2018 First Half-Year Report (H1 2018)

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

2018 FIRST HALF-YEAR REPORT (H1 2018)

(based on the condensed consolidated interim reviewed financial statements prepared in accordance with IAS 34)

REGARDING THE ECONOMIC AND FINANCIAL ACTIVITY OF SOCIETATEA ENERGETICA ELECTRICA S.A.

in compliance with art. 65 of the Law no. 24/2017 on issuers of financial instruments and market operations and with annex no. 14 to ASF Regulation no. 5/2018 and the Bucharest Stock Exchange Code

for the six month period ended 30 June 2018

Free translation from the Romanian version of the report, which will prevail in the event of any discrepancies with the English version.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Table of content 1. Identification Details Of The Issuer ...... 4 2. Highlights ...... 5 2.1. Key Events in H1 2018 ...... 5 2.2. Summary of financial indicators...... 9 3. Organizational Structure ...... 10 3.1. Group Structure ...... 10 3.2. Key information by segments ...... 12 4. Shareholders’ Structure ...... 13 5. Operational Results ...... 15 6. Financial position ...... 21 7. Statement of cash flows ...... 24 8. Outlook ...... 25 9. Capital Expenditures ...... 30 10. Statements...... 31 11. Annexes ...... 32 11.1. Contracts concluded reported according to art. 82 of Law 24/2017 ...... 32 11.2. List of major investments and commissioning works ...... 33 11.3. List of major litigations as of 30 June 2018 ...... 34

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

1. Identification Details Of The Issuer

Report date: 13 August 2018

Company name: Societatea Energetica Electrica S.A.

Headquarters: 9 Grigore Alexandrescu Street, 1st District, Bucharest, Romania

Phone/fax no: 004-021-2085999/ 004-021-2085998

Fiscal Code: RO 13267221

Trade Registry registration number: J40/7425/2000

LEI Code (Legal Entity Identifier): 213800P4SUNUM5AUDX61

Subscribed and paid in share capital: RON 3,459,399,290

Main characteristic of issued shares: 345,939,929 ordinary shares of 10 RON nominal value, issued in dematerialized form and freely transferable, nominative, tradable and fully paid

Regulated market where the issues securities are traded: the Company’s shares are listed on the Bucharest Stock Exchange (ticker: EL) and Global Depositary Receipts (ticker: ELSA) are listed on the London Stock Exchange

Applicable accounting standards: International Financial Reporting Standards as approved by the European Union; interim financial statements based on the International Accounting Standard IAS 34 – Interim Financial Reporting

Reporting period: Half year of financial year 2018 (period 1 January - 30 June 2018)

Audit/Review: The condensed consolidated interim financial statements as at and for the period ended 30 June 2018 are reviewed by an independent financial auditor

Ordinary Shares GDR ISIN ROELECACNOR5 US83367Y2072 Bloomberg Symbol 0QVZ ELSA:LI Currency RON USD Nominal Value 10 RON 40 RON Stock Market Bursa de Valori Bucuresti REGS London Stock Exchange MAIN MARKET Ticker EL ELSA Source: Electrica

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

2. Highlights The Group is a leading distributor and supplier of electricity on the regulated Romanian market. The Group’s core business segments are the distribution of electricity to users and the supply of electricity to household and non- household consumers.

Electrica’s distribution segment comprises the following subsidiaries: Societatea de Distributie a Energiei Electrice Muntenia Nord (“SDMN”), Societatea de Distributie a Energiei Electrice Transilvania Nord (“SDTN”), Societatea de Distributie a Energiei Electrice Transilvania Sud (“SDTS”) and Electrica Serv (“ELSERV”), and it is geographically limited to Northern Muntenia, Northern Transylvania and Southern Transylvania in what concerns the distribution subsidiaries. The Group holds exclusive distribution licenses for these regions which have a remaining term of 9 years and may be extended for another 25 years. Electrica Serv provides repair and other ancillary services to third parties and various services to the companies within the group (vehicles rental, building rental etc.)

The electricity supply segment operates through Electrica Furnizare subsidiary and the main activity is the supply of electricity to final customers, both as the supplier of last resort (in the geographic regions where the Group's distribution segment operates) and as a competitive supplier, all over Romania. The Group holds two supply licenses covering the entire territory of Romania, valid until 2021 and respectively 2022, with the possibility of extension.

2.1. Key Events in H1 2018

During the first semester of 2018, the following significant events for the main activity segments of the Group took place:

Events in the period January – June 2018 Main resolutions of the Ordinary General Meetings of Shareholders (OGMS) dated 9 February 2018:

- Approval of the remuneration policy of the members of the Board of Directors of the Company and its application from the date of its approval by the OGMS; - Approval of the proposed Mandate Agreement for the members of the Board of Directors of the Company and of the remuneration limits of the Company's executive managers. Main resolutions of the General Meetings of Shareholders dated 27 April 2018: - Approval of Electrica’s 2017 financial statements and 2018 income and expenses budget, both at individual and consolidated levels; - Approval of the 2017 net profit distribution; gross dividend value - MRON 245.37; gross dividend per share - RON 0.7237; payment date - 22 June 2018; - Election of the members of the Board of Directors of Electrica SA through the cumulative voting method: Elena Doina Dascalu, Gicu Iorga, Ramona Ungur, Valentin Radu, Arielle Malard De Rothschild, Bogdan George Iliescu, Willem Jan Antoon Henri Schoeber and the setting of their mandate’s duration for a period of four years; - Rejection of the appointment of Deloitte Audit as Electrica’s financial auditor; - Rejection of the establishment of a company's working point in Bucharest, 4 – 8 Nicolae Titulescu Road, West Wing, 6th floor, district 1, Romania.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Main Board of Directors decisions in H1 2018 and up to date:  Board of Directors: - The appointment of Ms. Elena Doina Dascalu as Board of Directors Chair for a one year mandate; the approval of the committees’ composition and the election of their chairs for one year mandate, starting with 14 May 2018; - Strategy and Corporate Governance Committee: Mr. Willem Jan Antoon Henri Schoeber – Chair, Ms. Arielle Malard de Rothschild – Member, Mr. Gicu Iorga – Member; - Audit and Risk Committee: Mr. Bogdan George Iliescu – Chair, Ms. Arielle Malard de Rothschild – Member, Ms. Ramona Ungur – Member; - Nomination and Remuneration Committee: Mr. Valentin Radu – Chair, Mr. Bogdan George Iliescu – Member, Ms. Doina Elena Dascalu - Member  Corporate Governance - policies: - The approval of the updated version of the Policy of Transactions with Related Parties, of the updated version of the Dividend Policy and of the Forecast Policy for Electrica S.A., all published on the Company’s website on 19 February 2018.  Intra-group loans and other intra-group facilities granted by Electrica SA: - Intercompany loans in favor of the DSOs, up to a total amount of RON 520 million for financing the 2018 CAPEX plan as necessary – 5 April 2018; - The approval for granting intercompany loan in favor of Servicii Energetice Muntenia SA (a Group subsidiary), up to a total amount of RON 5.5 million – 26 April 2018.  Conclusion of the Balancing Responsible Party (BRP) activity transfer from Electrica S.A. to Electrica Furnizare S.A. – 28 March 2018  Appeal of the Competition Council’s Decision no. 77/20.12.2017, by which the Company has been sanctioned with a fine amounting to RON 10.8 million (2.98% of the total turnover achieved in the financial year 2016). Main requests: to cancel the sanction mentioned above as unlawful and unfounded and, additionally, to reduce the amount of the fine. The suspension of the enforcement of the Decision until the final settlement of the claim was requested on 15 May 2018 but rejected and the company filed for appeal. Subsequent events

 During the meeting held on 25 July 2018, the Board of Directors of Electrica SA approved the revocation of Mr. Dan Crisfalusi from the position of Chief IT&T Officer of Electrica SA starting with July 25 2018. Distribution Segment a) Implementing the transformation plan in the distribution area of activity (Electrica Serv, SDMN, SDTN, SDTS) - after the business transfer from Electrica Serv, beginning with 1 November 2017, a new target model of organizing the distribution segment was implemented, having as main objective the accomplishment of the ambitious investment plan for 2018, as well as the increase of the reaction capacity and improving the performance in the operational area:  the activities internalized from Electrica Serv (design, acquisition and logistics, maintenance, investments’ execution, technical auto services) were integrated in the functions of the new organizational model, and the transferred employees were included in the new organizational structure;  the network construction entitities (internal structures) were created, dedicated to the internally generated investments;

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

 the business processes were redefined based on the unique responsibility principle with emphasis on streamlining and the quality of services provided to customers. b) A new business plan has been approved for Electrica Serv providing measures to streamline and optimize the operational processes, including:  Improving the services currently provided and extending them to companies outside Electrica Group;  Developing new products and supporting activities for the companies within the Group;  Streamlining of the real estate portfolio;  Reduction of the administrative and general costs.  Distribution Activity:

ANRE (Romanian Energy Regulatory Authority) issued orders that require additional efforts from the distribution operators in order to comply with the new requirements: a) New orders:  ANRE order no. 34/2018 that supplements and amends the Investments’ Procedure approved through Order 8/2016 which stipulates the additional obligation of the distribution operator to realize 95% from the value of the investment plan and the right of the distribution operator to request the accord for setting the auto fleet, and as a result, Electrica Group’s distribution companies have requested the approval for setting its own auto fleet, providing supporting documents;  The Order no. 145/2014 regarding the implementation of electricity smart metering systems was supplemented and amended by Order no. 25/2018 that stipulates: the value of the investments related to the smart metering systems may not exceed 10% of the investment program approved for 2018; the limit for investments recognized in 2018 is the weighted average cost of distribution operators at which a 10% variance is allowed; ANRE will approve until 30 September 2018, the conditions for drawing up investment programs for the implementation of the smart metering systems. b) Regulations regarding network connection  ANRE order no. 95/2018 for the approval of mandatory clauses in the connection works’ services contracts: it imposes terms to the DSOs regarding the payment of the works executed by certified operators;  ANRE Order no. 113/2018 amending the Methodology for Establishing Connection Tariffs, approved by ANRE Order no. 11/2014, and also the ANRE Order no. 141/2014 for the approval of the specific tariffs and specific indices used for setting the connection tariffs: it stipulates the removal of the cost of the meter from the connection tariff and implicitly its bearing by the DSO (i.e. the decrease of the investments value made with financial contributions and the increase of the investments realised with own sources, recognized in the tariff, within the limit approved for 2018); c) Energy law no. 123/2012 amended by the law no. 167/2018:  The timetable for implementation of the smart metering systems recognized in the investment plans will be approved by ANRE as follows: c1) 1 January 2024: customers with an annual consumption higher than a threshold established by ANRE and producers with an installed power of less than 10 Kw; c2) 31 December 2028: customers who do not fall under c1).  New contraventions and increased fines, between 5% and 10% of the annual turnover, for:

