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1

#### CONTENTS

#### MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS

2

#### MESSAGE FOR THE CHIEF EXECUTIVE OFFICER

4

#### DIRECTORS’ REPORT FOR THE YEAR 2021

6

#### INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

221

#### CONSOLIDATED FINANCIAL STATEMENTS

227

#### INDEPENDENT AUDITOR’S REPORT ON THE SEPARATE FINANCIAL STATEMENTS

307

#### SEPARATE FINANCIAL STATEMENTS

311

#### DECLARATION OF THE MANAGEMENT

368

2

#### MESSAGE FROM THE CHAIRMAN OF THE BOARDS OF DIRECTORS

Dear shareholders,

The

events

of

2021

have

brought

many

challenges

and

transformations

for

the

entire

energy

sector,

both
nationally and internationally. Implicitly, the challenges, the transformations, were also received by Electrica.

We

had

the

opportunity

to

prove

that

in

any

context

there

is

an

opportunity

to

become

more

focused

and
involved

in

order

to

achieve

common

goals,

being

needed,

more

than

ever,

a

higher

degree

of

adaptability
and consistency.

Also

in

2021,

Electrica

Group

has

constantly

sought

to

reflect

its

commitments

to

shareholders,

consumers,
and all stakeholders, through a team of over 8,000 very experienced people in the field of energy.

There was good cooperation between the Board of Directors and the Group’s management team in 2021.

Corporate

governance

is

a

key

element

of

Electrica’s

strategy

and

is

essential

for

the

sustainable

development
of

the

company

in

the

future,

but

also

a

condition

to

create

added

value

for

our

investors

and

partners.

Since
its

listing

in

2014,

in

order

to

ensure

high

standards

of

corporate

governance,

transparency

and

integrity

of
the

business,

Electrica

Group

has

adhered

and

applied

the

provisions

of

the

Corporate

Governance

Code
issued

by

BSE

and

LSE.

Starting

with

2015,

the

Group

has

created

its

own

Code

of

Governance

which

is
permanently

revised

and

supplemented.

As

there

are

updates,

progress

and

other

impactful

elements,

the
Group

reports

them

to

the

capital

market,

given

the

commitment

made

to

our

shareholders

to

communicate
transparently

and

promptly,

understanding

that

transparency

and

communication

are

important

elements

in
our relationship with investors.

Electrica

Group

makes

every

effort

to

implement

the

best

standards

in

the

Investor

Relation

corporate
disclosure

Policy,

increasing

the

transparency

and

quality

of

communication

with

analysts,

being

constantly
thoughtful

of

the

shareholders’

opinion.

Evidence

of

the

recognition

of

these

efforts

was

the

Group’s

ranking
in

the

top

of

listed

companies,

by

obtaining

a

rating

of

10

on

Vektor

–

the

indicator

of

communication

with
investors

for

the

companies

listed

on

the

stock

exchange.

The

award

given

by

the

Association

for

Investor
Relations

at

the

Romanian

Stock

Exchange

(ARIR),

for

the

activity

carried

out

by

The

Group

in

the

category
"Best Sustainability Report", also came as a recognition of having best practices in place.

The

Board

of

Directors

has

done

its

best

to

integrate

the

principles

of

sustainable

development

into

the
company’s

business

model

and

strategy

as

well

as

into

our

investment

processes,

in

a

difficult

year,

with

many
transformations

and

challenges.

According

to

the

strategy

for

the

period

2019-2023,

Electrica

aims

to

expand
in

related

fields

and

obtain

synergies

with

the

fields

in

which

it

operates.

An

important

step

towards

the
implementation

of

the

growth

strategy

by

expanding

the

value

chain

was

the

signing

of

the

financing
agreement

worth

RON

750

million,

with

Erste

Group

Bank

AG

and

Raiffeisen

Bank

Romania

S.A.,

for

production
projects

from

renewable

resources

and

other

value-added

services,

but

also

the

acquisition

of

ready-to-build
projects, of different capacities, in order to develop the electricity production line.

Being

aware

of

the

strategic

role

we

have

in

the

Romanian

energy

market,

as

well

as

in

supporting

the
objectives

of

the

European

Green

Deal,

we

continued

the

strategy

of

modifying,

transforming,

and

integrating
the

activities,

being

approved

the

establishment

of

a

subsidiary

dedicated

to

projects

in

the

area

of

power
generation from renewable sources, Electrica Productie Energie S.A.

I

believe

that

the

Directors

must

have

a

special

involvement

in

the

sustainability

aspects,

because,

through
their role, they militate for the long-term success of the company.

3

In

order

to

take

to

another

level

our

involvement

in

the

company

and

to

remain

relevant

in

the

perception

of
all

stakeholders,

whether

we

are

talking

about

shareholders,

community

or

employees,

in

August

2021

the
shareholders

approved

the

set-up

of

the

Electrica

Foundation,

an

independent

organization,

established

with
the purpose of getting involved in social responsibility activities throughout Romania.

Managing

the

impact

that

the

unfavourable

context

had

on

the

energy

market

in

2021

and

the

limitation

of
the

negative

effects

of

this

context

was

also

possible

through

a

close

collaboration

with

the

Group’s

executive
management,

but

also

with

the

support

of

the

professionalism

and

dedication

of

wonderful

people

from

the
great Electrica team.

Sure, it’s always possible to do more and better.

On

behalf

of

the

entire

Board

of

Directors,

I

thank

you

for

your

support

and

assistance

and

I

assure

you

that
we,

the

Directors,

will

act

with

all

our

diligence

and

knowledge

in

order

to

achieve

the

planned

objectives,

for
the long-term sustainable development and for increasing the value of the Electrica Group.

Iulian Cristian BOSOANCA

Chair of the Board of Directors Electrica SA

4

#### STATEMENT OF THE CHIEF EXECUTIVE OFFICER

Dear shareholders,

The

energy

sector

has

been

in

a

continuous

transformation

in

2021,

starting

with

the

total

liberalization

of
energy

prices

and

up

to

the

accelerated

increase

in

acquisition

costs

of

electricity.

