SOCIETATEA ENERGETICA ELECTRICA S.A.
Consolidated Financial Statements
as at and for the year ended
31 December 2020
prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
Image should be here
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION
i
Contents
Consolidated statement of financial position 1
Consolidated statement of profit or loss 3
Consolidated statement of comprehensive income 4
Consolidated statement of changes in equity 5
Consolidated statement of cash flows 7
Notes to the consolidated financial statements
Basis of preparation
1. Reporting entity and general information 9
2. Basis of accounting 17
3. Functional and presentation currency 18
4. Use of judgments and estimates 18
Accounting policies
5. Basis of measurement 20
6. Significant accounting policies 20
7. Adoption of new and revised standards 32
Performance for the year
8. Operating segments 34
9. Revenue 39
10. Electricity and natural gas purchased 39
11. Other income and expenses 40
12. Net finance result 41
13. Earnings per share 41
Employee benefits
14. Short-term employee benefits 41
15. Post-employment and other long-term employee benefits 42
16. Employee benefit expenses 45
Income taxes
17. Income taxes 45
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2020
PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION
ii
Assets
18. Trade receivables 47
19. Deposits with maturity date more than three months 48
20. Other receivables 49
21. Cash and cash equivalents 49
22. Assets held for sale 50
23. Inventories 50
24. Property, plant and equipment 51
25. Intangible assets 54
Equity and liabilities
26. Capital and reserves 56
27. Trade payables 57
28. Other payables 58
29. Provisions 58
30. Long-term bank borrowings 58
Financial instruments
31. Financial instruments - Fair values and risk management 60
Other information
32. Acquisition of subsidiaries 65
33. Related parties 66
34. Contingencies 67
35. Commitments 70
36. Subsequent events 70
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
1
Note
31 December 2020
31 December
2019
ASSETS
Non-current assets
Intangible assets related to concession arrangements
25
5,455,185
5,188,155
Other intangible assets
25
7,213
13,410
Property, plant and equipment
24
508,130
544,098
Restricted cash
21
-
320,000
Deferred tax assets
17
19,666
19,887
Other non-current assets
1,173
1,845
Right of use assets
27,091
35,034
Total non-current assets
6,018,458
6,122,429
Current assets
Trade receivables
18
1,029,775
889,979
Other receivables
20
32,460
28,503
Cash and cash equivalents
21
570,929
607,506
Deposits with maturity date more than three months
19
-
66,471
Restricted cash
21
320,000
-
Inventories
23
70,066
74,370
Prepayments
2,817
2,699
Current income tax receivable
1,837
8,288
Assets held for sale
22
15,476
17,027
Total current assets
2,043,360
1,694,843
Total assets
8,061,818
7,817,272
EQUITY AND LIABILITIES
Equity
Share capital
26
3,464,436
3,464,436
Share premium
26
103,049
103,049
Treasury shares reserve
26
( 75,372 )
( 75,372 )
Pre-paid capital contributions in kind from shareholders
26
7
7
Revaluation reserve
26
116,372
87,665
Legal reserves
26
392,276
371,833
Retained earnings
1,759,506
1,637,909
Total equity attributable to the owners of the Company
5,760,274
5,589,527
Total equity
5,760,274
5,589,527
(continued on page 2)
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
2
Note
31 December 2020
31 December
2019
Liabilities
Non-current liabilities
Lease liability – long term
16,875
9,607
Deferred tax liabilities
17
177,787
168,138
Employee benefits
15
143,876
126,424
Other payables
28
33,873
36,775
Long-term bank borrowings
30
400,296
432,786
Total non-current liabilities
772,707
773,730
Current liabilities
Financing for network construction related to concession agreements
-
1,008
Lease liability – short term