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

- the refusal of a distribution operator to take over the power grid if the owner of the distribution network is unable to provide universal service to the users connected to that network; - non-compliance by the transmission and system operator (TSO) and the distribution operators of the maintenance and investment programs, within the terms and conditions established by the ANRE regulation.  Investments

 In the first half of 2018, it is estimated that the three distribution operators of Electrica Group realized and commisioned investments amounting to RON 183 million out of total year value of RON 905 million, which represents the highest historical level of investments of Electrica Group;  The Investment Plans were drafted in accordance with the Offering Prospectus and the requirements stipulated by the regulatory authority in the ANRE Order no. 8/2016 "Procedure regarding the elaboration and approval of the investment programs of the concessionaire distribution operators of the electricity distribution service". Thus, the total value of the investment plans accepted by ANRE for the current regulatory period (2014-2018) is RON 3,2 billion (in real terms 2013, value adjustable with inflation). Supply Segment  Starting 1 April 2018, the activity of Balancing Responsible Party (BRP) was transferred from Electrica S.A. to Electrica Furnizare S.A;  Starting with 10 May 2018, the license for the electricity supply activity of Electrica SA ceased, according to the ANRE Decision no. 728/2018 – at the request of the operator.  Supply activity  In the first half of the year 2018 the implementation of the identified functionalities for streamlining the customer relationships within Electrica Furnizare SA was continued as follows: - Resolving the reported issues in the MyElectrica mobile application and aligning it with the web interface; - Continuing the implementation of the Customer Relationship Management (CRM) system; - Implementing in the production environment of an Enterprise Service Bus (ESB) component for the integration facility; - Automation development in the process of transfering meters readings from the distributors of electricity;  ANRE Order no. 75/2017, which applies to H1 2018, has established the conditions for the participation of suppliers of last resort (SoLR) in the purchase of electricity on Centralized Market for Universal Service (CMUS) being obliged to ask for offers on CMUS for at least 50% of the energy requirement for universal service (US) clients, and the remaining energy could be purchased from the other centralized forward markets (CFM). The value of the purchase price used to calculate the competitive market component (CMC) depends on: the weighted average price of contracts concluded on CMUS, the weighted average price of all contracts concluded on the CFM (Centralized Forward Markets) after the entry into force of the ANRE Order and a profiling rate of up to 8%. For purchased energy on the CFM, ANRE considers the minimum of the weighted average purchase price realized on the CFM by SoLR and the weighted average price of all contracts concluded on the CFM after the date of entry into force of the ANRE Order with delivery during that period. The cost of supply per unit considered by ANRE is RON 4.5/client/month. The regulated profit for supplying US customers is 1.5% of total costs. Adjustment of the regulated tariff/ CMC/ last instance of the previous period applies;  Based on ANRE Order no. 119 from 2017, EFSA was assigned as SoLR for its own licensed areas until 1 July 2018.  The tariffs for transmission services and for system service, approved by ANRE Order no. 122/2017, were maintained at the same values and respectively increased by 25.4% compared with the second half of 2017. The

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

tariff for the transmission service for the network insertion remained at the same value as in the second half of 2017;  The contribution for high efficiency cogeneration decreased by 3% compared with the second half of 2017, according to ANRE Order no. 123/2017;  As result of finalizing the schedule of elimination of regulated tariffs and the total liberalization of electricity market starting 1 January 2018, ANRE approved the regulatory package for the last resort supplying service/ universal service , which is applicable starting with H2 2018: - Regulation for organizing and conducting auctions on the Centralized Market for Universal Service – ANRE Order no. 27/2018 – CMUS becomes voluntary market for SoLR; - The competitive selection regulations for appointment of the suppliers of last resort and for the change of some regulations in the electricity sector – ANRE Order no. 26/2018 – appointment of the SoLRs is realized through a competitive process: the bound SoLRs are appointed for a period of 4 years on the basis of eligibility and capability criteria and the optional SoLRsare designed based on eligibility, capability and availability criteria; Electrica Furnizare S.A. was appointed as bound supplier of last resort for the network areas Muntenia Nord, Transilvania Nord and Transilvania Sud, through ANRE Decision no. 657/2018 until June 2022; - The methodology for determining the calculation method and conditions of prices approval applied by the obliged and optional last resort suppliers to the final customers – ANRE Order no. 39/2018 – ANRE establishes for each network area and each SoLR the maximum price for universal service based on three components: acquisition cost (based on acquisitions realized and the average price on the centralized markets), the cost of supply (which includes the recognized profit), adjustment cost (previous corrections) and endorses the proposed prices by SoLR as equal to the maximum prices for universal service. 2.2. Summary of financial indicators A summary of the main indicators is presented below:

- During the first semester of 2018, EBITDA increased by RON 263 million to RON 477 million, as compared with the same period of 2017; - The volume of the investments in the distribution network in the first six months of 2018 was of RON 289.5 million, increasing by RON 30.4 million, or 12%, from RON 259 million in the first semester of 2017; - The operating profit in the first semester of 2018 was of RON 261 million, posting a significant increase as compared with the same period of the previous year, when the Group recorded an operational profit of only RON 18 million, mainly due to the increased electricity acquisition prices in H1 2017, as a result of the energy crisis from the beginning of prior year; - The cost of electricity purchased decreased by RON 262.7 million, or 17%, to RON 1,269 million in the six months period ended 30 June 2018, from RON 1,531 million recorded in the comparative period, when it has been recorded a significant electricity price increase; - Revenue from the distribution segment increased by RON 40 million, or 3%, to RON 1,244 million (out of which RON 671 million external revenues), compared to the first half of the prior year; the contribution of the electricity distribution segment to the Group’s revenues is of 25%; - In the first semester of 2018, the revenue from the supply segment decreased by RON 166 million y-o-y, or 8%, to RON 1,979 million (out of which RON 1,964 million external revenues), mainly from the variation of

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

the revenues from BRP (“Balancing Responsible Party”); the contribution of the electricity supply segment to the Group’s total revenue is of 74%. 3. Organizational Structure 3.1. Group Structure

The Company is the parent company for the Group, which comprises four subsidiaries in its distribution segment: Societatea de Distributie a Energiei Electrice Transilvania Nord SA (“SDTN”), Societatea de Distributie a Energiei Electrice Transilvania Sud SA (“SDTS”), Societatea de Distributie a Energiei Electrice Muntenia Nord SA (“SDMN”), FISE Electrica Serv SA (“Electrica Serv”), whereas the supply segment comprises one subsidiary, Electrica Furnizare S.A. (“Electrica Furnizare”).

The Company also owns all shares of Servicii Energetice Oltenia SA (“SE Oltenia”) and Servicii Energetice Muntenia SA (“SE Muntenia”). In January 2014, the Board of Directors of Servicii Energetice Oltenia and in October 2014, the Board of Directors of Servicii Energetice Muntenia decided the commencement of the insolvency procedure with a view to reorganization. The insolvency processes were initiated in 2014.

As of 30 June 2018, the main shareholder of Electrica SA is the Romanian State, represented by the Ministry of Energy (48.7805%).

Figure 1: Entities included in the consolidation as of 30 June 2018:

Source: Electrica

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Presentation of Group subsidiaries

Registration % shareholdings Subsidiary Activity Headquarters code as of 30 June 2018 Societatea de Distributie a Electricity distribution in Energiei Electrice North Muntenia 14506181 Ploiesti 99,9999696922382% Muntenia Nord SA geographical area ("SDMN") Societatea de Distributie a Electricity distribution in Energiei Electrice Northern Transylvania 14476722 Cluj-Napoca 99,9999829770757% Transilvania Nord SA geographical area ("SDTN") Societatea de Distributie a Electricity distribution in Energiei Electrice Southern Transylvania 14493260 Brasov 99,999976413243% Transilvania Sud SA geographical area ("SDTS") Electrica Furnizare SA Supply and trading of 28909028 Bucharest 99,9998390431663% (“EFSA”) electricity Services in the energy sector Electrica Serv SA (maintenance, repair, 17329505 Bucharest 100% (“ELSERV”) construction) Servicii Energetice Services in the energy sector Muntenia SA (in (maintenance, repair, 29384120 Bucharest 100% insolvency) (“SEM”) construction) Servicii Energetice Services in the energy sector Oltenia SA (in insolvency) (maintenance, repair, 29389861 Craiova 100% (“SEO”) construction) Source: Electrica S.A.

The main activities of the Group are the regulated distribution of electricity (through operation and development of electricity distribution networks) and the electricity supply to end consumers. The Group is the electricity distribution operator and the main electricity supplier in North Transylvania (Cluj, Maramures, Satu Mare, Salaj, Bihor and Bistrita-Nasaud counties), South Transylvania (Brasov, Alba, Sibiu, Mures, Harghita and Covasna counties) and North Muntenia (Prahova, Buzau, Dambovita, Braila, Galati and Vrancea counties), ensuring the electricity distribution service by operating installations that function at voltages ranging from 0,4 kV to 110 kV (power lines, substations and electrical transformer stations).

The Company’s distribution subsidiaries (SDMN, SDTN and SDTS) invoice the electricity distribution service to electricity suppliers (mainly to Electrica Furnizare SA subsidiary, the main electricity supplier in Muntenia North, Transylvania North and Transylvania South areas), which further invoice the electricity consumption to final consumers.

Electrica Furnizare is an electricity supplier in the competitive market and supplier of last resort ("SoLR", defined as a supplier designated by the regulator - ANRE - to provide the universal electricity supply under regulated conditions) in the Muntenia North, Transylvania North and Transylvania South regions.

According to the regulations issued by the National Regulatory Authority for Energy ("ANRE"), the suppliers of last resort are obliged to ensure the supply of electricity to the final customers who have not exercised their eligibility right (the right to choose the electricity supplier) and to end customers who are in the position of not being able to secure electricity from any other source, including customers who have used eligibility.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

The supply of electricity to customers in the competitive market is based on negotiated contracts within the limits of the regulations in force. Electricity consumption is invoiced, according to the contractual terms, at prices negociated with the final customer. The provision of electricity in regimes of universal service and in the last resort is performed based on contracts regulated by ANRE Orders.

