Annual Report of Elektro Primorska D.D. Company and Elektro Primorska Group for Year 2014 Annual Report of Elektro Primorska D.D

Annual Report of Elektro Primorska d.d. Company and Elektro Primorska Group for Year 2014 Annual Report of Elektro Primorska d.d. Company and Elektro Primorska Group for Year 2014 KAZALO 12.1. Environmental policy 52 57 A. BUSINESS REPORT 7 12.2. Realization of environmental programs in year 2014 52 57 1. MANAGEMENT REPORT 8 13. RISK MANAGEMENT 52 57 2. MANAGEMENT RESPONSIBILITY STATEMENT 12 13.1. Financial risks 53 58 3. SUPERVISORY BOARD REPORT 13 13.2. Operational risks 53 58 4. CORPORATE GOVERNANCE STATEMENT 20 13.3. Strategic risks 54 59 4.1. Management board 20 13.4. Legislative risks 54 60 4.1.1. Appointment and composition 20 4.1.2. Responsibilities and operation 20 B. FINANCIAL STATEMENTS 56 62 4.1.3. Remuneration of the management 20 1. BALANCE SHEET AS AT DECEMBER 31 2014 56 64 4.1.4. System of internal control and risk management relating to financial 20 2. PROFIT AND LOSS ACCOUNT FOR YEAR ENDED AS AT DECEMBER 31 2014 58 66 reporting, auditing 3. STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED AS AT DECEMBER 31 2014 67 4.2. Supervisory board 21 4. CASH FLOW STATEMENT FOR YEAR ENDED AS AT DECEMBER 31 2014 60 68 4.2.1. Appointment and composition 21 5. STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED AS AT DECEMBER 31 2014 61 69 4.2.2. Powers and operation 21 6. STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED AS AT DECEMBER 31 2013 62 70 4.2.3. Remuneration of supervisory board and supervisory board committees' members 22 7. INDICATORS 63 71 4.3. Shareholders meeting 22 7.1. Main indicators of financing (investing) 63 71 4.4. Statement of compliance with the Corporate Governance Code 23 7.2. Main investment indicators (investing) 63 71 4.5. Compliance with the recommendations and expectations of Slovenian Sovereign Holding 23 7.3. Main horizontal financial structure indicators 64 72 4.6. Management of the Parent Company and the Group 23 7.4. Main indicators of economy 64 72 5. PRESENTATION OF THE COMPANY 24 7.5. Main indicators of return 64 73 5.1. Company identity card 24 5.2. Mission, vision and business culture of the company 25 C. NOTES TO THE FINANCIAL STATEMENTS ACCORDING TO THE COMPANIES ACT 74 5.2.1. Mission of the company 25 AND SLOVENIAN ACCOUNTING STANDARDS 5.2.2. Vision of the company 25 1. BASIS FOR PREPARATION OF FINANCIAL STATEMENTS 65 76 5.2.3. Business culture 25 2. NOTES TO THE BALANCE SHEET ITEMS 69 80 5.3. Regulatory frameworks of the electricity activity of the company 26 2.1. Intangible assets 69 80 5.4. Company organization 29 2.2. Tangible fixed assets 71 82 6. HUMAN RESOURCES MANAGEMENT IN YEAR 2014 30 2.3. Long-term financial investments 74 84 6.1. General 30 2.4. Long-term operating receivables 75 85 6.2. Overview of key data about employees in year 2014 30 2.5. Stocks 75 85 6.3. Age structure of employees 31 2.6. Short-term financial investments 76 86 6.4. Structure of employees according to the years of service 31 2.7. Short-term operating receivables 77 86 6.5. Structure of employees according to gender 32 2.8. Monetary assets 79 88 6.6. Educational structure of employees 33 2.9. Short-term accruals and prepaid expenditure 79 88 6.7. Employees with disabilities 33 2.10. Capital 80 88 6.8. Education of employees 33 2.11. Provisions and long-term accruals and deferred income 81 90 6.9. Care for employees 34 2.11.1. Provisions 81 90 6.10. Health and safety at work 34 2.11.2. Long-term accruals and deferred income 81 90 6.11. Voluntary supplementary pension insurance 36 2.12. Long-term liabilities 82 91 6.12. Accident insurance 36 2.13. Short-term liabilities 83 92 6.13. Secondary activities affecting the well-being of employees 36 2.14. Short-term accrued costs and deferred revenues 83 93 7. IMPLEMENTATION OF ANNUAL OBJECTIVES IN YEAR 2014 37 3. NOTES TO THE PROFIT AND LOSS ACCOUNT 85 94 8. DISTRIBUTION OF ELECTRICITY 39 3.1. Operating revenues 86 95 8.1. Services for SODO 39 3.2. Operating expenses 87 96 8.1.1. Achieving the goals and comparison with year 2013 40 3.3. Financial revenue 90 100 8.2. Investments 3.4. Financial expenses 91 101 8.2.1. Achieving the goals and comparison with year 2013 40 3.5. Other revenue 91 101 8.3. Acquired and transmitted electricity in year 2014 47 3.6. Other expenses 91 101 8.4. Access to the distribution network 48 3.7. Corporate income tax 92 102 8.4.1. Use of electricity network 48 3.8. Net profit or loss 92 102 8.4.2. Excessively acquired wattles power at cos ϕ < 0,95 49 3.9. Total comprehensive income for the period 92 102 8.4.3. Electricity losses in the distribution network 50 4. NOTES TO THE CASH FLOW STATEMENT 93 103 8.4.4. Peak of distribution network consumption and operating hours 50 4.1. Receipts from operating activities 93 103 8.4.5. Production of electricity from producers connected to the distribution network 51 4.2. Expenditure for operating activities 93 103 8.4.6. Quality of electricity supply 52 4.3. Receipts from investing activities 93 103 8.4.6.1. Voltage quality 52 4.4. Expenditure for investing activities 93 103 8.4.6.2. Continuity of power supply 53 4.5. Receipts from financing activities 93 103 8.4.6.3. Commercial quality 53 4.6. Expenditure for financing activities 93 103 9. SERVICES FOR EXTERNAL CUSTOMERS 54 4.7. Cash flow for the period 93 104 10. INFORMATION SUPPORT AND DEVELOPMENT 55 5. DISCLOSURE OF EVENTS WITH RELATED PARTIES 94 104 11. INTEGRATED MANAGEMENT SYSTEM 56 6. CONTINGENT LIABILITIES OF THE COMPANY 95 105 12. CARE FOR THE ENVIRONMENT 57 7. EVENTS AFTER THE BALANCE SHEET DATE 95 106 8. NOTES TO THE FINANCIAL STATEMENTS ACCORDING TO ENERGY ACT 106 AND THE COMPANIES ACT 8.1. Notes to the balance sheet 106 8.2. Notes to the profit and loss account 107 8.3. Criteria for allocating revenues and expenses, assets and liabilities of joint activities 107 to individual activities 8.4. Sub-balance sheet according to the Energy Act as at 31. 12. 2014 108 8.5. Profit or loss account according to the energy act for year 2014 101 110

D. BUSINESS REPORT OF ELEKTRO PRIMORSKA GROUP 112 1. PRESENTATION OF THE GROUP 115 1.1. Composition of the group 115 1.2. Presentation of controlled company E 3, d. o. o. 116 1.3. Presentation of associate company Knešca, d. o. o. 117 1.4. Presentation of the controlling company JOD, d. o. o. 118 1.5. Presentation of the controlling company ECO ATMINVEST, d. o. o. 119 2. RISK MANAGEMENT 120 3. CONSOLIDATED FINANCIAL STATEMENTS 122 3.1. Consolidated balance sheet as at December 31 2014 122 3.2. Consolidated profit or loss account for business year ended as at December 31 2014 124 3.3. Consolidated statement of comprehensive income for year ended as at 125 December 31 2014 3.4. Consolidated cash flow statement for year ended as at December 31 2014 125 3.5. Consolidated statement of changes in equity for year ended as at December 31 2014 126 3.6. Indicators in Elektro Primorska Group 128 4. FINANCIAL REPORT OF ELEKTRO PRIMORSKA GROUP 130 4.1. General notes and disclosures 130 4.2. Notes to the consolidated balance sheet 131 4.2.1. Long-term assets 131 4.2.1.1. Intangible assets 132 4.2.1.2. Tangible fixedassets 133 4.2.2. Long-term financial investments 135 4.2.3. Long-term operating receivables 136 4.2.4. Deferred tax assets 136 4.2.5. Short-term assets 137 4.2.5.1. Stocks 137 4.2.5.2. Short-term financialinvestments 137 4.2.5.3. Short-term operating receivables 138 4.2.5.4. Monetary assets 139 4.2.6. Accruals and prepaid expenditure 139 4.2.7. Capital 140 4.2.8. Provisions and long-term accruals and deferred income 141 4.2.8.1. Provisions 141 4.2.8.2. Long-term accruals and deferred income 141 4.2.9. Long-term liabilities 142 4.2.10. Short-term liabilities 143 4.2.11. Accrued expenses and deferred revenues 144 4.3. Notes to the consolidated profit or loss account 144 4.3.1. Operating revenues 144 4.3.2. Operating expenses 145 4.3.3. Financial revenue 147 4.3.4. Financial expenses 147 4.3.5. Other revenues 147 4.3.6. Other expenses 147 4.3.7. Corporate income tax 147 4.3.8. Net profit or loss 147 4.4. Notes to the consolidated cash flow statement 147 4.5. Contingent liabilities of Elektro Primorska Group 148 4.6. Events after the balance sheet of Elektro Primorska Group 148 5. MANAGEMENT RESPONSIBILITY STATEMENT – GROUP OPERATIONS 149

A Business Report A Business Report | 1. Management Report Business Report | 1. Management Report A 8 9

1. risks, and we achieved a radical reduction of risk assessment in the parent company as Management Report well as in the subsidiary E 3, d. o. o.

In accordance with the annual and operative plan of internal audit for year 2014 key Dear shareholders, business partners, and co-workers, business processes were reviewed and audited in the parent company as well as in the subsidiary. There were nearly 60 measures issued, of which 60 % have already conclu- year 2014 was full of events that marked the operations of the group in many ways. At the ded, while 40 % are being implemented. very beginning, when we just finished the operations of the previous year, put our sails up and turned to new goals, we were hit by a natural disaster of an exceptional character. Ice On the electricity market, where one of the key roles are played also by our subsidiary E 3, damage that shook us well at the end of January caused extreme damage on the entire d. o. o., the fight for market share among the key players has continued, which expressed Slovenian energy infrastructure. Area covered by Elektro Primorska was especially hard mainly in the form of additional reduction of prices for existing products. Our subsidiary hit. There were more than 350 km of distribution network damaged, which represents did not give into the senseless fight of price reductions, but fought the competition by more than four percent of the infrastructure owned by the company. finding the way to new buyers through introduction of new selling channels. We were so successful at this, that we recorded another customer growth at the end of the year, We started renovating deliberately and energetically. Our first goal was to ensure the both in the segment of household and business customers. In the last quarter we also most urgent supply of electricity to all our customers. We installed more than120 aggre- re-launched the sale of electricity in Italy, which was stopped due to reorganization of gates and upgraded certain parts of the damaged network. We reached the goal in the Italian buyer. exceptional circumstances, with the help of external partners and international aid, within less than a month. Despite positive trend in the last quarter it was impossible to make up for the lost electricity quantities, which was the result of customers loss in the first half of the year, excepti- Even the rest of the year was devoted almost exclusively to rehabilitation of the damaged onally warm winter and mild summer. Weather conditions also impacted the field of heat network. Majority of investment funds were intended for the restoration of medium-vol- and electricity production, where we recorded worse result than planned. tage power lines and construction of the heavy line between Pivka and Postojna, which increased the reliability of power supply for the town of Postojna. Final rehabilitation of In the given circumstances we are pleased with the achieved result of the subsidiary in damage, mainly on the low-voltage network, will be delayed well into year 2015. the amount of 1.5 mio EUR, despite the fact that planned profit was not realized.

Operating results of the parent company are entirely marked with the vents from the be- In Elektro Primorska Group we are well aware that in addition to the business success of ginning of the year. The resulting damage and the implementation of rehabilitation have the company, attitude toward the environment we operate in is also important, so we pro- had a significant impact on costs and revenues of the company. Increased volume of co- mote the principles of socially responsible behavior in business and social environment. sts is connected with operation of aggregates, overtime work, hiring the services of exter- We also strive for improvement of environmental aspects of operation, for rational beha- nal contractors and write-off of fixed assets damaged during the glaze storm. Because of vior and rational use of energy, raw materials and other natural resources. paid insurance claims, we exceeded the planned volume of operating revenues as well. Despite the extreme conditions, we achieved a positive operating result in the amount of Year 2014 is behind us. In Elektro Primorska Group we will certainly remember it well. On 3.2 mio EUR and even exceeded other core business objectives. this occasion, I would like to thank once again all co-workers, who in the moment of crisis proved their loyalty and outstanding care for what is the main mission of the company, We carried out by more than 13 mio EUR of investments; surpassed planned objectives namely to ensure undisturbed electricity supply. In this year we all learned a lot and we in the segment of own services, carried out all necessary maintenance work and at the did our work as a mission. same time additionally created a difference in price in the segment of implementing services for the market. Dear shareholders and business partners, together with our co-workers we would like to thank you for your trust in the past year. We will continue to care for the successful In year 2014 we continued with the implementation of measures of the cost rationalizati- development of the group and we wish for your support and creative participation while on program (RAST), which is implemented on the level of entire group and will be taking doing so. place until the end of year 2015.

In accordance with the adopted methodology of integrated risk management we imple- Uroš Blažica, mented measures, which were adopted with the purpose of reducing and controlling the Chairman of the Board A Business Report | 1. Management Report Business Report | 1. Management Report A 10 11

Uroš Blažica, Chairman of the Board A Business Report | 2. Management Responsibility Statement Business Report | 3. Supervisory Board Report A 12 13

2. 3. Management Responsibility Supervisory Board Report Statement

Management board hereby approves the financial statements for year 2014and business In the period from January 1 2014 to December 31 2014 the supervisory board operated Composition of report for the period between January 1 and December 31 2014, as well as used accou- in the following composition: nting policies and notes included in the proposed annual report. • mag. Uroš Saksida, chairman of the supervisory board, the Supervisory • Valter Vodopivec, vice-president of the supervisory board, employee representative, Board Management is responsible for preparing the annual report and hereby declares that the • Dean Kocjančič, supervisory board member, report provides a true and fair picture of the financial condition of the company and its • Massimo Makovac, supervisory board member, operating results for year 2014. • Matjaž Bajec, supervisory board member, • Jernej Kenda, supervisory board member, employee representative. Management board hereby certifies that relevant accounting policies were used consistently and that accounting estimates were prepared according to the principles of pru- Composition of the supervisory board is varied. Members possess relevant expertise, dence and due diligence. At the same time it certifies that the financial statements and experience and skills. With their knowledge and experience they complement each other, notes were prepared on a going concern basis and in accordance with the relevant legi- which ensure adequate control over the operations of the company. slation and Slovene Accounting Standards. Members of the supervisory board in the management or supervisory bodies of related Management board is also responsible for appropriate accounting, for adoption of and unrelated companies are: appropriate measures to protect the property and prevent and detect fraud and other • mag. Uroš Saksida – director of Stem, d. o. o. Company, Vipavska 67, 5000 Nova irregularities. Gorica, • Valter Vodopivec – member of the supervisory board in company Mestne storitve, In its operation company strictly abides by the laws and tax regulations, so the manage- javno podjetje, d. o. o., Trg Edvarda Kardelja 1, 5000 Nova Gorica, ment of the company does not expect any significant obligations in this respect. • Dean Kocjančič – director of Tourist association Izola, g. i. z., Ljubljanska ulica 17, 6310 Izola, • Massimo Makovac, who is not a member in any of the management or supervisory bodies of related or unrelated companies, • Matjaž Bajec – director of company Mlina, družba za upravljanje z naložbami, d. o. o., Tovarniška cesta 14, 5270 Ajdovščina, • Jernej Kenda, who is not a member in any of the management or supervisory bodies of related or unrelated companies.

In year 2014 the supervisory board carefully and responsibly supervised the operation of Operation of the company and group Elektro Primorska. Supervisory Board has carried out its work in accordance with the law, the statute of the company, Rules of Procedure of the Su- the Supervisory pervisory Board, the Code of Corporate Governance of State Capital Investments and Board recommendations of the operator of direct and indirect equity investments of the Re- public of Slovenia. Operation and supervision of the content related to the monitoring of achievement of business objectives and long-term business and financial development of the company and the Group. Management Board regularly, correctly and thoroughly reported to the Supervisory Board on the operating results, on the broad terms of business and significant events in the company and the group. Supervisory board believes that cooperation with the Management Board held a professional and appropriate professional level. A Business Report | 3. Supervisory Board Report Business Report | 3. Supervisory Board Report A 14 15

In year 2014 Supervisory Board met at nine regular and three correspondence sessions, 8th regular session, May 21 2014 where it adopted a total of 82 decisions and dealt with the following major contents: • consideration and approval of the revised annual report of the company and group for year 2013, 5th regular session, February 4 2014 • drafting a proposal for allocation of distributable profit, • familiarization with the situation on the electricity distribution network owned by the • consideration and approval of the annual report of the supervisory board of the company after the ice damage, company for year 2013, • consideration of the report on the operations of the group for the period January– • consideration and approval of materials and decision proposals for the 19th share- November 2013, holders meeting of Elektro Primorska d. d. Company. • consideration of the report on liquidity situation of the group, • approval of estimated sources of financing investments and long-term indebted- 1st correspondence session, June 4 2014–June 6 2014 ness of Elektro Primorska d. d. Company for year 2014, • consideration and approval of Annex no.2 to the employment contract of the chair- • adoption of the annual internal audit plan for year 2014, man of the board. • consideration of RAST program, • familiarization with the report of the audit committee of the supervisory board. 9th regular session, July 10 2014 • consideration of the report on the operations of the group for the period January– 6th regular session, March 27 2014 May 2014, • consideration of the report on the operations of the group for the period January • consideration of the evaluation of the group operations for the period January–De- -December 2013, cember 2014, • familiarization with the interim report on the damage and the rehabilitation of distri- • consideration of the report on liquidity situation of the group, bution network owned by the company after the ice damage, • consideration of the report on the integrated risk management of the group for the • consideration of the report on liquidity situation of the group, first quarter of year 2014, • approval of the supervisory board of the contracts for real estate sales, • consideration of the report on internal audit of the group for the first quarter of year • consideration of the report on the integrated risk management of the group for the 2014, last quarter of year 2013, • familiarization with the decision on the refusal of a public contract for the supply of • consideration of the report on the integrated risk management of the group for year direct electricity meters, 2013, • familiarization with the procedure and costs of introduction of new ERP system. • consideration of the report on internal audit of the group for the last quarter of year 2013, 2nd correspondence session, August 25 2014–August 26 2014 • consideration of the report on internal audit of the group for year 2013, • consent to the conclusion of the transaction to hire long-term loan to refinance ex- • familiarization with the time schedule of implementation of the 19th shareholders isting long-term indebtedness. meeting of Elektro Primorska d. d. Company, • familiarization with the report of the audit committee of the supervisory board, 10th regular session, September 11 2014 • requirement to complete an annual internal audit plan for year 2014. • consideration of the report on the operations of the group for the period January– June 2014, 7th regular session, May 8 2014 • consideration of the report on liquidity situation of the group, • consideration of the report on the operations of the group for the period January– • familiarization with the conclusion of the Annex no.3 to the Contract on the lease February 2014, of electricity distribution infrastructure and provision of services for the distribution • consideration of the evaluation of the group operations for the period January–April system operator, 2014, • consideration of comparative analysis of selected indicators of electricity distribu- • consideration of the report on liquidity situation of the group, tion companies in the period 2011–2013, • familiarization with the guidelines of the revised plan of investments for year 2014, • consideration of comparative analysis of selected indicators of energy trading sub- • consent to the commencement of the procedure of borrowing in Elektro Primorska sidiary companies in the period 2011–2013, d. d. Company for the purpose of refinancing the existing loans, • consent to the conclusion of a contract for the lease of the new ERP system, • adoption of the amended annual internal audit plan for year 2014, • consideration of the report on the integrated risk management of the group for the • consideration of the draft annual report of the Supervisory Board for year 2013. second quarter of year 2014, • consideration of the report on internal audit of the group for the second quarter of year 2014, • familiarization with the report of the audit committee of the supervisory board, A Business Report | 3. Supervisory Board Report Business Report | 3. Supervisory Board Report A 16 17

• adoption of amendments to the Rules of Procedure of the Audit Committee of the Professional support to the supervisory board in exercising control over the management Work of the Supervisory Board of Elektro Primorska d. d. Company and confirmation of a clean of the company was offered also by the audit committee of the supervisory board. Re- copy of the Rules of Procedure. view of business and legal transactions of the company in 2014 were monitored by the supervisory following members of the audit committee: board 11th regular session, October 22 2014 • Dean Kocjančič, chairman of the audit committee, committees • consideration of the report on the operations of the group for the period January • Massimo Makovac, internal member of the audit committee, –August 2014, • Maja Curk, external member of the audit committee, and • consideration of the report on liquidity situation of the group, • Aleš Jakin, external member of the audit committee. • adoption of the revised plan of investments for year 2014 (version No. 3), • familiarization with the impact of ice damage on company's operation in year 2014, In year 2014 the audit committee met at four regular and one correspondence session, • discussion and conclusion on the fulfillment of the criteria for the payment of bonus- where members paid special attention primarily to the following topics: liquidity, compre- es to the chairman of the board for year 2013. hensive risk management, effectiveness of internal controls, reviewing the correctness of the implementation of procurement procedures, external audit. 12th regular session, December 4 2014 • consideration of the report on the operations of the group for the period January 1st correspondence session, January 17 2014–January 24 2014 –September 2014, • consideration of the annual internal audit plan for year 2014. • consideration of the report on liquidity situation of the group, • consideration of the draft of the Business plan of Elektro Primorska d. d. for the 3rd regular session, February 20 2014 period 2015–2017. • consideration of the report on the operations of the group for the period January– November 2013, 13th regular session, December 16 2014 • analysis of the performance of subsidiary E 3, d. o. o., and related companies, • consideration of the draft of the Business plan of Elektro Primorska d. d. for the • consideration of the report on liquidity situation of the group, period 2015–2017, • familiarization with the process of recovery in the parent company and subsidiary • consideration of the report on the integrated risk management of the group for the company E 3, d. o. o. third quarter of year 2014, • consideration of the report on internal audit of the group for the third quarter of year 4th regular session, May 14 2014 2014, • consideration of the proposal of selecting the audit of the annual report for year • familiarization with the report of the audit committee of the supervisory board, 2014, • adoption of a plan of work of the audit committee of the supervisory board of Elektro • consideration of the revised annual report of the company Elektro Primorska d. d. Primorska d. d. for year 2015, and group for year 2013, • consideration and approval of the proposal for additional criteria for the selection of • consideration of the report on the operations of the group for the period January the contractor to revise the annual report. –March 2014, • consideration of the report on liquidity situation of the group, 3rd correspondence session, December 22 2014–December 23 2014 • consideration of the report on the integrated risk management of the group for the • consideration and approval of the Business plan of Elektro Primorska d. d. for the last quarter of year 2013, 2015–2017, • consideration of the annual report on the integrated risk management of the group • confirmation of the forecast sources of financing investments and long-term indebt- for year 2013, edness of the company for period 2015–2017. • consideration of the report on internal audit of the group for the last quarter of year 2013, At all meetings members of the Supervisory Board met in full cast. • consideration of the annual report on internal audit of the group for year 2013, • self-assessment of the audit committee of the supervisory board. Supervisory Board had no expenses for its operation, except for costs linked to the decision of the general meeting on the payments for performing the function. Remuneration 5th regular session, September 2 2014 of the supervisory board members is disclosed in table no. 54 of the annual report. • consideration of content of the contract on auditing the individual and consolidated financial statements for year 2014, • consideration of the report on the operations of the group for the period January –June 2014, A Business Report | 3. Supervisory Board Report Business Report | 3. Supervisory Board Report A 18 19

• consideration of the operational assessment of the group for the period January– December 2014, Based on the review of the annual report and the accompanying auditor's report, the • consideration of the report on liquidity situation of the group, Supervisory Board established that the Annual Report is prepared in accordance with • consideration of comparative analysis of selected indicators of electricity distribu- the provisions of the Companies Act and in accordance with accounting standards and tion companies in the period 2011–2013, that the information contained therein constitute a faithful reflection of the company's • familiarization with the presentation of Eco Atminvest, d. o. o. Company, operations in the previous financial year. • consideration of the report on the integrated risk management of the group for the first and second quarter of year 2014, On the basis of the foregoing considerations and the positive opinion issued by the cer- • consideration of the report on internal audit of the group for the first and second tified auditing company, the Supervisory Board, without comment approved the Annual quarter of year 2014, Report of the company Elektro Primorska d. d. and of Elektro Primorska Group for 2014. • consideration of the proposal of amendments to the Rules of Procedure of the Audit With this the Annual report of Elektro Primorska d. d. Company and of Elektro Primorska Committee of the Supervisory Board. Group for 2014 is adopted.

6th regular session, December 10 2014 In year 2014 Elektro Primorska d. d. Company made net profit in the amount of 2,813,603 • consideration of the proposal of additional criteria for selecting the audit of the an- EUR. Following the decision of the management, the company has formed other profit nual report, reserves in the amount of 47.36 % of net profit for year 2014 already in compiling the • consideration of the report on the operations of the group for the period January annual report. Company notes that the distributable profit as at 31. 12. 2014 amounted to –September 2014, 1,481,000 EUR and consists of the net profit from year 2014 in the amount of 1,481,000 • consideration of the report on liquidity situation of the group, EUR. • consideration of comparative analysis of selected indicators of energy trading subsidiary companies in the period 2011–2013, Management Board proposes that the entire distributable profit in the amount of • familiarization with the operations of Eco Atminvest, d. o. o. Company, and forming 1,481,000 EUR is paid to shareholders in the form of dividends. of opinion about the planned merger with E 3, d. o. o. Company, • consideration of the report on the integrated risk management of the group for the Supervisory Board believes that the Management Board's proposal on the use of dis- third quarter of year 2014, tributable profit is in line with the strategic development goals of the company and takes • consideration of the report on internal audit of the group for the third quarter of year into account the interest of the shareholders for the long-term increase in share value, 2014, and therefore supports the Management Board proposal on profit distribution and will • consideration of the annual report on internal audit for year 2015, forward it together with the Management Board to the General Meeting of Shareholders. • consideration of the work plan of the supervisory board audit committee for year 2015. Nova Gorica, May 25 2015

Members of the audit committee met in full composition, except at the 4th regular session, when Ms. Maja Curk, external member of the audit committee, was justifiably ab- Uroš Saksida, MSc sent. Chairman of the Supervisory Board

Audit Committee had no expenses for its operation, except for costs linked to the decision of the general meeting on the payments for performing the function. Remuneration of the audit committee members is disclosed in table no. 54 of the annual report.

Approval of the annual report and position on the auditor's report

Approval of the At its 17th regular session on May 25 2015 the supervisory board considered the annual report of Elektro Primorska d. d. Company and Elektro Primorska Group for year 2014, annual report including the report by the audit company ABC Revizija, družba za revizijo in sorodne and position on storitve, d. o. o., in which the authorized auditing firm notes that the financial statements the auditor's that are part of the annual report give a true and fair view of the financial situation of the Company and the Group and their income, changes in equity and cash flow statements. report Supervisory board had no comments to the auditor's report. A Business Report | 4. Corporate Governance Statement Business Report | 4. Corporate Governance Statement A 20 21

preparation of financial statements that present a true and fair view of the financial posi- 4. tion, income statement, cash flows and changes in equity in accordance with accounting Corporate Governance standards and applicable regulations. Internal audit activity in the company and the group is carried out in accordance with the Statement Regulations on Internal Audit in Elektro Primorska d. d. Basic function of internal audit is constantly checking and making recommendations for improvements in the functioning 4.1. Management board of the internal control system in terms of managing all types of risk. In accordance with 4.1.1. Appointment and composition the annual internal audit plan, which was approved by the Supervisory Board, in 2014 the In accordance with the Statute, the Management Board consists of one member. Office parent company conducted an internal audit in the following areas of process implemen- of the chairman of the Management Board lasts four years and he may be reappointed. tation: a) informatics in Elektro Primorska Company b) investments and maintenance of Since June 30 2012 the chairman of the board has been Uroš Blažica. infrastructure in Elektro Primorska c) process of recovery.

4.1.2. Responsibilities and operation Audit of the financial statements of the parent company and subsidiaries is carried out Chairman of the Board manages the business of the company to the benefit of the com- by the audit company ABC Revizija, d. o. o., Ljubljana. Within the audit of financial sta- pany, independently and on his own responsibility. In accordance with the Statute of the tements the external auditor cooperates with the internal audit. External and Internal Au- company the chairman of the board must obtain the consent of the Supervisory Board ditors report to the Management Board, Supervisory Board and Audit Committee of the prior to the conclusion of a legal transaction of over 835,000.00 EUR, for transactions on Supervisory Board on their findings. real estate and borrowing of more than 418,000.00 EUR.

Supervisory Board's consent is not required when it comes to business in the field of buying and selling electricity, legal transactions with real estate and borrowing and len- 4.2. Supervisory board ding, insofar as these legal transactions are included in the Company's business plan. 4.2.1. Appointment and composition Supervisory board in Elektro Primorska Company has six members. Four members are

Chairman of the Board reports regularly to the Supervisory Board about its work and representatives of shareholders, two representatives of workers. Members of the super- informs it about all significant business events. Chairman of the management board and visory board representing the shareholders are elected by the general meeting, while Chairman of the Supervisory Board consult on the strategy and business development representatives of workers by the works council in accordance with the law and its acts. also outside the meetings of the Supervisory Board. Term of office of the members of the Supervisory Board is four years and they may be reappointed.

4.1.3. Remuneration of the management In accordance with the employment contract the Chairman of the Board shall be entitled Since August 28 2013 the supervisory board of Elektro Primorska has been operating to the basic monthly salary and performance bonus. Basic salary (gross pay, undimini- in the following composition: Uroš Saksida, MSc, chairman, and Matjaž Bajec, Dean shed by taxes and contributions) is set as a multiple of average gross wage paid in a Kocjančič, Massimo Makovac, Valter Vodopivec and Jernej Kenda, members. group of Elektro Primorska in the previous financial year. Bonus for performance is determined in accordance with the criteria set out in the employment contract by a decision 4.2.2. Powers and operation of the Supervisory Board within 30 days after the adoption of the annual report for the Powers of the Supervisory Board are defined by law and the statute of the company financial year for which the bonus is calculated. Bonus can amount a maximum of 15% of Elektro Primorska d. d. In its operations, the Supervisory Board complied with the provi- the basic monthly salaries paid to the chairman of the board in the financial year and shall sions of the Corporate Governance Code of the Republic of Slovenia, which was based be paid only in the event that the company's planned profit was exceeded. on the Act Amending the Slovenian Sovereign Holding Act on March 15 2013 adopted by the Slovenian Restitution Fund, d. d. (SOD), and from December 19 2014 with the

In accordance with the employment contract the Chairman of the Board is also entitled to provisions of the Corporate Governance Code for Companies with Capital Assets of the an annual preventive medical examination, life and accident insurance, use of company State, which was in accordance with the provisions of ZSDH-1 adopted by the Slovenian car for business and private purposes, and payment of education expenses. Sovereign Holding, d. d.

