SOCIETATEA ENERGETICA ELECTRICA S.A.
Separate Financial Statements
as at and for the year ended
31 December 2020
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
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SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF PUBLIC FINANCE NO. 2844/2016
i
Contents
Separate statement of financial position 1
Separate statement of profit or loss 3
Separate statement of comprehensive income 4
Separate statement of changes in equity 5
Separate statement of cash flows 7
Notes to the separate financial statements
Basis of preparation
1. Reporting entity and general information 9
2. Basis of accounting 12
3. Functional and presentation currency 12
4. Use of judgments and estimates 12
Accounting policies
5. Basis of measurement 13
6. Significant accounting policies 13
7. Adoption of new and revised standards 21
Performance for the year
8. Revenue 23
9. Other income and operating expenses 23
10. Net finance income 24
11. Earnings per share 24
Employee benefits
12. Short-term employee benefits 25
13. Post-employment and other long-term employee benefits 25
14. Employee benefit expenses 28
Income tax
15. Income tax 28
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF PUBLIC FINANCE NO. 2844/2016
ii
Assets
16. Trade receivables 30
17. Deposits with maturity date more than three months 31
18. Other receivables 31
19. Cash and cash equivalents 32
20. Property, plant and equipment 33
21. Intangible assets 37
22. Investments in subsidiaries 37
23. Loans granted to subsidiaries 41
Equity and liabilities
24. Capital and reserves 44
25. Trade payables 45
26. Other payables 45
27. Provisions 46
Financial instruments
28. Financial instruments - fair values and risk management 46
Other information
29. Related parties 50
30. Contingencies 54
31. Commitments 56
32. Subsequent events 56
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
1
Note
31 December
2020
31 December
2019
ASSETS
Non-current assets
Property, plant and equipment
20
96,943,295
161,619,617
Intangible assets
21
272,880
4,231,289
Investments in subsidiaries
22
2,284,881,698
2,217,229,628
Restricted cash
19
-
320,000,000
Loans granted to subsidiaries – long term
23
1,030,000,000
1,030,000,000
Right of use assets
1,433,070
1,739,658
Total non-current assets
3,413,530,943
3,734,820,192
Current assets
Cash and cash equivalents
19
193,484,820
180,279,381
Deposits with maturity date more than three months
17
-
66,471,188
Restricted cash
19
320,000,000
-
Trade receivables
16
411,954
5,051,841
Other receivables
18
180,761,447
15,120,713
Inventories
-
89,312
Prepayments
427,549
200,921
Loans granted to subsidiaries – short term
23
-
5,500,000
Total current assets
695,085,770
272,713,356
Total assets
4,108,616,713
4,007,533,548
EQUITY AND LIABILITIES
Equity
Share capital
24
3,464,435,970
3,464,435,970
Share premium
24
103,049,177
103,049,177
Treasury shares reserve
24
(75,372,435)
(75,372,435)
Pre-paid capital contributions in kind from shareholders
24
7,366
7,366
Revaluation reserves
24
12,605,266
5,851,829
Legal reserves
24
212,027,639
197,091,689
Other reserves
24
35,644,469
35,645,456
Retained earnings
296,938,104
256,204,946
Gains referring to share issue
24
-
2,185,519
Losses referring to share issue
24
-
(963,601)
Total equity
4,049,335,556
3,988,135,916
(Continued on page 2)
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
2
Note
31 December 2020
31 December 2019
Liabilities
Non-current liabilities
Lease liability – long term
485,741
1,012,867
Employee benefits
13
1,453,187
1,978,305
Total non-current liabilities
1,938,928
2,991,172
Current liabilities
Lease liability – short term
968,556
795,513
Trade payables
25
7,199,932
4,886,047
Other payables
26
36,034,414
1,613,208
Deferred revenue
152,559
554,548
Employee benefits
12,13
7,168,505
5,249,675
Provisions
27
5,818,263
3,307,469
Total current liabilities
57,342,229
16,406,460
Total liabilities
59,281,157
19,397,632
Total equity and liabilities
4,108,616,713
4,007,533,548
The accompanying notes are an integral part of these separate financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
3
Note
2020
2019
Revenues
8
3,250,787
19,040,578
Other income
9
14,516,325
2,329,343
Employee benefits
14
(31,818,555)
(29,501,304)