3.2. Key information by segments

DISTRIBUTION SEGMENT Essential information

 The Regulated Assets Base (RAB estimated) at the end of H1 2018 was RON 4,788 million  197,257 km of electric lines – 7,591 km for High Voltage (“HV”), 45,529 km for Medium Voltage (“MV”) and 144,138 km for Low Voltage (“LV”)  Total area covered: 97,196 km2, 40.7% of Romania’s territory  3.72 million users at the end of H1 2018 for the distribution activity  8.8 TWh of electricity distributed in H1 2018, a decrease of 1.8% as compared to H1 2017. Figure 2: Romanian electricity distribution map

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Figure 3: Quantity of electricity distributed on voltage levels (TWh)

17.52 17.82 3.33 3.10

6.35 6.68 9.00 8.84 1.69 1.21 3.25 3.51 7.84 8.03 4.05 4.11

2016 H1 2017 2017 H1 2018

Low Voltage Medium Voltage High Voltage

SUPPLY SEGMENT Essential market data (according to ANRE Report for April 2018)

. The supply market comprises both the competitive segment and the regulated segment . The regulated segment comprises five suppliers of last resort, while the competitive market segment comprises 95 suppliers (including those of last resort active in the retail market competitive segment, of which 89 are relatively small - less than 4% market share) . Electrica Furnizare has a market share of 17.70%. Electrica Furnizare is the market leader on the regulated market, with a market share of 43.06%, while for the competitive market has a share of 9.77%. By comparison, in 2017, Electrica Furnizare had a market share of 40.79% on the regulated market and a 11.58% market share on the competitive market (ANRE report for December 2017); . In H1 2018, the Group supplied to a number of approx. 3.55 million final consumers 4.8 TWh of electricity, representing a decrease of 4.7% y-o-y. 4. Shareholders’ Structure

Until July 2014, the Romanian State, acting through the Ministry of Energy was the sole shareholder of Electrica S.A. Starting with 4 July 2014 the Company’s shares are listed on Bucharest Stock Exchange, and the GDRs are listed on London Stock Exchange. As of 30 June 2018, the shareholder’s structure is:

Percentage of share Shareholder Shares capital (%) Romanian State through the Ministry of Energy 168,751,185 48.7805% BERD 23,955,272 6.9247% Bank of New York Mellon - DRS 12,076,340 3.4909% Other legal persons 123,004,917 35.5567% Individual persons 18,152,215 5.2472% Total 345,939,929 100.0000%

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Source: Electrica S.A.

Following the stabilization process after the IPO, Electrica SA owns 6,890,593 of its own shares, representing 1.9918% of the total share capital. These shares do not entitle Electrica to voting rights, nor dividends.

Figure 4: Shareholders’ Structure as of 30 June 2018 5.2472%

48.7805% Romanian State 35.5567% EBRD

BNY MELLON DRS - LSE

Other legal persons

3.4909% 6.9247% Individual persons

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

5. Operational Results Selected financial information from the condensed consolidated statement of profit or loss – in RON million.

30 June 2018 30 June 2017 Variation Indicator (reviewed) (reviewed) (%)

Revenues 2,654 2,675 -1% Other operating income 75 90 -17% Electricity purchased (1,269) (1,531) -17% Green certificates (155) (183) -15% Construction costs related to concession agreements (290) (259) 12% Employee benefits (297) (317) -6% Repairs, maintenance and materials (42) (30) 42% Depreciation and amortization (216) (197) 10% Reversal of impairment of property, plant and equipment, net 0 1 -75% Impairment of trade and other receivables, net (2) (17) -86% Change in provisions, net 0 (5) - Other operating expenses (196) (209) -6% Operating profit 261 18 1,377%

Finance income 6 12 -49% Finance costs (3) (3) 30% Net finance income 2 9 -72%

Profit before tax 264 27 893% Income tax expense (54) (18) 195% Profit for the period 210 8 2,467%

Profit/ (Loss) for the period attributable to: - owners of the Company 210 (6) - - non-controlling interests - 15 -100% Profit for the period 210 8 2,467%

Key financial indicators for H1 2018: Revenues: RON 2.7 billion, a 1% y-o-y decrease; EBITDA: RON 477 million, a RON 263 million increase compared to same period of last year; EBIT: RON 261 million, a RON 244 million increase compared to H1 2017; EBT: RON 264 million, a RON 237 million increase compared to same period of last year; Net Profit: RON 210 million, a RON 201.5 million y-o-y increase.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Revenues and other operating income

Figure 5: Revenue for H1 2018 and comparative information (RON mil.)

5,518 5,603

401 373

2,675 2,654 5,117 183 5,230 155

2,492 2,499

2016 H1 2017 2017 H1 2018

Revenues from Green Certificates Revenues (ex-Green Certificates)

Electrica’s revenues and other operating income in the six month period ending 30 June 2018 and 30 June 2017 amounted to RON 2,728 million and RON 2,766 million, respectively, a decrease in revenue by RON 37 million, or 1%.

Revenues

As of January 1st, 2018, the Group applied the treatment of IFRS 15 ‘Revenue from contracts with customers’, and the consequence is that the revenue and expenses from Balancing Responsible Party activity (“BRP”) have been eliminated, without affecting the margin. If this financial reporting standard wouldn’t have been implemented, the Revenues and respectively Electricity purchased lines from the consolidated condensed statement of profit or loss for the six months period ended at 30 June 2018 would have been higher by RON 52 million, without any impact on the margin.

The first semester of 2017 has been significantly affected by the balancing market, when there have been higher imbalances due to the energy crisis. The consolidated revenues presented for H1 2017 include Balancing Responsible Party activity revenues of approx. RON 181 million, since the Group decided to apply IFRS 15 using the modified retrospective method, without restating the figures of the comparative period.

The revenues decreased by RON 22 million, or 1%, being the cumulative effect of the following main factors:

- external revenue (outside the Group): the electricity sales towards third parties have increased by RON 105 million, having a favorable impact on the consolidated revenue; - RON 40 million increase of the distribution segment’s revenues; - decrease by RON 166 million of the supply segment, out of which RON 52 million are attributable to the change in the financial reporting standards.

Revenue from the electricity distribution segment increased by RON 40 million, or 3%, to RON 1,244 million in the six month period ending 30 June 2018 from RON 1,204 million in the six month period ending 30 June 2017; even if the total quantity distributed decreased by 28%, evolution that influenced even the decrease of the total distributed quantity, the increases recorded on medium and low voltage by 7.8% and 1.6%, respectively, generated an overall positive effect on the distribution revenues, compensating even the reduction of the regulated distribution tariff; the increase of the revenues from reactive energy had also a positive impact on the revenues. The revenues

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT from electricity distribution segment are influenced also by the recognition of investments into the network under concession in accordance with IFRIC 12.

In the six month period ending 30 June 2018, revenue from the electricity supply segment decreased by RON 166 million, or 8%, to RON 1,979 million from RON 2,145 million in the six month period ending 30 June 2017.

The variation of the supply segment is generated by two elements: the electricity supply with a positive impact on the segment revenue, mainly due to the increase in the sale prices by 10.6%, which covers the impact of the quantity decrease by 4.7%, while the Balancing Responsible Party activity revenues variation had a negative influence mainly due to the accounting for BRP activity starting 1 January in accordance to IFRS 15, thus by eliminating the BRP revenues and the corresponding expense.

The value of the Green Certificates included in the invoice to the final consumer, set by ANRE, increased from RON 44.92/MWh in the six month period ending 30 June 2017 to RON 46.93/MWh in the six month period ending 30 June 2018.

Other operating income

The other operating income decreased by RON 15 million, or 17%, to RON 75 million in the six month period ending 30 June 2018 from RON 90 million realized in the six month period ending 30 June 2017. The decrease is generated by the fact that in H1 2017 were recognized revenues from litigations won with customers, having as subject old receivables due and, also, from compensations for termination of contracts on the supply segment. Electricity purchased

The expense for electricity purchased decreased by RON 262.7 million, or 17%, to RON 1,269 million in the six month period ending 30 June 2018 from RON 1,531 million in the six month period ending 30 June 2017.

The decrease is mainly due to the fact that the first part of 2017 was affected by the unfavorable events from the energy market, which generated significantly higher electricity prices as compared to H1 2018.

The cost of the electricity purchased for supply and balancing decreased by RON 210 million, or 19%, to RON 867 million in the first six months of 2018, from RON 1,077 million recorded in the same period of 2017, the main effect being the normalization of electricity purchase prices; out of this variance, RON 52 million decrease is attributable to the change in the financial reporting standards.

Regarding the distribution segment, in the six months period ending 30 June 2018, the cost of the electricity purchased to cover network losses decreased by RON 28 million, or 9%, to RON 285 million, from RON 313 million recorded in the six month period ending 30 June 2017, the evolution being attributable mainly to the decrease in the electricity purchase price.

The table below presents the structure of the electricity purchased expenses for the indicated periods:

Six month period ending 30 June (RON million) 2018 2017 Electricity purchased to cover network losses 285 313 Transmission and system services 117 142 Electricity purchased for supply and trading 867 1,077 Total electricity purchased 1,269 1,531

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Green Certificates

Green Certificates’ cost is recognized in the profit and loss account based on the quantitative quota set by the regulatory authority, representing the amount of the Green Certificates that the Group has to purchase for the current year and the price of Green Certificates on the centralized market. The cost with the acquisition of Green Certificates is a pass through cost.

In the six months period ended 30 June 2018, the cost for the acquisition of the Green Certificates decreased by RON 28 million, or 15%, to RON 155 million, from RON 183 million in the six months period ending 30 June 2017.

The decrease was mainly determined by: - lower supplied volumes by 8% (RON 15 million positive variance); - the regularization for 2017 with an impact in 2018 in the amount of RON 36 million compared to the regularization for 2016 with impact in 2017 in amount of RON 14 million (RON 22 million positive variance - these regularizations are reflected in both revenues and expenses and have no impact on the net result); - 1.4% increase in the average price from RON 132.50 per Green Certificate in the six months period ending 30 June 2017 to RON 134.30 per Green Certificate in the six-month period month ended 30 June 2018 (RON 9 million negative variance).

