Contents

01 ELEKTRO LJUBLJANA IN 2019 9 1.1 PERFORMANCE HIGHLIGHTS 10 1.2 SIGNIFICANT EVENTS IN 2019 12 1.3 STATEMENT OF THE PRESIDENT OF THE MANAGEMENT BOARD 17 1.4 REPORT OF THE SUPERVISORY BOARD 19

02 PRESENTATION OF ELEKTRO LJUBLJANA 25 2.1 MISSION, VISION AND VALUES 26 2.2 BASIC INFORMATION ABOUT THE COMPANY AND AREA OF WORK 28 2.3 ORGANISATIONAL STRUCTURE 38 2.4 CORPORATE GOVERNANCE AND MANAGEMENT 39 2.5 CORPORATE GOVERNANCE STATEMENT 43 2.5.1 Reference to the valid governance code 43 2.5.2 Corporate integrity 44 2.5.3 Main features of internal control systems and risk management at the company in relation to the financial reporting process 44 2.5.4 Diversity policy 46 2.5.5 Information in accordance with the sixth paragraph of Article 70 of the ZGD-1 46 2.6 AFFILIATES 51 2.7 OWNERSHIP STRUCTURE 52 03 STRATEGIC POLICIES 55 4.3 DEVELOPMENT OF THE DISTRIBUTION NETWORK 97 4.3.1 Investments 98 3.1 KEY STRATEGIC POLICIES 56 4.3.2 Network maintenance 103 3.2 DEVELOPMENT PLAN 2019–2028 58 4.4 USERS 108 3.3 DEVELOPMENT AND RESEARCH PROJECTS 61 4.4.1 Network access 108 3.4 QUALITY SYSTEM 63 4.4.2 Quality of electricity supply 111 3.4.1 Quality management system 63 4.4.3 User satisfaction 116 3.4.2 Environmental management system 64 4.5 MARKET SERVICES 120 3.4.3 Occupational health and safety management system 64 4.6 PROCUREMENT 122 3.4.4 Information security management system 64 4.7 INFORMATION AND TELECOMMUNICATIONS 3.5 CORPORATE INTEGRITY 66 SUPPORT AND DEVELOPMENT 124 3.6 RISK MANAGEMENT 68 4.8 EMPLOYEES 127 3.6.1 Strategic risks 69 4.8.1 Number and structure of employees 127 3.6.2 Operational risks 71 4.8.2 Strategic planning and human resource development 128 3.6.3 Financial risks 75 4.8.3 The right person at the right place 128 3.7 BUSINESS CONDITIONS IN 2019 4.8.4 Education, specialisation and training of employees 130 AND PLANS FOR 2020 79 4.8.5 Cooperation with high schools and faculties 130 3.7.1 Macroeconomic environment 79 4.8.6 Employee- and a family-friendly company 131 3.7.2 Regulatory framework 79 4.8.7 Communication with employees 131 3.7.3 Business objectives for 2020 and achievement 4.8.8 Occupational health and safety 132 of objectives/goals in 2019 81 4.9 SOCIAL RESPONSIBILITY 135 4.9.1 Responsibility to youth 135 4.9.2 Responsibility to the media 135 04 BUSINESS REPORT 85 4.9.3 Responsibility to former employees 137 4.1 PERFORMANCE ANALYSIS IN 2019 86 4.9.4 Responsibility to industrial heritage 137 4.1.1 Revenues and expenses 86 4.9.5 Environmental responsibility 137 4.1.2 Financial position 89 4.9.6 Responsibility towards local community 138 4.1.3 Financial performance indicators 91 4.9.7 For our friends on Facebook 140 4.2 DISTRIBUTION OF ELECTRICITY 93 4.10 ENVIRONMENTAL PROTECTION 141 4.2.1 Distribution network 93 4.10.1 Environmental programmes 143 4.2.2 Flow of electricity 95 4.10.2 Environmental investments 143 05 INDEPENDENT 07 STATEMENT OF AUDITOR’S REPORT 145 MANAGEMENT’S RESPONSIBILITY 191 06 FINANCIAL REPORT 149 6.1 FINANCIAL STATEMENTS 150 6.2 NOTES TO THE FINANCIAL STATEMENTS 158 6.2.1 Financial statements and activity 158 6.2.2 Data regarding group companies and the associated company 158 6.2.3 Information about employees 159 6.2.4 Exchange rate and method of conversion to the local currency 159 6.2.5 Reporting in accordance with the Energy Act 159 6.2.6 Summary of accounting policies 159 6.2.7 Disclosures of items in the statement of financial position 168 6.2.8 Disclosure of items in the profit or loss statement 180 6.2.9 Costs by functional group 183 6.2.10 Cash flow statement 183 6.2.11 Related party disclosures 184 6.2.12 Disclosure of the remuneration of Management Board and Supervisory Board members, and employees on individual contracts 184 6.2.13 Denationalisation claims 185 6.2.14 Off-balance-sheet contingent liabilities 185 6.2.15 Audit costs 185 6.2.16 Financial statements by activity 186 6.2.17 Events after the balance sheet date 189 01 Elektro Ljubljana in 2019

Development brings a better and more user-friendly IT support and the digitalisation of the distribution network. We are ready for the future of the electricity distribution network. Annual Report | 10 | Elektro ljubljana in 2019 Annual Report | 11 | Elektro ljubljana in 2019

1.1 NET PROFIT OR LOSS (EUR MILLION) RETURN ON EQUITY (ROE) EBIT margin1 Return on assets (ROA) 19.5% Performance Highlights 5.9% 5.6% 17.9% 17.3% 16.4% 16.3% 4.7%

v EUR 2019 2018 2017 2016 2015 4.3% 4.4%

Net sales revenue 86,815,271 84,388,121 80,753,112 80,118,851 88,005,131 3.6% 3.5% EBIT1 16,885,346 20,248,991 16,839,483 17,046,275 16,757,033

EBITDA2 45,724,241 47,660,382 43,004,834 43,406,744 41,969,883 3.0% 2.8% 2.7% Net profit or loss 13,912,351 16,965,742 13,978,169 16,893,325 12,160,656

3 17.0 12.2 13.9 16.9

Value added 78,557,076 79,307,868 73,937,570 73,828,913 69,852,459 14.0 Investments 39,774,720 37,508,591 32,917,281 32,218,570 27,577,729 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Total assets as at 31 December 499,978,445 489,601,491 480,432,984 466,710,427 461,589,169 1 EBIT/gross profit from operations Equity as at 31 December 328,198,761 319,939,892 307,862,366 299,144,067 289,035,120 EBITDA (EUR MILLION) VALUE ADDED (EUR MILLION) Financial liabilities as at 31 December 91,090,650 92,468,912 84,774,093 94,213,381 92,706,826 EBITDA margin2 Value added/employee3 (EUR thousand)

FINANCIAL INDICATORS 2019 2018 2017 2016 2015 95.1 95.1 94.0 94.0 45.9% 4 45.5% 44.3% 88.7 88.2 Operating efficiency 119.6% 124.2% 121.0% 121.7% 119.5% 44.4% 83.6 83.6 40.9% EBITDA margin5 44.4% 45.9% 44.3% 45.5% 40.9% Return on assets (ROA)6 2.81% 3.50% 2.95% 3.64% 2.67% Return on equity (ROE)7 4.39% 5.55% 4.71% 5.91% 4.35% Net financial debt/EBITDA 1.94 1.87 1.83 2.12 2.01

EMPLOYEES 2019 2018 2017 2016 2015

Number of employees as at 31 December 846 850 841 841 857 Average number of employees based on hours worked 836 834 838 832 836 47.7 79.3 73.9 73.8 78.6 45.7 69.9 43.4 43.0 42.0

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 ACTIVITY 2019 2018 2017 2016 2015 2 EBITDA/gross profit from operations 3 average number of employees based on hours worked Distributed electricity in MWh 4,248,674 4,259,056 4,187,398 4,041,483 3,971,144

Number of customers in the supply area 342,951 341,501 338,525 336,417 334,697 INVESTMENTS (EUR MILLION) FINANCIAL LIABILITIES (EUR MILLION) SAIDI - duration of interruptions/customer8 46.61 56.27 73.13 38.36 39.29 Investments/net sales revenue Net financial debt/EBITDA SAIFI - number of interruptions/customer8 1.04 1.13 1.39 1.02 0.83 45.8%

MAIFI – number of momentary interruptions per customer 4.76 6.42 7.53 5.47 3.30 44.4% 2.12 2.12 2.01 2.01 1.94 40.8% 40.2% Proportion of losses/distributed electricity 3.89% 4.00% 4.12% 4.44% 4.62% 1.87 1.83 1.83 31.3% SHARE 2019 2018 2017 2016 2015

Earnings per share (EUR) 0.36 0.43 0.36 0.43 0.31 Dividends per share (EUR) 0.1400 0.1200 0.1300 0.1667 0.1407 Book value per share as at 31 December (EUR) 8.38 8.17 7.86 7.64 7.38

1 operating profit 4 operating revenue/operating expenses 2 operating profit before write-downs 5 EBITDA/gross profit from operations 3 gross operating profit – costs of goods, materials and services 6 net profit/average assets 91.1 37.5 27.6 92.7 32.2 32.9 92.5 39.8 94.2 – other operating expenses 7 net profit/average equity 84.8 8 unplanned interruptions of service – own cause 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Annual Report | 12 | Elektro ljubljana in 2019 Annual Report | 13 | Elektro ljubljana in 2019

1.2 Significant Events in 2019

01 02 03 04 05 06

JANUARY FEBRUARY MARCH APRIL MAY JUNE

Beginning of cooperation Introduction of an electronic Replacement of 11 pylons on 5th strategic conference of Press conference upon introducing Completion of the training of in the international project application for the connection of the Kleče–Vrhnika and Kleče– electricity distribution companies fees for the charging of electric the Business Academy's second INTERRFACE. The purpose of the users. Logatec 110 kV transmission in Rogaška Slatina. vehicles within the network Driven generation. project is to set up a direct trading lines (hereinafter: TLs), thereby ••• by electricity (Gremo na elektriko). ••• platform between energy service ultimately remedying the Upgrade and relocation of the ••• Annual press conference on the providers and distribution network consequences of the ice storm secondary data centre. Traditional Neighbour Day in the company's operations. consumers. from 2014. ••• old city power plant in cooperation ••• ••• Commencement of the with other institutes and societies Workshop for all stakeholders End of the project concerning the construction of a new power in the Tabor district. in the international project installation of electronic meters supply system for the Komenda INTEGRID. in Metlika, which introduced an business zone. ••• advanced metering system for the ••• Meeting with the mayors entire Bela krajina region. Commencement of the second and representatives of the ••• phase of the NEDO project. municipalities from the area Presentation of the most state- Elektro Ljubljana is taking part in covered by Elektro Ljubljana. of-the-art trends relating to setting up a system for the island e-mobility in the context of the operation of the city of Ljubljana World Energy Efficiency Day at in the system failures. the Faculty of Social Sciences, University of Ljubljana. Annual Report | 14 | Elektro ljubljana in 2019 Annual Report | 15 | Elektro ljubljana in 2019

07 08 09 10 11 12

JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

Presentation of the European Establishing roaming in the Renovation of the transformer Awarded the first platinum Conclusion of construction of an End of integration under the CIM Top Managers and Businesses Driven by electricity system station at the Vrbanski Plateau Certificate of Excellence AAA. electricity network to supply the standard (Common Information – Business Champion for 2019 for all ‘native’ applications in pumping station in Maribor, ••• developing IKEA shopping centre Model). – Award to the President of the BMW, Mercedes, Audi and other which is of strategic significance Establishment of a joint portal in Ljubljana with power. ••• Management Board Andrej Ribič, vehicles. for the supply of Maribor and its for all electricity distribution ••• End of electrical installation work in Sarajevo. ••• surroundings with drinking water. companies Moj elektro – System Beginning of the construction of on the Ivančna Gorica–Trebnje ••• Maximo World Award for the ••• for single access to measurement the Ivančna Gorica logistics centre segment of the Grosuplje–Trebnje Opening of the self-supply T-SENSE Enterprise AR Platform Commencement of construction data (SSAMd). The portal received and joint control station. 2 x 110 kV transmission line. charging station in Trebnje. project, which was created of the Dobruška vas an award for energy innovation. ••• During the stretching of electrical ••• in collaboration with Elektro 110/20 kV DTS. ••• Opening of the upgraded Hrastnik conductors over the motorway our 25th ordinary meeting of Elektro Ljubljana and Troia. ••• The signing of the consortium 110/20 kV DTS. company was the first in Slovenia Ljubljana shareholders. Commencement of the Phoenix contract for the promotion to use an innovative protection for ••• international project that strives and acceleration of the green crossings. Commencement of the to improve the cyber security of transformation of the Slovenian ••• environmental protection project European energy systems. energy sector aimed at the Commencement of the Fly Stork, Fly! (Leti, leti štorklja) ••• decarbonisation (zero-carbon construction of long supply cable Company Day in Trbovlje. society) of Slovenia by 2050. lines for the Ig business zone. ••• ••• Commencement of the End of the first phase of the international project construction of a 2 x 20 kV cable INTERCONNECT, which focuses connection between the Vodenska on researching the links between 35/10 kV DTS and the Hrastnik the SCADA systems and external 110/20 kV DTS. users. ••• ••• End of the comprehensive Our book “Long live progress, upgrade of the Kočevska Reka DS. long live light! on the history ••• of Ljubljana's electrification” Setting up a system for the (Živel napredek, živela svetloba! capture and distribution of data o zgodovini elektrifikacije on the generation of electricity to Ljubljane), in the company of the transmission system operator design masterpieces qualified for in almost real time via the ECCO the Brumen Biennial of Slovenian SP (Entsoe Communication and Design and was presented in an Connectivity Service Platform) exhibition at the National Gallery. national platform. Annual Report | 16 | Elektro ljubljana in 2019 Annual Report | 17 | Elektro ljubljana in 2019

1.3 Statement of the President of the Management Board

Dear shareholders, business partners and colleagues. Andrej Ribič, MSc

PRESIDENT OF THE MANAGEMENT BOARD The year 2019 was again a very successful year. We One of our current greatest challenges is our gradual achieved all the goals we set and even surpassed transition to clean energy and a carbon-neutral some of them. We ended the year with a net profit economy. We are therefore actively involved in the of EUR 13.9 million. The result met our expectations, adoption of two key documents, i.e. the Integrated even though it was slightly lower than a year earlier. National Energy and Climate Plan (NECP) and Year 2019 marked the beginning of a new three- Slovenia's National Energy Concept (NEC). These year regulatory period (2019–2021), which will lower documents must appropriately respond to the the return on revenue from the development and climate changes that we are already witnessing, and Elektro“ Ljubljana management of the distribution network. to the changes to the electricity network. Electricity is a company built on trust. is becoming the main secondary energy source. There We are proud that we received an AAA platinum will also be significantly more of it from renewable certificate of excellence in creditworthiness on the sources, which together with the electrification of basis of our stable financial operations and are mobility and heating and the installation of smaller considered a leading company in Slovenian business production units will require major adjustments to excellence. The end of the year also marked the 20- the distribution network. The relationship between year anniversary since we received our first quality electricity distribution companies and customers certificate, and now the company has an integrated will also change, as the latter will also become an quality system in place that meets international important stakeholder involved in this system. standards, which is approved by certificates for systems of quality management, environmental That is why in 2019 we focused on the intensive management, occupational health and safety introduction of information support for network management and information security management. management and operation, asset management, inclusion of advanced electricity meters into the We ended the year with the highest level of advanced metering system, and participated in investments in the last decade. Investments development projects. We are also continuously totalled EUR 39.8 million, which was 8% above the developing new services and simpler and more planned targets. Major investments included: the effective communication with users, thereby laying construction of the Grosuplje DTS–Trebnje DTS DV 2 down the groundwork to fulfil energy objectives. x 110 kV transmission line which began in 2018, the completion of works on the 2 x 110 kV cable line along The development of new services for users, e.g. the Bršljin–Gotna vas route and the Hrastnik DTS, start market flexibility, requires distribution companies of the renovation of the Kamnik 110/20 kV DTS and to develop new HR competencies, IT support and construction work for the Dobruška vas 110/20 kV DTS. the digitalisation of the distribution network. To Annual Report | 18 | Elektro ljubljana in 2019 Annual Report | 19 | Elektro ljubljana in 2019

that end, we are building a distribution management The year was also characterised by a change to 1.4 centre (DMC) and participating in multiple projects. our external image. Our new logo expresses a The new DMC will enable advanced network contemporary view and global changes. Our mission management functions and unlike the current centre today is much more than providing quality energy, Report of the Supervisory will display the entire network, including the low- and through our new appearance we symbolically voltage network and measuring points. covered all the changes that distribution is Board experiencing. Through our work we are committed The extensive electrification that is expected in the to sustainable development. Our innovative activity coming years also provides business opportunities. and changes that the new technologies, new sources The Supervisory Board of Elektro Ljubljana responsibly supervised One of these is the charging infrastructure for electric and development of new services require from us the company’s operations in 2019. vehicles that the company is developing under the are therefore guided by a responsible attitude to the Driven by Electricity (Gremo na elektriko) brand. environment. At the beginning of the year we worked intensely WORK OF THE SUPERVISORY BOARD to introduce a service billing system, which we successfully launched at the beginning of May. We The Supervisory Board performed its work in accordance with the powers and competences prescribed by the law, are now slowly being joined by an increasing number the company’s Articles of Association, the Rules of Procedure of the Supervisory Board and other recommended of partners. With the largest network of charging best practices, in particular the Corporate Governance Code for Companies with Capital Assets of the State and stations under the Driven by Electricity (Gremo na Andrej Ribič, MSc the Recommendations and Expectations of Slovenian Sovereign Holding. elektriko) brand, we remain the leading company in President of the Management Board developing the charging infrastructure. The Supervisory Board functioned in the following composition in 2019: Andrej Šušteršič, MSc (Chairman), David Valentinčič (Deputy Chairman), David Skornšek, MSc, Davorin Dimič, MSc, and the employee representatives Egon Hoda and Igor Adlešič. Its composition was diverse in terms of level of education and work experience, which enabled the effective exchange of opinions and positions. The composition of the Supervisory Board remained unchanged in 2019.

The Supervisory Board met at seven regular sessions, one correspondence session and one extraordinary session in 2019. Apart from one member who was justifiably absent one time, all members attended all the sessions. The company's certified auditors attend the session when the annual report is adopted.

The Supervisory Board’s work and decisions are based on the monitoring of the achievement of Elektro Ljubljana’s objectives and compliance with the law. The Supervisory Board was regularly briefed on reports on operations, and adopted the appropriate resolutions and monitored their implementation. The composition of the Supervisory Board facilitates effective discussions and the adoption of high-quality decisions. Supervisory Board members have the required expertise and experience, carefully prepare for the topics of discussion, submit constructive proposals and on the basis of the prepared materials and comprehensive written and verbal information received from the company's Management Board, make competent decisions, and try to reconcile any different views and adopt unanimous decisions. Members of the Supervisory Board also update their expertise by participating in various professional seminars and training sessions organised by Slovenian Sovereign Holding and other professional organisations. They attended a total of 13 training sessions in 2019. Annual Report | 20 | Elektro ljubljana in 2019 Annual Report | 21 | Elektro ljubljana in 2019

WORK OF SUPERVISORY BOARD COMMITTEES • at its 13th regular session of 14 March 2019, the Supervisory Board was briefed on the monthly liquidity report of Elektro Ljubljana and Elektro Ljubljana OVE for January 2019, together with an assessment of the operations of Elektro Ljubljana and Elektro Ljubljana OVE in 2018, gave its consent to the annual The Supervisory Board has the following committees: Audit Committee, Human Resources and Training internal audit plan for 2019, was briefed on the auditing of the detection of loss events and the timeliness Committee, and Medium-Term Business Plan Monitoring and Risk Management Committee. The Supervisory of taking actions in terms of enforcing claims, and subsequently was also briefed on contract no. JN(S)18- Board’s committees addressed a wide range of technical areas, and reported to and advised the Supervisory 003: Use (provision) of Microsoft software licences and gave its consent to the sales contract for real Board accordingly. However, decisions in such matters remain the responsibility of the Supervisory Board. estate – Kočevska Reka control centre;

The Audit Committee met at five regular sessions in 2019, while the Human Resources and Training Committee • at its 14th regular session of 18 April 2019, the Supervisory Board was briefed on the unaudited annual met at three regular sessions, and the Medium-Term Business Plan Monitoring and Risk Management Committee report of Elektro Ljubljana and Elektro Ljubljana OVE for 2018 and the operating results of Elektro Ljubljana also met at three regular sessions. Committee chairs regularly reported on the work of committees at sessions and Elektro Ljubljana OVE for the period January–February 2019, together with the monthly liquidity report of the Supervisory Board. The Supervisory Board discussed the proposed resolutions and recommendations of for March 2019. The Supervisory Board was also briefed on the construction of the storage facility and committees, and adopted its own appropriate resolutions based on careful assessments. The Supervisory Board workshops in Ivančna Gorica in accordance with the document Validation of report no. 2/2016 for the regularly monitored the implementation of its own resolutions. establishment of the joint headquarters of the Grosuplje and Zagradec in Ivančna Gorica control stations.

• at its 15th regular session of 23 May 2019, the Supervisory Board was briefed on the report on the operations ASSESSMENT OF THE WORK OF THE MANAGEMENT BOARD AND of Elektro Ljubljana and Elektro Ljubljana OVE during the first quarter of 2019, together with the monthly SUPERVISORY BOARD liquidity report for April. Like every year, the Supervisory Board together with the Management Board prepared the agenda and material for the general meeting of shareholders, which was held on 3 July 2019. It also verified and approved the audited annual report of Elektro Ljubljana for 2018, and approved the The Management Board regularly attended all sessions of the Supervisory Board. The Supervisory Board annual report of Elektro Ljubljana OVE for 2018, while also approving the proposed use of distributable believes that its cooperation with the Management Board was appropriate, and in line with the relevant profit and giving its consent to the distribution of the net profit. It proposed that the general meeting legislation and best practices. To the best of its knowledge, it was informed of all events of material significance adopt a resolution appointing the audit firm BDO Revizija, d. o. o., družba za revidiranje, Cesta v Mestni to the supervision of the company’s operations. The Chairman of the Supervisory Board and President of the log 1, 1000 Ljubljana as certified auditor for the next three years; Management Board maintained contact between sessions, consulted one another and communicated about open issues during 2019. In 2019, the Management Board prepared all of the data, materials, reports and • at its 16th regular session of 3 July 2019, the Supervisory Board discussed the operating results of Elektro information required by the Supervisory Board for the high-quality performance of its work. Ljubljana and Elektro Ljubljana OVE during the first four months of 2019, together with the monthly liquidity report for May, and gave its consent to the agreement for public contract no. JN2019/028: Delivery In accordance with the Recommendations and Expectations of Slovenian Sovereign Holding and in line with best and installation of equipment for the Kamnik 110/20 kV DTS and discussed a decrease in share capital corporate practices, the Supervisory Board devoted a great deal of attention to the continuous improvement through the withdrawal of treasury shares. The purpose of a decreasing share capital is to increase the of its work. A self-assessment of the Supervisory Board according to the Slovenian Directors’ Association company's value for shareholders and return on the company's equity. At this session the Supervisory methodology indicates that the work of the Supervisory Board and its committees meets the highest standards. Board proposed that the Management Board prepare a letter to be sent to institutions authorised in The completed self-assessment procedures raise the level of the work of the Supervisory Board, which is also connection with the adopted regulations governing RES, which due to the increasing obligations imposed reflected in the higher quality in the supervision of operations. on distribution companies will cause problems in the operations of a distribution company, as the latter will lack the sufficient resources that are essential for the company to realise the commitments arising In light of the above, the Supervisory Board believes that its work in 2019 was successful, as by discussing from the regulations governing the fulfilment of environmental requirements; numerous areas described in this report it thoroughly oversaw the operations of the company. • at the 2nd correspondence session of 9 July 2019, the Supervisory Board was briefed on the legal opinion issued by the Filipović Law Firm on the correct selection of a certified auditor for the period 2019–2021. It MOST IMPORTANT TOPICS OF SUPERVISORY BOARD SESSIONS IN 2019 tasked the Management Board with delivering the legal opinion to all shareholders present at the general meeting, as indicated in the notarial record of the general meeting;

The topics at sessions of the Supervisory Board were linked to the monitoring of the ordinary operations and • at its 17th regular session of 9 September 2019, the Supervisory Board was briefed on the report on the development of the company. The Supervisory Board met at seven regular sessions, one correspondence session operations of Elektro Ljubljana and Elektro Ljubljana OVE for the period January to June 2019, together and one extraordinary session, where it discussed and adopted the following important resolutions: with the monthly liquidity report for July 2019. It was also briefed on the draft business plan of Elektro Ljubljana and Elektro Ljubljana OVE for 2020 with forecasts for 2021 and 2022. At the same session, the Annual Report | 22 | Elektro ljubljana in 2019 Annual Report | 23 | Elektro ljubljana in 2019

Supervisory Board gave its consent to the agreement for public contract no. JN2019/035: Delivery and installation of equipment and construction of the Dobruška vas 110/20 kV DTS and to the agreement for public contract no. JN2019/037: Delivery and installation of equipment for the Ivančna Gorica 110/20 kV DTS and was briefed on the agreement for public contract no. JN2019/041: Delivery and installation of equipment for the Ljubljana passenger centre 110/20 kV DTS. The President of the Management Board Andrej Ribič, MSc briefed the members of the Supervisory Board at this session of the fact that the employment relationship of the current managing director of Elektro Ljubljana OVE Matjaž Glavič, MSc will expire on 4 December 2019;

• at its 18th regular session of 16 October 2019, in accordance with Article 40 of the Articles of Association of Andrej Šušteršič, MSc Elektro Ljubljana, d. d., the Supervisory Board adopted the business plan of Elektro Ljubljana for the period 2020–2022, and gave the founder Elektro Ljubljana its prior consent to adopt the business plan of Elektro CHAIRMAN OF THE SUPERVISORY BOARD Ljubljana OVE for 2020 with forecasts for 2021 and 2022. The business plan of Elektro Ljubljana for 2020 was created under the assumption that the company exercises its right of withdrawal in accordance with the exchange agreement concluded between Gen-I and Elektro Ljubljana. When discussing the business plan for Elektro Ljubljana the Supervisory Board also adopted the appropriate resolutions connected with variant plan B in the event of not exercising its right of withdrawal. The Supervisory Board was briefed on the fact that the managing director of Elektro Ljubljana OVE was selected by way of a public tender. The Supervisory Board was also briefed on the responses to questions asked by shareholder G. I. Dakota Investments Limited, submitted in connection with agenda item 2 of the 25th regular general meeting of shareholders of Elektro Ljubljana. At the same session, the Supervisory Board gave its consent to the agreement for awarding public contract no. JN2019/042: Delivery of power transformers for the Ivančna Gorica 110/20 kV DTS;

• at the 1st extraordinary session of 19 November 2019, on the basis of the second paragraph of Article 17 of Elektro Ljubljana OVE, d. o. o.'s Articles of Association, the Supervisory Board gave its consent to the appointment of Matjaž Lampe to the position of the managing director of Elektro Ljubljana OVE, d. o. o., Slovenska cesta 56, 1000 Ljubljana, for the entire duration of the term of office, from 5 December 2019 to 4 December 2023, i.e. for a full four-year period;

• at the 19th regular session of 12 December 2019, it adopted the work programme of the Supervisory Board and its committees for 2020, was briefed on the report on the operations of Elektro Ljubljana and Elektro Ljubljana OVE for the period January–September 2019, together with the monthly liquidity report for October. It also gave its consent to the conclusion of a sponsorship agreement with the Slovenian Kayaking Association. At this session, the Supervisory Board was also briefed on the audit and recommendations for carrying out the procedure for high-value public contracts.

CONCLUSION On the basis of its monitoring and supervision of the company’s operations in 2019, the Supervisory Board finds that the company performed well and diligently pursued the achievement of planned objectives.

Andrej Šušteršič, MSc Chairman of the Supervisory Board 02 Presentation of Elektro Ljubljana

One of our greatest challenges is our transition to clean energy and a carbon-neutral economy. Commitment to sustainable development is the guiding principle of our operations. Annual Report | 26 Presentation of Elektro Ljubljana Annual Report | 27 Presentation of Elektro Ljubljana

2.1 Mission, Vision and Values

MISSION VALUES

The company ensures a reliable, safe, high-quality and sustainable Excellence and quality Tradition and curiosity Teamwork and trust electricity distribution system by combining the most advanced We combine risks and We combine tradition with We encourage teamwork, electricity supply services. We bring together the needs of users, opportunities, and achieve innovation, knowledge with and value the knowledge and owners and employees. superior quality, professionalism curiosity. We drive the cycle of experience of the company’s and added value through technological development in an diverse teams and the mutual systematic solutions. Our environmentally responsible way. cooperation between them. All business processes are in line with employees are treated equally the highest environmental, safety and with respect, and we promote and information standards. open and honest communication. VISION

Through efficient, innovative and comprehensive electricity supply solutions, Safety Ethics and integrity Dialogue we remain the leading partner in the development of the energy sector at the national and local levels, and the leading group for the management Employee safety and security is The management and operations We encourage dialogue with our highest priority, and is the of the company are in line with employees, owners, projects of modern energy infrastructure networks, while generating an appropriate return responsibility of every employee the highest ethical and moral partners and the broader on investments for owners and a stimulating work environment for employees. at the company. standards. environment. We develop the best long-term solutions for all stakeholders.

Networking with“ positive energy Annual Report | 28 Presentation of Elektro Ljubljana Annual Report | 29 Presentation of Elektro Ljubljana

2.2 ELECTRICITY SUPPLY SYSTEM Basic Information about the Elektro Ljubljana is the owner of the electricity distribution infrastructure, which is a part of Slovenia's electrical power grid (EPG). The EPG brings together electricity producers and users via the transmission and distribution Company and Area of Work network. The distribution network is connected to the transmission network via distribution transformer stations and is comprised of transformer stations and electricity conductors of various voltage levels dedicated to the distribution of electricity to end customers. In addition to these, small producers of electricity are also connected COMPANY PROFILE OF ELEKTRO LJUBLJANA, D. D. to the distribution network.

Company name: Elektro Ljubljana, podjetje za distribucijo električne energije, d. d. Elektro Ljubljana manages the largest electricity distribution network in Slovenia, which covers 6,166 km2, or 30.4% of the total area of Slovenia, where it supplies more than 342,950 electricity customers. Registered office: Slovenska cesta 56, 1000 Ljubljana

Core activity: 35.130 Distribution of electricity A total of 4,248,674 MWh of electricity was distributed to network users in the area covered by Elektro Ljubljana President of the Management Board: Andrej Ribič, MSc during 2019, representing 37.3% of all electricity distributed by five electricity distribution companies in Slovenia.

Chairman of the Supervisory Board: Andrej Šušteršič, MSc

Tel.: +386 1 230 40 00

E-mail: [email protected]

Website: www.elektro-ljubljana.si

VAT ID no.: SI49977725

Registration no.: 5227992000

Date of entry in companies register: 21 December 1990

Share capital: EUR 163,412,977.80 WIND SMALL SOLAR GENERATORS HYDROELECTRIC PLANTS POWER PLANTS Number of no-par value shares: 39,160,286

Legal organisational form: public limited company GENERATION Number of employees: 846 (31 December 2019)

DISTRIBUTION NETWORK TRANSMISSION NETWORK

CHARGING INFRASTRUCTURE HOUSEHOLDS (blocks of flats, houses, COMPANIES INDUSTRY heat pumping stations) Annual Report | 30 Presentation of Elektro Ljubljana Annual Report | 31 Presentation of Elektro Ljubljana

Distribution Supply Area of Elektro Ljubljana

5 DISTRIBUTION REGIONS City of Ljubljana Ljubljana Environs Novo mesto 120 years of Kočevje POSITIVE ENERGY Trbovlje

From its very beginnings to the present day, Elektro Ljubljana has been a technologically advanced company that provides electricity to serve people and allow their progress. From the installation of the first public lighting in Slovenia at the end of the 19th century to the establishing of conditions for the development of e-mobility at the beginning of the 21st century, we remain pioneers of development in service to the people. 6,166 km² 342,950 4,248,674 MWh (30.4% of the total area of Slovenia) ELECTRICITY CONSUMERS OF ELECTRICITY DELIVERED (37.3% of all five electricity At Elektro Ljubljana we provide network and commercial distribution companies in Slovenia) services associated with the electricity distribution infrastructure in central and south-eastern Slovenia. The largest distribution network in Slovenia and the ownership of the electricity infrastructure are in our professionally trained hands. 61% 17,686.4 km 5,552 of equipment remote controlled of power lines transformer substations

26 30 1.88 GVA substations distribution/transformer stations nominal power of energy installations Annual Report | 32 Presentation of Elektro Ljubljana Annual Report | 33 Presentation of Elektro Ljubljana

Our Results Driven by Electricity Largest network of charging stations in Slovenia

86.8 million 39.8 million 13.9 million NET SALES INVESTMENT NET PROFIT REVENUE ASSETS OR LOSS 250 130 CHARGING STATIONS IN THE SYSTEM CHARGING STATIONS

846 93,968 € 877,170 € EMPLOYEES VALUE ADDED/ INVESTMENTS EMPLOYEE IN THE ENVIRONMENT 5,509 48,755 USERS CHARGES

Highest quality standards

2010 90,000 ELEKTRO LJUBLJANA INSTALLS FREE CHARGES FIRST PUBLIC CHARGING STATION IN 9 YEARS Annual Report | 34 Presentation of Elektro Ljubljana Annual Report | 35 Presentation of Elektro Ljubljana

DISTRIBUTION SUPPLY AREA OF ELEKTRO LJUBLJANA

The core activity of Elektro Ljubljana is the management of the electricity distribution infrastructure. Elektro Ljubljana is the owner of the electricity distribution infrastructure, which it leases to the electricity distribution network system DU LJUBLJANA ENVIRONS operator SODO, as a public service provider.

DU LJUBLJANA CITY DU TRBOVLJE

It also provides the following contractually agreed services for SODO:

• maintenance of the electricity infrastructure and DU NOVO MESTO the organisation of on-call services; • the management and operation of the electricity distribution system; • network development planning; • preparation and management of investments in the electricity infrastructure; • monitoring and ensuring the quality supply of electricity; • electricity measurements; and • the provision of distribution network access services and other services for users.

