Directors' Report for the Year 2018 -Electrica Group
Total Page:16
File Type:pdf, Size:1020Kb
Chairman of the Board of Directors Valentin RADU Directors’ Report for the year 2018 -Electrica Group- ELECTRICA SA – 2018 DIRECTORS’ REPORT DIRECTORS’ REPORT FOR THE YEAR 2018 (based on the individual financial statements prepared in accordance with the Order of the Ministry of Public Finance no. 2844/2016 for the approval of the Accounting Regulations in accordance with International Financial Reporting Standards, respectively on the consolidated financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union) REGARDING THE ECONOMIC AND FINANCIAL ACTIVITY OF SOCIETATEA ENERGETICA ELECTRICA S.A. and ELECTRICA GROUP in compliance with art. 67 of the Law no. 24/2017 on issuers of financial instruments and market operations and with annex no. 15 to ASF Regulation no. 5/2018 and the Bucharest Stock Exchange Code for the 12 month period ended 31 December 2018 Free translation from Romanian, which is the official and binding version, and will prevail, in the event of any discrepancies with the English version 2 ELECTRICA SA – 2018 DIRECTORS’ REPORT Table of Contents Identification details of Electrica .......................................................................................... 8 1 Electrica 2018 Overview ............................................................................................... 9 1.1. Key financial data 2018 ......................................................................................... 9 1.2. Key events in 2018 and up to the report’s publication date ......................................15 1.3. Post balance sheet events date .............................................................................22 2 Electrica Group .............................................................................................................24 2.1. Organizational structure .......................................................................................24 2.2. Mission, vision, values ..........................................................................................26 2.3. Key elements of the 2015 – 2018 Strategic Plan .....................................................27 2.4. Outlook ...............................................................................................................28 2.5. Key factors, directions and significant market trends affecting the operational results of Electrica Group ..............................................................................................................31 3 Electrica on the capital markets ...................................................................................33 3.1. Ownership structure .............................................................................................33 3.2. Shares evolution on BSE and Global depository receipts (GDRs) evolution on LSE ......35 3.3. Investor relations (IR) ..........................................................................................41 3.4. Legal acts reported ..............................................................................................42 3.5. Dividends policy ...................................................................................................43 3.6. Dividend distribution ............................................................................................43 3.7. Own shares .........................................................................................................44 4 Corporate Governance in ELSA .......................................................................................45 4.1. Corporate Governance Code .................................................................................45 4.2. General Meeting of ELSA’s Shareholders ................................................................46 4.3. Shareholders’ rights .............................................................................................48 4.4. ELSA’s Board of Directors .....................................................................................50 4.5. The activity of ELSA’s Board of Directors and of its Consultative Committees in 2018 .56 4.6. ELSA’s Executive management ..............................................................................64 4.7. Remuneration of the Directors and of the Executive Managers .................................67 4.8. Corporate Governance in ELSA’s Subsidiaries..........................................................70 3 ELECTRICA SA – 2018 DIRECTORS’ REPORT 4.9. Statement regarding the corporate governance “Comply or Explain” ........................73 4.10. Implementing action plans undertaken by signing the framework agreement with EBRD 83 4.11. Internal audit report for 2018 ............................................................................88 5 Operating activity .......................................................................................................90 5.1. Operating segments .............................................................................................90 5.2. Fixed assets ........................................................................................................93 5.3. Procurement ........................................................................................................98 5.4. Sales activity .......................................................................................................98 5.5. Reorganization and disposal of assets .................................................................. 101 5.6. Personnel .......................................................................................................... 102 5.7. Environmental considerations .............................................................................. 104 5.8. Research and development activities ................................................................... 105 6 Electrica financial reporting 2018 ............................................................................... 106 6.1. Consolidated statement of the financial position ................................................... 106 6.2. Consolidated statement of profit and loss ............................................................. 111 6.3. Consolidated cash flow statement ....................................................................... 119 6.4. Individual statement of the financial position ........................................................ 121 6.5. Individual statement of profit or loss ................................................................... 127 6.6. Individual cash flow statement ............................................................................ 130 6.7. Risk management .............................................................................................. 132 6.8. Description of the main features of internal control and risk management systems in relation to the financial reporting process ...................................................................... 137 Appendix 1 – Litigations .................................................................................................. 140 Appendix 2 – Details of the main investments accomplished in 2018 by the Electrica Group .. 159 4 ELECTRICA SA – 2018 DIRECTORS’ REPORT Glossary ANRE Romanian Energy Regulatory Authority BPS Basis points BoD Board of Directors BRP Balance Responsible Party BSE Bucharest Stock Exchange CAPEX Capital Expenditure CGC Corporate Governance Code CMC Competitive Market Component CMUS Centralized Market for Universal Service CNTEE The National Transmission System Operator CSR Corporate Social Responsibility DAM Day Ahead Market DSO Distribution System Operator DMS Distribution Management System EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortization EDN Electrical Distribution Network ELSA Electrica S.A. EGMS Extraordinary General Meeting of Shareholders EU European Union EUR The monetary unit of several member states of the European Union FCA Financial Conduct Authority – United Kingdom GC Green Certificates GDP Gross Domestic Product GDR Global Depositary Receipts GEO Government Emergency Ordinance GMS General Meeting of Shareholders HV High Voltage IAS International Accounting Standard IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standard 5 ELECTRICA SA – 2018 DIRECTORS’ REPORT IMS Integrated Management System IPO Initial Public Offering IR Investor Relations ISIN International Securities Identification Number KPI Key Performance Indicators kV KiloVolt LR Last Resort LSH Labour safety and health LV Low Voltage MV Medium Voltage MVA Mega Volt Ampere MWh MegaWatt hour MKP Management Key Position NAFA National Agency for Fiscal Administration NES National Electricity System NL Network Losses NRC Nomination and Remuneration Committee OMPF Order of Ministry of Public Finances OGMS Ordinary General Meeting of Shareholders OHS Occupational Health and Safety OHSAS Occupational Health and Safety Assessment Series OPCOM Romanian Gas and Electricity market operator PBS Percentage basis points PCB Polychlorinated Biphenylsor RAB Regulated Asset Base RM Retail Market RON Romanian monetary unit RRR Regulated Rate of Return SAD Distribution Automation System SCADA Supervisory Control And Data Acquisition SDEE Societatea de Distributie a Energiei Electrice SDMN Societatea de Distributie a Energiei Electrice Muntenia Nord 6 ELECTRICA SA – 2018 DIRECTORS’