In 2018, the regulatory Green Certificates quota imposed to the electricity suppliers by ANRE increased to 0.346 Green Certificates per MWh supplied from 0.339 Green Certificates per MWh supplied for the six month period ending 30 June 2017 (average value between the quota of 0.339 for the first quarter and 0.358 for the second quarter). Construction costs

The costs related to concession agreements increased by RON 30.4 million, or 12%, to RON 289.5 million in the six month period ending 30 June 2018 from RON 259 million in the six month period ending 30 June 2017. This increase is attributable to the realised investments related to the Regulated Asset Base. Salaries and other employee benefits

The expenses for salaries and employee benefits decreased by RON 20 million, or 6%, to RON 297 million in the six month period ending 30 June 2018 from RON 317.2 million in the six month period ending 30 June 2017, as an effect of the reduction in the number of employees, following the activity optimization measures taken by the Group. Repairs, maintenance and materials

In the six months period ending 30 June 2018, the repairs, maintenance and materials expenses increased by RON 12.5 million, or 42%, to RON 42.3 million, from RON 29.8 million in the six month period ending 30 June 2017, considering the Group’s reorganization of maintenance, investments and design activities to support the investments plan. Other operating expenses

Other operating expenses decreased by RON 13 million in the six month period ending 30 June 2018 compared to the same period of 2017, to RON 196 million, from RON 209 million, mainly as a net effect of the following factors:

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

- although in 2018, the other operating expenses increased, as an effect of the aforementioned reorganization of the group for the maintenance, investments and design activities, which led to increases in several categories of expenses with third parties, the overall evolution is downward as in 2017 Electrica incurred a significant expense related to Termoelectrica litigation, expense that has no effect in 2018. EBITDA and EBITDA margin

Figure 6: EBITDA and EBITDA margin for H1 2018 and comparative information (RON million and %) 17% 18%

11% 8%

960

601 477 214

2016 H1 2017 2017 H1 2018

Operating profit

The Group EBIT increased by approx. RON 244 million y-o-y adding to the EBITDA evolution only the slight impact of the depreciation and amortization, an increase by RON 19 million or 10%, mainly due to the increase of investments’ commissioning and also to the results of revaluations performed as of 31 December 2017.

Figure 7: EBIT and EBIT margin for H1 2018 and comparative information (RON million and %) 11%

10%

586 4%

262 197 1%

2016 H1 2017 2017 H1 2018

Net finance income

The net financial result at group level decreased by 72% in the six month period ending 30 June 2018 compared to the similar period in 2017, due to lower finance income while the finance costs remained at the same level. Profit before tax

The profit before tax increased by RON 237 million, to RON 264 million in the six month period ending 30 June 2018 from RON 27 million in the six month period ending 30 June 2017.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Income tax expense

The income tax increased by RON 36 million, to RON 54 million in the six month period ending 30 June 2018 from RON 18 million in the six month period ending 30 June 2017, this evolution being in line with the increase of the profit before tax. Net profit for the period

As a result of the factors described above, the net profit increased by RON 201.5 million, to RON 210 million in the six month period ending 30 June 2018 from RON 8 million in the six month period ending 30 June 2017.

Figure 8: Net profit and Net profit margin for H1 2018 and comparative information (RON million and %)

469 3%

172 210 0%

2016 H1 2017 2017 H1 2018

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

6. Financial position

Selected financial information from the consolidated statement of financial position – in RON million

30 June 2018 31 December Variation Indicator (reviewed) 2017 (%) ASSETS Non-current assets Intangible assets related to concession agreements 4,431 4,331 2% Other intangible assets 12 14 -17% Property, plant and equipment 671 702 -4% Restricted cash 320 320 0% Deferred tax assets 23 41 -45% Other non-current assets 1 1 -4% Total non-current assets 5,459 5,409 1%

Current assets Trade receivables 682 804 -15% Other receivables 30 56 -46% Cash and cash equivalents 565 562 0% Deposits, treasury bills and government bonds 500 747 -33% Inventories 25 22 14% Prepayments 9 4 138% Green certificates 3 13 -77% Income tax receivable - 1 -100% Total current assets 1,813 2,208 -18% Total assets 7,271 7,617 -5%

EQUITY AND LIABILITIES Equity Share capital 3,814 3,814 0% Share premium 103 103 0% Treasury shares (75) (75) 0% Pre-paid capital contributions in kind from shareholders 5 5 0% Revaluation reserve 116 124 -6% Other reserves 327 327 0% Retained earnings 1,330 1,358 -2% Total equity attributable to the owners of the Company 5,620 5,656 -1% Non-controlling interests - - Total equity 5,620 5,656 -1%

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

30 June 2018 31 December Variation Indicator (reviewed) 2017 (%) Liabilities

Non-current liabilities Financing for network construction related to concession agreements 6 11 -46% Deferred tax liabilities 209 201 4% Employee benefits 165 165 0% Other payables 42 40 3% Long-term bank borrowings 320 320 0% Total non-current liabilities 742 738 1%

Current liabilities Financing for network construction related to concession agreements 23 33 -31% Bank overdrafts 131 248 -47% Trade payables 474 689 -31% Other payables 166 134 23% Deferred revenue 6 7 -21% Employee benefits 61 79 -23% Provisions 30 30 0% Current income tax liability 19 4 400% Total current liabilities 909 1,224 -26% Total liabilities 1,652 1,962 -16%

Total equity and liabilities 7,271 7,617 -5%

Non-current assets

In the six month period ending 30 June 2018, Electrica’s non-current assets increased by RON 50 million, to RON 5,459 million from RON 5,409 million as at 31 December 2017, mainly due to the net effect between the investments made by the distribution subsidiaries (the most relevant values of the investments and commisionings are presented in Annex 11.2) and several disposals that generate a decrease of property, plant and equipment.

Current assets

At the end of the first semester of 2018, the current assets went down by RON 396 million, as compared with 31 December 2017, from RON 2,208 million to RON 1,813 million, driven by the decrease of deposits, treasury bills and government bonds and of the trade receivables. Below is detailed the evolution of the elements of current assets that generate most of the variation.

Trade receivables

Trade receivables decreased by RON 122 million, to RON 682 million in the six month period ending 30 June 2018, from RON 804 million as at 31 December 2017. This variation is mainly generated by the lower level of revenues generated by the supply segment, correlated with the decrease of the average receivables collection period.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Deposits, treasury bills and government bonds

The deposits, treasury bills and government bonds are denominated in RON with original maturity of more than three months and have an average interest rate (yield) of 2.16%. The variation of these elements from RON 747 million to RON 500 million is the result of using internal financing for investments.

Share capital

The issued share capital in nominal terms consists of 345,939,929 ordinary shares at 30 June 2018 with a nominal value of RON 10 per share and did not change since 31 December 2017.

All shares rank equally with regard to the Company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared, and are entitled to one vote per share at General Shareholders Meetings of the Company.

The Company recognizes changes in share capital only after their approval in the General Shareholders Meeting and their registration by the Trade Register. The contributions made by the shareholders which are not yet registered with the Trade Register at the end of the period are recognized as “pre-paid capital contributions in kind from shareholders”.

Treasury shares

In July 2014 the Company purchased 5,206,593 ordinary shares and 421,000 Global Depositary Receipts, equivalent to 1,684,000 shares, for price stabilization purposes. The total amount paid for acquiring the shares and the Global Depositary Receipts was RON 75,372 thousand.

Dividends

Dividends for the year ended 31 December 2017, in amount of RON 245,370,004 were declared based on the Company’s individual financial statements. The dividends in respect of the year ended 31 December 2017 were approved through Resolution of the OGMS no. 2 from 27 April 2018 and started to be paid from 22 June 2018. Gross dividend per share approved by the OGMS was RON 0.7237.

Current liabilities

Current liabilities decreased by 26% at the end of the first semester of 2018 compared to 31 December 2017, to RON 909 million from RON 1,224 million, mainly as a result of changes in the following categories:

 the decrease of the bank overdrafts by RON 117 million, or 47%;  trade payables decreased by 216 million, or 31%, from RON 689 million to RON 474 million. The main categories included are: payables to electricity suppliers, CAPEX suppliers and other suppliers (of services, materials, consumables etc); the effect is the result of the payables turnover improvement.

Provisions

As at 30 June 2018, the provisions have a relatively constant value compared to 2017 year end and refer mainly to the fine from the Competition Council, amounting to RON 10,8 million, and other provisions for claims for which the Group, as defendant, might have the obligation to pay the amounts subject to litigations.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

7. Statement of cash flows Selected financial information from the consolidated statement of cash flows – in RON million:

30 June 2018 30 June 2017 Variation Indicator (reviewed) (reviewed) (%) Cash flows from operating activities Profit for the period 210 8 2,467% Adjustments for: Depreciation 20 24 -17% Amortization 196 173 13% Reversal of impairment of property, plant and equipment, net (0) (1) -75% Loss/(Gain) on disposal of property, plant and equipment 0 (0) - Impairment of trade and other receivables, net 2 17 -86% Change in provisions, net (0) 5 - Net finance income (2) (9) -72% Income tax expense 54 18 195% 480 236 104% Changes in : Trade receivables 93 83 12% Other receivables 45 15 200% Deposits, treasury bills and government bonds 4 (1) - Prepayments (5) (1) 441% Green certificates 10 (6) - Inventories (3) (2) 75% Trade payables (96) (233) -59% Other payables 10 (7) - Employee benefits (18) (20) -10% Restricted Cash - (168) -100% Deferred revenue (2) (1) 119% Cash (used in) / from operating activities 518 (103) -

Interest paid (1) (1) 6% Income tax paid (11) (19) -41%

Net cash (used in) / from operating activities 506 (123) -

Cash flows from investing activities Payments for purchases of property, plant and equipment (2) (18) -90% Payments for network construction related to concession agreements (385) (230) 68% Payments for purchases of other intangible assets (2) - - Proceeds from sale of property, plant and equipment 14 1 1,823% Purchase of treasury bills and government bonds (95) (543) -82% Proceeds on maturity of treasury bills and government bonds 467 886 -47% Increase in deposits with maturity of 3 months or longer (452) (21) 2,042% Proceeds from deposits with maturity of 3 months or longer 325 110 196%

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

30 June 2018 30 June 2017 Variation Indicator (reviewed) (reviewed) (%) Interest received 5 10 -54% Net cash from/ (used in) investing activities (126) 194 -

Cash flows from financing activities Proceeds from long term bank loans - 175 -100% Proceeds from short term bank borrowings - 17 -100% Repayment of short term bank borrowings - (10) -100% Repayment of financing for network construction related to concession (13) (48) -73% agreements Dividends paid (244) (250) -2% Net cash used in financing activities (257) (117) 120%

Net (decrease) / increase in cash and cash equivalents 119 (46) - Cash and cash equivalents at 1 January 315 746 -58% Cash and cash equivalents at 30 June 434 700 -38%

In the six month period ending 30 June 2018, net cash generated by the operating activities amounted to RON 506 million.

The profit before tax for the period was RON 264 million. The key adjustments to the net profit were: adding depreciation and amortization in the amount of RON 216 million, a net change in trade and other receivables of RON 138 million and deducting a change in trade and other payables of RON 104 million (out of which the change in employee benefits and provisions of RON 20 million). Income tax and interest paid amounted to a total of RON 12 million.