Depreciation and amortization
20,21
(13,050,255)
(22,132,605)
Reversal of impairment of trade and other receivables, net
16,18
98,583,335
1,641,814
Impairment of property, plant and equipment, net
20
(9,979,491)
(3,905,952)
Change in provisions for legal cases and non-compete clauses, net
27
(2,510,794)
409,308
Other operating expenses
9
(23,870,825)
(20,813,350)
Profit/(loss) before finance result
35,120,527
(52,932,168)
Finance income
10
260,305,358
310,927,134
Finance costs
10
(123,963)
(202,583)
Net finance income
260,181,395
310,724,551
Profit before tax
295,301,922
257,792,383
Income tax benefit/(expense)
15
3,076,614
(17,652)
Profit for the year
298,378,536
257,774,731
Earnings per share
Basic and diluted earnings per share (RON)
11
0.88
0.76
The accompanying notes are an integral part of these separate financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
4
Note
2020
2019
Profit for the year
298,378,536
257,774,731
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of property, plant and equipment
24
11,901,253
-
Tax related to revaluation of property, plant and equipment
15
(3,059,897)
-
Re-measurements of the defined benefit liability
13
104,482
(60,739)
Tax related to re-measurements of the defined benefit liability
15
(16,717)
17,652
Other comprehensive income, net of tax
8,929,121
(43,087)
Total comprehensive income
307,307,657
257,731,644
The accompanying notes are an integral part of these separate financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
5
Subscribed and paid in share capital
Share premium
Treasury shares reserve
Capital contributions in kind from shareholders
Revaluation reserves
Legal reserves
Other reserves
Retained earnings
Gains referring to share issue
Losses referring to share issue
Total equity
Balance at 1 January 2020
3,464,435,970
103,049,177
(75,372,435)
7,366
5,851,829
197,091,689
35,645,456
256,204,946
2,185,519
(963,601)
3,988,135,916
Comprehensive income
Profit for the year
-
-
-
-
-
-
-
298,378,536
-
-
298,378,536
Other comprehensive income
-
-
-
-
8,841,356
-
-
87,765
-
-
8,929,121
Total comprehensive income
-
-
-
-
8,841,356
-
298,466,301
-
-
307,307,657
Transactions with owners of the Company
Contributions and distributions
Covering losses referring to share issue with gains referring to share issue
-
-
-
-
-
-
-
-
(963,601)
963,601
-
Dividends to the owners of the Company
24
-
-
-
-
-
-
(987)
(244,885,112)
(1,221,918)
-
(246,108,017)
Total transactions with owners of the Company
-
-
-
-
-
-
(987)
(244,885,112)
(2,185,519)
963,601
(246,108,017)
Other changes in equity
Set up of legal reserves
24
-
-
-
-
-
14,935,950
-
(14,935,950)
-
-
-
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
-
-
-
-
(2,087,919)
-
-
2,087,919
-
-
-
Balance at 31 December 2020
3,464,435,970
103,049,177
(75,372,435)
7,366
12,605,266
212,027,639
35,644,469
296,938,104
-
-
4,049,335,556
(Continued on page 6)
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
6
Subscribed and paid in share capital
Share premium
Treasury shares reserve
Capital contributions in kind from shareholders
Revaluation reserves
Legal reserves
Other reserves
Retained earnings
Gains referring to share issue
Losses referring to share issue
Total equity
Balance at 1 January 2019
3,459,399,290
103,049,177
(75,372,435)
5,144,025
11,837,805
184,202,070
-
288,528,416
-
-
3,976,788,348
Comprehensive income
Profit for the year
-
-
-
-
-
-
-
257,774,731
-
-
257,774,731
Other comprehensive income
-
-
-
-
-
-
-
(43,087)
-
-
(43,087)
Total comprehensive income
-
-
-
-
-
-
-
257,731,644
-
-
257,731,644
Transactions with owners of the Company
Contributions and distributions
Issue of ordinary shares
24
5,036,680
-
-
(5,136,659)
-
-
-
-
2,185,519
(963,601)
1,121,939
Dividends to the owners of the Company
24
-
-
-
-
-
-
-
(247,506,015)
-
-
(247,506,015)
Total transactions with owners of the Company
5,036,680
-
-
(5,136,659)
-
-
-
(247,506,015)
2,185,519
(963,601)
(246,384,076)
Other changes in equity
Set up of legal reserves
24
-
-
-
-
-
12,889,619
-
(12,889,619)
-
-
-
Set up of other reserves
24
-
-
-
-
-
-
35,645,456
(35,645,456)
-
-
-
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
-
-
-
-
(5,985,976)
-
-
5,985,976
-
-
-
Balance at 31 December 2019
3,464,435,970
103,049,177
(75,372,435)
7,366