On

the

national

market,
the

uncertainties

generated

by

the

changes

in

the

legislative

framework

was

added

to

these

challenges

with
impact

on

the

financial

statements

of

the

distribution

operators,

but

especially

the

electricity

and

natural

gas
supply companies.

In

this

difficult

market

context,

and

in

a

period

marked

by

volatility,

we

have

adopted

a

series

of

measures

to
prepare

the

Electric

Group

to

act

more

agilely,

across

all

business

lines,

and

strengthens

its

resilience

to

other
challenges

that

may

occur.

We

proved

that

we

are

a

solid

company,

which

found

the

right

resources

and
implemented

the

right

projects

to

keep

our

promise

to

all

interested

parties.

For

all

of

this,

as

well

as

for

the
support provided, a big “thank you” to the entire Electrica’s team.

Being

aware

of

the

strategic

position

of

the

Group,

we

have

focused

our

resources

to

ensure

the

continuity

of
the

activity

and

energy

supply.

For

Electrica

Group,

the

key

words

of

2021

were


#### consolidation

,


#### growth, flexibility.

Starting

with

1

January

2021,

the

new

company


#### Distributie



#### Energie



#### Electrica



#### Romania


S.A.


(DEER),
resulting

from

the

legal

merger

of

the

Group's

three

Distribution

companies,

has

become

the

most

important
electricity

distribution

operator

at

national

level,

with

a

coverage

of

40.7%

of

Romania's

territory

and

3.8
million users.

The

total

investments

assumed

and

accomplished

between

2018-2021,

exceeded

the

value

of




















RON
2.65

billion,

representing

by

far,

the

highest

level

of

investment

among

distribution

operators.

In

fact,

after
the

listing

in

2014,

The

Electrica

Group

became

the

largest

investor

in

the

modernization

and

refurbishment
of the electricity distribution networks, with a total of over RON 4.8 billion invested in the period 2014-2021.

Under

the

circumstances

of

energy

market

liberalisation,


#### Electrica



#### Furnizare


was

the

market

leader

in

2021,
with

a

market

share

of

18.42%

and

one

of

our

major

objectives

was

to

protect

the

entire

customers’

portfolio,
the

company

providing

energy

for

approximately

3.5

million

of

consumption

places.

For

this

purpose,

we

have
kept

the

tariffs

negotiated

with

the

customers

throughout

2021,

despite

the

increase

in

the

purchase

price,
the company keeping its commitment to remain a trustful partner for its consumers.

With

the

largest

portfolio

of

customers

in

the

regulated

market

at

the

beginning

of

2021,

Electrica

Furnizare,
managed

to

apply

measures

so

that,

at

the

end

of

the

year,

over

one

million

customers

were

transferred

to
the competitive market.

#### Electrica



#### Serv


S.A
.

is

one

of

the

most

performant

providers

of

energy

services,

in

continuous

transformation
and

keeping

up

with

the

new

technologies.

The

company

provides

integrated

maintenance

services,

design,
support

services

for

some

of

the

Distribution

Operators

as

well

as

values-added

energy

services

such

as
complete

grid

connection,

energy

efficiency

solutions,

electromobility

and

energy

independence

by

installing
photovoltaic power plants for final customers, achieving in 2021 a doubling of the turnover.

Consistent

with

the

goal

of

creating

medium

and long-term

value

for

investors

and

reconfirming

the

Group's
commitment

to

aligning

with

the

objectives

of

the



#### European



#### Green



#### Deal

,

we

have

continued

the

integration
of

activities

and

we

proposed

to

our

shareholders

to

set

up

a

subsidiary

dedicated

to

projects

in

the

area

of
generation

of

electricity

from

renewable

sources,


#### Electrica



#### Productie



#### Energie


S.A.
,

cumulated

with

the
development and operation of storage solutions that the company intends to develop and in the future.

5

In

2021,

the

inorganic

growth

projects

resulted

in

the

acquisition

of

four

companies

that

have

a

portfolio

of
projects

for

the

production

of

electricity

from

renewable

sources

with

a

projected

installed

capacity

of

284
MW,

of

which

163

MW

in

three

photovoltaic

projects

and

121

MW

in

a

wind

project

that

will

include

a

storage
capacity of 60 MWh. The acquisition adds to the existing production capacity at the end of 2020, of 7MW.

We

have

continued

the

process

of

organizational

transformation

and

optimization,

started

in

the

previous
years

with

the

Group

Reorganization

Plan,

a

necessary

and

timely

measure

in

order

to

increase

financial

and
operational

performance,

reduce

costs

and

the

cultural

transformation

of

the

organization

by

accelerating

the
adoption of good practices.

The

Board

of

Directors

proposed

for

the

approval

of

the

General

Meeting

of

Shareholders

a

gross

dividend,
from

the

individual

profit

registered

by

Electrica

SA.

for

the

financial

year

2021,

in

the

amount

of

0.45

RON

/
share.

The

total

gross

value

of

the

dividends

amounted

to

RON

152.8

million,

corresponding

to

50%

of

the
individual

net

profit

after

distribution

to

the

legal

reserve,

established

on

the

basis

of

electrica

SA's

audited
individual financial statements for 2021.

In

the

near

future,

we

intend

to

continue

the

projects

of

consolidation

and

sustainable

development

across
all

business

lines,

supported

by

the

acceleration

of

digitalization

and

the

development

of

the

production

from
renewable

sources.

We

will

continue

to

invest

in

the

preparation

of

distribution

grids

towards

smart

grid
concept,

in

order

to

cope

with

the

challenges

of

energy

transition,

as

well

as

the

development

of

alternative
channels for interactions with end users.

For

an

optimal

use

of

opportunities,

Electrica

aimed,

on

long

term,

the

development

of

a

portfolio

of

electricity
generation

capacities

from

renewable

sources

with

a

cumulative

capacity

of

400

MW,

in

parallel

with

electricity
storage capacities up to 100 MW.

Part

of

the

Group's

development

strategy

is

also


#### the expansion



of

operations

outside

the

domestic

market
(at

regional

level)

in

order

to

ensure

a

balance

between

long-term

value

creation

and

maximizing

profit

for
shareholders.

