financial asset after the Impairment of financial assets credit losses (iii) Measurement and recognition of expected The Group recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at fair value through other comprehensive income. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognizes lifetime expected credit losses for trade receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original as well as the forecast direction of conditions at the effective interest rate. reporting date, including time value of money where appropriate. control the transferred asset, the Group recognises financial statements. its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group (t) Pre-paid capital contributions in kind from retains substantially all the risks and rewards of shareholders ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. (r) Revaluation reserve These contributions from a shareholder represent pre-paid contributions of land for which the Company obtained title deeds in respect of future issuance of shares. The amounts recorded are based on the fair value of the land. The difference between the revalued amount and (u) Provisions the net carrying amount of property, plant and equipment is recognised as revaluation reserve included in equity. A provision is recognised if, as a result of a past event, the Group has a present, legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will result of a revaluation, the increase is recognised be required to settle the obligation. Provisions are and accumulated in equity under the heading of revaluation reserve. However, the increase is recognised in profit and loss to the extent that it reverses a revaluation decrease of the same determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the amount of the asset previously recognised in profit discount is recognised as finance cost. and loss. If an asset’s carrying amount is decreased as a the Group has approved a detailed and formal A provision for restructuring is recognised when in profit or loss. However, the decrease is recognized has commenced or has been announced publicly. in equity in revaluation reserves if there is any Future operating losses are not provided for. credit balance existing in the revaluation reserve in respect of that asset. The revaluation reserve is transferred to retained earnings in an amount corresponding to the use of the asset (as the asset is depreciated) and upon disposal of the asset. (v) Contingent assets and liabilities A contingent liability is: (a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or given default is based on historical data adjusted by result of a revaluation, the decrease is recognised restructuring plan, and the restructuring either NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A568 569 (b) a present obligation that arises from past events The Group remeasures the lease liability (and (x) Investment in associates whether it is necessary to recognise any impairment that is not recognised because: makes a corresponding adjustment to the related loss with respect to the Group’s investment in an i. it is not probable that an outflow of resources right-of-use asset) whenever: An associate is an entity over which the Group has associate. When the entire carrying amount of significant influence and that is neither a subsidiary the investment (including goodwill) is tested for embodying economic benefits will be • the lease term has changed or there is a nor an interest in a joint venture. Significant impairment in accordance with IAS 36 as a single required to settle the obligation; or significant event or change in circumstances influence is the power to participate in the financial asset by comparing its recoverable amount (higher resulting in a change in the assessment of and operating policy decisions of the investee but is of value in use and fair value less costs of disposal) exercise of a purchase option, in which case the not control or joint control over those policies. ii. the amount of the obligation cannot be measured with sufficient reliability. lease liability is remeasured by discounting the revised lease payments using a revised discount Contingent liabilities are not recognized in the Group’s financial statements, but disclosed unless rate; the possibility of an outflow of resources embodying • the lease payments change due to changes The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for economic benefits is remote. in an index or rate or a change in expected sale, in which case it is accounted for in accordance payment under a guaranteed residual value, with IFRS 5. with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Group. A contingent asset is not recognized in the Group’s financial statements, but disclosed when an inflow of economic benefits is probable. (w) Leases (i) The Group as lessee basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the default rate in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); • a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right- of-use asset reflects that the Group expects to exercise a purchase option, the related right-of- use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of- use assets are presented as a separate line in the consolidated statement of financial position. (ii) Rental income Rental income from property, plant and equipment other than investment property is recognised as Other income. Rental income is recognised on a Under the equity method, an investment in an associate is recognised initially in the consolidated to be an associate. statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the (y) Segment reporting profit or loss and other comprehensive income of the associate. Segment results that are reported to the Company’s Board of Directors (the chief operating decision When the Group’s share of losses of an associate maker) include items directly attributable to a exceeds the Group’s interest in that associate segment as well as those that can be allocated on a (which includes any long-term interests that, in reasonable basis. substance, form part of the Group’s net investment in the associate), the Group discontinues (z) Subsequent events recognising its share of further losses. Additional An investment in an associate is accounted for in the consolidated financial statements. Events using the equity method from the date on which occurring after the reporting date that provide the investee becomes an associate. On acquisition information on events that occurred after the of the investment in an associate, any excess of reporting date (non-adjusting events), when the cost of the investment over the Group’s share material, are disclosed in the notes to the of the net fair value of the identifiable assets and consolidated financial statements. When the going liabilities of the investee is recognised as goodwill, concern assumption is no longer appropriate at or which is included within the carrying amount of the after the reporting period, the financial statements investment. Any excess of the Group’s share of the are not prepared on a going concern basis. net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. Right-of-use assets are depreciated over the losses are recognised only to the extent that the Events occurring after the reporting date 31 Group has incurred legal or constructive obligations December 2023, which provide additional shorter period of lease term and useful life of the or made payments on behalf of the associate. information about conditions prevailing at the reporting date (adjusting events) are reflected straight-line basis over the term of the lease. The requirements of IAS 36 are applied to determine NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A570 571 9 Adoption of new and revised standards and As of 31 December 2023, the Group adopted of publication of these consolidated financial new IFRS international financial reporting standard interpretations Disclosure of Accounting Policies (Amendments to statements (the effective dates stated below is for that will align the current standard „IFRS 14 Deferral Initial application of new amendments to the existing standards effective for the current reviewed the accounting policies and made updates as per “Note 7 Changes in significant IAS 1 and IFRS Practice Statement 2). Management IFRS as issued by IASB): • IFRS 14 “Regulatory Deferral Accounts” (effective global level, which is expected to take into account Accounts Related to Regulated Activities” to the new requirements of the energy market at EU and reporting period accounting policies” in certain instances in line with for annual periods beginning on or after 1 all relevant related subjects, including the proper The following amendments to the existing standards issued by the International Accounting Standards Except of the above, the adoption of amendments the amendments. January 2016) – the European Commission has treatment of own technological consumption decided not to launch the endorsement process expenses. IASB has redeliberated proposals in the of this interim standard and to wait for the final Exposure Draft Regulatory Assets and Regulatory Board (IASB) and adopted by the EU are effective for to the existing standards has not led to any material standard; the current reporting period: changes in the Group’s consolidated financial statements. • IFRS 17 “Insurance Contracts” including amendments to IFRS 17 issued by IASB on 25 June Standards and amendments to the existing 2020 - adopted by the EU on 19 November 2021 standards issued by IASB and adopted by the EU (effective for annual periods beginning on or but not yet effective after 1 January 2023); • Amendments to IFRS 17 “Insurance contracts” financial statements, the following amendments At the date of authorization of these consolidated • Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current or Non-Current (effective for annual periods beginning on or after 1 January 2024); • Amendments to IAS 1 “Presentation of Financial Statements” - Non-current Liabilities with Covenants (effective for annual periods - Initial Application of IFRS 17 and IFRS 9 – to the existing standards were issued by IASB and beginning on or after 1 January 2024); Comparative Information, adopted by the EU on adopted by the EU and which are not yet effective: 9 September 2022 (effective for annual periods beginning on or after 1 January 2023); • The first two IFRS Sustainability Disclosure Standards in June 2023: IFRS S1 General • Amendments to IAS 1 “Presentation of Financial Requirements for Disclosure of Sustainability- • Amendments to IFRS 16 “Leases” - Lease Liability in a Sale and Leaseback (effective for annual periods beginning on or after 1 January 2024); Statements” and IFRS Practice Statement 2 - related Financial Information and IFRS S2 • Amendments to IFRS 10 “Consolidated Disclosure of Accounting Policies adopted by the Climate-related Disclosures, adopted by the EU Financial Statements” and IAS 28 “Investments EU on 2 March 2022 (effective for annual periods on 31 July 2023 (effective for annual reporting beginning on or after 1 January 2023); periods beginning on or after 1 January 2024). • Amendments to IAS 8 “Accounting Policies, The Group has elected not to adopt the Changes in Accounting Estimates and Errors” amendments to existing standards in advance of – Definition of Accounting Estimates adopted their effective dates. The Group anticipates that by the EU on 2 March 2022 (effective for annual the adoption of these amendments to existing periods beginning on or after 1 January 2023); standards will have no material impact on the financial statements of the Group in the period of • Amendments to IAS 12 “Income Taxes” - Deferred initial application. Tax related to Assets and Liabilities arising in Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and further amendments (effective date deferred indefinitely until the research project on the equity method has been concluded); • Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (applicable for annual periods beginning on or after 1 January 2025, but not yet endorsed in the from a Single Transaction adopted by the EU New standards and amendments to the existing EU); on 11 August 2022 (effective for annual periods standards issued by IASB but not yet adopted by beginning on or after 1 January 2023); the EU • International Tax Reform—Pillar Two Model Rules At present, IFRS as adopted by the EU do not – Amendments to IAS 12 (the Amendments) to significantly differ from regulations adopted by clarify the application of IAS 12 “Income Taxes” the International Accounting Standards Board (effective for annual periods beginning on or (IASB) except for the following new standards and • Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements (applicable for annual periods beginning on or after 1 January 2024, but not yet endorsed in the EU). after 1 January 2023). amendments to the existing standards, which were not endorsed for use in EU as at the date The International Accounting Standards Board has been currently working on the development of a Liabilities based on the feedback received on previous variants on Exposure Drafts made available for public comment (https://www.ifrs.org/projects/ work-plan/rate-regulated-activities/#current- stage). As debated in exposure drafts, until now there is no approved legislation at IASB level. Currently IFRS 14 (originally issued in January 2014 and applied to an entity’s first annual IFRS financial statements for a period beginning on or after 1 January 2016) can be applied only when a reporting entity is a IFRS First Time Adopter. As the Group is not a IFRS First Time Adopter, the management of the Company did not consider any impact coming out from the application of IFRS 14, further guidance being expected in the future. The Group anticipates that the adoption of these new standards and amendments to the existing standards will have no material impact on the consolidated financial statements of the Group in the period of initial application. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A572 573 10 Operating segments (a) Basis for segmentation The following summary describes the operations of each reportable segment: Reportable segments Operations Electricity and natural gas supply Buying and supplying electricity and natural gas to final consumers (includes Electrica Furnizare S.A.) Electricity distribution Electricity generation Operation, maintenance and construction of electricity networks operated by the Group (includes Distributie Energie Electrica Romania S.A. and the activity performed by Electrica Serv S.A within the distribution network). Production of electricity from renewable sources (Sunwind Energy S.R.L., New Trend Energy S.R.L., and Foton Power Energy S.R.L and the activity carried out by Electrica S.A. in the electricity production segment). External electricity network maintenance Repairs, maintenance and other services for electricity networks owned by other distributors (Electrica Serv S.A., without the activity performed in the electricity distribution segment). The Board of Directors of the Company reviews management reports of each segment. Segment Adjusted EBITDA (see definition below) is used to measure performance because management believes that such information is one of the most relevant in evaluating the results of the segments. There are varying levels of integration between the Electricity supply, Electricity distribution and External electricity network maintenance segments. This integration includes electricity distribution and shared electricity network maintenance services. Inter-segment pricing policy is determined on an arm’s length basis. All assets are allocated to reportable segments, except for investments in associates and deferred tax assets. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.Al a t o t d n a d e t a d i l o s n o C s n o i t a n m i i l e n o i t a d i l o s n o C - , 3 9 5 6 1 8 9 , - s t n e m t s u d a j , ) 9 2 4 4 9 9 1 ( , , 3 9 5 6 1 8 9 , , ) 9 2 4 4 9 9 1 ( , 1 8 0 2 , ) 5 9 7 3 9 2 ( , ) 1 8 4 4 2 5 ( , ) 0 2 8 5 7 ( , - - - - ) 5 6 0 2 6 9 ( , 3 9 9 0 5 7 , - - , 7 9 8 1 7 7 2 1 , , 4 7 2 4 3 6 2 , , ) 5 6 4 5 4 3 3 ( , , ) 7 0 5 4 3 9 1 ( , , 1 2 2 1 5 8 2 , 5 9 1 3 4 , , 2 4 6 7 1 3 1 , - - - 5 1 2 7 7 3 , - , 1 7 2 4 6 8 2 , , ) 6 8 2 3 1 9 1 ( , 4 5 8 9 6 5 5 5 0 3 , 5 7 7 3 , 3 4 9 5 2 1 , 5 8 8 1 6 , 6 8 9 6 0 2 , 574 3 0 1 2 7 7 , 2 6 9 8 , 5 9 9 3 2 , 9 3 1 9 3 7 , 6 2 8 , 2 1 1 4 1 7 1 , 1 2 7 3 1 , ) 5 9 1 9 4 ( , , 6 8 5 9 4 7 1 , ) 1 8 6 1 ( , ) 8 8 2 0 3 ( , ) 7 7 7 1 3 9 ( , ) 1 0 3 2 3 ( , - 9 4 7 9 , 1 5 1 2 , ) 4 6 2 ( 9 5 7 7 3 6 , 3 0 4 8 9 , ) 4 2 5 4 9 7 ( , ) 8 8 6 4 0 1 ( , , 7 4 0 6 3 4 1 , 1 7 4 5 0 3 , t e n , 7 2 2 1 , 7 2 0 1 , 9 5 1 - 1 4 t n a p l , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e R t e n , s t e s s a e b g n a t n l i i d n a t n e m p u q e d n a i ) 9 8 3 6 7 ( , 1 6 1 ) 2 1 2 9 ( , ) 8 3 3 7 6 ( , f o t n e m r i a p m i f o l a s r e v e R / ) t n e m r i a p m I ( , 3 5 5 8 9 4 3 , ) 0 6 0 1 7 ( , 0 2 2 1 , , 3 9 3 8 6 5 3 , - 2 2 2 2 2 2 , 1 7 3 6 1 8 9 , , 9 2 4 4 9 9 1 , , 0 0 8 0 1 8 1 1 , 6 2 8 8 3 , 2 8 1 6 6 , 8 0 0 5 0 1 , 0 1 2 2 2 , 3 0 9 7 , 6 7 1 6 , 9 7 0 4 1 , , 0 5 9 2 4 5 2 , , 3 1 5 8 6 8 1 , , 3 6 4 1 1 4 4 , , 2 9 6 6 2 2 7 , 8 5 5 3 5 , , 0 5 2 0 8 2 7 , - 2 8 9 4 5 1 , , 1 0 2 1 9 3 3 , 7 1 9 7 9 8 , 1 2 7 3 1 , 9 0 1 8 1 , 7 8 0 6 6 8 , 9 7 4 3 , 5 3 3 3 , , 5 4 5 9 2 7 8 2 7 9 2 1 , 8 9 8 7 6 , ) 3 9 6 1 6 3 ( , 4 5 5 2 1 , ) 2 3 2 4 ( , ) 6 8 7 9 0 2 ( , ) 9 2 2 0 6 1 ( , ) 8 4 4 1 ( , ) 3 3 0 3 2 5 ( , ) 1 2 4 8 ( , ) 1 4 3 2 ( , ) 6 1 7 6 9 4 ( , ) 5 5 5 5 1 ( , n o i t a z i t r o m a d n a n o i t a c e r p e D i x a t e r o f e b t i f o r p t n e m g e S ) t s o c ( / e m o c n i e c n a n i f t e N e u n e v e r t n e m g e s - r e t n I s e u n e v e r l a n r e t x E e u n e v e r t n e m g e S e m o c n i r e h t O r e t r a u q d a e H l e b a t r o p e r k r o w t e n s t n e m g e s e c n a n e t n a m i r o f l a t o T y t i c i r t c e e l l a n r e t x E y t i c i r t c e l E y t i c i r t c e l E d n a y t i c i r t c e l E n o i t a r e n e g n o i t u b i r t s i d l y p p u s s a g l a r u t a n d e d n E r a e Y 3 2 0 2 r e b m e c e D 1 3 s t n e m g e s e l b a t r o p e r t u o b a n o i t a m r o f n I ) b ( 6 4 8 2 , 7 4 1 8 4 7 , 1 8 9 1 , 0 0 0 0 1 , 5 8 4 6 2 7 , 1 8 6 9 , , 9 1 4 1 9 9 5 1 , , 6 2 7 5 6 5 4 , , 9 6 6 1 8 4 8 6 6 9 0 1 , 9 9 9 8 , 1 9 6 7 8 1 , , 7 0 0 9 1 6 9 , , 2 5 0 3 0 7 5 , , 4 8 1 4 8 7 1 , , 5 7 8 2 6 6 2 , 0 4 4 3 7 3 , 8 9 8 3 , 9 9 2 9 1 , 3 0 1 6 6 1 , 0 4 1 4 8 1 , , 2 7 6 5 1 7 4 , 9 7 9 2 5 , 8 8 3 2 1 , , 9 1 8 0 2 5 1 , , 6 8 4 9 2 1 3 , 0 4 1 2 , 5 5 0 1 4 , , 8 6 7 6 1 2 , 4 7 8 0 0 1 1 , , 5 3 2 4 4 6 2 , - 4 9 9 - - 9 2 5 4 7 7 , , 6 0 7 9 6 8 1 , 8 6 0 2 1 , 0 8 1 1 2 , 3 1 8 6 , - 4 7 8 0 0 9 , 0 0 0 0 0 2 , l m r e t - t r o h s d n a s e b a y a p r e h t o d n a e d a r T s t i f e n e b e e y o p m e l s t f a r d r e v o k n a B y t i l i b a i l e s a e L i s g n w o r r o b k n a B i l s t n e a v u q e h s a c d n a h s a C l s e b a v e c e r i s t e s s a t n e m g e S r e h t o d n a e d a r T l s e b a v e c e r i r e h t o d n a e d a r t t i f o r p t e n t n e m g e S s t i f e n e b e e y o p m l E e r u t i d n e p x e l a t i p a C I * A D T B E d e t s u d A j g n i t a r e p o e h t n i s t e s s a l i e b g n a t n i d n a t n e m p u q e i d n a t n a p l , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e r / t n e m r i a p m i d n a n o i t a z i t r o m a , i n o i t a c e r p e d ) i r o f d e t s u d a j t n e m g e s g n i t a r e p o n e v g i a f o S R F I o t e v i t a n r e t l a n a s a d e t a e r t e b t o n l d u o h s d n a e r u s a e m S R F I n a t o n s i A D T B E I . t n e m g e s g n i t a r e p o e h t n i e m o c n i e c n a n i f t e n ) i i i d n a l e a s r o f l d e h s t e s s a f o t n e m r i a p m i ) i i , t n e m g e s , e c n e u q e s n o c a s A . p u o r G e h t y b d e s u t a h t m o r f y l t n a c i f i n g s i r e f f i d i y a m s e n a p m o c r e h t o y b A D T B E I l e t a u c a c l o t d e s u d o h t e m e h T . d e n i f e d l y m r o f i n u t o n s i A D T B E I , r e v o e r o M . s e r u s a e m x a t e r o f e b ) s s o l ( / t i f o r p t n e m g e s s a l d e t a u c a c l d n a d e n i f e d s i s t n e m g e s g n i t a r e p o r o f ) A D T B E I l y e m a n r o n o i t a s i t r o m a d n a i n o i t a c e r p e d , x a t , t s e r e t n i e r o f e b i s g n n r a E ( A D T B E I d e t s u d A * j r e t r a u q d a e H l e b a t r o p e r s t n e m g e s r o f l a t o T k r o w t e n y t i c i r t c e l E y t i c i r t c e l E y t i c i r t c e l E d n a y t i c i r t c e l E d e d n E r a e Y e c n a n e t n a m i n o i t u b i r t s i d n o i t c u d o r p l y p p u s s a g l a r u t a n * ) d e t a t s e r ( 2 2 0 2 r e b m e c e D 1 3 . i s e n a p m o c r e h t o f o A D T B E I o t n o s i r a p m o c f o e s o p r u p e h t r o f n o p u d e i l e r e b , h c u s s a , t o n n a c e t o n i s h t n i d e t n e s e r p A D T B E I e h t l a t o t d n a d e t a d i l o s n o C s n o i t a n m i i l e n o i t a d i l o s n o C - , 6 9 8 9 0 0 0 1 , - s t n e m t s u d a j , ) 8 0 2 5 7 6 1 ( , , 6 9 8 9 0 0 0 1 , , ) 8 0 2 5 7 6 1 ( , , 3 6 9 0 4 8 2 , ) 0 2 0 1 2 1 ( , 0 8 1 5 , , 3 0 8 6 5 9 2 , 5 ) 3 5 2 6 9 4 ( , ) 1 1 3 2 1 1 ( , - - - ) 4 3 6 7 8 2 ( , ) 4 5 3 3 4 ( , ) 5 9 9 4 6 1 ( , ) 4 1 5 4 2 ( , 3 0 6 5 2 , 7 5 8 5 6 , ) 6 8 5 1 ( , 5 2 0 1 ) 3 8 8 9 6 2 ( , ) 9 9 3 2 ( , ) 8 3 3 6 0 2 ( , 1 6 3 1 1 , ) 7 6 6 4 9 4 ( , ) 8 4 3 1 1 ( , - - ) 3 1 4 2 1 1 ( , 4 0 2 - - - , 6 9 8 9 0 0 0 1 , , 8 0 2 5 7 6 1 , , 4 0 1 5 8 6 1 1 , 2 7 4 5 2 , 2 1 6 5 5 , 4 8 0 1 8 , 5 9 2 2 4 , 575 ) 3 6 4 0 4 2 ( , ) 4 5 3 3 4 ( , 5 1 6 5 2 , ) 4 2 7 2 2 2 ( , ) 3 7 6 ( ) 2 2 4 3 2 8 ( , 7 8 3 5 2 6 , - - 3 2 3 2 , 4 6 0 3 2 6 , 2 4 3 1 , ) 4 1 6 8 2 ( , ) 8 0 8 4 9 7 ( , ) 5 5 0 0 3 ( , , 5 5 7 1 7 6 0 1 , , ) 2 1 7 3 7 3 2 ( , , 5 5 2 3 9 5 2 , , ) 6 3 5 3 4 0 1 ( , 8 7 3 5 2 6 3 1 2 , , 2 4 8 1 3 8 2 1 , , 3 1 4 6 3 6 3 , , 0 4 9 8 1 4 7 5 5 0 9 , 7 8 8 4 3 3 , - 0 3 6 5 0 1 , 7 5 2 9 2 2 , 3 2 6 5 , 9 4 0 0 2 7 , 0 8 3 1 2 , 6 2 5 9 , ) 2 8 4 2 ( , ) 0 8 4 2 ( , - - , 4 5 0 7 1 8 1 , 0 8 1 4 1 , , 2 7 5 9 7 5 1 , 5 0 5 9 5 1 , , 6 2 6 6 9 3 3 , , 0 9 1 3 5 1 8 , 4 2 8 2 3 , , 4 1 0 6 8 1 8 , , 4 5 9 4 5 7 2 , - - ) 0 8 1 2 9 5 ( , 0 7 1 5 1 3 , ) 9 4 0 2 5 1 ( , ) 8 6 1 3 6 ( , ) 2 8 2 8 6 4 ( , ) 7 5 5 2 1 ( , 7 7 1 9 1 , ) 4 9 7 1 3 1 ( , - 6 0 0 8 , ) 1 7 1 ( 3 4 7 6 4 1 , 5 6 2 5 , 9 8 8 4 , 1 0 1 6 1 , 4 6 6 2 1 6 , 8 5 0 9 , 3 1 9 0 6 9 , , 6 7 0 5 2 1 8 , , 3 8 0 1 4 1 4 , , 8 7 6 9 7 5 2 , 6 2 8 9 6 , 9 1 9 8 4 1 , , 7 7 3 6 2 0 1 , , 4 9 8 5 6 3 2 , 6 0 6 3 7 3 , ) 3 4 8 8 1 ( , ) 3 7 6 8 3 ( , 2 2 1 1 3 4 , ) 2 1 4 2 ( , 8 8 4 4 1 , 1 5 1 8 2 , 5 9 8 0 9 3 , ) 6 5 1 1 9 4 ( , 9 9 0 1 6 2 , ) s s o l ( t i f o r p t e n t n e m g e S ) 3 6 9 1 6 6 ( , ) 9 1 6 2 0 1 ( , s t i f e n e b e e y o l p m e r e h t o d n a s e i r a l a S , t n e m p i u q e d n a t n a l p , y t r e p o r p f o t n e m r i a p m I t e n d n a s e l b a v i e c e r e d a r t n o s e s s o l t n e m r i a p m I t e n , s t e s s a t c a r t n o c * * A D T B E I d e t s u j d A x a t e r o f e b ) s s o l ( t i f o r p t n e m g e S n o i t a z i t r o m a d n a n o i t a i c e r p e D e m o c n i / ) t s o c ( e c n a n i f t e N e u n e v e r t n e m g e s - r e t n I s e u n e v e r l a n r e t x E e u n e v e r t n e m g e S e m o c n i r e h t O m r e t - t r o h s d n a , s e l b a y a p r e h t o d n a e d a r T s e l b a v i e c e r r e h t o d n a e d a r T s t n e l a v i u q e h s a c d n a h s a C e r u t i d n e p x e l a t i p a C s t e s s a t n e m g e S s t i f e n e b e e y o l p m e s t f a r d r e v o k n a B e s a e l e c n a n i F i s g n w o r r o b k n a B 5 e t o N e e s e s a e p * l , 9 3 2 1 6 4 2 , 3 7 6 3 5 , 3 1 7 0 6 7 , , 7 3 0 1 7 5 2 , - - - , ) 5 4 8 3 3 0 1 ( , , 0 0 0 0 0 1 3 1 7 0 6 6 , - - 3 1 7 0 6 6 , - 9 6 2 4 0 4 3 5 , ) 3 8 9 ( 8 8 0 2 1 , 0 3 8 3 3 , 9 6 4 8 , 9 9 3 4 4 , 8 3 1 9 0 2 , , 5 8 6 0 5 4 3 , , 9 9 8 1 6 3 2 , - 3 1 3 2 4 , - 8 9 0 2 7 7 , , 1 0 8 9 8 5 1 , g n i t a r e p o e h t n i s t e s s a l i e b g n a t n i d n a t n e m p u q e i d n a t n a p l , y t r e p o r p f o t n e m r i a p m i f o l a s r e v e r / t n e m r i a p m i d n a n o i t a z i t r o m a , i n o i t a c e r p e d ) i r o f d e t s u d a j t n e m g e s g n i t a r e p o n e v g i a f o x a t e r o f e b ) s s o l ( / t i f o r p t n e m g e s s a l d e t a u c a c l d n a d e n i f e d s i s t n e m g e s g n i t a r e p o r o f ) A D T B E I l y e m a n r o n o i t a s i t r o m a d n a i n o i t a c e r p e d , x a t , t s e r e t n i e r o f e b i s g n n r a E ( A D T B E I d e t s u d A * * j S R F I o t e v i t a n r e t l a n a s a d e t a e r t e b t o n l d u o h s d n a e r u s a e m S R F I n a t o n s i A D T B E I . t n e m g e s g n i t a r e p o e h t n i e m o c n i e c n a n i f t e n ) i i i d n a l e a s r o f l d e h s t e s s a f o t n e m r i a p m i ) i i , t n e m g e s , e c n e u q e s n o c a s A . p u o r G e h t y b d e s u t a h t m o r f y l t n a c i f i n g s i r e f f i d i y a m s e n a p m o c r e h t o y b A D T B E I l e t a u c a c l o t d e s u d o h t e m e h T . d e n i f e d l y m r o f i n u t o n s i A D T B E I , r e v o e r o M . s e r u s a e m . i s e n a p m o c r e h t o f o A D T B E I o t n o s i r a p m o c f o e s o p r u p e h t r o f n o p u d e i l e r e b , h c u s s a , t o n n a c e t o n i s h t n i d e t n e s e r p A D T B E I e h t NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 576 577 11 Revenue Electricity distribution and supply, net Supply of natural gas Construction revenue related to concession agreements (Note 25) Repairs, maintenance and other services rendered Proceeds from sale of green certificates Re-connection fees Consulting services Sales of merchandise Total *please see Note 5 2023 8,457,651 191,339 1,018,912 74,077 3,212 14,362 106 56,934 2022 (restated)* 8,991,986 322,320 611,294 45,937 3,741 3,824 - 30,794 13 Other income and expenses (a) Other income Subsidies related to electricity supply and natural gas (Note 20) Rental income Late payment penalties from customers Other Total *please see Note 5 2023 3,306,839 92,332 71,075 28,307 2022 (restated)* 2,687,131 92,486 52,110 9,236 3,498,553 2,840,963 9,816,593 10,009,896 Rental income refers mainly to the subsidies, following by rental of the electricity poles by the distribution subsidiary to telecom operators. In respect to the timing of the revenue recognition, most of the Group’s services provided are transferred During 2023, the Group recognized subsidies on the supply segment recognized subsidies of RON 3,306,839 to the customer over time, only a small part amounting to RON 2,921 thousand (2022: RON 2,694 thousand) thousand, out of which RON 2,614,535 thousand outstanding receivable from the Ministry of Energy following being transferred at a point in time (e.g. metering services provided by the distribution companies, providing periodic data analysis to the customer for certain taxes collected on behalf of them). the application of the electricity and natural gas price capping and compensation mechanism, approved by Order no. 118/2021 with subsequent amendments and GEO no. 27/2022, the latter being amended by GEO 12 Electricity, natural gas and merchandise purchased Electricity purchased Green certificates purchased Cost of merchandise Natural gas purchased Total 2023 8,238,811 543,359 221,255 54,551 2022 9,380,690 609,107 493,847 23,165 9,057,976 10,506,809 The cost of electricity and natural gas purchased includes the cost of the green certificates purchased by the supply subsidiary which has a legal obligation to purchase green certificates from producers of electricity from renewable sources, based on annual targets or quotas set by law, which are applied to the quantity of electricity purchased and supplied to final customers. The cost of green certificates is then invoiced to final customers separately from electricity tariffs. no. 119/2022. (b) Other operating expenses Utilities Other taxes and duties IT services Fines and penalties Printing and distribution of invoices services Meters reading expenses Bank fees Security services Advertising and publicity expenses Penalties to State budgets Cash collection services Postage and telecommunication services Call centre services Rent Other Total 14 Net finance income/(cost) 2023 63,138 51,549 51,151 48,404 36,341 29,831 26,635 19,795 14,654 14,482 13,148 11,448 12,047 12,461 26,315 2022 56,643 46,950 34,929 12,948 44,092 39,748 10,836 17,549 7,440 2,135 14,632 21,010 18,998 10,929 14,132 431,399 352,971 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A578 579 Interest income Other finance income Total finance income Interest expense Interest cost for employee benefits (Note 17) Foreign exchange losses, net Total finance costs Net finance cost 15 Earnings/(loss) per share 2023 3,270 155 3,425 2022 2,847 6,871 9,718 (280,463) (156,985) (10,043) (6,714) (297,220) (293,795) (7,354) (10,374) (174,713) (164,995) The calculation of basic and diluted earnings/(loss) per share has been based on the following profit attributable to Company’s shareholders and weighted-average number of ordinary shares outstanding: Profit/(Loss) attributable to shareholders Profit/(Loss) for the year attributable to the owners of the Company Profit/(Loss) attributable to shareholders of the Company *please see Note 5 Number of ordinary shares (in number of shares) Number of ordinary shares at 31 December 2023 772,217 772,217 2022 (restated)* (240,354) (240,354) 2023 2022 339,553,004 339,553,004 For the calculation of basic and diluted earnings per share, treasury shares (6,890,593 shares) were not treated as outstanding ordinary shares and were deducted from the number of issued ordinary shares. Earnings/(Loss) per share Basic and diluted earnings/(loss) per share (RON) 2023 2022 (restated) 2.27 (0.71) 16 Short-term employee benefits Personnel payables Current portion of defined benefit liability and other employee benefits Social security charges Tax on salaries Total 31 December 2023 31 December 2022 70,598 12,871 31,192 5,887 70,105 11,548 27,301 5,220 120,548 114,174 For details of the related employee benefit expenses, see Note 18. In Romania, all employers and employees, as well as other persons, are contributors to the State social security system. The social security system covers pensions, child benefit, temporary inability to work situations, risks of work accidents and professional diseases and other social assistance services, redundancy payments and incentives granted to employers for creating new jobs. 17 Post-employment and other long-term employee benefits The Group provides cash benefits to employees depending on seniority in the form of jubilee bonuses and depending on the years of service at retirement in the form of retirement bonuses. The post-employment and other long-term employee benefits are stipulated in the Collective Labour Contracts. In 2023 and 2022, employee benefit obligations were computed by an independent actuary using the projected unit credit method with benefits calculated proportionally to the period of service. Defined benefit liability Other long-term employee benefits Total - Current portion* - Non-current portion *included in Personnel payables in Note 16 31 December 2023 31 December 2022 55,839 108,923 164,762 13,404 151,358 41,675 87,762 129,437 12,168 117,269 (i) Movement in the defined benefit liability and other long-term employee benefits The following tables shows a reconciliation from the opening balances to the closing balances for the defined benefit liability and other long-term employee benefits and its components. There are no plan assets. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A580 581 Defined benefit liability Balance at 1 January Included in profit or loss Current service cost Past service cost Interest cost 2023 41,675 4,904 - 3,278 2022 79,078 4,893 (23,367) 3,100 (b) Group specific assumptions: • For the year 2023 were taken into consideration the salaries’ growth rates budgeted by the Group. Starting with the year 2024, salaries’ growth is forecasted at the inflation rate; • Employees’ turnover: based on historical data; • Jubilee and retirement bonuses granted based on seniority as per the collective labour contracts, as Included in other comprehensive income follows: Remeasurements loss - Actuarial loss Other Benefits paid Balance at 31 December Other long-term employee benefits Balance at 1 January Included in profit or loss Current service cost Past service cost Actuarial (gain)/ loss Interest cost Other Benefits paid Balance at 31 December 11,918 (9,503) Jubilee bonus based on years of service in the Group (5,936) 55,839 2023 87,761 7,580 - 16,637 6,764 (9,819) 108,924 (12,526) 41,675 2022 88,356 7,786 (353) (4,509) 4,256 (7,775) 87,761 Seniority 20 years 30 years 35 years 40 years 45 years No of gross monthly base salaries 31 December 2023 31 December 2022 1 2 3 4 5 1 2 3 4 5 Retirement bonus based on years of service in the Group Seniority Between 8 and 10 years Between 10 and 25 years More than 25 years No of gross monthly base salaries 31 December 2023 31 December 2022 2 3 4 2 3 4 Defined benefits refer to the retirement bonuses granted according to the seniority within the Group and other long-term benefits refer to the jubilee bonuses granted for seniority. Termination benefits (ii) Actuarial assumptions (a) Termination benefits for individual lay-offs at the Group’s initiative The following were the main actuarial assumptions at each reporting date: (a) Macroeconomic assumptions: In accordance with the Collective Labour Contracts concluded between the Group and the Unions, when individual labour contract are terminated at the Group’s initiative, the Group pays termination benefits to the employees depending on their period of service, as follows: • inflation. The actuary used information from the National Commission for Strategy and Prognosis: Year 2023 2024 2025 2026 2027+ Valuation date 31 December 2023 Valuation date 31 December 2022 10.4% 4.8% 3.5% 3% 2.5% 7.5% 4.9% 3% 2.5% 2.5% • the discount rate used is based on the yield of the Romanian Government bonds at the reporting date, therefore the weighted average discount rate is 6% for the year 2023 (2022: 8.1%); • taxes and social charges are those in force as at the reporting date. Period of service 1 – 2 years 2 – 5 years 5 – 10 years 10 – 20 years More than 20 years No of gross monthly base salaries 31 December 2023 31 December 2022 2 3 4 5 8 2 3 4 5 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A582 583 (b) Termination benefits for collective lay-offs at the Group’s initiative 18 Employee benefit expenses For collective lay-offs, according to the Collective Labour Contracts, the Group pays termination benefits to the employees depending on their period of service, as follows: Vechime 1 – 3 years 3 – 5 years 5 – 10 years 10 – 20 years More than 20 years No of gross monthly base salaries 31 December 2023 31 December 2022 3 6 7 11 16 3 6 7 11 16 The above mentioned stipulations do not apply to employees with individual labour contract concluded for a determined period. The above stipulations do not apply to employees that obtained other higher cumulative salary compensation rights, provided by legal regulations regarding the Group’s reorganization and restructuring. Employees who are re-employed within the Group after lay-off are not entitled to the above-mentioned benefits. Sensitivity analysis Significant actuarial assumptions for the determination of the benefit obligation are the discount rate, expected salary increase and retirement age. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. Average number of employees Number of employees at 31 December Wages and salaries* Social security contributions Meal tickets Termination benefits Total employees benefits for the year Capitalised employee benefit expenses Total employees benefits in the statement of profit or loss 2023 7,676 7,960 2023 911,995 27,163 46,583 1,015 986,756 (24,691) 962,065 2022 7,760 7,874 2022 790,425 20,694 33,187 267 844,573 (21,151) 823,422 *Wages and salaries includes also current service cost, defined benefits and other long-term employee benefits Management remuneration is disclosed in Note 33 b) Related parties. 19 Income taxes In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. The Group considers that the accounting records for taxes due are adequate for all open tax years, based on assessment made by management taking into account various factors, including the interpretation of Increase by 1% Decrease by 1% tax legislation and previous experience. New information may become available that causes the Group to 2023 (11,301) 2022 (9,237) 2023 12,675 2022 8,611 change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period when such a determination is made. 13,195 9,415 (11,930) (10,049) (i) Amounts recognised in profit or loss Current tax expense Deferred tax expense Total expense/(benefit) related to income tax *please see Note 5 2023 78,819 46,995 125,814 2022 (restated)* 2,576 (49,747) (47,171) Discount rate Salary growth Retirement age Increase by 1 year Decrease by 1 year 2023 1,135 2022 812 2023 (1,135) 2022 (812) The sensitivity analysis presented above may not be representative of the actual change in the benefit obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated. In presenting the above sensitivity analysis, the present value of the benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the benefit obligation liability recognized in the statement of financial position. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A584 585 (ii) Amounts recognised in other comprehensive income Before tax 2023 Tax expense Net of tax Before tax 2022 Tax expense Net of tax 2022 Revaluation of property, plant and equipment Remeasurement of defined benefit liability Total 85,510 (13,699) 71,811 - - - (11,918) 1,907 (10,011) 9,503 (1,479) 73,592 (11,792) 61,800 9,503 (1,479) 8,024 8,024 (iii) Reconciliation of effective tax rate 2023 2022 (restated)* Profit before tax 897,917 (287,634) Tax using Company’s domestic tax rate 16% 143,667 2% -3% 0% -1% 0% 17,338 (25,426) (3,165) (5,622) (978) 16% -10% 8% 1% 0% 2% (46,021) 28,845 (22,083) (3,388) (137) (4,387) Non-deductible expenses Non-taxable income Deduction of legal reserves Other tax effects Recognition of tax effect of previously unrecognised tax losses Income tax expense/(benefit) *please see Note 5 (iv) Movement in deferred tax balances Net balance at 1 January 2022 39,838 Recognised in profit or loss (2,858) Property, plant and equipment Intangible assets related to concession agreements 187,500 20,515 Balance at 31 December 2022 (restated)* Net Deferred tax Deferred tax assets liabilities Recognised in other comprehensive income - - 36,980 208,015 - - 36,980 208,015 Employee benefits Impairment of trade receivables Tax loss carried forward Other items Tax liabilities/(assets) before set-off Set off of tax Net tax liabilities/(assets) *please see Note 5 (23,940) 1,360 1,479 (21,101) (21,101) (24,732) (6,198) (95,972) 89,904 (4,299) (152,471) - - - (30,930) (30,930) (6,068) (6,068) (156,770) (156,770) - - - - 78,395 (49,747) 1,479 30,126 (214,869) 244,996 - - - - 184,689 (184,689) 78,395 (49,747) 1,479 30,126 (30,180) 60,306 (v) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the certain tax losses generated by the Company, because it is not probable that future taxable profit will be available against which the entity 14% 125,814 16% (47,171) generating it can use the benefits therefrom. Balance at 31 December 2023 Tax losses 2023 balance at in profit or in other 1 January loss comprehensive Net Deferred tax Deferred tax assets liabilities Net Recognised Recognised 20 Trade receivables Property, plant and equipment Intangible assets related to concession agreements Employee benefits Impairment of trade receivables Tax loss carried forward Other items Tax liabilities/(assets) before set-off Set off of tax Net tax liabilities/(assets) 2023 36,980 income 8,837 13,699 59,516 208,015 21,679 - 229,694 - - 59,516 229,694 (21,101) (4,236) (1,907) (27,244) (27,244) (30,930) 5,370 (6,068) (156,770) 1,712 13,633 - - - (25,560) (25,560) (4,356) (4,356) (143,136) (143,136) - - - - 30,126 46,995 11,792 88,914 (200,296) 289,210 - - - - 167,892 (167,892) 30,126 46,995 11,792 88,914 (32,404) 121,318 Trade receivables, gross Bad debt allowance Total trade receivables, net Trade receivables from related parties are presented in Note 33. 2023 318,176 2022 337,136 31 December 2023 31 December 2022 3,180,660 (640,218) 2,540,442 3,118,691 (652,689) 2,466,002 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 586 587 Trade receivables, gross, comprise: Electricity distribution and supply Late payment penalties receivable Customers with judicial execution titles Repairs, maintenance and other services Other Total trade receivables, gross 31 December 2023 31 December 2022 2,603,238 2,482,266 89,346 333,682 20,904 133,490 80,658 347,667 11,850 196,250 Loss allowances are determined according to IFRS 9 “Financial instruments” based on “expected credit loss” model. In applying IFRS 9, the Group has identified 5 clusters of customers based on shared risk characteristics: 3 separate clusters for the distribution subsidiaries and 2 clusters (households and non- households) for the supply subsidiary. A significant part of the bad debt allowances refers to clients in litigation, insolvency or bankruptcy procedures, many of them being older than five years. The Group will derecognize these receivables together with the related allowances after the finalization of the bankruptcy process. These receivables were treated separately in computing the allowance according to IFRS 9. The amounts written-off in 2022 relates 3,180,660 3,118,691 to Oltchim (please see Note 19 from prior year financial statements). Following the adoption of the Order no. 118/2021 with subsequent amendments and GEO no. 27/2022, the latter one being amended by GEO no. 119/2022, concerning the capping and compensation mechanism, In applying IFRS 9 as of 31 December 2023, The Group has considered all the information available without undue costs (including forward looking information) that may affect the credit risk of its receivables since part of the receivables due to the subsidiary Electrica Furnizare S.A. for the sale of electricity and gas to final original recognition, thus recording a bad debt allowance in amount of RON 111,271 thousand. consumers will be recovered from the Romanian State through National Agency for Payments (domestic consumers) and Social Inspection and Ministry of Energy (non-household consumers). Electricity distribution and supply On 31 December 2023, the amounts estimated to be received from the Ministry of Energy for non-household consumers are 10,130 thousand RON (31 December 2022: 20,480 thousand RON) and from the National Agency for Payments and Social Inspection for household consumers are 36,496 thousand RON (31 December 2022: 21,043 thousand RON). The receivables are booked under the caption “Electricity distribution and supply”. Grants to be received As at 31 December 2023, the estimated amount for subsidies to be received from the Ministry of Energy is RON 2,595,554 thousand (31 December 2022: RON 1,280,788 thousand) and from County Agency for Payments and Social Inspection is RON 18,981 thousand. From the total amount of subsidies to be received, RON 1,528,679 thousand represent uncollected claims submitted to the state authorities and RON 1,085,856 thousand claims not yet submitted to the state authorities as at 31 December 2023. According to the legal provisions and regulations adopted regarding the recovery of these subsidies, the amounts should be recovered within 40 days after submission of the required documentation to the National Agency for Payments and Social Inspection or the Ministry of Energy, as the case may be. The amounts should be recovered within 40 days of submission of the required documentation to the National Agency for Payments and Social Inspection or the Ministry of Energy, as appropriate. Claims are recorded under the line „Electricity distribution and supply”. The reconciliation between the opening balances and the closing balances of the impairment for trade receivables in the form of lifetime expected credit losses is as follows: Lifetime expected credit losses Balance as at 1 January Loss allowance recognized Decrease in loss allowance Amounts written off Balance as at 31 December The aging of trade receivables is presented in Note 32. 