In year 2014 the Supervisory Board met at nine regular and three correspondence sessi- 4.1.4. System of internal control and risk management relating to financial ons. Based on the responsibilities and powers set by law and the statute of the company, reporting, auditing For the effective functioning of the management system of the company it is crucial the Supervisory Board of Elektro Primorska d. d. regularly monitored and supervised the to ensure reliability of financial reporting. Internal controls include all procedures and operations of the parent company and the group Elektro Primorska. measures that the company implemented in order to manage risk and to ensure the A Business Report | 4. Corporate Governance Statement Business Report | 4. Corporate Governance Statement A 22 23

Supervisory Board has formed a four-member Audit Committee, which in 2014 consisted 4.4. Statement of compliance with the of: Dean Kocjančič, chairman, Massimo Makovac, internal member, and Maja Curk and Aleš Jakin, external members. Corporate Governance Code In year 2014 Elektro Primorska d.d. Company complied with the provisions of the Corpo-

Supervisory Board has not formed other committees. rate Governance Code of the Republic of Slovenia, which was based on the Act Amen- ding the Slovenian Sovereign Holding Act on March 15 2013 adopted by the Slovenian

4.2.3. Remuneration of supervisory board and supervisory board committees' Restitution Fund, d. d. (SOD). From December 19 2014 the company has complied with members the provisions of the Corporate Governance Code for Companies with Capital Assets For performance of their functions and regular work at the meetings members of the of the State, hereafter: Code, which was in accordance with the provisions of ZSDH-1 Supervisory Board and members of the Supervisory Board committees are entitled to adopted by the Slovenian Sovereign Holding, d. d. Code is published on the website: payment for performing the function, attendance fees and reimbursement, as determi- http://www.sdh.si/sl-si/upravljanje-nalozb/kodeks-upravljanja-kapitalskih-nalozb- ned by a decision of the general meeting. At the 16th general meeting of the company, republike-slovenije which took place on August 25 2011, the decision was adopted based on which the members of the supervisory board are entitled to payment for performing the function in the amount of 11,300 EUR gross per year, to attendance fee in the amount of 275 EUR 4.5. Compliance with the recommendations gross and to reimbursement of expenses in connection with the performance. Chairman and expectations of Slovenian Sovereign of the Supervisory Board is entitled to 50% larger payments and attendance fees. For correspondence sessions of the Supervisory Board, members of the Supervisory Board Holding are entitled to 80% of the attendance fee. Elektro Primorska d. d. Company meets the recommendations and expectations of Slo- venian Sovereign Holding with the smaller exception of recommendations and expecta- Members of the supervisory board committees shall receive a fee for performing the tions that have been newly adopted in December 2014 and the company will strive to functions, which for each member of the committee amounts to 25% of the basic perfor- implement in 2015. mance fee of the supervisory board member. Chairman of the committee is also entitled to an additional payment in the amount of 50% additional cost for a member of the supervisory board committee, while deputy chairman of the committee to payment in 4.6. Management of the Parent Company and the amount of 10% additional cost for performing the function of a supervisory board committee member. In accordance with the decision of the supervisory board the exter- the Group In Elektro Primorska d. d. a two-tier management system has been established. Appo- nal members of the committee are entitled to payment for performing the function in the intment of members of the management board and the supervisory board is conducted amount 11,300 EUR gross and attendance fee in the amount of 80 % attendance fee in accordance with applicable law and with the recommended standards in the field of belonging to the supervisory board members. management.

4.3. Shareholders meeting Elektro Primorska Group consists of Elektro Primorska d. d. as the parent company, Shareholders of Elektro Primorska d. d. exercise their rights arising out of the Compa- company E 3, energetika, ekologija, ekonomija, d. o. o. (owned by Elektro Primorska d. nies Act, at the general meetings of the company. Voting rights may be exercised by d.), company JOD, d. o. o. ( 100 % owned by E 3, d. o. o.) and company ECO ATMIN- shareholders who have been until the day of the meeting recorded in the central registry VEST, d. o. o. (100 % owned by E 3, d. o. o., since December 2013) as subsidiaries, of securities or the share register and have announced their participation at the general and company Knešca, d. o. o., as associate company (47.27 % owned by JOD, d. o. o. meeting at least three days before the general meeting, about which the shareholders are Company). specifically warned. Statute of the company does not set any restrictions on voting rights.

In year 2014 the shareholders met at the general meeting, which took place on July 4 For better connections and control over the operations of the subsidiary, management 2014. Shareholders were familiarized with the annual report for year 2013 and the report of the parent company represents the general meeting of the subsidiary E 3, energetika, of the supervisory board on the verification of the annual report for business year 2013, ekologija, ekonomija, d. o. o. Control of subsidiary's operation takes place on the basis they granted a discharge to the management and supervisory boards, decided on the use of regular reporting and approving of transactions in accordance with the provisions of of distributable profit for year 2013 and appointed the company ABC Revizija, družbo za the Act of Incorporation of the company E 3, d. o. o. revizijo in sorodne storitve, d. o. o., Ljubljana, an auditor of Elektro Primorska d. d. Com- pany for business year 2014. A Business Report | 5. Presentation Of The Company Business Report | 5. Presentation Of The Company A 24 25

5. 5.2. Mission, vision and business culture of Presentation Of The Company the company 5.2.1. Mission of the company Fundamental mission of Elektro Primorska d. d. Company is ensuring quality and reliable electricity supply in an environmentally friendly and safe way, in accordance with the laws 5.1. Company identity card and regulations. Mission of the company is also care for development and construction of electricity network in accordance with the needs of business and household customers. With professional and efficient operation we want to meet the expectations of owners and other stakeholders. It relates to the mission and vision of SODO, d. o. o. Company, Name: Elektro Primorska, podjetje za distribucijo električne energije, d. d. which are published on the following website (http://www.sodo.si/druzba_sodo/vizija):

Abbreviated name: Elektro Primorska d. d. »Our mission is to care for the long-term, reliable, quality and efficient supply Business address: Erjavčeva ulica 22, 5000 Nova Gorica of electricity distribution network users. We wish to connect with the customer Phone: 05 339 67 00 and become recognizable in our field as a friendly company with responsible Fax: 05 339 67 05 environmental management.« VAT identification number: 37102656

Registration number: 5229839 5.2.2. Vision of the company Transaction accounts numbers: 04750 0000510950 Nova KBM, d. d. Our vision is to create business environment which enables creation of new solutions and 02241 0019980250 Ljubljanska banka, d. d. development of infrastructure, sale and new projects by understanding the wishes of our

03130 1000002961 SKB banka, d. d. users, and by acting responsibly towards environment and employees.

06000 0039424688 Banka Celje, d. d. Companies of Elektro Primorska Group will be companies of high business excellence in Company is registered in the Companies Register at the District Court in Nova Gorica under number relation to our customers, employees, business partners, shareholders and other busi- 1/01335/00. ness environment. Its companies will continue to be socially responsible, will demonstrate high business culture and excellence of operation. They will be introducing friendly Share capital of the company: 78,562,831.75 EUR and innovative services and solutions for customers, buyers and other users of their Ownership as of 31. 12. 2014: 79.5000 % Republic of Slovenia services. They will achieve all this effectively through quality services and by minimizing 2.7631 % Skladi kapitalskih družb operating costs. Companies will be flexibly organized, which will enable them to adapt 14.4203 % PID (Authorized Investment Companies), originally to changes in business environment. funds, business entities

3.3166 % Employees, retired employees, other 5.2.3. Business culture

Supply area: SW, W, NW part of Slovenia Past experience and foreign experience confirm that for the successful operation of the company a good business culture is also needed. With constant development of inte- Size of the supply area: 4,335 km2 grated management system in accordance with ISO 9001 standard, with a responsible Number of customers: 131,408 attitude towards the environments in accordance with the ISO 14001 standard, health Amount of transferred electricity: 1,445 GWh and safety at work management system in accordance with BS OHSAS 18001 standard, Supervisory board: http://www.elektro-primorska.si which we verify by regular internal and external audits, and with acquisition of Family

E-mail address: [email protected] Friendly Company certificate we prove that we cultivate good business culture and establish social responsibility as business strategy of the company. Management: Uroš Blažica, chairman of the board

Supervisory board: mag. Uroš Saksida, chairman of the supervisory board 5.3. Regulatory frameworks of the electricity activity of the company Dean Kocjančič, member Important legal, statutory and contractual regulations governing the electricity business Massimo Makovac, member of the company are:

Matjaž Bajec, member

Valter Vodopivec, member

Jernej Kenda, member A Business Report | 5. Presentation Of The Company Business Report | 5. Presentation Of The Company A 26 27

Energy Act (EZ-1), which entered into force on March 22 2014, is an organic law, which after obtaining the consent of the Government of the Republic of Slovenia, which was fully transfers the European legislation in the field of the energy market, energy efficiency issued by order No. 36001-8/2007/4 as at December 27 2007 after a prior opinion from and renewable energy sources into the Slovenian legislation, and increases the trans- the Public Agency of the Republic of Slovenia for Energy as at November 13 2007. parency of legal arrangements in this field as well as complies with the decision of the Constitutional Court of the Republic of Slovenia as at April 14 2011. General terms and conditions for the supply and consumption of electricity from the electricity distribution network define: Energy Act lays down: • relations between SODO and consumers, • principles of energy policy, • connection to the electricity distribution network (hereinafter: network), • rules for the operation of the market of electricity and natural gas, • consumption and delivery of electricity, • transport of carbon dioxide through the pipe transmission networks, • measuring device and measurement of electricity, • resolving consumer complaints, • billing, method of charging and billing for the use of networks, • methods and forms of utilities implementation in the energy sector, • relations between SODO and electricity suppliers, • principles of reliable supply and efficient use of energy, • relations between customers and electricity suppliers, • promoting the use of energy from renewable energy sources, • records of measuring points, • requirements for the eco-design of products related to energy, • quality of services of the system operator of the electricity distribution network. • an indication of the consumption of energy and other resources of these products with the energy label and product information sheets, Rules on the system operation of electricity distribution network • conditions for the operation of energy plants, They were published by SODO, electricity distribution system operator, d. o. o., Maribor, • conditions for carrying out energy activities, on the basis of the fourth paragraph of Article 40 of the Energy Act (Official Gazette of the • issuing licenses and energy permits, Republic of Slovenia, No. 27/07 – official consolidated text, 70/08, and 22/10) and Article • competence, organization and functioning of the Energy Agency and the powers of 8 of the Decree on the concession of an electricity DSO service of general economic other bodies performing tasks under this Act. interest (Official Gazette of the Republic of Slovenia, No. 39/07) and after obtaining the consent of the Government of the Republic of Slovenia, which was issued by order No. Energy Act provides: 36001-3/2011/3 as at April 21 2011 and after a prior consent from the Public Agency of • conditions for the safe and reliable supply of users with energy services accord- the Republic of Slovenia for Energy No. 535-11/2009-3/EE-06 as at November 9 2009. ing to market principles, principles of sustainable development, taking into account efficiency, rational utilization of renewable energies and environmental protection System operating instructions for the electricity distribution network provide for a system conditions; of operation of the electricity distribution network, defining the distribution services of • competitiveness in the energy market by the principles of impartiality and transpar- electricity through distribution network, the method of providing system services on the ency, taking into account consumer protection and enforcement of effective control distribution network, operation and development of the distribution network, and techni- of the energy supply. cal conditions for connection to the distribution network.

Decree on the method of provision of an electricity DSO service of general econom- Contract on electricity infrastructure lease and provision of services for electricity ic interest and a service of general economic interest of electricity supply to tariff distribution system operator customers regulates the manner of implementation of the mandatory utilities activity of In June 2007 Elektro Primorska d. d. for the first time concluded the contract with SODO system operator of the electricity distribution network (hereafter: system operator activ- Company from Maribor, which is, as already mentioned, the exclusive holder of the con- ity) and the mandatory utilities activity of electricity supply to tariff customers (hereafter: cession for the distribution network system operator in Slovenia. On the basis of this supply to tariff customers), but above all it regulates: contract Elektro Primorska d. d. continues to perform most of the activities related to • rights and obligations of public service, the implementation of the activities of the distribution network system operator, which it • organizational and spatial design to provide these public services, already carried out until July 1 2007. These activities (services) are: • manner and conditions of providing services, which compose the public service, • maintenance of electricity infrastructure and organizing emergency services, • rights and obligations of users, • management and operation of the electricity distribution network, • method of financing the public service. • development, planning and investment in electricity infrastructure, • preparation and management of investments, General Conditions for connection to the distribution Electric system • monitoring and assessing the quality of supply, They were published by SODO, d. o. o., Maribor, on the basis of the fourth paragraph • electricity metering, of Article 70 of the Energy Act (Official Gazette of the Republic of Slovenia, No. 27/07 – • provision of services of access to the distribution network and other services to official consolidated text) and Decree on the concession of an electricity DSO service of users. general economic interest (Official Gazette of the Republic of Slovenia, No. 39/07) and A Business Report | 5. Presentation Of The Company Business Report | 5. Presentation Of The Company A 28 29

Since July 1 2007 the company Elektro Primorska d. d. no longer generates revenue from Sectors: charges for the use of the network (network charge), because it is a revenue of the con- • sector for distribution system management (DEES) cessionaire, but revenue from rentals for the electricity infrastructure and revenue for the • sector for distribution network (SDO) implementation of the above mentioned services to SODO from Maribor. • general sector (SS) and • finance and accounting sector (FRS). On October 29 2012 the Official Gazette of RS No. 81/2012 published Act determining the methodology for charging for the network charge, the methodology for setting the network charge, and the criteria for establishing eligible costs for electricity networks Special services of the management: with Annex 1: Implementation criteria and parameters for determining network charges • service of information and communication technologies (IKT) and for electricity network and identifying the eligible costs for the regulatory period 1. 1. • service for purchase and procurement (SNJN). 2013–31. 12. 2015. Regional distribution units: Act determining the methodology for charging for the network charge, the metho- • Distribution unit Nova Gorica (DU Nova Gorica ) dology for setting the network charge, and the criteria for establishing eligible costs • Distribution unit Koper (DU Koper) for electricity networks. This act issued by the Energy Agency, defines: • Distribution unit Sežana (DU Sežana) and • the methodology for setting the network charge and the criteria for establishing • Distribution unit Tolmin (DU Tolmin). eligible costs for electricity networks, separately for transmission and distribution network; Management board has the chairman of the board office, where there are organized the • methodology for charging for the network charge separately for transmission and secretariat, field of integrated management system, internal audit and risk management. distribution network; • methodology for charging for the network charge for customers that buy electricity from production facilities of renewable energy sources and high-efficiency co-gen- eration to the nominal power of 10 MW, for which they obtained the certificate of origin and which producers sell independently in the electricity market to end customers connected to the same distribution network; • duration of the regulatory period, implementation criteria and parameters for setting the network charge and to determine the eligible costs of the regulatory period.

On October 29 2012 the Official Gazette of RS No. 81/2012 published Act determining the methodology for charging for the network charge, the methodology for setting the network charge, and the criteria for establishing eligible costs for electricity networks with Annex 1: Implementation criteria and parameters for determining network charges for electricity network and identifying the eligible costs for the regulatory period 1. 1. 2013–31. 12. 2015. On December 16 2013 the Council of Energy Agency adopted the Act amending the Act determining the methodology for charging for the network charge, the methodology for setting the network charge, and the criteria for establishing eligible costs for electricity networks. Act applies from January 1 2014 and in certain items is retroactive.

5.4. Company organization

In accordance with the Rules on the internal organization of Elektro Primorska d. d. Com- pany, which entered into force on January 1 2013, the activity of the company is carried out in the following organizational units: A Business Report | 6. Human Resources Management In Year 2014 Business Report | 6. Human Resources Management In Year 2014 A 30 31

6. 6.3. Age structure of employees Human Resources Average age of employees in the company was 44.89 years and increased by 0.63 Management in Year 2014 compared to the year 2013.

Table 2: No. Age class Number of employees Number of employees in 6.1. General 1 to 20 1 individual age class At a time when business conditions are increasingly exacerbating, human resources ma- 2 from 21 to 30 years 37 nagement requires appropriate balance between measures that enable the company to 3 from 31 to 40 years 132 influence the reduction of costs directly and measures that ensure motivation of employe- 4 from 41 to 50 years 149 es for better work and retention of key personnel. That employees are the key factor of 5 from 51 to 60 years 142 success and undisturbed operation of the company was once again established in year 6 61 and more years 16 2014, when nature put us to the test once more. Despite the tough operating conditions Total 477 we did not neglect the most important fields, like training and education, creativity and cooperation between co-workers, which resulted in successful solving of problems and implementing of the set goals. Grafikon 1: Age structure of employees

6.2. Overview of key data about employees in 61 and more years 3,4 %

year 2014 from 51 to 60 years 29,7 % As at December 31 2014 there were 477 employees in the company. Average number of employees for year 2014 was 476 and increased by one employee compared to the from 41 to 50 years 31,2 %

average number in 2013. from 31 to 40 years 27,7 %

from 21 to 30 years 7,8 % Table 1: Employees No. of em- No. of em- Structure to 20 0,2 % overview Activity ployees as at Structure (%) ployees as at (%) 31. 12. 2013 31. 12. 2014

Main activity (distribution network sector, electricity 376 77.6 370 77.6 system management sector) 6.4. Structure of employees according to the Joint activities (management, financial accounting sector, 106 22.4 107 22.4 years of service general sector, purchasing, information technology) In year 2014 more than 60 % of employees had been employed for a period longer than 20 years.

Total 473 100 477 100 Table 3: No. Years of service Number of employees Number of employees 1 to 5 28 according to the years of service 2 from 6 to 10 years 42

3 from 11 to 20 years 113

4 from 21 to 30 years 145

5 from 31 to 40 years 133

6 over 40 years 16

Total 477 A Business Report | 6. Human Resources Management In Year 2014 Business Report | 6. Human Resources Management In Year 2014 A 32 33

Graph 2: Structure of employees according to the years of service 6.6. Educational structure of employees Educational level of employees is not significantly different compared with the previous year. over 40 years 3,3 %

from 31 to 40 years 27,9 % Table 5: Level No. of No. of Educational Structure Structure from 21 to 30 years 30,4 % No. according employees as employees as structure of (%) (%) employees to BP at 31. 12. 2013 at 31. 12. 2014 from 11 to 20 years 23,7 % 1 8/2 1 0,21 1 0,20

from 6 to 10 years 8,8 % 2 8/1 4 0,85 4 0,84

3 7 41 8,67 43 9,00 to 5 5,9 % 4 6/2 37 7,82 38 8,00

5 6/1 51 10,78 52 10,90

6 5 148 31,29 149 31,24

Average period of employment per employee in year 2014 amounted to 23.55 years and 7 4 169 35,73 168 35,22 it increased slightly – by 0.45, compared to the year 2013. 8 3 15 3,17 15 3,10

9 2 6 1,27 6 1,30 6.5. Structure of employees according to 10 1 1 0,21 1 0,20 gender Total 473 100 477 100 Gender ratio does not deviate significantly from year to year.

Table 4: Number of No. Gender Number of employees employees 6.7. Employees with disabilities according to 1 Male 401 gender As at December 31 2014 there were 35 disabled persons employed in the company. 2 Female 76 7 disabled workers performed their duties as a part-time job (4 hours); other 28 were Total 477 employed with a full time working obligation. Percentage of employees with disabilities exceeds 6 % of all employees, which fulfills the statutory quota from the Decree establishing employment quota for persons with disabilities – Article 3, Paragraph 3) D.

Since May 2014 the company has been granted the right by the Republic of Slovenia Fund for Promotion of Employment for Disabled Persons to bonuses for exceeding quo- Graph 3: Structure of tas, which the fund pays monthly in the amount of 20 % of the minimum wage for each employees according to gender disabled employee above the statutory quota.

Male 84,1 % Female 15,9 % 6.8. Education of employees In year 2014 192 employees attended the trainings, including seminars, courses, professional trainings, professional examinations, internal trainings. 267 working days were

spent for these purposes.

Within the application to the public tender Training and Education of Employees 2011 the company was selected by the Slovene Human Resources Development and Scholarship Fund for co-financing the implementation of employee motivation trainings. In this re- A Business Report | 6. Human Resources Management In Year 2014 Business Report | 6. Human Resources Management In Year 2014 A 34 35

spect the Company was entitled to reimbursement of 70 % of funds for the implemented In the company we take care of safe and orderly working conditions and to preserve the trainings. health of employees: • by respecting the Occupational Health and Safety Act and all the alternative legal 175 employees attended trainings and examinations in the field of health and safety at acts (in this respect a register of health and safety at work legislation was made), work. • by regular periodic medical examinations of workers, • by implementing specific preventive health measures: e.g. vaccinations against TBE, In order to obtain higher educational level the company has 15 contracts on education flu, implementation of preventive measures though promoting health at workplace, concluded with the employees, which have n been completed yet. • by implementing health and safety at work policy, which is the commitment of the company's management to ensure health and safety at work and represents a For the purposes of additional education and progress of employees (tuitions, work- framework for defining objectives of quality, environmental management and health shops, seminars, courses) in year 2014 we paid 131,354.32 EUR or an average of 276 and safety at work, EUR per employee. This amount includes also costs of employee salaries, which are • by making and adopting the Declaration of safety with Risk Assessment, which planned in the other item - cost of wages and salaries. additionally bounds the management of the company to implement measures, set goals, informing, trainings, giving instructions, appropriate organization and provi- Since October 1 2013 the company has not been giving scholarships. For several years sion of necessary sources, now there has been enough suitably educated candidates on the labor market, so we • by regular periodic checks and care of the working and protective equipment, give more funds to practical trainings of high school and university students, who other- • by making instructions for safe work and controlling the implementation of safe work wise have no opportunities obtaining specific skills in other companies. measures, • by monitoring the condition regarding injuries at work, occupational diseases as well as detecting and preventing their causes, 6.9. Care for employees • by training workers for safe work and regular assessments of their knowledge and In Elektro Primorska Company we devote much attention to creating good working con- preparedness in the field of safety and health at work. ditions, maintaining and improving the health and to identifying and eliminating adverse events. We are aware that a satisfied and motivated employee can contribute the most In the context of a systematic approach to improving health and safety at work in Elektro to the success of the company. Primorska Company we emphasize the necessity of a responsible attitude of the employees to the field of health and safety at work including fire protection.

Employees are informed about the events and activities in the company daily through electronic mail, on the intranet and bulletin boards. In the second half of the year we additionally enriched the informing of employees with the issuing of an internal e-newsletter.

1 3 Graph 4: 2 Number of 6.10. Health and safety at work accidents at work in Elektro Primorska Safe and healthy working environment are the basic prerequisites for productivity and d. d. in the period from 2010 to 2014 satisfaction of workers, who care for the well-being of all employees and the company 21 17 13 16 26 as a whole. easier

serious In year 2014 we took care to provide and meet conditions for safe and healthy work of

employees and carried out all the necessary activities to reduce and prevent life and 2010 2011 2012 2013 2014 health risks at workplaces. A Business Report | 6. Human Resources Management In Year 2014 Business Report | 7. Implementation Of Annual Objectives In Year 2014 A 36 37

7. 6.11. Voluntary supplementary pension insurance Implementation of annual Regulation and realization of the principles of social security of employees is part of the objectives in year 2014 company's business policy. One of the segments taking care of the good social condition of employees is also the decision of the company for an agreement on financing the supplementary pension insurance for employees of Elektro Primorska d. d.

Updating the system for the comprehensive management of customer relations Joining the voluntary supplementary pension insurance scheme increases the social se- (implementation of the medium-term objective – improvement of customer satis- curity of employees, above all during their retirement. faction for services rendered): In year 2014 we upgraded and updated the technology of the elS information system for work with customers. We continuously perform organizational, staff, and technological 99 % of all employees are included in the voluntary supplementary pension insurance measures to increase efficiency, transparency, risk management and rationalization of scheme. costs. In year 2014 we realized the system to inform customers about outages, which is currently at the stage of trial operation and integration into a new company website. Set objective was fully achieved. 6.12. Accident insurance Update of the geographic information system (GIS Eng. NIS) (implementation of All employees in Elektro Primorska d. d. Company are insured against injury at work and the medium-term objective – continuous improvement of the power supply service in connection with work. quality): a. implementation of the first phase of GIS upgrade b. inventory of LV network and entry into GIS up to 90 %. 6.13. Secondary activities affecting the In the context of the implementation of the first phase of upgrading the GIS geographic well-being of employees information was forwarded to providers to demonstrate the functionality of systems for We take care of the well-being of employees in Elektro Primorska d. d. Company by entering and editing of geographic and attribute data. Interviews were conducted with stimulating and creating material conditions for different forms of socializing and spend- companies CGS, d. o. o., Sl-King, d. o. o., and GDi GISDATA, d. o. o. In addition, we had ing holidays in holiday facilities owned by the company. Day of the employees was not a presentation of GIS, which the company SODO intends to introduce and presentations organized in year 2014 due to large workload of all employees during the elimination of of GIS solutions of the Telekom Slovenia. In view of this, we have prepared a comparative analysis of the offers in the first phase. We have prepared a list of requirements for consequences of ice damage. Nevertheless, large number of employees took part in network inventory in the first stage and forwarded it to Telekom Slovenia, d. d., together annual sports games of electricity distribution companies, which are an opportunity for with which we will study the technical possibilities of adapting their system for identifying socializing of employees within Elektro Primorska Group as well as with the employees of the distribution network. other distribution companies. In year 2014 the company paid 5,000.00 EUR for operation

of Elektro Primorska sports society, which is the main motivator of sports and recreation- Due to the accident and elimination of its consequences the inventory of LV-network was al socializing of employees by organizing sports activities and mountain trips. being implemented in limited scale. We achieved 76.8 % realization.

Comprehensive asset management (asset management) In accordance with the Family Friendly Company certificate, which the company obtained Long-term objective of introducing a system of integrated asset management is to in- already in year 2010, we continued with the implementation of selected and agreed for crease the utilization of funding opportunities, increase their value and reduce manage- new additional measures that will be implemented in year 2015. ment costs. Specific objectives, which we pursue in this, are: • monitoring and managing the assets installations and related costs through one system, • integrated management of planned and unplanned maintenance activities, • optimization of resources, • planning stock movement, A Business Report | 7. Implementation Of Annual Objectives In Year 2014 Business Report | 8. Distribution of Electricity A 38 39

8. • managing contracts with suppliers, • automation of business processes. Distribution of Electricity

To establish a system of integrated assets management certain conditions must be met. First one (elS renovation) was met on September 10 2014. Next necessary step is the selection of the supplier of the new ERP system as the last purchase of a new GIS. IT In year 2014 the activity was carried out in accordance with the Contract on the lease of strategy of Elektro Primorska group is being prepared. Task force was established, which electricity infrastructure and provision of services for electricity distribution system ope- defined the project's platform. Offers of potential providers were obtained. In January rator between Elektro Primorska and SODO. It is implemented in two organizational units: 2015 we selected a suitable provider and signed a contract. Activities related to IT strat- in distribution network sector – SDO and the electricity distribution system management egy formation start in February 2015. sector – SUDEES.

Implementation of RAST program In year 2014 the electricity system managed by Elektro Primorska d. d., reached the fol- Program of operating costs rationalization was launched in year 2012. In 2013 we started lowing level of technical equipment according to distribution units (DU). with the implementation of proposed measure. In the first stage of the project's implementation Elektro Primorska Group defined the impact of these measures on the oper-

ations of the group (EBIT) in total amount of about 2.23 mio EUR (by the end of the year Table 6: ELEKTRO Distribution network 2015). Following are achieved financial effects of the program according to individual DU GORICA DU KOPER DU SEŽANA DU TOLMIN PRIMORSKA operated by Elektro TOTAL Primorska as at organizational units in year 2014 according to year 2011. Implementation of RAST pro- 31. december 2014 DV : 10kV–110 kV (m) 684,037 270,179 657,318 532,202 2,143,736 gram continues in year 2015. KBV: 10kV–35 kV (m) 129,824 182,893 169,917 75,561 558,195

NNO + JR (m) 1,620,522 1,799,150 1,121,777 1,304,971 5,846,420

RTP + RP (piece) 17 8 8 7 40

TP (piece) 800 526 570 474 2,370

DV – power line, KBV – cable conduit, NNO – low voltage network, JR – public lighting 92,6 % RTP – transformer substation, RP – substation, TP – transformer station Graph 5: Achieved financial effects according to individual OU in year 2014 and 2011 8.1. Services for SODO (December 2014) For the implementation of services for SODO Company in year 2014 there were 6,256,455 EUR spent, which amounted to 90.93 % of planned funds for this period or 97.79 % compared with year 2013.

Table 7: 100,6 % Type of work Plan (€) Realization (€) Realization (€) % % Realization of services for SODO January– January– January– 2:1 2:1 in year 2014 December 2014 December 2014 December 2013

1 2 3 4 5 49,0 % 129 Maintenance of electricity 3,286,472 2,916,171 2,877,958 88,73 101.33 154,8 % infrastructure

140 Implementation and organization 372,600 376,795 375,178 101.13 100.43 108,0 % of emergency service 67,0 % number of 9 9 9 10 9 19 141 Conducting of operation 420,700 419,842 426,267 99.80 98.49 measures 146 Process management 374,600 354,444 364,317 94.62 97.29 PUBLIC FINANCE AND DISTRIBUTION DEES PROCUREMENT GENERAL 151 Telecommunication support 160,000 146,704 164,629 91.69 89.11 ACCOUNTING NETWORK MANAGEMENT IKT SERVICE AND PURCHASES DEPARTMENT DEPARTMENT DEPARTMENT DEPARTMENT SERVICE 156 Management of protective 42,200 36,000 30,000 85.31 120.00 devices

Estimated 161 Development 213,500 131,976 153,094 61.82 86.21 impact on EBIT 439.515 977.250 121.776 57.645 88.281 234.816 (in EUR) 168 Monitoring and establishing of 32,000 8,960 22,033 28.00 40.67 supply quality Realized impact on EBIT 442.363 904.712 188.508 38.610 95.322 114.987 169 Electricity metering 1,142,340 991,596 1,156,354 86.80 85.75 (in EUR) 183 Implementation of access 836,140 873,967 828,038 104.52 105.55 services

TOTAL IMPLEMENTATION OF 6,880,552 6,256,455 6,397,868 90.93 97.79 * Note: Problem of determining the actual savings in 2014 is related to the additional costs incurred in the period of SERVICES FOR SODO ice damage, since these cannot be entirely excluded. A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 40 41

8.1.1. Achieving the goals and comparison with year 2013 Majority of investments in medium voltage overhead lines was carried out to eliminate the Financial realization of the plan of implementation of services for SODO is lower than consequences of ice damage in early 2014. planned due to the rationalization implemented maintenance works measures. In individual areas, the plan was physically carried out between 75% and 100%. Inspection of Significant investments in the 20 kV overhead lines: equipment were realized 97.2 %, audit of devices 76.0 % and route clearings for over- DV Hrenovica RTP Postojna–Razdrto (5 km), DV Pivka–Ilirska Bistrica (4.9 km), DV head lines 107.7 %. In audits of facilities, the percentage of output is lower, because our Vojsko–Kočevše (4 km) , DV RTP Črni Vrh–Idrija (3.7 km), DV RTP Postojna–TP Prestra- colleagues were busy due to the elimination of ice damage. nek (3.6 km), DV branch Vojsko (3 km), DV branch Mrzla Rupa (3 km).