In the six month period ending 30 June 2017, net cash used in operating activities amounted to RON 123 million.

The profit before tax for the period was RON 27 million. The key adjustments brought to the net profit were: adding depreciation and amortisation in the amount of RON 197 million, a net change in trade and other receivables of RON 98 million, deducting the variation of RON 168 million of restricted cash (representing guarantees) and deducting a change in trade and other payables of RON 259 million (out of which the change in employee benefits and provisions of RON 20 million). Income tax and interest paid amounted to a total of RON 20 million. 8. Outlook

Tendencies in the energy market Considering the developed EU energy policies, the following medium and long term trends are expected to characterize the Romanian electricity market:  Through the completion of the liberalization calendar, the competition on the electricity supply market segment has an increasing trend at national level and will be accompanied by the diversification of the portfolio of products offered to customers (offers for gas, insurance, household appliances etc.) and digitalization of the services offered (mobile applications, invoices and online payments, expanding customer service through chat type solutions);

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

 Customers who, in accordance with the legal provisions, have the right to benefit from the universal service and do not wish to migrate to the eligible segment, will be provided with the supply of electricity under regulated conditions. It is possible to have a moderate competition on this segment as well, with the new rules for optional suppliers of last resort;  A trend in electricity distribution area is the remuneration of the distribution operator taking into consideration the quality of service, together with the operational costs and efficiency;  Distributed energy generation technologies will determine the distribution operators to adapt their processes and strategies for the upgrade and development of the network and offer solutions to independent producers, considering the new prosumers, which are active participants on the energy market; in this context, significant investments are needed to improve infrastructure, both for transmission and for distribution;  Full electric vehicles and light commercial vehicles are expected to increase the consumption of electricity in the transportation sector;  Future technological development will support energy efficiency policies such as: - Development of transmission and distribution networks, including smart grid and smart metering; - End-use energy efficiency (thermal integrity of buildings, lighting, electric appliances, motor drives, heat pumps, etc); - The implementation of smart metering will offer to the consumers complex tariffs options, detailed information about the consumption profile, which might lead to increased flexibility and peak demand reduction. Thus, the consumers shall be better informed and involved in decision making process, as active participants. The pace of implementation of smart metering depends on the implementation timetable to be adopted at national level; - Significant cost reduction of photovoltaic technologies is a development opportunity for smaller-scale generation projects, especially in the household area;  Development of the transmission and distribution infrastructure and long-distance interconnection will become a necessity. The Electricity Market Target Model, which implies the development of European Union’s internal electricity market, will continue to evolve and be in line with future trends and challenges in the energy industry.

The following table presents key drivers of changes in the electricity market:

Key driver Description Impact on Economic growth is a key determinant of electricity demand. Although there is not a one-to-one relationship between GDP growth rates and electricity demand growth rates, there is a positive correlation, mainly between the industrial demand for electricity and economic growth. In the future, household and GDP evolution and industrial electricity demand will also be influenced by energy efficiency Electricity industry structure policies. consumption Intensification of electricity consumption is a major trend in Romania. Over 2010-2017, there was a significant increase in consumption, as opposed to a decrease of the gas consumption over the same period, mainly due to the curtailment of heavy industry production. Demographic Despite the demographic decline recorded at EU and Romanian level (approx. evolution and 0.5% p.a.), the electricity consumption is impacted by the changes in the Electricity technology consumer behaviour and the increase in urbanization. For example, smart devices consumption development are expected to generate a massive increase in connected devices, and implicitly

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Key driver Description Impact on in the electricity consumption and revenue growth across multiple industries. The regulatory framework has undergone major changes with the aim of aligning the Romanian legislation with the EU legislation. Although important steps have been taken, other major changes are expected to occur in the next decade, particularly following the new Framework Strategy for a European Energy Union which highlights the need for integration and cooperation amongst member states. Also, changes of the methodology during the regulatory period created a Changes in lack of predictability and stability of regulatory environment, with a negative Electricity prices regulations impact on the distribution operators’ operational and financial performance. From 2019, the 4th Regulatory Period will start, and among the proposals published by ANRE there are significant changes in the methodology for all tariff elements (Regulated Rate of Return, Regulated Assets Base, Network losses, Operating Expenses, etc), an increased focus on the efficiency in exploitation, maintenance, utilization as well as increasing the pace of network investments. Smart networks and smart meters will create benefits for end consumers, distributors and suppliers in terms of energy efficiency, resource optimization Technological and network operation, implementation of demand response etc. It is necessary Electricity prices and development to prepare the networks and to integrate the distributed resources (storage consumption solutions, micro-grids, local production, electric machines, etc.), considering also the management of their impact. Romania has adopted the EU 20-20-20 targets, aiming to reduce greenhouse gas Increase in Electricity prices and emissions, improve energy efficiency and raise the share of renewable energy. environmental consumption, Moreover, the 2030 Framework increases these targets and therefore more efforts awareness regulatory framework are needed from governments and market players to achieve them. Source: Electrica

Regulatory Framework The energy regulatory framework has experienced major changes in the past decade, including market liberalization, unbundling and support scheme for renewable energy. Other legislative changes that have recently occurred in Romania refer to the remuneration of the distribution operators - according to the ANRE Order no. 146/2014, starting with 2015 the distribution operators’ Regulated Rate of Return (RRR) was reduced to 7.7% from 8.52%. Also, ANRE Order no. 165/2015 has modified art. 105 para. 1 from the Methodology of establishing the electricity distribution tariffs, eliminating the cap regarding the maximum percentages by which the distribution tariffs could be diminished, keeping however the limits concerning the maximum percentage increase of these tariffs.

ANRE’s changes of the distribution tariff setting methodology, including the change in level of remuneration given by the Regulated Rate of Return, during the regulatory period, induce a lack of predictability and stability of regulatory environment and a negative impact on the Groups’ distribution operators’ operational and financial performance.

For the distribution area, the following ANRE proposals for the 4th regulatory period are relevant, published on ANRE website on 20 July 2018:  Regulated Rate of Return (RRR) – to be corrected annually (the risk free rate is defined in real terms, interest on government securities with a maturity of ten years);

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

 Regulated Assets Base (RAB) – ANRE propose the exclusion from RAB of the fixed assets not recorded and/or rented; the inflation is automatically considered by ANRE, until the difference between the inflated RAB and net book value of the assets included in RAB is lower than 5%; RAB will be decreased with the disposals from the initial RAB made in the period 2005-2018;  Investments – in the case of the partial realization of the investment plan, annual corrections will be made, and the negative investment corrections from the end of the period will be penalized through a 10% increase;  Network Losses (“NL”) – the following targets have been proposed: the target for 2019 on voltage levels – minimum between the target approved for 2018 and the percentage realized in RP3; the target for low voltage (LV) for 2019 is max. 15%; the target for RP4 (4th Regulatory Period) for LV will gradually decrease depending on the percentage of NL for 2019, as follows: - If the NL target for 2019 is higher or equal to 15%, the reduction of the NL target during the regulatory period will be at least of 25%; - If the NL target for 2019 is between 14% and 15%, the reduction of the NL target during the regulatory period will be at least of 20%; - If the NL target for 2019 is between 13% and 14%, the reduction of the NL target during the regulatory period will be at least of 15%; The price recognized for NL will be the minimum between the average prices of the distribution operators and the transport and system operator, additional to which is accepted a 2% price increase related to imbalances cost;  The controllable costs (controllable OPEX) – the costs taken into account as a reference at the start of the regulatory period are equal to the minimum of the controllable costs approved for 2018 and the minimum controllable costs incurred in RP3; annual corrections will be calculated and transmitted; 40% from the efficiency gain is attributable to the distribution operators; a detail of the costs unrecognized in tariff is presented; the efficiency factor considered for RP4 is higher or equal to 1,5% and is not applied for the maintenance costs, health and safety costs and personnel costs; the rules of cost allocation are strict, and without complying with them, the costs realized won’t be recognized;  Costs with affiliates – the average cost per user will be established, and will not exceed the minimum of the average cost per user recorded in each year of the RP3 by all the distribution operators (DSO) and the one recorded by the distribution operator in each year of the RP3;  Profit from other activities – corrections will be made in order to keep the profit from other activities at max. 5%;  Number of employees – the distribution operator will maintain an optimal number of employees, assumed for the whole RP4;  Working capital financing component - elimination from revenue (tariffs).

Other significant changes to the Romanian legislation, relevant for the supply segment, refer to:  The complete market liberalization starting January 1, 2018 may change, in the next period, the structure of the customer portfolio, through the migration of the household customers to the eligible segment;

 Amendments to the Electricity and Natural Gas Law no. 123/2012: - It introduces the obligation of the electricity suppliers to purchase electricity so as to ensure the coverage of their customers' consumption, with priority for the customers of the universal service in their own portfolio. The provision leads to the change/ revision of the energy acquisition strategy;

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

- The supplier does not have the right to unilaterally terminate the electricity supply contracts with the final customers. The effects of the application are major, the supplier being practically captive in a contract that may become unprofitable.  Amending the Government Emergency Ordinance no.24/2017 regarding the amendment and completion of the Law no. 220/2008 for establishing the system of promoting the production of energy from renewable energy sources and for amending some normative acts: - Starting with the 2018 analysis year, by 1 March of each year, ANRE establishes through order the mandatory annual green certificate acquisition quota for the previous year, based on the final electricity consumption of the previous year, so that the average impact the final consumer will be up to 11.7 euro/MWh in 2018, 12.5 euro/MWh in 2019, 13 euro/MWh in 2020 and 2021 and 14.5 euro/MWh from 2022; - Prosumers who own electricity generating units with renewable power of up to 27 kW installed power on consumption place can sell electricity produced and delivered to the electricity network to the electricity suppliers with whom they have concluded contracts for the supply of electricity, according to ANRE regulations. Electrica Group Currently, Electrica is in the process of reviewing its medium and long-term strategy in order to incorporate and capitalize on changes in the national and international environment, taking also into account the organizational changes. The Group analyzes the strategic options and aims to implement streamlining measures, including through restructuring programs and transformation of group’s divisions, training and staff development programs, redesigning business models, introducing a system of intra-group service contracts, or entering new business segments, in order to improve both the quality of the services offered and the financial performance. In this process, for the distribution area, an important element is the finalization and publication of the methodology for the 4th Regulatory Period by ANRE. The most important assumptions considered for the strategy review are as follows:

 The Romanian energy mix landscape is changing significantly, being heavily disrupted by the advent of renewables;  Romanian GDP will have a positive trend in the future; however, divergent trends in the electricity consumption would lead to a stable long-term outlook (increasing trend of the electricity consumption on medium term, but stagnating/ decreasing on longer term);  Romania will maintain its commitment towards the accomplishment of the 20-20-20 strategy regarding the climate changes and the implementation of the new Framework for the period 2020-2030;  The remuneration mechanism for distribution companies will not change significantly in the year 2018. However, the remuneration mechanism, the tariff type and regulated rate of return could be subject to changes beginning with the next regulatory period and are key drivers for strategic planning;  In supply, the market liberalization has changed the landscape significantly, requiring repositioning of all market players; in addition, impeding challenges to Supplier of Last Resort business model are expected and should be considered.  No major geopolitical turbulences have been taken into account, which might significantly affect the Romanian electricity market;  Financial markets would allow access to financing sources to support companies’ investment programs.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Please note that other factors not presented above and not considered by the Group may occur and may have a significant impact on the implementation and evolution of the Group’s strategy. 9. Capital Expenditures

A core part of Electrica business strategy includes implementing the investment plan. Electrica’s operations require significant capital expenditures mostly connected with its operations in the electricity distribution segment. Furthermore, Electrica’s assets require periodic maintenance and modernization in order to improve operational efficiency.