10,747
26,900
Bank overdrafts
21
164,966
350,624
Trade payables
27
607,195
730,455
Other payables
28
240,946
218,285
Deferred revenue
5,629
6,918
Employee benefits
14,15
92,292
87,857
Provisions
29
19,238
19,558
Current income tax liability
9,211
4,898
Current portion of long-term bank borrowings
30
378,613
7,512
Total current liabilities
1,528,837
1,454,015
Total liabilities
2,301,544
2,227,745
Total equity and liabilities
8,061,818
7,817,272
The accompanying notes are an integral part of these consolidated financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, except per share data)
3
Note
2020
2019
Revenue
9
6,501,100
6,279,834
Other income
11
165,422
160,031
Electricity and natural gas purchased
10
( 3,905,705 )
( 3,859,617 )
Construction costs related to concession agreements
25
( 675,967 )
( 759,205 )
Employee benefits
16
( 774,501 )
( 620,192 )
Repairs, maintenance and materials
( 104,577 )
( 100,379 )
Depreciation and amortization
24,25
( 490,918 )
( 480,273 )
Reversal of impairment/(Impairment) for trade and other receivables, net
18,20
62,167
( 4,940 )
Other operating expenses
11
( 325,104 )
( 381,037 )
Operating profit
451,917
234,222
Gain from bargain purchase of subsidiaries
32
7,477
-
Finance income
12
9,651
14,118
Finance costs
12
( 26,736 )
( 22,297 )
Net finance cost
( 17,085 )
( 8,179 )
Profit before tax
442,309
226,043
Income tax expense
17
( 54,766 )
( 19,366 )
Profit for the year
387,543
206,677
Profit for the year attributable to:
- owners of the Company
387,543
206,677
Profit for the year
387,543
206,677
Earnings per share
Basic and diluted earnings per share (RON)
13
1.14
0.61
The accompanying notes are an integral part of these consolidated financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA SA
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
4
Note
2020
2019
Profit for the year
387,543
206,677
Other comprehensive income
Items that will not be reclassified to profit or loss
Re-measurements of the defined benefit liability
15
( 7,152 )
291
Tax related to re-measurements of the defined benefit liability
17
572
502
Revaluation of property, plant and equipment
24
43,823
-
Tax related to revaluation of property, plant and equipment
17
( 7,931 )
-
Other comprehensive income, net of tax
29,312
793
Total comprehensive income
416,855
207,470
Total comprehensive income attributable to:
- owners of the Company
416,855
207,470
Total comprehensive income
416,855
207,470
The accompanying notes are an integral part of these consolidated financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
5
Note
Share capital
Share premium
Treasury shares reserve
Pre-paid capital contributions in kind from shareholders
Revaluation reserve
Legal reserves
Retained earnings
Total equity
Balance at 1 January 2020
3,464,436
103,049
( 75,372 )
7
87,665
371,833
1,637,909
5,589,527
Comprehensive income
Profit for the year
-
-
-
-
-
-
387,543
387,543
Other comprehensive income
-
-
-
-
35,892
-
( 6,580 )
29,312
Total comprehensive income
-
-
-
-
35,892
-
380,963
416,855
Transactions with owners of the Company
Contributions and distributions
Dividends to the owners of the Company
26
-
-
-
-
-
-
( 246,108 )
( 246,108 )
Total transactions with owners of the Company
-
-
-
-
-
-
( 246,108 )
( 246,108 )
Other changes in equity
Set up of legal reserves
26
-
-
-
-
-
20,443
( 20,443 )
-
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
26
-
-
-
-
( 7,185 )
-
7,185
-
Balance at 31 December 2020
3,464,436
103,049
( 75,372 )
7
116,372
392,276
1,759,506
5,760,274
(continued on page 6)
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
6
Note
Share capital
Share premium
Treasury shares reserve
Pre-paid capital contributions in kind from shareholders
Revaluation reserve
Legal reserves
Retained earnings
Total equity