Physical realization of the plan in the investment group 20 kV power lines amounts to 8.2. Investments 100.12%, while the financial 96.56%. Implementation of investments in 2014 took place in accordance with the plan and with Investments in the medium-voltage cable conduits were carried out with the objective of the changes that have been defined within the version II and version III of the plan of ensuring reliable supplies of electricity consumers. Thus, medium-voltage cable conduits investments. As by the month of October we successfully remedied the consequences of investments were incorporated in the urban areas with the aim of increasing the looping ice damage with the planned financial resources, we decided that by the end of 2014 we of the network in areas where there are weather phenomena that affect the quality of increase the volume of rehabilitation works, and thereby reduce the risk for the smooth electricity supply (sleet, wind), and on the routes, where frequent defects were occurring functioning of the electricity distribution system. Thus, we increased the planned amount due to wear of the existing cable conduits. of investments in the version III of the investment plan from 12,000,000 EUR by additional 1,100,000 EUR to 13,100,000 EUR. Significant investments in the 20 kV cable conduits: KBV RTP Postojna–Pasje hiše (4.5 km), KBV heavy line Pivka–Postojna (3.3 km), KBV riral For investments in facilities, equipment procurement and project documentation we have Pivka–Postojna (3.3 km), KBV 20 kV Lohača–Staje (2.2 km), EKK Miren–DV Sela (1.72 together invested 13,100,450 EUR or. 100.00 % of planned annual funds (in year 2013 km), KBV Dekani 1–Dekani square (1.5 km), reconstruction KBV TP Parangal–Marina (1 financial realization of the plan was 10,982,407 EUR or. 91.52 % of planned funds). km), KBV Debeli Rtič II–Miloki (0.9 km).

Physical realization of the plan in the investment group 20 kV cable conduits amounts to 89.89 %, while the financial 91.01 %. Discrepancy between planning and realization was due to bad weather at the end of 2014, which did not allow the execution of the works Table 8: for the construction of cable routes, especially on the route between Pivka and Postojna. Investments Investment groups Realized assets Shares of investment groups according to main Physical realization of the plan in the investment group 0.4 kV overhead lines amounts investment groups Buildings 10,265,185 € 78.36 % of all assets to 99.94 %, while the financial to 104.49 %. Increased volume of realization is detected Equipment 2,097,596 € 16.01 % of all assets mainly in the implementation of the renewal of obsolete 0.4 kV overhead lines in areas of Documentation 737,669 € 5.63 % of all assets DU Nova Gorica.

Total: 13,100,450 € Physical realization of the plan in the investment group 0.4 kV cable conduits amounts to 89.19 %, while the financial to 110.60 %. Financial realization surpassed the planned We invested 11,388,425 EUR or. 98.64 % of planned annual funds in the sector for the values due to the increased volume of work and specific costs in urban areas. distribution network, 1,209,265 EUR or. 109.93 % of planned annual funds in the DES management sector, 87,825 EUR or. 93.43 % of planned annual funds in market activiti- Physical realization of the plan in the investment group TP 20/0.4 kV amounts to 107.53 es, 15,790 EUR or. 63.16 % of planned annual funds in general sector and 399,145 EUR %, while the financial to 108.86 %. Greater realization than planned is due to the imple- or. 118.88 % of planned annual funds in the services for information and telecommuni- mentation of a large number of renovations of transformer stations. cation technologies.

According to different groups the results are as follows: Facilities up to 20 kV In facilities of up to 20 kV: DV, KBV, TP and NNO we invested a total of 9,550,861 EUR or. 72.90 % of entire annual consumption (in year 2013 – 5,590,004.00 EUR). Financial realization of the plan was 98.66 %. A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 42 43

Table 9: Physical indicators 2014 2013 2012 of constructed Transformer stations RTP 35/20/10 kV and substations (RP) and reconstructed Power lines 20 kV 97.56 km 30.90 km 27.23 km facilities In RTP 35/20 kV RP we invested a total of 397,205 EUR. In year 2014 we implemented Cable conduits 20 kV 32.48 km 18.53 km 19.17 km the following investments in RP:

Low-voltage network 47.91 km 38.58 km 49.66 km • RP 20 kV Gradišče – e completed the renovation of 20 kV juncture with the supply and installation of new primary and secondary juncture equipment. Transformer stations 24 pcs 37 pcs 38 pcs • RP 20 kV Bovec – together with the national technical office, we implemented a static post-earthquake rehabilitation of the building and replaced batteries. We intend to 110 kV power lines complete the static rehabilitation in 2015. In 2014, we carried out the renovation of the 110-kV Pivka Postojna, which collapsed in • RP 20 kV Rožna dolina – we installed a remote control with the aim of improving the February due to ice damage. quality of electricity supply in the area. • RP 20 kV Kanal – we carried out the replacement of rechargeable batteries. Physical realization amounts to 100 %, while financial to 109.45 %. Financial deviation • RP 20 kV Komen – we started with activities for the purchase of equipment for the from the planned value was created because it was necessary to carry out additional reconstruction of 20 kV juncture. We intend to carry out the reconstruction in 2015. work, which the basic plan did not cover. Need for it was demonstrated during the ren- • RTP 110/20 kV Idrija: we started with the reconstruction of the equipment of own ovation (rehabilitation of additional damage discovered on steel structures observed in use of energy facility. In 2014 we built two new cabinets of DC distribution and test- the implementation of works, additional works for cleaning undergrowth in the leg parts ed them functionally. They will provide the power to in 2015 reconstituted secondary of pillars, ancillary works for regulating the access routes due to soggy terrain, additional part of 20 kV juncture and remote control devices. Old cabinet of DC distribution will replacement of cables between the SM 12 and SM 15 due to the detection of damage, remain to power the rest of the juncture until the latter is reconstituted too. increased costs for the implementation of control over the quality of the works carried out

due to the inclusion of new subcontractors). Physical realization in investment group RTP 35/20 kV amounted to 83.07 %, while financial to 108.77 %. Physical realization does not reach the planned level due to the long Transformer stations (RTP) 110/20 kV procurement procedures in the event of the implementation of investments in RP Komen. In facilities of transformer stations RTP 110/20 kV we invested a total of 119,291 EUR. In Financial realization exceeds the physical due to incorrect assessments of the value of year 2014 we implemented the following investments in v RTP 110/20 kV: post-earthquake rehabilitation in RP 20 kV Bovec. • RTP 110/20 kV Ilirska Bistrica: together with the company ELES we completed the

construction and obtained an operating permit for a new 110 kV juncture in GIS Electricity facilities total implementation. In electricity facilities we invested a total of 10,265,184 EUR, financial realization amount- • RTP 110/35/20 kV Tolmin: We completed the renovation of the 110 kV transformer ed to 98.01 % of the planned (in year 2013: 7,306,021 EUR). Share of electricity facilities field TR 1 so that we changed technically obsolete primary and secondary equip- in total spending amounted to 76.85 %. ment.

• RTP 110/20 kV Gorica: We carried out electrical installation work to connect power Commercial and operating buildings transformer 110/20 kV TR 2, which we transported from RTP Vrtojba. We plan to In 2014 we arranged rooms for measuring center in the service complex Kromberk, complete the work in year 2015. bought an apartment on the Rejčeva Street and carried out small-scale investments in • RTP 110/20 kV Koper: we started with activities for the installation of operational commercial buildings in DU Nova Gorica and DU Sežana. Invested assets amounted to control of power transformer 110/20 kV TR 2. 197,827 EUR. • RTP 110/20 kV Idrija: we completed the reconstruction of own use energy facility, by

replacing the worn-out rectifiers and inverters. Physical realization in investment group commercial buildings amounted to 98.40 %, • RTP 110/20 kV Cerkno: we started with activities for the reorganization of the con- while financial to 77.06 %. Financial realization lags behind the plans mainly due to the necting links in the juncture20 kV, which will enable the implementation of safe ma- delay of contractual activities for arrangement of a conference room at the seat of DU nipulation of the switch between the systems collectors. Sežana to year 2015.

Physical realization in investment group RTP 110/20 kV amounted to 47.82 %, while Physical realization in investment group operating facilities amounted to 107.41 %, while financial to 59.88 %. Physical realization does not reach planned levels owing to the financial to 96.46 %. delayed activities for the installation of insulation in medium voltage bus bars of power

transformers in RTP 110/35/20 kV Tolmin and RTP 110/20 kV Postojna, and in the execu- Facilities total tion of the connecting links in the juncture 20 kV in RTP 110/20 kV Cerkno. In facilities RTP, DV, KBV, TP, NNO and buildings we invested a total of 9,550,861 EUR, financial realization amounted to 98.66 % of the planned (in year 2013 – 5,590,004 EUR). Share of facilities in total spending amounted to 78.36 %. A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 44 45

Equipment Tools In the equipment we invested a total of 2,097,596 EUR or 16.01 % of all assets (in year We purchased the necessary tools and equipment to carry out electrical installation 2013: 2,901,153 EUR). Total financial realization amounted to 110.78 % of the planned. works, which replaced the worn-out.

Remote control Financial realization amounted to 87.77 % of the planned value. Planned value was not We carried out the following major investments: achieved due to lower achieved prices for the purchase of tools and smaller needs for • carried out the adaptation of SCADA system for login of failures and replaced a wall tools than according to plans. display in the distribution control center, • continued with the project of installation of protection on covered conductors, Means of transport • installed protection devices for the control of resistor in two 110 kV transformer We purchased seven new transport vehicles, replacing the worn out. fields, Financial realization amounted to 111.38 %. Financial realization was exceeded due to • began with activities for replacement of secondary equipment of 20 kV juncture in faster delivery of means of transport according to plans. RTP Idrija (installed a new DC hub of own use), • carried out the transition to the protocol IEC 104 RP Črni Vrh and Dobrovo, Office equipment • installed two new remotely controlled disconnectors, We purchased the necessary office equipment for the call center at company headquar- • installed remote control in RP Rožna Dolina, ters and replaced other outdated equipment. Financial realization amounted to 49.88 % • replaced all technically outdated protective relays on existing DVPLMs. of the planned value.

Financial realization amounted to 103.58 % of the planned. Deviation was due to the ac- Informatics celerated implementation of the replacement of relays DVPLM's according to the plans. We completed the renovation of IIS, we purchased computers and printers as well as in- Financial realization amounted to 106.09 % of the planned. Deviation was due to the formation energy equipment. Financial realization amounted to 122.09 % of the planned accelerated implementation of works in the replacement of secondary equipment for values. Deviation was caused due to unplanned labor costs for the installation of com- juncture20 kV in RTP Idrija and incorrect assessment of the budgets for replacing the puter and energy IT equipment. relays on existing DVPLMs. Documentation Telecommunications For the project documentation we invested a total of 737,669 EUR or 5.63 % of all assets We carried out the following major investments: (in year 2013: 775,232 EUR). Financial realization amounted to 100.64 % of the planned. • rehabilitated the damaged telecommunication links from the ice damage, like RTP We have produced 82.67 pieces of project documentation. Postojna–Belsko, • began with activities for the introduction of digital FM.

Financial realization amounted to 98.89 % of the planned value.

Measuring devices We carried out the following major investments: • purchased and installed in 1694 direct electricity meters, • purchased and installed 207 industrial meters, • replaced electricity meters in RTP Pivka, • implemented the SUNSEED project.

Financial realization amounted to 112.70 % of the planned value. Financial realization deviates from the planned value because labor costs for the installation of electricity meters were not included in the plan. A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 46 47

Table 10: Overview of NO. NAME OF FACILITY, EQUIPMENT PLANNED REALIZATION REALIZATION % % investment plan 2014 IN EUR 2013 IN EUR 2014 IN EUR realization for year 8.2.1. Achieving the goals and comparison with year 2013 2014 1 2 3 3:1 3:2 In Elektro Primorska d. d. Company in year 2014 we implemented investments according 1 POWER LINES 4,153,950 1,256,352 4,101,600 98,7 % 326,5 % to the adopted plan of investments in the amount of 13,100,000 EUR. Realization of the 1.1. DV 110 kV 700,000 0 766,173 109,5 % 0 % plan of investments slightly exceeded the planned value. Compared to 2013, the realiza- 1.2. DV 35kV 0 0 0 0,0 % 0 % tion of the plan of investments increased by 19.3 %. 1.3. DV 20kV 3,453,950 1,256,352 3,335,426 96,6 % 265,5 % 2 CABLE CONDUITS 2,677,200 1,451,416 2,436,600 91,0 % 167,9 % 8.3. Acquired and transmitted electricity in 2.1. KBV 110kV 0 0 0 0 0 year 2014 2.2. KBV 20kV 2,677,200 1,451,416 2,436,600 91,0 % 167,9 % In year 2014 there were 1,340,006.8 MWh acquired from the transmission network, 3 LOW VOLTAGE NETWORK 1,955,650 1.563,309 2,080,009 106,4 % 133,1 % 188.351,0 MWh from electricity producers and 3,158.0 MWh from aggregates. In total, 3.1. NADZEMNI VODI 0,4 kV 1,359,850 783,844 1,42,024 104,5 % 181,3 % the distribution network acquired 1,531,515.8 MWh. Comparison of assumed quantities 3.2. KABLOVODI 0,4kV 595,800 779,465 658,985 110,6 % 84,5 % of electricity in 2014 from 2013 records a drop acquisition from the transmission network 4 STATIONS 1,458,190 2,753,932 1,449,148 99,4 % 52,6 % by 4.9% and an increase in the acquisition of the qualified producers by 16.4%, so that

4.1. RTP 110/20kV 199,200 1,216,718 119,291 59,9 % 9,8 % the joint acquisition index amounts to 0.9752.

4.2. RTP 35/20/10kV 365,150 218,286 397,205 108,8 % 182,0 % In 2014, all customers were invoiced for 1,445,454.0 MWh. 4.3. TP 20(10)/0,4kV 710.550 986.714 773,506 108,9 % 78,4 % Index of invoiced electricity on quantities from year 2013 amounted to 0.9733. 4.4. TRANSFORMATORJI 183,290 332,214 159,146 86,8 % 47,9 %

TOTAL FACILITIES UP TO 20 kV 9,680,640 5,590,004 9,550,861 98,7 % 170,9 % (1.2+2.2+3+4.3+4.4)

TOTAL ELECTRICITY FACILITIES 10,244,990 7,025,008 10,067,357 98,3 % 143,3 % (1+2+3+4)

7 COMMERCIAL BUILDINGS 116,250 212,978 89,592 77,1 % 42,1 % Table 11: Realization 2014 Realization 2013 Index of realization Month Plan 2014 [kWh] Monthly quantities [kWh] [kWh] (2014/2013) 8 OPERATING FACILITIES 112,200 68,035 108,236 96,5 % 159,1 % of delivered electricity January 121.323.005 124.697.217 124.805.441 0,9729 FACILITIES TOTAL 10,473,440 7,306,021 10,265,184 98,0 % 140,5 % February 108.255.836 114.610.366 119.993.572 0,9446 9 REMOTE CONTROL 255,700 702,032 271,281 106,1 % 38,6 % March 124.301.395 130.822.608 128.870.595 0,9502 11 TELECOMMUNICATION 81,500 172,007 80,598 98,9 % 46,9 % April 119.525.577 121.907.809 119.382.456 0,9805 12 MEASURING DEVICES 755,300 1,183,333 851,285 112,7 % 71,9 % May 115.761.830 120.188.098 125.765.262 0,9632 13 MECHANIZATION 0 19,150 0 0,0 % 0,0 % June 122.811.344 119.735.744 124.438.560 1,0257 14 TOOLS 113,810 160,054 99,901 87,8 % 62,4 % July 129.996.626 134.126.144 131.492.783 0,9692 15 MEANS OF TRANSPORT 315,000 323,506 350,871 111,4 % 108,5 % August 119.210.943 124.651.770 121.238.058 0,9564 16 OFFICE EQUIPMENT 15,000 38,869 7,483 49,9 % 19,3 % September 115.094.643 123.549.603 122.787.417 0,9316 17 INFORMATICS 454,300 302,202 436,177 96,0 % 144,3 % October 126.048.484 126.268.114 126.614.823 0,9983 EQUIPMENT TOTAL 1,893,560 2.901,153 2,097,596 110,8 % 72,3 % November 119.536.751 119.329.518 118.128.337 1,0017 18 DOCUMENTATION December 123.587.560 125.190.865 125.659.696 0,9872 18.1. PROJECT DOCUMENTATION 733,000 775,232 737,669 100,6 % 95,2 % Total 1.445.453.994 1.485.077.856 1.489.177.000 0,9733 DOCUMENTATION TOTAL 733,000 775,232 737,669 100,6 % 95,2 %

INVESTMENTS 13,100,000 10,982,407 13,100,450 100,0 % 119,3 %

In year 2014 the electricity sent to Italy amounted to 50,153.9 MWh. 13,897.1 MWh were sent to the area of Gorica and 36,256.8 MWh to the area of Opčine. Distribution of electricity in Italy is not recorded as a distribution from the distribution network management, but as the supply of energy on commercial lines.

In 2014 losses in the distribution network amounted to 82,903.8 MWh or 5.74 % of invoiced quantities. A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 48 49

2014 INVOICED QUANTITIES REVENUE FROM USE OF NETWORK [€] REVENUE SUPPORTS [€] TOTAL REVENUE [kW] [kW] Trans- Distribution System Addition Addition Excessive Addition Addition [€] mission network Services JARSE BORZEN wattles OVE + DVE 8.4. Access to the distribution network network energy SPTE In 2014 the organization of the distribution of electricity remained unchanged and so consumption distribution system operator - SODO, d. o. o., based in Maribor remained the holder of January 1.208.490 121.323.005 697.407 3.198.929 387.635 20.625 15.772 22.467 1.067.487 -2 5,410,319

providing access to the distribution network under the provisions of the Energy Act, while February 1.200.256 108.255.836 643.634 2.961.053 384.994 18.403 14.073 19.120 1.049.774 3 5,091,054

the electricity distribution companies remained providers on the basis of contracts on March 1.209.753 124.301.395 683.972 3.058.826 388.040 21.131 16.159 25.725 1.060.095 5 5,253,953

lease of distribution infrastructure and provision of services for SODO. April 1.156.473 119.525.577 559.017 2.620.424 370.950 20.319 15.538 25.592 1.020.099 -6 4,631,933

May 1.202.586 115.761.830 562.877 2.653.518 385.741 19.680 15.049 22.909 1.058.790 20 4,718,584

As part of the implementation of the operational tasks of providing access to the distribu- June 1.220.310 122.811.344 572.065 2.666.539 391.427 20.878 15.965 32.499 1.092.346 0 4,791,720

tion networks all revenues from network usage are revenues of SODO. July 1.216.735 129.996.626 593.300 2.752.611 390.280 22.099 16.900 32.324 1.087.251 0 4,894,763

August 1.216.016 119.210.943 572.907 2.692.296 390.049 20.266 15.497 27.602 1.081.294 -3 4,799,909 Elektro Primorska d. d. as owner of the distribution infrastructure and the service pro- September 1.194.774 115.094.643 554.970 2.628.177 383.236 19.566 14.962 24.024 1.046.636 0 4,671,571 vider issues SODO monthly bills for rent of infrastructure and services, as well as for October 1.241.074 126.048.484 688.165 2.959.676 398.087 21.428 16.386 23.442 1.112.979 0 5,220,164 the purchase of electricity to cover losses in the distribution network in the amount of November 1.214.036 119.536.751 663.195 2.917.149 389.414 20.321 15.540 20.224 1.070.051 0 5,095,895 recognized costs. December 1.222.484 123.587.560 709.114 3.189.304 392.124 21.010 16.066 17.798 1.085.219 0 5,430,635 TOTAL 14.502.987 1.445.453.994 7.500.623 34.298.502 4.651.978 245.727 187.909 293.725 12.832.020 17 60,010,500

8.4.1. Use of electricity network In accordance with the provisions of the Act determining the methodology for charging for the network charge, the methodology for setting the network charge, and the criteria 8.4.2. Excessively acquired wattles power at cos ϕ < 0,95 Table 12: for establishing eligible costs for electricity networks (Official Gazette RS, No. 17/2014) Revenues from In 2014 there were no changes regarding the way excessive reactive energy for cus- network use and tariff items for distribution network did not change. supports for year tomers was acquired and with the acquisition on the transmission network. There was 2014

On January 1 2014 lower tariff item for transmission network, which is managed by ELES a change in the pricelists though. For high-voltage feed the same differentiated price Company, entered into force. Network charge for transmission network decreased by 5.1 remained 0.00626 EUR/kvarh per individual feed point. For medium and low-voltage feed % compared to year 2013. Downward trend in transmission network charge will continue the consumption is no longer charged or the new pricelist now equals 0 EUR/kvarh. In in 2015. accordance with the lease agreement of the distribution infrastructure and implementation of services for the system operator of the electricity distribution network Elektro

In 2014 there was also no change in the contribution for the provision of support for Primorska d. d. issues invoices from excessively acquired reactive power in the name diffuse sources. This was last changed in September 2013, when there was a significant and for the account of SODO, d. o. o. reduction in high and medium-voltage consumption groups. In year 2014 there were 330,974 kvarh of excessively acquired wattles power acquired

In year 2014 the number of customers connected to the distribution network of Elektro from the transmission network. Index of wattles power from the transmission network Primorska, increased by 364 and as at December 31 2014 it amounted to 131,408. compared to the quantities in 2013 amounted to 1.0433. Cost of excessive reactive power is 0 EUR, whereas the total acquired energy occurs on the medium-voltage level.

In 2014 to all electricity consumers in the area of Elektro Primorska there were by In the same period the excessive wattles energy from electricity networks of all custom- 14,502,987 kW of power invoiced and 1,445,453,994 kWh of electricity, and in this re- ers in the area there were 35,193,295 kvarh invoiced in the amount of 293,725,03 EUR. spect the invoiced value of 60,010,500 EUR. Index of invoiced value compared to the Index of excessive reactive energy on quantities in 2013 amounted to 1.07165. value in 2013 is 0.9479. Account of excessive reactive energy for the area for the year 2014 show positive difference of 293,725.03 EUR.

8.4.3. Electricity losses in the distribution network In accordance with the mentioned agreement on the lease of electricity distribution infrastructure and provision of services for the distribution system operator, the company Elektro Primorska in 2014 purchased electricity to cover losses in its own name and for A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 50 51

Table 13: Peak and annual operating hours of Elektro Primorska in year 2014

its own account under a contract of sale and purchase of electricity from the supplier Holding Slovenske elektrarne at the price of 51.66 EUR/MWh. For the calculation of the

costs for covering the losses the recognized percentage of losses in the amount of 5.77% Entire electricity Operating hours Operating hours Monthly peak acquired* annual** annual** Monthly peak Entire electricity Month of consumption of electricity charged to customers at the purchase cost of losses (51.66 ratio 2014 / 2013 acquired 2013 [MWh/h] date hour [MWh] [h] [MWh/h] €/MWh) was used. January 249,772 29/01/14 10:00 135.703,488 6.397,031 248,240 1,006 142180,087

February 227,424 19/02/14 10:00 119.341,950 6.840,560 254,339 0,894 129905,179 Losses in the distribution network for year 2014 amounted to 82,903,838 kWh, which March 235,560 05/03/14 20:00 132.944,392 6.645,071 256,768 0,917 144005,627 represented 5.74 % of total invoiced electricity to all customers. Compared to year 2013 April 221,409 02/04/14 21:00 123.998,849 6.813,872 239,248 0,925 125382,141 losses were lower in quantity and percentage (in year 2013: 85,419,284 kWh and 5.75 %). May 207,253 28/05/14 10:00 118.623,045 6.739,061 213,407 0,971 117491,219

Recognized costs for covering the losses amounted to 4,308,583 EUR, while the cost of June 235,090 12/06/14 13:00 124.937,561 6.465,922 233,767 1,006 122781,507

purchasing losses amounted to 4,282,812 EUR. Costs of covering the losses thus show July 228,036 17/07/14 13:00 131.572,732 6.793,501 239,001 0,954 136630,707

a positive difference in the amount of 25,771 EUR. August 221,393 27/08/14 10:00 121.271,355 6.449,492 226,566 0,977 126445,586

September 221,142 08/09/14 21:00 122.917,515 6.762,607 217,677 1,016 123870,010

8.4.4. Peak of distribution network consumption and operating hours October 239,233 26/10/14 03:00 128.833,873 6.340,743 228,647 1,046 132125,848

In year 2014 the peak of distribution network EP consumption occurred on Wednesday, November 246,435 26/11/14 18:00 131.791,646 6.506,654 245,846 1,002 128059,635

December 10 2014, at 18.00 and it amounted to 252.905 MW. Compared to year 2013 December 252,905 10/12/14 18:00 139.579,430 6.498,231 258,004 0,980 141616,466 (258.004 MW) it was lower by 5.099 MW or by 2.0 %. Annual operating hours amount to Peak: 252,905 Total: 1.531.515,836 6.055,696 1570494,012 6,055.7 hours.

Annual peak 2014 252,905 Operating hour 2014 6.055,696 In Table 13 monthly peaks in the distribution network of Elektro Primorska for the year Annual peak 2013 258,004 Operating hour 2013 6.087,092 2014 and the related annual operating hours are shown. Graph 6 shows monthly con- Annual peak ratio 2014 / 2013 0,980 Operating hours ratio 0,995 sumption peaks, while Graph 7 monthly quantities of acquired electricity in year 2014. 2014 / 2013

Peak in EP for year 2014 amounted to252,905 MW and occurred on Wednesday December 10 2014 at 18:00.

Note: *Entire electricity acquired represents entire acquisition of electricity in the distribution network (acquisition from transmission network+ acquisition from producers) – following the system of hourly average values of balance group realization including derogations **Monthly values of annual operating hours are calculated according to monthly data calculated to the annual value

Graph 6: Graph 7: Monthly electricity Monthly acquired 8.4.5. Production of electricity from producers connected to the distribution consumption peaks electricity quantities in year 2014 in year 2014 network

P [MWh/h] [GWh] In year 2014, according to the balance as at December 31 2014 there were 494* produ-

300 300 cers of electricity connected to the distribution network of Elektro Primorska d. d. or 26 more than in year 2013. In year2014registered production of these producers amoun- 275 275 Quantities 2013 ted to 197,979,631 kWh or was by 13.6 % higher than in year 2013. In the distribution 250 250 Peak 2013 network of Elektra Primorska d. d. there were 188,351,020 kWh of electricity delivered or

225 225 Quantities 2014 by 16.4 % more than in year 2013. Difference between quantities of electricity produced Peak 2014 and power delivered in the distribution network, is proper consumption of SPTE produ- 200 200 ction facilities and delivery of produced electricity in the internal network of customers, 175 175 which in year 2014 amounted to 9,628,611 kWh.

150 150 July July May May April April June June March March August August January January October October February February December December November November September September A Business Report | 8. Distribution of Electricity Business Report | 8. Distribution of Electricity A 52 53

Table 14: Production of Number Production 2014 Production 2013 2014 / electricity according Electricity source of power [KWh] [KWh] 2013 8.4.6.2. Continuity of power supply to primary energy sources stations In the area of Elektro Primorska on high-voltage and medium-voltage power devices in HE SENG 22 106.785.928 84.663.419 1,261 year 2014 we recorded 6,086 unannounced interruptions of electricity, longer than three

HE Other 75 42.305.595 37.116.853 1,140 minutes, of which 31 were outages of power transformers 110/SN kV and SN/SN kV. For the purposes of regular and investment maintenance of devices 958 disconnections Solar power stations 357 34.051.675 37.860.699 0,899 were made, which caused announced interruption of electricity. In DCV Elektro Primorska Wind power stations 8 4.208.614 4.221.222 0,997 252 dispatches were issued, of which 89 were for works on power transformers 110/SN SPTE 32 10.627.819 10.435.943 1,018 kV and SN/SN kV. Total 494 197.979.631 174.298.136 1,14 Total number of unannounced and announced interruptions of electricity, longer than * number of all power stations in the area of EP that are connected to the distribution network or internal network of three minutes, was 7,044. Number of interruptions is significantly higher than in previous the customer years, because of the glaze ice in January and February.

8.4.6. Quality of electricity supply 8.4.6.1. Voltage quality Table 15: Continuous monitoring of voltage quality in the company Elektro Primorska in 2014 co- Number of interruptions, longer than 3 minutes in year 2014 in year 2013 Index 14 /13 Number of interruptions, longer vers 55 registrars in 28 facilities of the network. Data on the quality of the voltage is ob- Number of unannounced interruptions 6086 1047 5,812 than three minutes

tained from 15 high-voltage bus bars, from two medium-voltage bus bars bordering the Number of announced interruptions – disconnections 958 509 1,882 neighboring network, and from 38 medium-voltage bus bars representing the main power Total number of announced and unannounced interruptions 7044 1556 4,527 points in our distribution network.