On

behalf

of

the

Electrica

Group

team,

thank

you

for

your

trust

and

support

and

we

assure

you

that

we

will
make

every

effort

for

a

positive

change,

through

continuing

the

initiatives

to

improve

the

operational

and
financial

performance

of

the

company

and

that

we

will

remain

the

same

reliable

partner

for

all

stakeholders.

Georgeta Corina POPESCU

General Manager of Electrica S.A.

6

![Image should be here]()

# Directors’ Report for the year

2021

-
Electrica Group -

#### Chairman of the Board of Directors







#### Iulian



#### Cristian



#### BOSOANCA

![Image should be here]()

7

### DIRECTORS’ REPORT

### FOR THE YEAR 2021

(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. 63 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 2021

Free

translation

from

Romanian,

which

is

the

official

and

binding

version,

and

will

prevail,

in

the

event

of

any

discrepancies
with the English version

#### Table of Contents

8

#### Glossary

.........................................................................................................................................
5

#### Identification details of Electrica

...................................................................................................
8

1

#### Electrica 2021 Overview

.........................................................................................................
9

1.1.
2021 Key financial data
...............................................................................................
9

1.2.
Key events in 2021
...................................................................................................
15

1.3.
Subsequent events
...................................................................................................
45

2

#### Electrica Group

.....................................................................................................................
50

2.1.
Organizational structure
............................................................................................
50

2.2.
Mission, vision, values
...............................................................................................
51

2.3.
Key elements of the 2019 – 2023 Strategic Plan
.........................................................
51

2.4.
Outlook
....................................................................................................................
54

2.5.
Key

factors,

directions

and

significant

market

trends

affecting

the

operational

results

of

Electrica Group
...................................................................................................................
59

3

#### Electrica on the capital markets

...........................................................................................
62

3.1.
Ownership structure
.................................................................................................
62

3.2.
Shares evolution on BSE and Global depository receipts (GDRs) evolution on LSE
.........
63

3.3.
Investor relations (IR)
...............................................................................................
65

3.4.
Related parties transactions
......................................................................................
66

3.5.
Dividends policy
.......................................................................................................
66

3.6.
Dividend distribution
.................................................................................................
67

3.7.
Own shares
..............................................................................................................
67

4

#### Corporate Governance in ELSA

.............................................................................................
68

4.1.
Corporate Governance Code
......................................................................................
68

4.2.
General Meeting of ELSA’s Shareholders
.....................................................................
70

4.3.
Shareholders’ rights
..................................................................................................
71

4.4.
ELSA’s Board of Directors
..........................................................................................
73

4.5. The activity of ELSA’s Board of Directors and of its consultative committees in 2021
.........
79

4.6. ELSA’s Executive management
......................................................................................
87

4.7. Remuneration of the Directors and of the Executive Managers with mandate agreements
.
91

4.8. Corporate Governance in ELSA’s subsidiaries
.................................................................
96

4.9. Statement regarding the corporate governance “Comply or Explain”
..............................
104

4.10.

Implementing

action

plans

undertaken

by

signing

the

framework

agreement

with

EBRD

.......................................................................................................................................
117

9

4.11. Internal audit activity report for 2021
........................................................................
126

5
Operating activity of Electrica in 2021
...............................................................................
127

5.1.
Operating segments
................................................................................................
127

5.2.
Fixed assets
...........................................................................................................
130

5.3.
Procurement
...........................................................................................................
134

5.4.
Sales activity
..........................................................................................................
134

5.5.
Personnel
...............................................................................................................
138

5.6.
Environmental considerations
..................................................................................
142

5.7.
Research and development activities
........................................................................
144

6
Electrica financial reporting for 2021
.................................................................................
146

6.1.
Consolidated statement of the financial position
........................................................
146

6.2.
Consolidated statement of profit or loss
....................................................................
151

6.3.
Consolidated cash flow statement
............................................................................
160

6.4.
Separate statement of the financial position
..............................................................
163

6.5.
Separate statement of profit or loss
.........................................................................
169

6.6.
Separate cash flow statement
..................................................................................
172

6.7.
Risk management
...................................................................................................
174

6.8.
Description

of

the

main

features

of

internal

control

and

risk

management

systems

in

relation to the financial reporting process
...........................................................................
178

#### Appendix 1 – Litigations

............................................................................................................
181

#### Appendix 2 – Details of the main investments of Electrica Group during 2020

........................
205

10

#### Glossary

#### ANRE

Romanian Energy Regulatory Authority

#### ASF

Romanian Financial Supervisory Authority (Autoritatea de Supraveghere Financiara)

#### BPS

Basis points

#### BoD

Board of Directors

#### BRP

Balance Responsible Party

#### BSE

Bucharest Stock Exchange

#### BTA

Business Transfer Agreement

#### CAPEX

Capital Expenditure

#### CGC

Corporate Governance Code

#### CMC

Competitive Market Component

#### CMBC (EA/CN)

Centralized Market for Bilateral Contracts (Extended Auction/Continuous Negotiation)