5,851,829
197,091,689
35,645,456
256,204,946
2,185,519
(963,601)
3,988,135,916
The accompanying notes are an integral part of these separate financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
7
Note
2020
2019
Cash flows from operating activities
Profit for the year
298,378,536
257,774,731
Adjustments for:
Depreciation
20
11,133,444
20,268,618
Amortisation
21
1,916,811
1,863,987
Impairment of property, plant and equipment, net
20
9,979,491
3,905,952
Loss/(Gain) from the disposal of tangible assets
9
629,452
(1,366,442)
Reversal of impairment of trade and other receivables, net
16,18
(98,583,335)
(1,641,814)
Net finance income
10
(260,181,395)
(310,724,551)
Changes in employee benefits obligations
13
(390,301)
-
Changes in provisions, net
27
2,510,794
(409,308)
Income tax (benefit)/ expense
15
(3,076,614)
17,652
(37,683,117)
(30,311,175)
Changes in:
Trade receivables
103,223,222
5,591,265
Other receivables
4,329,592
4,316,870
Trade payables
1,755,495
1,243,177
Other payables
(419,871)
(2,531,418)
Employee benefits
1,888,495
(1,278,415)
Cash generated/(used in) from operating activities
73,093,816
(22,969,696)
Interest paid
(1,983)
(68,675)
Net cash from/(used in) operating activities
73,091,833
(23,038,371)
(Continued on page 8)
SOCIETATEA ENERGETICA ELECTRICA S.A.
SEPARATE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
8
Note
2020
2019
Cash flows from investing activities
Payments for purchases of property, plant and equipment
(4,024,333)
(2,248,969)
Payments for purchase of intangible assets
(29,175)
(280,541)
Proceeds from the sale of property, plant and equipment
191,996
1,785,429
Payments for deposits with maturity of 3 months or longer
-
(368,000,000)
Proceeds from deposits with maturity of 3 months or longer
66,471,188
403,000,000
Loans granted to subsidiaries
23
-
(62,209,626)
Cash pooling net position
29
(132,171,404)
-
Interest received
41,385,917
43,746,912
Dividends received
10
214,969,717
264,434,825
Net cash from investing activities
186,793,906
280,228,030
Cash flows from financing activities
Proceeds from issue of share capital, net
24
-
1,121,939
Dividends paid
24
(245,779,724)
(247,197,612)
Payment of lease liabilities
(900,576)
(801,567)
Net cash used in financing activities
(246,680,300)
(246,877,240)
Net increase in cash and cash equivalents
13,205,439
10,312,419
Cash and cash equivalents at 1 January
19
180,279,381
169,966,962
Cash and cash equivalents at 31 December
19
193,484,820
180,279,381
The accompanying notes are an integral part of these separate financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
9
1 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 2020.
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 2020 and 31 December 2019, the major shareholder of Societatea Energetica Electrica S.A. is the Romanian State, represented by the Ministry of Energy (former Ministry of Economy, Energy and Business Environment) 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 2020, Electrica SA has the following investments in subsidiaries:
Subsidiary
Activity
Sole registration code
Head
Office
% shareholding as at 31 December 2020
Distributie Energie Electrica Romania S.A. („DEER”)
Electricity distribution in geographical areas Transilvania Nord, Transilvania Sud and Muntenia Nord
14476722
Cluj- Napoca
100%
Electrica Furnizare S.A.
Electricity and natural gas supply
28909028
Bucuresti
99.9998409513906%
Electrica Serv S.A.
Services in the energy sector (maintenance, repairs, construction)
17329505
Bucuresti
100%
Servicii Energetice Oltenia S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29389861
Craiova
100%
Servicii Energetice Moldova S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29386768
Bacau
100%
Servicii Energetice Banat S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29388211
Timisoara
100%
Servicii Energetice Dobrogea S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29388378
Constanta
100%
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
10
As at 31 December 2019, Electrica SA had the following investments in subsidiaries:
Subsidiary
Activity
Sole registration code
Head Office
%
shareholding as at 31 Dec 2019
Societatea de Distributie a Energiei Electrice Muntenia Nord S.A. (“SDEE Muntenia Nord S.A.”)