Results of the permanent measurements in the area of the distribution company Elektro Table 16: SAIFI (System Average Interruption Frequency Index) in year 2014 in year 2013 Index 14 /13 SAIFI – System Primorska in 2014 we can observe improvement of voltage quality compliance with the Average requirements of the standard on the HV-level 96.52 % in year 2013 to 97.70 % in year Average number of unannounced interruptions per customer 5,19 4,12 1,259 Interruption Frequency Index 2014, while on the MV-level however there was a deterioration of voltage quality from Average number of announced interruptions – disconnections per customer 0,69 0,68 1,015

97.75 % in year 2013 to 97.68 % in year 2014. Average number of announced and unannounced interruptions per customer 5,88 4,8 1,225

Vast majority of deviations of voltage quality in 2014 was due to the ice damage in early February 2014 and the failure of the transmission line DV 110kV Divača–Ajdovščina Table 17: SAIDI (System Average Interruption Duration Index) in year 2014 in year 2013 Index 14 /13 SAIDI – System (ELES) on October 15 2014. There was also an increase in flickers during summer storms Average Average time of customer without electricity due to unannounced interruptions Interruption 31,73 6,23 5,093 with lightning strikes. in hours Duration Index

Average time of customer without electricity due to announced interruptions – 1,57 1,37 1,146 disconnections in hours In 2014 at 27 measuring points (out of 55) in all measured weeks we recorded a full Average time of customer without electricity due to announced and unan- 33,3 7,6 4,381 compliance with the voltage quality requirements of the standard, while the remaining nounced interruptions in hours 28 of the measuring points recorded at least one week of non-compliance parameters of voltage quality standard EN 50160. On three measuring points we recorded deviation of Availability: 0.99619 root mean square value of the voltage level, on nine measuring points we recorded deviations of rms value of the voltage level, on nine measuring points we recorded increase of flickers, on 25 measuring points we recorded the variation of frequency. 8.4.6.3. Commercial quality In accordance with the Act concerning the reporting of data on quality of electricity supply the company has been regularly monitored the commercial quality indicators and reported to the Energy Agency and SODO. A Business Report | 9. Services For External Customers Business Report | 10. Information Support and Development A 54 55

9. 10. Services For External Information Support and Customers Development

Acquisition of business for the market and for external customers took place with no- IT service covers an area of modernization of the IT system, intranet and internet portal, tifications on published public tenders and direct negotiations with potential investors. server infrastructure with all the services, databases, network computing infrastructure for the needs of management of facilities and business computing as well as care for Services were conducted primarily in facilities of medium- and low-voltage network and installing new workstations and user support. public lighting. Market business covers the entire scope of work for which the company Elektro Primorska is specialized, namely the design and preparation of project documen- Contractual partner Informatika, d. d., is responsible for the operation of the accounting tation, construction or reconstruction of cable lines, transformer stations, production information system and the development of new modules for connection processes, bill- connectors for new buildings, renovation of public lighting with the reconstruction of ing of network charge and balances on accounts. switching points and other minor services. Main activities in year 2014 were as follows: In 2014 we were successful in this work, as despite extraordinary competition in the • In the field of modernization of IT system all milestones in the contract with Informa- market we managed to exceed the market value of the services compared to the plan by tika, d. d. were completed, multiple test have been carried out, and in September a 2.67 %, while compared to the previous year we fell back by 4.22 %. renovated part of an information system went into operation; • on the internal portal, we created a multitude of checks for purposes of monitoring the costs; • we upgraded the software module COT (comprehensive risk management);

Table 18: • we upgraded the computer network primarily for the purpose of managing energy Type of work Plan(€) Realization(€) Realization(€) % % Realization of facilities; services for external customers in year January– January– January– 2 : 1 2 : 3 • we maintained all wired, radio and optical communications infrastructure including 2014 December 2014 December 2014 November 2013 FM network and participated in the upgrade of optical connections; 1 2 3 4 5 • we began with activities to replace the existing outdated FM system; 206 Market services 1,950,000 1,745,756 1,705,928 89,53 102,33 • we purchased new workstations for the purpose of replacing the obsolete ones; 12 Other services 450,000 718,205 866,637 159,60 82,87 • we set up new monitoring tools to monitor the performance of computers and com- TOTAL 2,400,000 2,463,961 2,572,565 102,67 95,78 puter networks; • in the context of all the distribution companies we have produced a joint security policy; Let us state a few other major services for the market we have carried out in 2014: • by means of an external contractor we made procedures for continuity of operations • cable conduit 20 kV in tunnel Markovec, for the entire company; • SPTE Fructal, • we provided all the infrastructure services and support to the subsidiary E3, d. o. o. • reconstruction of TP for company SKP KNAUF in Ajdovščina, • preparation of project documentation for cable conduit 110 kV Koper–Izola, • cable conduit and TP for company MOL in Rožna Dolina, • cable conduit 20 kV for TP Martex 2, • electrical installation work on the project CČN in Vrtojba, • maintenance of public lighting in municipality of Izola, • maintenance of public lighting in municipality Postojna, • electrical installation work on the project SPTE Park 1, • electrical installation work for TP Riba.

Framework of these services also includes operation of holiday facilities. A Business Report | 11. Integrated Management System Business Report | 12. Skrb za okolje A 56 57

11. 12. Integrated Management Care for the Environment System 12.1. Environmental policy Integrated management system includes quality management system, environment man- Environmental policy is an important component of the company's business policy and is agement system and management system of safety and health at work. System consists integrated into all business processes. Our business and our facilities intervene into the of interconnected processes, which Elektro Primorska uses to: space and its intended use, so with the established environmental management system • provide quality services and customer satisfaction, and pursue development poli- we manage the significant environmental aspects associated with the activity of electric- cies, ity transmission, maintenance and construction of facilities, the operation of electricity • care for the development of employees, their safety, health and satisfaction, metal workshops and vehicle fleet. By adopting environmental programs in accordance • reduce negative impacts on the environment and contribute to the development of with the financial capabilities of the company we realize framework and implementing narrower and broader social environment. environmental objectives.

Elektro Primorska has an established and certified integrated management system for the following standards: • Quality Management System – ISO 9001:2008, 12.2. Realization of environmental programs • Environmental Management System – ISO 14001:2004 in in year 2014 • Management System for Safety and Health at Work – BS OHSAS 18001:2007. In 2014 in accordance with the set environmental objectives we implemented the following activities of environmental programs: Integrated quality management system is managed through the structure of formalized • we replaced asbestos cement roofing on RP Bovec, documents: a) rules of quality management, b) definition of processes, c) management • we reduced light pollution in RP Bovec, service premises Kromberk and service processes, d) instructions, e) forms. Quality of processes implementation is monitored premises and inspectorate in Tolmin by quality indicators. Effectiveness of the integrated management system is regularly • we replaced ionization fire detectors with optical detectors in distribution transform- checked by internal and external audits. er stations RTP Lucija and RTP Vrtojba.

Requirements for improvements in the integrated management system are managed by a special program that enables employees to communicate any ideas, comments and suggestions for better business organization and other activities in the company. This system also includes risk management. 13. Verification of the integrated management system took place in 2014 as planned by internal audits and annual reviews: environmental review, review of safety and health at Risk Management work, and management review. Internal audits of quality management system, environment management system and the system of safety and health at work were conducted from April 23 to April 24 2014. On May 28 and May 29 2014 external assessment com- Risks are managed in accordance with the methodology of integrated risk management pany SIQ conducted a regular external assessment of requirements of ISO 9001:2008 in Elektro Primorska. Identified risks are classified in accordance with the methodology standard and reassessment of requirements of ISO 14001:2004 standard and BS OHSAS for managing risks in one of the four groups that are included in the risk register: financial, 18001:2007 standard, and it made findings that the company implements, maintains and operational, strategic and legislative. Risks are evaluated at least monthly on the basis develops the management system in accordance with the requirements of the standards. of assessing the implications of the risk and on the basis of the likelihood that a risk will occur. These risks are managed in the following ways: risk avoidance – abandonment of risky operations; risk reduction – use of different hedging, transferring risk to a third party; acceptance of risk – accepting the risk that is acceptable. In order to continuously identify risks primarily responsible are the heads of organizational units and other authorized expert staff. A Business Report | 13. Risk Management Business Report | 13. Risk Management A 58 59

Reporting on the status of individual risks or measure is carried out through the portal the operation are reduced. In this field, we are facing human resource risk, risks in the - monthly, quarterly and annually. Internal audit supervises the implementation of the operation of the system and the IT risk. measures and compliance of the reported with the actual situation. Reporting and risk control are an integral part of the integrated management system in the company. For a Human resources risks are associated with the possibility of loss or lack of qualified systematic display of the degree of all risks on the cut-off date, total average rate of all staff and the emergence of work-related injuries arising from risky working practices in the risks (average of the sum of all risk levels of all groups) has been introduced. In year the business of power distribution. The risk is managed through scholarships, constant 2014 the value decreased from the baseline 3.17 to 2.89. For all measures that exceed training of employees, encouraging further education, communication and information to the acceptable level of risk 3.00, new measures, contractors and deadlines for implemen- all employees, liability insurance of employees in the implementation of design, assembly tation were determined. These measures are being implemented. and maintenance work, and collective accident insurance of employees. We continuously improve the safety and health at work, which reduces the risk of injury at work and main- In 2015 we will include in the risk management system, also risks arising from the busi- taining the health of employees. ness continuity process. Risks associated with the system operation are related to ensuring the broadest possible availability of facilities, which we ensure with regular planning, construction and 13.1. Financial risks maintenance, by implementing activities (reviews, audits, measurement) with the aim of preventing the failure of electricity power plants and the occurrence of major damage to Financial risks of the company represent those risk factors that directly threaten the the device. Property risk arises from exposure of electrical installations and other assets achievement of planned income statement and capital adequacy. Significant risks are: of the company to environmental influences and other threats. Risks are managed in such credit, liquidity, market. a way that we have concluded adequate property insurance with insurance companies.

Credit risk arises because of untimely settled receivables. Systematic monitoring of Information risk is associated with the operation of a computerized information system debtors' financial position and use of applications for enforcement to recover the debts in the company and includes the risk of data loss, unauthorized access to data, intrusion lower the credit risk of the company. into the system, and undisturbed operation of the system. Company has signed a contract for the provision of key information services with the Informatika Company, which Liquidity risk is directly related to the credit risk. With cash flow planning company man- provides services to other distribution companies as well. With investing each year in ages liquidity risk by adjusting expenditure to financial capacity, draws bridging loans equipment of the computer system, with an appropriate security policy, with the renova- and plans the dynamics of raising long-term investment loans. tion of the information system in collaboration with Informatika, and with the implementation of adopted measures, these risks are managed. Economics of investments is associated with the two stated risks, due to the eventual exceeding of the value of investments and due to the deviation of specific planned values for the type investment solutions. 13.3. Strategic risks Market risk arises from failure to achieve services for the market, which affects the cash Strategic risks affect the ability to ensure an efficient and competitive continuity of com- flow. pany operations. Among the strategic risks the company is facing price, quantity, investment risks, and risks related to power supply interruptions of own cause. Interest rate risks are associated with the possibility of unexpected increases in financing costs, which are tied to a variable interest rate based on market conditions. Company Price risks occur in the contractual relationship between SODO and Elektro Primors- minimizes interest rate risk by selecting the best bidder when borrowing. ka, which regulates the rent of electricity infrastructure and the provision of services by Elektro Primorska for SODO. They determine the price for rental of infrastructure and Company is not faced with currency risks due to the limited sectoral operation. the provision of other services. Late conclusion of the contract or annex to the contract for the financial year represents the price risk. Price risks also arise in procurement of materials and equipment used in investment and maintenance works. They arise from 13.2. Operational risks changes in commodity prices, especially copper, and conditions on the market of electro technical materials and equipment. During the year price risk is managed through the Operational risks are related to the implementation of business processes in the com- implementation of the procurement of material and equipment and by signing annual pany. In the past the company modernized and certified its business processes in ac- contracts for real-time supply. cordance with the standards of quality management system ISO 9001, environmental management system ISO 14001 and system of health and safety at work BS OHSAS 18001. Indirectly, by complying with the provisions of standards the potential risks of A Business Report | 13. Risk Management Business Report | 13. Risk Management A 60 61

Quantitative risks arise in the transfer of electricity through the distribution network to customers. They arise from the uncertainty of consumption of electricity and they have impact on revenues from network usage and, consequently, on the amount of the Com- pany's revenue from the provision of services for SODO. Quantitative risks are managed by the monthly monitoring of the transferred quantities of electricity through distribution network and charged usage of the network.

Investment risks are reflected in the possibility of achieving the implementation of planned investments. They are managed by real-time verification of realization and effectiveness of the adopted plans.

Risks due to power interruption for own reason require large financial investments with effects over a longer period. They are managed with the regular reporting on the implementation of the plan of necessary investments in infrastructure.

13.4. Legislative risks Essence of managing regulatory risks is in ensuring the functioning of the system in accordance with regulations. Responsibility for legitimate business and compliance with the internal workings of the company EP is specially defined. Decision-making in the EP is limited to the framework of sectoral legislation. Regulation of the operation resulting from the contractual obligations between SODO and Elektro Primorska, as provider of public utility service, constitutes restrictions the company must respect and are not al- ways economically viable. B Financial Statements B Financial Statements | 1. Balance Sheet as at December 31 2014 Financial Statements | 1. Balance Sheet as at December 31 2014 B 64 65

1. Balance Sheet as at December 31 2014

Table 19: Table 20: Balance sheet ASSETS NOTE 31.12.2014 31.12.2013 LIABILITIES NOTE 31.12.2014 31.12.2013 Balance sheet (assets) (liabilities) A. Long-term assets : in EUR A. Capital: in EUR

I. Intangible assets 2.1. 1,914,064 837,805 I. Called-up capital 78,562,832 78,562,832

1. Long-term rights 1,852,408 738,615 1. Share capital 78,562,832 78,562,832

2. Long-term deferred development costs 19,414 99,190 II. Capital reserves 46,208,187 46,208,187

3. Other LT accruals and pre-paid expenditure 1,692 III. Profit reserves 11,314,699 9,071,106

4. Intangible assets in acquisition 40,550 1. Statutory reserves 651,328 651,328

II. Tangible fixed assets 2.2. 169,050,522 168,508,891 2. Other profit reserves 10,663,371 8,419,778

1. Land 5,805,301 5,795,772 IV. Revaluation surplus -41,298 42,522

2. Buildings 114,595,258 111,810,105 V. Net profit or loss from previous periods 140,188

3. Equipment 45,831,490 47,129,861 VI. Net profit or loss of the business year 1,481,000 2,088,679

4. Fixed assets in acquisition 2,818,473 3,773,153 Total capital 2.10. 137,525,420 136,113,514

III. Long-term financial investments 2.3. 7,014,088 6,994,741 B. Provisions and LT accrued costs and deferred revenues 2.11. 13,083,346 13,114,937

1. Investments in group companies shares 6,522,017 6,522,017 1. Provisions 3,284,729 3,216,790

2. Other shares and stakes 492,071 472,724 2. Long-term accrued costs and deferred revenues 9,798,617 9,898,147

IV. Long-term operating receivables 2.4. 20,322 16,965 C. Long-term liabilities 2.12. 20,310,659 20,517,977

1. Long-term receivable due from others 20,322 16,965 I. Long-term financial liabilities 20,310,659 20,517,977

Total long-term assets 177,998,996 176,358,402 1. Long-term financial liabilities to banks 20,310,659 20,517,977

B. Short-term assets: Č. Short-term liabilities 2.13. 15,066,751 20,935,644

I. Stocks 2.5. 965,840 858,455 II. Short-term financial liabilities 7,803,318 10,929,030

1. Material 965,840 858,455 1. Short-term financial liabilities to banks 7,803,318 10,927,973

II. Short-term financial investments 2.6. 25,207 129,145 2. Other short-term financial liabilities 1,057

1. Short-term loans to others 25,207 129,145 III. Short-term operating liabilities 7,263,433 10,006,614

III. Short-term operating claims 2.7. 7,242,753 8,220,445 1. Short-term operating liabilities to group companies 38,387 87,220

1. Short-term operating claims on group companies 70,297 84,995 2. Short-term operating liabilities to suppliers 5,817,414 7,600,323

2. Short-term operating accounts receivable 6,678,229 7,465,500 3. Other short-term operating liabilities 1,407,632 2,319,071

3. Short-term operating claims on others 494,227 669,950 Total liabilities 48,460,756 54,568,558

IV. Monetary assets 2.8. 95,222 5,034,969 D. Short-term accrued costs and deferred revenues 2.14. 631,271 638,795

Total short-term assets 8,329,022 14,243,014 TOTAL LIABILITIES 186,617,447 191,320,867

C. Short-term accruals and pre-paid expenditure 2.9. 289,429 719,451

TOTAL ASSETS 186,617,447 191,320,867 Breakdown of individual items and explanatory notes are part of the financial statements and should be read in conjunction with them. B Financial Statements | 2. Profit And Loss Account for Year Ended as at December 31 2014 Financial Statements | 3. Statement Of Comprehensive Income For Year Ended As At December 31 2014 B 66 67

2. 3. Profit and Loss Account for Year Statement of Comprehensive Ended as at December 31 2014 Income For Year Ended as at

Table 21: December 31 2014 Profit and loss NOTE 2014 2013 account in EUR 1. Net sales revenue 3.1. 38,391,026 40,807,348 a. on domestic market 38,391,026 40,807,348 2. Capitalized own products and services 3.1. 6,098,307 6,300,696 3. Other operating revenues 3.1. 3,925,150 1,647,952 Table 22: Pojasnilo 2014 Statement of 4. Costs of goods, material, and services 3.2. -16,939,400 -16,401,697 comprehensive in EUR income a. Costs of goods sold and material used -10,312,114 -8,971,667 17. Net profit or loss of the accounting period 3.9. 2,813,603 b. Costs of services -6,627,286 -7,430,030 5. Labor costs 3.2. -15,539,166 -15,139,882 Changes in the surplus from the revaluation of financial assets available for sale 10,893 a. Costs of salaries -11,391,828 -10,892,670 Other components of comprehensive income -94,713 b. Costs of additional pension insurance of employees -566,045 -575,110 TOTAL COMPREHENSIVE INCOME OF THE ACCOUNTING 2,729,783 c. Social security costs -1,856,986 -1,790,765 PERIOD č. Other labor costs -1,724,307 -1,881,337 6. Amortization/depreciation expense 3.2. -11,642,503 -11,397,832 a. Depreciation -10,745,484 -11,009,697 b. Operating expenses from revaluation in intang. and tang. -694,009 -163,021 fixed assets c. Operating expenses from revaluation in current assets -203,010 -225,114 7. Other operating expenses 3.2. -176,482 -204,800 8. Financial revenues from shares 3.3. 17,299 49,656 a. In other companies 17,299 49,656 9. Financial revenues from given loans 3.3. 12,655 2,201 a. given to others 12,655 2,201 10. Financial revenues from operating claims 3.3. 44,861 68,759 a. on others 44,861 68,759 11. Financial expenses from impairments and financial invest- 3.4. -2,799 ment write-offs 12. Financial expenses from financial liabilities 3.4. -872,883 -789,933 Financial expenses from loans, received from banks -803,109 -743,413 Financial expenses from operating liabilities -69,774 -46,520 13. Financial expenses from operating liabilities 3.4. -5,058 -4,880 a. Financial expenses from liab. to suppliers and bill of ex- -4,568 -4,591 change l. b. Financial expenses from other operating liabilities -490 -289 14. Other revenues 3.5. 3,465 3,346

15. Other expenses 3.6. -78,657 -65,782 NET PRE-TAX PROFIT OR LOSS OF THE ACCOUNTING PERIOD 3,238,614 4,872,353 16. Income tax 3.7. -425,011 -694,996 17. NET PROFIT OR LOSS OF THE ACCOUNTING PERIOD 3.8. 2,813,603 4,177,357

Breakdown of individual items and explanatory notes are part of the financial statements and should be read in conjunction with them. B Financial Statements | 4. Cash Flow Statement For Year Ended As At December 31 2014 Financial Statements | 5. Statement Of Changes in Equity For Year Ended as at December 31 2014 B 68 69 0 0 0 0 10,893 in EUR

4. -94,713 2,729,783 1,481,000 2,813,603 -1,317,877 -1,317,877 136,113,514 136,113,514 137,525,420 Table 24: Statement of changes in equity 2014 Cash Flow Statement for Year TOTAL CAPITAL Ended as at December 31 2014 VI 2,813,603 1,481,000 2,088,679 2,088,679 1,481,000 2,813,603 -2,088,679 -1,332,603 -3,421,282 YEAR BUSINESS YEAR Table 23: OF THE BUSINESS NET PROFIT OF THE Cash flow NOTE 2014 2013 NET PROFIT OR LOSS statement A. OPERATING CASH-FLOW in EUR 0 1. Operating receipts 4.1. 74,769,154 73,615,181 140,188 140,188 V -910,990 1,177,689 2,088,679 -1,317,877 a. Receipts from sales of products and services 49,888,228 48,441,346 -1,317,877 NET PROFIT poslovni izid

b. Other operating receipts 24,880,925 25,173,835 Preneseni čisti BROUGHT FORWARD

2. Operating expenditure 4.2. -64,046,689 -58,972,237 0 a. Expenditure for purchase of material and services -17,441,140 -13,555,657 42,522 42,522 10,893 -41,298 -94,713 -83,820 b. Expenditure for salaries and employees profit shares -16,326,980 -15,044,663 IV c. Expenditure for duties of all kinds -3,352,917 -3,806,941 SURPLUS REVALUATION č. Other operating expenditure -26,925,652 -26,564,976 3a. Excess of operating receipts or expenditure 10,722,465 14,642,944 910,990 2,243,593 8,419,778 8,419,778 1,332,603 B. CASH FLOWS IN INVESTING ACTIVITIES III/2 10,663,371

4. Receipts in investing activities 4.3. 69,383 197,771 RESERVES OTHER PROFIT

a. Receipts from received interest and profit shares of others 58,761 122,962 referring to investing activities b. Receipts from disposal of tangible fixed assets 10,622 74,809 651,328 651,328 651,328 PROFIT RESERVES 5. Expenditure in investing activities 4.4. -10,232,657 -10,940,618 III/1 RESERVES a. Expenses for acquisition of intangible assets -165,450 -831,631 STATUTORY b. Expenses for acquisition of tangible fixed assets -10,058,753 -10,108,987 c. Expenses for acquisition of long-term financial investments -8,454 II

6. Excess of expenditure in investing activities -10,163,274 -10,742,847 46,208,187 46,208,187 46,208,187 CAPITAL 7a. Excess of operating and investing receipts 559,191 3,900,097 RESERVES C. CASH FLOWS IN FINANCING ACTIVITIES 8. Receipts in financing activities 4.5. 38,957,000 31,949,000

a. Receipts from long-term loans 21,060,000 9,800,000 I 78,562,832 78,562,832 78,562,832

b. Receipts from short-term loans 17,897,000 22,149,000 CALLED-UP SHARE CAPITAL 9. Expenditure in financing activities 4.6. -44,455,938 -30,973,726 a. Expenditure for given interest -854,493 -792,351 b. Expenditure for repayment of long-term loans -21,391,973 -7,896,063 c. Expenditure for repayment of short-term loans -20,897,000 -20,967,000

č. Expenditure for dividend -1,312,472 -1,318,312

10a. Excess of receipts or expenditure in financing activ. 975,274 10b. Excess of expenditure in financing activ. -5,498,938 11a. Total excess of receipits or expenditure 4,875,371 11b. Total excess of expenditure or expenditure -4,939,747 Č. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 95,222 5,034,969

X. OPENING BALANCE OF CASH AND CASH EQUIVALENTS 5,034,969 159,598

Y. CASH FLOW FOR THE PERIOD 4.7. -4,939,747 4,875,371 Closing balance of cash on 31.12. 95,222 5,034,969 a) Entry of net profit or loss for the reporting period a) Dividend payment a) Allocation of remaining part net profit the comparative reporting period to other capital items b) Allocation of part net profit reporting period to other items capital following the decision of management b) Changes in surplus from financial investments revaluation c) Allocation of part net profit for additional provisioning under the decision of the annual general meeting c) Other items in comprehensive income of reporting period Breakdown of individual items and explanatory notes are part of the financial statements

and should be read in conjunction with them. 2014 A.1. Balance as of 31.12.2013 A.2. Balance as of 1.1.2014 B.1 . Changes in equity capital – transactions with owners B.2. Total comprehensive income of reporting period B.3. Changes within capital C. Balance as of 31.12.2014 Distributable profit 2014 5. Statement of Changes in Equity For Year Ended as at December 31 2014 Explanatory notes are part of the financial statements and should be read in conjunction with them. B Financial Statements | 6. Statement Of Changes In Equity For Year Ended As At December 31 2013 Financial Statements | 7. Indicators B 70 71 0 0 0 7,797 in EUR 7. 2,228,867 4,185,154 4,177,357 -1,317,876 -1,317,876 133,246,236 136,113,514 133,246,236 Total capital Table 25: Statement of changes in equity 2013 Indicators 1,454,547 2,088,679 4,177,357 2,088,679 1,454,547 4,177,357 VI -1,454,547 -2,088,678 -3,543,225 7.1. Main indicators of financing (investing) year business year of the business Net profit of the Net profit or loss Net profit or loss

Table 26: 3,517 3,517 Seq. Description 2014 2013 2012 2011 2010 2009 2008 Main indicators of 140,188 140,188 No financing V 1,454,547 1,454,547 -1,317,876 -1,317,876 periods Net profit 1. equity financing rate 0,737 0,711 0,717 0,697 0,650 0,622 0,660 from previous brought forward Net profit or loss capital / liabilities

2. long-term financing rate 0,916 0,887 0,889 0,868 0,813 0,804 0,822 7,797 7,797 capital , long-term debts and long-term 34,725 34,725 42,522

IV provisions/ liabilities surplus

Revaluation 3. debt financing rate 0,260 0,285 0,274 0,297 0,350 0,370 0,329 debts / liabilities

Indicators of financing show the financing structure of the company and express the 6,331,100 2,088,678 6,331,100 8,419,778 2,088,678 III/2

reserves degree of the company's financial independence. Other profit Profit reserves 651,328 651,328 651,328 III/1 serves Statutory re - 7.2. Main investment indicators (investing)

II Table 27: 46,208,187 46,208,187 46,208,187 Seq. Description 2014 2013 2012 2011 2010 2009 2008 Main investment No indicators Capital reserves 1. operating fixed assets rate 0,906 0,881 0,908 0,899 0,820 0,805 0,826 fixed assets / assets

I 2. Financial investment rate 0,038 0,037 0,038 0,037 0,008 0,008 0,008 78,562,832 78,562,832 78,562,832 Long-term and short-term financial invest-

Share capital ments/assets Called-up capital 3. long-term assets rate 0,944 0,917 0,946 0,936 0,828 0,813 0,835 fixed assets, long-term financial investments and l.t. oper. claims / assets

These indicators are used to establish where the company invested its assets and what structure of assets it has according to these investments.

a) Dividend payment a) Entry of net profit or loss for the reporting period a) Allocation of remaining part net profit the comparative reporting period to other capital items b) Allocation of part net profit reporting period to other items capital following the decision of management b) Changes in surplus from financial investments revaluation

A.1. Balance as of 31.12.2012 2013 A.2. Balance as of 1.1.2013 B.1 . Changes in equity capital – transactions with owners B.2. Total comprehensive income of reporting period B.3. Changes within capital C. Balance as of 31.12.2013 Distributable profit 2013 6. Statement Of Changes In Equity For Year Ended As At December 31 2013 B Financial Statements | 7. Indicators Financial Statements | 7. Indicators B 72 73

7.3. Main horizontal financial structure 7.5. Main indicators of return indicators

Table 28: Table 30: Main horizontal Seq. Description 2014 2013 2012 2011 2010 2009 2008 Seq. Description 2014 2013 2012 2011 2010 2009 2008 Main indicators of financial structure No No return indicators 1. equity to operating fixed assets 0,814 0,808 0,789 0,776 0,792 0,773 0,800 1. level of revenue profitability 0,073 0,102 0,073 0,039 0,018 0,003 0,012 capital / fixed assets net profit or loss / sale revenues

2. immediate solvency ratio 0,006 0,240 0,008 0,036 0,005 0,112 0,044 2. ROA 0,015 0,022 0,016 0,008 0,010 0,002 0,007 liquid assets / short-term liabilities net profit or loss / average assets

3. quick ratio 0,487 0,633 0,377 0,331 0,795 0,872 0,911 3. ROE (%) 0,021 0,031 0,022 0,012 0,016 0,003 0,011 liquid assets and short-term claims / short- net profit or loss / average capital (excl. net term liabilities profit or loss of business year)

4. current ratio 0,553 0,680 0,429 0,393 0,837 0,913 0,961 short-term assets / short-term liabilities By analyzing the ratio of profitability we establish that company's operation is viable due to a positive operating result. These indicators show how individual categories of assets are financed and how the company is able to settle its short-term financial liabilities.

7.4. Main indicators of economy

Table 29: Main indicators of Seq. Description 2014 2013 2012 2011 2010 2009 2008 economy No

1. operating efficiency ratio 1,093 1,130 1,091 1,060 1,015 1,002 1,028 operating revenues / operating expenses

2. entire efficiency ratio 1,072 1,111 1,074 1,040 1,018 1,003 1,011 revenues / expenses

Indicators of economy are indicators of business success and explain business results in relation to the invested elements of the business process. C Notes to the Financial Statements According to the Companies Act snd Slovenian Accounting Standards C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 76 1. Basis for Preparation of Financial Statements 1. Basis for Preparation of Financial Statements 77

1. of services for electricity distribution system operator was concluded with SODO Com- Basis for Preparation of Financial pany, which has been used since January 1 2011. Contract also contains provisions relating to the preliminary settlement of regulatory year. Based on this, the company in the income statement for year 2014 considered the final settlement of regulatory year 2013 Statements (negative in the amount of 7,984 EUR) and preliminary settlement of year 2014 (positive in the amount of 258,473 EUR).