Balance at 1 January 2019
3,459,399
103,049
( 75,372 )
5,144
108,704
352,038
1,675,479
5,628,441
Comprehensive income
Profit for the year
-
-
-
-
-
-
206,677
206,677
Other comprehensive income
-
-
-
-
-
-
793
793
Total comprehensive income
-
-
-
-
-
-
207,470
207,470
Transactions with owners of the Company
Contributions and distributions
Issue of ordinary shares
26
5,037
-
-
( 5,137 )
-
-
1,222
1,122
Dividends to the owners of the Company
26
-
-
-
-
-
-
( 247,506 )
( 247,506 )
Total transactions with owners of the Company
5,037
-
-
( 5,137 )
-
-
( 246,284 )
( 246,384 )
Other changes in equity
Set up of legal reserves
26
-
-
-
-
-
19,795
( 19,795 )
-
Transfer of revaluation reserve to retained earnings due to depreciation and disposals of property, plant and equipment
26
-
-
-
-
( 21,039 )
-
21,039
-
Balance at 31 December 2019
3,464,436
103,049
( 75,372 )
7
87,665
371,833
1,637,909
5,589,527
The accompanying notes are an integral part of these consolidated financial statements.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
7
Note
2020
2019
Cash flows from operating activities
Profit for the year
387,543
206,677
Adjustments for:
Depreciation
24
27,850
37,743
Amortisation
25
463,068
442,530
Impairment of property, plant and equipment and intangible assets, net
24
3,025
3,441
Gain on disposal of property, plant and equipment and intangible assets
24
( 285 )
( 2,256 )
(Reversal of impairment)/Impairment of trade and other receivables, net
18,20
( 62,167 )
4,940
(Reversal of impairment)/Impairment of assets held for sale
22
( 188 )
416
Change in provisions, net
29
( 320 )
( 9,548 )
Net finance cost
12
17,085
8,179
Changes in employee benefits obligations
15
-
( 54,546 )
Gain from bargain acquisition of subsidiaries
32
( 7,477 )
-
Corporate income tax expense
17
54,766
19,366
882,900
656,942
Changes in:
Trade receivables
( 87,249 )
( 135,955 )
Other receivables
3,837
27,156
Prepayments
593
( 33 )
Inventories
4,307
( 10,785 )
Trade payables
( 76,010 )
176,993
Other payables
( 2,331 )
3,406
Employee benefits
14,735
4,775
Deferred revenue
( 1,289 )
1,881
Cash generated from operating activities
739,493
724,380
Interest paid
( 19,953 )
( 12,893 )
Income tax paid
( 51,672 )
( 13,901 )
Net cash from operating activities
667,868
697,586
(Continued on page 8)
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
8
Note
2020
2019
Cash flows from investing activities
Payments for purchases of property, plant and equipment
( 6,730 )
( 15,964 )
Payments for network construction related to concession agreements
( 637,996 )
( 887,419 )
Payments for purchase of other intangible assets
( 2,226 )
( 2,243 )
Proceeds from sale of property, plant and equipment
5,012
8,384
Payments for deposits with maturity of 3 months or longer
19
-
( 368,000 )
Proceeds from deposits with maturity of 3 months or longer
19
66,471
438,000
Interest received
8,962
15,845
Net cash effect from gain of control over the acquired subsidiary
32
5,577
-
Payment for acquisition of subsidiaries
32
( 8,006 )
-
Net cash used in investing activities
( 568,936 )
( 811,397 )
Cash flows from financing activities
Proceeds from issue of share capital, net
26
-
1,122
Proceeds from long-term bank borrowings
30
354,383
120,260
Repayment of long-term bank loans
30
( 29,130 )
-
Payment of lease liabilities
( 29,324 )
( 38,310 )
Dividends paid
26
( 245,780 )
( 247,198 )
Repayment of financing for network construction related to concession agreements
-
( 11,939 )
Net cash from/(used in) financing activities
50,149
( 176,065 )
Net increase/(decrease) in cash and cash equivalents
149,081
( 289,876 )
Cash and cash equivalents at 1 January
21
256,882
546,758
Cash and cash equivalents at 31 December
21
405,963
256,882
The accompanying notes are an integral part of these consolidated financial statements.