Electricity distribution in geographical area of Muntenia Nord
14506181
Ploiesti
99.9999719027621%
Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. (“SDEE Transilvania Nord S.A.”)
Electricity distribution in geographical area of Transilvania Nord
14476722
Cluj- Napoca
99.9999731116341%
Societatea de Distributie a Energiei Electrice Transilvania Sud S.A. (“SDEE Transilvania Sud S.A.”)
Electricity distribution in geographical area of Transilvania Sud
14493260
Brasov
99.999977637%
Electrica Furnizare S.A.
Electricity and natural gas supply
28909028
Bucuresti
99.9998390431663%
Electrica Serv S.A.
Services in the energy sector (maintenance, repairs, construction)
17329505
Bucuresti
100%
Servicii Energetice Muntenia S.A.
Services in the energy sector (maintenance, repairs, construction)
29384120
Bucuresti
100%
Servicii Energetice Oltenia S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29389861
Craiova
100%
Servicii Energetice Moldova S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29386768
Bacau
100%
Servicii Energetice Banat S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29388211
Timisoara
100%
Servicii Energetice Dobrogea S.A. (in bankruptcy)
Services in the energy sector (maintenance, repairs, construction)
29388378
Constanta
100%
The Company’s main activities
Currently, the core business of the Company, according to the Statute is "Activities of business and management consulting”, also performing corporate activities at parent company level for its subsidiaries.
Electrica SA is the parent company of one electricity distribution company (set up from merger of three electricity distribution companies), one electricity and natural gas supplier and five companies providing services in the energy sector (out of which four are currently in b ankruptcy ). As of 31 August 2020, Electrica SA has an indirect shareholding of 100% in one energy production company from renewable sources (photovoltaic panels), Electrica Energie Verde 1 SRL, which was acquired by the subsidiary Electrica Furnizare S.A..
During 2020, the three 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., merged through absorption, the absorbing entity being Societatea de Distributie a Energiei Electrice Transilvania Nord S.A..
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
11
On 14 October 2020, the Cluj Specialized Court admitted the request of SDEE Transilvania Nord S.A., as absorbing company, and the request of SDEE Transilvania Sud S.A. and SDEE Muntenia Nord S.A., as the absorbed companies, approved the merger according to the merger project no. 1404 dated 26 June 2020, registered with the Trade Register Office of Cluj Court, the Trade Register Office of Prahova Court and the Trade Register Office of Brasov Court and published in the Official Gazette of Romania Part IV no. 2351 from 10 July 2020 and
ordered the deregistration of the absorbed companies from the Trade Register.
Therefore, the merger produces its effects starting with the effective date, 31 December 2020, when SDEE Transilvania Sud S.A. and SDEE Muntenia Nord S.A. as the absorbed entities ceased to exist, being dissolved without going into liquidation. Consequently, all of their assets and liabilities were transferred through the effect of the merger by absorption to SDEE Transilvania Nord S.A., as the absorbing entity, in exchange of the issuance of new shares in the share capital of SDEE Transilvania Nord S.A. in favour of the shareholder of the absorbed entities, namely Electrica SA.
Thus, on 31 December 2020, Distributie Energie Electrica Romania S.A., formed by the merger of the three former electricity distribution companies was recorded on the National Trade Register Office.
During 2020, the two energy services subsidiaries, Electrica Serv S.A. and Servicii Energetice Muntenia S.A. merged through absorption, the absorbing entity being Electrica Serv S.A..
On 17 September 2020, the VI Civil Section of the Bucharest Court admitted the request of Electrica Serv S.A., as absorbing company, and the request of Servicii Energetice Muntenia S.A., as the absorbed company, approved the merger according to the merger project no. 934 dated 12 June 2020 registered with the Trade Register Office of Bucharest Court and published in the Official Gazette of Romania Part IV, no. 2303 from 8 July 2020 and ordered the deregistration of the absorbed company from the Trade Register.