#### CMNG-AN

Centralized Market for Bilateral Natural Gas Contracts – Auction and Negotiation

#### CMNG-PA

Centralized Market for Bilateral Natural Gas Contracts – Public Auction

#### CMNG – OTC

Centralized Market for Bilateral Natural Gas Contracts – OTC

#### CMUS

Centralized Market for Universal Service

#### CNTEE

The National Transmission System Operator

#### CSR

Corporate Social Responsibility

#### DAM

Day Ahead Market

#### DAM-NG

Day Ahead Market – Natural Gas

#### DEER

Distributie Energie Electrica Romania

#### DSO

Distribution System Operator

#### DMS

Distribution Management System

#### EEA

European Economic Area

#### EBIT

Earnings before interest and tax

#### EBITDA

Earnings before interest, tax, depreciation and amortization

#### EDN

Electrical Distribution Network

#### EGMS

Extraordinary General Meeting of Shareholders

#### EFSA

Electrica Furnizare SA

#### ELSA

Electrica SA

#### ERM

Enterprise Risk Management

EU

European Union

11

#### EUR

The monetary unit of several member states of the European Union

#### FCA

Financial Conduct Authority – United Kingdom

#### FPM-LT

Medium and Long-Term Flexible Products Market

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

IM-NG

Intraday Market for Natural Gas

#### IMS

Integrated Management System

#### IPO

Initial Public Offering

IR

Investor Relations

#### ISIN

International Securities Identification Number

#### KPI

Key Performance Indicators

kV

KiloVolt

#### LOC

Land Ownership Certificate

LR

Last Resort

#### LSH

Labor 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

12

#### 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

#### PCB

Polychlorinated Biphenylsor

#### RAB

Regulated Asset Base

RM

Retail Market

#### RON

Romanian monetary unit

#### RRR

Regulated Rate of Return

#### SAD

Distribution Automation System

#### SAPE

Societatea de Administrare a Participatiilor in Energie

#### SCADA

Supervisory Control And Data Acquisition

#### SDEE

Societatea de Distributie a Energiei Electrice SA

#### SDMN

Societatea de Distributie a Energiei Electrice Muntenia Nord SA

#### SDTN

Societatea de Distributie a Energiei Electrice Transilvania Nord SA

#### SDTS

Societatea de Distributie a Energiei Electrice Transilvania Sud SA

#### SED

Servicii Energetice Dobrogea SA

#### SEM

Servicii Energetice Muntenia SA

#### SEO

Servicii Energetice Oltenia SA

#### SoLR

Supplier of last resort

#### SPO

Secondary Public Offering

#### TWh

TeraWatt hour

#### TSO

Transmission and system operator

UM

Unit of Measurement

US

Universal Service

#### USD

United States Dollar

#### VAT

Value Added Tax

Note:

The

figures

presented

in

this

document

are

rounded

based

on

the

round

to

nearest

method;

as

a

result,

rounding
differences may appear.

13

## Identification details of Electrica

#### Report date

: 28 February 2022

#### Name of the Issuer

: Societatea Energetica Electrica S.A.

#### Headquarter

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

#### Telephone/fax number

: +4021.208.5999; +4021.208.5998

#### Fiscal code

: 13267221

#### Trade Registry No

: J40/7425/2000

#### LEI Code (Legal Entity Identifier)

:

213800P4SUNUM5AUDX61

#### Subscribed and paid share capital

: RON 3,464,435,970

#### Main characteristics of issued shares





:

346,443,597

ordinary

shares

of

10

RON

nominal

value,

out

of
which

6,890,593

treasury

shares

and

339,553,004

shares

issued

in

dematerialized

form

and

freely
transferable, nominative, tradable and fully paid

Regulated market where the issued securities are traded:








the

company’s

shares

are

listed

on

the
Bucharest

Stock

Exchange

(ticker:

EL)

and

the

Global

Depositary

Receipts

(ticker:

ELSA)

are

listed

on

the
London Stock Exchange

Applicable accounting standards:



Order

of

the

Ministry

of

Public

Finance

no.

2844/2016

for

the

approval
of

the

Accounting

Regulations

in

accordance

with

International

Financial

Reporting

Standards

and

the
International Financial Reporting Standards as approved by the European Union

Reporting period:
 2021 Year (period 1 January - 31 December 2021)

Audit:

The

individual

and

consolidated

financial

statements

as

of

and

for

the

period

ended

31

December

2021
are audited by an independent financial auditor

Ordinary Shares

GDR

ISIN

ROELECACNOR5

US83367Y2072

Bloomberg Symbol

OQVZ

ELSA:LI

Currency

RON

USD

Nominal Value

RON 10

-

Stock Market

Bucharest Stock Exchange REGS

London Stock Exchange MAIN
MARKET

Ticker

EL

ELSA

Source: Electrica

14

1

### Electrica 2021 Overview

1.1.

#### 2021 Key financial data

In

2021,

the

net

result

of

the

Electrica

Group

was

a

loss

of

RON

553

mn,

a

result

generated

mainly

by

the
performance

of

the

electricity

supply

segment

significantly

influenced

by

the

increase

in

energy

costs,

to

which
is added the increase in electricity costs to cover CPT for distribution segment.

The revenues of the Electrica Group in 2021 and 2020 were RON 7,179 mn, respectively RON 6,501 mn.

(RON mn)

2021

2020

2019

Revenue

7,179

6,501

6.280

Other operating income

196

165

160

Operational costs

(7,980)

(6,215)

(6,206)

EBITDA
1

(128)

953

718

EBIT

(606)

459

234

Gross profit

(632)

442

226

Net profit

(553)

388

207

Source: Electrica

As

can

be

seen

in

the

graphs

below,

the

EBITDA

margin

decreased

by

1640

ppb

in

2021

compared

to

2020
(vs.

330

ppb

increase

in

2020

compared

to

2019),

while

the

net

profit

margin

decreased

by

1370

ppb

(vs.
increase 270 ppb in 2020 compared to 2019).

As

of

December

31,

2021,

the

Group

has

a

capital

structure

with

net

debt

position
2

of

RON

1,056

mn
(December 31, 2020: RON 81 mn).

1

Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation or namely EBITDA) is defined and calculated as profit/(loss)
before tax adjusted for i) depreciation, amortization and impairment/reversal of impairment of property, plant and equipment and intangible assets, ii)
impairment of assets held for sale and iii) net finance income. EBITDA is not an IFRS measure and should not be treated as an alternative to IFRS
measures. Moreover, EBITDA is not uniformly defined. The method used to calculate EBITDA by other companies may differ significantly from
that used by the Group. As a consequence, the EBITDA presented in this note cannot, as such, be relied upon for the purpose of comparison to
EBITDA of other companies.

2

Net debt/(Cash) is defined as bank borrowings + bank overdrafts + financial leases +
funding for concession agreements

- cash and cash equivalents
– restricted cash - bank deposits, treasury bills and government bonds.