In addition to the regulated services, the company provides services in the market segment focused on the planning, consultancy, construction and maintenance, and optimisation of distribution and user electricity networks. DU KOČEVJE Annual Report | 36 Presentation of Elektro Ljubljana Annual Report | 37 Presentation of Elektro Ljubljana

MEMBERS OF THE EXECUTIVE BOARD OF ELEKTRO LJUBLJANA Annual Report | 38 Presentation of Elektro Ljubljana Annual Report | 39 Presentation of Elektro Ljubljana

2.3 2.4 Organisational Structure Corporate Governance and Management

MANAGEMENT BOARD The basis for the operations of Elektro Ljubljana is of distributable profit, the appointment or recall the Companies Act, while specific powers and tasks of Supervisory Board members and amendments relating to governance and management are set out to the Articles of Association, and carry out other in the company’s valid Articles of Association. legally prescribed activities. The function of the Supervisory Board is to supervise the management The Company has a two-tier governance system. of the company's operations. The Management In addition to the general meeting, the governance Board manages operations and represents the structure of Elektro Ljubljana comprises two other company. bodies: the Supervisory Board and Management Board. At the general meeting, the company’s The company is subject to regular internal and shareholders exercise their rights, make decisions external auditing. TECHNOLOGICAL CORPORATE INTERNAL regarding the adoption of the annual report, the use DEVELOPMENT COMMUNICATIONS AUDIT DEPARTMENT DEPARTMENT DEPARTMENT

ORGANISATIONAL UNITS

DISTRIBUTION DISTRIBUTION INFORMATION AND SHARED ACCOUNTING NETWORK NETWORK COMMUNICATION SERVICES OU AND FINANCIAL OPERATION AND SERVICES OU TECHNOLOGY SERVICES OU DEVELOPMENT OU (ICT) OU Annual Report | 40 Presentation of Elektro Ljubljana Annual Report | 41 Presentation of Elektro Ljubljana

Company Management Supervisory Board

MANAGEMENT BOARD SHAREHOLDER REPRESENTATIVES

Andrej Ribič, MSc Andrej Šušteršič, David Valentinčič David Skornšek, Davorin Dimič, President of the Management Board MSc Deputy Chair MSc MSc Chair Member Member

EXECUTIVE DIRECTORS EMPLOYEE REPRESENTATIVES

Matjaž Osvald Mitja Brudar, MSc Alenka Kolar, PhD Marjan Ravnikar, Igor Adlešič Egon Hoda Executive Director Executive Director Executive MSc Member Member of the Distribution of the Distribution Director of the Executive Director Network Operation Network Services Information and of the Accounting and Development OU Communication and Financial OU Technology OU Services OU and Shared Services OU (by authorisation)

DIRECTORS OF DISTRIBUTION UNITS

Roman Jesenko Iztok Bartol Anton Cugelj Roman Ponebšek Zoran Lebič Ljubljana DU Ljubljana Environs Novo mesto DU Trbovlje DU Kočevje DU DU Annual Report | 42 Presentation of Elektro Ljubljana Annual Report | 43 Presentation of Elektro Ljubljana

Supervisory Board Committees 2.5 Corporate Governance HUMAN RESOURCES AND TRAINING COMMITTEE Statement

David Skornšek, MSc David Valentinčič Igor Adlešič Egon Hoda Chair Deputy Chair Member Member In accordance with the provision of the fifth paragraph of Article 70 of the ZGD-1 (Official Gazette of the Republic of Slovenia, No. 65/09), Elektro Ljubljana, d. d. hereby issues the following corporate governance statement:

AUDIT COMMITTEE 2.5.1 REFERENCE TO THE VALID GOVERNANCE CODE

David Valentinčič David Skornšek, MSc Saša Jerman, MSc Elektro Ljubljana has not adopted its own governance code. Governance is carried out in accordance Chair Deputy Chair Member with the provisions of the ZGD-1.

The company followed the following recommended standards and codes in the period from 1 January MEDIUM-TERM BUSINESS 2019 to 31 December 2019: • In accordance with point 3.4.1 of the Corporate Governance Code for Companies with Capital PLAN MONITORING AND RISK Assets of the State (hereinafter: the Code) issued by Slovenian Sovereign Holding, Elektro MANAGEMENT COMMITTEE Ljubljana undertook to apply the Code voluntarily. The Code is publicly accessible on the website of Slovenian Sovereign Holding (SSH).1 • In its operations, the company also complied with the Recommendations and Expectations of Davorin Dimič, MSc Egon Hoda Andrej Šušteršič, MSc 2 Chair Deputy Chair Member Slovenian Sovereign Holding, which are publicly accessible on SSH’s website.

2.5.1.1 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE FOR COMPANIES WITH CAPITAL ASSETS OF THE STATE ISSUED BY SLOVENIAN SOVEREIGN HOLDING MEMBERSHIP OF MANAGEMENT BOARD AND SUPERVISORY BOARD MEMBERS The company mostly complied, mutatis mutandis, with the Code in its operations, taking into account its activity and other attributes specific to the company. The company did not implement ON THE MANAGEMENT OR SUPERVISORY the following recommendations in 2019: BODIES OF RELATED AND UNRELATED • Recommendation 6.9.3: In the scope of Elektro Ljubljana’s collective D&O insurance, Supervisory Board members are entitled to be included in D&O insurance. In accordance with valid legislation, COMPANIES that insurance is charged to Supervisory Board members as a taxable benefit. • Recommendation 6.12.7 has not been implemented in full. The Audit Committee functions in Andrej Ribič, MSc accordance with the authorisations of the Supervisory Board (Supervisory Board resolutions) and President of the Management Board of Elektro Ljubljana, d. d. valid legislation. ••• • Recommendation 7.3 is implemented in accordance with the Act Governing the Earnings of member of the Supervisory Board of Stelkom, Management Staff at Companies Under the Majority Ownership of the Republic of Slovenia and telekomunikacije in storitve, d. o. o., Špruha 19, 1236 Trzin Self-Governing Local Communities (ZPPOGD). •••

member of the institute council of Šiška Secondary School for Technical Professions, 1 Corporate Governance Code for Companies with Capital Assets of the State, SSH, May 2017. Litostrojska cesta 51, 1000 Ljubljana 2 Recommendations and Expectations of Slovenian Sovereign Holding, SSH, March 2018. Annual Report | 44 Presentation of Elektro Ljubljana Annual Report | 45 Presentation of Elektro Ljubljana

• The company is obliged to implement Recommendation 8.3 in accordance with the Access to The internal control system is the sum of various guidelines and policies formulated and adopted by Public Information Act (ZDIJZ). the management board with the aim of ensuring the best possible management of risks associated • Recommendations 9.2.3, 9.2.4, 9.2.5, 9.2.6, 9.2.7, 9.2.8, 9.2.9, 9.2.10 and 9.3 have not been with financial reporting. The purpose of the internal control system is to ensure efficiency and implemented in full. In accordance with the relevant resolution of the Supervisory Board, the effectiveness of operations, the reliability of financial reporting and compliance with valid laws and company carries out internal auditing activities with the help of external contractors and in the other external and internal regulations. scope of activities in the area of risk management. The company has a system in place for the management of financial reporting risks. The accuracy, 2.5.1.2 COMPLIANCE WITH THE RECOMMENDATIONS AND EXPECTATIONS OF completeness and veracity of financial reporting is ensured through the implementation of the SLOVENIAN SOVEREIGN HOLDING following types of internal controls: • control over the accuracy of financial reporting data, which is ensured in different ways, e.g. The company complies with the aforementioned recommendations in its operations. Deviations through the reconciliation of accounting items with customers and suppliers; from the following recommendations were recorded in 2019: • control over the completeness of data capture (e.g. documentation sequencing and numbering); • Recommendation 4: The company publishes data regarding payments in accordance with the • control over the segregation of duties and responsibilities (e.g. separate recording and Access to Public Information Act. Due to the mutatis mutandis application of the company-level payments); collective agreement, the company does not pay a Christmas bonus and is thus not bound to • control over access restrictions (access rights to accounting records are allocated selectively); and publication. • control over supervision. • Recommendation 5: We will study the rationale of the implementation of the EFQM model in the future, taking into account the other standards Elektro Ljubljana already complies with. The accounting process is information supported, so all of the aforementioned types of internal controls are connected to control systems that are built into our information technology system, including control of restricted access to the network, data and applications, and control of the 2.5.2 CORPORATE INTEGRITY accuracy and completeness of data capture and data processing.

Elektro Ljubljana has a comprehensive risk management system in place. The basis for managing Elektro Ljubljana has a comprehensive risk management system in place. The basic starting points risks is the internal risk management act, which defines all risks (business, IT, occupational health for risk management are set out in the Bylaw on risk management, with the following contents and and safety, environmental and corruption risks), as well as the duties and responsibilities of addenda: employees in connection with those risks. 1. Risk management process • Responsibility/supervisors A system of announced and unannounced internal controls of operations is in place at the company • Risk management system/process to ensure corporate integrity. Announced internal and external assessments of the integrated • Risk assessment quality management system are also performed. • Risk register 2. Risk management • Risk response 2.5.3 MAIN FEATURES OF INTERNAL CONTROL SYSTEMS AND RISK • Risk management guidelines and measures MANAGEMENT AT THE COMPANY IN RELATION TO THE FINANCIAL 3. Risk monitoring and reporting REPORTING PROCESS The chapter on Risk Management in the Business Report gives in-depth presentations of risk The company’s management board is responsible for establishing internal controls and internal management and control mechanisms in connection with the assessment of individual types of accounting controls, the selection and application of accounting guidance and the protection of the risk. In our opinion, the company’s system of controls in 2019 ensured the effective and successful company’s assets. achievement of the business objectives, operations that are compliant with legal provisions, and fair and transparent reporting in all material aspects. The basic starting points for the establishment of accounting controls are set out in the Accounting Rules and the Rules on Management Responsibilities with the following annexes: Register of liquidators and approvers, Register of authorisations, Initial list for drafting, initialling and signing contracts. Annual Report | 46 Presentation of Elektro Ljubljana Annual Report | 47 Presentation of Elektro Ljubljana

2.5.4 DIVERSITY POLICY • the deadline or day until which shareholders may submit to the company proposed resolutions and voting proposals, which should be published, The company does not have any commitments arising from a diversity policy. However, the company • where and how shareholders may obtain the full text of documents, proposed resolutions and is committed to ethical operations. It does not discriminate among its employees with regard explanations thereof, and to aspects such as sex, age or education. From the perspective of management and leadership • a statement that shareholders may exercise their right to information at the company in effectiveness, we do not define diversity as an aspect of achieving efficiency, but we are committed accordance with the Companies Act. to ethical and lawful conduct regarding representation in various company bodies. The company’s bodies include all aspects of diversity. In the invitation, the party who convenes the general meeting may, as a precondition for participation and voting at the general meeting, require that shareholders announce their 2.5.5 INFORMATION IN ACCORDANCE WITH THE SIXTH PARAGRAPH OF participation by no later than the close of business four days prior to the general meeting (cut-off ARTICLE 70 OF THE ZGD-1 date), or forfeit their right to participate and vote at the general meeting.

2.5.5.1 INFORMATION REGARDING THE WORK OF THE COMPANY’S GENERAL Only those shareholders who are registered as such in the central register of securities by no later MEETING AND ITS KEY COMPETENCES, AND A DESCRIPTION OF THE RIGHTS OF than the close of business four days prior to the general meeting may attend the general meeting SHAREHOLDERS AND HOW THOSE RIGHTS ARE EXERCISED and exercise their voting rights.

In accordance with valid legislation, i.e. the Companies Act (ZGD-1), the general meeting is the body The general meeting may pass resolutions, regardless of the number of votes present. through which shareholders exercise their rights in matters relating to the company. The general meeting defines the company’s basic development strategies. The general meeting adopts resolutions by a simple majority of votes cast, unless the ZGD-1 and Elektro Ljubljana’s Articles of Association envisage a higher majority. The general meeting is convened in accordance with the company’s Articles of Association and valid legislation. The Management Board convenes the general meeting either at its own initiative, at One general meeting was convened by Elektro Ljubljana in 2019, on 3 July 2019, when the following the request of the Supervisory Board or at the request of shareholders who represent at least 5% of resolutions were adopted: the company’s share capital. When those entitled to do so request in writing that the Management 1. opening of the general meeting and the election of working bodies; Board convene the general meeting, such a request must include the agenda, and a proposed 2. briefing of the general meeting on the audited annual report for 2018 with the auditor’s resolution for each proposed item on the agenda on which the general meeting is to decide. If the opinion; the written report of the Supervisory Board on the review and approval of the annual general meeting does not pass a resolution for a specific item on the agenda, an explanation of report of Elektro Ljubljana for 2018; and briefing of the general meeting on the earnings of the that point on the agenda is included. The convening of the general meeting in accordance with Management Board and Supervisory Board members; the provisions of the act governing companies is published on the websites of the AJPES and the 3. adoption of resolutions on the use of distributable profit for the 2018 financial year and the company at least 30 days prior to the general meeting. Shareholders who hold at least 5% of the conferral of official approval on the Management Board and Supervisory Board; company’s share capital are also notified about the convening of the general meeting, the agenda 4. election of the new member of the Supervisory Board representing shareholders; and associated materials by registered post with notice of delivery 30 days prior to the general 5. expansion of the activities of the company and amendment of the Articles of Association: meeting. The company's activity shall expand to: J58.110 Book publishing The convening of the general meeting must include the following: G47.910 Retail sale via mail order houses or via internet • the business name and registered office of the company, G47.990 Other retail sale not in stores, on stalls or in markets • the time and place of the general meeting, The Articles of Association of Elektro Ljubljana, d. d., shall be amended in Article 3 by adding the • the proposed agenda, following company activities: • proposed resolutions, 47.910 Retail sale via mail order houses or via internet • the cut-off date, 47.990 Other retail sale not in stores, stalls or markets • the conditions under which shareholders may participate in the general meeting and exercise 58.110 Book publishing voting rights, 6. appointment of a certified auditor for the 2019 financial year. • the deadline or day until which shareholders may request amendments to the agenda of the general meeting, Annual Report | 48 Presentation of Elektro Ljubljana Annual Report | 49 Presentation of Elektro Ljubljana

2.5.5.2 COMPOSITION AND FUNCTIONING OF MANAGEMENT AND SUPERVISORY BODIES MEMBERS OF THE MANAGEMENT BOARD IN 2019 AND THEIR COMMITTEES In 2019 the Management Board was represented by its President, Andrej Ribič, MSc. The Supervisory The company has a two-tier corporate governance system. It is managed by the Management Board, Board appointed him to a new four-year term of office on 23 March 2018, which will expire on 22 while the work of the latter is supervised by the Supervisory Board. Corporate governance at Elektro March 2022. Ljubljana is carried out on the basis of legal provisions, the company’s Articles of Association as its core legal act, internal acts, the Code of Slovenian Sovereign Holding, the Recommendations and AUTHORISATION OF THE PRESIDENT OF THE MANAGEMENT BOARD IN 2019 Expectations of Slovenian Sovereign Holding, and established and generally accepted best business practices. In accordance with Article 27 of Elektro Ljubljana’s Articles of Association, and based on the notarised authorisation to represent Elektro Ljubljana during the absence of the President of the MANAGEMENT BOARD Management Board issued on 17 July 2015 and notarial deed no. OV-DP 35/2015 on the filing of signatures, Marjan Ravnikar, MSc (Executive Director of the Accounting and Financial Services The Management Board manages and represents the company independently, and is liable for and Shared Services Departments) replaced the President of the Management Board of Elektro its own actions in that regard. The Management Board has one member, its President, who is Ljubljana in the performance of his tasks and duties in 2019, and represented him in the function appointed and recalled by the Supervisory Board. The President of the Management Board’s term of of Management Board before administrative and other bodies and banks, and concluded all legal office is four years, with the possibility of re-appointment. transactions in the scope of ordinary operations, except transactions requiring special authorisation.

WORK OF THE MANAGEMENT BOARD IN 2019 TASKS AND COMPOSITION OF THE SUPERVISORY BOARD

The Management Board functioned in 2019 with the full powers vested in it by the law. The Elektro Ljubljana’s Supervisory Board performs its tasks in accordance with the act governing the Management Board regularly reported to the Supervisory Board with regard to the company’s operations of companies. Those tasks include supervision of the management of the company’s operations, and consulted with the Supervisory Board regarding the company’s strategy, the transactions, the selection and appointment of the company’s Management Board and tasks in development of operations and risk management. The Management Board also focused its connection with the competences of the general meeting. activities on cooperation with the works council and representative trade union. In accordance with the company’s Articles of Association, Elektro Ljubljana’s Supervisory AUTHORISATIONS AND LIMITATIONS OF THE MANAGEMENT BOARD Board comprises six members, four of whom are shareholder representatives and two of whom are employee representatives. All members of the Supervisory Board have the same rights In accordance with the company’s Articles of Association, the Management Board must obtain the and obligations, except the limitation laid down by the Articles of Association regarding the Supervisory Board’s prior consent for the following transactions: appointment of the Chairman of the Supervisory Board, who may only be selected from shareholder • the establishment, winding-up or recapitalisation of companies; representatives. • the purchase, sale or other disposal, exchange or encumbrance of real estate and equity investments above the gross value of EUR 50,000; Members of the Supervisory Board are elected for a period of four years and may be re-elected when • the sale, other disposal or encumbrance of facilities and buildings that form an integral part of their term of office expires. The Supervisory Board elects a Chairman and Deputy Chairman from the energy infrastructure; amongst its members according to the aforementioned limitation. The Chairman of the Supervisory • all legal transactions (including investments, borrowings and similar transactions), where the Board also represents the company against the Management Board and in the conclusion of an gross value of a single transaction or several related transactions exceed 1% of the company’s agreement with the auditor. share capital, except transactions in connection with the short-term management of cash, legal transactions in connection with the payment method, and transactions in connection with the The Supervisory Board reappointed Andrej Ribič, MSc to a four-year term of office as the President short-term placement of cash in the form of deposits at commercial banks; and of the company’s Management Board in 2017. That term of office begins 23 March 2018. • the issue of sureties, guarantees and letters of comfort. The following committees functioned under the Supervisory Board in 2019: Notwithstanding the limitations described above in the articles of association, the consent of the 1. Audit Committee, Supervisory Board is not required for legal transactions with real estate and the raising of borrowings, 2. Human Resources and Training Committee, provided that such legal transactions are included in the company’s approved business plan. 3. Medium-Term Business Plan Monitoring and Risk Management Committee. Annual Report | 50 Presentation of Elektro Ljubljana Annual Report | 51 Presentation of Elektro Ljubljana

2.5.5.3 STRUCTURE OF THE COMPANY’S SHARE CAPITAL 2.6

All of the company’s shares are freely transferable. Each share represents the same stake and corresponding amount in share capital. Ordinary shares are shares that provide their holders: Affiliates • the right to participate in the management of the company, • the right to a share of profits (dividends), and • the right to a corresponding portion of residual assets after the liquidation or bankruptcy of the company.

2.5.5.4 SHAREHOLDERS WITH A PARTICIPATING INTEREST EXCEEDING 5% OF THE Elektro Ljubljana OVE is a subsidiary 100% owned by Elektro Ljubljana. Elektro Ljubljana OVE’s core activity COMPANY’S SHARE CAPITAL WITH THE RIGHT TO CONVENE THE GENERAL is the development of the use of renewable energy sources, primarily the production of electricity from 100% MEETING IN ACCORDANCE WITH ARTICLE 45 OF THE COMPANY’S ARTICLES OF renewable energy sources. ASSOCIATION Elektro Ljubljana OVE, inženiring s področja obnovljivih virov Company name: energije, d. o. o. • Republic of Slovenia Registered office: Slovenska cesta 56, 1000 Ljubljana

2.5.5.5 TREASURY SHARE RESERVE Core activity: 35.111 Production of electricity at hydroelectric power plants Matjaž Glavič, MSc, Managing Director (until 4 December 2019) Senior management: In accordance with the authorisation of the general meeting of 30 August 2016 and resolution Matjaž Lampe, Managing Director (since 5 December 2019) adopted at the 3rd session of the Supervisory Board of 10 October 2017, the company’s Management Telephone: +386 1 56 57 500 Board purchased treasury shares until 31 March 2018. E-mail: [email protected]

The company’s Management Board purchased a total of 29,700 treasury shares from the date of Website: www.el-ove.si

authorisation of the general meeting until 31 March 2018. That number accounts for 0.1% of the VAT ID no.: SI46895728 company’s share capital. Registration no.: 1702203000

In accordance with the same authorisation of the general meeting of 30 August 2016, the Date of entry in companies register: 14 March 2002 Management Board is authorised with the prior approval of the Supervisory Board to withdraw Share capital: EUR 1,220,777.00 the acquired shares without making any subsequent decision on a decrease in share capital. The general meeting authorised the Supervisory Board to align the wording of the company's Articles Legal organisational form: limited liability company of Association with any decrease in share capital that would be carried out due to a withdrawal Number of employees: 10 (31 December 2019) of treasury shares. The Management Board and the Supervisory Board have yet to realise this authorisation to date in 2019.

Elektro Ljubljana also holds a 27.7% participating interest in Informatika, d. d. and a 25% participating interest in GEN-EL, d. o. o.

Andrej Ribič, MSc Ljubljana, 13 January 2020 President of the Management Board Annual Report | 52 Presentation of Elektro Ljubljana Annual Report | 53 Presentation of Elektro Ljubljana

2.7 The company’s largest shareholder is the Republic of Slovenia, with a participating interest of 79.5%, while the company’s five largest shareholders held a total of 89.3% of all shares.

Ownership OWNERSHIP STRUCTURE OF ELEKTRO LJUBLJANA AS AT 31 DECEMBER 2019 Structure

Elektro Ljubljana is a public limited company whose In accordance with the relevant general meeting 7.97 % 2.77% 79.50% share capital as at 31 December 2019 amounts to resolution, the company began purchasing treasury Other legal entities Natural persons Republic of Slovenia EUR 163,412,977.80, and is divided into 39,160,286 shares in 2016, and in 2016 and 2017 purchased a freely transferable, ordinary no-par value shares. total of 29,700 of these shares. It did not acquire Each share represents the same stake and any new treasury shares in 2018 and 2019. The corresponding amount in share capital. entire purchase comprises 0.1% of the total shares 1.47% of Elektro Ljubljana. KD Group The shares of Elektro Ljubljana are listed on the SI ENTER (ticker symbol ELOG) market, which was Elektro Ljubljana had a total of 897 shareholders at created under the auspices of the Ljubljana Stock the end of 2019, comprising 77 legal entities and 820 Exchange. This is a multilateral trading facility that natural persons. The number of shareholders was enables trading in securities that are not available down by 27 in 2019 relative to the previous year. on the stock exchange.

NUMBER OF ELEKTRO LJUBLJANA SHAREHOLDERS

1.65% G.I. Dakota Investments Limited 2.72% Triglav vzajemni skladi – delniški (Triglav mutual % funds – Triglav 3.92 equity fund) Adriatic Slovenica 1,210 1,005 936 924 897

2015 2016 2017 2018 2019 03 Strategic Policies

Extensive electrification which we will encounter in the coming years provides new business opportunities. We know how to take advantage of them. Annual Report | 56 Strategic policies Annual Report | 57 Strategic policies

3.1 Key Strategic Policies

Committed to developing a reliable and secure network Committed to fulfilling the business objectives and ensuring the company's long-term financial stability In its 10-year plan to develop the distribution network in the Republic of Slovenia the company made a commitment to a unified approach to ensuring a contemporary, cost-effective and reliable and secure network The company is committed to functioning efficiently and ensuring financial stability. The fundamental in the Republic of Slovenia. objectives and policies for operation to achieve its business objectives are set out in the company's annual business plan and three-year strategic business plan and in the annual governance plan for companies in the The objectives set in the 10-year plan to develop the distribution network in Slovenia, which we are focused on SSH portfolio. achieving from 2019 to 2028 and which are connected with the outlined policies and objectives of the national energy and environmental policy, include: • the satisfaction of the planned and actual consumption and the electric power requirements; Committed to sustainable development and innovative activity • the satisfaction of the needs to integrate dispersed generation of electricity; • ensuring a contemporary network; Slovenia's National Energy Concept, the coming Integrated National Energy and Climate Plan (NECP), the • ensuring a cost-effective network; Paris Agreement and relevant laws, with the Energy Act leading the way, comprise the fundamental premises • ensuring environmental protection under the law; that impact the operations of our company, and will continue to do so in the coming years. Commitments • ensuring long-term stability, reliability and availability of the distribution network; and objectives from these documents will dictate the construction and development of our network and the • ensuring the long-term rise or preservation of the quality of electricity supply services according to development of new technologies. the target quality level and satisfying the needs set out in the national energy and environmental objectives. Major steps forward were taken in the digitalisation of the company, a process that already began in the 90s, with the projects establishing a new distribution management centre, an advanced metering system, which is Elektro Ljubljana as a distribution company is in the middle of a ‘energy transformation’ that relies heavily on launched regularly each year, the development of information systems and through numerous other projects. intense electrification. On one hand, this implies increased needs for the distribution of electricity, and on the other on an increased responsibility for the environment in which the network operates and develops. In the scope of these projects we are already testing technologies and business models that will enable the higher quality and lower cost of the distribution of electricity, and through recruiting younger employees and additional training we will get the human resources that for a long time will remain a key element of our company's success ready for the new reality of the high-tech energy sector.

With the additional construction of new electric charging stations our network already includes more than 70 electric charging stations for the charging of electric vehicles, and we are currently operating over 240 electrical charging stations within our information system. Annual Report | 58 Strategic policies Annual Report | 59 Strategic policies

3.2 decision to accelerate the electrification of transport LV transformation and also the introduction of and heating intensify the construction of the MV new technologies and smart solutions into the Development Plan and LV electricity distribution network, the MV/ operations of the electricity distribution system. 2019–2028 DEVELOPMENT PLAN OF ELEKTRO LJUBLJANA FOR THE PERIOD 2019–2028 (JUNE 2018)

50

The Development Plan is our company's strategic document with which we define our most important investments in the renovation and development 40 of the electricity distribution system over a ten-year period to also ensure the reliable, high-quality and secure supply of electricity to users also in the coming years. 30

In accordance with the Energy Act and the system according to an assessment of electricity agreement on the lease of the electricity consumption and peak load development in the 20 distribution infrastructure and the provision of current state of the network, the planning criteria services for the system operator of the distribution and the inclusion of dispersed sources. The network we draft a proposal every two years for the development plan ensures a technically sound, cost- 10 10-year development plan for our area. efficient, high-quality, reliable and the appropriate level of availability of the electricity distribution In June 2018 we submitted our current development system. We also meet the needs for integrating 0 plan to SODO to be included in the Development dispersed generation of electricity and ensure 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Plan of the Electricity Distribution System in the environmental protection and the fulfilment of the Republic of Slovenia 2019–2028, and in January national energy and climate objectives. Basic option Extended option 2019 obtain consent thereto from the Ministry of Infrastructure. When drafting the development plan we did not limit ourselves to the mere construction We are planning the following major investments in of new customers and transition to the 20 kV The development plan is the result of long-term and renovation of the conventional electricity DTS' over the next decade in the scope of the basic voltage level in the city centre of Ljubljana; and continuous planning regarding the electricity distribution system (‘robust network’), but we version: • Brdo DTS for the connection of new customers distribution system via which we promptly also took into account its upgrade to an advanced Construction of a new 110/20 kV DTS: and transition to the 20 kV voltage level for identify the required new investments and electricity distribution system. • Potniški center Ljubljana (PCL) DTS for the the western part of Ljubljana; work (interventions) into the current electricity supply of new customers living in the city • Rudnik DTS for the connection of new distribution system to ensure the required The Development Plan 2019–2028 was drafted in centre of Ljubljana; customers and transition to the 20 kV voltage transmission capacities and the reliable operation two versions. The basic version ensures the optimal • Ivančna Gorica DTS for the connection of level for the southern part of Ljubljana. of the electricity distribution system over its entire development of the electricity distribution system new customers and easing the burden on the lifetime. We therefore provide all users with reliable in the scope of the available resources, while Grosuplje DTS; Renovation and expansion of a 110/20 kV DTS: access to high-quality electricity supply. the expanded version follows the development • Dobruška vas DTS for the connection of new • renovation of the HV and MV-switchgear and of the MV and LV distribution network for the customers; the upgrading of the third 110/20 kV TRs at The development plan of Elektro Ljubljana is accelerated electrification of heating and transport, • Vodenska DTS for the ultimate abandonment the Kamnik DTS; prepared on the basis of development studies and exceeds the company's financial capacities of the 35 kV and 10 kV voltage in Zasavje; • upgrading of a TL-field and MV switchgear at (REDOS) that indicate the long-term optimal (available budget) by EUR 10 million per year on • Ljubljana Logistics Centre (LLC) DTS the Mengeš DTS; development of the electricity distribution average. The national commitments and the (Toplarna; heating plant) for the connection Annual Report | 60 Strategic policies Annual Report | 61 Strategic policies

• reconstruction of the MV and installation of a • CL 110 kV TE-TOL–PCL–Center–TE-TOL; 3.3 new HV (GIS) switchgear at the Center DTS; • 2 x 110 kV Kamnik–Visoko TL; • construction of a TR-field and new 110/20 kV • 2 x 110 kV Grosuplje–Trebnje TL; and TR at the Ribnica DTS; • 2 x 110 kV Polje–Vič TL. Development • renovation of a HV-field, MV-switchgear and secondary equipment at the Domžale DTS; Construction of a MV-network, MV/LV TS and LV- and Research Projects • a new TR- and TL-field, a new TR and new network: MV-switchgear at the Žiri DTS; • construction of 1,044 kms of an underground • renovation of the MV-switchgear at the Polje and 269 kms of an overhead MV-network; DTS; • construction of 1,091 new MV/LV TS; A large-scale energy transformation with the intensive electrification of • back-up Bežigrad DTS; • renovation of 581 MV/LV TS; the entire society will be the result of the implementation of European and • renovation of the MV-switchgear at the Vič • replacement of 496 MV/LV TS; Slovenian plans relating to its transition to a sustainable economy. DTS; • construction of 289 kms of an underground • upgrading of the MV-switchgear at the Litija and 389 kms of an overhead LV-network; Industry electrification and electrification of heating with heat pumps is already underway, which is evident DTS; from an increase in the network's peak load. The national plan on the implementation of RES from diverse • upgrading of the MV-switchgear at the Investment in advanced electricity distribution sources account for up to 12 TWh of electricity annually over the next 30 years, which practically accounts Vrhnika DTS; networks: for Slovenia's total current consumption. The extensive electrification of transport with requirements up to • back-up Črnuče DTS. • completion of the AMS – advanced metering 4 TWh annually for personal transport has also been forecast. This means that the distribution network will system project; need a great deal of power to transfer a significantly greater amount of energy, which is a major challenge and In order to provide dual supply at the 110 kV • construction of a new DMC. can also be an opportunity, certainly requiring intensive development and adjustments. voltage level we are planning the following major investments: Elektro Ljubljana is already developing and testing technologies and business models that will enable the higher quality and lower cost of the distribution of electricity in the future. The following local and international research and development projects will help us reach these goals:

Project name Content focus

FutureFlow Flexibility for the system operator through the regulatory reserve InteGrid Development of the flexibility market and reserves for the distribution operator Phoenix Cyber security of management systems for the distribution operator Development of new products for the energy market by increasing the utilisation and capacity of the Flexitranstore network InterConnect Linking of the distribution operator's management systems with external stakeholders Interrface Adjustability to the LV- and MV-network, mutual trading Easing the burden on the Adjustment of burdens distribution network Advanced systems for the protection and management of the electricity distribution system (EDS) PAKT with loop operation and Phasor Measurement Units (PMU). NEDO System for automated transition to island mode upon system failure Management of capacity power Managing capacity reactive power and voltage during the intensive cabling of the MV-network Promotion and development of ideas for start-up companies in the area of technologies for the EDI Data Incubator distribution operator Development of the technology for the monitoring and supervision of the state of utility poles for Smart poles the MV- and LV-network

In EU's development strategies e-mobility is labelled as one of the pillars of the transition to a sustainable society, so in 2019 a notable portion of activities was also dedicated to the development of the charging Annual Report | 62 Strategic policies Annual Report | 63 Strategic policies

infrastructure for electric vehicles that the company is developing under the Driven by Electricity (Gremo na 3.4 elektriko) brand. In this area we successfully launched a service charging system in May 2019, which is being used by more and more partners. The expanded system and established roaming with other systems, which already includes Plugsurfing, DCS with brands Audi, Mercedes-Benz, BMW, Ford, Gen-I and Porsche Slovenija, Quality will soon be joined by a few other foreign systems. In the EU Interreg e-SMART project, in which we participate as an escort, we control the development of the charging infrastructure solutions, which will enable the system potential of electric vehicles to be utilised to level the system, which we believe is one of the key conditions for e-mobility to be successful.

The quality system at Elektro Ljubljana is based on established and received international standards in the Number of electric vehicle charges area of:

5 • quality (ISO 9001:2005); 5 , 7 5 8

1 • environmental management (ISO 14001:2015); 4 , 7 2

4 • occupational health and safety (OHSAS 18001:2007); and • information security (ISO 27001:2013). 2 4 , 6

7 Standards are integrated as a uniform system and represent a tool for corporate governance, which is 1

1 confirmed and demonstrated in practice, both in areas of work and in the planning of the company's long-term 6 8 8 1 , 2 9 , 8 5 8 9 4 2 , 3 development. 2 2 0 1 7 4 2 2011 2012 2013 2014 2015 2016 2017 2018 2019 The company has been acquiring system quality certificates since 1999, when it received the ISO 9001 certificate, which was upgraded by other certificates until 2006. Upgrades and new versions of standard requirements are currently being introduced in the area of the occupational health and safety system in Electricity used at charging stations (kWh) accordance with the requirements of the new ISO 45001:2018, which substitutes the current OHSAS 18001 standard. 3 7 , 7 4 4 8 5 1

, 6 In addition to the aforementioned certificates Elektro Ljubljana also holds the full Family-Friendly Company 6 3

4 certificate. 5

2 In 2019 we carried out key activities that were discussed beforehand by the company's Quality Committee , 7 4 6

1 or the council of the Management Board. These activities are set out below for each separate integrated 6 8 4 8 7 0 , 2 management system. , 5 0 0 3 0 0 3 , 9 , 8 8 1 2 8 2 7 9 2011 2012 2013 2014 2015 2016 2017 2018 2019 3.4.1 QUALITY MANAGEMENT SYSTEM

The quality management system under the ISO 9001 standard is the key element of integrated systems, as it serves as the basis for the control of operations. This is achieved with the identified and adopted business processes, to which according to specific requirements we added other management requirements under the other adopted standards and systems of management.

In 2019 the company: • created three new and supplemented 14 identified processes Annual Report | 64 Strategic policies Annual Report | 65 Strategic policies

• conducted six internal assessments in 12 processes (in accordance with the annual plan of internal standard enables companies to manage information risks more easily. In addition, legal frameworks in the assessments) and 81 internal controls; area of critical infrastructure and information security in recent periods summarise the requirements of this • updated or drafted 84 new quality system documents; standard, which can only be positive for the company's operations. • completed an annual management review in April and May; • conducted an external assessment by an external certification body according to all the standards under The company analyses IT risks according to an internal methodology for identified IT equipment. We identified which the company was certified at the end of May; and seven new items of IT equipment in 2019. In accordance with our internal act we addressed five security events • participated at the 28th annual conference of the Slovenian Association for Quality and Excellence, or incidents in 2019. A total of 9 measures were adopted on this basis, of which 5 were implemented the same Energy Section, in November. year in accordance with the adopted action plan.