Electrica’s capital expenditures in the six month period ending 30 June 2018 and 30 June 2017 amounted to RON 296.5 million and RON 266 million, respectively.

The investments in the distribution network increased by RON 30.4 million, or 12%, to RON 289.5 million in the six month period ending 30 June 2018 from RON 259 million realized in the same period of the previous year.

This increase is mainly attributable to the realised investments related to the Regulated Asset Base. The volume of investments had a material impact, and, according to Electrica’s expectations, will continue to have an impact on the results of Electrica’s operations, Electrica’s indebtedness, and future cash flows.

Capital expenditures in the distribution network will only have the anticipated positive impact on Electrica’s result of operations to the extent they are recognised in the Regulated Asset Base by ANRE and considering the rate of return approved by the regulatory authority.

Figure 9: Network investments for all national DSOs for 2014-2018 and the variation 2017 vs. 2014 (RON mil.)

Source: 2017 Annual ANRE report and Electrica During RP3, Electrica Group had the most ambitious medium term investment plan, correlated with the objectives assumed after the IPO. During 2017, the investments’ execution was supported by the optimization measures implemented within the distribution area, SDMN and SDTS significantly improving their performance y-o-y. The average performance of Electrica DSO in 2017 in terms of investment commissionings, which is 92.8% of the planned values, was approx. 69% higher than the national average achieved in 2017 by the other distribution operators.

A list of the most significant investments of Electrica Group in H1 2018 is presented in Annex 11.2.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

10. Statements

We confirm to the best of our knowledge that the reviewed interim condensed consolidated financial statements for the six months period ended June 30, 2018 prepared in accordance with the International Accounting Standard IAS 34 – Interim Financial Reporting give a true and fair view of Electrica Group’s assets, liabilities, financial position and profit or loss, as required by the applicable accounting standards, and that this Report prepared in accordance with art. 65 of the law no. 24/2017 on issuers of financial instruments and market operations and to annex no. 14 to ASF Regulation no. 5/2018 provide a correct view of financial and economic situation of the company and its activity, the important events that have occurred during the period and a description of the principal risks and uncertainties.

Chair of the Board of Directors, Doina Elena DASCALU

Chief Executive Officer, Dan Catalin STANCU

Chief Financial Officer, Mihai DARIE

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

11. Annexes 11.1. Contracts concluded reported according to art. 82 of Law 24/2017

In the first semester of 2018 five current reports were issued with regard to the contracts concluded according to art. 82 of Law 24/2017 (previously art. 225 of Law 297/2004, annuled).

 Current report from 3 January 2018: Subsequent contract no. 344/29.12.2017 with Filiala de Intretinere si Servicii Energetice “Electrica Serv”: Transportation services for Electrica for the period 1 January 2018 – 30 June 2018

 Current report from 29 March 2018: Business transfer contract no. 42/28.03.2018 with Electrica Furnizare: Business and assets transfer of Balancing Responsible Party activity

 Current report from 5 April 2018: Loan contract no. 74/05.04.2018 with Societatea de Distributie a Energiei Electrice „Muntenia Nord”: Granting a loan of max. RON 230 million Loan contract no. 75/05.04.2018 with Societatea de Distributie a Energiei Electrice “Transilvania Nord”: Granting a loan of max. RON 160 million Loan contract no. 73/05.04.2018 with Societatea de Distributie a Energiei Electrice „Transilvania Sud”: Granting a loan of max. RON 130 million

 Current report from 27 April 2018: Services contract no. 153/27.04.2018 with Societatea de Distributie a Energiei Electrice „Muntenia Nord”: Rendering of services using AMR system; Services contract no. 155/27.04.2018 with Societatea de Distributie a Energiei Electrice „Transilvania Nord”: Rendering of services using AMR system Services contract no. 154/27.04.2018 with Societatea de Distributie a Energiei Electrice „Transilvania Sud”: Rendering of services using AMR system.

 Current report from 29 May 2018: Loan contract no. 167/29.05.2018 with Servicii Energetice Muntenia: Granting a loan of max. RON 5,500,000.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

11.2. List of major investments and commissioning works The achievements recorded during the 1st semester of 2018 of the main* investment objectives are presented in the table below: CAPEX

Description Value (million RON) MUNTENIA NORD Modernization of MV/ LV distribution network and improvement of technical conditions of 3.5 LV power supply Modernization of transformer stations 4.2 Distribution Automation System 3.4 Modernization of OHL 110 kV 6.5 Modernization of 110/ 20 kV stations and integration into SCADA 9.6 Modernization of 110/ MT transformer stations (replacement of primary equipment) 15.2 TRANSILVANIA NORD Improvement of technical conditions of LV power supply 2.3 Increasing energy efficiency of distribution installations by switching them to 20 kV 4.7 Distribution Automation System 4.9 Modernization of 110/ MT transformer stations (replacement of primary equipment) 12.4 TRANSILVANIA SUD Improvement of technical conditions of LV power supply 9.1 Modernization of MV/ LV distribution network 15 Increasing energy efficiency of distribution installations by switching them to 20 kV 1.0 Modernization of transformer stations 9.5 Modernization of 110/ MT transformer stations 4 *) investments with an individual value above RON 1 million

The main* investments that were commisioned during the 1st semester of 2018 are presented below by the main categories:

Description Value (million RON) MUNTENIA NORD Modernization of MV/ LV distribution network and improvement of technical conditions of 4.8 LV power supply Modernization of transformer stations 5.3 Distribution Automation System 4.8 Modernization of OHL 110 kV 2.9 Modernization of 110/ 20 kV stations and integration into SCADA 4.4 Modernization of 110/ MT transformer stations (replacement of primary equipment) 11.7 TRANSILVANIA NORD Improvement of technical conditions of LV power supply 7.4 Modernization of MV distribution network 2.2 Modernization of transformer stations 5.5

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

Description Value (million RON) Modernization of 110/ MT transformer stations (replacement of primary equipment) 12.3 TRANSILVANIA SUD Improvement of technical conditions of LV power supply 17.8 Modernization of MV/ LV distribution network 1.4 Modernization of transformer stations 10.1 Distribution Automation System 2.7 *) investments commissioned having an individual value above RON 1 million

11.3. List of major litigations as of 30 June 2018 As of 30.06.2018, at the Electrica Group level, the status of the litigations was the following:

- Total number of litigations involving Electrica SA and its subsidiaries: 10.101, out of which:  9,552 litigations - in which the Group Companies acts as plaintiff;  552 litigations - in which the Group Companies acts as defendant.

The total number of litigations includes also the file no. 8019/2/2017 representing a litigation involving ANRE, file that is currently at the Bucharest Court of Appeal, in which both ELSA and the three distribution subsidiaries are plaintiffs. The litigations structure for each Group subsidiary (except of insolvency subsidies) is as follows:

- Electrica SA: 245 litigations (plaintiff: 64 litigations, defendant: 181 litigations); - Electrica Furnizare SA: 8,338 litigations (plaintiff: 8,285 litigations, defendant: 53 litigations); - Societatea de Distributie a Energiei Electrice Muntenia Nord SA: 509 litigations (plaintiff: 381 litigations, defendant: 128 litigations); - Societatea de Distributie a Energiei Electrice Transilvania Nord SA: 540 litigations (plaintiff: 467 litigations, defendant: 73 litigations); - Societatea de Distributie a Energiei Electrice Transilvania Sud SA: 281 litigations (plaintiff: 214 litigations, defendant: 67 litigations); - Electrica Serv SA: 191 litigations (plaintiff: 141 litigations, defendant: 50 litigations).

The status of resolved litigations involving the Group Companies:

Beginning with 30.06.2017 and until 30.06.2018 a number of 16 litigations were resolved, out of which 12 litigations were settled in favor of Group Companies and 4 litigations were settled unfavorably.

The status of litigation amounts at Group level

As of 30.06.2018, in the judicial settlement were in litigations files having as object claims in total amount of:

- 3,712,255,593 RON - requested by third parties from the Group companies; - 2,039,088,208 RON and 655,164 EUR - to be recovered by group companies from third parties.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

The status of the amounts to be recovered/paid by each Group Company:

Electrica S.A.

- Total amounts requested by third parties from Electrica: RON 3,653,510,543 RON (out of which 3,629,529,920 litigation with SAPE SA); - Total amounts to be recovered by Electrica: RON 812,452,077.

Electrica Furnizare S.A.

- Total amounts requested by third parties from Electrica Furnizare: RON 4,268,013; - Total amounts to be recovered by Electrica Furnizare: RON 947,067,561.

SDEE Muntenia Nord S.A. (SDMN)

- Total amounts requested by third parties from SDMN: RON 24,809,963 (out of which RON 22,500,000.00 with Vir Company International SRL); - Total amounts to be recovered by SDMN: RON 2,914,390.

SDEE Transilvania Nord S.A. (SDTN)

- Total amounts requested by third parties from SDTN: RON 6,763,091; - Total amounts to be recovered by SDTN: RON 13,221,602.

SDEE Transilvania Sud S.A. (SDTS)

- Total amounts requested by third parties from SDTS: RON 3,503,407; - Total amounts to be recovered by SDTS: RON 9,180,882.

Electrica Serv S.A.

- Total amounts requested by third parties from Electrica Serv SA: RON 19,400,576; - Total amounts to be recovered by Electrica Serv SA: RON 229,251,695 and EUR 655,164.