The non-cash transactions are disclosed in Note 21.
Chief Executive Officer
Chief Financial Officer
Georgeta Corina Popescu
Mihai Darie
4 March 2021
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
9
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 2020.
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 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, the Company’s subsidiaries are the following:
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%
Electrica Energie Verde 1 SRL* („EEV1” – former Long
Bridge Milenium SRL)
Electricity generation
19157481
Bucuresti
100%*
*indirect shareholding - Electrica Energie Verde 1 SRL is 100% owned by the subsidiary Electrica Furnizare S.A.
As at 31 December 2019, the Company’s subsidiaries were the following:
Subsidiary
Activity
Sole registration code
Head
Office
% shareholding as at 31 December 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%
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
10
Subsidiary
Activity
Sole registration code
Head
Office
% shareholding as at 31 December 2019
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%
Changes in Group structure during 2020
Merger of the three distribution companies within the Group
On 27 May 2020, Electrica SA’s Board of Directors approved in principle the merger through absorption between 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., the absorbing entity being Societatea de Distributie a Energiei Electrice Transilvania Nord S.A..
Subsequently, on 3 July 2020 Electrica SA’s Board of Directors approved the merger through absorption between the aforementioned distribution entities, the absorbing entity being Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. according to the merger project no. 1404 dated 26 June 2020 that was 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 was published in the Official Gazette of Romania Part IV no. 2351 from 10 July 2020.
On 21 August 2020, the Extraordinary General Meeting of the Shareholders of Electrica SA approved the empowerment of the representative of Electrica SA to participate in the Extraordinary General Meeting of the Shareholders of SDEE Transilvania Sud S.A. and SDEE Muntenia Nord S.A. and to express a favourable vote regarding the dissolution without liquidation and of the deregistration from the Trade Register and from the financial administration’s records of the absorbed companies SDEE Transilvania Sud S.A. and SDEE Muntenia Nord S.A. starting with the effective date of the merger, in accordance with the Merger Project. Subsequently, on 26 August 2020, took place the Extraordinary General Meetings of the Shareholders of SDEE Transilvania Sud S.A., SDEE Transilvania Nord S.A. and SDEE Muntenia Nord S.A. regarding the approval of the merger by the companies involved in this process.
On 14 October 2020, the Cluj Specialized Court admitted the requests 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 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 SA, formed by the merger of the three former electricity distribution companies was recorded on the National Trade Register Office.
Also, based on the Romanian Energy Regulatory Authority decision no. 2461 dated 23 December 2020, the electricity distribution licenses granted by the regulator to the absorbed companies for the areas Muntenia Nord and Transilvania Sud were transferred to the absorbing company, Distributie Energie Electrica Romania S.A., starting with 1 January 2021.
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
11
Merger of the two energy services companies within the Group
On 27 March 2020, Electrica SA’s Board of Directors approved in principle the merger through absorption between Electrica Serv S.A. and Servicii Energetice Muntenia S.A. and the participation of the companies to the merger, with Electrica Serv S.A. as absorbing company.
Subsequently , on 3 July 2020, Electrica SA’s Board of Directors approved the merger through absorption between Electrica Serv S.A. and Servicii Energetice Muntenia S.A. according to the merger project no. 934 dated 12 June 2020 that was registered with the Trade Register Office of Bucharest Court and was published in the Official Gazette of Romania Part IV, no. 2303 from 8 July 2020.
On 21 August 2020, the Extraordinary General Meeting of the Shareholders of Electrica SA, as the shareholder of Servicii Energetice Muntenia S.A., approved the empowerment of the representative of Electrica SA to participate in the Extraordinary General Meeting of the Shareholders of Servicii Energetice Muntenia S.A. and to express a favourable vote regarding the dissolution without liquidation and of the deregistration from the Trade Register and from the financial administration’s records of the absorbed company Servicii Energetice Muntenia S.A. starting with the effective date of the merger, 30 November 2020. Subsequently, on 25 August 2020, took place the Extraordinary General Meetings of the Shareholders of Servicii Energetice Muntenia S.A. and Electrica Serv S.A. regarding the approval of the merger by the companies involved in this process.