We also carried out an assessment of the contractual supplier of ICT services with the aim of monitoring 3.4.2 ENVIRONMENTAL MANAGEMENT SYSTEM implementation in accordance with contractual provisions, which represents one of the important requirements of the ISO/IEC 27001:2013 standard. On the basis of a resolution adopted during a management Environment management is becoming increasingly important for every company and constitutes a social review we examined LGB, geodetski inženiring in informacijske tehnologije, d. o. o. in October 2019. The responsibility based on specific activities. Both the ISO 14001 standard and the law require business systems council of the Management Board and/or the company’s Quality Committee was briefed on the results of the to reduce their impacts on the environment, while continuously raising the bar on what is permitted in terms examination. of the environment.

The appropriateness of the company’s operations is subject to frequent inspections to verify whether it is complying with the law governing environmental management. Environmental programmes are implemented consistently, while the company invests additional resources with the aim of reducing its impacts on the environment. The environmental policy is not only a cost borne by a company but also an opportunity to generate revenue from waste management.

The company implemented a programme to manage environmental risks in 2019. Environmental aspects were also identified via technical guidelines. We updated all waste management plans.

3.4.3 OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM

Elektro Ljubljana is currently still certified according to the OHSAS 18001 standard. A preliminary external review under the requirements of the new ISO 45001:2018 was carried out in 2018. On the basis of this review the company received guidelines for its transition to the new standard. To that end, we amended more than 15 internal documents relating to the quality system and included the management of readiness and response to emergency circumstances through the application of practical preventive drills.

In 2019 we handled 38 adverse events, one of which was a serious work-related accident that ultimately resulted in the full recovery of the afflicted person. Additional measures for the mitigation of risks were drawn up and adopted, most of which were also implemented during the year.

3.4.4 INFORMATION SECURITY MANAGEMENT SYSTEM

During a time of e-commerce (electronic operations) information security has a very important role in the operations of any company. The information security management system (ISMS) under the ISO/IEC 27001 Annual Report | 66 Strategic policies Annual Report | 67 Strategic policies

3.5 OFFICERS RESPONSIBLE FOR SPECIFIC RIGHTS AT THE COMPANY

In order to oversee specific rights of employees the company appointed independent officers who are required Corporate to protect the high ethical standards of conduct in specific areas of authorised operation and have the possibility to carry out tasks in accordance with the law independent of the company's Management Board or Integrity other bodies, such as: • the information security officer; • the occupational health and safety officer; • the environmental management officer; Ethical conduct is crucial for the development of a healthy, • the officer responsible for the dissemination of information of a public nature; fair and friendly work environment. • the personal data protection officer; • the contact person for information security; Elektro Ljubljana complies with high ethical standards, and through our daily operation we carry out our • the person responsible for the control and direction of security measures relating to the implementation activities in accordance with the law, and the standards and norms of ethical conduct. We incorporated of an order, the training of persons with access to confidential data, reporting to the responsible body standards and processes into our organisational structure that helped us form an environment that enables on circumstances that affect the issuance of security authorisation, and the implementation of other our employees to comply with high ethical commitments. prescribed measures for the secure treatment of confidential data

CODE OF ETHICS

Our ethical standards of conduct are covered in our code of ethics, which upon adoption was provided to all our employees, who were also informed of all the main forms of ethical behaviour and conduct. Ethical conduct is crucial for the development of a healthy, fair and friendly work environment.

STATEMENT AGAINST MOBBING

The company's Management Board, works council and trade union all signed a statement against mobbing with which they undertook to create a work environment in which no employee would be exposed to any form of harassment or mobbing by the employer, supervisors or colleagues. By signing this statement the company undertakes to: • put in place values that will ensure positive responses among employees; • encourage innovativeness, creativity, cooperation, team work, mutual trust and open and honest communication; • respect the right of all employees to work in an environment in which there is no mobbing; and • also adopt all other measures needed to prevent and eliminate mobbing in agreement with the company's trade union and works council.

Any employee is entitled to and has the possibility to report mobbing to his/her supervisor, the human resources department, the trade union or works council. The company is obliged to establish a committee that is required to investigate the mobbing incident, and to provide legal protection and other suitable protection to the mobbing victim. Annual Report | 68 Strategic policies Annual Report | 69 Strategic policies

3.6 2. operational risks, and Risk 3. financial risks. Management 3.6.1 STRATEGIC RISKS INVESTMENT RISKS

The investment risks to which the company is exposed include the risk of the untimely implementation of Elektro Ljubljana has a comprehensive risk investments to ensure the sufficient capacities and reliability of the electricity network due to protracted management system in place. implementation (positioning) procedures or complications in public procurement procedures, the risk of exceeding planned investment values and the risk of failure to achieve the expected effects of an investment. The aim of risk management is to establish a system for controlling individual risks assessed as high that Risks associated with the planning and assessment of investments, the purchase of equipment and the could have a significant effect on the company’s adopted annual objectives and on its three-year strategic implementation of works are managed through an established system of planning investments and selecting objectives. The system in place is a tool at the Management Board’s disposal for managing risks and contractors, regular control over the justification of changes to investments, and the impact of changes on protecting the company’s business plans and objectives. Comprehensive risk management contributes to the planned costs and implementation according to plan. External risk factors, over which the company has no management of processes and helps guide the company in the right direction, which increases the likelihood direct control, are managed by participating in legislative procedures and in the drafting of spatial plans. of achieving better operating results and reduces the probability of generating operating losses or incurring other damage. Through risk management, we are able to maintain and add to the value of the company’s OWNER’S POLICY overall reputation. It also provides support for the company in achieving its objectives by facilitating consistency and the planning of future activities. It provides support for business decisions, contributes to the Risks associated with the strategy and management of the company form part of a wider category of strategic more efficient allocation of resources and capital, facilitates development and offers support to employees risks. A strategy containing poorly set objectives and a weak response to changes from the environment and the sharing of knowledge within the company, while ensuring the optimisation of business activities. The represents a risk for the company. The implementation of a strategy must be supported in such a way that comprehensive risk management system is a tool used by the Management Board and broader management strategic objectives are aligned with human resource and technological capacities, and are appropriately team to monitor the achievement of established objectives, and facilitates a rapid response when the communicated within the company. company is exposed to specific risks that are the consequence of identified causes. At the same time, vulnerabilities that dictate new and additional risk management measures are systemically identified. The company under the ownership of the state is thus, in accordance with the principles of corporate governance, committed to high standards of transparency, publishes essential information on all matters Elektro Ljubljana has a risk register in place with corresponding administrators, and assessments of integrated stated in the aforementioned principles, and focuses on areas important to both the state as the owner and and final risk, together with measures and controls. Coordination meetings shall take place on a quarterly the general public. basis. At these meetings the Management Board shall approve changes to the risk register. Management risks are associated with the adopted ownership policy, which affects the provision of Through the comprehensive and timely identification of risks, and the effective management thereof, the transparent and responsible corporate governance accompanied by the necessary levels of professionalism company’s primary objectives are: and efficiency. The purpose and objective of risk management with regard to strategy is to establish and • the achievement of strategic and business objectives; maintain an effective and cost-efficient system of internal controls that ensures risks are maintained at an • a more rapid response to changes; acceptable level in terms of financial performance and the reputation of the company. • the reduction of the impact of adverse or extraordinary events; and • the optimisation of the risk-return ratio. HUMAN RESOURCE RISKS

Presented below by individual business areas are the key risks that we assess the company will continue to be The company pays particular attention to human resource risks. The most crucial of these are: exposed to in the future. • excessively high age structure of employees in the field; • a lack of comprehensive information regarding employee satisfaction in the workplace; and Risks are classified to three categories: • risks associated with ensuring the professional qualifications of employees. 1. strategic risks, Annual Report | 70 Strategic policies Annual Report | 71 Strategic policies

We manage the risk of an excessively high age structure by employing younger employees for field work, while 3.6.2 OPERATIONAL RISKS we have also strengthened our cooperation with educational institutions in the area of electrical engineering, as we offer practical training to students, and thereby meet and identify potential future employees. RISK OF LOSS OF THE COMPANY’S PROPERTY

Good mutual relations serve as the basis for workplace satisfaction. The risk of a lack of comprehensive The objective of managing risks in the area of insurance is to ensure or preserve the value of the company’s information regarding employee satisfaction in the workplace is therefore managed by regularly measuring property in certain activities and procedures. Insuring the company’s property is crucial, as unpredictable the organisational climate and employee satisfaction, and via the implementation of the company’s code of events can have an adverse effect on the company’s operating results. It is therefore important that the ethics through which we promote core values in personal, professional and business activities, both within the company dedicate a great deal of attention to insuring its assets. The primary purpose of such insurance is to company and outside of it. To ensure the health and satisfaction of employees, the company actively supports protect property and people against various dangers or unforeseen events that could result in damage. The activities relating to the full Family-Friendly Company certificate. risks that the company is exposed in the performance of its activities are constantly changing, primarily due to technological development, and climate, environmental, socio-political and economic changes. Because those The risk associated with ensuring the professional expertise of our employees is mitigated by providing risks are constantly changing, due attention must be given in particular to the content or way in which such continuous education, training and the upgrading of employees’ knowledge, while we have also enhanced risks are managed through insurance contracts. By concluding an insurance contract, the risk of the assessed activities in our own learning and training centre in Domžale. In this way, we ensure professionally trained potential risk of an unexpected and unforeseen loss event is partly transferred from the company (the insured) and motivated employees who help the company achieve and exceed the strategic objectives set out in its to other market participants (insurers). business plan. In addition to the financial insurance the company’s assets are also protected, physically and in terms of MARKET RISKS information, against unauthorised access by transferring responsibility for the protection of property to contractors (contracts entered into with security and information companies). The transfer of indirect risks to The market risks to which the company is exposed include the risks of reduced investment activities others is carried out by concluding a contract that fixes prices for a particular product or service. and the associated cancellation, optimisation and amendment of planned construction timetables. The company manages these risks through the rationalisation of operations and the use of internal reserves, PURCHASING RISKS and by implementing market activities. Risks from the external environment include events that affect the company’s operations but over which the company has no control. It is therefore important that the company The aim of risk management in this area is to ensure the timely supply of required or ordered materials or anticipates these risks to the greatest possible extent while preparing itself for these risks through the services at a coordinated price. Purchasing risks are managed through contracts and contractual provisions, appropriate organisational structure. the monitoring of the status of orders and by implementing measures at potentially critical moments. The primary causes of such risks are the untimely delivery of required materials or services by suppliers or The aim of managing risks associated with market activity is to ensure adjustments to and the optimisation contractors, which could also result in failure by the company to comply with contractual obligations, and of timetables, and the availability of contractors due to the abandonment or rationalisation of individual the possible failure of suppliers to supply materials due to a change in raw material prices, which could result projects by clients or investors. In certain moments, this is reflected in excessive demand for implementation in the inability to supply materials at previously agreed contractual prices due to a financial loss incurred by in a specific period (excessive workload) or in a lack of work related to market activities in a given period. We the supplier. The only way to mitigate the impact of this risk is to carry out activities such as the continuous primarily address this risk through flexible planning and the coordination of the schedules of work groups on monitoring of orders and the implementation of appropriate measures at potentially critical moments (e.g. a quarterly, monthly or weekly basis, where regulated and market activities overlap. We also accept this risk the search for alternatives for the supply of materials and coordination of the final implementation deadline). through the company’s link with the activities of the construction sector, where electrical installation services are required in most projects. As part of that risk, we also accept the unavoidable element of every market Purchasing risks and, thus, the inability to implement public contracts for the purchase of equipment activity, i.e. competition that is more affordable and flexible. This risk can be further mitigated through the could lead to non-compliance with the applicable legislation. The inability to supply new equipment that is timely identification of critical moments and thus the timely implementation of measures (planning), and by technologically compliant with the requirements of laws and implementing acts could lead to the inability to increasing commercial activities, and the advertising or marketing of existing and any new market services. perform basic processes at the company. The implementation of public contracts and the timely delivery of equipment is extremely important taking account of the above.

RISKS ASSOCIATED WITH BUSINESS PROCESSES – EMPLOYEES

The aim of risk management in this area is to mitigate intentional or unintentional losses caused by employees, and other losses that involve employees. This includes any intentional or unintentional errors Annual Report | 72 Strategic policies Annual Report | 73 Strategic policies

and abuse by employees (e.g. the quality of work, the fulfilment of contractual provisions and the control RISKS ASSOCIATED WITH THE MALFUNCTIONING OF THE MEASUREMENT CENTRE’S ICT and monitoring of works), the unavailability of employees (planning), procedures regarding the treatment EQUIPMENT of employees and ensuring occupational safety (compliance with regulations and instructions). We manage these risks through appropriate planning, the fulfilment of contractual provisions and the requirements An analysis of the vulnerabilities of and threats to the measurement centre’s (MC) information- of ISO standards, and verification of pro-forma invoices and subsequent transactions (projects) concluded communication equipment was performed. The risk associated with the MC’s information-communication during the entire life cycle. These risks may be affected by events that are the result of employees’ improper equipment was assessed as high according to the ISO 27001 standard. On the basis of that analysis, we conduct due to a minor, partial or complete failure of the internal control system: the management, planning formulated a programme for developing and implementing information security, with envisaged measures to and monitoring of work, failure to comply with contractual provisions and the provisions of ISO standards, reduce threats and vulnerabilities. We have also established an information-communication infrastructure and occupational safety at work. Risks are mitigated also by attaching to each offer a table in which all the that ensures: elements of the calculation are indicated in a structured manner, including the indication of the contribution • the smooth functioning of processes, from meter to invoice; for the coverage of fixed costs and data for negotiations with the customer, by controlling and monitoring • uninterrupted scalability by increasing the number of remote capture measurement points; market transactions over the entire life cycle, and timely identification, warnings and measures in response to • the appropriate reliability and availability of the system; and potential critical events. • the system conditions required for the implementation of the security policy in accordance with the ISO 27001 standard. RISKS ASSOCIATED WITH THE FUNCTIONING OF MEASUREMENT-COMMUNICATION EQUIPMENT IT RISKS

The systematic testing of measurement equipment is in place in the process of ordering and delivering The implementation of business processes depends significantly on the horizontal management of business new measurement-communication equipment. ‘Acceptance controls’ allow the ordering party to inspect information services. Risks are broken down into several subcategories to facilitate the management of IT measurement-communication equipment in detail prior to receipt, and to reject an entire delivery in the event risks: of non-compliance. This is particularly important where, due to transportation or procedural issues, delivered • risks associated with shared IT infrastructure; equipment is not in accordance with the ordering party's specifications. This prevents the installation of • risks associated with shared central elements; equipment that could result in a malfunction or the inability to bill electricity. • risks associated with application systems, including the presentational element, and • risks associated with the provision of information services. When entering the market, we always verify the compliance of new measurement-communication equipment with the System Operating Instructions for the Electricity Distribution Network and minimum measurement Serving as the basis of all that is the assessment of risks associated with all of the company’s identified and communication equipment requirements. information resources. IT risks are analysed and managed in line with the relevant organisational regulation which, in addition to describing the procedure, also includes a method for assessing information resources, Random controls of measurement points are carried out in accordance with Articles 72 and 75 of the System assessing vulnerabilities and threats, and the definition and calculation of risks on that basis. These risks are Operating Instructions for the Electricity Distribution Network, and also on the basis of internal findings managed with the help of an annual programme of measures. Well-established and the best-known measures and the statistical sampling of active electronic energy meters. Such a sophisticated approach will raise the include: an approved and continuously tested business continuity plan, an annual analysis of information quality of control over individual populations of metering equipment in use and reduce the costs of the regular system security or a planned ethical hack into the information system, the effective management of security metrological control of entire uniform populations of energy meters in the long term. incidents, multi-level anti-virus protection, a permanently and actively controlled system for preventing abuse, the implementation of security policies, and an implemented controlled system for assigning In addition to other controls over measurement-communication equipment, we have established control over authentications and authorisations, etc. We continuously follow technological trends and introduce new the electricity flow in areas where the advanced metering infrastructure is already in place. Software has been technological solutions, taking into account realistically available resources. As a preventive measure, we adapted to control the electricity flow in the distribution network. Measurement data from the advanced ensure the cyclical replacement of information technology, taking both technological obsolescence and the metering infrastructure also facilitates the continuous monitoring of the functioning of measurement- economic purpose of the equipment into account. communications devices, so that defects and faults at measurement points can be rectified in the shortest possible time. Risks associated with the delivery and installation of measurement-communication equipment In addition to implementing the ordinary measures listed above, we also implemented a recommendation in that does not comply with globally established standards could expose the company to significant financial 2019 deriving from the external SIQ assessment in connection with the ISO 27001 standard. Security policies and strategic risks. were updated in the common interest of electricity distribution companies and the company Informatika, which provides information services for those companies. The company also followed technological trends and introduced new technological solutions in 2019, and trained employees and users as required. Annual Report | 74 Strategic policies Annual Report | 75 Strategic policies

LEGAL RISKS RISKS ASSOCIATED WITH ENVIRONMENTAL MANAGEMENT

The legal risks to which the company is exposed include the risk of financial and commercial losses due to Risks associated with environmental management include the risk of financial losses resulting from the the breach of or failure to comply properly with laws, implementing regulations, the collective agreement incorrect handling of waste, pollution of the environment due to oil spills, etc. These risks are managed and internal acts, due to the adoption of erroneous legal decisions, and due to unresponsiveness or untimely through activities in the scope of the ISO 14001 standard, primarily through the adopted waste management responses (e.g. missing deadlines for filing lawsuits and submitting responses to lawsuits, for filing appeals plan, the efficient separation and recording of waste, environmental risk assessments and environmental against the decisions of national authorities or the failure to file such appeals, and for issuing decisions in programmes adopted on the basis thereof, and by continuously improving and verifying the implementation of administrative proceedings, failure to file a request for review, etc.), all of which can lead to complaints, organisational regulations relating to the environment. claims, legal proceedings, penalties, and other material and moral damage. The register of environmental aspects has been updated and adopted in the management review process. These risks are managed through continuous training and the on-going communication of changes in Environmental programmes are also defined in accordance with the adopted methodology for all significant legislation and internal acts to employees, by adopting internal acts that cover business processes and current environmental aspects where the level of assessed risks has risen. In addition to measurable financial losses, legal issues (protection of personal data, archiving, the regulation of real estate, etc.), and through appropriate environmental incidents also comprise the risk of the loss or deterioration of the company’s reputation. To two-way communication (consultation with internal or external experts prior to adopting business decisions), address that risk, the company has undertaken to meet the highest environmental standards. Today, concern the timely inclusion of lawyers in project teams or legal issues in general, and the initialling of all contracts for the environment is now a key social category that the company manages through compliance with the ISO and correspondence by the company’s authorised persons, thereby reducing the likelihood of harmful 14001 standard, and through a system for monitoring and implementing local and national legislation in the consequences and avoiding conduct that could cause such consequences. These risks are also managed business process. There were no inspections conducted in 2019. An external SIQ assessment in 2019 in the through the computerisation of the legal office’s processes. area of the environment was very successful in terms of preventative action; no cases of non-compliance were identified. RISKS ASSOCIATED WITH OCCUPATIONAL SAFETY

Risks associated with occupational health and safety and fire safety are seen at an economic level as losses 3.6.3 FINANCIAL RISKS due to absences arising from sick leave, recourse claims, employee disability, work interruptions due to work accidents and the poor organisation of work, and at the non-economic level due to employee dissatisfaction. Active risk management at Elektro Ljubljana pursues the objective of the timely identification and response to These risks are managed through technical and organisational measures, as reflected in the adopted safety potential threats through the drafting of appropriate measures for protection against identified risks and/or declaration with risk assessment, health risk assessments for individual jobs, and in adopted fire safety rules reducing risk exposure. Due to the changing environment, the management of financial risks is an important and activities in the scope of the OHSAS 18001 standard. One programme functions in the scope of the OHSAS and necessary element of the company’s overall strategy. Active management and the management of 18001 standard to mitigate risks, which are assessed as significant. financial risks minimises the costs incurred by the company and maximises revenue, with the aim of achieving the planned business results and increasing the value of the company. The company systematically monitors, Risk management, particularly the mitigation of risks in the areas of occupational health and safety and analyses and controls the financial risks to which it is exposed in its operations, assesses the impact of those fire safety, will gradually result in a general improvement in the health and safety culture of all employees, risks on its operations, and defines the appropriate financial procedures and methods for monitoring risk as well as contractors, supervisors and the highest level of management. Also in place is a more precisely exposure. The company identifies and assesses exposure to individual types of financial risks, and implements defined system for managing undesired events, from identification, analysis and measures, to control measures aimed at protecting the company against those risks on the basis of the effects on financial and over implemented measures. The transition to the new occupational health and safety ISO 45001:2018 cash flows. standard will significantly impact the management systems, in particular the demand for an even larger role of employees in the decision-making and informing in relation to occupational health and safety. The CREDIT RISK management's commitments to the establishment and functioning of the ISO 45001 system are being additionally reinforced. A major step has been taken to the management and mitigation of risks relating to Credit risk or the risk of failure to settle contractual obligations by business partners (customers) as the result occupational health and safety with the action plan implemented for transitioning to the new standard. of insolvency is deemed one of the most significant financial risks to which the company is exposed.

A re-assessment of risks is carried out upon each undesired event and measures are adopted for the mitigation of risks and prevention of recurring incidents. Annual Report | 76 Strategic policies Annual Report | 77 Strategic policies

The company manages credit risks, in particular the risk associated with payment indiscipline (insolvency), INTEREST-RATE RISK through the following measures: • the regular control and monitoring of the credit ratings of all new and existing business partners; Due to the raising of short-term and long-term loans at domestic and foreign banks, the company is exposed • through the control over late payers; to the risk of changes in reference interest rates, which affects the costs of financing. For that reason, the • through the relevant provisions in commercial contracts (appropriate financial collateral and the company continuously monitors exposure to interest-rate risk and adopts measures to mitigate that risk. economic viability of suppliers, references etc.); • by securing trade receivables through bank guarantees, bills of exchange, suretyship insurance, The European Central Bank (ECB) continued its expansive monetary policy in 2019, i.e. by implementing enforcement drafts, advance payments and withheld funds; negative interest rates on the deposit facility for liquidity surpluses placed by banks at the ECB, and negative • through bilateral and multilateral compensation, assignations and cessions; interest rates on loans the ECB grants to commercial banks. That measure eventually led to adjustments • through the systematic and active collection of receivables; in market interest rates, as reflected in the negative EURIBOR. Adjustments by the banking sector to the • by investing in the quality of mutual business cooperation; and ECB’s expansive monetary policy measures also resulted in the higher costs of banking services. In order • with contractual partners in the area of group consumption, which for appropriate fees take up to compensate for the drop in interest income from lending to the corporate sector, the banking sector insolvency risk. introduced fees for certain services and raised the price of certain existing services. The company manages the rising costs of banking services through a diversified portfolio of banking service providers, from which it The company continuously monitors open receivables, absolute exposure and the structure thereof, and selects the optimal combination of banking services. ensures control over and the collection of due receivables. Risk management in the area of receivables is an area to which the company will also devote a great deal of attention in 2020 despite the improved economic Negative reference rates for the euro and a surplus of funds on the Slovenian and European financial growth and macroeconomic conditions. markets led to the implementation of measures to reduce exposure to interest-rate risk. The upgrading of the company’s credit rating, which resulted in the improved credit rating of banks in terms of the banking LIQUIDITY RISK sector’s portfolio of loans granted, facilitated access to more affordable bank loans with longer maturities. Through negotiations with creditor banks, the company secured new, more favourable bank loans in terms of Liquidity risk comprises the risk of mismatches between the maturities of the company’s assets and maturity and price. Through financial restructuring and deleveraging, the company successfully reduced its liabilities, which can cause liquidity problems, i.e. a shortage of cash to settle due liabilities. financial liabilities and thus its exposure to interest-rate risk. We also significantly reduced our exposure to interest-rate risk by diversifying the credit portfolio through a combination of loans with variable and fixed The company actively manages liquidity risk, and ensures sufficient cash at all times for the continuous interest rates. In 2019 we therefore continued our policy of raising foreign funding at low fixed interest rates. settlement of liabilities and for maintaining the normal scope of operations. Best business practices and the The ratio in the long-term portion of foreign sources of funding amounts to almost 80% of funding raised at law dictate that we ensure a proper level of liquidity. Article 31 of the Financial Operations, Insolvency and a fixed interest rate in the final calculation, by which the risk of interest rate growth was practically already Compulsory Dissolution Act (ZFPPIPP) states that a company must regularly settle its liabilities as they fall eliminated. ECB's forecasts gravitate in the direction of the conclusion of the policy of negative interest rates due, and manage its resources and investments in such a way that ensures it is capable of settling all due when inflation reaches 2%. liabilities at all times. CAPITAL ADEQUACY The company secures short-term and long-term sources of financing in accordance with the Decree on the Terms, Conditions and Methods of Borrowing by Legal Entities referred to in Article 87 of the Public Finance The ZFPPIPP states that a company must ensure it has at its disposal, at all times, adequate capital with Act. The company dedicated a great deal of attention to the aforementioned risk during the past year, and regard to the scope and type of transactions it executes, and with regard to the risks to which it is exposed in further eased the burden on its liquidity position through an active approach to the refinancing of existing the execution of those transactions. That law also states that a company must be solvent in the long term, i.e. debt and the restructuring of liabilities with new, more favourable loans in terms of costs and maturity. the extent of its long-term sources of financing is sufficient with regard to the scope and type of transactions it executes, and with regard to the risks to which it is exposed in the execution of those transactions. The company’s liquidity management policy comprises: • the continuous monitoring of the company’s solvency; The concept of capital adequacy focuses on the management of risks associated with a company’s solvency, • the adoption of appropriate measures to mitigate the causes of insolvency; and is based on the principle that a company must be continuously capable of settling its due liabilities by • the planning of future monetary liabilities and cash inflows for the coverage thereof; and established deadlines and must adapt its financial policy accordingly. • the appropriate refinancing of loans and lending conditions. Annual Report | 78 Strategic policies Annual Report | 79 Strategic policies

The company’s risk management measures in the area of capital adequacy include: 3.7 • long-term financial planning; • the regular monitoring of long-term solvency; and • the verification and improvement of capital adequacy. Business Conditions in 2019 The company’s capital adequacy was further stabilised in 2019 in the context of a high level of profitability and and Plans for 2020 the continuing process of the intensive restructuring of long-term funding.

3.7.1 MACROECONOMIC ENVIRONMENT

Economic growth stood at 2.4% in 2019, down significantly on the previous year (4.1%). Lower growth was mostly impacted by the lower growth in investments and exports, which followed lower economic growth in Slovenia's trade partners and major uncertainty in the international environment. Growth in construction investments remained high at the beginning of the year, and practically stalled during the year, slowing down most in the segment of commercial buildings and civil engineering works. The slowdown in the growth of exports and industrial production began to spread more intensely to the service sector at the end of the year. Growth in GDP continued to be significantly affected by household consumption, which was supported by favourable developments on the labour market and growth in disposable income.3

The year 2020 was characterised by the coronavirus pandemic, which broke out in China, spread to Italy and to other European countries beside Slovenia. The rapid spread of the epidemic required emergency and extensive measures for the protection of health and lives, which significantly affected economic activity. If the significantly hindered operations of the production and service sector last only two months and are then gradually restored to the level prior to the epidemic outbreak, a 6–8% decline in GDP is expected.4 The protracted stabilisation of the economic situation most likely cannot be expected before the development and mass use of a vaccine.

3.7.2 REGULATORY FRAMEWORK

The commercial public service of the electricity distribution operator in the territory of the Republic of Slovenia is carried out by SODO, the exclusive holder of a concession to perform this service. Since electricity distribution companies are the owners of the electricity distribution infrastructure and the capacities required for the performance of the tasks of the distribution operator, SODO has concluded contracts on the lease of the electricity distribution infrastructure and provision of services for the distribution operator with five distribution companies, i.e. Elektro Celje, Elektro Gorenjska, Elektro Ljubljana, Elektro Maribor and Elektro Primorska.

Electricity distribution companies provide SODO with the following services based on the relevant agreement: infrastructure maintenance, organisation of on-call (duty) services, management and functioning of the electricity distribution network, network development planning, preparation and management of investments

3 Institute of Macroeconomic Analysis and Development, February 2020. 4 Assessment of the economic situation of 23 March 2020, Institute of Macroeconomic Analysis and Development Annual Report | 80 Strategic policies Annual Report | 81 Strategic policies

in the electricity infrastructure, monitoring of the quality of the electricity supply and the measurement of 3.7.3 BUSINESS OBJECTIVES FOR 2020 AND ACHIEVEMENT OF OBJECTIVES/ electricity, access to the distribution network and other services for network users. GOALS IN 2019

Contractual values for the lease of the electricity infrastructure and the provision of services are based 2020 plan Actual in 2019 2019 plan on the eligible costs defined by the Energy Agency for each annual regulatory period. The Energy Agency Net sales revenue (EUR million) 84.9 86.8 81.8 defined regulatory rules in July 2018 for the regulatory period 2019–2021 in theAct on the Methodology for Net profit or loss (EUR million) 12.9 13.9 11.8 Defining the Regulatory Framework and the Methodology for Calculating the Network Charge for Electricity EBIT (EUR million) 14.7 16.9 15.0 5 6 Operators . At the end of 2018, by way of a decision , it also defined the regulatory framework for the activities EBITDA (EUR million) 43.8 45.7 42.6 of the distribution system operator (SODO), as well as for lessors and maintenance technicians. Value added (EUR million) 77.5 78.6 75.0 Investments (EUR million) 36.6 39.8 36.8 A major amendment to the act for the new regulatory period that impacts the operations of the company the Financial debt as at 31 December (EUR million) 86.0 91.1 89.9 most is a change to the regulated return. During the regulatory period 2016–2018 the recognised return stood Number of employees as at 31 December 874 846 865 at 4.13% on the existing energy infrastructure as at 31 December 2010 and 7.14% on the energy infrastructure activated since 2011, while it is calculated according to the single rate of 5.26% during the 2019–2021 Return on assets (ROA) 2.60% 2.81% 2.41% regulatory period. In addition, the new regulatory period adds an exemption of the period from regulation with Return on equity (ROE) 4.00% 4.39% 3.74% quality of supply in case of an extraordinary event, additionally recognising costs for the maintenance of smart EBITDA margin 44.2% 44.4% 44.0% network assets within the framework of uncontrolled operating and maintenance costs, claiming additional Net financial debt/EBITDA 1.91 1.94 2.05 dedicated eligibility of costs for research and innovation, and an incentive for EU funds for the coverage of Investments/net sales revenue 43.1% 45.8% 45.0% these costs acquired free-of-charge, etc. Value added/employee1 (EUR thousand) 90.8 94.0 87.3

SAIDI - duration of interruptions/customer2 39.81 46.61 40.05 SAIFI - number of interruptions/customer2 0.95 1.04 0.96 MAIFI – number of momentary interruptions/customer 5.20 4.76 5.30 Proportion of losses/distributed electricity 4.40% 3.89% 4.45%

1 average number of employees based on hours worked 2 unplanned interruptions of service – own cause

Elektro Ljubljana's business plan for 2020 and for the period 2020–2022 was drafted in October 2019 on the basis of the valid investment plan of the electricity distribution network operator in the Republic of Slovenia for a three-year period 2019–2021 and the 10-year development plan in the area covered by Elektro Ljubljana for the period 2019–2028 from July 2018, taking into account the regulatory rules set out by the Energy Agency in July 2018 for the new regulatory period 2019–2021 in the Act on the Methodology for Defining the Regulatory Framework and the Methodology for Calculating the Network Charge for Electricity Operators. The business plan takes into account to the largest extent possible the expectations of the manager of the capital assets of the state (Slovenian Sovereign Holding).

KEY OBJECTIVES OF ELEKTRO LJUBLJANA ACCORDING TO THE BUSINESS PLAN FOR 2020

• achievement of planned profitability (4% ROE); • management of the company's level of indebtedness (net financial debt / EBITDA below 1.91); • planned investments in the amount of EUR 36.6 million and activation of investments in accordance with the plan (non-activated investments below EUR 8.5 million at the end of 2020); • ensuring the optimal HR structure in the scope of the target number of employees (874 at the end of 5 Official Gazette of the Republic of Slovenia, Nos. 46/18, 47/18 - corr., 86/18, 76/19, 78/19 - corr. 2020); 6 Decision of Energy Agency no. 211-42/2018-58/452 of 11 December 2018 Annual Report | 82 Strategic policies

• optimisation of warehousing operations with the goal of decreasing inventories of material (EUR 2.1 million at the end of 2020); • further sale of assets not required for business purposes.

Due to the new coronavirus pandemic we know that our objectives will be difficult to achieve in 2020. However, at the time of compiling the company's annual report the economic consequences are still very difficult to predict due to the uncertainty surrounding the spread of the virus and different responses thereto.

Contracted economic activity in the operation of Elektro Ljubljana first entails a reduction in the transmission of electricity. Lower electricity consumption and exemption from payment of a portion of the network charge for certain users will result in lower inflows from the billed network charges. Lower network charges do not impact the company's operating profit, as it is charged on behalf of SODO, but the company's cash flow will nevertheless decline significantly. We also expect poor payment discipline due to liquidity problems in the corporate sector. All the government's measures are still unknown at the time of compiling our annual report, but we expect nonetheless that these measures will be coordinated also in our business relationship with the distribution operator.

