OPERATING STATEMENT OF CRNOGORSKI ELEKTROPRENOSNI SISTEM AD FOR THE YEAR 2019 Podgorica, MAY 2020 TABLE OF CONTENTS Introduction 1. Opening Statement ..............................................................................1 2. Background ........................................................................................... 3 3. Ten Years of CGES ............................................................................... 4 4. Key Data for 2019. .............................................................................. 5 5. Highlights in 2019. ............................................................................... 6 6. Organisational Structure .................................................................. 10 7. Corporate Management ...................................................................11 8. Human Resources ............................................................................ 14 9. Regulatory Framework ................................................................... 15 10. Financial Statements ........................................................................17 11. Transmission System Control ....................................................... 19 • Reliable network 24/7 – our most important task ............... 19 • Electric power indicators .............................................................20 • Quality of electricity transmission service ............................25 • 2019 Control Novelties . ............................................................. 27 • Modern SCADA system for successful electricity ........ transmission in the interest of the Company ........................ 27 • Single control system for everything ........................................29 • Optical fibres at the heart of smart grids .................................29 12. Electricity transmission system facilities ...................................32 • Transmission system users ..........................................................34 • Operating, testing and maintenance ........................................34 13. Occupational Safety and Health in 2019. ................................36 14. Environmental Protection Measures ........................................... 37 15. Investments in 2019 ........................................................................38 16. International Cooperation .............................................................39 17. Internal Audit ....................................................................................43 18. Independent Auditor’s Report .....................................................44 CGES ∞ 2019 Annual Report 1. Opening Statement by putting the Lastva substation into operation and connecting it to the transmission system, Vesna Bracanović we created the preconditions for putting the Chairwoman of the Board of Directors undersea cable into operation and commercial use. This project, the interconnection between the transmission systems of Montenegro and Italy, completed the first phase of the project, the importance of which goes far beyond the borders of our country; it is important for both the Energy Community and the European Union, and we have proved that CGES is a reliable partner in the implementation of the projects of regional significance. With the same commitment, we have worked on other projects that will make the transmission network in Montenegro more Dear shareholders, institutional and business reliable and secure and provide its current partners of Crnogorski elektroprenosni and future customers with a better quality sistem, electricity transmission service. I am particularly pleased that our company We continued to actively participate in the continued to achieve its goals and remarkable work of ENTSO-E and other organizations, results in all segments of our activities in 2019, as well as joint regional companies, and in in which we marked 10 years of successful addition to the primary obligation to ensure the business operation of CGES. operation, maintenance and development of the transmission system, through the activities We dedicated ourselves to the implementation relating to corporate social responsibility, we of development projects and maintenance of affirmed a responsible attitude towards our the existing transmission network. In order to community. preserve the stable operation of the system and security of power supply to consumers in The results we have achieved are not accidental. Montenegro, we have invested 18 million euros They originate from strategic and careful and completed projects worth more than 40 planning, responsible and duly decisions, million euros. Successful business results by perseverance and dedication in achieving the which our company was recognized did not set goals. Everything we have achieved so far stay behind even at the end of 2019, in which, creates even higher expectations, therefore, in despite numerous challenges, we managed to the next period we will continue to work with make a profit of 3.6 million euros. the full commitment and involvement of the management and all employees of CGES. I would especially like to point out that in 2019, CGES ∞ 2019 Annual Report 1 Opening Statement Podgorica 2-Trebinje into it, or the construction of the 400 kV transmission line Lastva-Čevo in Dragan Kujović the length of 2x35 km, the commercial use of Executive Director the undersea interconnection commenced at the end of the year. Besides, activities have been intensified in respect of the Trans Balkan Corridor to connect the Balkan countries with Italy, for which Montenegro, i.e. CGES, received a European Union grant in the amount of 25 million euros. Within this project, a contract was signed with the contractor and specific activities commenced to reconstruct 15 substations regarding replacement of high voltage equipment, relay protection, auxiliary consumption and control. Furthermore, we are working on a feasibility study and development of preliminary designs for the future 400 kV transmission line Pljevlja-Bajina Bašta. Dear shareholders, We have made a significant step forward in the The business of our company during 2019 was integration of SCADA system into National and marked by good results from every aspect. The Back-up Dispatch Centre and its connection Company realized profit, implemented capital with 28 transmission infrastructure facilities, investment projects, adequately responded to thus providing a control and monitoring all challenges we encountered and continued architecture of two parallel and independent investing in strengthening the performance of dispatch centers in the main and back-up the transmission network. configuration, all in line with ENTSO-E standards. The fact that the transmission network in Montenegro is part of a technically integrated We have earmarked approximately 3,5 million European transmission network, with its reliability affecting the security of power supply euros for maintenance, which is being to consumers far beyond Montenegro, speaks carried out through preventive, planned volumes about the significance of launching and intervention activities, as well as capital and implementing numerous investment investments in the revitalization of transmission projects. Sixteen implemented investment lines and substations in 2019. projects, for which CGES earmarked approximately 18 million euros during 2019, Thanks to the longstanding practice of socially speak best about the dynamic development of responsible operations, CGES was one of the the transmission network. initiators of various actions in 2019, as well as a reliable partner to local communities and We should definitely single out the activities society as a whole, which we are particularly concerning one of the greatest investment proud of. projects in Montenegro in general, the undersea interconnection with Italy. Thanks to We present this report as part of our responsible the activities through which we completed the attitude towards you – our shareholders, construction of the 400/110/35 kV substation institutional and business partners, wishing Lastva and connected it to existing power grid to witness the dynamic development of our by integrating the 400 kV transmission line company in the coming years as well. 2 CGES ∞ 2019 Annual Report network of optical telecommunication fibres, 2. Background approximately 850 kilometres long, across CGES was registered as an independent the country. joint-stock company on 27 March 2009. The core activity of the Company is electricity Besides the core activity, CGES has been transmission, for which it obtained a performing an activity of laying electrical license from the Energy Regulatory Agency. installations and equipment, designing civil The quality of performing the activity is and other structures, coarse civil works, guaranteed by a multi-decade experience in other civil and specialised works as well as development, operation, maintenance and telecommunications. control of the transmission system, acquired through a series of organisation forms within the Montenegrin electric power sector since CGES Mission 1957, when the first facility of the transmission Secure and reliable operation of the electric network of Montenegro was commissioned. power system in Montenegro, quality transmission and supply of electricity and Besides electricity transmission, the Company system control in accordance with the possesses also a license for providing services international operational standards. in telecommunications,