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, and ascertained the legality of the merger process and approved the registration with the Trade Register of the corresponding merger mentions.
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 finalised and the Group’s 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.
Both mergers that took place within the Group during 2020 consist only in reorganization of the subsidiaries and have no impact on the consolidated financial statements, Electrica SA remaining the parent company with the same % of ownership.
Acquisition of a photovoltaic park
On 23 June 2020, Electrica Furnizare S.A. signed a sale purchase agreement for the acquisition of 100% of the share capital of Long Bridge Milenium SRL, a company that owns a photovoltaic park located in Stanesti, Giurgiu County, with an installed capacity of MW 7.5 (operational power limited at MW 6.8). The photovoltaic park was built between October 2012 and January 2013 and has been delivering electricity into the national grid since February 2013.
Closing of the transaction and the transfer of shares’ ownership to Electrica Furnizare S.A. took place on 31 August 2020, the purchase price of the shares being of RON 7,830 thousand (equivalent of EUR 1,617,940). On 30 October 2020, the purchase price was adjusted in accordance with the purchase agreement based on the financial results of the acquired company as at 31 August 2020, the final price being RON 8,006 thousand (equivalent of EUR 1,637,515 and fees of EUR 17,318). Amongst various elements of the transaction, Electrica Furnizare S.A. also took over the loans granted by the former shareholders of Long Bridge Milenium SRL to the acquired company, in amount of RON 18,473 thousand (equivalent of EUR 3,817,749) (for further details please refer to Note 32).
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
12
On 24 November 2020, the company Long Bridge Milenium SRL changed its name to Electrica Energie Verde 1 SRL.
Group’s main activities
The main activities of the Group include operation and construction of electricity distribution networks and electricity and natural gas supply to final consumer as well as energy production from renewable sources . The Group is the electricity distribution operator and the main electricity supplier in Muntenia Nord area (Prahova, Buzau, Dambovita, Braila, Galati and Vrancea counties), Transilvania Nord area (Cluj, Maramures, Satu Mare, Salaj, Bihor and BistritaNasaud counties) and Transilvania Sud area (Brasov, Alba, Sibiu, Mures, Harghita and Covasna counties), operating with transformation station and 0.4 kV to 110 kV power lines.
The Company’s distribution subsidiary, Distributie Energie Electrica Romania S.A. which resulted from the merger through absorption of the three distribution subsidiaries Societatea de Distributie a Energiei Electrice Transilvania Nord S.A., Societatea de Distributie a Energiei Electrice Muntenia Nord S.A. and Societatea de Distributie a Energiei Electrice Transilvania Sud S.A. now operates electric lines in 18 counties, from three geographical areas of the country, representing 40.7% of the Romanian territory, and serves over 3.8 million users. It invoices the electricity distribution service to electricity suppliers (mainly to Electrica Furnizare S.A. subsidiary) which further invoices the electricity consumption to final consumers.
Electrica Furnizare S.A. is active on both the competitive market and as the supplier of last resort for aprox. 3.1 million clients (defined as supplier designated by the regulatory authority to deliver the universal service of electricity supply under specific regulated conditions) in Muntenia Nord, Transilvania Nord and Transilvania Sud areas. According to the regulations issued by the National Authority for Energy Regulation (“ANRE”), the suppliers of last resort have the obligation to ensure electricity supply to final customers which have not exercised their eligibility right the right to choose their electricity supplier (hereinafter named captive consumers). Starting with 1 January 2021, as a result of the changes in the regulatory framework, Electrica Furnizare S.A. is designated as supplier of last resort (SoLR) at national level, continuing to supply the existing clients in the universal service regime, but also with the possibility to take over in the supply of last resort regime the clients who are left without a supplier from any network area on the Romanian territory.