Due to the suspension of works on the company's investment projects, the risks associated with the termination of supply chains and thus the delays in the supply of equipment and extension of delivery periods we expect investments to decline below the planned levels. We currently do not expect any deviations from our plans in the area of maintenance of the electricity distribution infrastructure, electricity measurement and quality of electricity supply. It is difficult to predict the response of investors in the market segment. However, a negative impact on operations is expected. 04 Business Report

We achieved all the goals we set and even surpassed many of them. Together we can plan and fulfil the objectives we set for ourselves. Annual Report | 86 Business report Annual Report | 87 Business report

4.1 Net sales revenue amounted to EUR 86,815.3 thousand in 2019, an increase of 2.9% relative to 2018. The largest contribution to the increase came from higher revenue from the sale of electrical installation services Performance and higher revenues from the regulated activity. Net sales revenue was 6.1% higher than planned. Revenue from the leasing of the electricity distribution infrastructure and services provided for SODO Analysis in 2019 amounted to EUR 77,495.8 thousand in 2019, an increase of EUR 1,196.9 thousand or 1.6% relative to 2018. Higher revenues are mostly the result of higher depreciation and lower revaluation operating revenue, which in accordance with the regulator's methodology is taken into account for the coverage of eligible costs of the regulated activity. Revenue vis-à-vis SODO was 3.2% higher than planned. Elektro Ljubljana ended the 2019 financial year with a net profit of EUR 13,912.4 thousand. Other sales revenue in the amount of EUR 9,319.5 thousand was generated primarily on account of higher revenue from electrical installation services for the market, which was up EUR 1,230.3 thousand or 15.2% Earnings before interest and taxes (EBIT) was down distribution infrastructure during the new regulatory relative to the previous year, and 38.5% higher than planned. EUR 3,363.6 thousand on the previous year, but was period, but the lower return was also caused EUR 1,858.3 thousand or 12.4% higher than planned primarily by higher labour costs, lower revenues Revenue from capitalised own products and services in the amount of EUR 12,363.8 thousand was down by for 2019. from the effectiveness of operations relating to EUR 1,436.9 thousand or 10.4% relative to the previous year, and 3.9% higher than planned. losses of electricity in the network, reduction Return on equity (ROE) was at 4.4%, down 1.2 in recognised controlled costs of operation and Other operating revenue amounted to EUR 3,853.5 thousand in 2019, down EUR 1,769.5 thousand or 31.5% percentage points on 2018, while the return on maintenance and lower revenues generated from relative to the previous year, primarily as the result of lower insurance benefits received and lower revaluation assets (ROA) stood at 2.8% and declined by 0.7 capitalised own products. The better result in 2018 operating revenue generated from the sale of fixed assets, and was 26.5% higher than planned. percentage points in 2019. was also significantly impacted by the received insurance benefits and SODO reconciliation for The lower return is in essence the result of a previous years. EXPENSES reduction in recognised return on the electricity in EUR 2019 2018 R19/R18

Costs of materials 10,998,415 11,955,656 92.0 OPERATING PROFIT OR LOSS Costs of services 13,054,576 12,125,746 107.7 in EUR 2019 2018 A 2019/A 2018 Labour costs 32,832,835 31,647,486 103.7 Operating profit or loss 16,885,346 20,248,991 83.4 Write-downs 28,838,895 27,411,391 105.2 Net finance income -573,842 -435,757 131.7 Other operating expenses 422,540 422,628 100.0 Other operating result -7,494 14,650 Finance costs 1,423,965 1,361,276 104.6 Pre-tax profit 16,304,010 19,827,884 82.2 Other costs 34,870 37,408 93.2 Net profit or loss 13,912,351 16,965,742 82.0 Total costs 87,606,096 84,961,591 103.1

4.1.1 REVENUES AND EXPENSES The costs of materials amounted to EUR 10,998.4 thousand, a decrease of EUR 957.2 thousand or 8% relative to the previous year, which was mostly the result of lower costs of materials used for internal investments. REVENUES The costs of materials were 17.1% higher than planned mostly due to higher costs of materials for the provision in EUR 2019 2018 R19/R18 of market services. Net sales revenue 86,815,271 84,388,121 102.9 Capitalised own products 12,363,790 13,800,719 89.6 Costs of services amounted to EUR 13,054.6 thousand, up EUR 928.8 thousand or 7.7% on 2018, which was Other operating revenues 3,853,546 5,623,058 68.5 primarily the result of higher costs of third-party services in the provision of the company’s services for the Finance income 850,123 925,519 91.9 market, and was 8.4% higher than planned. Other revenue 27,376 52,058 52.6 Total revenue 103,910,106 104,789,475 99.2 Annual Report | 88 Business report Annual Report | 89 Business report

Labour costs, which stood at EUR 32,832.8 thousand in 2019, were up 3.7% on 2018 mostly due to wage indexation Net finance expenses amounted to EUR 573.8 thousand and were up EUR 138.1 thousand or 31.7% on 2018, in accordance with the company-level collective agreement, higher performance bonus payments and higher than primarily as a result of lower revenue from the investment in GEN-EL in 2019 and higher expenses from realised provisions for jubilee benefits and termination benefits. These costs were 1.2% higher than planned. hedging against interest rate risk and financial liabilities for the lease of fixed assets. The aforementioned expenses were 35.7% lower than planned. Amortisation and depreciation expenses amounted to EUR 27,628.7 thousand, an increase of EUR 1,334.2 thousand or up 5.1% relative to 2018, and 2.7% higher than planned. A portion of the increased amortisation was the result of changes to accounting standards in connection with the booking of leases. 4.1.2 FINANCIAL POSITION

Revaluation operating expenses amounted to EUR 1,210.2 thousand in 2019, an increase of EUR 93.3 Elektro Ljubljana’s total assets amounted to EUR 499,978.4 thousand at the end of 2019, an increase of EUR thousand or by 8.4% relative to 2018, and were 83.4% higher than planned. 10,377 thousand or 2.1% relative to the previous year.

ASSETS

STRUCTURE OF OPERATING REVENUE AND EXPENSES IN 2019 in EUR 31. 12. 2019 % 2019 31. 12. 2018 % 2018 A 2019/A 2018 % Long-term assets 474,149,522 94.8% 461,139,079 94.2% 102.8 12.0 Property, plant and equipment 453,413,589 90.7% 442,031,887 90.3% 102.6 Capitalised own products and services Intangible assets and long-term deferred expenses and 4,436,416 0.9% 3,982,908 0.8% 111.4 3.7% accrued revenue % Other operating revenues Long-term financial assets 15,171,027 3.0% 14,029,457 2.9% 108.1 9.0 Deferred tax assets 1,128,490 0.2% 1,094,827 0.2% 103.1 Other sales revenue Current assets 25,828,923 5.2% 28,462,412 5.8% 90.7 Inventories 1,931,998 0.4% 2,274,668 0.5% 84.9 % Current financial assets 96 0.0% 6,325 0.0% 1.5 38.4 Current operating receivables 16,606,183 3.3% 18,221,352 3.7% 91.1 Revenue from the lease of infrastructure Cash and cash equivalents 2,508,600 0.5% 3,117,065 0.6% 80.5 Current deferred expenses and accrued revenue 4,782,046 1.0% 4,843,002 1.0% 98.7 Total assets 499,978,445 100.0% 489,601,491 100.0% 102.1 36.8% Revenue from services provided for SODO

Property, plant and equipment, which account for 91% of the company’s total assets, were up by EUR 11,381.7 thousand or 2.6% due to high investments, while intangible assets increased by EUR 561.3 thousand or 16.6% mostly also due to changes to accounting standards connected with the booking of leases. 0.5% Other operating expenses Long-term deferred expenses and accrued revenue declined by EUR 107.8 thousand or 18%. % 33.5 Within the scope of long-term financial assets the company disclosed its investments in the subsidiary Write-downs % 12.8 Elektro Ljubljana OVE and in GEN-EL, Informatika, Stelkom and Zavarovalnica Triglav. Investments increased Costs of materials by EUR 1,141.6 thousand or by 8.1% primarily due to the transfer of sHPP Sava Brod to the subsidiary and to a lesser extent due to the revaluation of the investment in Zavarovalnica Triglav. % 15.2 Current operating receivables were down by EUR 1,615.2 thousand or 8.9% relative to the end of 2018, Costs of services 38.1% primarily as the result of lower trade receivables for network charges and lower receivables from SODO. Labour costs The inventories of materials were down by EUR 342.7 thousand or by 15.1% at the end of 2019, while the balance of cash was down by EUR 608.5 thousand or by 19.5% at the end of 2019. Annual Report | 90 Business report Annual Report | 91 Business report

The majority of current deferred expenses and accrued revenue comprises current accrued revenues from the 4.1.3 FINANCIAL PERFORMANCE INDICATORS reconciliation of leases and services for SODO. Current deferred expenses and accrued revenue were down by

EUR 61 thousand or 1.3% relative to the end of 2018. INVESTMENT RATIOS 2019 2018 2017 2016 2015

Fixed asset turnover ratio LIABILITIES 0.915 0.910 0.905 0.916 0.908 = fixed assets/assets in EUR 31. 12. 2019 % 2019 31. 12. 2018 % 2018 R19/R18 Investment financing ratio = (long-term financial assets + current financial assets + investment property)/ 0.030 0.029 0.027 0.027 0.019 Equity 328,198,761 65.6% 319,939,892 65.3% 102.6 assets Provisions and long-term accrued expenses and deferred 57,902,778 11.6% 54,728,936 11.2% 105.8 Long-term investment ratio revenue = (fixed assets + long-term deferred expenses and accrued revenue + long-term 0.948 0.942 0.936 0.949 0.934 Long-term liabilities 74,118,153 14.8% 71,406,092 14.6% 103.8 financial assets + investment property + long-term operating receivables)/assets Current liabilities 37,358,236 7.5% 38,961,567 8.0% 95.9 FINANCING RATIOS Equity financing ratio Current accrued expenses and deferred revenue 2,400,517 0.5% 4,565,004 0.9% 52.6 0.656 0.653 0.641 0.641 0.626 = equity/liabilities Total equity and liabilities 499,978,445 100.0% 489,601,491 100.0% 102.1 Long-term financing ratio = (equity + long-term liabilities + provisions + long-term accrued expenses 0.920 0.911 0.918 0.904 0.910 and deferred revenue)/liabilities

The company’s equity was up by EUR 8,258.9 thousand or 2.6%, while EUR 5,478.3 thousand was earmarked HORIZONTAL FINANCIAL STRUCTURE RATIOS Equity to fixed assets ratio for the payment of dividends for 2018 in accordance with the relevant general meeting resolution. 0.718 0.718 0.708 0.700 0.690 = equity/fixed assets Long-term assets coverage ratio Provisions amounted to EUR 9,476.4 thousand and were up by EUR 543.3 thousand or 6.1%, primarily due = (equity + long-term liabilities + provisions + long-term accrued expenses 0.971 0.967 0.980 0.953 0.974 and deferred revenue)/long-term assets to an increase in provisions for jubilee benefits and termination benefits.Long-term accrued expenses and Quick ratio 0.063 0.072 0.148 0.047 0.201 deferred revenues that stood at EUR 48,426.4 thousand as at 31 December 2019 increased by EUR 2,630.6 = liquid assets/current liabilities thousand or 5.7% in 2019 mostly due to the increase in free acquisitions and EU funds gained free-of-charge. Accelerated liquidity ratio 0.481 0.490 0.626 0.430 0.686 = (liquid assets + current receivables)/current liabilities Current ratio The majority of other long-term liabilities comprise long-term financial liabilities, which amounted to EUR 0.650 0.654 0.776 0.538 0.734 = current assets/current liabilities 73,638.4 thousand at the end of 2019, and increased by EUR 2,492.9 thousand or 3.5% relative to the previous EFFICIENCY RATIOS year, and long-term operating liabilities, which increased by EUR 207.7 thousand or by 106%. Operating efficiency ratio 1.196 1.242 1.210 1.217 1.195 = operating revenue/operating expenses Overall efficiency ratio Current financial liabilities in the amount of EUR 17,452.2 thousand were down by EUR 3,871.2 thousand 1.186 1.233 1.204 1.241 1.163 = income/expenses or 18.2% relative to the end of 2018, while current operating liabilities were up by EUR 2,267.8 thousand or PROFITABILITY RATIOS 12.9%. Return on assets (ROA) ratio 0.028 0.035 0.030 0.036 0.027 = net profit or loss/average assets Current deferred revenues and accrued expenses decreased by EUR 2,164.5 thousand at the end of 2019, Return on equity (ROE) ratio 0.044 0.056 0.047 0.059 0.043 mostly as a result of SODO preliminary reconciliation. A surplus was disclosed from leases for the electricity = net profit or loss/average equity (without net profit or loss for the reporting year) Dividend to share capital ratio distribution infrastructure in 2018 and a deficit in 2019 from leases and services. 0.034 0.029 0.031 0.040 0.034 = dividends paid in the financial year/average share capital

Long-term assets as a proportion of assets increased by 0.6 percentage points at the end of 2019, mostly due to an increase in the company's fixed assets and long-term financial assets. The proportion of current assets reduced accordingly, mostly due to a decrease in current operating receivables, cash and inventories.

The proportion of assets financed by equity increased by 0.3 percentage points, while the proportion of the total long-term sources of financing increased by 0.9 percentage points. Long-term coverage of non-current assets thus increased by 0.4 percentage points. Annual Report | 92 Business report Annual Report | 93 Business report

Short-term coverage of current liabilities was down by 0.4 percentage points at the end of 2019. Cash and 4.2 other current assets, even inventory, could be used on 31 December 2019 to settle 65% of the current liabilities.

Return on equity (ROE) was at 4.4%, down 1.2 percentage points on 2018. Return on assets (ROA) stood Distribution at 2.8% in 2019 and exceeded the expectations of the manager of capital assets of the state (Slovenian Sovereign Holding) by 0.05 percentage points, but was down 0.7 percentage points relative to 2018. of Electricity

4.2.1 DISTRIBUTION NETWORK

Elektro Ljubljana manages distribution transformer stations (DTS) of varying voltage levels and transmission ratios: two 110/35 kV DTS, 27 110/20/10 kV DTS and one 35/20/10 kV DTS. In addition, 26 distribution stations (DS) ensure the reliable supply of electricity to users. We are connected through the transmission network to the 400/220/110 kV Beričevo DTS, 220/110 kV Kleče DTS, 110/35 kV TET DTS and 110 kV Hudo DS.

We manage a total of 17,686.4 km of cable lines over an area of 6,166 km2, and supply power to 342,951 customers via more than 5,552 SN/0.42 kV transformer stations (TS). The installed power of power transformers is more than 1.88 GVA and of distribution transformers over 2.36 GVA, and has more than doubled since 1980.

The number of distribution devices has increased from year to year, an indication of the rapid development of the network and an increase in consumption. Exceptionally, the 35 kV and 10 kV network is being gradually phased out or replaced by a voltage level of 110 kV or 20 kV.

NUMBER OF DTS, DS AND TS

number of TS number of DTS and DS

6,000 60

5,500 55

5,000 50

4,500 45

4,000 40

3,500 35

3,000 30

2,500 25

2,000 20

1,500 15

1,000 10

500 5

0 0 1992 1995 2013 1983 2016 2019 1998 1989 1986 2001 2010 1980 2007 2004 Year TS DTS DS Annual Report | 94 Business report Annual Report | 95 Business report

INSTALLED POWER OF POWER TRANSFORMERS AND DISTRIBUTION TRANSFORMERSV LENGTH OF THE CABLE NETWORK BY VOLTAGE LEVEL

(kVA) 0.2 kV – 20 kV (km) 110 kV and 35 kV (km) 2,500,000 6,500 12 6,000 11

5,500 10 2,000,000 5,000 9 4,500 8 1,500,000 4,000 7 3,500 6 3,000 1,000,000 5 2,500 4 2,000 3 500,000 1,500 1,000 2 500 1 0 0 0 1992 1995 2013 1983 2016 2019 1998 1989 1986 2001 2010 1980 2007 2004 1992 1995 2013 1983 2016 2019 1998 1989 1986 2001 2010 1980 2007 2004 Year Leto MV/LV HV/MV 20 kV CL 10 kV CL 1–0.4–0.2 kV CL Public lighting CL 110 kV CL 35 kV CL

LENGTH OF THE NETWORK BY VOLTAGE LEVEL 4.2.2 FLOW OF ELECTRICITY 0.2 kV – 20 kV (km) 35 kV, 110 kV (km) 14,000 400 The consumption of electricity by Elektro Ljubljana’s distribution network from the transmission network 13,000 12,000 350 (ELES), distribution companies (Elektro Celje and Elektro Gorenjska) and directly connected electricity 11,000 producers totalled 4,434,014 MWh in 2019, a decrease of 0.3% relative to 2018. 300 10,000

9,000 250 CONSUMPTION OF ELECTRICITY BY ELEKTRO LJUBLJANA (IN GWH) 8,000 7,000 200 +3.3% +1.6% -0.3% +1.6% 6,000 5,000 150 4,000 100 3,000

2,000 50 1,000 .5 .4 .0

0 0 .5 .8 9 4 0 9 4 4 3 7 4 7 1992 1995 2013 1983 2016 2019 1998 1989 1986 2001 2010 1980 2007 2004 , 1 , 2 , 3 , 4 , 4 4 4 4 4 Leto 4 20 kV 10 kV 1–0.4–0.2 kV with public lighting 110 kV 35 kV 2015 2016 2017 2018 2019

A total of 4,248,674 MWh of electricity was distributed to end-customers in Elektro Ljubljana’s distribution 7 LENGTH OF LINES MANAGED BY ELEKTRO LJUBLJANA BY VOLTAGE LEVEL supply area in 2019. Household customers accounted for 27.6% of total electricity supplied, while business Voltage level 110 kV 35 kV 20 kV 10 kV 1–0,4–0,2 kV Total customers accounted for 72.4% of electricity. A total of 64.7% of consumption by business customers is at

Length in km 313.8 55.8 4,872.8 839.3 11,604.7 17,686.4 medium voltage, with 35.3% at low voltage.

The loss of electricity in the distribution network amounted to 165,365 MWh in 2019 or 3.89% of the total electricity delivered to end customers. 7 Lines managed by Elektro Ljubljana comprise devices owned by Elektro Ljubljana, by SODO and third parties. The systemic length by operating voltage is indicated. Annual Report | 96 Business report Annual Report | 97 Business report

LOSS OF ELECTRICITY IN ELEKTRO LJUBLJANA'S DISTRIBUTION NETWORK (IN GWH) 4.3 183.6 179.5 172.4 170.4 165.4 Development of the Distribution Network

In the scope of the development of the electricity distribution system (EDS) 2015 2016 2017 2018 2019 we monitor and analyse energy and spatial data in our supply area and thus identify in good time the needs for the construction and renovation of the EDS.

The recognised percentage of loss in Elektro Ljubljana's distribution network for 2019 stood at 4.37%,8 i.e. Elektro Ljubljana as the largest electricity distribution company in the country is actively involved in the 185,667 MWh of electricity. Operations from the quantity difference between the recognised and actual losses drafting and implementation of energy and spatial laws. (20,302 MWh) were successful and generated a positive effect on Elektro Ljubljana's operating result.

The issuance of guidelines to spatial acts increased by 44% in the period 2015–2018, while the issue of The maximum total peak load on the consumption side in 2019 was recorded in January, at 711.3 MW. It opinions to spatial acts increased by 32%, from 63 in 2015 to 83 in 2019. All the municipalities in Slovenia decreased by 2.1% relative to the previous year. were forced to draft new municipal spatial plans in previous years, which impacted the rising number of MAXIMUM PEAK LOAD (IN MW) applications for the issue of guidelines and opinions.

726.7 NUMBER OF DRAFTED GUIDELINES AND OPINIONS TO SPATIAL ACTS 702.0 711.3

661.8 32 642.1 2019 83

62 2018 89

63 2017 71 2015 2016 2017 2018 2019 59 2016 76

43 2015 63

Drafting of guidelines to spatial acts Drafting of opinions to spatial acts

Most of our development work is completed by defining optimal technical solutions for the connection of new distribution system users and increasing the connection power for existing distribution system users, for ensuring the appropriate quality of the power supply for distribution system users, for reducing electricity losses in the distribution system, and for optimising costs for the construction of the EDS.

8 Decision of Energy Agency no. 211-42/2018-58/452 of 11 December 2018. Annual Report | 98 Business report Annual Report | 99 Business report

In 2019 we participated in the drafting of Slovenia's Energy Concept and the National Energy Development INVESTMENTS BY INVESTMENT CATEGORY (EUR MILLION) Plan (NEDP), which will set out the fundamental guidelines for the drafting of the revised Development Plan 39.8 for the period 2021–2030. 37.5 32.2 32.9 5.1 7.0 27.6 5.4 5.3 In 2019 we carried out 58 electricity analyses in which we analysed the distribution network’s development 7.9 5.3 6.8 3.9 alternatives for increasing the connection power of existing system users and connecting new system users. 4.1 3.2 15.9 14.7 We analysed the increases in connection power in the Logatec commercial zone (CZ) and Zapolje commercial 16.4 14.6 and industrial zone (CIZ) in Logatec, Komenda CZ, in Ljubljana in the area of the Technological Park, Brdo, 15.0 Stegne, Litostroj, Rudnik and Brnčičeva cesta in Črnuče, in the area of Škofljica CIZ, Podskrajnik CZ in Cerknica 11.2 12.8 5.6 7.2 and at the sawmills in Stari trg. We analysed the development opportunities to expand the distribution 2.6 2015 2016 2017 2018 2019 network in the region between Litostroj and Vič, Vrhnika and Ljubljana, Hrastnik and Trbovlje and between HV MV and LV Secondary equipment Other Kamnik and Stahovica.

We performed seven electricity analyses for the connection of electricity charging stations with up to a 700 kW connection power on motorway rest areas and 10 electricity analyses for the connection of charging stations Breakdown of investments over a five-year period indicates a continuous increase of investments in HV with a connection power of 150 kW–300 kW on P + R rest areas, and in front of commercial buildings and facilities, while the size of the investments in MV and LV facilities during these years remained approximately major shopping centres. at the same level. Value of investments in secondary equipment has risen over the last two years due to the construction of the advanced metering system. Investments in IT, in 2019 due to the change in accounting We performed 600 electricity analyses in which we verified the possibility of connecting small producers of standards relating to the booking of leases, contributed most to the increase in realisation in the segment electricity from renewable energy sources (RES), self-supply power plants and the cogeneration of heat and Others in years 2016 and 2019. electricity (CHE) to the distribution system. We also performed three preliminary analyses on the possibility of connecting wind power plants with an electricity connection power of 10,000 kW and two plants with an Among investments in 2019 we emphasise below the investments in HV, MV and LV-level facilities and in electricity connection power of 999 kW. secondary equipment.

4.3.1.1 INVESTMENTS IN HV FACILITIES 4.3.1 INVESTMENTS Investments in a group of HV facilities amounted to EUR 12,798 thousand or 97% of the planned value, which Planned investments according to Elektro Ljubljana's business plan for 2019 amounted to EUR 36,800 was EUR 13,208 thousand and 32% of the total realisation of investments in 2019. thousand, with realisation reaching EUR 39,774.7 thousand and exceeding the plan by 8.1%. Key facilities in this segment of investments: construction of the 110/20 kV Ivančna Gorica DTS, construction Investments were up 6% on 2018. In the segment of high-voltage (HV) facilities realisation was up 13.9%, of the 110/20 kV LPC (Ljubljana passenger centre) DTS and first phase of the 2 x 110 kV Grosuplje–Trebnje while being down 7.6% in the segment of the medium-voltage (MV) and low-voltage (LV) distribution network. TL on the Trebnje–Ivančna Gorica section, and the reconstruction of the 110/20 kV Hrastnik DTS, and the In terms of secondary equipment realisation in 2019 was at the level of the previous year, i.e. recording an commencement of the reconstruction of the 110/20 kV Kamnik DTS. increase of 1.2%. Construction works for the 110/20 kV Ivančna Gorica DTS were completed at the end of 2018. The supply of primary and secondary equipment, energy transformers of 31.5 MVA apparent power and the performance of electric installation work took place until the end of the year. After its completion in 2020 the new Ivančna Gorica DTS will enable the further development of the urban and wider area of Ivančna Gorica and improve the reliability of the power supply, as the permitted voltage drops in this area were now exceeded in normal and backup (extraordinary) operating conditions. The construction of this facility will also ease the transformation burden at the Grosuplje DTS, which in the event of a transformer failure no longer has the sufficient capacities to operate. Annual Report | 100 Business report Annual Report | 101 Business report

Construction of the 110/20 kV LPC (Ljubljana passenger centre) DTS will enable the connection of new users INVESTMENTS IN THE MV- AND LV-NETWORK IN 2019 BY PURPOSE in the Ljubljana city centre and the beginning of the migration of the 10 kV network to the 20 kV voltage level. % % By migrating to the 20 kV voltage level, the Bežigrad DTS, LJ-Centre DTS, Šiška DTS, Vič DTS and the Žale DTS % 7 5 % will be relieved of their burden. The facility is in the final phase of construction. Secondary equipment for 4 Withdrawals Other 5 Simultaneous construction New connections based protection, control, measurements and own use was supplied. Electric installation works were carried out until of the utilities infrastructure on issued connection approvals the end of the year and will be completed in 2020. 9% 7% Easing the burden Improvement In 2018 construction of the first phase of the2 x 110 kV Grosuplje–Trebnje TL began, which in its final total on the network of electricity quality length of 34 kms will improve the reliability of the supply of power to the Dolenjska region, as it will ensure the basic and backup supply of electricity to the Ivančna Gorica DTS and the backup power supply of the Trebnje DTS. In 2019 electric installation works were done in the construction of the first phase of the transmission line, i.e. on the Trebnje–Ivančna Gorica section. In 2020 we plan to conclude the investment when the fibre- optic cable system is installed on the line. 63% Revitalisation The comprehensive renovation of the facility at the 110/20 kV Hrastnik DTS was completed, which after the of the network Potoška vas DTS and the Radeče DTS is the third station at which the migration of the 35 kV supply voltage to the new 20 kV voltage in the area of the Trbovlje DU is being carried out. The DV Laško transmission field and the TR1 110 kV transformer field were both connected. The second phase of works was completed, i.e. the electric installation works for the rearrangement of cabinets for the control, protection, measurement and own The following major investments, in terms of financial or physical scope, were completed or constructed in use of the facility to its final state. Transfer against payment was also completed for a portion of the 110 kV 2019: switchgear to the system operator ELES. • the cabling of the existing 20 kV Dane transmission lines (section Jelenov Žleb–Bela voda) and 20 kV Ribnica transmission lines (section Grčarice–Gotenica), the construction of the 20 kV Mahovnik– With the installation of the third transformer TR3 of 31.5 MVA apparent power the reconstruction of the Agroservis–Mahovniška cable line, the renovation works on the 20 kV Velike Lašče transmission Kamnik 110/20 kV DTS will facilitate preserving the independent operation of the DTS and an increase in line (Strletje branch), the 20 kV Poljanska dolina (Dol branch) and the 20 kV Žlebič transmission electric connection power to existing users, such as Calcit, and the connection of new users to the Komenda line, the construction of the Elektro LR, Kukmaka and Srobotnik ob Kolpi transmission stations, the CIZ. The following activities took place until the end of the year: the supply of equipment and construction reconstruction of the Mala Ilova gora LV-network and the purchase of the cable ducts of the Hinje CZ at work that included the upgrading of the 110 kV field of the TR3 and replacement of the roof and renovation of the Kočevje DU; the façade of the command segment of the building and the 20 kV switchgear. • the continuation of the construction of missing sections of the 20 kV Litostroj DTS–Vič DTS cable lines, the construction of the 20 kV Litostroj DTS–Mladinska DTS, the 20 kV Šiška–Rakuševa DTS and the 20 4.3.1.2 INVESTMENTS IN MV AND LV FACILITIES kV Vodnikova cable lines, the replacement of obsolete 10 kV cables at the Slovenska cesta collector, the construction of the Ikea TS, Stegne 23 TS, IVKC Parmova TS, Tribuna TS, Gozdarski inštitut TS (back-up), The financial realisation of investments on facilities of the MV and LV distribution network amounted to EUR Vošnjakova TS, Tiskarna Gorkičeva TS and Šola Šubičeva TS transformer stations, and the construction 14,659.1 thousand, i.e. 116.4% of the planned value and 36.9% of the total realisation of investments this year. of cable ducts along Šmartinska, Snebrska, Dolenjska, Celovška, Trubarjeva, Parmova and Vodnikova The average physical realisation was estimated at 112% of the plan and includes: ulica roads at the Ljubljana DU; • 109 new, reconstructed and rehabilitated transformer stations; • the construction of the 20 kV Ig CIZ, the 20 kV Logatec DTS–Cerknica DTS cable lines through the • the construction and renovation of 148 km of overhead or underground MV lines; and Podskrajnik CZ and the 2 x 20 kV Mengeš DTS–Komenda CIZ–Podgorje CIZ cable lines, the construction • the construction and renovation of 107 km of the LV overhead and underground network. of the 20 kV cable outlets from the Žužemberk TS, the renovation of the existing 20 kV Horjul, 20 kV Moravče, 20 kV Begunje and 20 kV Ledine transmission lines, the construction of the Dol Robič TS, In terms of purpose, most of the investments were made in MV and LV facilities dedicated to the revitalisation Sostro Pečar TS, Spodnja Draga TS, Koseze (back-up) TS, Strahomer (back-up) TS and GC Velike Bloke of the existing network's facilities (62% of all investments in MV and LV), followed by investments in TS transformer stations with 20 kV connections and LV-ducts, and the construction of the Polčeva pot easing the burden on the network (9%) and improving the quality of electricity (7%). On the basis of these cable duct in Kamnik at the Ljubljana Environs DU; investments the connection of 76 new customers was enabled and the quality of the power supply to 2,508 • the continuation of the inclusion of 20 kV outlets at the Ločna DTS, the renovation of existing 20 kV customers improved. Straža, 20 kV Škocjan, 20 kV Vinica, 20 kV Dolenjske Toplice and 20 kV Stopiče transmission lines, the construction of the Trebanjski vrh TS, GC Metlika TS, Mačji Dol TS with a 20 kV connection and LV- Annual Report | 102 Business report Annual Report | 103 Business report

outlets, and the renovation of the Grad outlet Miran Jarc, Hrast pri Jugorju and Brstovec LV networks at 20 kV Suha krajina transmission lines two fibre-optic cables were also laid on the same transmission lines. the Novo mesto DU; Moreover, the fibre-optic cable at Brezovica pri Ljubljani and the fibre-optic cable on the Kočevje–Dvor route • the construction of 2 x 20kV Trbovlje DTS–Hrastnik DTS, 20 kV Litija DTS–Zagorica TS, the 20 kV Trbovlje were relocated (cabled). The ruptured fibre-optic cable along the Kette avenue in Novo mesto and the primary DTS– Naselje za Savo TS cable lines and the renovation of the Širje outlet Trojar–Bremše, Gradiške Laze fibre-optic line at Slovenska cesta 54 in Ljubljana were renovated and repaired. We set up the connection of outlets Vodenk and Laze, Podkrnice outlet Podkraj, Pleš outlet Pleš and Jablaniške Laze LV-networks at the fibre-optic cable for Porsche Slovenija's locations on Bravničarjeva, the inlet for Yaskawa in Ribnica, the the Trbovlje DU. Billiard House at Slovenska cesta 58 in Ljubljana, and also the industrial facility in Jarše pri Domžalah and the sawmill in Kočevje were connected. At the request of Stelkom, which is preparing and leasing out base Investment interventions in the distribution network in 2019 continued also in the scope of the preparations stations for mobile operators, the connection of six locations to the fibre-optic network was carried out in for migration to the 20 kV voltage level in Ljubljana, focusing on the Brdo region and Trbovlje region. Metlika, Črnomelj, Zagorje and Trbovlje at the end of the summer. The fibre-optic connection on the Vič DTS– Investment in the total amount of EUR 1,662.3 thousand were made for that purpose. Ljubljana Mailing and Logistics Centre was strengthened and Predilnica Litija was connected to the network. The ESRI geographic information system was introduced in order to verify the occupancy of fibre-optic lines. 4.3.1.3 INVESTMENTS IN SECONDARY EQUIPMENT At the end of the year a fibre-optic cable was supplied for the connection on the Trebnje–Ločna route, as well as documentation being drafted for the replacement of the ground wire on the Logatec–Cerknica transmission Investments in secondary equipment were made in 2019 on the project regarding a new distribution control line with a OPGW (Optical Power Ground Wire). centre (DCC), a measurement system and metering devices, the automation of the MV-network, resonant neutral point resonant grounding (NPRG) and telecommunications (TC). These investments were valued at The tender for upgrading the process network for the connection of SCADA ADMS servers was successfully EUR 5.325 thousand, i. e. 13.4% of the total realisation. completed. Active TC devices have already passed the initial tests at the supplier of the SCADA ADMS. The audio recording devices were merged into a single contemporary device, at the DCC, for the needs of the Intense work took place during 2019 on the project regarding the new DCC. According to the agreement and call centre and radio connections. A supply control system was introduced and certain supply systems were planned schedule the details of the implementation were coordinated with the contractor and annexes were replaced depending on how spent the batteries were. signed for the completion of the required adjustments to existing systems. Due to the standard's vagueness and the resulting protracted coordination there was a minor delay in establishing CIM interfaces, and We equipped all the control stations with a wireless network in November 2019. therefore in the preparation of the data required for factory testing, which was consequently moved back from November 2019 to February 2020. The commencement of the gradual migration of control to the new system was scheduled for December 2020. 4.3.2 NETWORK MAINTENANCE

Investments in the measurement system and measurement devices in 2019 stood at EUR 4,171.4 thousand The maintenance of electricity devices and equipment from 110kV to the low-voltage level is carried out in and reached the planned framework of envisaged installations and replacements (101.6% of the plan). A accordance with the Instructions for the Maintenance of the Electricity Distribution Network and the contract total of 29,780 measurement devices were installed and 30,994 advanced electricity meters were included in with SODO. the advanced metering system. For remote control needs a total of 305 transformer stations were equipped with data concentrators and summation meters. The financial realisation followed the physical scope of the The regular, professional and high-quality maintenance of the existing electricity distribution network (EDN) realisation. All the works were carried out in the scope of the project for the construction of the advanced is crucial for maintaining its continuous functionality, operational capacity, reliability and operational security metering system. The equipping of measurement points with advanced metering infrastructure was carried over its entire expected life cycle. Revitalisation must also be ensured. out in the areas of Ljubljana, Trbovlje, Dobrepolje, Zagradec and Šentjernej. The reliability of the EDN mostly depends on the quality of maintenance works and the prompt elimination of the consequences of malfunctions and extraordinary events. In addition to the installation of 10 automated switch points supplied in 2018 the realisation of the MV- network automation in 2019 also included the supply of equipment for eight automated switch points on the Due to the diversification of maintenance resources work has been allocated by distribution unit and control basis of the tender from 2019. A further five automated switch points were installed by the end of the year, station, which organised operational maintenance work locally according to needs, plans and availability of while the remaining three will be installed during the first quarter of 2020. In terms of value, the investments resources. amounted to EUR 157.4 thousand or 92.6% of the plan. Inspections, audits, measurements and felling are done under the instructions of SODO – according to a In the segment of telecommunications the realisation of investments in 2019 amounted to EUR 397.6 periodic plan, preventively, aimed at mitigating the likelihood of device or system failures, and to establish thousand or 69.1% of the plan. There was an active start to investments in the scope of telecommunication the actual situation. On the basis of information obtained about the actual situation we carry out required links due to the favourable weather in 2019. In parallel with the cabling of the 20 kV Velike Lašče and the works according to urgency and availability of resources, completing minor critical repairs and eliminating Annual Report | 104 Business report Annual Report | 105 Business report

deficiencies and minor damage. For situations that exceed the criteria of maintenance activity/interventions 4.3.2.1 NETWORK SITUATION we propose corrections and repairs via separate investment items (critical repairs, elimination of damage via investments) or via specific investments if major interventions are involved that are backed up by When analysing the state of EDN assets we identify a trend of rapid ageing of devices, which is especially development needs, via reconstruction and overhauling of entire systems. pronounced in relation to wooden utility poles. The useful life rarely goes beyond 30 years, while the depreciation period recognised is 33 years. Taking into account that there are more than 125,000 poles Maintenance in 2019 proceeded without any major incidents of note. We also concluded the final remedial installed in the network, more than 4,100 poles would have to be replaced annually. A similar situation applies work relating to the ice storm that affected us significantly in 2014. There were no major deviations from the to power transformers. We would have to renew or replace twice as much key assets, such as poles and plan. transformers, on the existing EDN to maintain the average age of the EDN. Due to limited resources this is not feasible, so over time the risk and the ensuing costs of repairs increase significantly. In order to be able PHYSICAL MAINTENANCE PERFORMED ON THE EDN BY TYPE OF ASSET to most effectively manage risk of failure and the resulting supply outage in the scope of available funds, we have established a system for monitoring the Asset Health Index (AHI). 3,428 3,387 3,370 3,303 3,078 NUMBER OF INSTALLED WOODEN UTILITY POLES BY NEED 2,232 2,151 2,027 2,031 1,974

92 986 807 801 796 73 739 707 668 648 118 439 376 353 348 348 348 349 349 349 363 360 337 9 6 6 6 6 4,100 2,632 2,147 inspection inspection inspection audit inspection clearing inspection 2,015 [km] [km] [no. of DTS, DS] [no. of DTS, DS] [km] [km] [km]

Overhead High-voltage DTS 110/medium-voltage kV, Overhead medium-voltage lines Medium-voltage 269 347 401 high-voltage lines cable lines DS 110 kV cable lines 2017 2018 2019 Annual requirements Maintenance Investments Claims 4,732 4,674 4,642 4,631 4,498

NUMBER OF INSTALLED POWER TRANSFORMERS BY NEED 2,867 2,138 2,097 2 1,881 1,685 1,669

1,420 116 125 1,216 1,168 1,129 1,101 1,073 1,052 1,044 1,044 902

874 81 839

670 53 1 228 228 228 228 228 219 175 135 103 91 84 2017 2018 2019 Annual inspection audit inspection audit inspection clearing measurements requirements [no. of DTS, DS] [no. of high-voltage [no. of TS] [no. of TS] [km] [km] [no. of high-voltage fields, fields and Maintenance Investments Claims medium-voltage medium-voltage cells and TR] cells with protection]

DTS medium-voltage/medium-voltage, TS medium-voltage/0.4 kV, Low-voltage network Management of 4.3.2.2 IT SUPPORT OF MAINTENANCE – DIGITALISATION DS medium-voltage TS medium-voltage/0.95 kV, protective devices (through management and protection) TS 0.95/0.4 kV By increasing the quantity and type of assets and equipment the management of the state/condition of assets is becoming increasingly complex. For this reason we are putting together new IT solutions and 2015 2016 2017 2018 2019 introducing new approaches to maintenance that help us optimise work, improve the overview of assets and their state, and as a result we have increased the efficiency of maintenance. Annual Report | 106 Business report Annual Report | 107 Business report

To that end, IT support (IBM Maximo AM) has been put in place that enables more efficient insight into • 10,974 regular replacements due to the expiration of the metrology stamp; the state of devices and support for making decisions on the priorities of maintenance activities. We are • 1,283 extraordinary replacements on account of statistical sampling; and developing analytical tools and IT support for field work. Since knowledge of the state of assets is crucial to • 220 extraordinary replacements of meters in the industrial segment due to updating the manner of improving the maintenance process, we intensively developed PISELJ geographical information system in measurement or communication with key measurement points in the network. 2019. We adjusted it to the CIM standard with which data can be exchanged with other systems, e.g. with the management system EDN SCADA, ADMS, REDOS etc. We devoted a great deal of attention to the elimination In independent areas of the introduced AMS we are carrying out control over the flow of electricity in the of errors in the records of assets and to supplementing/amending the missing data. network.

