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Public Enterprise Elektroprivreda Srbije Beograd Consolidated Financial Statements for the Year Ended 31 December 2015 and Indep

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Public Enterprise Elektroprivreda Srbije Beograd Consolidated Financial Statements for the Year Ended 31 December 2015 and Indep PUBLIC ENTERPRISE ELEKTROPRIVREDA SRBIJE BEOGRAD CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 AND INDEPENDENT AUDITOR'S REPORT Independent auditor’s report To the Management of Public Enterprise Elektroprivreda Srbije, Beograd Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Public Enterprise Elektroprivreda Srbije, Beograd (the „Company“) and its subsidiaries (the „Group”), which comprise the consolidated balance sheet as of 31 December 2015 and the consolidated income statement, consolidated statement of other comprehensive income, consolidated statement of changes equity and consolidated cash flow statement for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the requirements of the Law on Accounting and accounting regulation effective in the Republic of Serbia, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. PricewaterhouseCoopers d.o.o., Omladinskih brigada 88a, 11070 Belgrade, Republic of Serbia T: +381 11 3302 100, F:+381 11 3302 101, www.pwc.rs This version of our report/ the accompanying documents is a translation from the original, which was prepared in Serbian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. Report on the Consolidated Financial Statements (continued) Basis for Qualified Opinion As at 31 December 2015, intangible assets in the amount of RSD 1,753,849 thousand, buildings in the amount of RSD 1,040,064 thousand and assets under construction in the amount of RSD 10,980,310 thousand related to projects which are in progress for more than 3 years and for which the Group did not assess the recoverability as required by IAS 36 - Impairment of assets. Out of total amount of RSD 13,774,223 thousand, the amount of RSD 6,973,502 thousand relates to construction of the thermal power plant “Kolubara B”, the amount of RSD 4,508,506 thousand relates to assets under construction in subsidiary Operator distributivnog sistema EPS distribucija d.o.o., Beograd while the remaining amount relates to various other projects. In the absence of information of the recoverable amount of these assets, we were unable to satisfy ourselves as to the carrying amount of those assets. The audit report for 2014 consolidated financial statements was qualified with this respect. As at 31 December 2015 the Group’s inventories are carried in the balance sheet at the amount of RSD 26,614,723 thousand (net of advances paid). Inventory balance includes slow moving inventories in the gross amount of RSD 6,858,024 thousand while the total provision amounts to RSD 3,194,006 thousand. In the absence of information to assess net realisable value of remaining balance of slow moving inventories in the amount of RSD 3,664,018 thousand, we were unable to satisfy ourselves as to the aforementioned carrying amount of inventories as of 31 December 2015. As at 31 December 2015, the Group did not recognize a provision for decommissioning of landfills and dumps for ash and slag in Thermal Power Plants Kostolac, Kolubara, Morava, Nikola Tesla A and Nikola Tesla B, as required by IAS 37 – “Provisions, contingent liabilities and contingent assets”. In the absence of information to assess the amount of provision for decommissioning, we were unable to satisfy ourselves as to the value of provisions, related assets and expenses in the consolidated financial statements. As at 31 December 2014 in the process of preparing the consolidated statement of cash flows, cash receipts and payments from internal transactions were not fully reconciled, while the amount of unreconciled internal cash flows remained unconsolidated and was included in the consolidated cash flow statement. Qualified Opinion In our opinion, except for the possible effects of the matters described in the basis for qualified opinion paragraphs, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2015, and of its financial performance and its cash flows for the year then ended in accordance with the requirements of the Law on Accounting and accounting regulation effective in the Republic of Serbia. 2 This version of our report/ the accompanying documents is a translation from the original, which was prepared in Serbian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. Report on Other Legal Matters Report on the Annual Report In addition we have verified that the other information included in the annual report of the Group for the year ended 31 December 2015 is consistent with these consolidated financial statements. Management is responsible for the accuracy of the annual report. Our responsibility is to express an opinion on the consistency of the annual report with the consolidated financial statements based on our verification procedures. Auditor’s Responsibility We conducted our verification procedures in accordance with the International Standards on Auditing. Those standards require that we plan and perform the verification procedures to obtain reasonable assurance about whether the other information included in the annual report which describes matters that are also presented in the consolidated financial statements is, in all material respects, consistent with the relevant consolidated financial statements. We believe that the verification procedures performed provide a reasonable basis for our opinion. Opinion In our opinion, the other information included in the annual report of the Group for the year ended 31 December 2015 is consistent, in all material respects, with the information contained in the consolidated financial statements. Refer to the original signed Refer to the original signed Serbian version Serbian version _________________________ ______________________________ Milivoje Nešović PricewaterhouseCoopers d.o.o., Beograd Licensed Auditor Belgrade, 13 July 2016 3 This version of our report/ the accompanying documents is a translation from the original, which was prepared in Serbian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. To be filled in by the legal entity - entrepreneur TIN – Tax Registration 2 0 0 5 3 6 5 8 Activity code 3 5 1 4 identifica 1 0 3 9 2 0 3 2 7 number tion number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 BALANCE SHEET As at 31 December 2015 - in thousands of Dinars - Amount Accoun Previous year t group, ITEM АОP Note no. account Current year Closing balance as at Opening balance as 31 December 2014 at 1 January 2014 1 2 3 4 5 6 7 ASSETS 00 A UNPAID SUBSCRIBED CAPITAL 0001 B FIXED ASSETS (0003 + 0010 + 957,682,639 943,393,848 944,443,606 0002 0019 + 0024 + 0034) 5,105,579 4,222,887 3,185,541 I. INTANGIBLE ASSETS (0004 + 0005 01 0003 + 0006 + 0007 + 0008 + 0009) - - 010, p.o. - - 1. Investment in development 0004 019 011, 22 2. Concessions, patents, licenses, 1,018,025 989,597 803,134 012, p.o. 0005 similar rights, software and other rights 019 013, p.o. - - 3. Goodwill 0006 019 014, p.o. 22 38,994 34,525 53,327 4. Other intangible assets 0007 019 015, p.o. 22 4,048,560 3,198,765 2,329,080 5. Intangible assets in development 0008 019 016, p.o. 6. Advance payments for acquisition of - - 0009 019 intangible assets II. PROPERTY, PLANT AND 949,015,863 934,668,242 933,086,429 02 EQUIPMENT (0011 + 0012 + 0013 + 0010 0014 + 0015 + 0016 + 0017 + 0018) 22 020, 39,415,804 37,859,612 34,551,039 021, p.o. 1. Land 0011 029 022, p.o. 22 322,809,705 327,854,618 331,982,248 2. Buildings 0012 029 023, p.o. 22 495,582,893 491,294,381 512,633,765 3.
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