Changes occurred during H1 2018 regarding the litigations presented in the Board of Directors’ report for 2017 - litigations registered beginning with 01.01.2018 1. Litigations against ANRE b) Electrica filed a request for lawsuit against ANRE, thus concluding the file no. 134/2/2016, having as object the suspension of the administrative act – ANRE Order no. 165/2015 regarding the Methodology of establishing the tariffs for the electricity distribution service, approved through ANRE Order no. 72/2013, having Electrica as plaintiff, and ANRE as defendant; the file is in recourse, at the High Court of Cassation and Justice; the term for the recourse is 02.10.2018; c) SDEE Muntenia Nord filed a request against ANRE, thus file no. 165/2/2016, having as object the suspension of the execution of ANRE President's Order no. 165/2015 regarding the modification of the Tariff Pricing Methodology for Electricity Distribution Service, approved by the Order of the President of the National Regulatory Authority for Energy no. 72/2013, having SDEE Muntenia Nord as plaintiff, and ANRE as

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

defendant; the file is in recourse, as the High Court of Cassation and Justice; the term for the recourse is 02.10.2018; d) SDEE Muntenia Nord filed a request for a lawsuit against ANRE, thus file no. 42/42/2016, regarding the suspension of the execution of ANRE President's Order 172/2015 regarding the approval of the specific tariffs for the electricity distribution service and the reactive electricity price for the company " Filiala de Distribuţie a Energiei Electrice Electrica Distribuţie Muntenia Nord" - S.A, having SDEE Muntenia Nord as plaintiff, and ANRE as defendant; the file is recourse, as the High Court of Cassation and Justice; the term for the recourse is 25.10.2018; e) Electrica S.A. and the distribution subsidiaries filed a request for a lawsuit against ANRE, thus forming the file no. 8019/2/2017, having as object the cancellation of the address representing the refusal to issue a favorable opinion AMR system transfer, the obligation to issue the administrative acts for approval favorable transfer of the AMR system from ELSA to DSO, the obligation of ANRE to make corrections on the DSO distribution tariffs, in which Electrica SA and distribution subsidiaries have the status of plaintiffs, and ANRE has the status of defendant; the court of first instance dismissed the petition as inadmissible, and Electrica and the distribution subsidiaries filed an appeal in the filing procedure at the High Court of Cassation and Justice; f) SDEE Transilvania Nord filed a request for a lawsuit against ANRE, thus constituting file no. 353/2/2015, having as object the annulment of ANRE President's Order no. 155/2014 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive electricity, for Societatea Comercială "Filiala de Distribuţie a Energiei Electrice Electrica Distribuţie Transilvania Nord", in which SDEE Transilvania Nord is the plaintiff, and ANRE has the status of defendant; the High Court of Cassation and Justice has rejected the action definitively; g) SDEE Transilvania Nord filed an action against ANRE, thus constituting file no. 17/33/2016, having as object the suspension of the administrative act –Order no. 165/2015 of ANRE regarding the modification of the Tariff Establishment Methodology for the Electricity Distribution Service, approved by the Order of the President of the National Energy Regulatory Authority no. 72/2013, in which SDEE Transilvania Nord has the status of plaintiff and ANRE has the status of a defendant; the High Court of Cassation and Justice has rejected the action definitively; h) SDEE Transilvania Sud formulated an action against ANRE, thus constituting the file no. 371/2/2015, having as object the annulment of ANRE President's Order no. 156/2014 regarding the approval of the specific tariffs for the electricity distribution service and the price for the reactive electricity, for the Societatea Comercială "Filiala de Distributie a Energiei Electrice Electrica Distribuţie Transilvania Sud" - S.A., in which SDEE Transilvania Sud has the status of plaintiff, and ANRE has the status of defendant; the file in settlement at the Bucharest Court of Appeal and is suspended until the final settlement of the file 208/2/2015, in settlement at the Bucharest Court of Appeal; i) Electrica Furnizare S.A. filed a request for a lawsuit against ANRE, thus constituting the file no. 8201/2/2015, having as object judicial action for obliging the defendant to resolve a dispute regarding the procedure of changing the supplier, in which Electrica Furnizare S.A. is the plaintiff, and ANRE has the status of defendant;

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

the litigation was won by Electrica Furnizare SA; the appeal filed by ANRE is in settlement at the High Court of Cassation and Justice;

2. Litigations for fiscal matters a) Electrica filed a lawsuit against NAFA, which constituted the file no. 7614/2/2013, having as object the Complaint Decision no.147/22.05.2013. The amount of RON 2,387,992 (action for annulment of Decision No. 147/22.05.2013, issued by NAFA in the procedure for solving the administrative complaints formulated against the debentures by which were set up accessories for late payment of the current budgetary obligations, through Decision No. 214/2012 in the amount of RON 2,387,992), in which Electrica has the status of plaintiff, and NAFA has the quality of defendant; in the first instance the court partially upheld the claim of Electrica and NAFA filed an appeal, which was finally rejected by the High Court of Cassation and Justice; b) Electrica filed an application against NAFA, thus constituting the file no. 9131/2/2017, having as object the annulment of the fiscal decisions issued by NAFA and communicated to the company through the address no. 665/17.03.2017 (new accessories approximately RON 39,000,000), in which Electrica is the plaintiff, and NAFA has the quality of defendant; the file is in settlement at the Bucharest Court of Appeal; c) Electrica filed a lawsuit in the contradictory with NAFA, thus constituting file no. 3430/2/2017, having as object opposition to enforcement, cancelation of forced execution for the amount of RON 39,083,190 – Decision no. 665/17/03/2017, – in which Electrica has the status of plaintiff and NAFA has the status of a defendant; the court of first instance rejected the application as unfounded. The appeal filed by Electrica S.A. has been finally dismissed by the High Court of Cassation and Justice; d) SDEE Muntenia Nord S.A filed a request for a lawsuit against SPFL Ploiesti (NAFA), constituting file no. 309/42/2015, having as object the annulment of the administrative act - tax decision no. 124814/28.11.2014. The amount of the litigation: 11,963,955 RON, representing additional differences from the fiscal inspection report, out of which 8,528,896 RON additional tax on buildings for the period January 2009 - September 2014 and 3,439,085 RON accessories calculated until 10.11.2014 , in which SDEE Muntenia Nord SA has the capacity of plaintiff, and SPFL Ploiesti has the status of defendant; the appeal filed by SDEE MN is in regularization procedure at the High Court of Cassation and Justice; 3. Other significant litigations with a value greater than 500,000 EURO a) SPEEH Hidroelectrica SA filed a request for a lawsuit against Electrica, representing the file no. 13268/3/2015, with the object of forcing Electrica to pay to SPEEH Hidroelectrica SA the amount of RON 5,444,761 (the loss suffered by selling the energy using an average price per MWh below the production cost of 1 MWh), the partial obligation to pay the unrealized benefit of Hidroelectrica by selling the total quantity of 398,300 MWh, calculated according to the ANRE regulations (RON 9,646,826, according to the written statements of 5 May 2015/ RON 5,444,761, according to the conclusions of the complainant mentioned in the Conclusion signed on March 15, 2017), forcing the defendant to pay the legal interest from the date of the decision and up to the actual payment, court costs, in which SPEEH Hidroelectrica SA is a complainant and Electrica SA has the status of defendant; the court of first instance rejected the exception to the limitation of the material right to action as unfounded and the action as groundless. Both parties have appealed, rejected by the Bucharest Court of Appeal as unfounded. Electrica SA will appeal;

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT b) Electrica has filed a request for a call in contradiction with AAAS, thus file no. 38859/299/2015, on the role of District 1 Court, having as object the contestation against the enforcement of the Administrative Decision no. P/14/27055/16.12.2014 and all subsequent enforcement acts (administrative decision issued by the defendant AAAS against the subscription for the amount of RON 7,505,637 for the recovery of unlawful state aid that would have been granted to Electrica SA in the context of the privatization of Electrica Banat SA and CSR Resita SA) – cancellation of this act; the cancellation of the payment order issued by BEJ-Oprescu Mihai in the enforcement file no.8/2015 (where it is stated that “the interest is to be calculated starting with the date of the sums placed at the disposal of the beneficiary and up to the effective date of the flow plus RON 99,687.50 as the equivalent of enforcement costs and all subsequent execution costs”); cancellation of all execution documents issued in decision no.8/2015; suspension of forced execution started by the defendant until the irrevocable resolution of the present dispute; the temporary suspending until the settlement of the request for suspension claimed by the present petition for suing, in which Electrica has the status of contestant Electrica SA, and AAAS has the status of respondent; the court partially upheld the contestation of enforcement; canceled the order of March 26, 2015 and all the execution documents issued in the enforcement file no.8/2015 of BEJ Oprescu Mihai; dismissed as inadmissible the head of claim for annulment of Administrative Decision no. P/14/27055/16.12.2014 issued by AAAS; ordered the restitution to the contestants of the amount of RON 1,000, representing the judicial stamp duty related to the contestation of the execution, after the final decision was passed; AAAS can appeal; c) Electrica filed a request in contradiction to AAAS, thus file no.2155/2/2015, as the High Court of Cassation and Justice, having as object the annulment of Administrative Decision no. P/14/27055/16.12.2014, of Order no. 883/16.12.2014 (the restitution by Electrica of the amount of RON 7,505,637 plus the calculated interest starting from 27 March 2006 until the date of the actual collection of the entire amount) and notification no. 883/16.12.2014, issued by AAAS; suspending the execution of the contested administrative acts until the final settlement of the case; order the respondent to pay the costs, in which Electrica has the status of a contestant, and AAAS has the best quality; the court of first instance ordered the annulment of the administrative decision no. P/14/27055/16.12.2014, of the Order no.883/16.12.2014 and of the notification no. 883/16.12.2014 issued by the defendant; AAAS declared appeal, which was dismissed as unfounded; d) AAAS has filed a lawsuit in contradiction with Electrica SA, thus file no. 27873/299/2016, having as object the contestation of execution – execution file no. 1914/2015 of the Bailiff’s Association Dorina Gont, Lucian Panait and Marian Panait – RON 10,342,892, in which the AAAS as contestant and Electrica SA as defendant; the court of first instance admits in part the disputed appeal by the contestants. It ordered the abolition of the measure imposed in the enforcement file no. 1914/2015 by Bailiff’s Association Dorina Gont, Lucian Panait and Marian Panait regarding the third parties, dismisses the application for the return of the execution as unfounded. The application for suspension of execution is rejected as being devoid of purpose, with call within 10 days of communication. Electrica has appealed, which is being solved by the Bucharest Tribunal; e) Electrica S.A. filed a request for a lawsuit against Termoelectrica S.A., thus file no. 16159/299/2017, having as object the enforcement against the execution initiated by BEJ Spiridonescu Ileana Cornelia in the execution file no. 30 / B / 2017, as well as the subsequent execution acts for the amount of RON 26,122,589 in the alternative, partial cancellation in terms of monitoring the amount of RON 1,561,105, representing the receivables offset by offsetting with the consequence of the return of the execution for this amount, the partial cancellation of the execution and the subsequent acts regarding the pursuit of the amount of RON 782.067, representing the