The IBM Maximo Anywhere application, which will serve as an application supporting operational activities in By including an increasing percentage of dispersed resources into the distribution network we established the field, thereby reducing the overheads of operational personnel, increasing the speed of data capture and a system for data capture in almost real-time, suitably equipped 50 measurement points with the relevant transfer to databases and as a result ensuring immediate accessibility to current data to all that need such measurement and communication infrastructure and upgraded the system for the processing of data in real- data, is in the trial phase. time. The equipping of measurement points of major production units and the acquisition of data in granular dynamics indicate technological progress in the method of obtaining data and the possibility of including In the scope of development projects we cooperated, in terms of maintenance, in the development of the network key points into the data capture in almost real-time. The system is set as scalable to enable rapid T-Sense platform that tests the use of augmented reality during maintenance field work. Augmented reality growth in the inclusion of new devices and the regular exchange of data with beneficiaries. In December 2019 (AR) is a technology that uses devices with the visualisation option (e.g. computer tablets, smart phones, VR we successfully integrated the system for data capture in almost real-time with the national database and goggles/headset) with additional information to upgrade the real-world image. We are primarily testing the service platform ECCO-sp and thus established the real-time transmission of data between Elektro Ljubljana visualisation of control lists and data, the visualisation of monopolar schematics, the spatial visualisation and ELES for the first key selection of measurement points. of lines, remote technical support, spatial display of measurement points, etc. The prestigious IBM Maximo World Award, was presented by IBM in the category of Best use of Maximo & Augmented Reality/Virtual Exponential growth in the inclusion of new advanced electricity meters, an increase in the number of registers Reality for the development of the T-Sense Enterprise Augmented Reality Platform at the Maximo World (types of data) and diverse dynamic in the acquisition of data (in real-time and for the previous day) were Conference, which was held in Orlando, US, in August 2019. key factors for establishing the development project of the new data and integration platform (Big Data platform), which alongside the ability to store large amounts of data with different time series and with the 4.3.2.3 MAINTENANCE OF METERING DEVICES already established integration links to other data sources (e.g. measurement data, geographic information system, weather, SCALAR, EAM, etc.) will provide the company with high-quality, quick and mass processing With the accelerated introduction of the advanced metering system (AMS) and coordinated project of various data, and the implementation of advanced or predictive analyses for the maintenance of the management we significantly cut costs of manual readings, while enabling network end users to switch to network or devices. billing of electricity according to actual consumption and other AMS functionalities. Manual annual reading was reduced by 17% in 2019. We also managed to reduce the number of manual monthly readings by 33%.

The remote control system already includes more than 208,034 measurement points, which covers 61% of all measurement devices in the region covered by Elektro Ljubljana, of which 202,407 measurement points are included in the AMS, which accounts for a share of 60.3%.

The target regarding reliability of data capture at end users on the LV-network, where we use PLC- communication as the communication protocol and the LV-network as the transport route, was not achieved in 2019 and remains at 1.4% of the installed devices. Due to different network disruptions that normally originate from devices at end users and require a comprehensive approach to identifying and eliminating disruptions we are putting together a special team of experts who through their special expertise and tools will begin to resolve the PLC issues.

In accordance with the requirements of the Metrology Act we verified the proper functioning of the metering devices and conducted: Annual Report | 108 Business report Annual Report | 109 Business report

4.4 Economic activity has been constantly growing in Slovenia since 2015, which is also evident from the number of connection approvals issued. This number increased from 3,913 to 6,157 approvals issued (by 57%) relative to 2015. The number of issued connection contracts therefore also grew in line with this increase. The number of Users connections was lower relative to the number of issued connection approvals and connection contracts given that these documents are issued for new measurement points and also for changes to existing measurement points. In addition to providing the reliable and safe supply of electricity the company's core mission also includes the provision of high-quality services relating The significant increase in issued connection approvals was also felt in the area of self-supply, where the to the supply of electricity. adopted Decree on self-supply encouraged households to build self-supply power plants. In 2019 we therefore recorded 727 issued approvals and 547 connections of self-supply power plants to our network.

COMPARISON OF ISSUED DOCUMENTS AND COMPLETED CONNECTIONS 4.4.1 NETWORK ACCESS All During the connection process we issue documents under the valid laws and instructions issued by SODO, i.e. 7 0 5 0 3 0 , 1 5 , 1 9 5 6

design conditions, consents to design solutions, connection approvals, we conclude connection contracts and 0 6 3 , 6 , 6 6 , 5 5 0 5 9 , 1 5 4 7 contracts on system use, and connect users to the electricity distribution system. 5 , 7 , 5 2 3 4 1 4 3 , 9 , 9 3 3 3 4 NUMBER OF ISSUED DOCUMENTS AND COMPLETED CONNECTIONS 3 8 7 5 , 9 6 8 7 2 , 6 9 , 4 2 , 3 , 1 2 2 2 15 Drafting of Information 14 on the possibility of RES 20 2015 2016 2017 2018 2019 69 and CHP connection 600 Connection approval Connection contract Connection 1,409 1,436 Drafting of design conditions 1,546 1,374 1,384 Self-supply 2,937

3,257 7

Issuance of consent 3 2 3,567 1 7 to design solutions 3,816 7 3,702 7 4

3,913 5 4,740 Issuance of connection approval 5,505 4 8 7 9 2 3

5,650 3 2 2 4 3 3 6,157 3 8 1 2 3 2 6 0 5 3,932 6 4 Issuance of 4,579 2 5,163 a connection contract 5,693 2015 2016 2017 2018 2019 6,100 28,983 Connection approval Connection contract Connection Issuance of 28,395 25,263 a system use contract 26,740 23,749 2,375 The number of issued connection approvals and connections of other production devices is at the level of 2015. 2,196 Connection 2,488 2,943 We connect seven production devices annually on average to the electricity distribution system. 2,673

Each network user (customer, producer) must have a contract on system use in place for the consumption or

2015 2016 2017 2018 2019 supply of electricity. The contract is concluded by the company responsible for the distribution of electricity with the approval holder for each measurement point separately before the beginning of consumption or supply of electricity or upon a change to the parameters in the access contract (change in owner, payer, addressee, to the technical parameters of the contract). Annual Report | 110 Business report Annual Report | 111 Business report

NUMBER OF ISSUED SYSTEM USE CONTRACTS NUMBER OF SELF-SUPPLY MEASUREMENT POINTS AND PRODUCTION DEVICES10 CONNECTED TO ELEKTRO LJUBLJANA’S NETWORK (AS AT 31 DECEMBER) -2.0%

+5.8% 1

-11.0% 4

-11.2% , 1 1 1 4 4 6 7 0 0 9 9 8 9 9 8 8 8 4 9 3 5 3 0 9 5 8 9 6 4 4 , 9 , 3 , 7 , 2 , 7 8 8 5 6 3 2 2 2 2 2 7 5

2015 2016 2017 2018 2019 2 6 2 0

2015 2016 2017 2018 2019 A total of 343,644 users were connected to Elektro Ljubljana’s distribution network as at 31 December 2019, Self-supply Manufacturers including 342,951 customers and 693 electricity producers, which are directly connected to the network.

NUMBER OF CUSTOMERS9 CONNECTED TO ELEKTRO LJUBLJANA’S NETWORK (AS AT 31 DECEMBER) Since the electricity market was completely opened the number of supplier replacements is changing from +0.9% +0.4% +0.6% year-to-year. The data recorded on the amount of supplier replacements indicates that the electricity market +0.5% is transitioning to a mature phase. After a continued decline in previous years, the drop in replacements in 2019 is particularly notable (34%).

NUMBER OF SUPPLIER REPLACEMENTS COMPLETED BY USERS 7 1 5 1 7 9 1 5 2 0 9.2% , 5 , 6 , 9 , 4 , 5 1 2 4 8 6 3 3 4 4 3 7.8% 7.7% 3 3 3 3 3 7.0% 2015 2016 2017 2018 2019 4.6% 2 8 5 7 6 4 1 9 9 5 , 8 , 0 , 1 , 8 Electricity self-supply is extremely popular in recent years and as a result the growth in the number of self- , 7 0 5 4 6 5 2 2 1 2 supply connected measurement points is very high, which stood at 92% relative to 2018. 3 2015 2016 2017 2018 2019

Number of supplier switches Substitution / number of connected users

4.4.2 QUALITY OF ELECTRICITY SUPPLY

The gradual improvement of supply quality is the basic mission of Elektro Ljubljana. Through our investments in development, management of operation and system maintenance we provide users with high quality of supply.

9 The category of customers comprises all measurement points that consume energy from the network; i.e. end customers without 10 The category of producers comprises end customers with production devices within the Px3 connection scheme and production devices production devices, end customers with production devices within the Px3 connection scheme and self-supply end customers. connected directly to the network. Annual Report | 112 Business report Annual Report | 113 Business report

The national regulator's incentives are focused on improving the quality of supply which, depending on the DURATION OF INTERRUPTIONS PER CUSTOMER (SAIDI) ACCORDING TO THE PRESCRIBED IMPROVEMENT state of the system, the current implementation of activities and the functioning of the system, defines the THRESHOLD

reference (desired) parameter values of quality dimensions of supply. SAIDI – urban SAIDI – rural .6 .0 8 2 5 1 5 1 .7 .7 2 9 2 1 1 We monitor the following dimensions of quality in terms of the comprehensive supervision of supply quality: 1 .6 2 .4 9 9 • the continuity of the power supply (i.e. whether electricity is available to customers at all times); .0 .3 7 8 7 6 • the voltage quality (deviations from the parameters prescribed by the relevant standards); and 6 .4 .0 .0 .0 .0 .2 .8 .5 8 5 5 5 5 3 2 2 2

commercial quality (relationship with users). 2 2 2 2 2 • 2 2

2016 2017 2018 2019 2016 2017 2018 2019

4.4.2.1 CONTINUITY OF SUPPLY Prescribed Achieved Prescribed Achieved

The continuity of supply to users is monitored by individual areas of the distribution system according to parameter value of the system average duration of interruptions to supply (SAIDI) and the parameter of the In 2019 we achieved an improvement of SAIFI and SAIDI indicators relative to 2018, which is the result of system average frequency of interruptions to supply (SAIFI). The two parameters reflect unplanned protracted favourable weather conditions, and also took a major step forward in demonstrating interruptions that were interruptions as a result of own causes. the result of force majeure or foreign cause.

The national regulator, i.e. the Energy Agency, prescribes the values of reliability indicators to ensure the 4.4.2.2 VOLTAGE QUALITY annual improvement in the quality of supply. The basis is comprised of disclosed achieved annual levels of continuous supply in the previous regulatory period. The operator's activities are therefore systemically The quality of electricity is measured, analysed and reported on in accordance with the SIST EN 50160 focused on annual improvements in the level of continuous supply in terms of the gradual improvement of European standard. We are conducting continuous and periodic monitoring of the quality of electricity. continuity indicators relative to prescribed levels.

NUMBER OF INTERRUPTIONS PER CUSTOMER (SAIFI) ACCORDING TO THE PRESCRIBED IMPROVEMENT Continuous monitoring of the quality of electricity is carried out at location in the electricity network that THRESHOLD are prescribed by implementing regulations. Measurement points of continuous monitoring included both SAIFI – urban SAIFI – rural facilities on the border between the distribution and transmission network, on the border with neighbouring 9 1 . 6 . 6 2

1 distribution companies and at network points bordering system electricity producers. 7 2 . 3 . 2 2 2 6 6 5 . 9 2 . 8 1 . 8 1 1 . 7 1 Periodic monitoring of the quality of electricity is carried out in accordance with the requirements of 5 5 5 5 1 network analyses or at the request of distribution network users. At the request of network users, we issue 9 6 . 7 . 7 . 7 . 7 3 . 7 0 0 0 0 . 5 0 . 5 . 5 0 0 0 a declaration on the conformity of the quality of electricity with requirements after performing quality measurements. 2016 2017 2018 2019 2016 2017 2018 2019 The following indicators of voltage quality make it possible to perform a comprehensive assessment of voltage Prescribed Achieved Prescribed Achieved quality: • IKEE-VN/IKEE-SN as the aggregate indicator of voltage quality at the high-voltage (HV) and medium- voltage (MV) levels; • IPLT-VN/IPLT-SN as an indicator of transmission-line flicker at the HV and MV levels; • IH-VN/IH-SN as an indicator of harmonic voltages at the HV and MV levels; and • IU-VN/IU-SN as an indicator of supply voltage deviations at the HV and MV levels.

The indicators show that the systemic level of voltage quality is improving from year to year, and is at a high level. Annual Report | 114 Business report Annual Report | 115 Business report

PERCENTAGE OF COMPLIANT WEEKS FOR ALL MEASUREMENT POINTS IN THE SCOPE OF CONTINUOUS COMMERCIAL QUALITY PARAMETER VALUES CONTROL OF THE QUALITY OF ELECTRICITY BY VOLTAGE LEVEL AND VARIOUS VOLTAGE QUALITY PARAMETERS 20 Average time required to issue 15.7 100% a connection approval [in business days] 16.7 98% 96% 10 Average time required to issue a cost estimate 0.0 94% (pro-forma invoice) for simple works [in business days] 92% 0.0 90% 20 Average time required to issue a contract for connection 88% 8.5 to the low-voltage network [in business days] 86% 11.9 84% 10 Average time required to activate an electricity 82% 3.3 network connection [in business days] 80% 2.8 2011 2017 2012 2013 2015 2019 2016 2014 2018 2010 2007 2005 2009 2006 2004 2008 8 Average response time to written questions, 1.1 complaints or requests from users [in business days] 2.7 IKEE – HIGH-VOLTAGE IKEE – MEDIUM-VOLTAGE IPLT – HIGH-VOLTAGE IPLT – MEDIUM-VOLTAGE Average call-holding time at the call centre [in seconds] 109.7 IH – HIGH-VOLTAGE IH – MEDIUM-VOLTAGE IU – HIGH-VOLTAGE IU – MEDIUM-VOLTAGE 116.7

Indicator of the level of call centre services [in %] 88.4 87.0 We carried out measurements of the impact of devices with new technologies on the voltage quality and the 5 Average time to restore the power supply in the event of an error network's operating properties in 2019 to better manage and support network planning to set new objectives 1.6 on a current-limiting device (6 am – 10 pm) [in hours] and guidelines for the energy policy. For a number of years now we have noticed the number of self-supply 1.6 8 solar power plants rise and also an increase in the use of heat pump by users. Average time to restore the power supply in the event of an error 2.2 on a current-limiting device (10 pm – 6 am) [in hours] Measurements at selected points in segments of the low-voltage network where the self-supply solar power 3.3 plans are installed have shown moderate increase in the number of power supply voltage deviations according 30 Average response time to complaints in relation 29.6 to the delivered active power of solar plants. The trend of the level of harmonic voltages of a higher order was to voltage quality [in business days] 25.8 also increased, which could be attributed to the effect of small solar power plants on the network. 6 Average time required for the resolution Measurements at network points where we have detected an increased frequency of installed heat pumps 7.3 of deviations in voltage quality [in months] mostly indicate an increased trend of the inclusion of the 15th harmonic component. This is even more 0.6 8 pronounced at more remote network points. An increase in deviations in the size of voltage supply according Average time required for the elimination of defects to an electricity 3.3 meter [in business days] to the distance from transformer stations is also more pronounced. Despite this no non-compliance was 2.9 detected in these voltage properties' parameters. The dynamic in the operation of heat pumps complies with 3 Average time required to restore the power supply after disconnection 0.1 the weather factors and user requirements. due to the user's payment default [in business days] 0.2 Standard 2019 2018 4.4.2.3 COMMERCIAL QUALITY

We devote special attention to maintaining a high level in terms of our attitude to users. Through our The response times of commercial quality services at the company are confirmation of the effective execution continuous improvement of processes and services we wish to ensure the highest level of commercial quality of user-friendly processes, as the measured parameters of guaranteed commercial quality standards are to our users. Commercial quality standards are mostly defined by response times for the provision of the most significantly shorter than the prescribed threshold values. common services for users. No compensation was paid to users in 2019 due to failure to achieve guaranteed commercial quality standards. We distinguish between system and guaranteed commercial quality standards. For users, system standards serve as the basis for the amount of time they can expect for the provision of services. The time may be longer or shorter than prescribed by system standards. Guaranteed commercial quality standards represent the individual commercial quality guaranteed to all users. If a distribution company fails to meet guaranteed standards, a user is entitled to the corresponding compensation based on a claim. Annual Report | 116 Business report Annual Report | 117 Business report

4.4.3 USER SATISFACTION NUMBER OF CALLS INCOMING TO THE SCC

+27.7% +3.5% Elektro Ljubljana recognises the importance of continuous improvement of services, processes and user 9,415 8,723 +12.3% +0.7% experience. That is why we regularly measure customer satisfaction and when providing our whole selection of 7,249 5,920 6,962 services we strive to not only meet out users' expectations but attempt to exceed them. To that end, we follow 62,940 66,138 the principles of reliability, responsiveness, encouraging the right attitude of employees, the availability of 50,761 43,168 49,043 services and communication with our company. The results of the user satisfaction survey and the established uniform system of monitoring complaints is used as the basis for preventive and corrective measures for the 2015 2016 2017 2018 2019 continuous improvement of user satisfaction.

SATISFACTION OF USERS WITH ELEKTRO LJUBLJANA (YEAR 2019, N=850) Answered Unanswered

44% 44%

Each year users are increasingly recognising the simplicity and effectiveness of using the e-mail addressinfo@ 19% 19% 17% 18% elektro-ljubljana.si and as a result the quantity of the mail coming to this address is growing rapidly. Despite 15% 13% the major complexity of receiving a larger amount of incoming mail and the high growth in its amount we 3% 3% 4% 3% guaranteed an average response time that was shorter than 24 hours in 2019 during which we received more Very Dissatisfied Neither satisfied Satisfied Very Don’t know than 11,000 emails. dissatisfied nor dissatisfied satisfied

By regularly updating current content we endeavour to ensure the company's website is of interest to a wide 2017 2019 range of readers. In terms of our primary activity, our site with data on the situation in the network, where via an interactive map you can gain access to the network situation in a very transparent and simple manner practically in real-time was the most visited site in 2019. In addition to high quality and efficient performance of primary activities it is extremely important to the company to ensure simple, available and effective communication with users, and therefore we provide users EXAMPLE OF ACCESS TO THE NETWORK SITUATION ON THE COMPANY'S WEBSITE and the interested public with suitable communication channels, the use of which we constantly improve and adjust to achieve an even better experience for the user.

According to the results of the analysis conducted in 2017, user satisfaction with the single call centre (SCC) has grown in the most important segments, as follows: • availability (accessibility) of the SCC; • understanding user needs; and • the ability to provide quick answers.

The user satisfaction score in these segments approaches the average score of 4 when using a five-point assessment scale (where five is the highest score).

We responded to almost 89% of all calls on both SCC incoming numbers in 2019 despite the high growth in incoming calls with continuous organisational and technical measures, with the average waiting period to talk to the operator being shorter than two minutes. Annual Report | 118 Business report Annual Report | 119 Business report

COMPANY'S WEBSITE TRAFFIC MOJA MREŽA (MY NETWORK) TRAFFIC

2019 773,399 +24.1% 2019 46,372 +34.8%

2018 623,313 -4.1% 2018 34,413 -15.8%

2017 649,930 +0.7% 2017 40,847 -1.1%

2016 645,317 +2.9% 2016 41,316 +17.8%

2015 627,171 2015 35,074

Our online portal Moja mreža (My Network) allows users to access data on previous consumption or production and to order the most frequent interventions at measurement points on the internet. In 2019 we In 2019, in the scope of the commercial interest being informed of planned interruptions to supply enabled access to quarterly hour data from self-supply measurement points in both directions, which due to association in cooperation with other distribution in the event of planned works on the network. Due the specific manner of billing this category of measurement points is the most sought-after data by owners. companies, we opened the single portal Moj elektro to this we provide users with an extremely effective for access to previous measurement data for users service using free notification of planned outages EXAMPLE OF ACCESS TO QUARTERLY HOUR CONSUMPTION DATA OR PRODUCTION FOR THE SELF-SUPPLY with measurement points throughout Slovenia. through SMS messages and/or e-mail to enable MEASUREMENT POINTS ON THE MY NETWORK PORTAL In this portal users with measurement points in users to adjust their planned activities accordingly areas of authority of various distribution companies and minimise any negative effects in the event of a can gain access to past measurement data for all planned interruption of supply. Users only need to measurement points in a single place through a register to the website to apply for the service or, single user profile. where users do not use the internet, they only need to fill in the prescribed form. We nevertheless recognise the importance of the reliability of supply to users and, in particular, of

In accordance with the newly adopted service pricelist for users we also enabled free access as of 2019 to past consumption data to all users with consumption measurement points. Annual Report | 120 Business report Annual Report | 121 Business report

4.5 Public institutions (hospitals, schools, and so on) provide major potential in the Slovenian economic environment. They are tied to the investment resources of specific ministries but generally have an old and Market Services obsolete electricity infrastructure that will need to be replaced in the coming years. In terms of market services our objectives are focused on increasing competitiveness. Our aim is to provide our partners with high quality services at a competitive price through our range of comprehensive solutions, The company provides products and services in the market segment focused knowledge, internal human resource capacities and equipment. Our success and recognition on the Slovenian on the planning, consultancy, construction and maintenance, and optimisation market is confirmed by the references of our business partners, investors and suppliers. To that end, we of distribution and user electricity networks. can emphasise that Elektro Ljubljana is the only electricity distribution company that successfully offers its market services throughout Slovenia.

Our services on the distribution network and on devices on the low-voltage, medium-voltage and 110 kV level In 2020 we will devote special attention to the charging infrastructure, a segment in which today we are comprise the following, in particular: already one of the leading companies. The charging infrastructure is a major challenge, as we are currently • design and associated technical consultation services; witnessing an e-mobility trend where the proportion of electric vehicles is increasing sharply. • the implementation of low-voltage (LV) connections; • the implementation of the distribution network and devices (transformer stations with complete equipment, medium-voltage (MV) and 110 kV transmission lines and cable lines, and more extensive LV networks); • the implementation of other services (the maintenance of electrical devices, implementation of comprehensive over-voltage protection, measurements at electrical installations etc.); • the possibility of comprehensive engineering for the above-mentioned services; and • the implementation of work in the charging infrastructure in the area of e-mobility.

NET SALES REVENUE IN THE MARKET SERVICES SEGMENT (IN EUR THOUSAND) 3 6 , 1 8 4 6 3 , 7 2 3 6 7 , 0 4 , 6 6 5 4 , 7 4

2015 2016 2017 2018 2019

In 2019 net sales revenue in the market services segment increased by EUR 1,399.3 thousand relative to the previous year or by 21%, and exceeded the plan for 2019 by 52%.

In the segment of electric installation work for the market ca. 7% of the turnover was generated outside our company. We executed 78% of all the LV connections in 2019 in Elektro Ljubljana's supply area.

Our market activity is strongly dependent on economic growth and the investment activity associated therewith, particularly in the industry and construction sector. In recent years industrial zones have provided new market opportunities, as these zones are a major concentration of investments in a relatively small area. Here investments are made by local and foreign successful companies with high added value. Annual Report | 122 Business report Annual Report | 123 Business report

4.6 Procurement

The basis task of the procurement function is to secure goods or services CHANGES IN INVENTORIES OF MATERIAL (IN EUR THOUSAND) on time for the continuous performance of maintenance and construction of the network and other processes at the company, taking into account 3,519 the applicable procurement rules.

Elektro Ljubljana's procurement is centralised for basis of public tenders. For requirements for goods or the needs of the entire company. The procurement services that are not covered by long-term contracts, 2,275 function covers a process of procuring goods, public procurement procedures are carried out during 1,932 services and construction works, and the warehouse the year in accordance with the ZJN-3 and internal operation process. instructions that define the procurement of goods, construction works and services even below the In accordance with the Public Procurement Act legally prescribed minimum values, when the use of 2017 2018 2019 (ZJN-3), Elektro Ljubljana is obliged to purchase the ZJN-3 is not required (record procedures). In 2019 goods, construction works and services, whenever we conducted 43 public procurement procedures. purchases are made to provide or manage fixed networks intended for the provision of public When purchasing materials and services, where the services and when its activities involve the supply appraised value is lower than set out in the ZJN-3 for of electricity to those networks. During the infrastructure area, and when making purchases for implementation of public procurement we take the market we abide by the principles of economy, into account the principles of economy, efficiency efficiency and transparency to the greatest extent and effectiveness, ensuring competition among possible with the procedure of collecting multiple tenderers, transparency, proportionality and equal bids and through negotiations. In accordance with treatment of tenderers, and the provisions of the the ZJN-3 each year until the last day of February we decree on green public procurement. The criterion publish data on contracts awarded under the records for the selection of the tenderer is the economically procedure on the Public Procurement Portal. most favourable bid, which can also be the lowest price, the total costs through the lifecycle or a For the uninterrupted supply of material the combination of various criteria. company disposes of inventories in the central warehouse and in warehouses at distribution units The company concludes annual or multi-annual and control stations. The stock of inventories of contracts with suppliers of most of the goods material amounted to EUR 1,932 thousand as at (intermediate goods) and service providers 31 December 2019, of which 92% of the inventory (in particular construction, surveying, various comprises basic material. The amount of inventories maintenance, servicing and clearing works) on the in 2019 was down 15% relative to the previous year. Annual Report | 124 Business report Annual Report | 125 Business report

4.7 In order to enhance security we began launching the Privileged Access Management system at the end of 2019. The system will be used to control access by our external partners that maintain or upgrade some of our Information and information systems (e.g. PISELJ). Additional security measures are being implemented on the basis of examining the state of security of our Telecommunications information and process technology in the company. We mostly devote our attention to process work which has only been at risk in recent years upon transitioning to the IP/Ethernet communication technology. At the Črnomelj DRC the systems for security data storage have been finally re-connected to express communication Support and Development systems over the Dense Wavelength Division Multiplexing network of ELES.

All control stations gained a connection in 2019 via wireless technology, and the company also introduced two- level authentication that ensures higher security in an increasingly risky and vulnerable cyber world. We ended a very important project of integration under the CIM standard (Common Information Model) at the end of 2019. The Modular Power System (MPS) and Uninterruptible Power Supply (UPS) systems have been equipped with a surveillance system that provides us with a comprehensive overview of the state of batteries and systems. Upon disruptions to power supply these systems have often enabled other devices to operate normally Through the enterprise service bus – CIM we provided input data for the FAT (Factory Acceptance Test) SCADA without interruptions. We also purchased a few new batteries. Uninterrupted power supply has also been ADMS (Supervisory Control and Data Acquisition – Advance Distribution Management System), which was updated in the primary data centre on Slomškova ulica (also for the needs of Stelkom's communication room). conducted in February 2020 in Novi Sad. The SCADA ADMS project required year-round commitment, with the company having to provide the suitable telecommunications and server equipment (hardware) and the The UKV system still serves its purpose. We replaced the tower on Velika planina, as it was damaged by a required software licences. Unfortunately, we still have not secured a redundant telecommunication route strong southern wind. Radio stations were purchased and installed as planned. (fibre-optic) to Elektro Celje, as there is still no agreement in place with ELES. In 2019 Microsoft Office was transferred to a cloud (cloud services). Before that the company had to set up With the renovation of the first floor in 2019 we provided a sufficiently large area for all employees working for a hybrid server solution for e-mail (Exchange), set up intranet on the updated cloud SharePoint Portal, and the ICT OU. The largest intervention/activity during the renovation was the relocation of Elektro Ljubljana's introduce new communication routes (Teams, Skype, and so on). Since certain workstations and laptops no secondary (back-up) data centre and the preparation of the new area to comply with today's requirements for longer met the upgraded software requirements, we completed a major purchase of workstations and laptops data centres. The physical relocation of the data centre was simultaneously also a fire drill in the event of an in 2019. outage at one of the data centres that are otherwise connected within the active-active system. All systems functioned normally during the entire relocation process. The business information systems EVT, eIS, AX and Maximo are the backbone of the IT support for Elektro Ljubljana's business processes. Upgrades were completed in 2019 in accordance with the laws and regulations, We installed fibre-optic cables along the 110 kV Trebnje–Ivančna Gorica transmission line, prepared the and by applying the user-customer's functional requirements. technical documentation and acquired all the necessary approvals for the construction of the ADSS fibre-optic The single access point (SAP) became a hub for all electricity distribution companies (the SEDMp project), cable along the Ločna DTS–Trebnje DTS route and ended the repair work (renovation) on the Ribnica DTS– which enables customers an overview of their measurement points regardless of the distribution area where Kočevska Reka DS and Kočevje DTS–Dvor routes. We installed multiple shorter ‘last miles’ on the fibre-optic the measurement point is located. network for Elektro Ljubljana and for the purpose of marketing via Stelkom. Major interventions for Stelkom include: 6 connections for base stations ordered by Telemach, connections for Predilnica Litija and MAHLE EDS Due to the requirements of new laws governing the electricity system we began upgrading the eIS in the in Ljubljana and an increase in the fibre-optic capacities on the Cesta v Mestni log road, also in Ljubljana. segment of procedures regarding customer connection and billing of the network charge. A project team specially appointed for this purpose prepared the substantive and object-based guidelines for performance The telecommunications equipment was expanded in the IP/Ethernet section for the transfer requirements at Informatika. The submitted guidelines are the result of the operationalisation of legal requirements and of SCADA ADMS. We successfully installed Anomaly Detection Systems (ADS). After conducting six Proof of improvements to functionalities on the basis of experience from the application of the eIS in the past. Concept tests we purchased the CyberX system. We broke new ground in Slovenia in the electricity sector with this solution. The system will be connected to Security Information and Event Management (IBM QRadar), Maximo acquired the mobile segment MX Anywhere, which will undergo a trial introduction at the end of which has served us well for the fourth consecutive year now and is an element of our internal security the year for a group of employees at the DU Novo mesto. Transition to the new version enables a more user- operations centre. friendly registration of work hours as work tasks. Annual Report | 126 Business report Annual Report | 127 Business report

AX is already a well-established solution of the core business information system. It was subject to minor 4.8 upgrades due to legal requirements, while a more major transition awaits in the next two years when Microsoft will no longer provide support for the current version. We are now in the process of deciding whether to place the service in a cloud (Microsoft Azure) or at the location of companies Informatika or Elektro Employees Ljubljana. The solution will be more affordable if it is introduced by all the electricity distribution companies in Slovenia in the same process and technological manner. When managing human resources we are aware of the important We decided to build a data warehouse on our own infrastructure and alongside the already implemented value of each individual. warehouse at Informatika (eIS) began the development of the Procurement module. Now we are frequently using the Microsoft Power BI tool for business analyses, in particular for accounting, finances and controlling, To that end, we follow a clear strategy and believe that mutual communication, proactive management, the monitoring of projects, HR and measurement of electricity. We will devote a great deal of attention identification of key employees and their growth, which is stimulated by material and non-material forms of and energy to analytical data and key performance indicators, as senior management may only make well- motivation, are required for mutual understanding and joint operations. informed decisions on the basis of high-quality information.

Our activity in the area of employment was marked in 2019 by approved business plans, the implementation The Big Data project is also coming along well, where advanced predictive analytics on the metering data of of set business objectives and the comprehensive management of costs at the company as a whole. During our customers is being built on open-source software. new hires we pursue in the long-term our key strategic policy of lowering the average age of employees in the company’s core activity.

4.8.1 NUMBER AND STRUCTURE OF EMPLOYEES

The company had 846 employees as at 31 December 2019. The total number of employees decreased by 0.5% relative to the last day of 2018.

The average age of the employees at the end of 2019 was 44.6, the same as the previous year.