Therefore, the merger produces its effects starting with the effective date, 30 November 2020, when Servicii Energetice Muntenia S.A., as the absorbed entity, ceased to exist, being dissolved without going into liquidation. Consequently, all of its assets and liabilities were transferred through the effect of the merger by absorption to Electrica Serv S.A., as the absorbing entity, in exchange of the issuance of new shares in the share capital of Electrica Serv S.A. in favour of the shareholder of the absorbed entity, namely Electrica SA.
Thus, starting with 1 December 2020, the merger between the aforementioned companies was finalized and the energy services will be carried out only under the umbrella of Electrica Serv. The registration on the National Trade Register Office took place on 2 December 2020, with effective date 30 November 2020.
COVID-19 impact
On 11 March 2020 the World Health Organization (hereinafter “WHO”) declared the COVID-19 outbreak a pandemic and on 16 March 2020 Romania entered into a state of emergency. Measures taken by the Romanian Government included restrictions on the cross-border movement of people, entry restrictions on foreign visitors and lock-down of certain industries. Furthermore, significant key players on the market decided to shut down their operations, especially in the automotive and heavy industries, while some smaller businesses decided to curtail or temporarily suspend their operations. Therefore, on a macroeconomic level, the COVID 19 pandemic generated a downturn of the economy leading to a decrease in the demand for electricity, especially from non-household consumers.
In the fight against the COVID-19 pandemic, the Company has adopted all the necessary measures for the activity to continue to be carried out under normal conditions and issued guidelines aimed at preventing and/or mitigating the effects of contagion at the workplace. Most important measures included strict adherence to hygiene and social distancing rules as well as working from home where possible. A resilience plan was developed identifying essential activities and critical roles through scenario analysis and ensuring staff backup.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
12
The aforementioned difficult conditions led to an increase in the operating expenses, mainly for the purchase of protective equipment as well as sanitation services. However, despite the unstable economic environment, through a close monitoring of the financial performance on multiple tiers, the Company’s financial performance maintained a positive trend as compared with the previous year, with improvements in profit, revenues and cash flows.
Therefore, based on the publicly available information and considering the actions already implemented, the Company does not anticipate a negative financial impact of the COVID-19 outbreak on its operations and no significant threat over the Company’s ability to continue as a going concern over a period covering at least 12 months from the date of these consolidated financial statements has been identified. However, considering the recent developments of the market, the long term effects of the COVID-19 outbreak cannot be reliably estimated currently as the Company cannot preclude the possibility of further lock downs or an escalation in the severity of current measures.
2 Basis of accounting
These separate financial statements have been prepared in accordance with the Ministry of Public Finance Order no. 2844/2016 for the approval of the Accounting Regulations in accordance with International Financial Reporting Standards ("OMFP no. 2844/2016"). In acceptance of OMFP no. 2844/2016, International Financial Reporting Standards are standards adopted under the procedure provided by the European Commission Regulation no. 1606/2002 of the European Parliament and of the Council of 19 July 2002 regarding the application of the international accounting standards.
These separate financial statements were authorized for issue by the Board of Directors on 4 March 2021 and will be submitted for shareholders’ approval in the general meeting scheduled on 28 April 2021.
Details of the Company’s accounting policies are included in Note 6. The Company has consistently applied the accounting policies to all periods presented in these separate financial statements.
3 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.
4 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.
Judgements, assumptions and estimation uncertainties
Information about judgements made in applying accounting policies and assumptions and estimation uncertainties that have the most significant effects on the amounts recognised in the separate financial statements is included below:
Note 6 h) – estimates regarding the useful lives of property, plant and equipment;
Note 20 – assumptions regarding the revalued amount of property, plant and equipment;
Note 22 – assumptions and estimates regarding the valuation of shareholdings in the subsidiaries;
Management projections din not modify significantly as a result of the COVID-19 pandemic, thus the assumptions related to the impact of COVID-19 are not expected to result in any material adjustments to the carrying amounts of assets and liabilities within the next twelve month period.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
13
Measurement of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability are categorised into different levels of the fair value hierarchy, then the fair value measurement is entirely categorised on the level of the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions used in measuring fair values is included in
Note 20: Property, plant and equipment.
Note 28: Financial instruments - fair values and risk management.
5 Basis of measurement
The separate financial statements have been prepared on the historical cost basis, except for the land and buildings, which are measured based on revaluation model.
6 Significant accounting policies
The Company has consistently applied the following accounting policies to all periods presented in these separate financial statements. The new amendments to existing standards that are effective starting with 1 January 2020 do not have a significant impact over the Company separate financial statements.