At the same time, Electrica Furnizare S.A. is also designated as SoLR for natural gas at national level, but only with the possibility of taking over the customers left without a supplier.
Through the acquisition of the new subsidiary Electrica Energie Verde 1 S.R.L. (former Long Bridge Milenium S.R.L.) as of 31 August 2020, the Group entered on the electricity generation segment, in particular from renewable sources.
Electrica Energie Verde 1 S.R.L. is a producer of electricity from renewable sources, operating a photovoltaic park in Stanesti, Giurgiu county, with an installed capacity of MW 7.5 (operating capacity limited to MW 6.8). In 2020 the operation of the plant was continuous, with no significant events leading to production shutdowns, producing in total MWh 10,131. According to Law no. 220/2008 and based on the accreditation issued by ANRE, Stanesti park receives a number of 6 green certificates (“GC”) for each MWh produced and delivered, of which until 2020, 4 GC were issued for trading and 2 GC were postponed (the amendment is introduced by Law no. 184/2018). The postponed green certificates will be reinserted starting with 1 January 2021, in equal monthly tranches until 31 December 2030.
(b) Regulations in the energy sector
Regulatory environment
The activity in the energy sector is regulated by the Romanian Energy Regulatory Authority.
Some of the main responsibilities of ANRE are to approve prices and tariffs and to issue substantiation methodologies used
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
13
to set regulated prices and tariffs.
Electricity distribution
Electricity distribution is a monopoly activity. Distribution tariffs are established through a “tariff basket-price cap” mechanism. The methodology for setting the electricity distribution tariffs applicable for the years ended 2019 and 2020 was approved by ANRE Order no. 169/2018 with subsequent amendments (Orders no. 193/2018, no. 60/2019, no. 203/2019, no. 207/2020 and no. 3/2021 ).
The specific distribution tariffs applicable for the three voltage levels (high, medium and low) by regions, for the years 2020 and 2019, were approved by ANRE orders as follows (RON/MWh, presented cumulatively for medium and low voltage levels):
Order 198,199,197/20.12.2018
1 January-28 February 2019
High voltage
Medium voltage
Low voltage
SDEE Transilvania Nord S.A.
18.16
60.00
158.67
SDEE Transilvania Sud S.A.
20.27
60.10
160.31
SDEE Muntenia Nord S.A.
15.21
48.29
162.46
Order 25,26,24/25.02.2019
1 March-30 June 2019
High voltage
Medium voltage
Low voltage
SDEE Transilvania Nord S.A.
18.58
61.40
162.38
SDEE Transilvania Sud S.A.
20.75
61.52
164.08
SDEE Muntenia Nord S.A.
15.56
49.40
166.20
Order 79,80,78/24.06.2019
1 July-31 December 2019
High voltage
Medium voltage
Low voltage
SDEE Transilvania Nord S.A.
19.03
62.88
166.27
SDEE Transilvania Sud S.A.
21.21
62.88
167.72
SDEE Muntenia Nord S.A.
15.93
50.58
170.16
Order 228,229,227/16.12.2019
1 January-15 January 2020
High voltage
Medium voltage
Low voltage
SDEE Transilvania Nord S.A.
19.11
65.48
171.98
SDEE Transilvania Sud S.A.
20.69
62.49
169.01
SDEE Muntenia Nord S.A.
16.97
54.09
180.15
Order 8,9,7/15.01.2020
16 January-31 December 2020
High voltage
Medium voltage
Low voltage
SDEE Transilvania Nord S.A.
18.77
64.31
168.91
SDEE Transilvania Sud S.A.
20.31
61.34
165.90
SDEE Muntenia Nord S.A.
16.68
53.16
177.06
In 2019, a new regulatory period began, governed by the provisions of ANRE Order no. 169/2018 for the approval of the
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
14
Methodology for establishing the tariffs for the electricity distribution service (IV regulatory period: 2019-2023).