A total of 5% of all employees were disabled. Through preventive measures in the scope of our full Family- Friendly Certificate and numerous other measures we prevent the outbreak of new illnesses in employees and the resulting additional restrictions for the disabled. In addition to this, we also ensure that disabled persons can proceed with their work in positions that correspond with their remaining work capacity.

A total of 86% of employees are men, while 14% are women.

CHANGE IN NUMBER OF EMPLOYEES

984

894 875 859 858 857 841 841 850 846

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Report | 128 Business report Annual Report | 129 Business report

4.8.2 STRATEGIC PLANNING AND HUMAN RESOURCE DEVELOPMENT AVERAGE EDUCATIONAL STRUCTURE OF EMPLOYEES IN 2019

The company has to certainly be aware of the critical and key factors of success in its activity and must therefore put in place a suitable business strategy to develop these factors. Then comes the decisive role of the human resource management strategy to support this business strategy and develop the suitable activities to be able to support this company's strategy. To that end, the strategic management of human % % resources is merely a plan of measures relating to the management of human capital, with which senior 1.1 1.4 management wishes to achieve the organisation's strategic objectives. Semi-qualified Unqualified

Accordingly, we draft a human resource plan annually for the next three-year period, in which the need for % new workers, anticipated retirements and the reassignment of employees are defined. Interviews with 0.3 Doctorate or PhD employees who will meet the conditions for retirement in the next year are of great assistance in human resource planning. Information about an intended retirement is important for the company in terms of human resources planning and thus for ensuring the company’s long-term development. 4.0% Master’s degree 4.8.3 THE RIGHT PERSON AT THE RIGHT PLACE 20.4% The HR manager certainly has good insight into the company's organisational culture and values and Qualified into the characteristics of their employees, and can therefore predict who can fit therein; so the careful preparation for the selection procedure is a decisive factor for the success of the selection. It is important % that a new employee occupies a position in which he/she will be able to express his/her talents, abilities, 18.7 Four-year tertiary skills, knowledge and character in the best possible way. Elektro Ljubljana therefore puts great emphasis on education the selection of our future colleagues and also to internal re-assignments. This is the only way that these employees will be able to cooperate with everyone and unify their goals with the company's objectives.

% % 19.1 35.0 Two-year tertiary Secondary school education education (college) Annual Report | 130 Business report Annual Report | 131 Business report

The company's educational structure indicates that 23% of all employees have a university level education, 4.8.6 EMPLOYEE- AND A FAMILY-FRIENDLY COMPANY master’s degree or doctorate, 19% have a tertiary two-year education, 35% have a secondary school education, and 23% of all employees have not completed secondary school. For a number of years we have been committed to creating a work environment in which our employees feel good and which enables them to effectively balance their work and family life. Measures are regularly The educational structure again improved in 2019 relative to the previous year. The proportion of employees upgraded and adjusted at the company mostly at the initiative of our employees, and we also always make with less than a secondary school education was down, while the proportion of employees with a high level of sure that the measures are also implemented in practice. education was up. Ever since the company received the full Family-Friendly Certificate we have adopted a series of family- friendly measures, such as flexible working hours with the possibility of selecting the time of arrival and 4.8.4 EDUCATION, SPECIALISATION AND TRAINING OF EMPLOYEES departure from work, reintegration of employees after extended absence from work due to parental or maternity leave, children’s time bonus that enables parents to take a few hours of leave when initiating The most successful companies globally systematically invest in knowledge and the training of employees. children in day care (kindergarten). Investing in training/education is the best investment in a company's overall success. Employees are also afforded additional perquisites, e.g. last year everyone was included in theSpecialist z The needs for the education/training of employees are determined by the current problems at a specific asistenco (Specialist with assistance) coverage that enables quick access to medical specialists, physiotherapy organisational unit or company, the requirements of customers, assessors, legal requirements, resolutions and operations (procedures), while our youngest are most excited about the annual Santa Claus visit and the by senior management, and also emerge in evaluation surveys after training is completed. Key personnel and accompanying show. those with competencies that are required for a specific position undergo targeted training/education. An employee may at any time communicate their wishes for training/education, which the supervisors approve Employees are encouraged to live a healthy life with a series of activities provided year-round, which is also if the training complies with the needs of the company. In that case the training is envisaged in the annual confirmed by the results of the exchange of opinion studies between employees and their active role in the training plan. drafting of proposals for new measures with which they wish to co-create a family-friendly atmosphere at the company. A total of 79.6% of employees were included in various forms of education and advanced training in 2019. A total of 14,826 training hours were organised in 2019, which translates to an average of 17.5 training hours per employee. 4.8.7 COMMUNICATION WITH EMPLOYEES

Employees are crucial to the company’s success. Since work takes place at various locations, the effective 4.8.5 COOPERATION WITH HIGH SCHOOLS AND FACULTIES notification of employees and a good two-way flow of information is therefore even more important.

In the previous period Elektro Ljubljana further strengthened its cooperation with high schools and faculties, Employees are informed about the company’s operations, maintenance of the network, new electrical power being actively involved in innovative events for the youth, introduced student work mostly for students taking facilities, projects, our employees’ achievements and other current news via e-mail, the internal newsletter, natural and technical science courses, and enhanced the performance of compulsory practical training. These billboards, the intranet and the company’s website. connections had already been well-established in the past, and recently, these connections have become increasingly innovative and challenging. New employees are therefore recruited through public recruitment Our internal newsletter Elektro novice (Elektro news) is received by all our employees, retired employees and and announcements on the company’s website. business partners. Employees with extended absence from work due to sick leave receive the newsletter at home. In addition to the members of our editorial board our retired workers also participate with their articles We provided practical training opportunities in 2019 for 84 secondary school and university students, which is in creating the newsletter. two students more than last year. This approach ‘from practical training to employment’ enables the company to secure its future employees, primarily those taking technical courses. We also organise informal gatherings each year for our employees. Company Day was organised together with the Trbovlje DU. We prepared a diverse sports and cultural programme for employees with the traditional pole- climbing contest. We presented acknowledgements to the best innovators and employees who excelled most in their work last year. We also come together at the pre-New Year's event and at sporting competitions for electricity distribution companies. Annual Report | 132 Business report Annual Report | 133 Business report

Notifications of current events can also be found on the company's website and in its social media. FIRE SAFETY

On the basis of the newly-adopted rules on the monitoring of active fire safety systems expert assessments 4.8.8 OCCUPATIONAL HEALTH AND SAFETY were made on the appropriateness of active fire safety. Periodic inspections of fire-extinguishing devices were carried out. TRAINING OTHER Internal training courses on occupational safety and health and fire safety were attended by 317 employees in 2019. The following refreshment courses in occupational safety were held: On the basis of the Occupational Health and Safety Act and the Rules on Occupational Health and Safety at • training for safe work at heights: 8 persons; Work in the Use of Work Equipment an internal inspection of means for work (fixed assets, work equipment • occupational safety training focused on 110 kV facilities: 33 persons; and personal protective equipment) was conducted at four distribution units (Novo mesto DU, Kočevje DU, • training for safe work with heavy machinery: 17 persons; Ljubljana DU and Trbovlje DU) by the authorised persons of the occupational health and safety department • a training course in safety at work with tractors and tractor-trailers: 13 persons; and the vehicle and tools department. All work means regarding which deficiencies were identified and did not • a training course for safe work with cranes and aerial platforms 8 persons; operate without flaws were removed from the work process. • a training course for safe work with a fork lift: 42 persons; • training course for safe work with construction cranes: 7 persons; We conducted periodic inspections of work means and periodic testing of personal protective equipment for • training course on safe operation of a chainsaw: 266 persons; work with electrical power plants. • workshop on work on live devices: 17 persons; • refreshment course for safe work on live low-voltage devices: 13 persons; OHSAS 18001 – ISO 45001:2018 • refreshment course for safe work on live medium-voltage devices: 3 persons: • training course for use of plant protection product: 8 persons; A total of 62 internal controls were performed in 2019 in the company as a whole in accordance with quality • training of responsible persons to extinguish initial fires and conduct the evacuation process: 80 management instructions. persons; • first aid course: 103 persons; In the scope of transitioning to the new ISO 45001 standard we supplemented the rules on performance of • coordinators (refreshment): 56 persons. first aid with the procedures for providing first aid, and with training and the upgrading of equipment for providing first aid. We added defibrillators, their locations and three appendices to the rules: the content of a MEDICAL EXAMINATIONS FOR EMPLOYEES, HEALTH CARE AND BREATHALYSERS first aid kit, the content of Water-Jel equipment and an equipment register for providing first aid. (ALCOHOL CONTENT TESTING) We also completely revised the Rules on the implementation of fire safety measures, which was renamed to Periodic medical examinations were attended by 322 employees in 2019. Of that number, 74 employees had Elektro Ljubljana's Fire Rules. In doing so, the fire rules of individual distribution units merged under joint restrictions and 48 required early re-examinations. In addition to regular periodic medical examinations, all company fire rules in which the specific features of individual micro-locations are set out. We updated the employees are still afforded the option of a free eye examination at an optician and preventive vaccinations list of responsible persons for extinguishing initial fires and evacuation, and replaced the person authorised against tick-borne encephalitis. A total of 152 employees decided in favour of getting vaccinated, with 33 for the performance of fire safety expert tasks. We supplemented/amended the fire safety employee training candidates deciding for the first time to take this vaccine. programme and the training programme for the persons responsible for extinguishing initial fires and evacuation, updated the appendices and forms, and obtained the signatures of employees on their knowledge In 2019 we carried out 433 alcohol tests and detected two instances of individuals exceeding the prescribed of the fire rules. alcohol content threshold, compared to 701 alcohol tests and four transgressions in 2018. In accordance with legal requirements and the ISO 45001:2018 standard we added in the Manual for action WORKPLACE ACCIDENTS in the event of occupational health and safety incident the employee representative among the responsible persons for implementing the manual and in the committee for the preparation of measures for mitigating A total of 16 workplace accidents and 22 adverse events were recorded in 2019, compared with 17 workplace risks. We added the requirement of attaching a photo of the location of the incident or accident and written accidents and 11 adverse events the previous year. One serious work-related accident occurred in 2019 that statements from witnesses to the mandatory documentation. We added two chapters relating to the handling ultimately resulted in the full recovery of the afflicted person. Additional measures for the mitigation of risks of the incident, the procedure and supervision, and supplemented the forms for reporting on the occupational were drawn up and adopted, most of which were also implemented during the year. health and safety incident and measures for the management of risks. Annual Report | 134 Business report Annual Report | 135 Business report

By amending the manual for the issue and appropriate use of documents for safe work the instructions were 4.9 renamed to the Manual for the issuance of the safety work programme and safety work order for works in a de-energised state. The manual sets out the procedure for the issuance of the safety work programme (SWP) and safety work order (SWO) within the Maximo software tool. Social Responsibility

The other content of issuing documents for safe work in a de-energised state and the performance of work on live devices is defined in the newRules on the implementation of safety rules for work on electrical power Through positive energy, we strive to improve the quality of life plants and the issuing of documents for safe work. We added two new chapters Testing of equipment and for the benefit of society and the environment. Archiving documents for safe work and the used abbreviations to the rules. We supplemented the form Safety instructions for external contractors in electric power facilities and plants and Safety instructions for visitors We are active in the area of raising awareness and providing advice on the efficient use of energy and to electric power facilities and plants. environmental protection. We support local communities, educational institutions and projects, take care of current and retired employees, nurture cultural and technical heritage, and support the arts. In accordance with the ISO 45001 standard we ended the project concerning the examination of documents for responses to extraordinary events and dryland training drills. We audited the Rules on ensuring health and We supported numerous humanitarian, cultural, sporting and professional events in 2019, as well as charitable safety at work at temporary and mobile construction sites, and the audit of the Manual for the management projects and institutions, and sports clubs. of the occupational health and safety system is currently in progress. We were actively involved in the implementation of new work technologies in the work process (horizontal unwinding of cables and unwinding Each year, our employees participate in charitable holiday gift-giving to socially deprived children. Through the with a three-chamber cable reel) and in the drafting of instructions in the event of the release of SF6 gas. campaign this year we again collected gifts, clothes, toys, books and financial aid. We delighted the children under the auspices of the Šiška Social Service Centre and the Red Cross Trebnje Branch with the gifts we collected.

4.9.1 RESPONSIBILITY TO YOUTH

Considerable attention is given to education and raising the awareness of youth. This year we also responded to the invitation of Tone Čufar Primary School and at the Neighbours Day event and for fifth- and sixth- grade children we organised a tour of the Old City Power Plant with a practical display of how electric cars are charged.

Our former colleague Piko the Electrician was replaced this year by Neža the Electrician and Rok the Electrician. They presented the start of Ljubljana's electrification, the basics of e-mobility and how Elektro Ljubljana is linked to storks.

4.9.2 RESPONSIBILITY TO THE MEDIA

Similar to every year, we strove to establish and maintain a professional relationship with the media, and responded to their questions in a professional and timely manner. We communicated with the media in an open and proactive manner. Through press releases and posts on our websites, we regularly informed the public, the media and journalists about our operating results, important events and business decisions. Depending on the importance of a particular issue, we organised several formal and informal press conferences. Annual Report | 136 Business report Annual Report | 137 Business report

In 2019 we prepared two press conferences that drew major media coverage. At the first, which was held 4.9.3 RESPONSIBILITY TO FORMER EMPLOYEES in April, the public was informed of the introduction of payment for the charging of electric vehicles at charging stations within our Gremo na elektriko (Driven by Electricity) network. At the June press conference Since its establishment, the company has supported the work of the Pensioners’ Association of Elektro we presented our operating results and major investments, the first analyses of user responses after the Ljubljana. We regularly inform former employees of events at the company and organise gatherings with introduction of charging services against payment and the project within the scope of which we followed them. This is extremely important to them, as this is how they maintain contact with the company in which storks on their path to Africa. they spent the greater part of their life. We thus maintain contact with former employees and communicate the message to current employees that they will not be forgotten when they retire. Former employees We prepared the 5th strategic conference Distribution networks, the driver of transition to a low-carbon joined us this year at Company Day and for the New Year's celebration, also representing us at the electricity society, with the other distribution companies in Rogaška Slatina in April, and pushed the development and distribution companies’ sporting events. activity of electricity distribution companies in the future to the forefront, focusing on solutions that will facilitate the transition to a low-carbon society. In addition to our employees we also send our internal newsletter, Elektro novice, to all retired employees. The most active members of the Pensioners’ Association of Elektro Ljubljana are also actively involved in the At the end of the year we organised the grand opening of the renovated Hrastnik distribution transformer creation of the newsletter and inform us of their activities. station. The facility, which is one of the company's most important projects this year, was opened by the Minister of Economic Development and Technology Zdravko Počivalšek together with the president of the management board and mayor of Hrastnik. 4.9.4 RESPONSIBILITY TO INDUSTRIAL HERITAGE

We are more than pleased with our image in the media. There were 1,358 relatively neutral media reports The current use of the Old City Power Plant is a unique example of how to combine, under one roof, the about Elektro Ljubljana in 2019, which is an increase of 35% on 2018's figure. Our media image maintained a preservation of technical and industrial heritage, the performance of our present business activity and use of neutral connotation, while the proportion of favourable (positive) publicity increased relative to the previous space for artistic purposes. year, from 10% in 2018 to 12% in 2019. The number of negative reports was almost negligible. In cooperation with the Ministry of Culture and the contest-winning Bunker Institute, contemporary art STATISTICS OF MEDIA REPORTS performances, training and exercises are organised in the Old City Power Plant managed by Elektro Ljubljana. Number of issues Tone used in reports Value (in EUR thousand) As every year, several events were organised there during the year: the general meeting, press conferences and 4 314 social gatherings. 1,358 +35% 7 110 211 1,009 The history of the Old City Power Plant and the electrification of Ljubljana was presented in the bookŽivel 1,192 41 120 napredek, živela svetloba! (Long live progress, long live light!) Our book qualified for the Brumen Biennial of 898 109 Slovenian Design and was presented in an exhibition at the National Gallery in the company of outstanding 61 84 design works. 104 162 2018 2019 2018 2019 2018 2019

Unfavourable Neutral Favourable Electronic Internet Print media 4.9.5 ENVIRONMENTAL RESPONSIBILITY

SAFE HOME FOR STORKS

Favourable media reporting in 2019 focused on our good performance results, with the media reporting Electrical transmission lines also frequently house certain bird species. Elektro Ljubljana therefore protects favourably on e-mobility and the setting up of new electricity charging stations, and on Elektro Ljubljana's these birds against accidents with insulation on exposed parts of our infrastructure. Special attention is given special attention that we devote to storks. to storks, whose nests and offspring we care for. The white stork is an endangered species that is protected in Slovenia due to the lack of a feeding habitat. Storks are actually inseparably linked to Elektro Ljubljana, as Comparisons with 2018 also showed that we maintained a relatively high share of planned publicity, while the they are displayed in the company's new logo precisely due to our many years of cooperation in the banding of number and percentage of reports with primary publicity in which Elektro Ljubljana was the central focus of storks and relocation of their nests, when nests are made at dangerous locations. the reported topic increased. Annual Report | 138 Business report Annual Report | 139 Business report

Our company has been involved in the banding of storks for over 15 years. The placement of bands is important SPONSORSHIPS AND DONATIONS for the future identification of storks. Depending on the band we can gain data for each stork, regardless of where in the world the stork was found, on its gender, age, date and place of banding. This is one of the The company provides sponsorship and donations to support various projects of associations, institutes, methods of monitoring the stork population in Slovenia and worldwide. This year, in cooperation with the non-profit and humanitarian organisations that operate within our supply area. We were a sponsor of various Slovenian Centre for Banding Birds, which operates in the scope of the Natural History Museum of Slovenia, sports clubs and a golden sponsor for the Kayak Association of Slovenia. We also supported many different we again conducted banding in the wider area of Šentjernej and collectively banded the offspring in nests at 11 educational and cultural projects. locations. In 2019 we received 305 applications/requests for aid and sponsorship partnerships, an increase of 10% FLY STORK, FLY! (LETI, LETI ŠTORKLJA) relative to the previous year. We awarded 57 donations to societies and institutes, supporting 12 projects relating to culture and education, 10 sports and six humanitarian projects. As in previous years we also In addition to the banding of storks we also fitted telemetric devices on two storks this year within the project supported the Pensioners’ Association of Elektro Ljubljana in 2019. Fly Stork, Fly! in cooperation with Birdlife Slovenia, and thus monitored their path and progress to Africa. Srečko and Bela, which were selected for ‘adoption’, come from Matena on Ljubljana marshes, with the general NUMBER OF APPLICATIONS IS GROWING EVERY YEAR. public and employees assisting us in giving them names. The scientists who monitor birds thus gained vital 305 278 information on their habitat, travel and other habits. The social media and Facebook reaction exceeded our 262 expectations. Since the platform has already been put in place, we will proceed with the project of equipping storks with GPS devices.

DRIVEN BY ELECTRICITY 2017 2018 2019

From the perspective of environmental responsibility, Elektro Ljubljana remains the leading company in terms of developing e-mobility in Slovenia. We have ensured the development of the public charging station infrastructure since 2010. We provided close to 90,000 free charges to the users of electric vehicles from We earmarked EUR 75,881 for sponsorship projects, of which 56% of the sponsorship funds were earmarked 2011 until May 2019. As of May 2019 we introduced fees (payment for the service) for the charging of electric for sports. We were a sponsor of various sports clubs, among others a golden sponsor for the Kayak vehicles within the network Driven by electricity (Gremo na elektriko). The response from users was positive. Association of Slovenia. The remaining funds were earmarked for expert conferences from the energy sector, for cultural and educational projects. We opened a new charging station for electric vehicles in Trebnje, which is a step forward in the development SPONSORSHIP FUNDS BY AREA of the Driven by Electricity charging infrastructure. This is a system of charging stations that are connected to a solar power plant and thus operates self-sufficiently. With this project we wished to also establish how much electricity for electric vehicles would we be able to supply directly from solar energy. The charging station 16% was equipped with advertising panels with the intention to maintain the charging service affordable also in Culture the future. 13% 4.9.6 RESPONSIBILITY TOWARDS LOCAL COMMUNITY Institutes, societies COOPERATION WITH MUNICIPALITIES 15% Professional consultations In addition to numerous informal meetings that are extremely important to our operation in the local environment, we also organised a meeting this year with mayors and municipality representatives. The gathering was intended for discussion on the common challenges and cooperation that await us in the future. 56% We also presented the problems surrounding investments in the electricity infrastructure and development Sport that we face in terms of e-mobility. Annual Report | 140 Business report Annual Report | 141 Business report

4.9.7 FOR OUR FRIENDS ON FACEBOOK 4.10 On Facebook we inform employees and the general public of important events at the company, projects, Environmental raising awareness on our social responsibility, and promote e-mobility. We have already collected more than 1,582 likes, an increase of 300 on last year. We organised two prize draws; one within the campaign and the second at New Year's. Protection

The most notable Facebook campaign was Leti, leti štorklja (Fly Stork, Fly!) We reached 57,795 people and We are aware of the importance of environmental protection. engaged 1700 people per week, which is almost 20-times the normal amount. Our environmental position is therefore defined as part of the company’s governance and business policies.

Care for the environment, in terms of reducing • the reduction of negative impacts on the the burden on the air, water and soil, is ensured environment; by Elektro Ljubljana through the management of • readiness for and a rapid response to environmental aspects, such as elements, products, accidents; services and activities that might interact with the • the communication of obligations arising environment, and by implementing the associated from the environmental policy to everyone environmental programmes. who works for or on behalf of the company; • ensuring compliance with applicable laws; The company fully complied with the established • increasing environmental awareness amongst environmental policy in 2019. That policy includes employees; the company’s intentions and principles, and its • the external and internal communication comprehensive approach to the environment. of information regarding environmental management; and The environmental policy is defined by the following • the continuous improvement of environmental principles: management processes with the help of • the prevention of environmental pollution and framework and operational environmental the improved preservation of raw materials objectives. and natural resources; • the orderly management of waste and The company continuously raises employee awareness hazardous substances; about the importance of separate waste collection.

SEPARATELY COLLECTED AND DISPOSED OF WASTE IN 2019 (IN KG)

Construction waste 40,010,701

Waste from shaping 153,030

Municipal waste 80,264

Waste packaging 32,841

Oil waste 29,382

Toners 1,510

Other wastes 302,880 Annual Report | 142 Business report Annual Report | 143 Business report

The reduction of impact on the environment in terms of carbon footprint is ensured through continuous litres investment in the energy renovation of buildings, efficient use and constantly drawing attention to energy 580,000 saving. Energy product consumption trends are a reflection of implemented measures. 560,000 540,000 ENERGY CONSUMPTION 520,000 500,000 kWh 2015 2016 2017 2018 2019 800,000 600,000 Fuel for vehicles 400,000 200,000 0 2015 2016 2017 2018 2019 4.10.1 ENVIRONMENTAL PROGRAMMES

Gas Electricity Actual environmental aspects were drawn up in 2019, and material environmental aspects defined based on assessments. Operational objectives, timeframes and responsible persons are defined for each environmental aspect. All of those elements together are defined in programmes. Impacts on the environment as the result of the company’s operations are reduced through the implementation of those programmes.

MWh 2,000 Environmental programmes may be implemented over several years, and are deemed completed when 1,500 operational objectives have been achieved. New environmental programmes are continuously added based on 1,000 an analysis of environmental aspects. 500 0 2015 2016 2017 2018 2019 The Transformers in Sensitive Areas programme was implemented in 2019.

Heat 4.10.2 ENVIRONMENTAL INVESTMENTS

Investments in environmental management amounted to EUR 877 thousand in 2019 and were down 59% on the investments in the previous year. litres 40,000 INVESTMENTS AND INCOME FROM ENVIRONMENTAL MANAGEMENT (IN EUR) 30,000 2019 2018 20,000 INVESTMENTS IN ENVIRONMENTAL MANAGEMENT 877,170 2,158,799 10,000 1. Environmental investments 809,267 2,086,855 0 2015 2016 2017 2018 2019 portion of the investments which are the result of environmental protection 771,847 2,050,095 studies of environmental impacts 37,420 36,760 Heating oil 2. Costs1 67,903 71,944 utility services (waste removal, sewerage collection) 62,068 62,464 waste removal (destruction) 3,088 4,221 maintenance of organic containers 157 549 Through the annual upgrading of the vehicle fleet with newer, more energy efficient vehicles that comply with system management ISO 14001 2,590 4,710 the highest environmental standards, and in specific segments, by purchasing electric vehicles, the amount of INCOME FROM ENVIRONMENTAL MANAGEMENT 47,683 24,728 consumed fossil fuels is declining over a period of several years. income from the sale of waste material 47,683 24,728 1 costs of materials and services 05 Independent Auditor’s Report

The year 2019 was characterised by the largest investments in the last decade. We are responsible for prudent and diligent care that is focused on reliable and safe electricity. Annual Report | 146 Independent auditor’s report Annual Report | 147 Independent auditor’s report 06 Financial Report

Stable financial operations over a period of multiple generations is a staple of the best firms. We are ranked at the very top of the Slovenian corporate sector. Annual Report | 150 Financial report Annual Report | 151 Financial report

6.1 in EUR Notes 2019 2018

A. Equity 6.2.7.9. 328,198,761 319,939,892 Financial Statements I. Called-up capital 163,412,978 163,412,978 1. Share capital 163,412,978 163,412,978 II. Share premium account 81,725,014 81,725,014 III. Profit reserves 79,236,095 69,753,998 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019 1. Legal reserves 6,524,274 5,830,451 2. Reserves for treasury shares and own participating interests 54,115 54,115 in EUR Note 2019 2018 3. Treasury shares and own participating interests (54,115) (54,115) A. Long-term assets: 474,149,522 461,139,079 4. Other profit reserves 72,711,821 63,923,547 I. Intangible assets and long-term deferred expenses and accrued revenue 6.2.7.1. 4,436,416 3,982,908 IV. Fair value reserves (569,691) (430,380) 1. Long-term property rights 3,945,749 3,384,453 VI. Net profit for the financial year 4,394,365 5,478,282 5. Other long-term deferred expenses and accrued revenue 490,667 598,455 II. Property, plant and equipment 6.2.7.2. 453,413,589 442,031,887 B. Provisions and long-term accrued expenses and deferred revenue 57,902,778 54,728,936 1. Land and buildings 360,054,525 349,662,828 1. Provisions for pensions and similar liabilities 6.2.7.10. 9,191,680 8,653,434 a) Land 19,155,352 17,588,781 2. Other provisions 6.2.7.10. 284,679 279,646 b) Buildings 340,899,173 332,074,047 3. Long-term accrued expenses and deferred revenue 6.2.7.11. 48,426,419 45,795,856 2. Production plant and machinery 80,793,445 81,027,783

3. Other plant and equipment 99,522 99,522 C. Long-term liabilities 74,118,153 71,406,092 4. Property, plant and equipment in acquisition 12,466,097 11,241,754 I. Long-term financial liabilities 6.2.7.12. 73,638,406 71,145,505 a) Property, plant and equipment under construction and manufacture 12,438,085 11,100,861 1. Long-term financial liabilities to banks 73,041,155 71,051,934 b) Advances for the acquisition of property, plant and equipment 28,012 140,893 2. Other long-term financial liabilities 597,251 93,571 IV. Long-term financial assets 6.2.7.3. 15,171,027 14,029,457 II. Long-term operating liabilities 6.2.7.13. 402,845 195,194 1. Long-term financial assets, excluding loans 15,162,904 14,021,334 1. Long-term trade payables 269,886 55,281 a) Shares and participating interests in group companies 2,847,285 1,766,290 2. Long-term operating liabilities based on advances 132,959 139,913 b) Shares and participating interests in associates 377,737 377,737 III. Deferred tax liabilities 6.2.7.5. 76,902 65,393 c) Other shares and participating interests 11,937,882 11,877,307 2. Long-term loans 8,123 8,123 Č. Current liabilities 37,358,236 38,961,567 b) Long-term loans to others 8,123 8,123 II. Current financial liabilities 6.2.7.12. 17,452,244 21,323,407 VI. Deferred tax assets 6.2.7.5. 1,128,490 1,094,827 1. Current financial liabilities to banks 17,010,779 21,197,120 2. Other current financial liabilities 441,465 126,287 B. Current assets: 21,046,877 23,619,410 III. Current operating liabilities 6.2.7.13. 19,905,992 17,638,160 II. Inventories 6.2.7.6. 1,931,998 2,274,668 2. Current trade payables 16,424,057 13,484,002 1. Materials 1,931,998 2,274,668 Current operating liabilities 3. 817,984 602,617 III. Current financial assets 6.2.7.3. 96 6,325 based on advances 2. Short-term loans 96 6,325 4. Other current operating liabilities 2,663,951 3,551,541 a) Short-term loans to others 96 6,325 D. Current accrued expenses and deferred revenue 6.2.7.14. 2,400,517 4,565,004 IV. Current operating receivables 6.2.7.4. 16,606,183 18,221,352 2. Current trade receivables 15,534,712 17,406,832 TOTAL EQUITY AND LIABILITIES 499,978,445 489,601,491 3. Other current operating receivables 1,071,471 814,520

V. Cash and cash equivalents 6.2.7.7. 2,508,600 3,117,065 The accompanying notes are an integral part of the consolidated financial statements and should be read in conjunction with them.

C. Current deferred expenses and accrued revenue 6.2.7.8. 4,782,046 4,843,002

TOTAL ASSETS 499,978,445 489,601,491 Annual Report | 152 Financial report Annual Report | 153 Financial report

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDING 31 DECEMBER 2019 STATEMENT OF CASH FLOWS FOR 2019

Notes in EUR Note 2019 2018 in EUR 2019 2018 6.2.10 1. Net sales revenue 6.2.8.1. 86,815,271 84,388,121 CASH FLOWS FROM OPERATING ACTIVITIES a) on the domestic market 86,815,271 84,388,121 Inflows from the sale of products and services 188,821,210 188,422,088 3. Capitalised own products and services 6.2.8.2. 12,363,790 13,800,719 Other inflows from operating activities 439,785 471,371 4. Other operating revenues 6.2.8.1. 3,853,546 5,623,058 Inflows from operating activities 189,260,995 188,893,459 Total revenue 103,032,607 103,811,898 Outflows for the purchase of materials and services (26,114,344) (26,438,090) 5. Costs of goods, materials and services 6.2.8.3. 24,052,991 24,081,402 Outflows for wages and employees’ profit participation (15,892,153) (15,000,845) a) historical cost of goods and materials sold and cost of materials used 10,998,415 11,955,656 Outflows for contributions of all types (110,931,327) (110,431,453) b) costs of services 13,054,576 12,125,746 Other outflows from operating activities (424,477) (12,237,496) 6. Labour costs 6.2.8.4. 32,832,835 31,647,486 Outflows from operating activities (153,362,301) (164,107,884) a) costs of wages and salaries 23,224,496 22,350,015 Net cash flow from operating activities 35,898,694 24,785,575 b) pension insurance costs 3,237,076 3,173,312 CASH FLOWS FROM INVESTING ACTIVITIES c) social security costs 1,721,126 1,691,196 Inflows from interest received, and shares in the profit of others 785,042 855,763 d) other labour costs 4,650,137 4,432,963 Inflows from the disposal of property, plant and equipment 2,439,650 3,819,949 7. Write-downs 6.2.8.5. 28,838,895 27,411,391 Inflows from the disposal of financial assets 6,394 9,985 a) amortisation/depreciation 27,628,712 26,294,511 Inflows from investing activities 3,231,086 4,685,698 b) revaluation operating expenses for intangible assets and property, plant and 1,110,816 1,023,277 equipment Outflows for the acquisition of intangible assets (2,455,582) (1,248,887) c) revaluation operating expenses for working capital 99,367 93,603 Outflows for the acquisition of property, plant and equipment (28,234,602) (32,057,915) 8. Other operating expenses 6.2.8.6. 422,540 422,628 Outflows for the acquisition of financial assets 0 (1,127,500) Operating profit 16,885,346 20,248,991 Outflows from investing activities (30,690,184) (34,434,302) 9. Finance income from participating interests 6.2.8.7. 784,390 854,620 Net cash flow from investing activities (27,459,098) (29,748,605) a) finance income from participating interests in other companies 45,890 45,890 CASH FLOWS FROM FINANCING ACTIVITIES b) finance income from other investments 738,500 808,730 Inflows from the increase in financial liabilities 30,300,000 34,300,000 10. Finance income from loans granted 6.2.8.7. 3,626 6,749 Inflows from financing activities 30,300,000 34,300,000 a) finance income from loans to others 3,626 6,749 Outflows for interest paid (1,370,845) (1,366,784) 11. Finance income from operating receivables 6.2.8.7. 62,107 64,150 Outflows for the repayment of capital 0 0 a) finance income from operating receivables from others 62,107 64,150 Outflows for the repayment of financial liabilities (32,497,120) (26,025,538) 13. Finance costs from financial liabilities 6.2.8.8. 1,423,494 1,360,791 Outflows for the payment of dividends and other shares in profit (5,480,096) (4,700,397) a) finance costs from bank loans 1,245,666 1,269,816 Outflows from financing activities (39,348,061) (32,092,719) d) finance costs from other financial liabilities 177,828 90,975 Net cash flow from financing activities (9,048,061) 2,207,281 14. Finance costs from operating liabilities 6.2.8.8. 471 485 CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 2,508,600 3,117,065 a) finance costs from trade payables 104 110 Net cash flow for the period (608,466) (2,755,749) b) finance costs from other operating liabilities 367 375 Opening balance of cash and cash equivalents 3,117,066 5,872,814 15. Other revenue 6.2.8.9. 27,376 52,058

16. Other costs 6.2.8.10. 34,870 37,408 The repaid GEN-I security deposit in the amount of EUR 11,727,500 is included under other outflows from operating activities in 2018. Pre-tax profit 6.2.8.11. 16,304,010 19,827,884 The accompanying notes are an integral part of the financial statements and should be read in conjunction with them. 17. Corporate income tax 6.2.8.12. 2,405,548 2,870,512 18. Deferred taxes 6.2.8.13. (13,889) (8,370) 19. Net profit for the accounting period 6.2.8.14. 13,912,351 16,965,742 21. Changes in fair value reserves 49,066 16,355 22. Other components of other comprehensive income 6.2.8.15. (224,266) (208,901) 24. Total comprehensive income for the reporting period 6.2.8.14. 13,737,151 16,773,196

The accompanying notes are an integral part of the financial statements and should be read in conjunction with them. Annual Report | 154 Financial report Annual Report | 155 Financial report

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDING 31 DECEMBER 2019

in EUR Fair value reserves due Share Reserves to the valuation Share premium Legal for treasury Treasury Other profit of long-term Net profit or loss Net profit for the Total Changes in equity capital account reserves shares shares reserves financial assets brought forward financial year equity A.1. Balance as at 31 December 2018 163,412,978 81,725,014 5,830,451 54,115 (54,115) 63,923,547 (430,380) 0 5,478,282 319,939,892 Balance as at 1 January 2019 163,412,978 81,725,014 5,830,451 54,115 (54,115) 63,923,547 (430,380) 0 5,478,282 319,939,892

B.1. Changes in equity – transactions with owners (5,478,282) (5,478,282) a) Payment of dividends (5,478,282) (5,478,282) d) Purchase of treasury shares

B.2. Total comprehensive income for the reporting period (175,200) 13,912,351 13,737,151 a) Entry of net profit or loss for the reporting period 13,912,351 13,912,351 d) Changes in fair value reserves 49,066 49,066 g) Other components of other comprehensive income (224,266) (224,266)

B.3. Changes in equity 693,823 8,788,274 35,889 5,478,282 (14,996,268) 0 Allocation of remaining net profit for the 2018 financial year to a) 5,478,282 (5,478,282) 0 other components of equity Allocation of a portion of net profit from the reporting period b) to other components of equity pursuant to the resolution of 693,823 8,788,274 (9,482,097) 0 the management body and the supervisory body e) Creation of reserves for treasury shares d) Other changes in equity 35,889 (35,889) 0

D. Balance as at 31 December 2019 163,412,978 81,725,014 6,524,274 54,115 (54,115) 72,711,821 (569,691) 0 4,394,365 328,198,761 DISTRIBUTABLE PROFIT 4,394,365 4,394,365 Annual Report | 156 Financial report Annual Report | 157 Financial report

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDING 31 DECEMBER 2018

in EUR Fair value reserves due Share Reserves to the valuation Share premium Legal for treasury Treasury Other profit of long-term Net profit or loss Net profit for the Total Changes in equity capital account reserves shares shares reserves financial assets brought forward financial year equity A.1. Balance as at 31 December 2017 163,412,978 81,725,014 4,983,769 54,115 (54,115) 53,314,888 (269,953) 228,432 4,467,238 307,862,366 Balance as at 1 January 2018 163,412,978 81,725,014 4,983,769 54,115 (54,115) 53,314,888 (269,953) 228,432 4,467,238 307,862,366

B.1. Changes in equity – transactions with owners (4,695,670) (4,695,670) a) Payment of dividends (4,695,670) (4,695,670) d) Purchase of treasury shares

B.2. Total comprehensive income for the reporting period (192,546) 16,965,742 16,773,196 a) Entry of net profit or loss for the reporting period 16,965,742 16,965,742 d) Changes in fair value reserves 16,355 16,355 g) Other components of other comprehensive income (208,901) (208,901)

B.3. Changes in equity 846,682 10,608,659 32,119 4,467,238 (15,954,698) 0 Allocation of remaining net profit for the 2017 financial year to a) 4,467,238 (4,467,238) 0 other components of equity Allocation of a portion of net profit from the reporting period b) to other components of equity pursuant to the resolution of 846,682 10,608,659 (11,455,341) 0 the management body and the supervisory body e) Creation of reserves for treasury shares d) Other changes in equity 32,119 (32,119) 0

D. Balance as at 31 December 2018 163,412,978 81,725,014 5,830,451 54,115 (54,115) 63,923,547 (430,380) 0 5,478,282 319,939,892 DISTRIBUTABLE PROFIT 5,478,282 5,478,282

The accompanying notes are an integral part of the financial statements and should be read in conjunction with them. Annual Report | 158 Financial report Annual Report | 159 Financial report

6.2 profit or loss, cash flows and changes in equity of the parent company. The financial statements of the subsidiary are thus not subject to consolidation.