15

Figure

1:

Consolidated

revenue

of

Electrica

Group
(RON mn)

Figure

2:

EBITDA

(RON

mn)

and

EBITDA

margin
(%)

Source: Electrica

Source: Electrica

Figure 3: Consolidated net profit (RON mn)

Figure 4: Net debt/(cash) (RON mn)

Source: Electrica

Source: Electrica

#### DISTRIBUTION SEGMENT

#### Essential market information

:

▪
Electricity

distribution

in

Romania

is

fulfilled

mainly

by

six

electricity

distribution

system

operators,
regulated by ANRE;

▪
Each

company

is

responsible

for

the

exclusive

distribution

of

electricity

in

the

region

for

which

it

is
authorized, under a concession agreement concluded with the Romanian State;

▪
Enel

owns

three

distribution

companies

each,

while

Electrica

through

Distributie

Energie

Electrica

Romania
(formed

by

the

merger

at

31

december

2020

of

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania
Nord,

Societatea

de

Distributie

a

Energiei

Electrica

Transilvania

Sud

and

Societatea

de

Distributie

a

![Image should be here]()

5.762

5.944

6.59

518

557

585

6.280

6.501

7.179

2019

2020

2021

Green Certificate Revenues

Revenues (w/o green certificates)

![Image should be here]()

718

953

(128)

11,4%

14,7%

-1,8%

(200)

-

200

400

600

800

1,000

1,200

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2019

2020

2021

EBITDA

EBITDA Margin

![Image should be here]()

207

388

(553)

3,1%

6,0%

-7,7%

(600)

(400)

(200)

-

200

400

600

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2019

2020

2021

Net Profit

Net Profit margin

(166)

81

1,056

2019

2020

2021

Net Debt / (cash)

16

Energiei

Electrice

Muntenia

Nord),

CEZ

through

Distributie

Oltenia

and

E.ON

through

Delgaz

Grid

own

the
remaining three;

▪
Electrica

Group

is

a

key

player

in

the

electricity

distribution

sector,

both

in

terms

of

areas

covered

and

of
number of users served;

▪
The estimated Regulated Assets Base (RAB) value at the end of 2021 was RON 6,0 bn;

▪
200,774

km

of

electric

lines

-

7,601

km

for

High

Voltage

(“HV”),

46,403

km

for

Medium

Voltage

(“MV”)
and 146,771 km for Low Voltage (“LV”);

▪
Total area covered: 97,196 km
2
, 40.7% of Romania’s territory;

▪
3.03 mn users (2021) for the distribution activity;

▪
18.5 TWh of electricity distributed in 2021, a decrease of 1.6% as compared to 2020;

▪

#### 39.6% market share for the distribution of electricity to final users in 2020















#### (based on distributed quantities, according to ANRE report for 2020).

■

Figure 5: Romanian electricity distribution map

Source: Electrica

Figure 6: Evolution of the number of users (mn)

Figure 7: Quantity distributed (TWh)

Source: ANRE Report for performance indicators’ monitoring 2020

Source:

ANRE

Report

for

performance

indicators’

monitoring

2020,

Electrica

![Image should be here]()

![Image should be here]()

![Image should be here]()

3.73

3.77

3.80

5.72

5.78

5.87

9.45

9.55

9.67

2018

2019

2020

Electrica

Others

![Image should be here]()

17,65

17,73

17,48

27,15

27,17

26,62

44,80

44,90

44,10

2018

2019

2020

Electrica

Others

17

#### Key financial indicators

In

2021,

revenues

from

the

electricity

distribution

segment

decreased

by

approx.

RON

20

mn,

or

0.7%,

to
RON

2,730.8

mn,

from

RON

2,750.8

mn

in

2020.

The

effect

of

the

decrease

by

RON

195.9

mn

of

revenues
recognized

in

accordance

with

IFRIC

12

(these

having

no

significant

impact

on

the

result),

was

offset

by

the
increase in distribution tariffs as well as the volumes of electricity distributed by 5.7%.

EBITDA

in

the

segment

is

adversely

affected

by

the

increase

in

CPT

costs

and

contributed

to

a

decrease

of
RON

251.6

mn

or

40.3%.

The

Electricity

Distribution

Operators

were

directly

affected

by

this

significant

price
increase,

being

obliged,

according

to

ANRE

Order

no.

73/2014,

to

purchase

the

electricity

necessary

to

cover
their

own

technological

consumption

(CPT),

in

order

to

comply

with

the

general

conditions

associated

with
the

license.

distribution

on

the

wholesale

electricity

market,

in

accordance

with

the

Law

on

electricity

and
natural

gas

no.

123/2012

with

subsequent

amendments

and

completions

(Art.

45).

For

2021,

for

the

Group's
electricity

distribution

subsidiary,

the

average

electricity

purchase

price

for

CPT

was

67%

higher

than

the
value

set

by

ANRE

ex-ante

in

tariffs,

generating

additional

costs

of

RON

397

mn.

The

effect

of

the

increase

in
electricity

purchase

prices

for

CPT

was

felt

mainly

in

the

third

and

fourth

quarters

of

2021,

when

the

increase
in prices was 36%, respectively 55% 167% compared to the same period in 2020.

According

to

the

methodology

applicable

to

the

distribution

activity,

respectively

ANRE

Order

no.

169/2018
approving

the

Methodology

for

establishing

the

tariffs

for

the

electricity

distribution

service,

the

difference
between

the

energy

price

for

CPT

achieved

in

2021,

by

each

Distribution

Operator

and

the

ex

-before
established

by

ANRE,

it

will

be

recovered

through

tariffs

in

2023,

within

the

minimum

limit

between

the
average

price

realized

and

the

average

of

the

prices

realized

in

2021

by

the

network

operators

(distribution
and transport).

The

net

result

of

the

segment

is

further

influenced,

unfavorably

by

the

increase

of

the

negative

financial
result,

to

which

is

added

the

favorable

impact

from

the

decrease

of

the

depreciation

of

tangible

and

intangible
assets

and

registered

a

reduction

of

approx.

RON

216.1

mn.

The

result

was

also

adversely

affected

by

the
provision

of

impairment

adjustments

for

trade

receivables

related

to

the

insolvency

of

the

insolvency

of
electricity suppliers in the market in the amount of approximately RON 20.4 million.

We

also

mention

the

fact

that,

at

the

beginning

of

the

current

PR4

regulatory

period,

ANRE

made

a

total
negative

correction

for

the

closing

of

PR3

in

the

amount

of

RON

(730)

million

(nominal

terms),

respectively
(RON

665)

million

(2018

terms).