Financial statements have been prepared in accordance with Slovenian Accounting On October 29 2012 the Official Gazette of RS No. 81/2012 published Act determining Standards (SRS) 2006, Energy Act (Official Gazette RS Nos. 27/07, 70/08 in 22/10) and the methodology for charging for the network charge, the methodology for setting the Companies Act (ZGD-1). network charge, and the criteria for establishing eligible costs for electricity networks with Annex 1: Implementation criteria and parameters for determining network charges SAS 2006 prescribe accounting policies and, in some cases, allow a choice between perfor electricity network and identifying the eligible costs for the regulatory period 1. 1. missible accounting policies. In its Accounting Rules the Company defined in detail the 2013–31. 12. 2015. accounting treatment of balance sheet items in the accounting records and determined the applicable accounting policies. Based on this Act the Energy Agency on November 15 2012 with a decision No. 111- 13/2012-01/452 determined the regulatory framework for the distribution network system In accordance with Article 19 of the Act amending the Companies Act (new Article 46. a) operator SODO for the regulatory period from January 1 2013 to December 31 2015. revenue and costs are adjusted for the regulated period backward based on the eligibility In the decision, the eligible costs, broken down by individual regions of the distribution criteria, which were produced and are monitored by the Agency for Energy. Compliance network are planned. with the Energy Act in this part, which corrects the revenue and cost backward, is considered a deviation from the Slovenian Accounting Standards. Planned eligible costs in the area of the distribution network of Elektro Primorska provide a framework of company assets in each year of the regulatory period. In the operation of the Company July 1 2007 plays an important role. On this day, Elektro Primorska d. d. lost the status of a public company and since then operates only as a On December 16 2013 the Council of Energy Agency adopted the Act amending the Act limited company. With a decision of the Government of RS on the concession for the pro- determining the methodology for charging for the network charge, the methodology for vision of public service activities of the distribution system operator for the entire territory setting the network charge, and the criteria for establishing eligible costs for electricity of the Republic of Slovenia it granted the exclusive concession to a newly established networks. Act applies from 1 January 2014. company SODO based in Maribor. Price list of services for external customers changed in October 2013. According to the decree on the implementation of the activity of the system operator SODO company concluded a contract on the lease of electricity distribution infrastruc- Wind farm Volovja reber ture and provision of services for the system operator of the electricity distribution net- On June 26 2006 the Ministry of Environment and Spatial Planning (MOP), Slovenian work with Elektro Primorska as the owner of the distribution infrastructure in the area of Environment Agency (ARSO), issued an environmental consent to Elektro Primorska d. Elektro Primorska. Contract defines that Elektro Primorska: d. for the construction of wind farms on Volovja reber and associated infrastructure. On • leases infrastructure for rent determined annually with annexes to the contract, February 19 2007, Elektro Primorska d. d. on the basis of this consent obtained a partial • implements services for SODO and charges for services described in the annex to building permit, which has become final on March 27 2007. At the request of Elektro Pri- the contract, morska the validity of the building permit was extended until March 27 2012. • in the name and for the account of SODO purchases electricity for losses incurred on the network, When the Ministry of Environment and Spatial Planning in 2007 recognized the status • in the name and for the account of SODO issues invoices to end users of the distri- of a participant in the process of issuing the environmental consent for the construction bution network accounts for the network use, of wind farms and associated infrastructure to the Society for Observation and Study of • in the name and for the account of SODO charges the network charge for power Birds of Slovenia (DOPPS), the process of issuing the environmental consent was reno- consumption. vated ex officio, while the implementation of environmental consent was withheld at the same time. On February 27 2012 a new lease contract on the electricity infrastructure and provision In a renewed process of issuing the environmental consent ARSO left the issued environmental consent in force, while MOP rejected an appeal DOPPS against the confirmed C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 78 1. Basis for Preparation of Financial Statements 1. Basis for Preparation of Financial Statements 79

environmental consent. DOPPS filed an action against the decision of the Environmental • DOPPS filed an action against the decision of the Environmental Agency with the Agency with the Administrative Court in Ljubljana, which granted the action by judgment Administrative Court in Ljubljana, which granted the action by judgment as at March as at March 3 2011 and remanded the case for reconsideration procedure to ARSO. On 3 2011 and remanded the case for reconsideration procedure of ARSO. December 19 2011 ARSO in a new decision in the renewed procedure performed oral • On April 4 2012 ARSO issued the decision that confirmed the validity of environmen- hearing and on April 4 2012 issued a decision confirming the validity of the environmental tal approval as at June 26 2006. consent of June 26 2006. • According to DOPPS appeal against the decision of the Environmental Agency of April 4 2012, the Ministry of Agriculture and Environment RS on December 21 2012 In accordance with the building permit to build wind farms on Volovja reber Elektro Pri- issued a decision, annulling the decision of the Environmental Agency of April 4 morska d. d. began with the implementation of works for the construction of the connec- 2012, and remanded the case to ARSO for reconsideration procedure and deci- tion point 110 kV power line RTP Ilirska Bistrica-RTP Volovja reber in distribution trans- sion-making. former station RTP Ilirska Bistrica. With this, the company prevented the construction • On May 6 2013 ARSO issued a new decision no. 35402-11/2004-328, which abol- permit as at March 27 2012 to expire. ished the environmental consent from the year 2006 and rejected the application of Elektro Primorska for issuing environmental consent for the planned wind farm After DOPPS appeal against the decision of the Environmental Agency of April 4 2012, Volovja reber. the Ministry of Agriculture and Environment RS on December 21 2012 issued a decision, • Company Elektro Primorska appealed to the issued decision of May 6 2013. But annulling the decision of the Environmental Agency of April 4 2012, and remanded the the Ministry of Agriculture and the Environment of RS as a body of appeal rejected case to ARSO for reconsideration procedure and decision-making. On May 6 2013 ARSO the appeal from EP with the decision no. 35402-29/2013/2 as at December 4 2013. issued a new decision no. 35402-11/2004-328, which abolished the environmental con- • As a result, Elektro Primorska on October 21 2013 signed an agreement with the sent from the year 2006. Company Elektro Primorska appealed to the issued decision. Municipality of Ilirska Bistrica, which defines the termination of the agreement from But the Ministry of Agriculture and the Environment of RS as a body of appeal rejected 2007 and the abolition of all obligations of Elektro Primorska to the Municipality of the appeal from EP with the decision no. 35402-29/2013/2 as at December 4 2013. Ilirska Bistrica, which has been identified for the event of the construction of wind As a result, Elektro Primorska on October 21 2013 signed an agreement with the Munici- farms Volovja reber. pality of Ilirska Bistrica, which defines the termination of the agreement from 2007 and the • Elektro Primorska in year 2014 fully discontinued all further activities related to the abolition of all obligations of Elektro Primorska d.d. to the Municipality of Ilirska Bistrica, implementation of works of the partial construction permit (issued on February 19 which has been identified for the event of the construction of wind farms Volovja reber. 2007), which form an integral part of the stated environmental consent from year Construction license: 2006. • it was obtained based on the Environmental approval for the construction of wind • Company has therefore adjusted the value of the investment in the construction of farm and associated infrastructure on Volovja reber as at June 26 2006, wind farms in the amount of funds invested 829,032 EUR. • partial building permit as at February 19 2007 was extended with the decision as at November 12 2009 to March 27 2012, Company ended the operations in 2014 positively. It generated a net profit of 2,813,603 • it was activated in the beginning of March 2012 by constructing the concrete foun- EUR, which is lower than planned for the year 2014 and the net profit of the previous year. dation on the land plot No. 390/15 k. o. Dobrepolje near the area of a power line portal.

Environmental approval: • It was issued on June 26 2006 by the Ministry of the Environment and Spatial Plan- ning (MOP), Slovenian Environment Agency (ARSO). • In 2007, MOP recognized the Society for Observation and Study of Birds of Slovenia (DOPPS) the status of a participant in the procedure of issuing an environmental permit. • After the recognition of the right side of the participant DOPPS, the process of issuing the environmental consent has been renovated ex officio, while the implementation of environmental consent was withheld at the same time. • In the renewed procedure of issuing the environmental consent ARSO left the issued environmental consent in force, while MOP rejected an appeal of DOPPS against the confirmed environmental consent. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 80 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 81

2. Table shows the changes in intangible assets during the year 2014: Notes to the Balance Table 31: 2014 Deferred Long-term Other Intangible Total Changes in development rights long-term assets in intangible assets in year 2014 Sheet Items studies costs accruals acquisition and pre-paid expenditure

Acquisition cost in EUR

2.1. Intangible assets Balance 1.1.2014 1,244,370 1,802,468 0 1,105,017 4,151,855 Intangible assets are recognized in the accounting records and the balance sheet when it Increases in year 1,710 1,504,338 1,506,048 is probable that the economic benefits associated with them will flow in, and when their Increases from invest. in progress 1,463,788 -1,463,788 0 cost can be measured reliably. Decreases in year -427,555 -18 -427,573

Among intangible assets the company recognizes development studies and studies in Balance 31.12.2014 816,815 3,266,256 1,692 1,145,567 5,230,330 acquiring. Among the rights there are recognized holiday facilities usage rights and land Value adjustment rights, as well as right to use space in the facility for the purposes of transformer stations, Balance 1.1.2014 1,145,180 1,063,853 0 1,105,017 3,314,050 and the right to use the software. While other long-term accrued expenses and deferred costs include costs of prepaid rent. Depreciation in year 79,776 349,995 429,771 Decreases in year -427,555 -427,555

Cost of an intangible asset consists of its purchase value or cost of manufacture. The Balance 31.12.2014 797,401 1,413,848 0 1,105,017 3,316,266 Company records intangible assets using the cost model. Carrying amount

Balance 1.1.2014 99,190 738,615 0 0 837,805 Value of intangible assets in 2014 increased for the purchase and activation of long-term rights in the amount of 1,463,788 EUR. Balance 31.12.2014 19,414 1,852,408 1,692 40,550 1,914,064

Value adjustments of studies in obtaining are value of invested assets in connection with Table shows the changes in intangible assets during the year 2013: the planned investment in the construction of wind farms, which the company has been forming since 2004 because of complaints in the process of obtaining a building permit. Table 32: Developmental studies are recognized at their purchase value and written off to the bur- 2013 Deferred Long-term Intangible Total Changes in development rights assets in intangible assets in year 2013 den of the cost of studies and not as a depreciation expense. We write them off in the studies costs acquisition amount of 20% annually, depending on the useful life of these assets, which is five years. Acquisition cost in EUR Individual carrying values of intangible assets are not significant for the financial state- Balance 1.1.2013 1,466,478 1,090,020 1,105,017 3,661,515 ments as a whole. Increases in year 712,448 712,448

Company has no intangible assets with limited ownership rights. Increases from invest. in progress 712,448 -712,448 0

Decreases in year -222,108 -222,108

Balance 31.12.2013 1,244,370 1,802,468 1,105,017 4,151,855

Value adjustment

Balance 1.1.2013 1,216,573 772,553 1,105,017 3,094,143

Depreciation in year 150,715 291,300 442,015

Decreases in year -222,108 -222,108

Balance 31.12.2013 1,145,180 1,063,853 1,105,017 3,314,050

Carrying amount

Balance 1.1.2013 249,905 317,467 0 567,372

Balance 31.12.2013 99,190 738,615 0 837,805 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 82 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 83

2.2. Tangible fixed assets Carrying value of fixed assets compared to the opening balance increased by 541,631 EUR. Changes consisted of new purchases in the amount of 11,766,848 EUR, depreciation in the Tangible fixed assets of the company are land, buildings and equipment and these assets amount of 10,395,491 EUR, additional value adjustment of investments in the amount of under construction. They are disclosed in the balance sheet at their carrying amount, 13,461 EUR and the eliminations of the carrying value in the amount of 816,265 EUR. which represents the difference between the acquisition and the written down value. Company has no investment property and evaluates the tangible fixed assets according Value adjustments of fixed assets in acquisition, in the amount of 829,032 EUR, refer to inves- to the acquisition cost model. ted assets, in relation to the planned investment in the construction of wind power plants, which is in the process of complaints. Adjustments have been formed since 2004. In year 2014 an Cost of the tangible fixed assets is comprised of its purchase price and all costs that can adjustment was additionally formed in the amount of 13,461 EUR. be directly attributed to its restoration for use.

Company has no fixed assets obtained by financial lease. One property is mortgaged in favor Acquisition cost of facilities built on its own is cost price, which does not exceed the price of Nova Kreditna Banka Maribor. Obligation is recorded in off-balance sheet. of the same kind of things on market. Cost price is comprised of direct material costs of manufacturing and services, direct labor costs and general production costs In accor- Since July 1 2007 the public utility service in the area of Elektro Primorska d. d. has been condu- dance with SAS 1.11 the company subdivides the purchase costs of new acquisitions cted by the newly established company SODO, d. o. o. In accordance with the relevant contract in year 2014, which have different useful lives, to component parts that are significant in the company Elektro Primorska rented SODO the entire infrastructure. As at December 31 2014 relation to the entire purchase price. the purchase value of infrastructure given to rent amounted to 461,683,893 EUR, value adjustments to 315,998,276 EUR and carrying amount to 145,685,617 EUR. Of which there are by: Value adjustments are established in the amount of calculated depreciation. • 3,356,040 EUR of land, • 98,657,148 EUR of infrastructure facilities, Company must revalue tangible fixed assets due to impairment when their carrying amo- • 41,880,070 EUR of infrastructure equipment and unt exceeds the recoverable value. Recoverable amount is the net selling price or value • 1,792,359 EUR of long-term rights. in use, whichever is higher.

In 2013 the company realized investment plan in one hundred percent in the amount of Changes in tangible fixed assets in 2014 are shown in the following table: 13,100,450 EUR. For the realization it hired a long-term loan in the amount of 7,500,000 EUR. Detailed information on the acquisition is presented in the report on the activities of the distribu- Table 33: Changes in tangible 2014 Land Facilities Equipment Fixed assets Total tion system operator in chapter 8.2. fixed assets in year in acquisition 2014 and advances

Acquisition cost in EUR Table 34: Balance 1.1.2014 5,795,772 371,057,021 143,281,334 4,588,724 524,722,851 2013 Land Facilities Equipment Fixed assets Total Changes in tangible in acquisition fixed assets in year 2013 Increases in year 144,111 23,705 11,599,032 11,766,848 and advances

Increases from invest. in progress 9,529 9,002,545 3,471,936 -12,484,010 0 Acquisition cost in EUR

Decreases in year -8,112,665 -2,955,604 -56,241 -11,124,510 Balance 1.1.2013 5,750,629 366,523,874 141,416,697 5,530,269 519,221,469

Transfer 24,610 -24,610 0 Increases in year 333,716 141,818 10,270,240 10,745,774

Balance 31.12.2014 5,805,301 372,115,622 143,796,761 3,647,505 525,365,189 Increases from invest. in progress 45,143 6,285,153 4,730,413 -11,060,709 0

Value adjustment Decreases in year -2,085,722 -3,007,594 -151,076 -5,244,392

Balance 1.1.2014 259,246,916 96,151,473 815,571 356,213,960 Balance 31.12.2013 5,795,772 371,057,021 143,281,334 4,588,724 524,722,851

Depreciation in year 5,698,022 4,697,469 10,395,491 Value adjustment

Decreases in year -7,427,304 -2,880,941 -10,308,245 Balance 1.1.2013 255,540,992 94,016,693 815,571 350,373,256

Increases in year 13,461 13,461 Depreciation in year 5,730,588 4,987,808 10,718,396

Transfer 2,730 -2,730 0 Decreases in year -2,024,664 -2,853,028 -4,877,692

Balance 31.12.2014 257,520,364 97,965,271 829,032 356,314,667 Balance 31.12.2013 259,246,916 96,151,473 815,571 356,213,960

Carrying amount Carrying amount

Balance 1.1.2014 5,795,772 111,810,105 47,129,861 3,773,153 168,508,891 Balance 1.1.2013 5,750,629 110,982,882 47,400,004 4,714,698 168,848,213

Balance 31.12.2014 5,805,301 114,595,258 45,831,490 2,818,473 169,050,522 Balance 31.12.2013 5,795,772 111,810,105 47,129,861 3,773,153 168,508,891 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 84 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 85

2.3. Long-term financial investments 2.4. Long-term operating receivables Long-term financial investments of the Company are shares and shares in other compa-

nies and the capital of the subsidiary E 3, energetika, ekologija, ekonomija, d. o. o., which Table 37: 31.12.2014 31.12.2013 Long-term is 100 % owned by the company. operating receivables In accordance with SAS 3, which deals with financial investments, they are classified as in EUR assets available for sale. Claims to apartment building managers 20,322 16,965

Total 20,322 16,965 Investments consist of the following items:

Long-term operating receivables are assets for maintenance of facilities, which are Table 35: Long-term financial 31.12.2014 31.12.2013 according to the Housing Act combined with operators of apartment buildings. investments Investments in shares of group companies in EUR

E3, energetika, ekologija, ekonomija d.o.o. 6,522,017 6,522,017

Total 6,522,017 6,522,017 2.5. Stocks Stocks consist of material and small tools in the warehouse. Other shares

Informatika Maribor d.d. 240,755 240,755 Stocks also include small tools with a useful life of up to one year and small tools of up to Banka Koper d.d. 95,879 95,879 500 EUR and the duration of over a year. These are means of protection and small tools Zavarovalnica Triglav d.d. 55,884 44,991 on the stock, which are kept off-balance according to the individual once issued in use.

Primorski tehnološki park d.o.o. 1,808 1,808 Stocks are initially measured at purchase cost, consisting of purchase price and direct acquisition costs. Purchase price is reduced by obtained discounts. Eldom Ljubljana d.o.o. 106,395 106,395

Stelkom d.o.o. Ljubljana 57,837 57,837 Consumption of stocks is calculated at a moving average price method. VIRS 12,626 4,172

571,184 551,837 Table 38: Impairment of investment Eldom d.o.o. -72,904 -72,904 31.12.2014 31.12.2013 Stocks

Impairment of investment Stelkom d..o.o. -6,209 -6,209 in EUR

-79,113 -79,113 Materials 907,395 788,906

Total 492,071 472,724 Small tools 58,445 69,549

Total long-term financial investments 7,014,088 6,994,741 Total 965,840 858,455

Largest share of stocks are materials intended for the maintenance and construction of electric power facilities and equipment. According to the previous year the stocks on the Table 36: Changes in financial Investments in Other shares Total last day were higher by 12.5 %. investments shares of group companies Based on a comparison of the value of stocks with the latest known purchase prices, we Changes in financial investments in EUR performed impairment of stocks in the amount of 6,463 EUR. In the last year no changes Balance 1.1. 6,522,017 472,724 6,994,741 occurred in 53,107 EUR of stock value, which represents 5.5 % of stocks that are ne- Increases 19,347 19,347 cessary for maintenance of energy facilities and were not impaired.

Balance 31.12. 6,522,017 492,071 7,014,088 Inventory differences amounted to 36 EUR, while due to uselessness during the year by 10,232 EUR of stock values were written off.

Investment in 11.88 % of shares in Informatika, d. d., Maribor, Company is stable. Com- pany complied the financial investment in the company Zavarovalnica Triglav, d. d. with the market value. Revaluation is recognized in other comprehensive income within equity items. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 86 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 87

2.6. Short-term financial investments Age structure of receivables:

Financial investments are financial assets the company has in order to increase its finan- Table 41: 31.12.2014 31.12.2013 Age structure of cial revenue through income arising from it. These are investments in financial debts of receivables in EUR other companies. Outstanding receivables 6,052,663 6,508,902 Receivables overdue from 30 days 454,467 651,441 Amount 25,207 EUR represents a short-term deposit with a bank dedicated to the recon- Receivables overdue from 31 to 60 days 125,943 310,349 struction of the building in post-earthquake reconstruction in Bovec. These assets will be Receivables overdue from 61 to 90 days 27,637 30,462 paid directly to the provider by the bank. Cost of reconstruction exceeding the amount of Receivables overdue from 91 to 365 days 184,995 116,977 the deposit is co-financed by the Government of the Republic of Slovenia. Receivables overdue over 365 days 514,561 480,001 Total 7,360,266 8,098,132 Table 39: Short-term financial Short-term loans to investments others in EUR Balance 1.1. 129,145

Refunds -103,938 As at December 31 2014 the age structure of receivables was as follows: Balance 31.12. 25,207 • 82 % of outstanding receivables, • 6 % of overdue receivables up to 30 days, 2.7. Short-term operating receivables • 2 % of overdue receivables from 31 to 60 days and All receivables are initially recognized with the amounts arising from the relevant do- • 10 % of overdue receivables over 60 days in the amount of 727,193 EUR, for which cuments under the assumption that they will be paid. Receivables for which there is a by 626,180 EUR or 86 % value adjustments were formed as they are older than 365 presumption that they will not be settled or are not settled in due time, are recognized as days or disputed or debtors are in in the insolvency proceedings and compulsory doubtful and disputed. settlements. Doubtful and disputed receivables include: Table 42: • outstanding claims arising before year 2014, 31.12.2014 31.12.2013 Value adjustment of short-term • disputed claims and Value adjustment of short-term operating receivables in EUR operating receivables • receivables of business partners in the insolvency proceedings and compulsory Balance 1.1. 578,584 450,529 settlements. Collected receivables written off -21,600 -9,159 Final write-off of receivables -105,763 -52,829 Formation of value adjustments in the year 176,776 190,043 Table 40: Short-term 31.12.2014 31.12.2013 Balance 31.12. 627,997 578,584 operating receivables Short-term receivables from sales: in EUR - from group companies 69,489 56,587 - on domestic market 7,211,977 7,957,707 Doubtful and disputed claims were impaired by the company according to the individual Value adjustment -565,061 -522,528 claim and business partner. In year 2014 it thus formed by 2 % of value adjustments 6,716,405 7,491,766 according to the balance of receivables. From the value adjustment of short-term operating receivables balance in year 2014 there were by 4% of recovered and 19% of defini- Interest receivables: tely written off. Receivables are not insured, but most of them are of such a nature that in - from group companies 8 0 the event of default, after repeated reminders, we sanction them through the termination - from other buyers 78,792 83,838 of access to the distribution network. Value adjustment -61,119 -55,999 17,681 27,839 In operating receivables from state and other institutions the largest portion of claims Advances 13,640 2,482 represent claims for the refund of overpaid tax prepayments of corporate income tax in Other operating receivables: the amount of 212,069 EUR and claims for the recovery of non-deductible VAT in the - from group companies 800 28,408 amount of 175,223 EUR. - from state and other institutions 417,432 404,736 - from employees 220,601 Operating receivables from others are mainly receivables from the company SODO for - from others 78,612 44,670 overpayment of network charge, claims on behalf of SODO for the connection power Value adjustment -1,817 -57 network charge and for services GJS SODO and other receivables. 495,027 698,358 Total 7,242,753 8,220,445 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 88 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 89

Table 45: 31.12.2014 31.12.2013 Capital 2.8. Monetary assets in EUR Share capital 78,562,832 78,562,832 Table 43: Monetary assets 31.12.2014 31.12.2013 Capital reserves 46,208,187 46,208,187

in EUR Statutory reserves 651,328 651,328 Other profit reserves 10,663,371 8,419,778 Cash in banks 95,222 404,969 Revaluation surplus -41,298 42,522 Short-term deposit 4,630,000 Net profit brought forward 140,188 Total 95,222 5,034,969 Net profit for the financial year 1,481,000 2,088,679 Total 137,525,420 136,113,514 Monetary assets include cash in bank accounts.

Share capital of Elektro Primorska d. d. Company is divided in 18,826,797 ordinary reg- 2.9. Short-term accruals and prepaid expenditure istered unit shares. Each share has an equal share and associated amount in the share capital. Ordinary shares are shares that give their holders: Table 44: Short-term accruals 31.12.2014 31.12.2013 • right to participate in company management, and prepaid expenditure in EUR • right to profit (dividends), • right to an adequate share of the assets after the liquidation or bankruptcy of the VAT from received advances 2,501 1,287 company. Short-term deferred costs 2,697 8,451

Short-term accrued revenues 283,287 708,450 All shares are of one class. Vouchers 944 1,263

Total 289,429 719,451 Capital reserves of the company originate from general equity revaluation adjustment, which was during the transition to SRS 2006 transformed into capital reserves.

Revaluation surplus refers to revaluation of financial investments to their fair value. In short-term accruals and prepaid expenditure the company recognizes VAT from received advances and overpayments, and deferred costs from invoices received in year 2014 All elements of capital outside share capital belong to the owners of the share capital in for expenses referring to the business year 2015. proportion to their equity share capital.

Short-term accrued revenues refer to the preliminary account of SODO Company for rent Result for the year 2014 is positive and amounts to 2,813,603 EUR. In accordance with and services for year 2014 in the amount of 258,473 EUR, which was made in March the powers laid down in the Companies Act-1 the management board allocated 47% of 2015. In the same month the invoice was issued to SODO Company, and the revenues net profit to other profit reserves in the amount of 1,332,603 EUR. Residue net profit for were included in year 2014. Remaining amount of 24,814 EUR includes accrued revenues 2014 represents the distributable profit totaling to 1,481,000 EUR. from settlement of services to the subsidiary E 3, d. o. o., which were invoiced in year 2015, but accrued in year 2014. Following the decision of the general meeting as at July 4 2014 the company allocated 1,317,876 EUR of distributable profit in year 2013 to dividends of shareholders, while the remaining amount of 910,991 to other profit reserves.

2.10. Capital Book value of the company's share as at December 31 2014 amounted to 7.3 EUR. Based on SRS 8.30 the company must disclose the profit calculated on the basis of the Capital of the company consists of: revaluation for maintaining the purchasing power of capital on the basis of consumer • share capital, price index. In year 2014 it amounted to 0.2 %, therefore, in the case of revaluation of • capital reserves, equity net profit of the company would amount to 2,541,376 EUR. • statutory reserves, • other profit reserves, Statement of changes in equity shows changes in equity for the years 2013 and 2014. • revaluation surplus, • net profit brought forward and • net profit for the financial year. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 90 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 91

In year 2014 the company formed long-term accruals and deferred income for free acquisiti- 2.11. Provisions and long-term accruals and ons of energy facilities of legal and natural persons.

deferred income Drawing of long-term accruals of fixed assets acquired free and co-financing of facility con- Amount recognized as a provision is the best estimate of the expenditure required to set- structions in the amount of 266,229 EUR represents the amount of annual depreciation, whi- tle the existing long-term commitments on the balance sheet date. Value of the provision ch is calculated from individual freely acquired or co-financed in share fixed asset. must be equal to the present value of the expenditures expected to be required to settle

the obligation. Average costs of connection are drawn for the actual charged depreciation for each individual energy facility. Depreciation of these facilities amounted to 110,299 EUR. Company formed the long-term provisions for long service bonuses and for severance

pays at retirement as at December 31 2014 in accordance with SAS 10. Assumptions In 2014 the company received state support for the earthquake reconstruction of the facility based on which the actuary calculation was made, include data that companies submit- in Bovec in the amount of 30,491 EUR and support from the European Union to the project ted to the actuary, namely the data for five past years on employees and their changes, SUNSEED. These two projects have not yet been completed in year 2014. data on the salary growth, severance pays, long service bonus and provisions in the collective agreement referring to the long-term benefits of the employees.

Actuarial calculation takes into account uniform discount rate by reference to market 2.12. Long-term liabilities Long-term financial liabilities are long-term borrowings for investment. interest rates on high-yield corporate bonds. Interest rate curve of the euro area is used (from 0.12 % to 2.4 %). Their book value is equal to their initial value, reduced by transfers to short-term liabilities. Interests on long-term liabilities are recorded as financial expenses or increase the cost of Long-term provisions are decreased directly by costs for which settlement they were fixed assets in preparation to its working condition. formed, and are formed by the differences according to the actuarial report on calculation as at December 31 of the current year and balance in the accounting records.

2.11.1. Provisions Table 48: 31.12.2014 31.12.2013 Long-term liabilities Table 46: Long-term liabilities in EUR Provisions 31.12.2014 31.12.2013 BKS Bank AG 8,400,000 PROVISIONS in EUR SKB d.d. 9,669,328 14,513,331 Balance 1.1. 3,216,790 3,095,830 Banka Sparkasse d.d. 7,500,000 1,270,966 Formation 282,645 347,477 Banka Celje d.d. 1,211,315 3,028,320 Nova Ljubljanska banka d.d. 1,333,333 9,633,333 Drawing -214,706 -226,517 Total 28,113,976 28,445,950 Balance 31.12. 3,284,729 3,216,790 Short-term part of long-term liabilities -7,803,317 -7,927,973 Total 20,310,659 20,517,977 Total long-term liabilities 20,310,659 20,517,977

2.11.2. Long-term accruals and deferred income

Table 47: Long-term financial liabilities are secured by bills and represent borrowings that fall due after Average Co-financing Long-term accruals Assets ac- Received 2015. For all loans the Ministry of Finance issues consent to the borrowing of the company, and deferred connection of facilities Other Total quired free supports income costs construction after the most favorable bidder was previously approved or selected.

in EUR

Balance 1.1. 7,163,250 2,545,157 189,740 0 0 9,898,147 All loans are due and payable no later than April 2020. Long-term loan taken out in 2014 in the Sparkasse Bank in the amount of 7,500,000 EUR, is payable in a period longer than 5 years Formation 151,874 157,846 30,805 340,525 (contractually agreed installments falling due in the period of 5 years amount to 500,000 EUR). Decrease due to write-off -63,527 -63,527 Interest rates have a one-month, three-month or six-month EURIBOR and the bank's premium Drawing in revenues -257,023 -110,299 -9,206 -376,528 range from 1.5 % to 3.2 %. Interest on borrowings is calculated and paid monthly. Balance 31.12. 6,994,574 2,434,858 180,534 157,846 30,805 9,798,617 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 92 2. Notes to the Balance Sheet Items 2. Notes to the Balance Sheet Items 93

2.13. Short-term liabilities 2.14. Short-term accrued costs and deferred Short-term liabilities are disclosed separately for short-term financial liabilities and shor- revenues t-term operating liabilities.

Table 50: Table 49: 31.12.2014 31.12.2013 31.12.2014 31.12.2013 Short-term accrued Short-term liabilities costs and deferred SHORT-TERM FINANCIAL LIABILITIES in EUR in EUR revenues

Short-term part of long-term loans 7,803,317 7,927,973 VAT from advances given 345 378

SKB d.d. 3,000,000 Short-term deferred revenues 97,471 196,750

Total short-term fin. liabilities to banks 7,803,317 10,927,973 Accrued expenses 533,455 441,667

Liabilities for payment of dividends 1,057 Total 631,271 638,795

Total short-term financial liabilities 7,803,317 10,929,030

SHORT-TERM OPERATING LIABILITIES

Liabilities to group companies 23,336 24,963 Short-term accrued costs and deferred revenues disclose VAT from advances given.

Liabilities to suppliers 5,773,680 7,575,569 Short-term deferred revenues are formed for the surplus of funds received for the years Liabilities for advances 43,735 24,754 2010 and 2011 on the basis of settlement for the regulatory year under the contract Total short-term operating liabilities to suppliers 5,840,751 7,625,286 between the two companies SODO and Elektro Primorska in the amount of 97,471 EUR. Liabilities to employees 15,051 62,257 Accrued expenses include accrued bonus at the end of the year on the basis of the Liabilities to state and other institutions 1,190,055 1,560,478 collective agreement in the amount of 268,326 EUR. Final profit of the company was Liabilities to state and other institutions 112,712 756,667 recognized only in the middle of March 2015, when company SODO sent a preliminary Other liabilities 104,865 1,926 settlement for 2014. Advance payment of bonus has already been calculated and paid, Total other short-term operating liabilities 1,422,683 2,381,328 while the difference to the final amount was included in the costs of year 2014, because

Total short-term operating liabilities 7,263,434 10,006,614 the company is obliged to pay it based on the agreement between the company management and the trade union. TOTAL SHORT-TERM LIABILITIES 15,066,751 20,935,644

Among accrued expenses there are also recognized costs of purchasing the losses in the amount of 247,754 EUR for 2014, for which the company will receive the final calculation in 2015. Short-term liabilities to banks include installments of long-term loans falling due in 2015.

Operating liabilities decreased compared to the previous year by 2,743,180 EUR. Liabiliti- es to suppliers reduced by 1,784,535 EUR, while to employees by 370,423 EUR.

Short-term liabilities to employees include liabilities for the December payroll.

Liabilities to the state consist of liabilities for the value added tax and liabilities to the state and other institutions from payroll. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 94 3. Notes to the Profit and Loss Account 3. Notes to the Profit and Loss Account 95

3. No. 81/2012 as at October 29 2012), which was determined by the Energy Agency and Notes to the Profit and based on a decision issued under this Act. On December 16 2013 the Council of Energy Agency adopted the Act amending the above mentioned Act, which in certain items is Loss Account retroactive.