2023 652,689 111,271 (35,198) (88,544) 640,218 2022 980,858 146,203 (34,248) (440,124) 652,689 21 Other receivables VAT receivable Receivables from EU funds Other receivables Lifetime expected credit losses Total other receivables, net 31 December 2023 31 December 2022 12,762 45,194 56,103 (20,227) 93,832 13,024 13,932 120,777 (20,480) 127,253 Other receivables include mainly guarantees from energy suppliers and receivables to be recovered from state authorities in respect to medical leave indemnities. The reconciliation between the opening balances and the closing balances of the impairment for other receivables is as follows: Loss allowance 2023 2022 Balance as at 1 January Decrease in loss allowance Balance as at 31 December 20,480 (253) 20,227 20,124 356 20,480 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 588 589 22 Cash and cash equivalents 24 Property, plant and equipment Bank current accounts Call deposits Cash in hand 31 December 2023 31 December 2022 The movements in property, plant and equipment in 2023 and 2022 are as follows: 223,213 153,997 5 141,656 193,219 12 Land and land improvements Buildings Equipment furniture Construction and office in progress Total equipment Vehicles, Total cash and cash equivalents in the consolidated statement of financial position 377,215 334,887 In the context of the consolidated statement of cash flows, non-cash activity includes the netting of trade receivables and trade payables in the amount of RON 160,104 thousand in 2023 (31 December 2022: RON 53,106 thousand). 23 Inventories As at 31 December 2023 and 31 December 2022, inventories are as follows: Spare parts Consumables and other materials Natural gas Other inventories Allowance for impairment of inventories Total inventories 31 December 2023 31 December 2022 35,057 50,060 25,536 13,693 (8,686) 29,589 53,527 23,319 17,004 (9,467) 115,660 113,972 Inventories include mainly spare parts, consumables and the natural gas storage (applicable only for the supply subsidiary) that was set up according to ANRE’s regulations. Spare parts refer mainly to items such as cables, conductors, sockets, switches which are used for the distribution network. As at 31 December 2023, the remaining quantity of natural gas stored is of MWh 143,870 (31 December 2022: MWh 107,427), amounting to RON 25,536 thousand (31 December 2022: RON 23,319 thousand). Gross carrying amount Balance at 31 December 2021 Reclassification of assets held for sale Balance at 1 January 2022 Additions Transfer from construction in progress Disposals Acquisition of subsidiary Balance at 31 December 2022 Additions Transfer from construction in progress Disposals Effect of revaluation recognised in other comprehensive income Effect of revaluation recognised in profit or loss Decrease in gross value through reversal of accumulated depreciation Balance at 31 December 2023 Accumulated depreciation and impairment losses Balance at 1 January 2022 Depreciation Accumulated depreciation of disposals Impairment loss Balance at 31 December 2022 Depreciation Accumulated depreciation of disposals Cancellation of accumulated depreciation Balance at 31 December 2023 Net carrying amounts At 1 January 2022 At 31 December 2022 At 31 December 2023 252,798 202,557 91,801 96,950 29,188 673,297 1,024 4,115 - - - 5,139 253,822 206,672 91,801 96,950 29,188 678,433 1,179 - 85 1,133 1,977 2,386 804 269 5,475 9,435 (3,778) 95 (3,276) (1,093) (1,844) (838) (9) (7,060) 25 - - - 3,875 3,900 251,835 206,712 94,320 97,185 34,751 684,803 763 - (576) 936 124 - 46,999 38,511 2,462 (381) - (23,907) 239 1,862 371 110 21,872 24,181 - 2,096 (5,236) (1,308) (1,271) (8,391) - - - - - - - - - 85,510 2,081 (23,907) 301,483 221,995 91,185 96,358 55,352 766,373 - - - - - - - - - 13,478 44,588 91,175 18,634 167,875 8,022 7,378 (1,778) (5) - 4,515 (594) - - - - 19,915 (2,372) (5) 21,495 50,188 95,096 18,634 185,413 7,450 6,499 2,442 - (5,375) (1,635) (23,416) - - - - - 16,391 (7,010) (23,416) 5,529 51,312 95,903 18,634 171,378 252,798 189,079 251,835 185,217 47,213 44,132 301,483 216,466 39,873 5,775 2,089 455 10,554 505,419 16,117 499,390 36,718 594,994 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A590 591 Tangible assets include mainly land, buildings and equipment. The following table shows the valuation techniques used in measuring fair values (Level 3), as well as the As at 31 December 2023, the Group carried out a revaluation to fair value of property, plant and equipment consisting of land, land improvements and buildings. The revaluation was carried out by an independent chartered valuer Darian DRS S.A. As a result of the revaluation, the gain recorded in the Consolidated Statement of Comprehensive Income was RON 85,510 thousand and the gain recorded in the Consolidated Statement of Profit or Loss was RON 2,081 thousand. Measurement of fair value The Group’s land, land improvements and buildings are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value measurements of the Group’s land, land improvements and buildings as at 31 December 2023 were performed by Darian DRS S.A., an independent valuer not related to the Group. Darian DRS S.A. is member of the National Association of Authorised Romanian Valuers and has appropriate qualifications and recent experience in the fair value measurement of properties in the relevant locations. The valuation conforms to International Valuation Standards and was based on recent market transactions on arm’s length terms for similar properties, whenever possible and discounted cash-flows method. There were no significant changes to the valuation technique in the period between the current revaluation performed on 31 December 2023 and the previous one performed on 31 December 2020. significant unobservable inputs used. Category Valuation technique Land and land improvements Market approach The fair value is estimated based on selling price per square meter of land of similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties and best use). The market price is mainly based on recent transactions. Buildings Buildings were evaluated using the following methods, depending on the best use and the availability and credibility of available market information: Inter-relationship Significant unobservable between key inputs unobservable inputs and fair value measurement • Adjustment for liquidity, location, size. The estimated fair value would increase/(decrease) if: • Adjustment for liquidity, location or size would be lower/(higher) The income approach The income approach is based on the determination of the reproducible annual flow, derived from the rental of the property and a determination of the capitalization rate and implicitly the multiplier factor. Market approach The market approach is based on the selling price per square meter for buildings with similar characteristics (i.e. ownership, legal limitations, financing and selling conditions, location, physical and economical properties, and best use), adjusted for liquidity, location, size etc. The cost approach It was applied for fixed assets where it was not possible to apply the market or income approach, as is the case with rural housing. The cost approach assumes that the maximum value of a good for an informed buyer is the amount needed to buy or build a new good with equivalent utility. When the good is not new, all the forms of depreciation that can be attributed to the good must be deducted (deducted) from the current new cost, until the evaluation date. • Adjustment for liquidity, location, size. The estimated fair value would increase/(decrease) if: • Adjustment for liquidity, location or size would be lower/(higher) Office space rent • Occupancy rates (between 85% and 90%) • Capitalisation rates (between 7% and 8%) • Annual rent per sqm (between 15 and 20 EUR/ sqm), depending on location; Commercial space rent • Occupancy rates (between 80% and 90%) • Capitalisation rates (between 7% and 8%) • Annual rent per sqm (between 10 and 60 EUR/ sqm), depending on location; • Occupancy rates were higher/(lower) • Yield rates were lower/ (higher) • Annual rent per sqm was higher/(lower) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A592 593 25 Intangible assets Intangible assets include mainly intangible assets related to distribution service concession agreements recorded in accordance with IFRIC 12 “Service Concession Arrangements”, as well as licenses and costs of SAP ERP implementation, customer management and billing system and other software, as follows: Gross book value Balance at 1 January 2022 Additions Transfers from intangible assets in progress Disposals Balance at 31 December 2022 Additions Transfers from tangible assets in progress Disposals Balance at 31 December 2023 Accumulated amortization and impairment losses Balance at 1 January 2022 Amortization Accumulated amortization of disposals Balance at 31 December 2022 Amortization Accumulated amortization of disposals Balance at 31 December 2023 Net carrying amounts At 1 January 2022 At 31 December 2022 At 31 December 2023 Intangible assets related Software and to concession licenses agreements Intangible assets in progress Total 10,132,347 193,401 1,909 10,327,657 611,294 - - 7,694 2 (1,006) 140 (2) - 619,128 - (1,006) 10,743,641 200,091 2,047 10,945,779 1,018,912 20,759 - - 680 (11,106) 994 (680) 1,040,665 - - (11,106) 11,762,553 210,424 2,361 11,975,338 4,617,790 186,327 449,987 - 3,960 (1,005) 5,067,777 189,282 474,246 6,171 - (10,490) 5,542,023 184,963 - - - - - - - 4,804,117 453,948 (1,005) 5,257,060 480,416 (10,490) 5,726,986 5,514,557 5,675,864 6,220,530 7,074 10,809 25,461 1,909 2,047 5,523,540 5,688,719 2,361 6,248,352 The Group applies IFRIC 12 for the accounting of the transactions under these concession contracts (see further details in Notes 4, 8(d) and 8(l)). For the year ended 31 December 2023, the Group has recognized construction revenue related to the concession agreements of RON 1,018,912 thousand (2022: RON 611,294 thousand). The main information related to the current concession contracts agreements and the intangible assets amounts recognized for each network distribution area is summarized below: Network distribution Contract areas date Concession period (years) Concession Net Net carrying carrying Contract period Renewal amount amount expiry date remaining option at 31 at 31 (years) December December Muntenia Nord area Transilvania Nord area Transilvania Sud area 2005 2005 2005 49 49 49 2054 2054 2054 33 33 33 Yes Yes Yes Total 2023 2022 2,197,712 1,968,811 2,007,855 1,890,409 2,014,963 1,816,644 6,220,530 5,675,864 The concession contracts can be prolonged for a period up to half of the initial established period of 49 years. The investments in relation to the development and modernization of the infrastructure incurred in 2023 refers mainly to: • Modernization of the current transformer points and stations, current underground and overhead power lines in amount of RON 484,220 thousand (2022: RON 139,487 thousand); • Investments related to improvements for electricity distribution network in amount of RON 81,660 thousand (2022: RON 79,132 thousand). • Significant construction works of new transformer stations, new underground and overhead power lines in amount of 2023: RON 144,980 thousand (2022: RON 148,404 thousand); • Acquisition of own car fleet, including utilities vehicles and specialized vehicles in amount of RON 0 thousand; (2022: RON 58,256 thousand); • Modernization and inclusion in SCADA (which is an automatic control system which monitors the equipment) of transformers points and stations, in amount of RON 24,880 thousand (2022: RON 164 thousand). 26 Investments in associates On 28 July 2021 and on 7 December 2021, Electrica SA concluded four agreements for the sale-purchase of shares in four project companies having as main activity the production of electricity from renewable sources. The sale-purchase agreements concluded, mention the fact that in the first stage the Group acquires 30% of the share capital of the four companies, remaining that in the following stages, to acquire the remaining 70% of the share capital after the conditions provided in the sale-purchase agreements will be fulfilled. By the end of 31 December 2023, three of the project companies were acquired by at least 60% (please see Note 1), therefore they are accounted as subsidiaries, the other one is as follows: • Crucea Power Park SRL, develops the wind project „Crucea Est”, with a projected installed capacity of 121 MW and a projected electricity storage capacity of 60 MWh (15 MW x 4h), located outside the Crucea area, Constanta County. The estimated purchase price for the „Crucea Est” wind project is 70 thousand EUR/MW for the aforementioned capacity, totalling the amount of 8,470 thousand EUR. On 28 July 2021, NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A594 595 Electrica SA paid the amount of EUR 2,541 thousand representing 30% of the project value, respectively The share loss in amount of RON 39 thousand for the period was recognized in the consolidated statement 30% of the shares of Crucea Power Park SRL. On 15 May 2023, Electrica acquired a further 10% of the of profit and loss for the year ended as at 31 December 2023. shares and voting interests in Crucea Power Park S.R.L. As a result, the Group’s shareholding increased from 30% to 40%. Considering the holding percentage of 40%, as at 31 December 2023, the entity is accounted for using the equity method in these consolidated financial statements as provided in the Group›s accounting policies in Note 8. The cost of the investments at acquisition date, totalling the amount of RON 12,500 thousand, is detailed as follows: Acquisition date Percentage ownership and voting rights at acquisition date Net assets at acquisition date Group’s share of net assets Goodwill Cost of investment at acquisition datei Crucea Power Park S.R.L. 31.07.2021 30% (242) (73) 12,573 12,500 Summarised financial information in respect of the Group’s associate is set out below: Crucea Power Park S.R.L. Non-current assets Current assets Non-current liabilities Current liabilities Net assets Reconciliation to carrying amounts: Opening net assets at acquisition date Additions net assets/liabilities Loss for the period Closing net assets 31.12.2023 31.12.2023 9,199 1,187 (10,376) (45) (36) (246) 293 (83) (36) 27 Capital and reserves (a) Share capital and share premium The issued share capital in nominal terms consists of 346,443,597 ordinary shares as at 31 December 2023 (31 December 2022: 346,443,597) with a nominal value of RON 10 per share. As of 4 July 2014, after the Initial Public Offering (“IPO”), the Company’s shares are listed on the Bucharest Stock Exchange and the Global Depositary Receipts are listed on the London Stock Exchange. The shares owned by the Company’s shareholders that are traded on the London Stock Exchange are the global depositary receipts (GDRs). A global depositary receipt represents four shares. The Bank of New York Mellon is the depositary bank for these securities. The GDRs’ weight in Electrica’s total share capital diminished following the Initial Public Offering, reaching a level of 0.7842% at the end of 2021 as compared to 10.17% at 4 July 2014. The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share in the shareholders’ meetings of the Company, except for the 6,890,593 treasury shares purchased by the Company in July 2014 in order to stabilize the price. All shares rank equally and confer equal rights to the net assets of the Company’s, except for treasury shares. The Company recognizes changes in share capital only after their approval in the General Shareholders Meeting and their registration by the Trade Register. The contributions made by the shareholders which are not yet registered with the Trade Register at year end are recognized as pre-paid capital contributions from shareholders. The share premium resulted at IPO was RON 171,128 thousand. The transaction costs of RON 68,079 thousand were deducted from the share premium. Following the SPO that took place in November 2019, the share capital of Electrica SA was increased by in kind and in cash contribution, with the amount of RON 5,037 thousand, from the amount of RON 3,459,399 thousand to the amount of RON 3,464,436 thousand, by issuing a number of 503,668 new nominative and dematerialized shares with a nominal value of 10 RON/share. The costs generated by the secondary public offering were in amount of RON 964 thousand. Also, the Company recorded gains referring to share issue of RON 2,186 thousand, resulting from the difference between the contribution value of the plots of land and their value recorded as pre-paid capital Reconciliation of the financial information summarized above with the net accounting value of the participation in the associated entity recognized in the consolidated financial statements: contributions in kind from shareholders. (b) Treasury shares reserve Crucea Power Park S.R.L. In July 2014, the Company purchased 5,206,593 ordinary shares and 421,000 Global Depositary Receipts, Closing net assets of associates 31.12.2023 Group’s share in associates % Group’s share of net assets as at 31.12.2023 Goodwill Carrying amount of interest in associate 31.12.2023 (36) 40% (14) 16,652 16,638 equivalent to 1,684,000 shares (totalling 6,890,593 shares). The total amount paid for acquiring the shares and Global Depositary Receipts was RON 75,372 thousand. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A596 597 (c) Revaluation reserve shares (6,890,593 shares) were not considered as outstanding shares and are deducted from the total The reconciliation between opening and closing balance of revaluation reserve is as follows: number of issued ordinary shares. 2023 2022 Out of the dividends declared by the Company of RON 39,999 thousand (2022: RON 152,799 thousand), the dividends paid were RON 39,894 thousand (2022: RON 152,447 thousand) the remaining difference represents dividends uncollected by the shareholders. Balance at 1 January Revaluation reserve for tangible fixed assets Deferred tax relating to the revaluation reserve Release of revaluation reserve to retained earnings corresponding to depreciation and disposals of property, plant and equipment Balance as at 31 December 92,117 85,510 (13,699) (4,392) 159,536 102,829 - - (10,712) 92,117 As at 31 December 2023, the Group has revalued its land, land improvements and buildings to fair value. The previous revaluation was carried out on 31 December 2020 (see note 24). 28 Trade payables Electricity suppliers Capital expenditure suppliers Other suppliers Total 31 December 2023 31 December 2022 1,005,761 453,014 212,703 1,671,478 970,815 243,715 192,567 1,407,097 (d) Legal reserves participants to the electricity market. Electricity suppliers are mainly state-owned electricity producers, as detailed in Note 34, but also other Legal reserves are set up as 5% of the gross profit for the year in the statutory individual financial Other suppliers include suppliers of services, materials, consumables, etc. statements of the companies within the Group, until the total legal reserves reach 20% of the paid-up nominal share capital of each company, according to the legislation. These reserves are deductible for income tax purposes and are not distributable. 29 Other payables Balance at 1 January 2022 Set-up of legal reserves Balance at 31 December 2022 Set-up of legal reserves Balance at 31 December 2023 (e) Dividends Legal reserves 408,405 21,178 429,583 19,780 449,363 VAT payable Liabilities towards the State Other liabilities Total 31 December 2023 31 December 2022 Current Non-current Current Non-current 588,814 33,372 412,898 1,035,084 - - 37,161 37,161 565,075 11,733 290,728 867,536 - - 72,432 72,432 Other liabilities include mainly guarantees, sundry creditors, connection fees, habitat tax and cogeneration contribution. Other non-current liabilities refer to guarantees from customers related to electricity supply. Romanian companies may distribute dividends from statutory profits, according to the separate financial statements prepared in accordance with Romanian accounting regulations. 30 Provisions The dividends declared by the Company in 2023 and 2022 (from the statutory profits of previous years) are as follows: To the owners of the Company Total Distribution of dividends 2023 39,999 39,999 2022 152,798 152,798 Balance at 1 January 2023 Provisions recognized Provisions utilised Provisions reversed Balance at 31 December 2023 Tax related 1,084 - - - 1,084 Other 52,617 7,924 (229) (20,229) 40,083 Total 53,701 7,924 (229) (20,229) 41,167 On 27 April 2023 the General Shareholders Meeting of the Company approved dividend distribution of RON As at 31 December 2023, provisions refer mainly to benefits upon the termination of executive directors’ 39,999 thousand (2022: RON 152,798 thousand). The dividend per share distributed is RON 0.1178 per share mandate contracts in the form of a non-compete clause amounting to RON 710 thousand (31 December (2022: RON 0.45 per share). When calculating the dividend per share, the Company’s repurchased own 2022: RON 1,839 thousand) and for various claims and litigations involving the Group companies in amount NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A598 599 of RON 40,457 thousand (31 December 2022: RON 51,862 thousand) of which the most significant was for the As at 31 December 2023, respectively 31 December 2022, the bank borrowings is as follows: distribution segment amounting to RON 24,345 thousand for a dispute with ANCOM. For the supply segment, starting with July 2022, from the amendment of the Performance Standard 82/2021, the compensations are calculated daily or weekly and paid to the customers. Thus, for the provision recognised until 31 December 2022, amounting to RON 11,020 thousand, a reversal of RON 8,770 thousand was recorded during 2023 and an additional provision of RON 1,482 thousand was set up for the period January-December 2023. 31 Bank borrowings and overdrafts Drawings and repayments of borrowings during the year ended 31 December 2023 were as follows: Currency Interest rate Maturity year Amount (RON thousand) Balance at 1 January 2023 Drawings of borrowings during the period, out of which: EBRD Exim Bank Romania Vista Bank CEC Bank ERSTE Group Bank and Raiffeisen Bank Total drawings Accumulated interest Payment of interest out of which paid in 2022 Reimbursements, out of which: BRD BRD BRD Banca Transilvania Unicredit Bank BCR EBRD Exim Bank Romania Balance at 31 December 2023 RON RON RON RON RON RON RON RON RON RON RON RON RON Floating rate (2.1% + interbank rate + ROBOR spread) ROBOR 3M+1.65% ROBOR 3M+2.95% ROBOR 3M+2.85% ROBOR 3M +1.16% 3.99% 3.85% 3.85% 4.59% 3.85% ROBOR 3M+1% Floating rate (1.15% + interbank rate + ROBOR spread) ROBOR 3M+1.65% 760,713 180,000 245,890 25,000 200,000 91,768 742,658 11,125 (9,124) 187,730 20,800 14,286 11,425 17,857 9,600 18,950 11,478 83,334 1,317,642 2028 2024 2024 2026 2024 2026 2028 2028 2027 2028 2028 2031 2024 Lender Borrower Balance at Balance at 31 December 2023 31 December 2022 Banca Transilvania UniCredit Bank BRD BRD BRD BCR EBRD EBRD Distributie Energie Electrica Romania (formerly SDEE Transilvania Sud S.A.) Distributie Energie Electrica Romania (formerly SDEE Transilvania Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Muntenia Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Transilvania Nord S.A.) Distributie Energie Electrica Romania (formerly SDEE Transilvania Sud S.A.) Distributie Energie Electrica Romania (formerly SDEE Muntenia Nord S.A.) Distributie Energie Electrica Romania Distributie Energie Electrica Romania CEC Bank Electrica Furnizare S.A. Exim Bank Romania Distributie Energie Electrica Romania Vista Bank Societatea Energetica Electrica S.A. ERSTE Group Bank and Raiffeisen Bank Total Societatea Energetica Electrica S.A. Less: current portion of the long-term bank borrowings Less: accumulated interest Total long-term borrowings, net of current portion Bank Borrowings description: a) Investment loan granted by Banca Transilvania 62,508 29,103 62,400 64,286 51,467 90,542 189,971 182,773 200,000 167,825 125,000 91,768 1,317,642 (512,169) (11,125) 794,348 80,367 38,793 83,200 78,571 62,904 109,785 202,983 - - 4,110 100,000 - 760,713 (104,400) (9,120) 647,193 On 18 July 2019, Societatea de Distributie a Energiei Electrice Transilvania Sud S.A., currently Distributie Energie Electrica Romania S.A., as a borrower, concluded with Banca Transilvania an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the investment plan. Main provisions are: Maximum loan amount: RON 125,000 thousand; Interest rate: fixed, 4.59% per annum; Reimbursements: quarterly instalments until 30.06.2027; Grace period: 12 months. As at 31 December 2023, the outstanding balance is of RON 62,508 thousand, of which RON 62,500 thousand principal and RON 8 thousand accrued interest. (Outstanding balance as at 31 December 2022: RON 80,367 thousand). b) Investment loan granted by Unicredit Bank On 13 November 2019, Societatea de Distributie a Energiei Electrice Transilvania Nord S.A., currently Distributie Energie Electrica Romania S.A., as borrower, concluded with Unicredit Bank an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the investment plan. Main provisions are: Maximum loan amount: RON 60,000 thousand; Interest rate: fixed, 3.85% per annum; Reimbursements: quarterly instalments until 13.11.2026; Grace period: 12 months. As at 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 600 601 December 2023, the outstanding balance is of RON financing investments in the electricity distribution The loan agreement is guaranteed by Electrica SA. On 31 December 2023, the outstanding balance is 29,103 thousand, of which RON 28,800 thousand network, according to the approved investment (Outstanding balance as at 31 December 2022: RON RON 167,825 thousand. The loan benefits from a principal and RON 303 thousand accrued interest. plan for 2020. Main provisions are: Maximum loan 202,983 thousand. (Outstanding balance as at 31 December 2022: RON amount: RON 80,000 thousand; Interest rate: fixed, 38,793 thousand). c) Investment loan granted by BRD – Groupe Societe Generale IOn 29 October 2019, Societatea de Distributie a Energiei Electrice Muntenia Nord S.A., currently Distributie Energie Electrica Romania S.A., as borrower, concluded with BRD – Groupe Societe Generale an investment credit agreement with the purpose of financing investments in the electricity 3.85% per annum; Reimbursements: quarterly instalments until 2028; Grace period: 12 months. As at 31 December 2023, the outstanding balance is RON 51,467 thousand, of which RON 51,429 thousand principal and RON 39 thousand accrued interest. (Outstanding balance as at 31 December 2022: RON 62,904 thousand). f) Investment loan granted by Banca Comerciala Romana (“BCR”) h) Investment loan granted by the European Investment Bank (“EIB”) On 14 July 2021, Societatea de Distributie Energie Electrica Romania SA, as a borrower, concluded with the European Investment Bank an investment credit contract, representing the first part of the Approved Credit in the amount of EUR 210,000 thousand for the guarantee in the name and account of the state and is guaranteed by Electrica SA. (Outstanding balance as at 31 December 2022: RON 4,110 thousand). The loan is guaranteed in the name and on behalf of the State and is guaranteed by Electrica SA. k) Line of Credit for working capital and for issuing Bank Guarantee Letters granted by Vista Bank purpose of financing investments in the electricity On 30 December 2022, Societatea Energetica distribution network according to the 2021-2023 Electrica S.A., as the borrower, concluded a contract investment plan. The main provisions are: Maximum for a line of credit for working capital and for the distribution network, according to the investment On 17 September 2020, Societatea de Distributie value of the loan: EUR 120,000 thousand; Interest issuance of Bank Guarantee Letters granted by Vista plan. Main provisions are: Maximum loan amount: a Energiei Electrica Muntenia Nord S.A., currently rate and Repayments will be agreed individually Bank for a period of 18 months. The main provisions RON 130,000 thousand; Interest rate: fixed, 3.99% Distributie Energie Electrica Romania S.A., as for each tranche drawn. On 31 December 2023, are: Maximum credit amount: 100,000 thousand RON; per annum; Reimbursements: quarterly instalments a borrower and Electrica SA as a guarantor, the outstanding balance is Nil as no withdraw Interest rate: ROBOR 3M +2.95 % p.a.; full refund at until 28.10.2026; Grace period: 12 months. As at 31 concluded with Banca Comerciala Romana S.A. an was made from the loan. The loan agreement is maturity. On 31 December 2023, the balance of the December 2023, the outstanding balance is of RON investment credit agreement with the purpose of guaranteed by Electrica SA. 62,400 thousand. (Outstanding balance as at 31 financing investments in the electricity distribution December 2022: RON 83,200 thousand. network, according to the approved investment d) Investment loan granted by BRD – Groupe Societe Generale On 25 June 2020, Societatea de Distributie a Energiei Electrice Transilvania Nord S.A., currently Distributie Energie Electrica Romania S.A., as a borrower, concluded with BRD – Groupe Societe Generale an investment credit agreement with the purpose of financing investments in the electricity distribution network, according to the approved