),

of

which

(341)

million

RON

for

the

meters

recognized

as

investments

in
PR2

(2008-2013).

The

meter

correction

was

challenged

in

court

by

the

distribution

branch

of

the

Electrica
Group,

because

in

2013,

ANRE

recognized

the

meters

in

BAR

based

on

the

principle

of

non-discrimination

of
all

distribution

operators,

although

they

were

not

registered

as

fixed

assets.

The

total

negative

correction

18

related

to

PR3

decreased

the

regulated

profitability

related

to

PR4,

with

an

average

annual

value

of

(146)
million RON.

Figure 8: Revenues - distribution segment (RON
mn)

Figure 9: EBITDA – distribution segment (RON
mn)

Source: Electrica

Source: Electrica

Figure

10:

Net

Profit

–

distribution

segment

(RON
mn)

Figure

11:

Net

debt/(Cash)

–

distribution

segment
(RON mn)

Source: Electrica

Source: Electrica

#### SUPPLY SEGMENT

#### Essential market data (according to ANRE Report for November 2021)

▪
The

supply

market

is

composed

of

both

competitive

and

universal

service

and

last

resort

segment

(US
and LR);

▪
The

universal

service

and

last

resort

segment

consist

of

6

last

resort

suppliers

designated

at

national

level;

2.741

2.751

2.731

2019

2020

2021

607

624

372

2019

2020

2021

106

77

(139)

2019

2020

2021

657

781

706

2019

2020

2021

19

▪
The

competitive

segment

consists

of

92

suppliers

(including

the

last

resort

suppliers

operating

on

retail
competitive segment), out of which 84 are relatively small (below 4% market share);

EFSA

is

the

market

leader

with

a

market

share

of

18.39%;

it

is

also

the

leader

on

the

LR

segment

having

a
market

share

of

30.67%,

while

its

market

share

on

the

competitive

segment

is

12.58%

(in

accordance

with
ANRE

November

2021

Report).

Comparatively,

in

2020,

EFSA

had

a

market

share

of

19.25%

in

total

energy
market;

54.56%

of

the

LR

market

and

a

market

share

of

10.86%

of

the

competitive

market

(ANRE

report

for
December 2020).

#### Key financial indicators

Revenues

from

the

supply

of

electricity

and

natural

gas

increased

in

2021

by

approx.

RON

757,2

mn,

or
15.1%, to RON 5,772.4 mn, from RON 5,015.1 million in 2021.

This

evolution

represents

mainly

the

effect

of

the

increase

of

the

sale

prices

of

electricity

on

the

retail

market
by 12.5%, but also of a slight increase of the quantity of electricity supplied by 1%.

Regarding

EBITDA,

the

supply

segment

registered

in

2021

a

significant

decrease

of

RON

705.2

mn

reaching
the level of -RON 439.7 mn, and a decrease of the EBITDA margin from 5.3% in 2020 to -7.6% in 2021.

The

main

cause

of

this

evolution

is

the

increase

in

prices

on

the

electricity

market

and

the

impossibility

of
transferring

these

price

increases

to

the

final

customer.

Thus,

the

prices

on

the

Romanian

electricity

market
increased

by

approximately

400%

on

the

Next

Day

Market

from

January

to

December

2021.

The

acquisition
market

registered

during

2021

significant

increases,

manifested

at

the

level

of

international

and

determined
by

the

international

economic

and

political

context.

The

prices

for

Q

products

(quarter)

registered

an
ascending

trend

since

the

end

of

the

first

quarter

of

2021,

later

the

growth

being

much

faster,

so

the

prices
in

the

wholesale

market

registered

an

increase

from

250-280

lei

/

MWh

-

to

1300

lei

/

MWh.

Another

important
factor

was

the

unilateral

termination

of

some

of

the

contracts

concluded

on

the

wholesale

market

as

well

as
the

takeover

of

a

significant

number

of

final

customers

based

on

the

obligations

assumed

as

a

supplier

of

last
resort,

which

led

to

the

need

to

purchase

larger

quantities.

from

the

Day

Ahead

Market.

The

negative

impact
on

the

gross

electricity

margin,

generated

by

the

increase

in

prices

is

approximately

896.1

million

lei

in

2021
lei.

Although

up

pricing

was

taken

in

cases

where

the

legislation

in

force

allowed

the

modification

of

existing
contracts, the positive impact generated by these steps was only partial.

Also,

another

factor

that

contributed

to

the

decrease

in

the

EBITDA

margin

was

the

impact

generated

by

the
protection

measures

related

to

the

liberalization

of

the

electricity

market.

Thus,

according

to

Order

171/2020
with

the

amendments

and

completions

of

Order

5/2021

art.

4,

paragraphs

4

and

5,

for

domestic

customers
who

have

concluded,

on

the

basis

of

one

of

the

competitive

offers

(transmitted

either

as

a

result

of

ANRE
Order

171/2020

in

conjunction

with

ANRE

Order

5/2021,

or

published),

a

contract

with

effect

between

1

and
30

June

2021,

the

electricity

consumption

achieved

between

1

January

2021

and

the

date

of

entry

into

force
of

the

new

contract

was

billed

at

the

price

of

the

universal

service

offer

communicated

by

the

supplier

of

last
resort.

If

the

customer

did

not

enter

the

competitive

market

until

30.06.2021,

a

commercial

discount

was
applied

for

the

period

01.01.2021-

30.06.2021,

a

discount

which

was

supplemented

by

a

discount

for

the
period

01.07.2021-31.08.2021,

which

generated

a

total

negative

impact

of

18.3

million

lei

in

total

gross
margin.

According

to

Law

259/2021,

regarding

the

approval

of

the

Emergency

Ordinance

118/2021,

completed

and
modified

by

the

Emergency

Ordinance

no.

120/2021,

certain

temporary

energy

support

measures

were
established

for

domestic

and

non-household

consumers,

which

generated

a

negative

impact

on

the

company's

20

results

as

a

result

of

the

supply

segment.