Based on the new contract with SODO revenues of the current year include also final settlement of regulatory year 2013 and preliminary account of year 2014. Company comprises the statement of profit and loss, as defined under SAS 25, according to version I. Revenues from capitalized own products and services result from the manufacturing documentation, construction, electrical installation and other works for the self-managed Revenue is recognized if increases in economic benefits during the accounting period are construction of facilities. associated with increases in assets or decreases in liabilities, and those increases can be measured reliably. Revenues and increases of assets or decreases in liabilities shall thus Other operating revenue associated with business effects cover the disbursement of be recognized simultaneously. accruals, revaluation operating revenue arising from the disposal of tangible fixed assets and the repayment of impaired assets, subsidies received, and compensation received Company achieved revenues: from insurance. • from electricity for losses, • from rent, Financial revenues and expenses are made out or received accounts of interest and • sale of services, dividend income. • capitalized own products and services, • other operating revenues, 3.1. Operating revenues • financial revenues and • other revenues.

Use of electricity network is charged to business customers through a special account Table 51: 2014 2013 Operating revenues based on the amount of transmitted energy and capacity charges. Company charges for Revenues from sale of in EUR the use of the energy network and DVE and SPTE contributions to its customers in the - electricity 4,310,110 4,974,377 name and on behalf of SODO, d. o. o., in the framework of the services they perform for this company. - infrastructure rent 15,678,046 18,149,462 - other rent 310,688 409,791 Revenues from the sale of services include electrical installation services and maintenan- - SODO services 16,014,023 15,216,339 ce of equipment owned by clients. Their volume depends on customer orders. Revenues - other services 2,086,143 2,059,188 in 2014 were evaluated in accordance with the price list of services of complementary activity, which changed in October 2013. Company also provides services for network - settlement for past regulatory periods -7,984 -1,809 users, which include connections and disconnections to the network, replacement of fu- Total 38,391,026 40,807,348

ses and additional readings on demand, but from January 1 2013 are no longer included Capitalized own products and services 6,098,307 6,300,696 in revenue of the company, but the company performs them on behalf of the company Otheroperating revenues from: SODO and transfers the charged funds monthly. - drawing of accruals 376,528 1,194,399

In its revenues the Company discloses sale of electricity from losses in the electricity - sale of fixed assets 9,491 95,588 network, rent of infrastructure and services for SODO in accordance with the contract - collected written-off receivables 21,600 9,159 and the annexes to the contract. Amount of funds for losses, rent and services is based - received grants 216,106 10,125 on the regulatory framework for 2014, defined by the Act determining the methodology - received compensations 3,281,068 315,807 for charging for the network charge, the methodology for setting the network charge, and the criteria for establishing eligible costs for electricity networks (Official Gazette of RS - other operating revenues 20,357 22,874 Total 3,925,150 1,647,952

Total operating revenues 48,414,483 48,755,996 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 96 3. Notes to the Profit and Loss Account 3. Notes to the Profit and Loss Account 97

Other operating revenues from the extraction of accruals consist of revenue from the Table 52: Production Sale costs General ac- Total Analysis of costs by use of provisions for depreciation of fixed assets acquired free of charge in the amount costs tivity costs functional groups of 257,023 EUR, use of provisions for the average costs of connection in the amount in EUR of 110,299 EUR, and other use of provisions for the co-financing of the construction of Cost of goods 4,304,680 4,304,680 energy facilities. Cost of material 4,818,170 745,962 443,302 6,007,434

Revenues from sale of fixed assets represent surplus of sales over the carrying value of Cost of services 5,738,820 127,004 761,462 6,627,286

fixed assets sold. Labor costs 12,438,973 324,104 2,776,089 15,539,166

Depreciation 10,487,249 258,235 10,745,484 Collected written off receivables include an amount of receivables for which a value adju- Other operating costs 147,533 333 28,616 176,482 stment was formed to the charge of expenses, and which were paid in 2014. Total 37,935,425 1,197,403 4,267,704 43,400,532

Received grants include received state support for partial reimbursement of the costs of using aggregates at ice damage and employment of persons with disabilities over the required quota.

Compensations received were recognized by the insurance companies for damage to power plants and cars. In 2014, they were higher than the previous year due to the clea- Table 53: ring of claims during ice damage. 2014 2013 Costs by nature

Costs of material, goods and services in EUR Revenues from sales decreased by 2,416,322 EUR in comparison with the previous Cost of electricity sales 4,304,680 4,934,540 year, of which revenue from electricity sold decreased by 664,267 EUR, revenues from rents are lower by 2,570,519 EUR, while revenues from services for SODO are higher by Cost of material 6,007,434 4,037,127 797,684 EUR. Revenues from other services are higher by 26,955 EUR, while settlement Cost of services 6,627,286 7,430,030

for previous regulatory period is slightly lower than in the previous year. Total 16,939,400 16,401,697

All revenues in 2014 were achieved with sales in the domestic market.

3.2. Operating expenses Cost of goods sold covers exclusively costs of electricity purchase for losses in the amo- Expenses are recognized if decreases in economic benefits during the accounting period unt of 4,282,812 EUR, for supplies in the amount of 1,527 EUR and settlement of costs are associated with decreases in assets or increases in liabilities and such decreases can for year 2013 in the amount of 20,341 EUR. Costs of electricity purchase for losses are be measured reliably. Expenses are recognized simultaneously with the recognition of increased by the estimated value of energy undercharged by the supplier Holding Slo- the decrease in assets or increase in debts. venske elektrarne, for which the company will receive a debit note in the first half of 2015. Cost of materials represent spare parts and materials for maintenance and the elimination Operating expenses include all expenses incurred in the financial year, recorded by natu- of damage, the cost of materials for the installation of services to their own needs and re, such as costs of materials and services, labor costs, write-downs and other operating market (4,398,990 EUR), cost of fuel consumed (1,146,582 EUR), electricity (138,540 expenses, on the basis of documents that prove that they are linked with the economic EUR), office supplies (50,819 EUR), small tools (245,392 EUR), and the rest the costs of benefits. auxiliary materials.

Operating expenses from revaluation arise upon the impairment or disposal of tangible Costs of services include costs of maintenance of fixed assets (2,223,781 EUR), cost of fixed assets and intangible assets and in relation to current assets due to their impa- health care, counseling, law and education services, as well as cost of computer pro- irment. grams and studies (804,545 EUR), insurance premiums and costs of banking services (921,101 EUR), cost of computer processing (736,315 EUR), costs of telephone and pos- Analysis of costs by functional group does not include revaluation expenses in the amo- tal services (456,401 EUR) and other costs related to the ordinary operations (1,485,143) unt of 897,019 EUR, which are shown in the income statement as write-offs. EUR. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 98 3. Notes to the Profit and Loss Account 3. Notes to the Profit and Loss Account 99

Gross remuneration of members of the board, paid in the year 2014: Costs of services include also payments to six members of the supervisory board, which Table 56: in year 2014 amounted to 95,155 EUR. This amount includes a net payment, income tax Fixed salary Reimburse- Bonus – Other reve- Total Remuneration of ment of insurance nue and other the management and contribution. The Company did not grant any loans or issued guarantees for their Bruto prejemki članov uprave, izplačani vexpenses letu 2014: premium bonuses board members liabilities to the members of the supervisory board. in EUR Uroš Blažica 85,250 1,607 24 1,284 88,165 Payments to members of the supervisory board in year 2014:

Table 54: Remuneration of Of which: Gross reve- supervisory board Bonus for Chairman of the Management Board and employees on individual contracts were not members nue for the Bonus for Reimburse- Attendance Supervisory board member Attendance performing accounting performing the ment of travel fee Audit approved any loans or issued guarantees for their liabilities by the company. fee SB the function year function in SB expenses Committee in AC in EUR Write-offs Uroš Saksida 18,272 15,537 2,640 95 Company uses the linear depreciation method. During the overall useful life of each asset Valter Vodopivec 14,034 11,394 2,640 it consistently allocates its depreciable amount among the individual accounting periods Matjaž Bajec 13,306 10,358 2,640 308 as depreciation at that time. All assets that are subject to depreciation are classified into Dejan Kocjančič 18,946 10,358 2,640 1,007 3,885 1,056 depreciation groups. Each group has a technical depreciable fixed period of life, from Massimo Makovec 17,599 10,358 2,640 955 2,590 1,056 which the depreciation rate is calculated. Fixed assets are depreciated individually. Jernej Kenda 12,998 10,358 2,640 Total 95,155 68,363 15,840 2,365 6,475 2,112 Table below provides an overview of depreciation rates in percentages used for the calculation of depreciation in 2014. Other two members of the audit committee were paid a total of 12,800 EUR in year 2014.

Costs of the audit, advisory and other financial services in the amount of 76,718 EUR Table 57: include by 8,850 EUR of costs for the service of auditing the annual report. 2014 2013 Depreciation rates Intangible assets (excluding software) 3,33 - 20,00 3,33 - 20,00 Computer and software equipment 33,3 33,3 Properties (land and buildings) 0,00 - 5,00 0,00 - 5,00 Table 55: Transformers 2,86 - 3,33 2,86 - 3,33 Labor costs 2014 2013 Labor costs in EUR Electronic meters 4,17 - 6,67 4,17 - 6,67 Wage cost 11,391,828 10,892,670 Transport vehicles 8,33 8,33 Costs of supplementary pension insurance 566,045 575,110 Cars 12,5 12,5 Cost of contributions and other duties from salaries 1,856,986 1,790,765 Other tangible fixed assets 2,50 - 20,00 2,50 - 20,00 Other labor costs 1,724,307 1,881,337 Works of art 0,00 0,00 Total 15,539,166 15,139,882

Table 58: Other labor costs include reimbursement to employees, accident insurance, social 2014 2013 Write-offs assistance, and the costs of long-term provisions for severance pay and long-service Write-offs in EUR bonuses to employees in the amount of 118,159 EUR. Costs of annual leave bonus in Depreciation of intangible assets 349,994 291,301 2014 amounted to 375,833 EUR. Depreciation of facilities 5,698,021 5,730,588 Depreciation of equipment 4,697,469 4,987,808 Total depreciation 10,745,484 11,009,697 According to the collective agreement in 2014 482 employees received a salary. Accor- Revaluation expenses for: ding to the agreements, which are not subject to the tariff part of the collective agre- - intangible and tangible assets 694,009 163,021 ement, the salary was received by seven employees, who in 2014 received a total of - current assets 203,010 225,114 478,676 EUR (management not included). Total revaluation expenses 897,019 388,135

Total write-offs 11,642,503 11,397,832 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 100 3. Notes to the Profit and Loss Account 3. Notes to the Profit and Loss Account 101

Depreciation for the year 2014 was used to repay investment loans in the amount of 3.4. Financial expenses 7,831,973 EUR, the remainder of the depreciation has been a source of investment fi-

nancing. Table 61: 2014 2013 Financial expenses in EUR In year 2014 the company has by 694,009 EUR of expenses from revaluation of intangible Financial expenses from liabilities to banks 803,109 743,413 and tangible fixed assets as a result of inventory write-off of unserviceable assets, sales Expenses from other financial liabilities 69,774 at the lower market price than the carrying value of the asset, but in particular from the Expenses for operating liabilities 5,058 51,400 write-off as a result of the destruction of buildings and equipment caused ice damage. Expenses from impairment of financial investments 2,799 Total 877,941 797,612 Operating expenses from revaluation of current assets in the amount of 186,314 EUR re-

late to the formed value adjustments of receivables for the use of networks and services, Financial expenses from liabilities to banks are higher than in the previous year and re- and receivables for accrued interest, while in the amount of 16,696 EUR they relate to the present the bank charged interest on short-term and long-term loans. Part of the interest impairment in value of material stocks. of long-term loans increase the cost of investments and are not recorded in financial expenses. Table 59: Other operating 2014 2013 Expenses from other financial liabilities constitute interest from actuarial calculations. expenses Other operating expenses in EUR Provisions for claims 22,821 Total provisions 22,821 3.5. Other revenue Duties, independent of profit or loss 47,409 88,176 Other revenues and expenses are difficult to announce as they are not expected to occur Environmental protection expenditure 98,123 98,829 regularly. Company thus discloses extraordinary revenues. Scholarships 2,734 Rewards to learners on practice 8,129 3,970 Table 62: Other 11,091 2014 2013 Other revenue Total other expenses 153,661 204,800 in EUR Total other operating expenses 176,482 204,800 Other revenue 3,465 3,346 Total 3,465 3,346

Among the duties, independent of profit or loss, the majority refers of the different types Other revenues and expenses arise from events or transactions that do not occur regu- of fees. Environmental protection expenditure includes compensation for the use of bu- larly and frequently. ilding land.

3.3. Financial revenue Financial revenues arise in connection with financial investments and receivables in the 3.6. Other expenses form of accrued interest. They are recognized when there is no doubt about their size 2014 2013 Table 63: and collectability. Other expenses in EUR Financial sanctions 30 Table 60: Financial revenue 2014 2013 Compensations 19,973 8,206 in EUR Other expenses 58,654 57,576 Financial revenues from shares 17,299 51,857 Total 78,657 65,782 Financial revenues from given loans 12,655 Financial revenues from operating receivables 44,861 68,759 Compensations are charged for damage, which were caused during the construction or Total 74,815 120,616 maintenance, mainly to natural persons, on their land.

Other expenses are disclosed financial aid and donations in the amount of 22,256 EUR, Revenues from shares are paid dividends from financial investments of Bank Koper, d. offset by hundredths and other expenses not indispensable for business. d., and Zavarovalnica Triglav, d. d.

Interest is charged to customers using the network and services, namely from late payments and the balance of open receivables overdue as at December 31 2014. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 102 3. Notes to the Profit and Loss Account 4. Notes to the Cash Flow Statement 103

4. 3.7. Corporate income tax Company charged the income tax in the amount of 425,011 EUR. Notes to the Cash Flow

The Company does not recognize and does not eliminate receivables and deferred tax Statement liabilities if the amounts of receivables and deferred tax liabilities are irrelevant for the company both individually and jointly. Amount of claims is essential if it exceeds 1% of the value of total assets, the amount of liabilities if it exceeds 1% of liabilities. Cash flow statement has been prepared using the direct method, version I. Data for the statement of cash flows derived from records of cash receipts and payments from the accounts of the company. 3.8. Net profit or loss 4.1. Receipts from operating activities Receipts from operating activities consist of inflows to the accounts. These are the rece- Table 64: Net profit or loss 2014 2013 ipts from sales of products and services and other income from operations, like costs of

in EUR network use, which company receives on the account of SODO, d. o. o., compensations, co-financing receipts and network charge for power consumption. Operating result 4,116,932 5,611,785

Financial result -803,126 -676,996 Profit or loss from extraordinary -75,192 -62,436 4.2. Expenditure for operating activities Profit before tax 3,238,614 4,872,353 Operating expenditure are outflows from accounts consisting of operating expenses paid

The tax on income of legal persons -425,011 -694,996 in the year such as materials, services, salaries, benefits and other outflows.

Net profit or loss 2,813,603 4,177,357 4.3. Receipts from investing activities Receipts from investing are inflows arising from interest paid and shares in profits, as well For business year 2014, the company income statement showed a net profit of 2,813,603 as revenues from disposal of fixed assets. EUR. Profit before tax is by 1% lower than planned.

While compiling the annual accounts the management board of already allocated 4.4. Expenditure for investing activities 1,332,603 EUR to other reserves from profit; the difference in the amount of 1,481,000 Expenditures for investing are measured by outflows of invoices paid for the acquisition EUR remained unallocated. of tangible and intangible assets and financial investments.

3.9. Total comprehensive income for the period 4.5. Receipts from financing activities Company has the positive surplus from revaluation of financial assets available for sale in Receipts from the financing activities are amounts remitted to the long-term and shor- the amount of 10,893 EUR, and the negative value of other components of comprehensi- t-term loans. ve income of actuarial earnings in the amount of 94,713 EUR.

Total comprehensive income for the period is thus 2,729,783 EUR. 4.6. Expenditure for financing activities Payments for interest, dividends and repayment of loans are expenditures for financing activities. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 104 5. Disclosure of Events With Related Parties 6. Contingent Liabilities of the Company 105

4.7. Cash flow for the period In year 2014 Elektro Primorska d. d. recorded in the income statement the following revenues and expenses to related companies: Difference between the initial cash balance and closing balance is a negative cash flow for year 2014 in the amount of 4,939,747 EUR. Table 66: 2014 2013 Revenues and expenses Company established net cash from operating activities. Net cash used in investing acti- Revenues: in EUR vities is a result of high investments, while net cash used in financing activities a result of Net sales E3, d.o.o. 470,071 393,860 the repayment of bank loans. Net sales Stelkom, d.o.o. 107,016 113,769

Net sales Knešca d.o.o. 362

Total 577,449 507,629

2014 2013 5. Expenses: in EUR Costs for the purchase of materials and services E3, d.o.o. 151,339 185,118 Disclosure of Events With Related Cost of services Informatika d.d. 991,528 939,792 Parties Total 1,142,867 1,124,910 Management estimates that in the relationship with the parent company no transactions were concluded, which would mean advantage or disadvantages arising from business for any company. As a related party company recorded assets and liabilities of the following companies: • E 3, d. o. o., Nova Gorica, which is 100 % owned, • Informatika, d. d., Maribor (11.9 % share in the capital), 6. • Stelkom, d. o. o., Ljubljana (9.9 % share), • JOD, d. o. o., which is 100 % owned by the subsidiary E 3, d. o. o., Contingent Liabilities of the Company • ECO ATMINVEST, d. o. o., which is also 100 % owned by the subsidiary E 3, d. o. o., • Knešca, d. o. o., from Most na Soči, which is associate company of the subsidiary JOD, d. o. o., and therefore indirectly related also to the parent company Elektro Primorska d. d. According to the assessment of legal experts disputes are not such as to have a significant impact on the economic outturn. Company assesses that provisions formed for Elektro Primorska d. d. Company has as at 31. 12. 2014 in the balance sheet the following these purposes are high enough and would cover contingent liabilities of the company. receivables and payables to related companies:

Company keeps contingent liabilities in the off-balance sheet for a guarantee for a loan of

Table 65: the subsidiary E 3, d. o. o., for the liens upon immovable property to Nova Kreditna Bank Receivables and 31.12.2014 31.12.2013 payables Maribor, and issued bank guarantees for tender and for elimination of defects during Receivables: in EUR warranty period (in providing services to external customers). Receivables from company E3, d.o.o. 69,929 84,995

Receivables from company Stelkom, d.o.o. 32,441 33,730 Table 67: 31.12.2014 31.12.2013 Contingent liabilities Receivables from company ECO ATMINVEST d.o.o. 368 2,198 of the company in EUR Receivables from company Informatika d.d. 1,915 Liabilities for guarantee 272,727 1,500,000 Total 104,653 120,923 Liabilities from pledged property 4,671,176 4,671,176 31.12.2014 31.12.2013 Bank guarantees 464,613 24,215 Liabilities: in EUR Total 5,408,516 6,195,391 Liabilities from company E3, d.o.o. 38,387 87,220

Liabilities from Informatike, d.d. 135,485 90,778

Total 173,872 177,998 C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 106 7. Events After the Balance Sheet Date 8. Notes to the Financial Statements According to Energy Act and the Companies Act 107

7. Amount of the share capital and capital reserves have been identified in the balance Events After the Balance sheet as at 31. 12. 2001 and remain unchanged. Other components of equity, reserves and profit are changed.

Sheet Date In the balance sheet as at 31. 12. 2014 after the allocation of results and an unchanged equity, receivables and liabilities are disclosed among activities that offset the sub- After the end of the reporting period and before the conclusion of the financial statements balance activities and are »consolidated« in the balance sheet for the company. there were no events that could influence the financial statements for year 2014.

8.2. Notes to the profit and loss account In the profit and loss account revenues and expenditure of the individual activity are disclosed. These are direct revenues and expenses of each activity and revenues and 8. expenses of general activities distributed on the basis of agreed criteria displayed. Notes to the Financial Statements According to Energy Act and the 8.3.Criteria for allocating revenues and expenses, assets and liabilities of joint Companies Act activities to individual activities

In accordance with Article 38 of the Energy Act, a company must prepare accounts specifically for the energy market activities and especially for the other activities of the no. employees from working hours in activity ×100 company. Individual activities are business segments that the company must, in accor- Key 1 share of labor costs dance with the general disclosure under the Companies Act, specifically disclose in the no. of all employees from working hours annual report.

share of current value of intangible assets and current value of fixed assets in activity ×100 Key 2 At the end of the year Elektro Primorska d. d. composes financial statements for the tangible fixed assets current value of all fixed assets company as a whole. As an annex to the notes to the financial statements it attaches the statements in accordance with Article 38 of the Energy Act. In this respect the com- revenues in activity×100 pany must distinguish the activity of electricity supply from other activities. Key 3 share of revenues all revenues Following are the criteria for: • calculating indirect costs for the allocation to individual activities and • criteria according to which assets, liabilities, revenues and expenses are allocated consumption of material from the warehouse for activity Key 4 share of material consumption to individual activities. entire consumption of material from the warehouse

consumption of material and services in activity ×100 Key 5 share of the cost of materials and services 8.1. Notes to the balance sheet entire consumption of material and services Balance sheets show assets and liabilities referring to the balance as at 31. 12. 2014. Physical division of assets in a particular activity was carried out in 2001. It was done by the company appointed group of experts from technical field in cooperation with the financial sector.

Division of assets and liabilities of joint activities is carried out and distributed to the individual activities according to agreed criteria on the balance sheet date. Method of calculation of criteria is described in the report below. C Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards Notes to the Financial Statements According to the Companies Act and Slovenian Accounting Standards C 108 8. Notes to the Financial Statements According to Energy Act and the Companies Act 8. Notes to the Financial Statements According to Energy Act and the Companies Act 109

Table 69: 8.4. Sub-balance sheet according to the Liabilities ED infra- Market Total Sub-balance structure and activities sheet according to the Energy Act Energy Act as at 31. 12. 2014 services for (liabilities) SODO

Capital: in EUR

I. Called-up capital 78,185,730 377,102 78,562,832 Table 68: Sub-balance sheet Assets ED Market Total according to the infrastructure activities 1. Share capital 78,185,730 377,102 78,562,832 Energy Act (assets)) and services II. Capital reserves 45,787,692 420,495 46,208,187 for SODO III. Profit reserves 9,833,957 1,480,742 11,314,699 A. Long-term assets: in EUR 1. Statutory reserves 741,732 -90,404 651,328 I. Intangible assest 1,913,813 251 1,914,064 2. Other profit reserves 9,092,225 1,571,146 10,663,371 1. Long-term rights 1,852,210 198 1,852,408 IV. Revaluation surplus -41,289 -9 -41,298 2. Long-term deferred development costs 19,414 19,414 V. Net profit or loss of the business year 1,317,879 163,121 1,481,000 3. Other LT accruals and pre-paid expenditure 1,692 1,692 Total capital 135,083,969 2,441,451 137,525,420 4. Intangible assets in acquisition 40,497 53 40,550 B. Provisions and LT accrued costs and deferred revenues 13,061,478 21,868 13,083,346 II. Tangible fixed assets 167,655,521 1,395,001 169,050,522 1. Provisions 3,284,007 722 3,284,729 1. Land 5,116,950 688,351 5,805,301 2. Long-term accrued costs and deferred revenues 9,777,471 21,146 9,798,617 2. Buildings 113,945,180 650,078 114,595,258 C. Long-term liabilities 20,310,659 20,310,659 3. Equipment 45,779,371 52,119 45,831,490 I. Long-term financial liabilities 20,310,659 20,310,659 4. Fixed assets in acquisition 2,814,020 4,453 2,818,473 1. Long-term financial liabilities to banks 20,310,659 20,310,659 III. Long-term financial investments 7,012,545 1,543 7,014,088 Č. Short-term liabilities 14,922,703 144,048 15,066,751 1. Investments in group companies shares 6,520,582 1,435 6,522,017 I. Short-term financial liabilities 7,803,318 7,803,318 2. Other shares and stakes 491,963 108 492,071 1. Short-term financial liabilities to banks 7,803,318 7,803,318 IV. Long-term operating receivables 20,318 4 20,322 II. Short-term operating liabilities 7,119,385 144,048 7,263,433 1. Long-term receivable due from others 20,318 4 20,322 1. Short-term operating liabilities to group companies 36,299 2,088 38,387 Total long-term assets 176,602,197 1,396,799 177,998,996 2. Short-term operating liabilities to suppliers 5,675,674 141,740 5,817,414 B. Short-term assets: 3. Other short-term operating liabilities 1,407,412 220 1,407,632 I. Stocks 965,604 236 965,840 Total liabilities 48,294,840 165,916 48,460,756 1. Material 965,604 236 965,840 D. Short-term accrued costs and deferred revenues 628,726 2,545 631,271 II. Short-term financial investments 25,202 5 25,207 E. Liabilities to other activities 711,571 711,571 1. Short-term loans to others 25,202 5 25,207 TOTAL LIABILITIES 184,719,106 2,609,912 187,329,018 III. Short-term operating claims 6,746,774 495,979 7,242,753

1. Short-term operating claims on group companies 1,133 69,164 70,297

2. Operating accounts receivable 6,273,514 404,715 6,678,229

3. Operating claims on others 472,127 22,100 494,227

IV. Monetary assets 91,089 4,133 95,222

Total short-term assets 7,828,669 500,353 8,329,022

C. Short-term accruals and pre-paid expenditure 288,240 1,189 289,429

Č. Claims on other activites 711,571 711,571

TOTAL ASSETS 184,719,106 2,609,912 187,329,018 C Pojasnila k računovodskim izkazom po ZGD in SRS | 8. Pojasnila k računovodskim izkazom po energetskem C 110 zakonu in zakona o gospodarskih družbah 111

8.5. Profit or loss account according to the energy act for year 2014

Table 70: Profit or loss Assets ED infra- Market Total account according structure and activities to the Energy Act services for SODO in EUR 1. Net sales revenue 36,303,540 2,087,486 38,391,026 a. on domestic market 36,303,540 2,087,486 38,391,026 2. Capitalized own products and services 6,098,307 6,098,307 3. Other operating revenues 3,922,538 2,612 3,925,150 4. Costs of goods, material, and services -15,881,686 -1,057,714 -16,939,400 a. costs of goods sold and material used -9,540,776 -771,338 -10,312,114 b. costs of services -6,340,910 -286,376 -6,627,286 5. Labor costs -14,930,013 -609,153 -15,539,166 a. costs of salaries -10,950,523 -441,305 -11,391,828 b. costs of additional pension insurance of employees -553,469 -12,576 -566,045 c. social security costs -1,784,673 -72,313 -1,856,986 č. other labor costs -1,641,348 -82,959 -1,724,307 6. Amortization/depreciation expense -11,591,810 -50,693 -11,642,503 a. depreciation -10,708,262 -37,222 -10,745,484 b. operating expenses from revaluation in intang. and tang. -680,545 -13,464 -694,009 fixed assets c. operating expenses from revaluation in current assets -203,003 -7 -203,010 7. Other operating expenses -175,737 -745 -176,482 8. Financial revenues from shares 17,295 4 17,299 a. in other companies 17,295 4 17,299 9. Financial revenues from given loans 12,652 3 12,655 a. given to others 12,652 3 12,655 10. Financial revenues from operating claims 35,437 9,424 44,861 a. on others 35,437 9,424 44,861 11. Financial expenses from financial liabilities -866,647 -6,236 -872,883 a. from loans, received from banks -803,109 -803,109 b. from other financial liabilities -63,538 -6,236 -69,774 12. Financial expenses from operating liabilities -4,609 -449 -5,058 a. from liabilities to suppliers and bill of exchange liabilities -4,163 -405 -4,568 b. from other operating liabilities -446 -44 -490 13. Other revenues 3,464 1 3,465 14. Other expenses -78,650 -7 -78,657 NET PRE-TAX PROFIT OR LOSS OF THE ACCOUNTING PERIOD 2,864,081 374,533 3,238,614 15. Income tax -360,376 -64,635 -425,011 16. NET PROFIT OR LOSS OF THE ACCOUNTING 2,503,705 309,898 2,813,603 PERIOD D Business Report of Elektro Primorska Group D Business Report of Elektro Primorska Group | 1. Presentation of the Group D 114 115

1. Presentation of the Group

1.1. Composition of the group Elektro Primorska group is composed of: • Elektro Primorska d. d. as the controlling company • E 3, d. o. o., as the controlled company in 100 % ownership of the parent company • JOD, d. o. o., in 100 % ownership of company E 3, d. o. o. • ECO ATMINVEST, d. o. o., in 100 % ownership of company E 3, d. o. o. • Knešca, d. o. o., from Most na Soči, in 47.27 % ownership of company JOD, d. o. o., as the associate company.

Consolidation includes parent company Elektro Primorska d. d., controlled companies E 3, d. o. o., JOD, d. o. o., and ECO ATMINVEST, d. o. o., which are fully consolidated and associate company Knešca, d. o. o., which is consolidates under the equity method. As at December 312014 the parent company Elektro Primorska d. d. had 137,525,420 EUR of capital among the liabilities. In year 2014 it operated positively and made 2,813,603 EUR of net profit.

Controlled company E 3, d. o. o., ended the 2014 business year with a net profit in the amount of 1,319,963 EUR. As at 31. 12. 2014 the company disclosed 13,443,877 EUR of capital.

Company JOD, d. o. o., ended the business year with a net profit in the amount of 72,283 EUR. As at 31. 12. 2014 the company disclosed capital in the amount of 1,115,783 EUR. Company ECO ATMINVEST, d. o. o., ended the business year with a loss in the amount of 154,684 EUR and as at 31. 12. 2014 it disclosed negative value of capital in the amount of 244,591 EUR.

Knešca, d. o. o., operated positively in year 2014 and made 336,702 EUR of net profit. As at 31. 12. 2014 it disclosed capital in the amount of 1,199,621 EUR. D Business Report of Elektro Primorska Group | 1. Presentation of the Group Business Report of Elektro Primorska Group | 1. Presentation of the Group D 116 117

1.2. Presentation of controlled company licenses for carrying out energy activities in the field of electricity production, production and distribution of heat, and supply, trade, representation and mediation in the electricity E 3, d. o. o. market. Company E 3 energetika, ekologija, ekonomija, d. o. o., was established on November At the end of year2014 there were 41 employees in the company, which are four employe- 15 2004. Founder and sole shareholder is Elektro Primorska d. d. Company. Basis for the es more than in the previous year. foundation of the company was the Energy act, which required legal spin-off of regulated

activities from market and production activities. Basic indicators of economy and return are favorable. Company operated with a net profit in the amount of 1,319,963 EUR.

Name: E 3 energetika, ekologija, ekonomija, d. o. o.

Abbreviated name: E 3, d. o. o.