investment plan for 2020. Main provisions are: Maximum loan amount: RON 100,000 thousand; Interest rate: fixed, plan for 2020. Main provisions are: Maximum loan amount: Ron 155,000 thousand; Interest rate: ROBOR 3M+1% per annum; Reimbursements: quarterly instalments until 2028; Grace period: 12 months. As at 31 December 2023, the outstanding balance is RON 90,542 thousand, of which RON 90,011 thousand principal and RON 531 thousand accrued interest. (Outstanding balance as at 31 December 2022: RON 109,785 thousand). g) Investment loan granted by the European Bank for Reconstruction and Development (“EBRD”) loan is 125,000 thousand RON. (Outstanding balance as at 31 December 2022: RON 100,000 thousand). i) Investment loan granted by the European Investment Bank (“EIB”) l) Investment loan granted by the European Bank for Reconstruction and Development (“EBRD”) On 7 December 2021, Societatea de Distributie Energie Electrica Romania SA, as a borrower, On 17 March 2023, Societatea de Distributie Energie concluded with the European Investment Bank an Electrica Romania SA, as a borrower, concluded investment credit contract, representing the second with the European Bank for Reconstruction and part of the Approved Credit in the amount of EUR Development a credit agreement for working 210,000 thousand for the purpose of financing capital. The main provisions are: The maximum investments in the electricity distribution network value of the loan RON 180,000 thousand; Interest according to the 2021-2023 investment plan. The rate: agreed individually for each tranche drawn; main provisions are: Maximum value of the loan: EUR Repayments: 14 quarterly instalments until 90,000 thousand; Interest rate and Repayments will 31.01.2028; Grace period: 18 months. Maximum credit be agreed individually for each tranche drawn. On amount: 180,000 thousand RON; Interest rate: ROBOR 3.85% per annum; Reimbursements: quarterly On 2 July 2021, Societatea de Distributie Energie 31 December 2023, the outstanding balance is Nil 3M + 2.10%. As at 19 December 2023, the value of instalments until 2028; Grace period: 12 months. As Electrica Romania SA, as a borrower, concluded as no withdraw was made from the loan. The loan the loan increased to 240,000 thousand RON. As at at 31 December 2023, the outstanding balance is of with the European Bank for Reconstruction and agreement is guaranteed by Electrica SA. 31 December 2023, the outstanding balance is RON RON 64,286 thousand. (Outstanding balance as at 31 Development a credit agreement for investments December 2022: RON 78,571 thousand). in order to finance investments in the electricity e) Investment loan granted by BRD – Groupe Societe Generale On 25 June 2020, Societatea de Distributie a Energiei Electrice Transilvania Sud S.A., currently Distributie Energie Electrica Romania S.A. as a borrower, concluded with BRD – Groupe Societe Generale an investment credit agreement with the purpose of distribution network according to the 2021-2023 investment plan. The main provisions are: The maximum value of the loan RON 195,136 thousand; Interest rate: agreed individually for each tranche drawn; Repayments: 17 half-yearly instalments until 31.07.2031; Grace period: 24 months. As at 31 December 2023, the outstanding balance is RON 189,970 thousand, of which RON 183,657 thousand principal and RON 6,313 thousand accrued interest. j) Loan for financing current activity granted by Eximbank Romania On 22 December 2022, Distributie Energie Electrica Romania S.A., as a borrower, concluded with Eximbank Romania a credit agreement for a period of 24 months. The main provisions are: Maximum loan amount: 250,000 thousand RON; Interest rate: ROBOR 3M +1.65 % p.a.; Repayments: 6 equal quarterly instalments; Grace period: 6 months. 182,775 thousand, of which RON 180,000 thousand principal and RON 2,775 thousand accrued interest. The loan agreement is guaranteed by Electrica SA. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A602 603 m) Multicredit facility for multiple financing by accessing cash and non-cash products granted by CEC Financial Covenants BANK SA (“CEC”) On 4 August 2023, Electrica Furnizare S.A., as the borrower, concluded a Facility Agreement Multicredit. The Banca Comerciala Romana, European Bank for Reconstruction and Development and European Investment The financial covenants specified in the agreements with BRD – Groupe Societe Generale, Unicredit Bank, main provisions are: The maximum value of the loan RON 150,000 thousand; Interest rate: ROBOR 3M+2.85%; Bank have been fulfilled as at 31 December 2023. full repayment at maturity; Maturity date: 03 August 2026. As at 31 December 2023, the outstanding balance is RON 200,000 thousand. The loan agreement is guaranteed by Electrica SA. Pledged Assets n) Syndicated credit facility granted by Erste Group Bank AG and Raiffeisen Bank SA On 31 December 2023, for several overdrafts the Group has pledges (guarantees) for trade receivables On 2 November 2021, Electrica S.A., as borrower, entered into a syndicated credit facility with Erste Group Bank AG and Raiffeisen Bank SA. The main provisions are: Maximum loan amount RON 750,000 thousand; Interest rate: ROBOR 3M+1.16%. On 3 November 2023 the loan was extended for a period of one year and the maximum loan amount was reduced to RON 450,000,000. As at 31 December 2023 the balance of the loan is RON 91,768 thousand, of which principal RON 91,768 thousand and accrued interest RON 619 thousand (31 December 2022: RON 0.0 thousand). Overdrafts amounts, as specified on contracts. Bank Guarantees The maximum limit of the facility for issuing bank guarantees (credit facility for issuing guarantee instruments and multi-product lines) RON 3,110,456 thousand, of which non-cash uses RON 1,104,986 thousand. 32 Financial instruments - fair values and risk management Until the authorization for issue of these Consolidated Financial Statements by the Board of Directors, (a) Accounting classifications and fair values the Group has overdrafts from various banks (ING Bank N.V., Raiffeisen Bank, Banca Comerciala Romana, Banca Transilvania, BNP Paribas, Intesa Sanpaolo Bank, BRD – Groupe Societe Generale S.A., Alpha Bank and UniCredit) with a total overdraft limit of up to RON 2,963,947 thousand (Total overdraft limit as at 31 December 2022: RON 2,743,542 thousand). The overdraft facilities are used for financing activities. The outstanding balance of the overdraft facilities as at 31 December 2023 is of RON 2,851,221 thousand (31 December 2022: RON 2,571,037 thousand). Lender (overdrafts) Borrower Balance at Balance at 31 December 2023 31 December 2022 ING Bank N.V Societatea Energetica Electrica S.A. Alpha Bank Electrica Furnizare S.A. BCR BRD Electrica Furnizare S.A. Electrica Furnizare S.A. Banca Transilvania Electrica Furnizare S.A. ING Bank N.V Electrica Furnizare S.A. Raiffeisen Bank Electrica Furnizare S.A. UniCredit Bank Electrica Furnizare S.A. BNP Paribas Electrica Furnizare S.A. BCR Distributie Energie Electrica Romania S.A Banca Transilvania Distributie Energie Electrica Romania S.A ING Bank N.V Distributie Energie Electrica Romania S.A Intesa San Paolo Distributie Energie Electrica Romania S.A Raiffeisen Bank Distributie Energie Electrica Romania S.A 206,986 213,702 378,887 218,817 187,194 170,602 369,274 302,399 28,830 210,593 159,544 49,682 135,815 218,895 209,138 147,497 227,311 216,570 185,528 169,600 343,001 300,294 - 208,412 158,965 49,855 135,096 219,770 According to IFRS 9, financial assets are measured at amortised cost as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. The Group assessed that the carrying amount is a reasonable approximation of the fair value for the financial assets and financial liabilities. (b) Financial risk management The Group has exposure to the following risks arising from financial instruments: • credit risk; • liquidity risk; • market risk. These risks are further explained and detailed. (i) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, cash and cash equivalents, restricted cash and bank deposits. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In the past, the Group had a high credit risk mainly from State-owned companies. Total overdrafts 2,851,221 2,571,037 Cash and bank deposits 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. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A604 605 Trade receivables (ii) Liquidity risk The Group’s credit risk in respect of receivables was concentrated in the past around state-controlled Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its companies and in the recent years refers to clients that are facing financial difficulties in their industries financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to due to specific changes in circumstances in their industry sector. The Group has implemented a policy managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities on credit risk management and is also considering securing trade receivables. Also, the electricity supply when they are due, under both normal and stressed conditions, without incurring unacceptable losses. contracts include termination clauses in certain circumstances. The Group establishes an allowance for impairment that represents the amount of expected credit losses, cash outflows on financial liabilities. The Group also monitors the level of expected cash inflows on trade calculated based on the expected loss rates. receivables together with expected cash outflows on trade and other payables. In addition, the Group The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected Impairment maintains overdrafts (refer to Note 32). Exposure to liquidity risk The following table provides information about the exposure to credit risk and expected credit losses for trade receivables for customers as at 31 December 2023: The following are the remaining contractual maturities of financial liabilities at the reporting date. The 31 December 2023 amounts are gross and undiscounted. Gross value Lifetime ECL Net trade Credit receivables impaired Financial liabilities Carrying amount Contractual cash flows Total less than 1 year 1-2 years 2-5 years more than 5 years Expected credit loss rates (“ECL”) 2% 7% 14% 37% 92% Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total 2,229,339 (35,330) 2,194,009 255,100 (16,875) 238,225 47,635 25,927 (6,670) 40,965 (9,640) 16,287 622,659 (571,703) 50,956 3,180,660 (640,218) 2,540,442 No No No No Yes The Group performed a sensitivity analysis and a 5% increase in the expected credit loss rates would not lead a material impact on the results of the Group. trade receivables for customers as at 31 December 2022: 31 December 2022 Expected credit loss rates (“ECL”) Gross value Lifetime ECL Net trade Credit receivables impaired 3% 4% 16% 35% 95% 1,951,656 (60,310) 1,891,346 490,985 (19,342) 471,643 66,365 27,259 (10,488) (9,671) 55,877 17,588 No No No No 582,426 (552,878) 29,548 Yes 3,118,691 (652,689) 2,466,002 Neither past due nor impaired Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due more than 90 days Total Details of the main movements in the allowances for doubtful debts are disclosed in Note 20. 31 December 2023 Bank overdrafts Lease liability 2,851,221 2,851,221 2,851,221 - - 43,195 43,195 14,052 9,920 3,980 Long term bank borrowings 1,317,642 1,317,642 523,294 258,923 475,905 1,671,478 1,671,478 1,671,478 - - 5,883,536 5,883,536 5,060,045 268,843 479,885 74,763 2,571,037 2,571,037 2,571,037 - - 53,673 53,673 19,211 10,795 10,645 1,407,097 1,407,097 1,407,097 - - 4,792,520 4,792,520 4,110,865 365,266 211,150 105,239 - 15,243 59,520 - - 13,022 92,217 - Trade payables Total 31 December 2022 Bank overdrafts Lease liability Trade payables Total (iii) Market risk Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect the Group’s income or the value of its financial instruments held. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Group. The functional currency of all entities belonging to the Group is the Romanian Leu (RON). The currency in which these transactions are primarily denominated is RON. Certain liabilities are denominated in foreign currency (EUR). The Group also has deposits and bank accounts denominated in The following table provides information about the exposure to credit risk and expected credit losses for Long-term bank borrowings 760,713 760,713 113,520 354,471 200,505 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A606 607 foreign currency (EUR). The Group’s policy is to use the local currency in its transactions as far as practically Exposure to interest rate risk possible. The Group does not use derivative or hedging instruments. Exposure to currency risk The summary of quantitative data about the Group’s exposure to currency risk is as follows: in thousands of RON Cash and cash equivalents Lease liability Net statement of financial position exposure 31 December 2023 31 December 2022 denominated in EUR denominated in EUR 347 (42,231) (41,844) 277 (21,004) (20,727) The following significant exchange rates have been applied during the year: RON EUR 1 Sensitivity analysis Average rate Year-end spot rate 2023 4.9465 2022 4.9315 2023 4.9746 2022 4.9474 A reasonably possible strengthening (weakening) of the EUR against RON at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and profit before tax by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. The interest rate profile of the Group’s interest-bearing financial instruments is as follows: 31 December 2023 31 December 2022 (restated*) Fixed-rate instruments Financial assets Call deposits Financial liabilities Long-term bank borrowings Lease liability Variable-rate instruments Financial liabilities Lease liability Long-term bank borrowings Bank overdrafts Total 153,997 193,219 (1,068,912) (32,312) (947,227) (10,883) (248,730) (651,752) (37,378) (495,911) (16,295) (108,961) (2,851,221) (2,571,037) (3,110,834) (2,696,293) 31 December 2023 EUR (5% movement) 31 December 2022 EUR (5% movement) Interest rate risk Profit before tax Fair value sensitivity analysis for fixed-rate instruments Effect Strengthening Weakening 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. (2,092) (1,036) 2,092 1,036 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. For financing purposes, the Group uses both medium and long-term bank loans and short-term loans in the form of overdraft facilities (please see Note 31). The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and 31 December 2023 floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed Variable-rate instruments and floating rate borrowings (please see Note 31), as the long-term borrowings are contracted mainly at fixed rates, while the overdraft facilities bear variable rates. The Group does not have in place hedging contracts for interest rate. 31 December 2022 Variable-rate instruments The Groups exposures to interest rates on financial