Thus,

in

the

last

quarter

of

the

year,

the

application

of

the

support
scheme

for

the

final

consumer

provided

by

GEO

118/2021,

Law

259/2021

and

GEO

130/2021

also

generated
an

effect

of

reducing

the

EBITDA

margin

through

the

capping

mechanism

due

to

the

uncertainty

in

regarding
the full recovery of the respective amounts by the suppliers.

It

should

also

be

mentioned

that

the

energy

suppliers

are

unable

to

terminate

the

existing

contracts

according
to the Law on Electricity and Natural Gas no. 123/2012, based on Article 57.

The

supply

segment

has

a

net

cash

financial

position

which

has

decreased

compared

to

2020

by

approx.

RON
424.3

mn,

following

the

decrease

of

the

cash

level,

the

use

of

overdrafts,

the

increase

of

trade

receivables,
and the usage of funds from the cash pooling scheme.

Figure 12: Revenues - supply segment (RON mn)

Figure 13: EBITDA - supply segment (RON mn)

Source: Electrica

Source: Electrica

Figure 14: Net profit - supply segment (RON mn)

Figure 15: Net debt/(Cash) - supply segment

(RON mn)

Source: Electrica

Source: Electrica

![Image should be here]()

4,250

4,458

5,187

518

557

585

4.768

5.015

5.77

2019

2020

2021

Reveneus from Green Certificates

Revenues (w/o Green Certificates)

![Image should be here]()

139

265

(440)

2,9%

5,3%

-7.6%

(500)

(400)

(300)

(200)

(100)

-

100

200

300

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2019

2020

2021

EBITDA

EBITDA Margin

![Image should be here]()

104

214

(390)

2.2%

4.3%

-6.8%

(500)

(400)

(300)

(200)

(100)

-

100

200

300

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2019

2020

2021

Net profit

Net Profit Margin

(257)

(183)

242

2019

2020

2021

Net Debt / (Cash)

21

1.2.

#### Key events in 2021

#### During 2021

 the following main events took place:

■

#### ELSA’s



#### General



#### Meetings of Shareholders





#### (GMS) and the main projects developed and completed during the year as a result of the approval received from ELSA’s GMS

In

2021,

an

Ordinary

General

Meetings

of

Shareholders

(OGMS)

took

place

on

28

April,

and

three

Extraordinary
General

Meetings

of

Shareholders

(EGMS)

were

held

on

28

April,

11

August

and,

respectively,

on

8

December.

On

4
th

March

2021
,


#### ELSA’s



#### BoD approved the convening of ELSA’s








#### Ordinary



#### General



#### Meeting of Shareholders




#### (OGMS)


and

of

the


#### Extraordinary



#### General



#### Meeting of Shareholders





#### (EGMS)

,

meetings
that took place on 28 April 2021.

During the

#### OGMS, ELSA’s shareholders approved

 mainly the following:

▪
the

audited

annual

financial

statements

for

2020

and

the

ELSA’s

budget

of

revenues

and

expenses

for
2021, both at individual and consolidated level;

▪
distribution

of

the

net

profit

for

the

financial

year

2020:

total

value

of

gross

dividends

-

RON

247.9

M

,
value

of

gross

dividend/share

-

RON

0.73,

ex

date

–

2
nd

June

2021,

registration

date

–

3
rd

June

2021,
date of dividends’ payment – 25 June 2021;

▪
discharge of liability of the members of ELSA’s Board of Directors for the financial year 2020;

▪
prolongation

of

the

mandate

of

the

financial

auditor

of

ELSA,

Deloitte

Audit

S.R.L.,

for

a

two-year

period,
respectively for the financial years 2021 and 2022;

▪
the Remuneration Policy of the Directors and Executive Managers;

▪
the

election

of

the

BoD’s

members,

by

applying

the

cumulative

voting

method.

Following

the

elections,
ELSA’s

new

Board

of

Directors

is

composed

of:

Mr.

Iulian

Cristian

Bosoanca,

Mr.

Gicu

Iorga,

Mr.

Ion-
Cosmin

Petrescu,

Mr.

Adrian-Florin

Lotrean,

Mr.

Radu

Mircea

Florescu,

Mr.

Dragos-Valentin

Neacsu

and
Mr. George Cristodorescu.
The mandate’s duration for the elected directors is for a period of four years.

The shareholders attending the EGMS approved mainly the following:

▪
the

guarantee

to

be

issued

by

ELSA

for

the

term

loan

in

the

amount

of

up

to

EUR

210

M

or

equivalent

in
RON

that

DEER

will

contract

from

the

European

Investment

Bank

(EIB)

for

financing

the

investments

plan
for

the

period

2021-2023,

the

value

of

the

independent

guarantee

provided

by

ELSA

for

the

first

request
being of maximum EUR 252 M or equivalent in RON;

▪
ELSA’s

contracting

of

a

non-binding

bridge

loan

in

the

amount

of

up

to

RON

750

M

from

a

consortium
comprised

by

Erste

Bank

and

Raiffeisen

Bank,

together

with

an

engagement

letter

for

arranging

a

bond
issue

(conditional

upon

obtaining

the

necessary

corporate

approvals)

to

finance

the

inorganic

growth
opportunities,

having

a

single

guarantee,

respectively

a

mortgage

on

the

bank

accounts

opened

by

ELSA
with BCR and Raiffeisen Bank, for a maximum value of RON 825 M.

On

18

June

2021,


#### ELSA’s



#### BoD approved the convening of ELSA’s








#### Extraordinary



#### General


Meeting of

22

Shareholders (EGMS),
 that took place on 11 August 2021.

#### The ELSA’s shareholders attending the EGMS approved

, mainly, the following:

▪
The

empowerment

of

the

ELSA

representative

to

participate

in

the

EGMS

of

DEER

and

to

express

the

vote
in

favor

of

the

approval

to

transfer

one

share

held

by

ELSA

in

DEER

towards

SERV,

representing
0.00000071%

of

DEER’s

share

capital,

for

the

total

price

of

RON

10

and

approving

the

article

6
amendment

-

Share

Capital,

from

the

Articles

of

Association

of

DEER,

to

reflect

the

new

shareholdings

of
the two shareholders
;

▪
The

empowerment

of

the

ELSA

representative

to

participate

in

the

EGMS

of

SERV

and

to

express

the

vote
in

favor

of

the

approval

to

transfer

one

share

held

by

ELSA

in

SERV

towards

DEER,

representing
0.00001905%

of

SERV’s

share

capital,

for

the

total

price

of

RON

10

and

approving

the

amendment

of
article

6

-

Share

Capital,

from

the

Articles

of

Association

of

SERV,

to

reflect

the

new

shareholdings

of

the
two shareholders;

▪
The

approval

of

the

participation

of

ELSA,

as

founding

member,

to

the

establishment

of

Electrica
Foundation;

▪
The approval for the amendment of the ELSA’s Articles of Association, regarding:

-
the

alignment

of

the

art.