Notes to the Financial The company holds 27.7% (or 4,524 shares) of all shares of Informatika, informacijske storitve in inženiring, d.d., Vetrinjska ulica 2, Maribor and one position on that company's supervisory board. That company is Statements entered in the companies register in Maribor under decision no. 1/00871/2000. The share capital of that company amounts to EUR 669,653. Shares are not listed on the stock exchange.

The company’s total equity amounts to EUR 1,568,935. The audited net profit for the accounting period of 6.2.1 FINANCIAL STATEMENTS AND ACTIVITY Informatika was EUR 136,822 in 2019, while audited net profit amounted to EUR 115,802 in 2018.

Elektro Ljubljana d.d. compiled a statement of financial position as at 31 December 2019 and a statement of comprehensive income, cash flow statement and a statement of changes in equity, and the corresponding 6.2.3 INFORMATION ABOUT EMPLOYEES disclosures for the 2019 financial year in accordance with the Slovenian Accounting Standards and the ZGD- 1. The company operates in accordance with the Energy Act and the Act Laying Down the Methodology for The company had 846 employees as at 31 December 2019, down from 850 as at 31 December 2018. The average Calculating the Network Charge and the Methodology for Setting the Network Charge, and the Criteria for number of employees during the 2019 financial year was 849, up from 846 in 2018. The employee structure in Determining Eligible Costs for the Electricity Network, which was adopted by the Council of the Energy Agency terms of education (qualifications) is presented in the business segment of the annual report in Section 4.8.3. on the basis of Articles 27 and 87 of the Energy Act.

Since 1 July 2007, Elektro Ljubljana is no longer a public company and thus no longer performs a public service. 6.2.4 EXCHANGE RATE AND METHOD OF CONVERSION TO THE LOCAL CURRENCY The company generates revenue: • under an agreement for the lease of the electricity distribution infrastructure and the provision of The company converts business events in a foreign currency on the reporting date according to the middle services as system operator of the distribution network of Elektro Ljubljana on behalf of SODO, which is exchange rate of the Bank of Slovenia. described in the business report in Section 3.7.2 Regulatory framework, 4.2 Distribution of electricity, 4.3 Development of the distribution system and 4.4 Users, and • through other services described in the business report in Section 4.5 Market services. 6.2.5 REPORTING IN ACCORDANCE WITH THE ENERGY ACT

In accordance with Article 109 of the Energy Act, the company must report by business segment, separately 6.2.2 DATA REGARDING GROUP COMPANIES AND THE ASSOCIATED for the energy-related (electricity) activity and for other activities. Section 6.2.16 presents the profit or loss COMPANY statement, statement of financial position and cash flow statement by activity, separately for regulated and market activities. Based on the Energy Act, Elektro Ljubljana d.d. established Male hidroelektrarne Elektro Ljubljana, proizvodnja električne energije, d.o.o., Ljubljana, Slovenska cesta 56 on 14 February 2002, which is 100% owned by the company. The company is entered in the companies register in Ljubljana under decision no. Srg 2002/01630. 6.2.6 SUMMARY OF ACCOUNTING POLICIES On 3 January 2011, the company was renamed Elektro Ljubljana OVE, inženiring s področja obnovljivih virov energije, d.o.o., with the abbreviated name of Elektro Ljubljana OVE d.o.o. An investment of EUR 2,847,285 6.2.6.1 ACCOUNTING POLICIES was made in Elektro Ljubljana OVE. The company’s total equity amounts to EUR 8,573,644. Net profit for the accounting period was EUR 175,235 The company applied the following accounting assumptions: in 2019 and EUR 305,493 in 2018. • the presented statements of financial position only include the assets and liabilities that relate to the company's activity. Costs, revenue and expenses are taken into account as they arise and are recorded in According to the criteria set out in the ZGD-1, the aforementioned subsidiary is classified as a micro company the accounting period to which they relate, regardless of inflows and outflows; and as such does not significantly impact the presentation of a true and fair picture of the financial position, • it is assumed that the company is a going concern for the foreseeable future, and that its interim results, even its annual results, have a mere relative value; Annual Report | 160 Financial report Annual Report | 161 Financial report

• the historical cost principle was applied in the compilation of financial statements and the notes 1 January 2019 (SAS 2019) Change SAS 1 31 December 2018 thereto, save for financial assets measured at fair value via other comprehensive income and Assets: derivatives, which are measured at fair value as at the balance sheet date. Property, plant and equipment 750,720 750,720 0 Intangible assets 2,099,307 481,102 1,618,205 When selecting accounting policies, i.e. the rules and procedures that need to be taken into account and 2,850,027 1,231,822 1,618,205 applied for the compilation of financial statements and for the entire accounting process, the company took Liabilities: into account the principles of prudence, priority of content over form and the significance of events. Long-term financial liabilities 878,576 859,777 18,799 Current financial liabilities 542,686 429,889 112,797 The principle of individual valuation of assets and liabilities was applied. 1,421,262 1,289,666 131,596

During the compilation of the profit or loss statement the company applied variant I under SAS 21.5. CHANGE IN ACCOUNTING POLICIES UNDER SAS 15 (2019) - REVENUES The cash flow statement has been compiled using the direct method (variant I of SAS 22.2). The data for the compilation of the cash flow statement are derived from accounting data. As of 1 January 2019 contracts with customers and separate performance obligations in these contracts serve as the basis for the recognition of sales revenue. The company analysed contracts with customers and Cash flows from operating activities on both the inflow and outflow sides also disclose operating inflows and assessed that as at 1 January 2019 there was no need to recognise any effects of the changed standard. outflows that the company incurs on its own behalf and for the account of SODO under the agreement on the lease of the electricity distribution infrastructure and the provision of services for the system operator of the a) LONG-TERM INTANGIBLE ASSETS, LONG-TERM DEFERRED EXPENSES AND ACCRUED distribution network. These services, which are not included in the company's revenue, include: the billing REVENUE AND PROPERTY, PLANT AND EQUIPMENT of the network charge and surcharges to customers that pay the network charge separately from electricity supply, the charging of average connection costs and above-standard services according to SODO's pricelist. Intangible assets comprise property rights for computer software. The purchase price is equal to the historical cost. The useful life of computer software is three to five years, and between 30 and 100 years for easements. The statement of changes in equity is compiled in accordance with SAS 23.

Long-term deferred expenses and accrued revenue primarily comprise long-term accrued costs for the CHANGES IN ACCOUNTING POLICIES IN 2019 development of the information system, rent paid in advance and the mandatory contribution paid to the reserve (sinking) fund for real estate owned by the company. The historical cost of long-term deferred Changes in accounting policies under SAS 1 (2019) - accounting for leases expenses and accrued revenue comprise expenses until their acquisition. Long-term accrued costs are written- • As of 1 January 2019 the company recognised the right-to-use leased assets and financial liabilities off at a rate of 10%, while rent is transferred to costs of services for each accounting period in the part relating from leases for all long-term leased assets whose new value exceeds EUR 10,000. Transitioning to the to that period. Combined assets pooled in the reserve fund are used on the basis of invoices issued by building new accounting approach was calculated by the company in accordance with the SAS 1.65 and applied administrators. the simplified approach. The company deemed contracts that were already categorised among lease contracts to have met the requirement set out by the SAS 1.27. On the basis of the Services of General Economic Interest Act (Official Gazette of the RS, No. 32/93) and the • Prior to 1 January 2019 the company categorised leases into operating and finance leases. It disclosed agreement defining the participating interest between the Republic of Slovenia and Javno podjetje Elektro operating leases as a rental cost, and as of 1 January 2019 it has disclosed leased assets as assets from Ljubljana p.o. of 19 July 1996, the Republic of Slovenia invested in infrastructure facilities, devices and the right-of-use, and financial liabilities from leases among liabilities. Upon initial recognition the right- networks, and mobile and other assets in the public company. On the date the agreement was signed, these of-use is measured at the present value of future rent, and then the right is depreciated over the full assets became the property of the public company with a restriction requiring the return of these assets in term of the lease. The depreciation cost and interest expense are recognised in the statement of profit their entirety to the Republic of Slovenia if bankruptcy proceedings were initiated against the public company. or loss as a financing expense. The company applied a single discount rate for the initial recognition of leases. Elektro Ljubljana is liable for its liabilities with all its assets, excluding infrastructure facilities, plant and • Short-term leases and lease of low-value assets continue to be disclosed as rental costs. networks and any other assets earmarked for the pursuit of the activity defined as a public service under the law.

The impact of applying this standard on the balance sheet items as at 1 January 2019 is as follows: Since 1 July 2007, all the infrastructure earmarked for the public service has been placed under operating lease and the management of SODO. Since 1 July 2007, Elektro Ljubljana is no longer a public company and thus no longer performs a public service. Annual Report | 162 Financial report Annual Report | 163 Financial report

Property, plant and equipment acquired until 31 December 2001 are disclosed at the values appraised in 2001. c) INVENTORIES According to that valuation, only impairments and not increases in value (gains) were disclosed in accordance with the applicable standards. Inventories are recognised at historical cost. The use of inventories of materials is valued using the moving average price method. A new average price of materials in inventory is therefore calculated every time new Property, plant and equipment acquired after 2001 are disclosed at historical cost, and all sales and materials are purchased. Inventories primarily comprise materials and spare parts for use in own investments eliminations taken into account accordingly. Value adjustments were created in the amount of depreciation and for the maintenance of fixed assets. charged. d) RECEIVABLES The company values fixed assets at historical cost, which comprises the purchase price, import duties and non-refundable purchase taxes, and the costs that can be directly ascribed to qualifying an asset for its The majority of operating receivables comprise trade receivables incurred during the normal course of intended use, less accumulated depreciation and any impairment. Economic benefits are expected from their business. Receivables are disclosed in net values in the statement of financial position, meaning they use by the company. are decreased by any value adjustments created for doubtful and disputed receivables. When creating adjustments to operating receivables, the company uses an accounting estimate according to which Repair and maintenance costs associated with property, plant and equipment incurred subsequently are adjustments are created in a percentage based on experience from previous years from doubtful and disputed disclosed by the company as maintenance costs if they are incurred to renew or preserve future economic receivables and late payments. benefits that are expected based on the initially estimated effectiveness of the asset in question. The expected costs of regular inspections or repairs to items of property, plant and equipment are treated as parts The company creates value adjustments as follows: in the amount of 80% for receivables in bankruptcy of the associated items of property, plant and equipment. proceedings not published in the Official Gazette of the Republic of Slovenia, for receivables subject to lawsuits and receivables in composition proceedings, if they have yet to be confirmed. For other receivables, More important property, plant and equipment, such as commercial buildings, distribution transformer station adjustments are created based on experience from previous years and expectations during the accounting facilities, distribution stations and transformer stations and equipment therein, which comprise individual period, in the amount of 30% for receivables from network charges and services, and in the amount of 50% for parts of assets with shorter useful lives compared to the entire assessed asset, are divided into several units receivables from default interest up to or more than 90 days past due. The amounts of written-off receivables with a shorter estimated useful life. The company does not charge depreciation for potential decommissioning are debited to revaluation operating expenses and credited to the associated adjustment to the value of and removals, as these costs are not envisaged. receivables.

The company has no fixed assets acquired under finance leases, nor are its assets mortgaged as collateral. e) DEFERRED TAX ASSETS AND LIABILITIES b) AMORTISATION AND DEPRECIATION On 31 December 2019, the company created deferred tax assets from temporary tax differences based on the balance of created adjustments from doubtful and disputed receivables and based on the balance of Amortisation and depreciation are charged on a straight-line basis with regard to the useful life of a specific temporarily non-deductible provisions for jubilee benefits and severance pay at retirement, and on the basis asset, and deducted from their historical cost. The company’s responsible employees determine the type and of actuarial gains and losses. They were created in the amount that is expected to be refunded by the tax period of an asset's useful life for new types of intangible assets and property, plant and equipment. administration and at tax rates that are valid during the financial year in which the assets are refunded. The company also created deferred tax liabilities from investments valued at fair value through equity as at 31 Fixed assets under construction are not subject to depreciation until transferred into use. December 2019.

Amortisation/depreciation rates used in 2018 and 2019: f) FINANCIAL ASSETS

Buildings 2.00 % to 6.67 % Investments comprise investments in the equity of other companies and investments in subsidiaries and Equipment 2.86 % to 20.00 % the associated company. All investments are recognised at historical cost and classified to available-for-sale Motor vehicles 8.33 % to 12.5 % financial assets, excluding investments in shares listed on the stock exchange, and are measured at fair value Furniture 6.67 % to 12.5 % through equity. Computer equipment 20 % to 33.33 %

Other investments 10 % At least once a year, before compiling the annual financial statements, the company verifies the Easement 1 % to 3.33 % appropriateness of the disclosed amount of individual financial assets. If the value of a financial asset is in Annual Report | 164 Financial report Annual Report | 165 Financial report

decline, the company verifies whether any adjustment (impairment) to the originally disclosed value needs distribution network. The deferred surplus of liabilities will be reconciled as an outflow in the period and by the to be created and charged to revaluation finance costs. It must also write-off a financial asset, in part or in deadlines set out in the aforementioned agreement. full, charging it directly to revaluation finance costs, as soon as reasons for write-off arise. It also reconciles investments in shares listed on the stock exchange at the end of the year. l) EQUITY g) PROVISIONS Total equity is defined by the amounts that were invested by shareholders and the amounts generated during operations and pertaining to shareholders. The company creates long-term provisions for jubilee benefits and severance pay at retirement as the present value of the employer’s liability to the employee. They are created due to the requirements of the SAS 2006. Share capital is a component of total equity and is recorded in nominal terms in the company's Articles of The calculation of long-term provisions is drawn up by a certified actuary. Association and in the companies register. Share capital is divided into no-par-value shares.

On the basis of court proceedings that the company is certain will result in future liabilities, it creates The share premium account comprises amounts from the reversal of the general capital revaluation provisions for such claims in accordance with the SAS. adjustment. With the transition to the SAS 2006, as at 1 January 2006, companies were required to transfer the balance of the general capital revaluation adjustment to the share premium account on 31 December 2005. h) LONG-TERM ACCRUED EXPENSES AND DEFERRED INCOME Net profit for the financial year is used for the purposes set out in the ZGD-1. By way of a decision, the The company discloses the following, in particular, under long-term accrued expenses and deferred revenue: Management Board determines the use of net profit for the financial year during the compilation of the • fixed assets acquired free of charge, which represent the connections and other parts of the network annual report. The general meeting decides on the use of distributable profit. and equipment that were acquired free of charge, and were financed by legal entities and natural persons and are included in the company’s distribution network; and Legally prescribed profit reserves are created in the amount of 5% of the net profit for the financial year until • fees paid for connections to the electricity network before 1 July 2007. that amount reaches 10% of the share capital that is entered in the companies register.

By crediting other operating revenue, the amount of actually charged depreciation of fixed assets, acquired Other profit reserves are created from net profit for the financial year under a Management Board resolution. free of charge, is recognised as consumption, and the consumption from paid fees is transferred to other operating revenue in an amount calculated according to the depreciation rates of fixed assets that were Fair value reserves comprise the amount of the revaluation of financial assets that are listed on the stock financed from assets acquired in this manner. exchange, and actuarial gains and losses from severance pay at retirement. i) TAXATION m) LONG-TERM AND CURRENT FINANCIAL LIABILITIES

The company is subject to the payment of corporate income tax. Long-term and current financial liabilities arise in connection with the financing of the company and comprise liabilities to creditors. j) CASH AND CASH EQUIVALENTS They are disclosed in the amount of cash received upon initial recognition and are subsequently reduced by Cash and cash equivalents comprise cash on transaction accounts and call deposits. repaid amounts. They are measured at amortised cost. k) CURRENT ACCRUALS/PREPAYMENTS AND DEFERRED/ACCRUED REVENUE The portion of long-term financial liabilities maturing within one year after the reporting date is disclosed under current liabilities. Current deferred expenses and accrued revenue include current accrued revenue, which is justifiably included in the profit or loss statement as revenue, but is not charged until it is recognised. Current operating liabilities comprise trade payables. They are initially valued on the basis of sums from relevant documents that confirm the acceptance of goods and services. Current accrued expenses and deferred revenue comprise current deferred liabilities that arose as a result of the surplus of total eligible costs after the reconciliation of regulatory periods under the agreement on the The carrying amount of long-term and current liabilities is equivalent to their amortised cost. lease of the electricity distribution infrastructure and the provision of services for the system operator of the Annual Report | 166 Financial report Annual Report | 167 Financial report

n) REVENUE Finance costs comprise costs from financing and investing activities. They primarily comprise accrued interest. They are recognised when charged, regardless of the related payments. Revenue is itemised into operating revenues, finance income and other revenues. Costs classified as neither operating nor finance costs are disclosed under other expenses. They are disclosed Operating revenues comprise sales revenue, capitalised own services and other operating revenues associated according to actual amounts incurred. with business effects. 6.2.6.2 TRANSACTIONS WITH SODO Sales revenue is recognised on the basis of provisions from contracts with customers, upon the transfer of the control of services to a customer, in the amount of expected fees to which the company is entitled in Under the agreement on the lease of the electricity distribution infrastructure and the provision of services exchange for services rendered, less repayments and discounts that were approved at the time of the sale or for the system operator of the distribution network, Elektro Ljubljana charged all relevant revenue for 2019 to subsequently. The recognition of revenues from services provided to customers occurs gradually, applying the SODO in the profit or loss statement. Operating results in 2019 thus include a preliminary calculation of the contribution method for the contributions used until the date of the measurement for the measurement of 2019 regulatory year in the amount of EUR 4,268,503. performance obligations. In accordance with the provisions of Article 70 of the agreement on the lease of the electricity distribution The amounts that were charged on behalf of and for the account of SODO d.o.o. shall not be disclosed under infrastructure and the provision of services for the system operator of the distribution network, the final revenues. reconciliation for the 2019 regulatory year will be drawn up by SODO based on the audited figures of both companies. The final reconciliation will be drawn up in 2020. In accordance with the provision of Article Finance income comprises revenue generated from investing activities. It arises in connection with non- 70 of the agreement on the lease of electricity distribution infrastructure and the provision of services for current and current financial assets, and in connection with long-term and current receivables. It primarily the system operator of the distribution network, the Energy Agency of the Republic of Slovenia can issue comprises accrued interest. It is recognised when charged, regardless of receipts. a decision in accordance with Article 46a of the Energy Act in which different surpluses or shortfalls were identified than those established by SODO d.o.o. and which both companies are required to take into account. Revenue classified as neither operating nor finance income is disclosed under other revenue. It is disclosed according to actual amounts incurred. o) EXPENSES AND COSTS

Expenses and costs represent a decrease in economic benefits during the accounting period in the form of a decrease in assets or increase in liabilities. Costs are recognised if a decrease in economic benefits during the accounting period is associated with a decrease in assets or an increase in liabilities, and that decrease or increase can be measured reliably.

Operating expenses are equal to costs accrued during the accounting period. The historical cost of goods sold, the costs of materials, costs of services, labour costs and amortisation and depreciation are disclosed under operating expenses.

Various charges and provisions are disclosed under other operating expenses.

Revaluation operating expenses arise in connection with property, plant and equipment and represent the value of write-downs of property, plant and equipment that still have a carrying amount, and also arise in connection with the sale of fixed assets when their carrying amount exceeds their selling price, and in connection with working capital, where they represent the amount of value adjustments created for doubtful and disputed receivables. Annual Report | 168 Financial report Annual Report | 169 Financial report

6.2.7 DISCLOSURES OF ITEMS IN THE STATEMENT OF FINANCIAL POSITION Intangible assets comprise property rights for computer software. Deferred expenses and accrued revenue comprise long-term deferred operating costs comprising investments in the acquisition of data regarding the 6.2.7.1 INTANGIBLE ASSETS AND LONG-TERM DEFERRED EXPENSES AND ACCRUED distribution network and long-term rent and mandatory assets paid for the creation of a reserve (sinking) fund REVENUE under the Housing Act.

2019 The historical cost of intangible assets and long-term deferred expenses and accrued revenue was up by EUR

Long-term property rights Long-term Total intangible assets 2,282,465 in 2019. Long-term deferred Fixed assets and long-term property Right- operating Reserve under deferred expenses in EUR rights of-use costs fund construction and accrued revenue The adjustment to the value of property rights was up by EUR 1,828,957 as a result of amortisation charged. Historical cost Balance as at 31 Dec 2018 9,502,773 516,962 81,493 199,135 10,300,363 6.2.7.2 PROPERTY, PLANT AND EQUIPMENT Adjustments due to changes to (1,618,205) 1,618,205 0 SAS 1 2019 Balance as at 1 January 2019 7,884,568 1,618,205 516,962 81,493 199,135 10,300,363 Production plant and machinery Increases (purchases and transfer 162,837 16,943 2,596,972 2,776,753 from investments in progress) Production Fixed assets Total property, plant and Right- Other under plant and Investments in progress activated 2,254,635 513,204 (2,767,839) 0 in EUR Land Buildings machinery of-use equipment Advances construction equipment Decreases/transfers 206,720 267,444 20,124 494,288 Historical cost Balance as at 31 December 2019 9,932,483 2,131,409 412,355 78,312 28,268 12,582,828 Balance as 17,689,877 901,471,665 208,521,167 0 99,522 140,893 11,100,861 1,139,023,985 Value adjustment (allowance) at 1 January 2019 Balance as at 1 January 2019 5,699,208 618,247 6,317,455 Reclassification 5,369 -5,369 0 Amortisation and depreciation 1,550,527 485,150 2,035,677 Increases 1,166 3,394,533 13,463 6,698 36,954,773 40,370,633 Investments Decreases/write-downs 206,720 206,720 1,756,796 23,413,685 9,696,348 750,720 -35,617,549 0 in progress activated Balance as at 31 December 2019 7,043,015 1,103,397 8,146,412 Decreases 148,802 10,480,474 6,598,209 119,579 17,347,064 Carrying amount Balance as 19,299,037 917,804,778 211,627,400 750,720 99,522 28,012 12,438,085 1,162,047,554 Balance as at 1 January 2019 2,185,360 999,958 516,962 81,493 199,135 3,982,908 at 31 December 2019 Balance as at 31 December 2019 2,889,468 1,028,013 412,355 78,312 28,268 4,436,416 Value adjustment

(allowance) Balance as 101,096 569,397,618 127,493,384 0 696,992,098 2018 at 1 January 2019 Reclassification 746 -746 0 Long-term Total intangible assets Long-term deferred Reserve and long-term deferred Amortisation and 42,589 16,908,945 8,391,261 250,240 25,593,035 in EUR property rights operating costs fund expenses and accrued revenue depreciation Historical cost Decreases/ 9,401,704 4,549,464 13,951,168 write-downs Balance as at 1 January 2018 8,710,866 755,000 81,575 9,547,440 Balance as Increases (purchases and transfer from 143,685 576,905,605 131,334,435 250,240 708,633,965 1,461,644 24,418 17,690 1,503,752 at 31 December 2019 investments in progress) Carrying amount Decreases/transfers 470,602 262,456 17,772 750,830 Balance as Balance as at 31 Dec 2018 9,701,908 516,962 81,493 10,300,363 17,588,781 332,074,047 81,027,783 0 99,522 140,893 11,100,861 442,031,887 at 1 January 2019 Value adjustment (allowance) Balance as 19,155,352 340,899,173 80,292,965 500,480 99,522 28,012 12,438,085 453,413,589 Balance as at 1 January 2018 5,028,036 5,028,036 at 31 December 2019 Amortisation and depreciation 1,657,376 1,657,376 Decreases/write-downs 367,957 367,957 Balance as at 31 Dec 2018 6,317,455 6,317,455 Carrying amount Balance as at 1 January 2018 3,682,830 755,000 81,575 4,519,405 Balance as at 31 Dec 2018 3,384,453 516,962 81,493 3,982,908 Annual Report | 170 Financial report Annual Report | 171 Financial report

2018 In accordance with the provisions of the SAS 1.27 (2016 with amendments) the company recognised the right-

Fixed assets Total property, of-use assets from long-term leases for licences and computer equipment as at 1 January 2019 in its books Production plant Other under plant and of account. The total cash flow for leases paid in 2019 amounted to EUR 549,305, of which EUR 113,959 was in EUR Land Buildings and machinery equipment Advances construction equipment accounted for by short-term leases and lower-value leases. Costs of interest from right-of-use assets in 2019 Historical cost Balance as amounted to EUR 28,701. 16,903,104 884,329,991 200,578,580 99,522 59,744 15,811,813 1,117,782,754 at 1 January 2018 Reclassification 827,521 -808,889 -18,632 0 6.2.7.3 FINANCIAL ASSETS Increases 2,250,307 52,479 567,569 35,956,471 38,826,826 Investments in CHANGES IN FINANCIAL ASSETS IN 2019: 452,238 25,727,216 14,487,969 -40,667,423 0 progress activated Shares and Decreases 492,986 10,026,960 6,579,229 486,420 17,585,595 Shares and participating Balance as participating interests in Other shares and Long-term/ 17,689,877 901,471,665 208,521,167 99,522 140,893 11,100,861 1,139,023,985 at 31 Dec 2018 interests in group associated participating short-term in EUR companies companies interests loans to others Total Value adjustment

(allowance) Long-term financial assets Balance as Balance as at 31 Dec 2018 1,766,290 377,737 11,877,307 8,123 14,029,457 60,312 560,520,742 125,973,701 686,554,755 at 1 January 2018 Increases 1,080,995 0 60,575 0 1,141,570 Reclassification 8,275 -8,275 0 Decreases 0 0 0 0 0 Amortisation and 32,509 16,771,726 7,832,899 24,637,134 Balance as at 31 December 2019 2,847,285 377,737 11,937,882 8,123 15,171,027 depreciation Decreases/write- 7,886,575 6,313,216 14,199,791 downs Current financial assets Balance as Balance as at 31 Dec 2018 0 0 0 6,325 6,325 101,096 569,397,618 127,493,384 696,992,098 at 31 Dec 2018 Increase 165 165 Carrying amount Decreases 6,394 6,394 Balance as 16,842,791 323,809,249 74,604,878 99,522 59,744 15,811,813 431,227,998 Balance as at 31 December 2019 0 0 0 96 96 at 1 January 2018 Balance as 17,588,781 332,074,047 81,027,783 99,522 140,893 11,100,861 442,031,887 at 31 Dec 2018 CHANGES IN FAIR VALUE RESERVES IN 2019

The historical cost of property, plant and equipment was up by EUR 39,026,711 in 2019. Of that amount, EUR in EUR 2019 2018 3,409,162 was accounted for by an increase in historical cost from the free acquisition of fixed assets. The Balance as at 1 January 344,175 323,983 reduction in historical cost due to the write-off of worn-out and unusable assets amounted to EUR 17,227,485. Adjustments to market value 60,575 20,192 Balance as at 31 Dec 404,750 344,175 The adjustment to the value of property, plant and equipment was up by EUR 25,593,035 as the result of depreciation charged and down by EUR 13,951,168 due to the write-off of worn-out and unusable assets. The purchase and sale of electricity was transferred to Elektro energija on 1 January 2011. Since 1 December 2016, Elektro Ljubljana is no longer the owner of Elektro energija, as it exchanged its 100% participating Material investments under construction amounted to EUR 12,438,085 and were up by 12% relative to 2018. interest for a 22.5% interest in GEN-EL in accordance with the agreement on the exchange of participating The carrying amount of property, plant and equipment was not decreased in 2019 relative to the balance as at interests concluded between GEN-I d.o.o. and Elektro Ljubljana. That company is entered in the companies 31 December 2018. All fixed assets are the property of the company and have not been pledged as collateral for register in Krško under decision no. 2016/26919. The share capital of the company amounts to EUR 10,000. The liabilities. audited net profit for the accounting period of GEN-EL was EUR 1,961,557 in 2019.

A more detailed presentation of investments in fixed assets is given in the business segment of the annual Elektro Ljubljana utilised its option and purchased an additional 2.5% in GEN-EL in 2018. The company report under Section 4.3.1. therefore became an owner of a 25% stake in GEN-EL. Elektro Ljubljana does not treat GEN-EL as an associate company, as it has no significant capital influence in it and is not its economic (beneficial) owner. Due to the Borrowing costs that are included in the historical cost of fixed assets amounted to EUR 68,246. put and call option held by GEN Energija, which together with its indirect participating interests maintains a voting majority under the articles of association in GEN-EL, GEN Energija is the economic owner of the latter. Annual Report | 172 Financial report Annual Report | 173 Financial report

Long term financial assets were up in 2019 due to the revaluation of shares that are listed on the stock As at 31 December 2019, outstanding receivables primarily comprised non-past-due receivables from SODO exchange and the recapitalisation of the subsidiary Elektro Ljubljana OVE d.o.o. for the lease of the infrastructure and provision of services, and receivables for the calculated network charge, including the fee in the company's supply area. The value of long-term loans to others was down due to repayments and the transfer of the portion that falls due for payment in the year after the reporting date to short-term loans to others. Trade receivables are not secured by collateral instruments.

The carrying amount of investments is also equal to the maximum possible exposure to credit risk. The fair CHANGES IN VALUE ADJUSTMENTS TO TRADE RECEIVABLES IN 2019: value of investments is equal to their carrying amount. Value adjustments to Value adjustments to Total value in EUR original receivables default interest adjustments created Value adjustments to receivables as at 31 December 2018 977,848 65,884 1,043,732 6.2.7.4 OPERATING RECEIVABLES Additional creation of value adjustments to receivables 87,475 11,892 99,367

BREAKDOWN OF CURRENT TRADE RECEIVABLES: Decrease – write-off of receivables 278,809 16,580 295,389 Closing balance of value adjustments to receivables 786,514 61,196 847,710 Balance as at 31 Balance as at 31 in EUR December 2019 December 2018 Trade receivables for network charges 7,283,761 8,728,346 Trade receivables from others 9,005,720 9,624,757 Value adjustments to receivables as at 31 December 2019 were down by 18.8% relative to 2018. Receivables for default interest 92,941 97,461 Total trade receivables 16,382,422 18,450,564 Current operating receivables from others account for 6.5% of total current operating receivables. The majority Adjustment to the value of trade receivables (847,710) (1,043,732) is accounted for by receivables from the repayment of VAT, receivables from the repayment of corporate Total trade receivables, including value adjustments 15,534,712 17,406,832 income tax and receivables from cohesion funds.

6.2.7.5 DEFERRED TAX ASSETS AND LIABILITIES Current trade receivables account for 93.6% of total current operating receivables. Current trade receivables were down by 10.8% on the balance as at 31 December 2018. CREATION OF DEFERRED TAX ASSETS: Balance as at 31 Balance as at 31 MATURITY BREAKDOWN OF TRADE RECEIVABLES: in EUR December 2018 Increase/decrease December 2019 Temporary differences from created value adjustments Balance as at 31 Balance as at 31 198,309 (37,244) 161,065 to trade receivables in EUR December 2019 % December 2018 % Temporary differences from unrecognised amounts of provisions Non-past-due 14,276,161 87.1 15,423,906 83.7 822,076 51,133 873,209 for jubilee benefits and severance pay at retirement Up to 30 days past due 650,775 4.0 1,147,563 6.2 Temporary differences from actuarial gains/losses 74,442 19,774 94,216 31–60 days past due 95,763 0.6 226,204 1.2 Total 1,094,827 33,663 1,128,490 61–90 days past due 13,262 0.1 25,314 0.1 More than 90 days past due 1,346,461 8.2 1,627,577 8.8 Total 16,382,422 18,450,564 The change in deferred tax from actuarial losses is not recorded in profit or loss but in equity. The effect of the Value adjustment created (847,710) (1,043,732) change in deferred taxes in the profit or loss statement is the sum of the first two items in the table in the Total 15,534,712 17,406,832 amount of EUR 13,889.