Business address: Nova Gorica, Erjavčeva 24 1.3. Presentation of associate company VAT identification number: 17851262

Registration number: 2010593 Knešca, d. o. o. In June 2006 E 3, d. o. o., Company repurchased 23.61 % share in Knešca, d. o. o., Bank accounts: 04750-0001095763 Nova KBM, d. d. Company, while in July of the same year also shares of four (4) natural persons in the 02945-0259665734 NLB, d. d. amount of 23.66 % (total share of the company is 47.27 %). In year 2012 the share was transferred as a contribution in kind to a subsidiary JOD, d. o. o. Company is registered in the Companies Register at the District Court of Nova Gorica, No. 1/04504/00.

Share capital of company: 6,522,016.72 EUR In comparison with the other ten (9) individual owners Company JOD, d. o. o., has an

Owner: Elektro Primorska d. d., 100 % important 47.27 % share capital of Knešca, d. o. o. Company.

Company represented by: Darko Pahor

Controlled company Jod, d. o. o. 100 %

Eco Atminvest, d. o. o. 100 % Name: KNEŠCA, d. o. o., Proizvodnja električne energije

Associate company: KNEŠCA, d. o. o. Abbreviated name: KNEŠCA, d. o. o.

JOD, d. o. o., Nova Gorica 47,27 % Business address: Kneža 78, Most na Soči

(9) fizičnih oseb 52,73 % VAT identification number: 92002307 Registration number: 5617383

Bank account: 27000-0000204363

E 3, d. o. o., began with regular operations on January 1 2005. On December 3 2004 it Company is registered in the Companies Register at the District Court of Nova Gorica, No. acquired a license for carrying out energy activities of production and trading of electri- RC-065-2005/224. city. Share capital of the company: 129,361 EUR

Within the company E 3, d. o. o., is organized into three organizational units, namely: Owners: JOD, d. o. o. 47,27 % • Department of electricity purchase and sale Natural persons 52,73 % • Department of production and services and Director of the company: Vincenc Hozjan • General Service department.

On May 1 2010 the company began to pursue an economic public service activity of the distribution system operator of heat in Šempeter – Vrtojba municipality. In accordance In year 2014 company operated positively and made 405,904 EUR of profit. It was char- with the concession agreement the company took over the heating of a residential com- ged with 69,202 EUR of corporate income tax, and net profit of the year amounted to plex Podmark. 336,702 EUR. As at 31. 12. 2014 capital of the company amounted to 1,199,621 EUR.

On January 1 2011 the company was merged with the spine-off part of Elektro Primor- In consolidated accounts it is presented as associate company and included in the con- ska d. d. Company, which deals with the purchase and sale of electricity. Company has solidation of the group according to the equity method in accordance with the SRS. D Business Report of Elektro Primorska Group | 1. Presentation of the Group Business Report of Elektro Primorska Group | 1. Presentation of the Group D 118 119

1.4. Presentation of the controlling company 1.5. Presentation of the controlling company JOD, d. o. o. ECO ATMINVEST, d. o. o.

On August 4 2011 Company E 3, d. o. o., founded JOD, d. o. o. Company. Share capital In September 2013 company E 3, d. o. o., bought 50 % share of the company, and in was paid on July 15 2011. December 2013 the remaining part.

Name: JOD, družba za inženiring in izgradnjo energetskih Name: ECO ATMINVEST, energija, okolje, ekonomija, d.o.o. objektov, d. o. o. Abbreviated name: ECO ATMINVEST, d. o. o. Abbreviated name: JOD, d. o. o. Business address: Bidovčeva ulica 1, 5000 Nova Gorica Business address: Ulica 15. maja 15, 6000 Koper VAT identification number: 79068090 VAT identification number: 13492233 Registration number: 3326489 Registration number: 6009441 Bank account: SI56 0475 0000 1795 521 Bank account: 047500001863518 Company is registered in the Companies Register at the District Court of Nova Gorica, No. Srg Company is registered in the Companies Register at the District Court of Koper, No. Srg 2011/29737. 2014/11036

Share capital of the company: 1,043,500 EUR Share capital of the company: 7,500 EUR

Owners: E 3, d. o. o., Nova Gorica (100 %) Owners: E 3, d. o. o., Nova Gorica (100 %)

Director of the company: Darko Pahor

In year 2014 company made 72,283 EUR of net profit. Company did not operate, so no In year 2014 the company operated with a loss in the amount of 154,684 EUR. operating revenues were generated. All revenues were of financial nature, namely from received dividends of the associated company Knešca, d. o. o. D Business Report of Elektro Primorska Group | 2. Risk Management Business Report of Elektro Primorska Group | 2. Risk Management D 120 121

2. Risk Management

Credit risks are the result of losses due to untimely performance or even failure to ful- fill obligations of the buyer of electricity to the company. Company limits credit risk by carefully checking the creditworthiness of customers, continuously monitoring, and ma- Risk management is defined by COT methodology, which is valid for Elektro Primorska naging credit exposures of individual customers according to their limits and by monito- Group. Subsidiary E3, d. o. o., buys and sells electricity and is thus extremely exposed ring outstanding receivables. To reduce such risk sale transactions in electricity field are to the market risks, which indirectly worsen capital adequacy of Elektro Primorska d. d. largely secured by instruments that include adequate insurance. Risk management is not Company. only associated with insurance, but rather with exactly defined purchase contracts, which the company claims in all types of transactions with electricity. Elektro Primorska Group meets different risks, monitors them regularly and submits appropriate measures to control them and thus establishes more stable operating con- Liquidity risks arise, if the company would not be able to meet its financial obligations as ditions. they fall due. By daily monitoring and planning of short- and long-term solvency provided by up to date coordination and planning of cash flows, the company ensures that the risk Risk management is one of the key tasks of the Elektro Primorska group's management. of a liquidity capacity is in the range of acceptable parameters and that it is manageable. Regulatory risks result from changes in market rules or legislation on the Slovenian mar- Market risks arise from the uncertain changes in prices on the domestic and foreign ket or foreign electricity markets and may affect business results. Company actively electricity markets, where the company is present, as well as from the open position monitors developments in the legislation both through the parent company as well as of the trading portfolio of the company. Open position, which is exposed to market risk independently according to activities of the controlled company E 3, d. o. o., to be able to arises when the aggregate quantity of electricity purchased at a fixed price within a given promptly respond to such changes by adjusting trades and production activities. accounting period deviates from the quantities sold at a fixed price. In doing so, the risk is controlled to the maximum extent so that each sale is marked by the appropriate counter In addition to external risks arising from the contracts concluded, the company must also purchase and conversely. In order to hedge open positions, in addition to contracts with manage internal risks arising from operational business of the company and its organi- the obligation to supply at a fixed price, the company also uses the option of purchasing zation. electricity through several »open« contracts that allow optimal purchase of electricity in several markets, and by limiting the open position not to exceed the percentage amounts Operational risk is present in all business operations performed by the company. The of electricity provided by Regulations. risk is reflected in the fact that due to insufficient efficacy of information technology, quality processes and control processes, the company could suffer financial damage. Quantity risks are the result of the risks arising from the difference between the forecast Company limits these risks with a control system based on the principle that all major (leased) and the actual delivered quantity of electricity. Quantity risks are borne by the operations are carried out with control of at least two persons as well as with continuing company in open contracts, that is in all contracts with final customers and qualified improvements in upgrading information infrastructure and automatic control of individual producers. Company manages this risk through a comprehensive information support phases of the process. In addition, the company seeks to limit this risk by identifying all for long- and short-term forecasting of consumption profiles and delivery of electricity, the processes, clearly defining the roles of individuals, including their powers, responsi- and through active daily monitoring of deviations of all measurement points included in bilities and policies. Operational risks are reduced by highly professional, experienced the balance subgroup E3. and motivated employees. From the latter it is expected to continuously upgrade existing and acquire new knowledge, as well as dynamism, multidisciplinary activities, teamwork Price risks are associated with increased competition in the electricity market and un- and own-initiative. Also, the provision of adequate working conditions and environment certainty in market prices. EP group manages price risks through appropriate pricing must prevent the possible loss of key employees, which is the essence of the staff risk. policies and coordinated maturity of the sales and purchase contracts. D Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements D 122 123

3. Consolidated balance sheet as at December 31 2014 Consolidated Financial Table 72: Liabilities Note 31/12/14 31/12/13 Consolidated balance sheet as at Statements December 31 2014 A. Capital: in EUR (liabilities) I. Called-up capital 78,562,832 78,562,832

3.1. Consolidated balance sheet as at 1. Share capital 78,562,832 78,562,832 December 31 2014 II. Capital reserves 46,208,187 46,208,187 III. Profit reserves 17,571,277 13,347,083

Table 71: 1. Statutory reserves 768,501 768,501 Consolidated Assets Note 31/12/14 31/12/13 balance sheet as at 2. Other profit reserves 16,802,776 12,578,582 December 31 2014 A. Long-term assets: in EUR (assets) IV. Revaluation surplus -35,997 42,522 I. Intangible assest 4.2.1.1. 2,394,084 974,999 V. Net profit or loss from previous periods 763,796 755,497 1. Long-term rights 2,233,242 776,623 VI. Net profit or loss of the business year 2,086,817 3,549,759 2. Goodwill 89,907 89,907 Total capital 4.2.7. 145,156,912 142,465,880 3. Long-term deferred development costs 19,413 99,189 B. Provisions and LT accrued costs and deferred revenues 4.2.8. 14,130,053 14,184,876 4. Other LT accruals and pre-paid expenditure 1,692 1. Provisions 3,484,839 3,411,933 5. Intangible assets in acquisition 49,830 9,280 2. Long-term accrued costs and deferred revenues 10,645,214 10,772,943 II. Tangible fixed assets 4.2.1.2. 178,085,210 177,615,806 C. Long-term liabilities 4.2.9. 20,868,992 21,445,704 1. Land 5,905,500 5,895,970 I. Long-term financial liabilities 20,868,992 21,445,704 2. Buildings 119,343,119 116,591,165 1. Long-term financial liabilities to banks 20,868,992 21,445,704 3. Equipment 49,318,381 50,798,795 Č. Short-term liabilities 4.2.10. 29,687,239 38,526,676 4. Fixed assets in acquisition 3,518,210 4,329,876 I. Short-term financial liabilities 8,348,080 11,515,741 III. Long-term financial investments 1,911,796 1,911,796 1. Short-term financial liabilities to banks 8,106,913 11,514,684 1. Investments in group companies shares 1,399,725 1,324,664 2. Other short-term financial liabilities 241,167 1,057 2. Other shares and stakes 512,071 492,725 II. Short-term operating liabilities 21,339,159 27,010,935 IV. Long-term operating receivables 4.2.3. 69,642 16,965 1. Short-term operating liabilities to suppliers 19,382,785 23,956,726 1. Long-term receivable due from others 69,642 16,965 2. Other short-term operating liabilities 1,956,374 3,054,209 V. Deferred tax assets 4.2.4. 655,399 670,355 Total liabilities 64,686,284 74,157,256 Total long-term assets 4.2.1. 183,116,131 181,095,514 D. Short-term accrued costs and deferred revenues 4.2.11. 899,391 1,034,077 B. Short-term assets: in EUR TOTAL LIABILITIES 210,742,587 217,657,213 I. Stocks 4.2.5.1. 967,296 870,006

1. Material 967,296 870,006

II. Short-term financial investments 4.2.5.2. 40,623 194,561 Explanatory notes are part of the financial statements and should be read in conjunction

1. Short-term loans to others 40,623 194,561 with them.

III. Short-term operating claims 4.2.5.3. 24,568,467 28,123,350

1. Operating accounts receivable 22,593,405 26,493,803

2. Operating claims on others 1,975,062 1,629,547

IV. Monetary assets 4.2.5.4. 868,441 6,488,438

Total short-term assets 4.2.5. 26,444,827 35,676,355

C. Short-term accruals and pre-paid expenditure 4.2.6. 1,181,629 885,344

TOTAL ASSETS 210,742,587 217,657,213 D Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements D 124 125 3.2. Consolidated profit or loss account for 3.3. Consolidated statement of comprehensive business year ended as at December 31 2014 income for year ended as at December 31 2014

Table 73: Consolidated profit Assets Note 2014 2013 2014 or loss account for business in EUR in EUR year ended as at 1. Net sales revenue 4.3.1. 92,558,815 114,119,766 18. NET PROFIT OR LOSS OF THE ACCOUNTING PERIOD 4,079,402 Table 74: December 31 2014 Consolidated a. on domestic market 89,559,539 105,725,368 Changes in the surplus from the revaluation of financial assets available for sale 10,893 statement of comprehensive b. on foreign market 2,999,276 8,394,398 Other components of comprehensive income -89,411 income for year ended as at 2. Capitalized own products and services 4.3.1. 6,127,555 6,381,552 Total comprehensive income of the accounting period 4,000,884 December 31 2014 3. Other operating revenues 4.3.1. 4,717,350 2,286,524 4. Costs of goods, material, and services 4.3.2. -67,242,378 -84,717,574 3.4. Consolidated cash flow statement for a. costs of goods sold and material used -58,426,372 -74,971,681 b. costs of services -8,816,006 -9,745,893 year ended as at December 31 2014 5. Labor costs 4.3.2. -16,912,474 -16,403,690 Table 75: Note 2014 2013 Consolidated cash a. costs of salaries -12,409,457 -11,844,823 flow statement for A. OPERATING CASH-FLOW v EUR year ended as at b. costs of additional pension insurance of employees -611,587 -621,212 1. Operating receipts 185,211,582 206,949,458 December 31 2014 c. social security costs -2,021,731 -1,946,341 a. Receipts from sales of products and services 159,983,781 180,897,350 č. other labor costs -1,869,699 -1,991,314 b. Other operating receipts 25,227,801 26,052,108 6. Amortization/depreciation expense 4.3.2. -13,203,378 -12,580,930 2. Operating expenditure -174,267,066 -190,689,575 a. depreciation -11,411,019 -11,692,566 a. Expenditure for purchase of material and services -81,679,534 -98,998,268 b. operating expenses from revaluation in intang. and tang. -694,009 -163,021 b. Expenditure for salaries and employees profit shares -17,725,682 -16,294,521 fixed assets c. Expenditure for duties of all kinds -9,326,117 -8,040,860 c. operating expenses from revaluation in current assets -1,098,350 -725,343 č. Other operating expenditure -65,535,733 -67,355,926 7. Other operating expenses 4.3.2. -748,832 -289,111 3. Excess of operating receipts 10,944,516 16,259,883 8. Financial revenues from shares 4.3.3. 167,997 205,601 B. CASH FLOWS IN INVESTING ACTIVITIES a. associate companies 150,698 153,049 4. Receipts in investing activities 326,077 319,080 b. in other companies 17,299 49,655 a. Receipts from received interest and profit shares 315,455 230,423 c. from other investments 2,897 b. Receipts from disposal of tangible fixed assets 10,622 88,657 9. Financial revenues from given loans 4.3.3. 13,339 5. Expenditure in investing activities -11,042,276 -11,251,391 a. given to others 13,339 a. Expenses for acquisition of long-term intangible assets -237,699 -831,631 10. Financial revenues from operating claims 4.3.3. 214,697 253,852 b. Expenses for acquisition of tangible fixed assets -10,709,688 -10,311,760 a. on others 214,697 253,852 c. Expenses for acquisition of long-term financial investments -8,454 11. Financial expenses from impairment and financial investment 4.3.4. -110,799 write-offs č. Expenses for acquisition of short-term financial investments -86,435 -108,000 a. from group companies -108,000 6. Excess of expenditure in investing activities -10,716,199 -10,932,311 b. from others -2,799 7. Excess of operating and investing receipts 228,317 5,327,572 12. Financial expenses from financial liabilities 4.3.4. -918,211 -762,883 C. CASH FLOWS IN FINANCING ACTIVITIES a. from loans, received from banks -844,793 -762,883 8. Receipts in financing activities 38,957,000 31,949,000 b. from other financial liabilities -73,418 a. Receipts from long-term loans 21,060,000 9,800,000 13. Financial expenses from operating liabilities 4.3.4. -37,601 -164,354 b. Receipts from short-term loans 17,897,000 22,149,000 a. from liabilities to suppliers and bill of exchange liabilities -37,111 -164,354 9. Expenditure in financing activities -44,825,450 -31,436,454 b. from other operating liabilities -490 a. Expenditure for given interest -896,732 -927,806 14. Other revenues 4.3.5. 3,576 60,679 b. Expenditure for repayment of long-term loans -21,719,246 -8,223,336 15. Other expenses 4.3.6. -84,646 -70,877 c. Expenditure for repayment of short-term loans -20,897,000 -20,967,000 NET PRE-TAX PROFIT OR LOSS OF THE ACCOUNTING PERIOD 4,655,809 8,207,756 č. Expenditure for dividend -1,312,472 -1,318,312 16. Income tax 4.3.7. 561,452 1,007,539 10. Excess of expenditure in financing activities -5,868,450 512,546 17. Deferred tax 14,955 -298,793 11.Total excess of receipts or expenditure -5,640,133 5,840,118 18. NET PROFIT OR LOSS OF THE ACCOUNTING 4.3.8. 4,079,402 7,499,010 Č. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 830,086 6,470,219 PERIOD X. Opening balance of cash and cash equivalents 6,470,219 630,101 Y. CASH FLOW FOR THE PERIOD 4.4. -5,640,133 5,840,118 Explanatory notes are part of the financial statements and should be read in conjunction Cash at end of period as at 31.12. 830,086 6,470,219 with them. Explanatory notes are part of the financial statements and should be read in conjunction with them. D Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements D 126 127 0 0 0 0 0 0 0 8,026 7,797 10,891 -89,410 2,850,613 4,305,256 4,000,883 7,506,807 4,079,402 7,499,010 -1,317,877 -1,317,876 -1,317,877 -1,317,876 142,465,880 142,473,906 136,276,949 136,276,949 142,465,880 145,156,912 Total capital Total capital Table 76: Consolidated statement of changes in equity for year ended as at December 31 2014 Table 77: Consolidated statement of changes in equity for year ended as at December 31 2013 8,026 2,086,817 3,549,759 4,079,402 7,499,010 3,549,759 3,557,785 1,403,553 1,403,553 3,549,759 4,079,402 7,499,010 2,086,817 -2,237,167 -1,943,508 -3,313,203 -3,409,296 -5,550,370 -5,352,804 VI/1 VI/1 year year business year business year of the business of the business Net profit of the Net profit of the Net profit or loss Net profit or loss Net profit or loss 0 0 763,796 755,497 755,497 755,497 129,865 129,865 755,497 763,796 -910,991 1,326,176 2,237,167 1,943,508 1,943,508 V/1 V/1 -1,317,877 -1,317,876 -1,317,877 -1,317,876 periods periods Net profit Net profit from previous from previous brought forward brought forward Net profit or loss Net profit or loss 7,797 7,797 42,522 42,522 34,725 34,725 42,522 10,891 -35,997 -89,410 -78,519 IV IV surplus surplus Revaluation Revaluation 910,991 4,224,194 3,409,296 9,169,286 9,169,286 3,313,203 3,409,296 III/1 III/1 12,578,582 12,578,582 12,578,582 16,802,776 reserves reserves Other profit Other profit

Profit reserves Profit reserves 768,501 768,501 768,501 768,501 768,501 768,501 III/1 III/1 serves reserves Statutory Statutory re - II II 46,208,187 46,208,187 46,208,187 46,208,187 46,208,187 46,208,187 Capital reserves Capital reserves I/1 I/1 78,562,832 78,562,832 78,562,832 78,562,832 78,562,832 78,562,832 Share capital Share capital Called-up capital Called-up capital

a) Dividend payment a) Dividend payment a) Entry of net profit or loss for the reporting period a) Entry of net profit or loss for the reporting period a) Allocation of remaining part net profit the comparative reporting period to other capital items a) Allocation of remaining part net profit the comparative reporting period to other capital items b) Allocation of part net profit reporting period to other items capital following the decision of management b) Allocation of part net profit reporting period to other items capital following the decision of management a. Retrospective conversion (error correction) b) Changes in surplus from financial investments revaluation b) Changes in surplus from financial investments revaluation c) Allocation of part net profit for additional provisioning under the decision of the annual general meeting c) Other items in comprehensive income of reporting period 2014 A.1. Balance as of 31.12.2013 A.2. Balance as of 1.1.2014 B.1 . Changes in equity capital – transactions with owners B.2. Total comprehensive income of reporting period B.3. Changes within capital Distributable profit 2014 2013 A.1. Balance as of 31.12.2012 A.2. Balance as of 1.1.2013 B.1 . Changes in equity capital – transactions with owners B.2. Total comprehensive income of reporting period B.3. Changes within capital C. Balance as of 31.12.2013 Distributable profit 2013 in EUR in EUR C. Balance as of 31.12.2014 3.5. Consolidated statement of changes in equity for year ended as at December 31 2014 Explanatory notes are part of the financial statements and should be read in conjunction with them. Consolidated statement of changes in equity for year ended as at December 31 2013 D Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements Business Report of Elektro Primorska Group | 3. Consolidated Financial Statements D 128 129

3.6. Indicators in Elektro Primorska Group Main indicators of financing (investing)

Contextually they define relations among liabilities, so they are used to establish the Main indicators of economy structure of financing the assets, and at the same time they express the degree of The operating efficiency ratio shows that the profit of the group companies is positive. financial independence.

Table 81: Seq. Description 2014 2013 2012 2011 2010 2009 2008 Main indicators of No economy Table 78: Main indicators of Seq. Description 2014 2013 2012 2011 2010 2009 2008 1. Operating efficiency ratio 1,054 1,077 1,021 1,020 1,000 1,010 1,050 financing No operating revenues / operating expenses 1. Equity financing rate 0,689 0,655 0,649 0,629 0,644 0,625 0,654 2. Entire efficiency ratio 1,047 1,071 1,016 1,013 1,003 1,010 1,035 capital / liabilities revenues / expenses 2. Long-term financing rate 0,855 0,818 0,804 0,785 0,809 0,804 0,818 capital, long-term debts and long-term provisions / liabilities

Main indicators of return Main investment indicators (investing) By analyzing the ratio of profitability we establish that the group's operation is viable These indicators are used to establish where Elektro Primorska Group invested its due to a positive operating result. assets and what structure of assets it has according to these investments.

Table 82: Table 79: Seq. Description 2014 2013 2012 2011 2010 2009 2008 Main indicators of Main investment Seq. Description 2014 2013 2012 2011 2010 2009 2008 No return indicators No

1. Operating fixed assets rate 0,845 0,816 0,840 0,823 0,819 0,802 0,818 1. Level of revenue profitability 0,044 0,066 0,016 0,011 0,002 0,008 0,030 fixed assets / assets net profit or loss / sale revenues

2. Financial investment rate 0,009 0,009 0,008 0,006 0,006 0,006 0,006 2. ROA 0,019 0,035 0,010 0,006 0,001 0,005 0,020 long-term and short-term financial net profit or loss / average assets investments / assets 3. ROE 0,029 0,054 0,015 0,010 0,002 0,008 0,031 3. Long-term assets rate 0,854 0,828 0,085 0,829 0,824 0,808 0,824 net profit or loss / average capital (excl. net fixed assets, long-term financial profit or loss of business year) investments and l.t. oper. claims / assets

Main horizontal financial structure indicators These indicators show how individual categories of assets are financed and how the Elektro Primorska group is able to settle its short-term financial liabilities.

Table 80: Main indicators of Seq. Description 2014 2013 2012 2011 2010 2009 2008 financial structure No

1. Equity to operating fixed assets 0,815 0,802 0,772 0,765 0,786 0,779 0,801 capital / fixed assets

2. Immediate solvency ratio 0,029 0,168 0,016 0,029 0,025 0,164 0,064 liquid assets / short-term liabilities

3. Quick ratio 0,857 0,898 0,712 0,715 0,799 0,905 0,946 liquid assets and short-term claims / short- term liabilities

4. Current ratio 0,891 0,926 0,737 0,747 0,838 0,944 0,993 short-term assets / short-term liabilities D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 130 131

4. Consolidation procedures relate to the following: Financial Report of Elektro Primorska • calculation of financial investment of the parent company with a capital of the controlled company, • elimination of intercompany receivables and payables, Group • elimination of intercompany revenues and expenses, • elimination of intercompany inflows and outflows, • increase of investment in the associate company for the corresponding amount of 4.1. General notes and disclosures capital, reduced by dividends paid and related financial income and expenses.

Accounting policies and accounting notes described in the Elektro Primorska d.d. also apply to Elektro Primorska Group. 4.2. Notes to the consolidated balance sheet Below we state only that information important for disclosure and draw up of consolida- In accordance with the SAS 24, which is related to the legal provisions on the scope of ted accounts. data on the balance sheet, order and required breakdown of asset and liabilities items for large companies have been considered, as well as provisions of the SAS defining Consolidated financial statements are comprised according to the provisions of the consolidation of balance sheets for external reporting. Companies Act and in accordance to Slovenian Accounting Standards 2006. Consolidated balance sheet includes assets and liabilities of the parent company Elektro Consolidation includes parent company Elektro Primorska d. d., controlled company E Primorska d. d., controlled company E 3, d. o. o., controlled company JOD, d. o. o., and 3, d. o. o., controlled company JOD, d. o. o., controlled company Eco Atminvest and controlled company Eco Atminvest. associate company Knešca, d. o. o. During the consolidation procedures 7,687,785 EUR of assets and liabilities have been Consolidated financial statements include: eliminated in the following items: • consolidated balance sheet, • receivables and payables in the amount of 450,681 EUR • consolidated profit or loss account, • long-term financial investments in the amount of 7,137,586 EUR • consolidated cash flow statement, • goodwill in the amount of –89,907 EUR • consolidated statement of changes in equity and • equity in the amount of 7,047,679 EUR • notes to the consolidated financial statements. • receivables and payables for short-term loans 164,234 EUR and • accrued and deferred income in the amount of 25,191 EUR. Companies in Elektro Primorska Group are subject to individual method of determining the corporate income tax. 4.2.1. Long-term assets Reported long-term assets of Elektro Primorska Group are: In group statements Elektro Primorska Group is presented in such a way as to deal with a single company. Group financial statements are comprised based on the original financial statements of the companies, including the appropriate consolidation adjustments, Table 83: Long-term assets 31.12.2014 31.12.2013 Long-term assets which are not subject to accounting in accounts of the considered companies. statements of in EUR Elektro Primorska Group

Consolidated accounts are comprised based on the full consolidation of subsidiaries E 3, 1.1. Intangible assets 2,394,084 974,999 d. o. o., JOD, d. o. o., and Eco Atminvest and with the use of equity method for associate 1.2. Tangible fixed assets 178,085,210 177,615,806

company Knešca, d. o. o. 1.3. Long-term financial investments 1,911,796 1,817,389

1.4. Long-term operating claims 69,642 16,965

1.5. Deferred tax asset 655,399 670,355

Total 183,116,131 181,095,514 D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 132 133

4.2.1.1. Intangible assets Following table shows changes in intangible assets in year 2013: Intangible assets of the parent company include deferred expenses of development stu-

dies and rights to use holiday facilities and land, as well as use of space in the transformer Table 85: 2013 Deferred Long-term Intangible Goodwill Total Changes in station facility. In the intangible assets we also report rights to computer software use of development rights assets in intangible assets in studies costs acquisition year 2013 the controlled and parent companies. Acquisition cost in EUR

Cost of the intangible asset is comprised of its purchase price or costs of manufacture. Balance 1.1.2013 1,466,478 1,645,388 1,114,297 0 4,226,163

Group recognizes its intangible assets according to the acquisition cost model. Value of Increases in year 712,926 89,907 802,833 intangible long-term assets increased in year 2014 for the purchase of long-term rights Increases from invest. in progress 712,926 -712,926 0 in the amount of 1,882,247 EUR. Disposals of intangible assets in acquisition constitute Decreases in year -222,109 -222,109 activation in development studies or long-term rights. Balance 31.12.2013 1,244,369 2,358,314 1,114,297 89,907 4,806,887

Value adjustments on studies in acquisition are values of invested assets, related to plan- Value adjustment ned investment in the construction of wind power plants, which the group forms since Balance 1.1.2013 1,216,573 1,174,814 1,105,017 0 3,496,404

2014 due to complaints in the process of obtaining a building permit. Depreciation in year 150,715 406,877 557,592

Decreases in year -222,108 -222,108 Development studies are disclosed at their acquisition costs and are charged to costs Balance 31.12.2013 1,145,180 1,581,691 1,105,017 0 3,831,888 of studies and not as depreciation cost in the amount of 20 % per year, according to Carrying amount the estimated useful life, which is five years for these assets. Individual book values of intangible assets are not significant for the accounts as a whole. Balance 1.1.2013 249,905 470,574 9,280 0 729,759 Balance 31.12.2013 99,189 776,623 9,280 89,907 974,999 Company has no intangible assets with limited ownership rights.

Following table shows changes in intangible assets in year 2014:

4.2.1.2. Tangible fixed assets Tangible fixed assets of the group companies are land, buildings and equipment and Table 84: Changes in 2014 Deferred Long-term Other Intangible Goodwill Total these assets under construction. They are disclosed in the balance sheet at their carrying intangible assets in development rights long-term assets in amount, which represents the difference between the acquisition and the written down year 2014 studies costs accruals acquisition and pre-paid value. Group has no investment property and evaluates the tangible fixed assets accor- expenditure ding to the acquisition cost model. Acquisition cost in EUR

Balance 1.1.2014 1,244,369 2,358,314 0 1,114,297 89,907 4,806,887 Cost of the tangible fixed assets is comprised of its purchase price and all costs that can Increases in year 1,710 1,882,247 1,883,957 be directly attributed to its restoration for use. Transfer 0 0

Increases from invest. in progress 1,841,697 -1,841,697 0 Acquisition cost of facilities built on its own is cost price, which does not exceed the price

Decreases in year -427,555 -18 -427,573 of the same kind of things on market. Cost price is comprised of direct material costs of

Balance 31.12.2014 816,814 4,200,011 1,692 1,154,847 89,907 6,263,271 manufacturing and services, direct labor costs and general production costs.