assets and financial liabilities are detailed below. The Group is exposed to the interest rate benchmark ROBOR, which is the interest rate on the Romanian interbank market. Profit before tax 50 bp increase 50 bp decrease (15,554) 15,554 (13,481) 13,481 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A 608 609 33 Related parties (a) Main shareholders Supplier As at 31 December 2023 and 31 December 2022, the major shareholder of Societatea Energetica Electrica S.A. Electrocentrale Bucuresti is the Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital. (b) Management and administrators’ compensation ANRE Transgaz Others Total Purchases (without VAT) Balance (including VAT) 2023 - 16,763 7,638 5,945 2022 191,862 10,458 8,029 7,768 31 December 31 December 2023 - 12 1,850 1,513 2022 - 14 986 1,168 5,585,186 6,299,475 635,845 426,562 Executive Management compensation 2023 36,623 2022 34,726 The Group also makes sales to companies in which the State has control or significant influence representing supply of electricity, of which the most important transactions are the following: Executive management compensation refers to both the managers with mandate contract and those with labour contract, from both the subsidiaries and Electrica SA. This also includes the benefits in the event of the termination of mandate contracts for executive directors. Compensations granted to the members of the Board of Directors were as follows: Members of Board of Directors 2023 4,151 2022 3,063 Electrica SA’s Board of Directors comprises 7 members. According to the remuneration policy approved by the General Meeting of Shareholders that took place on 20 April 2022, the annual number of paid sessions is limited to twelve for Board of Directors meetings and to six for each of the committees. Additional committee meetings can be organized only in exceptional situations, upon the Chairs’ committee decision, who are responsible to efficiently organize the agenda and activity. However, only one such additional meeting shall be remunerated, for each committee. No loans were granted to directors or administrators in 2023 and 2022. (c) Transactions with companies in which the state has control or significant influence The Group has transactions with companies in which the State has control or significant influence in the ordinary course of business, related mainly to the acquisition of electricity, transport and system services and sale of electricity. Significant purchases and balances are mainly with energy producers/suppliers, as follows: Supplier OPCOM Transelectrica Nuclearelectrica Hidroelectrica Complexul Energetic Oltenia OMV Petrom SA SNGN Romgaz SA Purchases (without VAT) Balance (including VAT) 2023 2022 2,879,757 2,727,101 671,172 799,117 44,631 1,107,474 - 52,689 968,470 866,763 581,598 478,813 261,123 197,490 31 December 31 December 2023 212,746 170,242 107,671 37 132,693 - 9,081 2022 23,981 185,856 93,013 42,493 45,257 26,349 7,445 Client OPCOM Transelectrica C.N.C.F CFR S.A. SNGN Romgaz SA Hidroelectrica CN Romarm CFR Electrificare Transgaz CN Remin SA C.N.C.A.F MINVEST SA Oltchim CET Braila Termoelectrica Sales Balance, gross Allowance (without VAT) (including VAT) (including VAT) Balance, net 2023 37,429 157,861 114,009 32,762 288,923 25,158 19,043 1,684 923 - - 14 - 2,174 44,220 33,841 - 32,882 4,279 2,347 544 71,347 26,802 115,426 3,378 1,206 31 December 2023 - - 5 - - - - - 71,216 26,802 115,426 3,361 1,206 - - 2,174 44,220 33,836 - 32,882 4,279 2,347 544 131 - - 17 - 18,981 2,605,684 County Agency for Payments and Social Inspection Ministry of Energy/ National Agency for Payments and Social Inspection 18,981 18,981 3,287,858 2,605,684 Others Total 211,691 9,173 364 8,809 4,196,336 3,008,780 218,380 2,790,400 (*) In the 12-month period ended 31 December 2023, Electrica Furnizare S.A. recognised subsidies amounting to RON 3,306,839 thousand, to be received from the Ministry of Energy/National Agency for Payments and Social Inspection, as a result of the application of the price cap mechanism for electricity and natural gas according to the legislation in force. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.AClient OPCOM Transelectrica SNGN Romgaz SA Hidroelectrica CN Romarm CFR Electrificare Transgaz CN Remin SA C.N.C.A.F MINVEST SA Oltchim CET Braila Termoelectrica Ministry of Energy/ National Agency for Payments and Social Inspection Others Total 34 Contingencies Contingent liabilities Fiscal environment 610 611 Sales Balance, gross Allowance (without VAT) (including VAT) (including VAT) Balance, net 2022 326,640 314,253 86,353 68,716 17,386 10,332 11,580 704 - - 5 - 22,630 112,754 2,253 16,429 648 2,089 764 71,279 26,802 115,943 3,365 1,206 31 December 2022 - - 9 - - - - 71,148 26,802 115,943 3,361 1,206 22,630 112,754 2,245 16,429 648 2,089 764 132 - - 3 - subsidiary representing building tax for the period 01.01.2012-31.12.2015 in the total amount of RON 24,831 thousand, of which principal in amount of RON 12,051 thousand and related late penalties computed as of October 2019, in amount of RON 12,780 thousand. The amount of late charges was recalculated to RON 13,021 thousand between the tax inspection report date and principal debt payment date. Litigious actions were started in order to challenge the tax inspection report. The Group recognised an expense in amount of RON 12,051 thousand during the year ended 31 December 2019 in accordance with IFRIC 23 „Uncertainty over Income Tax Treatments”. At the same time, for the late penalties in the amount of RON 13,021 thousand, a letter of bank guarantee was established in the amount of RON 13,021 thousand valid until 14 August 2024, in order to mitigate the associated risks. Other litigations and claims The Group is involved in a series of litigations and claims (ie, with ANRE, NAFA, Court of Accounts, claims for damages, claims over land titles, labour related litigations etc.). As summarised in Note 30, the Group set-up provisions for the litigations or claims for which the management assessed as probable the outflow of resources embodying economic benefits due to low chances of favourable outcomes of those litigations or disputes. The Group does not present information in the financial statements and did not set-up provisions for items for which the management assessed as 2,687,131 1,322,311 - 1,322,311 remote the possibility of outflow of economic benefits. 127,686 11,277 522 10,754 3,650,786 1,709,750 218,991 1,490,759 The Group discloses if the case information on the most significant items of litigations or claims for which the Group did not set-up provisions as they relate to possible obligations that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group (ie, litigations for which different inconsistent sentences were issued by the Courts, or litigations which are in early stages and no preliminary ruling was issued so far). 35 Commitments (a) Contractual commitments Contractual commitments as at 31 December 2023 and 31 December 2022 are as follows: Purchase of electricity Purchase of green certificates Purchase of property, plant and equipment and intangible assets 31 December 2023 31 December 2022 707,797 172,979 626,617 45,122 802,252 129,246 446,937 289,636 1,552,515 1,668,071 Tax audits are frequent in Romania, consisting of detailed verifications of the accounting records of taxpayers. Such audits sometimes take place after months, even years, from the date liabilities are established. Consequently, companies may be found liable for significant taxes and fines. Moreover, tax legislation is subject to frequent changes and the authorities demonstrate inconsistency in interpretation of the law. Income tax returns may be subject to revision and corrections by tax authorities, generally for a five-year period after they are completed. The Group may incur expenses related to previous years’ tax adjustments as a result of controls and litigations with tax authorities, The management of the Group believes that adequate provisions were recorded in the consolidated financial statements for all significant tax obligations; however a risk persists Purchase of investments Total that the tax authorities might have different positions. Tax inspection report for SDEE Muntenia Nord S.A. (currently Distributie Energie Electrica Romania S.A.) The subsidiary SDEE Muntenia Nord S.A. (currently Distributie Energie Electrica Romania S.A.) was subject to a tax audit performed by the Local Taxes Department of Galati City Hall that referred to the building taxes paid for the period 2012-2016. The tax audit was finalized in December 2019, when the fiscal inspection report was communicated to the subsidiary. The fiscal report established additional payment obligations for the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A612 613 (b) Investment program The investment program at Group level estimated to be approved for the year 2024 is as follows: Distribution activity Supply activity Maintenance activity Production activity Other Total 2024 865,480 53,290 10,300 588,130 16,600 1,533,790 The capital expenditures actually incurred may differ from the ones planned. (c) Guarantees and pledges At 31 December 2023 and 31 December 2022, the Group has guarantees on its bank accounts opened at ING Bank N.V., Raiffeisen Bank, Banca Comerciala Romana, Banca Transilvania, Intesa Sanpaolo Bank and Alpha Bank for the overdrafts contracted (please see Note 31), and also on its bank accounts opened at BRD – Group Societe Generale, Unicredit Bank, Banca Transilvania, Banca Comerciala Romana, Vista Bank and CEC Bank for the long-term borrowings contracted (please see Note 31). At 31 December 2023, the Group has outstanding bank letters of guarantee of RON 1,193,823 thousand (31 December 2022: RON 952,008 thousand) issued in favour of its suppliers. (d) Audit fees The audit fees for the consolidated financial statements were in amount of 1,075 thousand RON, and during the year 2023, non-audit services fees were in amount of 174 thousand RON (limited review of the interim consolidated financial statements). The audit fees for the individual financial statements are mentioned in the annual individual financial statements of Electrica S.A.. 36 Subsequent events On 15 February 2024, the subsidiary Distributie Energie Electrica Romania (DEER) has obtained approval for EUR 171 million in non-reimbursable European funding through the Modernisation Fund (FM), representing 80% of the eligible expenditure for seven new investment projects in the electricity distribution network, projects with an estimated value of approximately EUR 266 million (with VAT). Chief Executive Officer Alexandru-Aurelian Chirita Chief Financial Officer Stefan Alexandru Frangulea 25 March 2024 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)FOR THE YEAR ENDED 31 DECEMBER 20232023 ANNUAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTELECTRICA S.AFOR THE YEAR ENDED 31 DECEMBER 2023ELECTRICA S.A614 615 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU) 616 617 Deloitte Audit S.R.L. The Mark Tower, 82-98 Calea Griviței, Sector 1, 010735 Bucharest, Romania T: +40 21 222 16 61 F: +40 21 222 16 60 www.deloitte.ro INDEPENDENT AUDITOR’S REPORT To the Shareholders, SOCIETATEA ENERGETICA ELECTRICA S.A. Report on the Audit of the Consolidated Financial Statements Opinion 1. We have audited the consolidated financial statements of Societatea Energetica Electrica S.A.and its subsidiaries (“the Group”), with registered office in Bucharest, District 1, Street Grigore Alexandrescu, No. 9 , identified by unique tax registration code 13267221, which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information. 2. The financial statements as at December 31, 2023 are identified as follows: • • Net assets / Equity RON 5,360,415 thousand RON 772,103 thousand Net profit for the financial year 3. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU. Basis for Opinion 4. We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation (EU) No. 537/2014 of the European Parliament and the Council (herein after referred to as “the Regulation”) and Law 162/2017 on the statutory audit of annual financial statements and annual consolidated financial statements and on amending other pronouncements (herein after referred to as “the Law 162/2017”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), in accordance with ethical requirements relevant for the audit of the financial statements in Romania including the Regulation and the Law 162/2017 and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter 5. We draw attention to Note 2 of the consolidated financial statements, which describes that the Group prepares two sets of consolidated financial statements, one under statutory regulations, namely Ministry of Finance Order 2844/2016 with subsequent amendments and one under International Financial Reporting Standards as adopted by the European Union (“IFRS”). These consolidated financial statements are prepared under International Financial Reporting Standards as adopted by the European Union (“IFRS”), which differs from OMF 2844/2016 with subsequent amendments, as summarized in Note 2. Consequently these consolidated financial statements do not comply with OMF 2844/2016 with subsequent amendments. Our audit report is not modified in respect of this matter. Key Audit Matters 6. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters Going Concern How our audit addressed the key audit matter As presented in Note 8 the consolidated financial statements have been prepared on the going concern basis. The key judgement leading to this conclusion are set out in that note. We have assessed managements valuation of the going concern assumption by performing the following procedures: • We have obtained the cash flow forecasts and critically challenged the management and the Board of Directors and Audit Committee on the assumptions used; • We considered whether at the date of this report additional information exist from the Romanian authorities with respect to the capping mechanism; • We have assessed the Group’s position on the existing debt facilities, covenant compliance and newly negotiated debt facilities, during 2024 until the date of this report; • We assessed the adequacy of the disclosure of the basis of going concern assumption, including the key judgements adopted; In particular the Group operates in the electricity distribution and supply industry which is currently affected by the capping laws on sales to end customers. The Romanian authorities regulatory position is under review and there may be further laws enacted which could adversely impact the Group’s operating cash flows. In the forthcoming twelve months the Group will need to obtain additional financing and given the position of the Group and its significance to the Romanian economy management expects that all necessary financing will be made available. The ability of the Group to continue as a going concern is dependent on the successful extension of the existing debt facilities, drawdown of new financing and on stabilizing of the regulatory regime on energy prices as described in note 8 which provides an appropriate margin to support servicing of the Group’s short and long term financings. In view of the significant judgements, the application and disclosures of the basis of the going concern assumption are considered a Key Audit Matter. Valuation of Retail accrued revenue, related to electricity supplied to households The Group recognizes at the end of each reporting period accrued revenue from the energy supply activity, related to the household population. If the actual meter readings are not available at the end of the reporting period, energy supplied to households is estimated based on internal information related to historical patterns of consumption. The degree of estimation uncertainty reduces from one period to another, however judgement is inherent in the valuation of the accrued revenue related to the household population. The group has a number of IT systems across the businesses and we were not able to rely on the effectiveness of IT controls within the revenue cycle. The audit procedures adopted were substantive in nature and included the following: • Obtaining an understanding of the accounting policies used in the preparation of the consolidated financial statements, with respect to revenue recognition; Because of the significance of the estimations around the accrued revenue related to the households and the inability of relying on the effectiveness of the controls, we consider the valuation of retail accrued revenue, related to households a key audit matter. • Testing the reconciliation made by the Group between the quantity of electricity purchased for supply purposes and the quantity of electricity delivered from the supply activity; Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms, and their related entities (collectively, the "Deloitte organization"). DTTL (also referred to as "Deloitte Global") and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. 1 2 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORT 618 619 Key audit matters How our audit addressed the key audit matter Other information • • • Testing the acquired electricity for supply purposes through a combination of direct confirmations received from the electricity producers and other supporting documents; Testing the revenues related to electricity supplied to final customers through a combination of direct confirmations and other supporting documents; Performing analytical procedures on all electricity sales. We have assessed the Group’s position with respect to the recognition of the financial asset related to additional costs of purchasing electricity for covering own technological consumption of the distribution operators and restatement of the consolidated financial statements by performing the following procedures: • We have obtained the position paper prepared by the management and position paper prepared by an external consultant with respect to this matter; • We have read and assessed the memos in view of the application of the relevant IFRS standards and we have performed internal consultations with our IFRS specialists; We have assessed the adequacy of the restatement of the comparative financial information including related disclosure in the financial statements; Restatement of financial statements as at December 31, 2022 In our auditor’s report on the consolidated financial statements for the prior period (i.e. as of 31 December 2022 and for the year then ended), we have expressed a qualified opinion due to the fact that the Group has recorded a financial asset related to the concession agreement of RON 951,557 thousand related to the additional cost of purchasing electricity for covering the own technological consumption of the distribution operators. We were unable to obtain sufficient evidence to support the recognition of the amounts recorded as financial assets related to the concession agreement in the consolidated statement of financial position as of December 31, 2022 and the elements making up the statement of profit and loss and other comprehensive income, statement of changes in equity and statement of cash flows. As presented in Note 5 to the consolidated financial statements, during 2023, the Group reassessed its previous position within the consolidated financial statements related to the recognition of financial asset from the amendment of the concession agreements, for which a financial asset in the amount of RON 951,557 thousand was recognised, representing the difference between the net cost with the purchase of the energy for network losses and the network losses cost included in the regulatory tariff by ANRE, for the period 1 January – 31 December 2022, and restated the comparatives in the current year financial statements. In view of the significant judgements, the application of the IFRS as adopted by EU ("IFRS") measurement and recognition criteria and also restatement including related disclosures, this matter was considered a significant risk and a Key Audit Matter. 7. The administrators are responsible for the preparation and presentation of the other information. The other information comprises the Administrators’ Consolidated report and the Remuneration report, but does not include the consolidated financial statements and our auditor’s report thereon, or the non-financial information declaration, which is being presented in a separate report. Our opinion on the financial statements does not cover the other information and, unless otherwise explicitly mentioned in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements for the year ended December 31, 2023, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Other reporting responsibilities with respect to other information – Administrators’ consolidated report With respect to the Administrators’ consolidated report, we read it and report if this has been prepared, in all material respects, in accordance with International Financial Reporting Standards as adopted by the European Union. On the sole basis of the procedures performed within the audit of the consolidated financial statements, in our opinion: a) the information included in the Administrators’ consolidated report and the Remuneration report for the financial year for which the consolidated financial statements have been prepared, is consistent, in all material respects, with the consolidated financial statements; b) the Administrators’ consolidated report has been prepared, in all material respects, in accordance with International Financial Reporting Standards. Moreover, based on our knowledge and understanding concerning the Group and its environment gained during the audit on the financial statements prepared at December 31, 2023, we are required to report if we have identified a material misstatement of this Administrators’ consolidated report and the Remuneration report. We have nothing to report in this regard. Other reporting responsibilities with respect to other information – Remuneration report With respect to the Remuneration report, we read it to determine if it presents, in all material respects, the information required by article 107, paragraphs (1) and (2) of Law 24/2017 regarding the issuers of financial instruments and market operations, republished. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements 8. Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards as adopted by the EUand for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 9. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 10. Those charged with governance are responsible for overseeing the Group’s financial reporting process. 3 4 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORT 620 621 Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Report on Other Legal and Regulatory Requirements 11. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 12. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • • • • • • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 13. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 14. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 15. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 16. We were appointed by the General Meeting of Shareholders on April 27, 2023 to audit the consolidated financial statements of Societatea Energetica Electrica S.A. for the financial year ended December 31, 2023. The uninterrupted total duration of our commitment is 6 of years, covering the financial years ended December 31, 2018 to December 31, 2023. We confirm that: • Our audit opinion is consistent with the additional report submitted to the Audit Committee of the Company that we issued the same date we issued this report. Also, in conducting our audit, we have retained our independence from the audited entity. • No non-audit services referred to in Article 5 (1) of EU Regulation no. 537/2014 were provided. The engagement partner on the audit resulting in this independent auditor’s report is Răzvan Ungureanu. Report on compliance with the Law 162/2017 on the statutory audit of annual financial statements and annual consolidated financial statements and on amending other pronouncements (“Law 162/2017”), and Commission Delegated Regulation (EU) 2018/815 on the European Single Electronic Format Regulatory Technical Standard (“ESEF”) We have undertaken a reasonable assurance engagement on the compliance with Law 162/2017, and Commission Delegated Regulation (EU) 2018/815 applicable to the consolidated financial statements included in the annual financial report of Societatea Energetica Electrica S.A. and its subsidiaries (“the Group”) as presented in the digital files which contain this audit report (“Digital Files”). (I) Responsibilities of management and those charged with governance for the Digital Files prepared in compliance with the ESEF Management is responsible for preparing Digital Files that comply with the ESEF. This responsibility includes:    the design, implementation and maintenance of internal control relevant to the application of the ESEF; the selection and application of appropriate iXBRL mark-ups; ensuring consistency between the Digital Files and the consolidated financial statements to be submitted in accordance with IFRS Accounting Standards as adopted by the EU. Those charged with governance are responsible for overseeing the preparation of the Digital Files that comply with ESEF. (II) Auditor’s Responsibilities for Audit of the Digital Files Our responsibility is to express a conclusion on whether the consolidated financial statements included in the annual financial report complies in all material respects with the requirements of ESEF based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing and Assurance Standards Board. Our firm applies International Standard on Quality Management 1 (“ISQM1”), and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. 5 6 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORT 622 623 A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about compliance with ESEF. The nature, timing and extend of procedures selected depend on the auditor’s judgment, including the assessment of the risks of material departures from the requirements set out in ESEF, whether due to fraud or error. A reasonable assurance engagement includes:     obtaining an understanding of the Company’s process for preparation of the digital files in accordance with ESEF, including relevant internal controls; reconciling the digital files including the marked-up data with the audited consolidated financial statements of the Company to be submitted in accordance with IFRS Accounting Standards as adopted by the EU; evaluating if all financial statements contained in the consolidated annual report have been prepared in a valid XHTML format; evaluating if the iXBRL mark-ups, including the voluntary mark-ups, comply with the requirements of ESEF. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. In our opinion, the consolidated financial statements for the year ended 31 December 2023 included in the annual financial report in the Digital Files comply in all materials respects with the requirements of ESEF. Răzvan Ungureanu, Audit Partner For signature, please refer to the original signed Romanian version. Registered in the Electronic Public Register of Financial Auditors and Audit Firms under AF 4866 On behalf of: DELOITTE AUDIT SRL Registered in the Electronic Public Register of Financial Auditors and Audit Firms under FA 25 The Mark Building, 84-98 and 100-102 Calea Griviței, 9th Floor, District 1 Bucharest, Romania March 25, 2024 7 INDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT ON 2023 CONSOLIDATED FINANCIAL STATEMENTS (IFRS-EU)2023 ANNUAL REPORT 624 625 STATEMENT OF THE MANAGEMENT 626 627 Statement of the Management Based on the best available information, we confirm that the consolidated financial statements reviewed and audited for the period ended 31 December 2023 prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS-EU”), provides an accurate and real image regarding the Electrica Group’s financial position, the financial performance and the cash flows, as required by the applicable accounting standards, and that this Report, prepared in accordance with art. 63 of the law no. 24/2017 on issuers of financial instruments and market operations and to annex no. 15 to ASF Regulation no. 5/2018 for the period ended 31 December 2023, comprises accurate and real information regarding the Group’s development and performance. Based on the best available information, we confirm that the consolidated financial statements reviewed and audited for the period ended 31 December 2023 prepared in accordance with OMFP 2844/2016 for the approval of the Accounting Regulations in accordance with the International Financial Reporting Standards adopted by the European Union with subsequent changes, provides an accurate and real image regarding the Electrica Group’s financial position, the financial performance and the cash flows, as required by the applicable accounting standards, and that this Report, prepared in accordance with art. 63 of the law no. 24/2017 on issuers of financial instruments and market operations and to annex no. 15 to ASF Regulation no. 5/2018 for the period ended 31 December 2023, comprises accurate and real information regarding the Group’s development and performance. Chair of the Board of Dir ector s , Dumitru CHIRITA Chief Executive Offi cer, Alexandru-Aurelian CHIRITA Chief Fin ancia l Offi ce r, Stefan Alexandru FRANGULEA STATEMENT OF THE MANAGEMENTSTATEMENT OF THE MANAGEMENT2023 ANNUAL REPORT2023 ANNUAL REPORT

Continue reading text version or see original annual report in PDF format above