DEFERRED TAX LIABILITIES CREATED:

A total of 12.9% of total trade receivables were not settled by the maturity date at the end of 2019 (16.3% as Balance as at 31 Balance as at 31 at 31 December 2018). The amount of receivables more than 90 days past due also included trade receivables in EUR December 2018 Increase December 2019 subject to composition proceedings, lawsuits or bankruptcy proceedings, for which a value adjustment was Temporary differences from long-term financial assets 65,393 11,509 76,902 already created. Total 65,393 11,509 76,902 Annual Report | 174 Financial report Annual Report | 175 Financial report

6.2.7.6 INVENTORIES OWNERSHIP STRUCTURE AS AT 31 DECEMBER 2019: Republic of Slovenia 79.5 % The majority of the company's inventories relate to materials that are earmarked for installation when making Other legal entities 17.7 % own investments. Upon initial recognition, units of material are valued at historical cost, which comprises the Natural persons 2.8 % purchase price, import duties and other non-refundable purchase taxes, and the direct costs of procurement. Total 100.0 % Any discounts received reduce the purchase price. The moving average price method is used to account for the use of inventories. BREAKDOWN OF EQUITY COMPONENTS:

Ultimately, the Management Board assesses at the end of the year whether inventories require revaluation in EUR 31 December 2019 31 December 2018 due to impairment. The Management Board assessed that revaluation is not required in 2019, as the carrying Share capital 163,412,978 163,412,978 amount of inventories did not exceed their net recoverable amount. Share premium account 81,725,014 81,725,014 Profit reserves 79,236,095 69,753,998 The company did not pledge its inventories as collateral for its liabilities. Legal reserves 6,524,274 5,830,451 Reserves for treasury shares 54,115 54,115 6.2.7.7 CASH AND CASH EQUIVALENTS Treasury shares (54,115) (54,115) Other profit reserves 72,711,821 63,923,547 Cash and cash equivalents comprise cash on transaction accounts in the amount of EUR 2,508,600. An Fair value reserves (569,691) (430,380) undrawn revolving loan amounted to EUR 3,300,000 as at 31 December 2019. Net profit for the financial year 4,394,365 5,478,282 Equity 328,198,761 319,939,892 6.2.7.8 CURRENT DEFERRED EXPENSES AND ACCRUED REVENUE

in EUR 31 December 2019 31 December 2018 The share premium account is derived from the general capital revaluation adjustment which upon

Short-term services not invoiced to customers 122,238 132,207 transitioning to the application of the SAS 2006 was converted to the share premium account. All reserves Costs paid in advance 34,508 29,950 shall be used in accordance with Article 64 of the ZGD-1. Accrued income 4,591,114 4,651,600 VAT on advances received 34,186 29,245 When compiling the final account for 2019, the company's Management Board and Supervisory Board Total 4,782,046 4,843,002 distributed net profit for the financial year in accordance with their powers under the Companies Act, as follows:

in EUR Current deferred expenses and accrued revenue comprise temporarily accrued revenue and costs paid in Net profit for the 2019 financial year 13,912,351 advance. In 2019, this included revenue for the reconciliation of services rendered, for which an invoice will be Profit/loss brought forward arising from the actuarial deficit (35,889) issued in 2020, and services provided to customers in part as at 31 December 2019. 13,876,462 Creation of legally prescribed profit reserves 693,823 6.2.7.9 EQUITY Creation of other profit reserves 8,788,274 Undistributed net profit for financial year 4,394,365 The company’s share capital amounts to EUR 163,412,978 and is divided into 39,160,286 no-par-value shares. Distributable profit for the financial year 4,394,365 Each share gives its owner the right to vote at the general meeting and the right to profit participation. The weighted average number of ordinary shares outstanding in the accounting period was 39,130,586. Net profit A resolution was passed at the general meeting in 2019, under which distributable profit for 2018 was for the financial year amounted to EUR 13,912,351, meaning that the basic earnings per share amounted to allocated to dividends, as follows: EUR 0.36. Diluted earnings per share is equal to basic earnings per share. in EUR Distributable profit for 2018 5,478,282 For the payment of dividends 5,478,282 Dividenda na delnico 0.14 Annual Report | 176 Financial report Annual Report | 177 Financial report

The book value of one share stood at EUR 8.38 as at 31 December 2019. 6.2.7.11 LONG-TERM ACCRUED EXPENSES AND DEFERRED REVENUE

The company began a programme to purchase treasury shares outside the regulated market at the end of CHANGES IN LONG-TERM ACCRUED EXPENSES AND DEFERRED REVENUE IN 2019: November 2016 in accordance with the resolution of the general meeting in order to maximise value for Balance as at Increase – Use – reversal Balance as at in EUR 31 December 2018 acquisitions of provisions 31 December 2019 shareholders and increase the value of the company’s assets. A total of 7,444 treasury shares were therefore From fixed assets acquired free of charge 38,896,433 3,408,104 1,505,622 40,798,915 purchased in 2017, with no treasury share purchases in 2018 and 2019, as evident from the table below: From payments for connection to the network 5,266,917 0 289,936 4,976,981 before 1 July 2007 Number of shares Purchase of shares From long-term leases and for other reasons 1,632,506 1,191,907 173,889 2,650,523 Purchases for the year Purchase value in EUR Price per share in EUR purchased (as a % of total shares) Total 45,795,856 4,600,011 1,969,448 48,426,419 2016 36,722.40 1.65 22,256 0.06 2017 17,392.60 1.65 oz. 2.38 7,444 0.02 2018 0 0 0 0 Long-term accrued expenses and deferred revenue from fixed assets acquired free of charge were up by EUR 2019 0 0 0 0 3,408,104 in 2019. Due to the transfer of the amount for the accrued depreciation of fixed assets acquired free Total 54,115.00 29,700 0,08 of charge to other operating revenue, long-term accrued expenses and deferred revenue were down by EUR 1,505,622.

Changes in equity in 2019 are presented in the statement of changes in equity in Section 6.1. Long-term accrued expenses and deferred revenue from payments for connection to the network were down in 2019 due to the transfer of the amount (EUR 289,936) for the depreciation of fixed assets, which were 6.2.7.10 PROVISIONS financed from payments for connection to the network before 1 July 2007 to other operating revenue. CHANGES IN PROVISIONS IN 2019:

Termination 6.2.7.12 FINANCIAL LIABILITIES in EUR benefits Jubilee benefits Total Other provisions Balance as at 31 Dec 2018 5,113,786 3,539,648 8,653,434 279,646 LONG-TERM AND CURRENT FINANCIAL LIABILITIES COMPRISE LIABILITIES FOR LOANS RECEIVED FROM BANKS, AS FOLLOWS: Used and reversed 195,865 289,290 485,155 7,887 Created 598,339 425,062 1,023,401 12,920 in EUR 31 December 2019 31 December 2018 Balance as at 31 Dec 2018 5,516,260 3,675,420 9,191,680 284,679 Long-term financial liabilities to domestic banks 43,437,772 38,642,160 Long-term financial liabilities to foreign banks 29,603,383 32,409,774 Long-term financial liabilities to banks 73,041,155 71,051,934 Derivatives 177,150 74,771 Severance pay and jubilee benefits were paid in the respective amounts of EUR 195,865 and EUR 289,290 in Long-term lease liabilities 420,100 18,799 2019. Additional long-term provisions for liabilities from severance pay at retirement were created after the Total 73,638,406 71,145,505 actuarial calculation in the amount of EUR 598,339, and for liabilities from jubilee benefits in the amount of Current financial liabilities to domestic banks 4,000,000 7,300,000 EUR 425,062. Current portion of long-term financial liabilities to domestic banks 10,204,388 11,090,729 Current portion of long-term financial liabilities to foreign banks 2,806,391 2,806,391 The following assumptions were used in the actuarial calculation: Total short-term portion of long-term loans 13,010,779 13,897,120 • the company’s headcount as at 31 December 2019 (gender, age, total years of service and pensionable Total short-term portion of loans 17,010,779 21,197,120 years of service, average net and gross salaries in the period October–December 2019); Current lease liabilities 429,334 112,797 • the method for calculating severance pay and jubilee benefits at the company; Other current financial liabilities 12,130 13,491 • growth in the average wage in the amount of 1.5%; and Total 17,452,244 21,323,407 Total financial liabilities 90,051,934 92,249,054 • a long-term nominal interest rate of 0.45%.

The short-term portion of long-term loans is disclosed in the statement of financial position under current financial liabilities in the amount of EUR 17,010,779. Annual Report | 178 Financial report Annual Report | 179 Financial report

A liability from the lease of fixed assets in the amount of EUR 830,635, a long-term financial liability from a The company raised two loans in 2010 in the total amount of EUR 15,000,000 with a 10-year repayment derivative (interest-rate swap) in the amount of EUR 177,150, liability from finance lease in the amount of EUR period, at an interest rate comprising the 1-month EURIBOR plus a premium of 2.20%, and five loans with 18,799 and liability from dividends in the amount of EUR 12,130 are also disclosed under long-term and current a 7-year loan repayment period in the total amount of EUR 24,300,000 at an interest rate comprising the financial liabilities. 3-month EURIBOR plus premiums of 1.8% and 2.4%, which was converted to a fixed interest rate in 2015 plus a premium of 2.55%, and at an interest rate comprising the 6-month EURIBOR plus a premium of 1.6%. The balance of financial liabilities to banks as at 31 December 2019 was down by 2.4% relative to 31 December Two loans in the total amount of EUR 5,500,000 with a 7-year repayment period were transferred to the new 2018. company Elektro energija. The loans with a repayment period of 7 years have been repaid.

In 2019 the company raised two long-term loans in the total amount of EUR 15,000,000 to finance The company raised four loans in 2009 in the total amount of EUR 32,043,000 with a 10-year repayment investments in 2019. One long-term loan in the amount of EUR 7,000,000 with a 15-year repayment period at period, at an interest rate comprising the 1-month EURIBOR plus premiums of 2.25%, 2.49% and 2.50%, and a a fixed nominal annual interest rate of 1.65% and the second in the amount of EUR 8,000,000 with a 12-year loan at an interest rate comprising the 3-month EURIBOR plus a premium of 3.10%. Its premium was lowered repayment period at a fixed nominal annual interest rate of 0.88%. to 2.40% in 2014. Three loan agreements were repaid until 2019 inclusive, and one is expected to be repaid in April 2020. The company raised three long-term loans in 2018 in the total amount of EUR 16,000,000, one loan with a 12-year repayment period at an interest rate comprising the 3-month EURIBOR plus a premium of 0.65% and The company raised three loans in 2008 in the total amount of EUR 30,400,000 with a 10-year repayment hedging interest rate risk, and the other two with a 15-year repayment period at fixed annual interest rates of period, at an interest rate comprising the 1-month EURIBOR plus premiums of 0.95% and 0.96%, and a loan 1.71% and 1.63% respectively. with an interest rate comprising the 3-month EURIBOR plus a premium of 1.55%. Two loan agreements were repaid in 2018, and one in March 2019. The company entered into a long-term loan agreement in 2015 with an international financial organisation in the total amount of EUR 40,000,000 with a repayment period of 15 years from loan drawdown, with the aim Interest rates on long-term loans with a variable interest rate and the 1-, 3- or 6-month EURIBOR plus a of financing strategic projects to renovate and upgrade the electricity distribution network in the period 2015– premium fluctuated in 2019 from 0.32% to 3.23% per annum, compared with 0.33% to 3.23% per annum in 2017. The first tranche of the aforementioned loan in the amount of EUR 12,000.000 was drawn in 2015 with a 2018. Interest rates with a nominal fixed interest rate fluctuated from 0.88% to 1.71% per annum in 2019, fixed annual interest rate of 1.464%. The second tranche in the amount of EUR 13,500.000 was drawn in 2016 compared with 1.13% to 1.71% per annum in 2018. with a fixed annual interest rate of 1.131%. The last tranche in the amount of EUR 14,500.000 was drawn down in the third quarter of 2017 with a fixed annual interest rate of 1.431%. The company had EUR 4,000,000 disclosed as current borrowing as at 31 December 2019. The approved short- term loan for the revolving loan in the amount of EUR 3,300,000 as at 31 December 2019 was not drawn. A The company raised two loans in 2014 in the total amount of EUR 18,500,000 with a 15-year repayment current borrowing in the amount of EUR 7,300,000 was disclosed as at 31 December 2018. period, at an interest rate comprising the 1-month EURIBOR plus a premium of 1.70%, and an interest rate comprising the 6-month EURIBOR plus a premium of 1.36%. Interest rates on short-term loans with a variable interest rate and the 1-, 3- or 6- month EURIBOR plus premium fluctuated from 0.48% to 0.59% per annum in 2019, compared with 0.42% to 0.59% per annum in The company raised two loans in 2013 in the total amount of EUR 13,800,000 with an 8-year repayment 2018. Interest rates on short-term loans with a fixed interest rate fluctuated from 0.35% to 0.50% per annum period, at an interest rate comprising the 1-month EURIBOR plus a premium of 3.00%, and an interest rate in 2019, compared with 0.29% to 0.50% per annum in 2018. comprising the 1-month EURIBOR plus a premium of 2.95%. The company raises loans in accordance with the Decree on the Terms, Conditions and Methods of Borrowing The company raised one loan in 2012 in the total amount of EUR 5,670,000 with a 10-year repayment period, by Legal Entities referred to in Article 87 of the Public Finance Act[1]. at an interest rate comprising the 6-month EURIBOR plus a premium of 3.10% and two loans with an 8-year repayment period in the total amount of EUR 9,330,000 at an interest rate comprising the 6-month EURIBOR Bills of exchange were issued as collateral to secure loans. plus a premium of 3.50%, and an interest rate comprising the 3-month EURIBOR plus a premium of 3.75%, which was reduced by 2.40 percentage points in 2014. The total amount of debt with a maturity of more than 5 years amounts to EUR 42,694,322.

The company raised four loans in 2011 in the total amount of EUR 13,200,000 with a 10-year repayment 6.2.7.13 OPERATING LIABILITIES period, at an interest rate comprising the 1-month EURIBOR plus a premium of 2.80%, and an interest rate comprising the 3-month EURIBOR plus premiums of 1.95%, 2.10% and 2.40%. Operating liabilities primarily comprise current trade payables. The balance of total trade payables was up by 106.38% as at 31 December 2019 relative to 31 December 2018. Annual Report | 180 Financial report Annual Report | 181 Financial report

The balance of long-term operating liabilities amounted to EUR 402.845, of which EUR 269.886 relates to Costs of services amounted to EUR 13,054,576 in 2019. They primarily comprise costs associated with fixed long-term loans from suppliers and EUR 139,913 to advances and security deposits received. asset maintenance, insurance premiums and other service costs connected with ordinary operations. Costs of services were up by 7.7% relative to 2018. Current trade payables comprise non-past-due liabilities for property, plant and equipment and intangible assets, for maintenance services, and liabilities to SODO for the network charge and surcharges that the 6.2.8.4 LABOUR COSTS company invoices to electricity customers in the supply area. Labour costs include wages and salaries calculated in accordance with the company-level collective agreement Other operating liabilities include liabilities to employees for December wages and liabilities from current and the applicable regulations governing the calculation of wages and salaries. Labour costs were up by 3.7% transactions with government and other institutions. in 2019 relative to the previous year.

6.2.7.14 CURRENT ACCRUED EXPENSES AND DEFERRED REVENUE Other labour costs comprise employees' annual leave allowances, other receipts from the employment relationship, the reimbursement of allowances for travel to and from work, the costs of optional accidental CHANGES IN CURRENT ACCRUED EXPENSES AND DEFERRED REVENUE IN 2019: insurance for employees and the costs of social assistance. Balance as at 31 Balance as at 31 in EUR December 2019 December 2018 6.2.8.5 WRITE-DOWNS Accrued costs – regulatory period reconciliation 96,549 2,386,173 Accrued unused annual leave 1,060,954 1,030,249 Amortisation and depreciation for 2019 were charged based on the historical cost of fixed assets, as explained Performance bonus for 2019 1,240,945 1,146,226 in the summary of accounting policies in Section 6.2.6.1 under item b) Amortisation/depreciation, and Other accrued expenses and deferred revenue 2,069 2,356 accounted for 95.8% of total write-downs during the year and 95.9% of write-downs in 2018. Total 2,400,517 4,565,004

Revaluation operating expenses for fixed assets in 2019 were the result of the exclusion of fixed assets from 6.2.8 DISCLOSURE OF ITEMS IN THE PROFIT OR LOSS STATEMENT use, and accounted for 3.9% of total write-downs during the year and 3.7% in 2018.

6.2.8.1 NET SALES REVENUE AND OTHER OPERATING REVENUE Revaluation operating expenses for working capital comprise value adjustments to doubtful and disputed trade receivables.

Net sales revenue in 2019 comprised revenue under the agreement on the lease of the electricity distribution 6.2.8.6 OTHER OPERATING EXPENSES infrastructure, revenue from the provision of services for the system operator of the distribution network in the supply area and services charged to customers in the network, and electrical installation services. Other operating expenses comprise fees for building land use, scholarships and payments to students during Other operating revenue primarily comprised the amount of used long-term accrued expenses and deferred compulsory practical training. Other operating expenses were down in 2019 relative to the previous year. revenue in the amount of EUR 1,939,539 and revaluation operating revenues in the amount of EUR 777,350.

6.2.8.7 FINANCE INCOME 6.2.8.2 CAPITALISED OWN PRODUCTS AND SERVICES

Finance income from participating interests in other companies comprise dividends received, interest income Capitalised own products and services include capitalised fixed assets which, in accordance with the Slovenian from long-term loans granted to employees for the purchase of apartments owned by the company, interest Accounting Standards, are valued at the costs that relate directly to them, and at those general construction on funds placed at banks and default interest on late payments from operating receivables. Finance income and manufacturing costs that can be attributed to them. This revenue thus amounted to EUR 12,363,790 in from other investments comprise revenue from the exchange of the participating interest in Elektro energija 2019, compared with EUR 13,800,719 in 2018. It accounted for 12% of operating revenue during the year and d.o.o. for the participating interest in GEN-EL d.o.o. in the amount of EUR 738,500. 13.3% in 2018.

6.2.8.8 FINANCE COSTS 6.2.8.3 COSTS OF GOODS, MATERIALS AND SERVICES

The majority of finance costs comprise costs for interest on loans. Finance costs were down by 1.9% in 2019 Costs of goods and materials amounted to EUR 10,998,415 in 2019, down by 8% relative to 2018. relative to 2018. Annual Report | 182 Financial report Annual Report | 183 Financial report

6.2.8.9 OTHER REVENUE 6.2.8.15 OTHER COMPONENTS OF OTHER COMPREHENSIVE INCOME

Other revenue includes extraordinary items. in EUR 2019 2018

Net profit for the accounting period 13,912,351 16,965,742 6.2.8.10 OTHER COSTS Changes in fair value reserves 49,066 16,355 a) Revaluation of financial assets measured at fair value through equity 60,575 20,191 Other expenses include extraordinary items. b) Changes in fair value reserves for deferred tax liabilities (11,509) (3,836) Other components of other comprehensive income (224,266) (208,901) 6.2.8.11 PROFIT OR LOSS FOR THE ACCOUNTING PERIOD a) Actuarial gains/losses on provisions for termination benefits (244,040) (227,458) b) Effect of deferred tax from actuarial gains/losses 19,774 18,557 Total comprehensive income for the reporting period 13,737,151 16,773,196 The company disclosed a pre-tax profit of EUR 16,304,010 and a net profit for the accounting period of EUR 13,912,351 in 2019. The allocation of net profit for 2019 and distributable profit for 2018 is presented in Section 6.2.7.9. 6.2.9 COSTS BY FUNCTIONAL GROUP 6.2.8.12 CORPORATE INCOME TAX in EUR 2019 2018

Current income tax amounted to EUR 2,405,548 in 2019 compared with EUR 2,870,512 in 2018. Production costs 76,617,482 74,173,471 Selling costs 374,842 372,578 COMPONENTS OF TAX EXPENSE IN 2019: General administrative costs 7,944,755 7,899,978

in EUR 31 December 2019 31 December 2018 The table does not include revaluation operating expenses. Current tax 2,405,548 2,870,512 Deferred tax (13,889) (8,370) The cost breakdown by functional group provides a disclosure of costs by cost centres and accounts. The cost Income tax expense 2,391,659 2,862,142 centres and accounts that fall within the scope of a specific functional group were defined in that regard.

6.2.8.13 DEFERRED TAXES 6.2.10 CASH FLOW STATEMENT

Deferred tax from deductible temporary differences amounted to EUR 13,889 in 2019. Deferred tax was created The cash flow statement indicates changes in the balance of cash and cash equivalents at the company during based on the amount that is expected to be refunded by the tax administration, applying the tax rates and tax the 2019 financial year and comparative year (2018). regulations known on the reporting date, and will continue to be valid in the financial year in which the asset will be refunded. An overview of the deferred receivables is presented in Section 6.2.7.5 of the financial report. The company’s cash and cash equivalents comprise cash on transaction accounts and call deposits at banks.

6.2.8.14 TOTAL COMPREHENSIVE INCOME FOR THE ACCOUNTING PERIOD Cash flows in 2019:

In 2019, the company generated a total comprehensive income for the accounting period in the amount of EUR in EUR 2019 2018 13,737,151, which is EUR 175,200 less than net profit for the accounting period. Cash flows from operating activities 35,898,694 24,785,575 Cash flows from investing activities (27,459,098) (29,748,605) Cash flows from financing activities (9,048,061) 2,207,281 Net cash flow for the period (608,466) (2,755,749) Annual Report | 184 Financial report Annual Report | 185 Financial report

6.2.11 RELATED PARTY DISCLOSURES GROSS EARNINGS OF EMPLOYEES ON THE BASIS OF INDIVIDUAL CONTRACTS IN 2019 (IN EUR): Wages and Reimbursement Annual leave Cash social Fringe Number of employees salaries of costs allowance assistance Bonuses benefits Total As at 31 December 2019 and 2018, the company disclosed receivables from and liabilities to related parties that 10 820,255 15,176 17,163 2,543 10,000 25,543 890,680 are the result of the normal course of business.

The prices of all related-party transactions are set according to the principle of fair value. GROSS EARNINGS OF SUPERVISORY BOARD MEMBERS AND MEMBERS OF ITS COMMITTEES IN 2019 (IN EUR):

Breakdown of transactions and items in the statement of financial position and profit or loss statement for Fee for the performance Fee for the performance 2019 concluded with the subsidiary Elektro Ljubljana OVE and Informatika: First name and surname of Session of function of function of SB Reimbursement member fees of SB member committee member of costs Total Andrej Šuštaršič, MSc 3,080 19,500 3,250 511 26,341 in EUR 31 December 2019 31 December 2018 David Valentinčič 4,180 14,300 6,500 1,642 26,622 Statement of financial position: David Skornšek, MSc 3,905 13,000 6,500 281 23,686 Assets: Davorin Dimič, MSc 3,080 13,000 4,875 1,150 22,105 Receivables from Informatika 2,755 5,008 Egon Hoda 3,740 13,000 6,500 0 23,240 Receivables from Elektro Ljubljana OVE 11,171 8,344 Igor Adlešič 3,080 13,000 3,250 0 19,330 Liabilities: Saša Jerman 1,100 0 3,250 0 4,350 Trade payables – Elektro Ljubljana OVE 45,274 26,836

Trade payables – Informatika 848,249 698,275 The company had no receivables, guarantees issued nor liabilities to these groups of persons as at 31 Current lease liabilities – Informatika 429,334 0 December 2019. Long-term trade payables – Informatika 0 55,281 Long-term debts – Informatika 420,100 18,799

Profit or loss statement: 6.2.13 DENATIONALISATION CLAIMS Rental income – Informatika 21,963 49,262 Revenue – Elektro Ljubljana OVE 87,360 118,308 The HE Sava Brod hydro power plant, which was is still in denationalisation proceedings at the end of 2018, Costs of goods/services – Elektro Ljubljana OVE 4,510 19,019 is still part of the company. The court proceedings have concluded. In November 2019 the HE Sava Brod hydro Costs of goods/services – Informatika 1,365,741 1,615,004 power plant was transferred to the subsidiary Elektro Ljubljana OVE d.o.o., as a non-cash contribution, in accordance with the Articles of Association.

6.2.12 DISCLOSURE OF THE REMUNERATION OF MANAGEMENT BOARD AND SUPERVISORY BOARD MEMBERS, AND EMPLOYEES ON INDIVIDUAL 6.2.14 OFF-BALANCE-SHEET CONTINGENT LIABILITIES CONTRACTS The company disclosed bank performance guarantees in the amount of EUR 235,318 as at 31 December 2019,

A presentation of the company's Management Board and Supervisory Board is given in the business report but had no other off-balance-sheet contingent liabilities. under Section 2.4.

GROSS EARNINGS OF THE MANAGEMENT BOARD IN 2019 (IN EUR): 6.2.15 AUDIT COSTS Annual Reimbursement leave Performance Fringe Audit costs for Elektro Ljubljana's annual report for 2019 amounted to EUR 13,270, excluding VAT. The costs of in EUR Wages of costs allowance bonus benefits Total other assurance services amounted to EUR 1,080. President of the Management Board – Andrej Ribič 106,891 2,077 1,907 11,000 11,825 133,700 Annual Report | 186 Financial report Annual Report | 187 Financial report

6.2.16 FINANCIAL STATEMENTS BY ACTIVITY BALANCE SHEET BY ACTIVITY AS AT 31 DECEMBER 2019 Regulated Market Elektro in EUR activity activity Ljubljana In accordance with the Energy Act, Elektro Ljubljana also reports operating results separately for regulated and A. Long-term assets 471,130,364 3,019,157 474,149,521 market activities. 1. Intangible assets and long-term deferred expenses and accrued revenue 4,170,804 265,612 4,436,416 2. Property, plant and equipment 451,011,347 2,402,241 453,413,588 The regulated activity primarily comprises the tasks that Elektro Ljubljana performs under the agreement on 3. Long-term financial assets 15,162,904 8,123 15,171,027 the lease of the electricity distribution infrastructure and the provision of services on behalf of SODO, while 4. Long-term operating receivables 0 0 0 the market activity primarily comprises own investments for the company’s needs and the provision of market 5. Deferred tax assets 785,309 343,181 1,128,490 services. B. Current assets 18,217,572 2,829,306 21,046,878 1. Inventories 339,516 1,592,482 1,931,998 The financial statements by activity are compiled on the following bases: 2. Current financial assets 84 12 96 • business events that clearly relate to a particular type of service rendered (regulated or market) are 3. Current operating receivables 15,369,371 1,236,812 16,606,184 allocated directly to the relevant activity; 4. Cash and cash equivalents 2,508,600 0 2,508,600 • business events with common characteristics are allocated to the relevant activity in accordance with C. Current deferred expenses and accrued revenue 4,744,632 37,413 4,782,046 the criteria set out in the internal rules for the compilation of financial statements by activity, which are TOTAL ASSETS 494,092,569 5,885,876 499,978,445 approved by the company's Management Board and reviewed by an external auditor. A. Equity 327,011,671 1,187,089 328,198,760 Operating results by activity are determined on the basis of disclosed revenue and expenses by individual type B. Provisions and long-term accrued expenses and deferred revenue 55,943,990 1,958,788 57,902,778 or service, and assets and liabilities by individual organisational unit (OU) and/or activity. The indirect revenue C. Long-term liabilities 74,056,883 61,271 74,118,153 and expenses of individual OUs are classified to activities, primarily based on a breakdown of fixed assets 1. Long-term financial liabilities 73,601,101 37,305 73,638,406 and hours worked and kilometres driven by car for individual types of services or a specific activity. Revenue 2. Long-term operating liabilities 378,880 23,966 402,846 and expenses associated with fixed assets (revenue from rent, revaluation operating revenues and expenses, 3. Deferred tax liabilities 76,902 0 76,902 amortisation and depreciation, and partial insurance costs) are broken down into activities according to D. Current liabilities 35,254,393 2,103,843 37,358,236 the classification of fixed assets, while finance income is broken down according to the classification of 1. Current financial liabilities 17,414,119 38,125 17,452,244 receivables or investments, and finance costs from bank loans according to financial liabilities, etc. 2. Current operating liabilities 17,840,274 2,065,718 19,905,993 E. Current accrued expenses and deferred revenue 1,825,632 574,885 2,400,517

The statement of financial position is compiled by activity on the basis of disclosed assets and liabilities EQUITY AND LIABILITIES 494,092,569 5,885,876 499,978,445 by OU and on the basis of records of revenue and costs by OU and/or activity. Fixed assets are classified by activity according to which services they are used to provide. Inventories of materials are classified according to the use (costs) of individual types of materials, while current trade receivables are classified according to type of service, etc. The main criteria for the allocation of specific liabilities by activity include the allocation of assets and expenses by activity.

The cash flow statement by activity is compiled on the basis of the profit or loss statement by activity and the statement of financial position by activity.

Elektro Ljubljana regularly reports to the Energy Agency and SODO on operating results by activity. Annual Report | 188 Financial report Annual Report | 189 Financial report

STATEMENT OF PROFIT OR LOSS BY ACTIVITY FOR 2019 CASH FLOW STATEMENT BY ACTIVITY FOR 2019

Regulated Market Elektro Regulated Market Elektro in EUR activity activity Ljubljana in EUR activity activity Ljubljana 1. Net sales revenue 78,652,310 8,162,961 86,815,271 A. CASH FLOWS FROM OPERATING ACTIVITIES 2. Change in value of inventories of finished goods and work in progress 0 0 0 a) Inflows from operating activities 176,107,275 13,153,720 189,260,995 3. Capitalised own products and services 583,945 11,779,846 12,363,790 b) Outflows from operating activities -140,183,085 -13,179,216 -153,362,301 4. Other operating revenue 3,820,042 33,504 3,853,546 c) Net cash flow from operating activities 35,924,190 -25,496 35,898,694 TOTAL OPERATING REVENUE 83,056,296 19,976,311 103,032,607 B. CASH FLOWS FROM INVESTING ACTIVITIES 5. Costs of goods, materials and services 12,246,321 11,806,671 24,052,992 a) Inflows from investing activities 2,913,367 317,719 3,231,086 a) Historical cost of goods and materials sold, and cost of materials used 2,448,217 8,550,199 10,998,416 b) Outflows from investing activities -30,397,962 -292,222 -30,690,184 b) Costs of services 9,798,104 3,256,472 13,054,576 c) Net cash flow from investing activities -27,484,595 25,497 -27,459,098 6. Labour costs 24,992,996 7,839,839 32,832,835 C. CASH FLOWS FROM FINANCING ACTIVITIES a) Costs of wages and salaries 17,758,458 5,466,037 23,224,496 a) Inflows from financing activities 30,300,000 0 30,300,000 b) Social security costs 3,782,053 1,176,149 4,958,202 b) Outflows from financing activities -39,348,061 0 -39,348,061 c) Other labour costs 3,452,485 1,197,652 4,650,137 c) Net cash flow from financing activities -9,048,061 0 -9,048,061 7. Write-offs 28,028,699 810,196 28,838,895 D. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 2,508,600 0 2,508,600 a) Amortisation/depreciation 26,886,331 742,381 27,628,712 x) Net cash flow for the period -608,465 0 -608,465 b) Revaluation operating expenses for fixed assets 1,101,342 9,474 1,110,816 y) Opening balance of cash and cash equivalents 3,117,065 0 3,117,065 c) Revaluation operating expenses for working capital 41,026 58,342 99,367 8. Other operating expenses 381,429 41,111 422,540 OPERATING PROFIT OR LOSS 17,406,852 -521,507 16,885,345 6.2.17 EVENTS AFTER THE BALANCE SHEET DATE 9. Finance income from participating interests 784,390 0 784,390 10. Finance income from loans granted 3,441 184 3,626 Due to the new coronavirus pandemic we know that our objectives will be difficult to achieve in 2020. However, 11. Finance income from operating receivables 54,378 7,729 62,107 at the time of compiling the company's annual report the economic consequences are still very difficult to 12. Finance costs from impairments and write-offs of financial assets 0 0 0 predict due to the uncertainty surrounding the spread of the virus and different responses thereto. For more 13. Finance costs from financial liabilities 1,422,984 510 1,423,494 details please read Section 3.7.3 of the business report. 14. Finance costs from operating liabilities 422 49 471 15. Other revenue 17,485 9,891 27,376 16. Other expenses 32,119 2,751 34,870 PRE-TAX PROFIT OR LOSS 16,811,021 -507,011 16,304,010 17. Corporate income tax 2,405,548 0 2,405,548 18. Deferred taxes -15,688 1,799 -13,889 NET PROFIT OR LOSS FOR THE ACCOUNTING PERIOD 14,421,161 -508,810 13,912,351 07 Statement of Management’s Responsibility

A responsible attitude to the environment encourages the development of new technologies, new services and the use of new resources. We are committed to innovative activity in harmony with nature. Annual Report | 192 Statement of management’s responsibility Annual Report | 193 Statement of management’s responsibility

The Management Board of Elektro Ljubljana hereby confirms that the financial statements, including confirms the financial statements of Elektro the notes, have been compiled on a going concern Ljubljana for the year ending 31 December 2019. basis, in accordance with current legislation and the The Management Board also confirms that the Slovenian Accounting Standards. appropriate accounting policies were consistently applied in compiling the financial statements, that The company's Management Board has been briefed accounting estimates were made according to the on the constituent parts of Elektro Ljubljana's principle of prudence and the diligence of a good annual report for 2019, and thus on the entire manager, and that the annual report presents a true annual report. The Management Board agrees with and fair picture of the Elektro Ljubljana's financial it and confirms it with its signature. assets and operating results for 2019.

The company's Management Board is also President of the Management Board responsible for the appropriate management of Andrej Ribič, MSc accounting, for the establishment, functioning and maintenance of internal control related to the compilation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, and for the adoption of appropriate measures to secure property and other assets. The Management Board Ljubljana, 31 March 2020 Annual Report | 194 List of abbreviations Annual Report | 195 List of abbreviations

LIST OF ABBREVIATIONS

ADMS Advanced Distribution Management System LVN low-voltage network ADSS All-Dielectric Self-Supporting Cable CZ commercial zone DCC distribution control centre OU organisational unit DU distribution unit CIZ commercial and industrial zone EDN electricity distribution network OPGW Optical Power Ground Wire EDS electricity distribution system RES renewable energy sources DN distribution network PISELJ Elektro Ljubljana's spatial data system TL transmission line FS fire safety DWDM Dense Wavelength Division Multiplexing DTS distribution transformer station EI electricity infrastructure DS distribution station eIS electronic information system MV medium voltage GIS geographical information system CHE combined heat and electricity ICT information and communications technology TC telecommunications CL cable line TS transformer station QE quality of electricity TR transformer CD cable duct UKV ultra short waves SHE small hydroelectric plant HV high voltage AMS advanced metering system OHS occupational health and safety LV low voltage  Annual Report of Elektro Ljubljana for 2019

Translation: Amidas d.o.o. Design: Damjana Sušnik DTP and press: Tiskarna DTP, d. o. o. Photo: Miha Fras, Tomi Lombar and archive of Elektro Ljubljana Published by: Elektro Ljubljana, d.d. July 2020