The following items are considered by ANRE when setting the target revenue for one year of the regulatory period: controllable and non-controllable operating and maintenance costs; costs of electricity purchased for own technological consumption (distribution network losses); regulated depreciation charge; the return on the regulated assets base (“RAB”); revenues from reactive energy and revenues from other activities, as well as corrections from previous periods.
Starting with 2019, the regulated rate of return (“RRR”) on RAB was 5.66%, according to ANRE Order no. 168/2018. For the investments in the electricity distribution networks commissioned during the period 2019-2023, an incentive of 1 percentage point is granted over the regulated rate of return approved by the ANRE Order no. 168/2018. Subsequently, according to Government Emergency Ordinance no. 19/2019, the approved regulated rate of return was 6.9%.
On 9 January 2020 was issued the Government Emergency Ordinance no. 1 which modified:
The Energy Law regarding the cancellation of the article approving the regulated rate of return of 6.9% starting with 30 April 2020;
ANRE functioning law, imposing the establishment of the value of the contribution charged by ANRE (thus by ANRE Order no. 1/2020, the contribution has changed from 2% to 0.2%).
ANRE Order no. 75/2020 for establishing the regulated rate of return for the electricity and natural gas distribution and transport tariffs until the end of the fourth regulatory period entered into force on 13 May 2020.
Thus, for the year 2020, the regulated rate of return is as follow:
For the period 1 January 2020 – 29 April 2020: 6.9%;
For the period 30 April 2020 – 12 May 2020: 5.66% plus an incentive of 1% for new investments;
For the period 13 May 2020 – 31 December 2020: 6.39% plus an incentive of 1% for new investments.
The Methodology for establishing the distribution tariffs approved by ANRE Order no. 169/2018 was modified by ANRE Orders no. 207/2020 and no. 3/2021 as follows:
granting a 2% RRR 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;
in cases where, for certain categories of tangible/intangible assets, the regulated legislation establishes other regulated useful lives than those provided by the Methodology or in the Catalogue on the classification and normal operating useful lives of fixed assets, approved by Government decision, the annual regulated depreciation of those assets is calculated on the basis of the regulated useful lives established by the primary legislation.
Regulatory asset base (“RAB”)
In accordance with the old tariff methodology for electricity distribution approved by ANRE Order no. 72/2013 with subsequent amendments (Orders no. 112/2014, no. 146/2014 and no. 165/2015), and the new tariff methodology of electricity distribution approved by ANRE Order no. 169/2018 with subsequent amendments (ANRE Orders no. 193/2018, no. 60/2019, no. 203/2019, no. 207/2020 and no. 3/2021 ), hereinafter referred to as Methodology, the determination of the distribution tariffs is based on, inter alia, the RAB. The RAB calculation is based on capital expenditure.
The regulatory asset base at the beginning of the first regulatory period (1 January 2005) (“initial RAB”) includes the net book value of the property, plant and equipment and intangible assets as approved by ANRE and used only for regulated electricity distribution.
The subsequently calculated RAB includes besides the initial RAB, as a net value, the net value of the tangible and intangible assets subsequently acquired through investments approved by ANRE. The BAR does not include the fixed assets financed
SOCIETATEA ENERGETICA ELECTRICA S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts are in THOUSAND RON, if not otherwise stated)
15
from donations or other non-reimbursable funds, including the connection fee received from the new users of the electricity distribution network.
Tariff adjustments
Annually, ANRE makes revenue corrections due to: change in the quantities of electricity distributed compared to the forecast; change in quantities and acquisition price for the regulated own technological consumption (distribution network losses) compared to the forecast; the annual change in controllable operating and maintenance costs, realized and accepted against the forecast; annual change in uncontrollable operating and maintenance costs compared to the forecast; changes in revenues from reactive energy compared to the forecast; failure to meet/exceeding the approved investments programme; revenues generated from other operations made by the distribution operator and the quantity of electricity recovered from recalculations.
In regulated activities, the regulator establishes through the tariff adjustment mechanism (as presented above), the criteria to recognise over or under recoveries of one period in future periods.