(a) Revenue
The Company recognizes the revenue 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 Company is expected to be entitled to receive in exchange of those goods or services. Revenue is recognized at the fair value of the services rendered or goods delivered, net of VAT, excises or other taxes related to the sale.
(b) Commissions
The Company assesses its revenue arrangements based on specific criteria to determine if it is acting as principal or agent. If the Company acts in the capacity of an agent rather than as the principal in a transaction, then the recognised revenue is the net amount of commission earned by the Company.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
14
(c) Finance income and finance costs
The Company’s finance income and finance costs include:
interest income;
interest expense;
dividend income;
the foreign currency gain or loss on financial assets and financial liabilities;
impairment losses recognised on financial assets (other than trade receivables).
Interest income or expense is recognised using the effective interest method.
(d) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency at the exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date, as communicated by the National Bank of Romania. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated to the functional currency.
(e) Employee benefits
(i) Short-term employee benefits
Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present, legal or constructive obligation to pay this amount as a result of past services provided by the employee and the obligation can be reliably estimated.
(ii) Defined benefit plans
The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefits that employees have earned in the current and prior periods, by discounting that amount.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method.
Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, are recognised immediately in other comprehensive income. The Company determines the net interest expense/(income) on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, considering any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
(iii) Other long-term employee benefits
The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
15
(iv) Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the end of the reporting period, then they are discounted.
(f) Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except for the items recognised directly in equity or in other comprehensive income, in which case it will be recognized directly in equity or in other comprehensive income.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
temporary differences arising from the initial recognition of assets and liabilities resulting from transactions that are not business combinations and that affect neither accounting nor taxable profit or loss;
temporary differences resulting from investments in subsidiaries, associates and jointly controlled entities, to the extent that the Company can exercise control over the reversal period of the temporary differences and it is probable that they will not be reversed in the foreseeable future.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences only to the extent that it is probable that future taxable profits will be available to be used for covering them. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is measured based on the tax rates that are expected to be applicable to temporary differences when they are reversed, using tax rates enacted or substantively enacted at the reporting date.
The measurement of the deferred tax reflects the tax consequences that would follow from the manner in which the Company expects to recover or settle the carrying amount of its assets and liabilities at the reporting date.
Deferred tax assets and liabilities are offset only if certain criteria are met.
Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it is probable that the future taxable profits will be available against which they can be used.
(g) Inventories
Inventories consist mainly of consumables and other materials.
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of the business, less the estimated costs of completion and the estimated costs necessary to perform the sale.
The cost of inventories is based on the weighted average cost method. The cost of inventories includes all the acquisition costs and other expenses related to bringing the inventories to their current place and condition.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
16
(h) Property, plant and equipment
(i) Recognition and measurement
Property, plant and equipment are initially recognised at cost, which includes purchase price and other costs directly attributable to acquisition and bringing the asset to the location and condition necessary for their intended use. After initial recognition, land and buildings are measured at revalued amounts less any accumulated depreciation and any accumulated impairment losses since the most recent valuation.
The Company used the fair value as deemed cost for the tangible assets for the opening of the financial position.
Revaluations are performed with sufficient regularity to ensure that the carrying amount does not materially differ from the one which would be determined using the fair value at the end of the reporting period.
When a building is revalued, the accumulated depreciation is eliminated against the gross carrying amount of that item, and the net amount is restated to the revalued amount of the asset.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Spare parts, stand-by and servicing equipment are classified as property, plant and equipment if they are expected to be used during more than one period or can be used only in connection with an item of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
(iii) Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership right by the end of the lease term. Land and other non-current assets in progress are not depreciated.
The estimated useful lives of property, plant and equipment are as follows:
Category
Useful lives (years)
Buildings
40-60
Equipment
4-12
Vehicles, furniture and office equipment
3-10
The depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
SOCIETATEA ENERGETICA ELECTRICA S.A.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in RON, if not otherwise stated)
17
(i) Intangible assets
(i) Recognition and measurement
Intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.
(iii) 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 recognised in profit or loss.
The estimated useful lives of software and licenses are 3-5 years.
Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(j) Financial instruments
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 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 acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
(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 consist solely of payments of principal and interest on the principal amount outstanding.
The amortized cost of a financial asset is the amount at which