Value adjustment 0 0

Balance 1.1.2014 1,145,180 1,581,691 0 1,105,017 0 3,831,888

Depreciation in year 79,776 385,078 0 464,854

Write-off in year 0 0

Increases in year 0 0

Decreases in year -427,555 0 -427,555

Transfer 0 0

Balance 31.12.2014 797,401 1,966,769 0 1,105,017 3,869,187

Carrying amount 0 0

Balance 1.1.2014 99,189 776,623 0 9,280 89,907 974,999

Balance 31.12.2014 19,413 2,233,242 1,692 49,830 89,907 2,394,084 D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 134 135

Changes in tangible fixed assets of the group in year 2014: Changes in tangible fixed assets of the group in year 2013:

Tabela 86: Table 87: Spremembe 2014 Land Facilities Equipment Fixed assets Total 2013 Land Facilities Equipment Fixed assets Total Changes in tangible opredmetenih in acqui- in acqui- assets in year 2013 sredstev v letu 2014 sition and sition and advances advances

Acquisition cost in EUR Acquisition cost in EUR

Balance 1.1.2014 5,895,970 376,766,477 149,168,157 5,145,447 536,976,051 Balance 1.1.2013 5,850,827 372,233,127 147,264,786 6,057,820 531,406,560

Increases in year 144,112 23,705 12,157,252 12,325,069 Increases in year 333,716 141,818 10,399,732 10,875,266

Increases from invest. in progress 9,530 9,148,224 3,741,462 -12,899,216 0 Increases from invest. in progress 45,143 6,285,356 4,830,530 -11,161,029 0

Decreases in year -8,112,664 -2,960,663 -56,241 -11,129,568 Decreases in year -2,085,722 -3,068,977 -151,076 -5,305,775

Transfer 24,610 -24,610 0 Balance 31.12.2013 5,895,970 376,766,477 149,168,157 5,145,447 536,976,051

Balance 31.12.2014 5,905,500 377,970,759 149,948,051 4,347,242 538,171,552 Value adjustment

Value adjustment Balance 1.1.2013 256,290,507 95,827,333 815,571 352,933,411

Balance 1.1.2014 260,175,311 98,369,363 815,571 359,360,245 Depreciation in year 5,909,468 5,442,713 11,352,181

Depreciation in year 5,876,903 5,149,038 11,025,941 Decreases in year -2,024,664 -2,900,683 -4,925,347

Decreases in year -7,427,304 -2,886,001 -10,313,305 Balance 31.12.2013 260,175,311 98,369,363 815,571 359,360,245

Increases in year 13,461 Carrying amount

Transfer 2,730 -2,730 0 Balance 1.1.2013 5,850,827 115,942,620 51,437,453 5,242,249 178,473,149

Balance 31.12.2014 258,627,640 100,629,670 829,032 360,072,881 Balance 31.12.2013 5,895,970 116,591,166 50,798,794 4,329,876 177,615,806

Carrying amount

Balance 1.1.2014 5,895,970 116,591,166 50,798,794 4,329,876 177,615,806

Balance 31.12.2014 5,905,500 119,343,119 49,318,381 3,518,210 178,085,210 4.2.2. Long-term financial investments In accordance with SAS 3, which deals with financial investments, they are classified as 95 % of tangible fixed assets of the group belong to the parent company Elektro Primor- assets available for sale. ska d. d. Tangible fixed assets of the group increased due to new acquisitions in year 2014 by 12,325,069 EUR. 95 % of the increase value belongs to the parent company, 4 Long-term financial investments of Elektro Primorska Group include investments of the % to controlled company E 3, d. o. o., while the rest to company Eco Atminvest, d. o. o. parent company in shares and other companies in the amount of 492,071 EUR, inve- In year 2014 parent company realized its investment plan by 100%. It realized by stment of controlled company E 3, d. o. o., in the Aeronautical Museum in Nova Gorica 13,100,450 EUR of new investments. in the amount of 20,000 EUR and investment of controlled company JOD, d. o. o., in the associate company Knešca, d. o. o., in the amount of 1,399,725 EUR. In 2014 controlled company E 3, d. o. o., earmarked 558,220 EUR for investments.

Value adjustments of tangible fixed assets of the group increased in year 2014 by calculated depreciation in the amount of 11,025,941 EUR and reduced by asset eliminations. Value adjustments of fixed assets in acquisition are adjustments of investments for construction of wind power plants formed in the previous years. In year 2014 an adjustment was additionally formed in the amount of 13,461 EUR.

Elektro Primorska Group has no fixed assets obtained by financial lease. Part of real estate was pledged in year 2013 in return to the received bank guarantee to secure the payment in E3 company. Estimated value of all pledged real estate is 8,325,948 EUR. D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 136 137

Investments of the group are: 4.2.5. Short-term assets Short-term assets of the group are: Table 88: Investment 31.12.2014 31.12.2013 Table 89: categories 31.12.2014 31.12.2013 Short-term assets Investments in shares associate companies in EUR of the group in EUR Knešca d.o.o. 1,399,725 1,324,664 2.1. Stocks 967,296 870,006 Total 1,399,725 1,324,664 2.2. Short-term financial investments 40,623 194,561 Other shares: 2.3. Short-term operating receivables 24,568,467 28,123,350 Informatika Maribor d.d. 240,756 240,756 2.4. Monetary assets 868,441 6,488,438 Banka Koper d.d. 95,879 95,879 Total 26,444,827 35,676,355 Zavarovalnica Triglav d.d. 55,884 44,992

Primorski tehnološki park d.o.o. 1,808 1,808

Eldom Ljubljana d.o.o. 106,395 106,395

Stelkom d.o.o. Ljubljana 57,837 57,837 4.2.5.1. Stocks VIRS 12,626 4,172 All stocks belong to the parent company. They are represented by material intended

Aeronavtični muzej Nova Gorica 20,000 20,000 for maintenance and construction of electricity facilities, and small tools not exceeding the amount of 100 euro. Stocks also include protective equipment and small tools with 591,185 571,839 a useful life longer than one year and value of up to 500 euro. When issued to use such Impairment of investment Eldom d.o.o. -72,905 -72,905 equipment is then kept off-balance by individual user. Impairment of investment Stelkom d..o.o. -6,209 -6,209

-79,114 -79,114 Stocks are initially measured according to their purchase price, while their consumption

Total 512,071 492,725 is calculated according to the moving average valuation method.

Total long-term financial investments 1,911,796 1,817,389 4.2.5.2. Short-term financial investments Parent company discloses a short-term deposit earmarked for the reconstruction of the building in the amount of 25,207 EUR, while Eco Atminvest a short-term loan in the amo- 4.2.3. Long-term operating receivables unt of 15,416 EUR. Long-term operating receivables in the amount of 69,642 EUR represent claims for facilities maintenance funds that are joined at facility operators according to the Housing Act, and long-term receivables from Eco Gorenje electricity package.

4.2.4. Deferred tax assets Deferred tax assets in the amount of 655,399 EUR were disclosed by the group as lon- g-term operating receivables. In year 2014 these receivables reduced by 14,956 EUR.

Effects of differences between the accounting value of items disclosed in the balance sheet and their tax base are calculated in accordance with the balance sheet liability method for all temporary differences. Deferred tax assets are the amounts of tax accrued from long-term provisions and value adjustments on claims that will be recoverable in fu- ture periods depending on their deductible temporary differences and unused tax losses. D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 138 139

4.2.5.3. Short-term operating receivables Elektro Primorska Group forms value adjustments on claims according to the individual claim and individual business partner for receivables believed not to be settled. They are: Table 90: • outstanding claims before 2014, Short-term 31.12.2014 31.12.2013 receivables of the • defendant claims and group Short-term receivables from sales: in EUR • claims of business partners in bankruptcy and receivership. - on domestic market 24,379,021 27,620,781

- on foreign market 664,584 973,673 In Elektro Primorska Group value adjustments on claims were formed by the parent com-

Value adjustment -2,630,356 -2,296,755 pany as well as controlled company E 3. Share of claims formed in such way amounts to 11 % according to the balance of claims. 22,413,249 26,297,699

Interest receivables: In Elektro Primorska Group 3 % of short-term trade receivables are in foreign market. - from other buyers 449,023 436,598 They are receivables of E 3, d. o. o. Company. Value adjustment -294,391 -264,484 Among short-term trade receivables to others in the amount 1,975,062 EUR the largest 154,632 172,114 part are receivables from the state VAT refund and overpaid advance income tax in the Advances 39,924 23,990 amount of 1,849,703 EUR, while receivables from operations for the account of third Value adjustment -14,400 parties amount to 63,382 EUR, the rest are other claims. 25,524 23,990

Other operating receivables: 4.2.5.4. Monetary assets Among monetary assets cash on the commercial bank accounts of group companies is - from state and other institutions 1,880,319 1,276,698 disclosed. - from employees 236,226

- from others 111,700 125,265

Value adjustment -16,957 -8,642

1,975,062 1,629,547 Table 92: 31.12.2014 31.12.2013 Monetary assets of Skupaj 24,568,467 28,123,350 the group in EUR

Cash in banks 868,441 1,848,438 Short-term operating receivables in the group are by 13 % lower than in the previous year. Receivables are not insured, but its nature is such that in the event of default, after Short-term deposit 4,640,000 repeated reminders, they are sanctioned with the suspension of access to the network, Total 868,441 6,488,438 supply of electricity or heat.

Receivables from sale and interest receivables: 4.2.6. Accruals and prepaid expenditure Short-term accruals and pre-paid expenditure amounted to 1,181,629 EUR. Predominant part refers to the accrued cost of electricity purchase from controlled company E 3, d. Table 91: o. o., in the amount of 717,387 EUR, 258,473 EUR refer to accrued income of the parent Outstanding 31.12.2014 31.12.2013 receivables from company from the preliminary account on year 2014, 135,827 EUR to VAT on advances sale and for interest in EUR of the group received, and remaining to other short-term deferred costs. Outstanding receivables 18,479,033 21,737,586

Receivables overdue to 30 days 2,108,631 2,830,137 Tabela 93: Receivables overdue from 31 to 60 days 747,019 1,035,109 31.12.2014 31.12.2013 Aktivne časovne razmejitve Receivables overdue from 61 to 90 days 268,932 384,422 in EUR

Receivables overdue from 91 to 365 days 1,291,710 748,548 VAT on advances received 135,827 109,151

Receivables overdue over 365 days 2,597,303 2,295,250 Short-term deferred costs or expenses 4,826 8,451

Total 25,492,628 29,031,052 Accrued revenues 1,040,032 766,479

Vouchers 944 1,263

Total 1,181,629 885,344 D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 140 141

4.2.7. Capital 4.2.8. Provisions and long-term accruals and deferred income Capital of the group consists of: In Elektro Primorska Group long-term provisions for long service bonuses and for seve- • share capital, rance pays at retirement in accordance with SAS 10 were formed by the parent company • capital reserves, Elektro Primorska d. d. and controlled company E 3, d. o. o. Assumptions based on • statutory reserves, which the actuary calculation was made, include data that companies submitted to the • other profit reserves, actuary, namely the data for five past years on employees and their changes, data on • revaluation surplus, the salary growth, severance pays, long service bonus and provisions in the collective • retained net profit from previous periods and agreement referring to the long-term benefits of the employees. • net profit of the business year. Actuarial calculation takes into account uniform discount rate by reference to market interest rates on high-yield corporate bonds. Interest rate curve of the euro area is used Table 94: Capital of the group 31.12.2014 31.12.2013 (from 0.12 % to 2.4 %).

in EUR Long-term provisions are decreased directly by costs for which settlement they were share capital 78,562,832 78,562,832 formed, and are formed by the differences according to the report on calculation as at capital reserves 46,208,187 46,208,187 31.1 of the current year. statutory reserves 768,501 768,501

other profit reserves 16,802,776 12,578,582 4.2.8.1. Provisions revaluation surplus -35,997 42,522

retained net profit from previous periods 763,796 755,497

net profit of the business year 2,086,817 3,549,759 Table 95: 31.12.2014 31.12.2013 Provisions of the Total 145,156,912 142,465,880 group REZERVACIJE in EUR

Balance 1.1. 3,411,933 3,331,378 Share capital of Elektro Primorska Group is comprised of the equity capital of the parent Formation 300,059 314,478 company, which is divided in 18,826,797 ordinary registered unit shares. Each share has Drawing in revenues -227,153 -233,923 an equal share and associated amount in the share capital. Balance 31.12. 3,484,839 3,411,933

Capital reserves of the company originate from the general capital revaluation adjustment of the parent company, which was transformed in capital reserves when transferring to the use of SAS 2006.

4.2.8.2. Long-term accruals and deferred income Undistributed net profit of the business year in the amount of 2,086,817 EUR consists of the profit of the parent company and controlled companies E 3, d. o. o., and JOD, d. o. o., Table 96: loss of the company Eco Atminvest and associated profit of associate company Knešca, Assets Average Co-financing Compensa- Received do- Total Long-term accruals acquired free connection of facilities tion claims nations and and deferred d. o. o., in the amount of 159,159 EUR, reduced by paid dividends in the business year costs construction supports income

in the amount of 75,637 EUR and paid bonus to the director in the amount of 8,461 EUR. in EUR Group adjusted the initial balance of the profit from previous years in the amount 8,026 Balance 1.1. 7,163,249 2,545,157 189,740 1,181 873,616 10,772,943 EUR because of the subsequent correction of the revenue tax return for year 2013 in Formation 151,874 30,805 157,846 340,525 company JOD. Company carried out the correction after the completed consolidation. Statement of changes in equity shows changes in capital of the group for years 2013 Decrease due to write-off -63,527 -63,527 and 2014. Drawing in revenues -257,023 -110,299 -9,206 -28,199 -404,727

Balance 31.12. 6,994,573 2,434,858 180,534 31,986 1,003,263 10,645,214

D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 142 143

In year 2014 the parent company formed long-term accruals and deferred income for 4.2.10. Short-term liabilities free acquisitions of energy facilities of legal and natural persons and average connection Table 98: costs. Average connection costs are drawn for actual depreciation of individual power 31.12.2014 31.12.2013 Short-term liabilities of the group facility, which amounted to 110,299 EUR for year 2014. SHORT-TERM FINANCIAL LIABILITIES in EUR

Short-term financial liabilities to companies 21,500 5,000 Drawing of long-term deferred income of free acquisitions of fixed assets and co-financing of building constructions is formed by annual depreciation, which is calculated from Short-term financial liabilities to banks 3,254,438 individual freely acquired assets or in the share of the co-financed fixed asset. Short-term part of long-term loans 8,326,579 8,255,246

For long-term accruals for claims the group formed by 30,805 EUR of liabilities. Entire Liabilities for payment of dividends 1,057 amount refers to the parent company. Total short-term financial liabilities 8,348,079 11,515,741

Received donations refer to controlled company Eco Atminvest, which received funds from the Ministry of Economy RS to co-finance project of wood biomass district heating. Liabilities to suppliers 18,578,292 23,289,608 Liabilities for advances 804,494 650,406

Total short-term operating liabilities to suppliers 19,382,786 23,940,014 4.2.9. Long-term liabilities Liabilities to employees 1,286,437 1,697,846

Liabilities to state and other institutions 534,637 1,334,078 Table 97: Long-term liabilities 31.12.2014 31.12.2013 Other liabilities 135,300 38,997 of the group in EUR Total other short-term operating liabilities 1,956,374 3,070,921

Long-term liabilities 28,945,036 29,700,950 Total 21,339,160 27,010,935

Short-term part of long-term liabilities -8,076,044 -8,255,246 Total short-term liabilities 29,687,239 38,526,676

Long-term financial liabilities 20,868,992 21,445,704

Total long-term liabilities 20,868,992 21,445,704

Due to consolidation in Elektro Primorska Group short-term liabilities in the amount of Long-term liabilities include liabilities to banks for borrowings for investments in the pa- 450,681 EUR were offset with the short-term claims in the same amount. Entire amount rent company and controlled company Eco Atminvest. are short-term operating liabilities.

All loans are due and payable no later than in April 2020. Short-term financial liabilities of the group include short-term loan of the controlled company Eco Atminvest and installments of the long-term loans of the parent company and Long-term loan, raised in 2014 at Bank Sparkasse in the amount of 7,500,000 EUR, falls controlled companies E 3 and Eco Atminvest, due for payment in year 2015. due in the period longer than5 years (contractually agreed installments which fall due in the period longer than 5 years amount to 500,000 EUR). Interest rates have a one-month, Short-term payables in the group of companies are lower by 4,711,316 EUR, which re- three-month or six-month EURIBOR and the bank's premium range from 1.5 % to 3.2 %. presents 20 % less than in the previous year. Obligations to the state are lower than in Interest on borrowings is calculated and paid monthly. the previous year.

Short-term liabilities to employees are obligations for the December payroll, for part of the bonuses for successful business in year2014. D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 144 145

4.2.11. Accrued expenses and deferred revenues Due to consolidation there was 732,159 EUR of net sales revenue excluded from opera- Majority of accrued expenses and deferred revenues belong to the parent company. ting revenues.

Table 99: Accrued expenses 31.12.2014 31.12.2013 In year 2014 consolidated net sales revenues were by 21,560,951 EUR lower than in and deferred previous year. revenues of the in EUR group VAT from advances given 373 406 Revenues from capitalized own products and services and other operating revenues Short-term deferred revenues 97,471 251,530 belong mainly to the parent company. Revenues from capitalized own products and Accrued expenses 801,547 782,141 services are revenues from accounts of prepared documentation and participation in

Total 899,391 1,034,077 construction of facilities for investments. Other operating revenues are comprised of revenues from the extraction of accruals for amortization of free acquisitions, co-financings of facility construction and average connection costs.

Accrued expenses represent the accrued bonus at the end of the year on the basis of the 46 % 47,996,713 EUR of the total operating revenue of the group belong to the parent collective agreement in the amount of 290,962 EUR. Advance payment of the bonus has company, while 53% to the E3 subsidiary in the amount of 55,198,570 EUR, of which 5 already been calculated and paid, while the difference to the final amount was included % were realized on the foreign markets. by the company to costs for year 2014, as based on the agreement between the management board and the union it should be paid.

4.3.2. Operating expenses Accrued expenses also include costs of loss purchase of the parent company in the amount of 247,754 EUR, accrued expenses for payment of grants in the amount of 181,262 EUR, for which conditions were met and contracts signed in E 3 Company in year 2014, Table 101: 2014 2013 Operating expenses but the company has not carried out the payment yet. of the group in EUR

Cost of electricity sold 51,098,643 69,377,245 Short-term deferred revenues are formed in the parent company for surplus of received funds for years 20110 and 2011 based on the offset of the regulatory year under the con- Cost of material and services 16,143,735 15,340,329 tract between SODO and Elektro Primorska in the amount of 97,471 EUR. Labor cost 16,912,474 16,403,690

Write-offs 13,203,378 12,580,930

Other operating expenses 748,832 289,111 4.3. Notes to the consolidated profit or loss Total 98,107,062 113,991,305 account In the process of consolidation of the profit or loss for year 2014 868,596 EUR of all Operating expenses are costs, recorded by type, like electricity purchase, material and revenues and 745,758 EUR of all expenses were excluded. Revenues were increased services, labor costs, write-offs and other operating expenses. by the associated profit of the associate company Knešca, d. o. o., in the amount of 159,159 EUR and reduced by the payment of bonuses to the director of this company in Due to consolidation there was 732,159 EUR of expenses value excluded from operating the amount of 8,461 EUR. expenses, namely by 249,499 EUR of costs of material and purchase value of sold goods and by 482,660 EUR of costs of services.

4.3.1. Operating revenues Operating expenses in Elektro Primorska Group are lower than in the previous year by

Table 100: 15,884,243 EUR, which represents a 14 % reduction. Operating revenues 2014 2013 of the group in EUR

Net sales revenues 92,558,815 114,119,766

Capitalized own products and services 6,127,555 6,381,552

Other operating revenues 4,717,350 2,286,524

Total operating revenues 103,403,720 122,787,842 D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group D 146 147

Expenses of Elektro Primorska Group also include costs of supervisory board meetings 4.3.3. Financial revenue attendance fees. In year 2014 payments to members amounted to 95,155 EUR; all were Financial revenue of Elektro Primorska group amounted to 396,033 EUR of which 167,997 paid in the parent company. EUR refer to revenues from shares, the rest on interest revenues. Compared to the previous year they are by 63,420 EUR lower. Costs of annual report auditing in the group amounted to 14,385 EUR. Companies in the group have one member each in the management board. They recei- 4.3.4. Financial expenses ved a total of 164,666 EUR. Financial expenses in the amount of 955,812 EUR consist of interest on short-term and long-term loans, default interest on the late payment of supplier liabilities as well as in- Members of the board and employees on individual contracts were not approved any terest from actuarial calculations. Compared to the past year financial expenses from loan or given any surety for their obligations by the companies. banking loans are higher by 81,910 EUR, while default interest of suppliers are lower by 127,243 EUR. Parent company's participation in financial expenses is 92 %. Depreciation in the group is calculated in the amount of 11,411,019 EUR of which 10,745,485 EUR belong to the parent company. 4.3.5. Other revenues Other revenue arises from events and transactions, which are not expected to occur Write-offs in the amount of 1,792,359 EUR refer to revaluation expenses. Of which regularly and often. 694,009 EUR are revaluation expenses of fixed assets and 895,340 EUR are value adjustments on receivables and value adjustment on stocks. 4.3.6. Other expenses Other expenses in the amount of 84,646 EUR refer to the accrued compensation for Analysis of costs by functional groups damage, which Elektro Primorska Company caused during the construction or maintenance, mainly to natural persons, on their land, financial aid and grants and other expenses that are not necessary for business. 93 % of other expenses belong to the parent Table 102: Analysis of group's Production Cost of sales Cost of man- Total company. costs costs agement

in EUR 4.3.7. Corporate income tax

Cost of goods 51,098,643 51,098,643 In Elektro Primorska Group corporate income tax was charged by the parent company in the amount of 425,011 EUR and controlled company E 3 in the amount of 136.441 EUR. Cost of raw material 6,203,821 799,540 484,317 7,487,678 In the controlled company E 3 disclosure of deferred tax assets in the amount of 14,955 Cost of services 6,021,308 967,452 1,827,246 8,816,006 EUR was eliminated. Labor costs 12,670,548 1,009,429 3,232,498 16,912,475

Depreciation 11,049,947 69,894 291,177 11,411,018 4.3.8. Net profit or loss In year 2014 realized profit or loss, before tax return on income of legal persons, amou- Other operating costs 153,296 20,829 574,707 748,832 nted to 4,655,809 EUR. Total 87,197,563 2,867,144 6,409,945 96,474,652 Net profit or loss amounted to 4,079,402 EUR.

Analysis of costs by functional groups does not include revaluation expenses in the amount of 1,792,359 EUR, which are shown under write-offs in the profit or loss account. 4.4. Notes to the consolidated cash flow statement Group cash flow statement is comprised according to direct method from data on transactions and balances on bank accounts. It presents the changes in monetary assets in the accounting period. In accordance with the SAS the consolidated cash flow statement does not include items of inflows and outflows among companies in the group in the amount of 1,261,739 EUR.

Difference between initial and closing cash balance in the group is the negative cash flow for year 2014 in the amount of 5,640,133 EUR. In the previous year cash flow result was positive.

Operations show a positive cash flow, while at investing and financing cash flow is- ne gative. D Business Report of Elektro Primorska Group | 4. Financial Report of Elektro Primorska Group Business Report of Elektro Primorska Group | 5. Management Responsibility Statement – Group Operations D 148 149

5. 4.5. Contingent liabilities of Elektro Primorska Group Management Responsibility According to the assessment of legal experts disputes are not such as to have a significant impact on the economic outturn. Group assesses that provisions formed for these Statement – Group Operations purposes are high enough and would cover contingent liabilities of the company.

Group has contingent liabilities for issued bank guarantees for tender, for performance Management board hereby approves the financial statements of the group companies (electricity supply), for elimination of defects during warranty period (in providing services for year 2014 and business report of the group for the period between January 1 and De- to external customers). cember 31 2014, as well as used accounting policies and notes included in the proposed annual report.

Management is responsible for preparing the annual report and hereby declares that the

Table 103: report provides a true and fair picture of the financial condition of the company and its Contingent liabilities 31.12.2014 31.12.2013 of the group operating results for year 2014. in EUR

Liabilities for guarantee 272,727 1,500,000 Management board hereby certifies that relevant accounting policies were used consis-

Liabilities from pledged property 8,325,948 8,325,948 tently and that accounting estimates were prepared according to the principles of pru- dence and due diligence. At the same time it certifies that the financial statements and Bank guarantees 8,832,986 9,134,980 notes were prepared on a going concern basis and in accordance with the relevant legi- Total 17,431,661 18,960,928 slation and Slovene Accounting Standards.

Management board is also responsible for appropriate accounting, for adoption of appropriate measures to protect the property and prevent and detect fraud and other irregularities. 4.6. Events after the balance sheet of Elektro In its operation the group strictly abides by the laws and tax regulations, so the manage- Primorska Group ment of the company does not expect any significant obligations in this respect. In year 2015 controlled company ECO ATMINVEST, d. o. o., merged by acquisition with company E 3, d. o. o.

Nova Gorica, April 10 2015 Uroš Blažica, Chairman of the Board Area of Elektro Primorska d.d. appendix Company is 4,335 km2. Kazalo grafov Table 39: Short-term financial investments 86 Graph 1: Age structure of employees 31 Table 40: Short-term operating receivables 86 Graph 2: Structure of employees according to the years of service 32 Table 41: Age structure of receivables 87 Graph 3: Structure of employees according to gender 32 Table 42: Value adjustment of short-term operating receivables 87 Graph 4: Number of accidents at work in Elektro Primorska d. d. in the period from 2010 to 2014 35 Table 43: Monetary assets 88 Graph 5: Achieved financial effects according to individual OU in year 2014 and 2011 (December 2014) 38 Table 44: Short-term accruals and prepaid expenditure 88 Graph 6: Monthly electricity consumption peaks in year 2014 50 Table 45: Capital 89 Graph 7: Monthly acquired electricity quantities in year 2014 50 Table 46: Provisions 90 Table 47: Long-term accruals and deferred income 90 Index of tables Table 48: Long-term liabilities 91 Table 1: Employees overview 30 Table 49: Short-term liabilities 92 Table 2: Number of employees in individual age class 31 Table 50: Short-term accrued costs and deferred revenues 93 Table 3: Number of employees according to the years of service 31 Table 51: Operating revenues 95 Table 4: Number of employees according to gender 32 Table 52: Analysis of costs by functional groups 97 Table 5: Educational structure of employees 33 Table 53: Costs by nature 97 Table 6: Fizični obseg elektroenergetskih naprav na dan 31. 12. 2014 39 Table 54: Remuneration of supervisory board members 98 Table 7: Realization of services for SODO in year 2014 39 Table 55: Labor costs 98 Table 8: Investments according to main investment groups 40 Table 56: Remuneration of the management board members 99 Table 9: Physical indicators of constructed and reconstructed facilities 42 Table 57: Depreciation rates 99 Table 10: Overview of investment plan realization for year 2014 46 Table 58: Write-offs 99 Table 11: Monthly quantities of delivered electricity 47 Table 59: Other operating expenses 100 Table 12: Revenues from network use and supports for year 2014 49 Table 60: Financial revenue 100 Table 13: Peak and annual operating hours of Elektro Primorska in year 2014 51 Table 61: Financial expenses 101 Table 14: Production of electricity according to primary energy sources 52 Table 62: Other revenue 101 Table 15: Number of interruptions, longer than three minutes 53 Table 63: Other expenses 101 Table 16: SAIFI – System Average Interruption Frequency Index 53 Table 64: Net profit or loss 102 Table 17: SAIDI – System Average Interruption Duration Index 53 Table 65: Receivables and payables 104 Table 18: Realization of services for external customers in year 2014 54 Table 66: Revenues and expenses 105 Table 19: Balance sheet (assets) 64 Table 67: Contingent liabilities of the company 105 Table 20: Balance sheet (liabilities) 65 Table 68: Sub-balance sheet according to the Energy Act (assets)) 108 Table 21: Profit and loss account 66 Table 69: Sub-balance sheet according to the Energy Act (liabilities) 109 Table 22: Statement of comprehensive income 67 Table 70: Profit or loss account according to the Energy Act 110 Table 23: Cash flow statement 68 Table 71: Consolidated balance sheet as at December 31 2014 (assets) 122 Table 24: Statement of changes in equity 2014 69 Table 72: Consolidated balance sheet as at December 31 2014 (liabilities) 123 Table 25: Statement of changes in equity 2013 70 Table 73: Consolidated profit or loss account for business year ended as at December 31 2014 124 Table 26: Main indicators of financing 71 Table 74: Consolidated statement of comprehensive income for year ended as at December 31 2014 125 Table 27: Main investment indicators 71 Table 75: Consolidated cash flow statement for year ended as at December 31 2014 125 Table 28: Main horizontal financial structure indicators 72 Table 76: Consolidated statement of changes in equity for year ended as at December 31 2014 126 Table 29: Main indicators of economy 72 Table 77: Consolidated statement of changes in equity for year ended as at December 31 2013 127 Table 30: Main indicators of return 73 Table 78: Main indicators of financing 128 Table 31: Changes in intangible assets in year 2014 81 Table 79: Main investment indicators 128 Table 32: Changes in intangible assets in year 2013 81 Table 80: Main indicators of financial structure 128 Table 33: Changes in tangible fixed assets in year 2014 82 Table 81: Main indicators of economy 129 Table 34: Changes in tangible fixed assets in year 2013 83 Table 82: Main indicators of return 129 Table 35: Long-term financial investments 84 Table 83: Long-term assets statements of Elektro Primorska Group 131 Table 36: Changes in financial investments 84 Table 84: Changes in intangible assets in year 2014 132 Table 37: Long-term operating receivables 85 Table 85: Changes in intangible assets in year 2013 133 Table 38: Stocks 85 Table 86: Changes in tangible assets in year 2014 134 Table 87: Changes in tangible assets in year 2013 135 List of Abbreviations Table 88: Investment categories 136 AUKN Capital Assets Management Agency of Republic of Slovenia Table 89: Short-term assets of the group 137 BDP gross domestic product Table 90: Short-term receivables of the group 138 CUO use of network price Table 91: Outstanding receivables from sale and for interest of the group 138 COT comprehensive risk management D electricity distribution Table 92: Monetary assets of the group 139 DE distribution unit Tabela 93: Aktivne časovne razmejitve 139 DCV remote control center Table 94: Capital of the group 140 DV power line Table 95: Provisions of the group 141 DVPLM remotely controlled switch point Table 96: Long-term accruals and deferred income 141 DVE domestic energy sources Table 97: Long-term liabilities of the group 142 EIMV Milan Vidmar Electric Power Research Institute Table 98: Short-term liabilities of the group 143 ERP enterprise resource planning Table 99: Accrued expenses and deferred revenues of the group 144 EBIT earnings before interest and tax Table 100: Operating revenues of the group 144 GIS geographic information system Table 101: Operating expenses of the group 145 GIZ economic interest grouping Table 102: Analysis of group's costs 146 I investments Table 103: Contingent liabilities of the group 148 IIS integrated information system JR public lighting KBV cable conduit KEE quality of electricity NIS network information system NN low voltage NR internal audit OVE renewable energy sources RAST program of operating costs rationalization REDOS development of Slovenian electricity distribution network RP substation RS Republic of Slovenia RTP transformer station SAIDI average interruption duration index SAIFI average interruption frequency index SCADA distribution networks system monitoring SDH Slovenian Sovereign Holding SM standing place SN medium voltage SOD Slovenian Compensation Fund SODO distribution network system operator SODO EP activity of Elektro Primorska d. d., implementing a service for SODO SPTE cogeneration of heat and electricity TP transformer station UDO distribution network management URE efficient use of electricity UMAR Institute of Macroeconomic Analysis and Development UKV ultra short waves VN high voltage VZD maintenance

Oblikovanje: WOAF Design studio, Andraž Filač / Fotografija: Arhiv Elektro Primorska / Tisk: Color Print Nova Gorica ZSDH Slovenian Sovereign Holding Act