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

canceled claim by offsetting, with the consequence of the return for this amount; in the file, Electrica S.A. is the plaintiff and Termoelectrica S.A. is defendant. Stage: The court of law admits in part the appeal, in the sense that it reduces the execution costs to RON 135,000. Disputes the return of forced execution in respect of the amount of RON 178,553.52 in respect of undue enforcement costs. In any event, it denies the contestation as unreasonable. Electrica appealed, dismissed as unfounded by Bucharest Tribunal. Final; f) Electrica S.A. a is a creditor of the company Servicii Energetice Muntenia S.A. (SEM), in file no. 40081/3/2014, having as object SEM’s insolvency, the Electrica claim being of RON 9,542,336.82. The file was in settlement at the Bucharest Tribunal, the proceedings being ongoing, and Electrica S.A. has fully recovered the claim enrolled at the creditors table of the debtor SEM; g) Electrica S.A. filed a complaint against the Competition Council, thus constituting the file no. 3889/2/2018, having as object the annulment of the Competition Council Decision no. 77/20.12.2017, in which a fine of RON 10,800,984 was imposed to Electrica, in which Electrica S.A. has the capacity of plaintiff, and the Competition Council has the status of a defendant. The file is in the first instance settlement at the Bucharest Court of Appeal; h) Electrica S.A. filed a complaint against the Competition Council, thus constituting the file no. 3883/2/2018, having as object the suspension of the Competition Council's decision no. 77/20.12.2017, pending final settlement of the file 3889/2/2018, whereby a fine of 10,800,984 RON was imposed on Electrica, in which Electrica S.A. has the capacity of plaintiff, and the Competition Council is the quality of the defendant. The request for suspension was rejected by the Bucharest Court of Appeal, Electrica S.A. filing appeal; i) FISE Electrica Serv S.A. filed a request for a lawsuit against the CNAS and CASMB, thus constituting file no. 43602/3/2015, having as object the recovery of social insurances - FNUASS – RON 1,384,652 + interest, in which FISE has status of plaintiff, and CNAS and CASMB have the status of defendants; the file was finally settled by the Bucharest Court of Appeal, which rejects the appeal filed by FISE Electrica Serv SA as unfounded, admits the appeal filed by the Bucharest Health Insurance House, changes the part of the civil conviction in the sense that: the defendant to pay the plaintiff the sum of RON 161,657 representing sums to be recovered from the National Health Insurance Fund for January 2013 - March 2013 and January 2014, as well as the payment of legal interest calculated from the date of maturity of each amount at the date of the actual payment. It keeps the civilian conviction; j) Carpatcement Holding S.A. filed a request for a lawsuit in against the Ministry of Economy, the Government of Romania and Electrica Furnizare S.A., constituting file no. 1665/2/2014, having as object the obligation to make - cancellation of penalties amounting RON 2,440,785 RON, based GEO 57/2002, in which Carpatcement is the plaintiff and Electrica Furnizare S.A. has the status of defendant. The court dismissed the applicant's action on the merits of the appeal. The High Court of Cassation and Justice finally rejected the plaintiff's appeal; k) Electrica Furnizare S.A. filed a petition for a lawsuit against European Drinks S.A., thus constituting file no. 998/111/2018, having as its object claims (the equivalent of tax invoices) in the amount of RON 4,132,755, in which Electrica Furnizare is the plaintiff, and European Drinks is the defendant; the file is to be solved by the substantive court, the Bihor Court.

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

4. Litigations against Romanian Court of Accounts a) Electrica S.A. filed a lawsuit against the Court of Accounts of Romania, constituting file no. 2268/2/2014, having as object the suspension and annulment of the administrative act (Decision no.3 / 14.01.2014 and Conclusion no. 23/17.03.2014), in which Electrica S.A. has the status of plaintiff, and the Romanian Court of Accounts has the status of a defendant. The court of first instance partially upheld the appeal, partially annulled the Conclusion no. 23/17.03.2014, regarding items 1 and 5 and Decision no. 3/ 14.01.2014 with respect to items 4 and 8. It denies that the contestation regarding items 2, 3 and 4 of the Conclusion no. 23/ 17.03.2014 and 5, 6 and 7 of Decision no. 3/14.01.2014. Rejects the application for suspension of the enforcement of Decision no. 3/14.01.2014, as unintentional. Electrica and the Romanian Court of Accounts filed an appeal, admitted by the court. The High Court of Cassation and Justice partially upheld the petition for annulment made by Electrica and sent the case back to retrial. b) SDEE Muntenia Nord S.A. filed a lawsuit against the Court of Accounts of Romania, constituting file no. 2763/62/2017, having as object the annulment of the Decision 7/12.01.2017 and of the Conclusion no. 24 / 11.04.2017, in which SDEE Muntenia Nord S.A. is plaintiff and the Court of Accounts of Romania has the status of defendant. The court of first instance rejected the request, has admitted the exception to the inadmissibility of the plea of illegality raised by the defendants of the Romanian Court of Accounts and the Chamber of Accounts Brasov and the rejection of the objection of illegality raised by the plaintiff SDEE TS. The Brasov Tribunal dismisses the action brought by the plaintiff. SDEE TS has made an appeal. c) SDEE Muntenia Nord S.A. filed a lawsuit against the Court of Accounts of Romania, constituting file no. 1677/105/2017, having as object the Suspension and action for annulment of the Audit Report from the Chamber of Accounts Prahova no. 6618/11.11.2016 and Decision of the Chamber of Accounts Prahova no. 45/2016, in which SDEE Muntenia Nord S.A. is the plaintiff and the Court of Accounts of Romania has the status of defendant. The file is to be resolved by the court of first instance, the Prahova Tribunal.

5. Other litigations with significant impact a) Mr. Niculescu Vladimir filed an request for a lawsuit against with SDEE Muntenia Nord S.A., the City Hall of Valenii de Munte, thus forming the case file no. 1580/105/2008*, having as object the claim under Law no. 10/2001 – for 1558 sqm of land and 202 sqm of constructions, located in Valenii de Munte, N. Iorga street, no. 129 and used by Centrul de Exploatare Valeni, where Niculescu Vladimir is a complainant and SDEE Muntenia Nord S.A. has the quality of defendant. Prahova Court, the court of first instance, partially admits the action. It is noted the complainant's right to repairs by equivalent for the land of 1402 sqm located in Valenii de Munte, Nicolae Iorga Bvd., no. 129 (currently no.131), Prahova County. The defendant is obligated to pay to the complainant the amount of RON 800 of legal costs, representing a reimbursement of expert's fee. Right to appeal within 30 days from notification; b) Mr. Stanciu Razvan filed a lawsuit against with Electrica S.A., thus forming the case file no. 42479/3/2017, having as object the action for annulment of the OGSM decision no. 2 dated October 26, 2017 regarding the election of the members of the BOD by the cumulative vote method, where Mr. Stanciu Razvan is the complainant and Electrica S.A. has the quality of defendant. The case file was settled in the first instance by

ELECTRICA S.A. –2018 HALF-YEAR CONSOLIDATED REPORT

the Bucharest Court, which dismissed the action as unfounded, with a right of appeal within 30 days from notification; c) Mr. Dumitrascu Gabriel filed a lawsuit against Electrica S.A., thus forming the case file no. 44217/3/2017, having as object the action for annulment of the OGSM decision no. 2 dated October 26, 2017, regarding point 1 - the election of the members of the BOD by the cumulative vote method, Mr. Dumitrascu is a complainant and Electrica S.A. the quality of defendant. The case was pending before the Bucharest Court, and the complainant has dropped the claim, and the defendant dropped the request for court legal costs; d) The Companies Asito Kapital and Fast Broker filed a lawsuit against SDEE Transilvania Sud S.A. and Uniqua Asigurari, thus forming the case file no. 253/64/2018, having as object a complaint against Decision No. 1353/C11/1482 of the National Council for the solving of claims (auction cancellation), in which Asito Kapital and Fast Broker have the status of complainant and SDEE TS. the quality of defendant. The Brasov Court of Appeal has finally rejected the complainant's request; e) Mr. Triponescu Razvan Tudor filed a lawsuit in disagreement with SDEE Transilvania Sud S.A., thus forming the case file no. 5034/62/2015, having as object the obligation to do (moving poles) and damages for the non- use, in which Mr. Triponescu is a complainant and SDEE Transilvania Sud S.A. has the quality of defendant. The case file is to be settled by a court of first instance, Brasov Court of Law;

f) Mr. Zaharia Ioan filed a lawsuit in disagreement with SDEE Transilvania Sud S.A., thus forming the case file no. 6104/62/2016, having as object the obligation to do (remove the trafo station) and damages for the non-use, in which Mr. Zaharia is the complainant and SDEE Transilvania Sud S.A. has the quality of defendant. The case file is to be settled by a court of first instance, Brasov Court of Law; g) Mr. Anghel Radu and other 39 employees of Braila Distribution Branch filed a request for a lawsuit against SDEE Muntenia Nord S.A., thus forming the case file no. 7345/105/2015, regarding the granting of salary rights (overtime over the order period, isolation benefit, night benefit), in which the employees have the status of plaintiffs, and SDEE Muntenia Nord S.A. has the quality of defendant. The case file is to be settled by a court of first instance, Braila Court of Law; h) Mr. Costache Dinu and 12 other employees of the Galati Distribution Branch filed a request for a lawsuit against SDEE Muntenia Nord S.A., thus forming the case file no. 4906/121/2017, regarding the granting of salary rights (overtime over the order period, isolation benefit, night benefit), in which the employees have the status of plaintiffs, and SDEE Muntenia Nord S.A. has the quality of defendant. The case file is to be settled by a court of first instance, Galati Court of Law;

i) Mr. Burlacu Daniel and 11 other employees of the Targoviste Distribution Branch filed a request for a lawsuit against SDEE Muntenia Nord S.A., thus forming the case file no. 5374/1220/2015, regarding the granting of salary rights (overtime over the order period, isolation benefit, night benefit), in which the employees have the status of plaintiffs, and SDEE Muntenia Nord S.A. has the quality of defendant. The case file is to be settled by a court of first instance, Dambovita Court of Law.