12,

para.

(2)

provisions

with

the

Law

24/2017

regarding

the

issuers

of
financial instruments and market operations;

-
the

introduction

of

a

new

attribution

of

the

OGMS

regarding

the

approval

of

the

Remuneration
Policy for Directors and Executive Managers;

-
the

completion

of

the

situations

in

which

the

secret

vote

is

applied,

in

accordance

with

the
applicable legal provisions.

▪
The

approval

of

ELSA’s

participation,

together

with

SERV,

in

the

establishment

of

a

new

legal

entity

-
Electrica

Productie

Energie

S.A.,

organized

as

a

public

limited

liability

company,

a

subsidiary

of

ELSA,

in
which

ELSA

holds

a

percentage

of

99.9920%

of

the

share

capital

and

SERV

holds

a

percentage

of

0.0080%
of the share capital.

On

15

October

2021,


#### ELSA’s



#### BoD approved the convening of ELSA’s








#### Extraordinary



#### General



#### Meeting of Shareholders (EGMS)

, that took place on 8 December 2021.

The shareholders attending the EGMS rejected:

▪
The

acquisition

by

Electrica,

as

Buyer,

of

the

following

holdings

of

MT

Project

B.V.

(“MTP”)

and

HiTech
Solar Investment GmbH ('HSI'), as Sellers:

-
in

TCV

Impex

S.A.

("TCV"),

a

company

of

Romanian

nationality,

having

its

registered

office

at
1/VII

Bd.

Pipera,

Nord

City

Tower

Building,

office

no.

1,

Section

A7,

8th

floor,

Voluntari,

Ilfov
County,

registered

with

Ilfov

Trade

Registry

under

no.

J23/1072/2018,

sole

registration

code
19123942,

-
in

ACV

Solar

Technology

S.A.

(“ACV”),

a

company

of

Romanian

nationality,

having

its

registered
office

at

1/VII

Bd.

Pipera,

Nord

City

Tower

Building,

office

no.

1,

Section

A6,

8th

floor,

Voluntari,
Ilfov

County,

registered

with

Ilfov

Trade

Registry

under

no.

J23/351/2018,

sole

registration

code
30042717,

-
in

TIS

Energy

S.A.

("TIS"),

a

company

of

Romanian

nationality,

having

its

registered

office

at
1/VII

Bd.

Pipera,

Nord

City

Tower

Building,

office

no.

1,

Section

A5,

8th

floor,

Voluntari,

Ilfov
County,

registered

with

Ilfov

Trade

Registry

under

no.

J23/354/2018,

sole

registration

code
28563306,

23

-
in

Delta

&

Zeta

Energy

S.A.

(“DZE”),

a

company

of

Romanian

nationality,

having

its

registered
office

at

1/VII

Bd.

Pipera,

Nord

City

Tower

Building,

office

no.

1,

Section

A3,

8th

floor,

Voluntari,
Ilfov

county,

registered

with

Ilfov

Trade

Registry

under

no.

J23/350/2018,

sole

registration

code
29092649,

-
in

the

Gama

&

Delta

Energy

S.A.

("GDE"),

a

company

of

Romanian

nationality,

having

its
registered

office

at

1/VII

Bd.

Pipera,

Nord

City

Tower

Building,

office

no.

1,

Section

A4,

8th

floor,
Voluntari,

Ilfov

county,

registered

with

Ilfov

Trade

Registry

under

no.

J23/349/2018,

sole
registration code 29092657,

hereinafter

referred

to

as

the

Companies,

holdings

which

together

represent

100%

of

the

share

capital

of
each Company, as follows:

-
4,597,060

shares

held

by

MTP

out

of

the

total

number

of

4,600,000

shares,

representing
99.936087%,

respectively

2,940

shares

held

by

HSI

out

of

the

total

number

of

4,600,000

shares,
representing

0.063913%

of

the

share

capital

of

TCV

for

a

total

price

of

EUR

5,997,900

which

will
be adjusted in accordance with the provisions of the Sale Purchase Agreement ("SPA");

-
4,249,100

shares

held

by

MTP

out

of

the

total

number

of

4,250,000

shares,

representing
99.978824%,

respectively

900

shares

held

by

HSI

out

of

the

total

number

of

4,250,000

shares,
representing

0.021176%

of

the

share

capital

of

ACV

for

a

total

price

of

EUR

6,058,500

which

will
be adjusted in accordance with the provisions of the SPA;

-
5,899,100

shares

held

by

MTP

out

of

the

total

number

of

5,900,000

shares,

representing
99.984746%,

respectively

900

shares

held

by

HSI

out

of

the

total

number

of

5,900,000

shares,
representing

0.015254%

of

the

share

capital

of

TIS

for

a

total

price

of

EUR

7,094,500

which

will
be adjusted in accordance with the provisions of the SPA;

-
5,993,322

shares

held

by

MTP

out

of

the

total

number

of

6,000,000

shares,

representing
99.888700%,

respectively

6,678

shares

held

by

HSI

out

of

the

total

number

of

6,000,000

shares,
representing

0.111300%

of

the

share

capital

of

DZE

for

a

total

price

of

EUR

7,924,550

which

will
be adjusted in accordance with the provisions of the SPA;

-
6,693,382

shares

held

by

MTP

out

of

the

total

number

of

6,700,000

shares,

representing
99.901224%,

respectively

6,618

shares

held

by

HSI

out

of

the

total

number

of

6,700,000

shares,
representing

0.098776%

of

the

share

capital

of

GDE

for

a

total

price

of

EUR

7,924,550

which

will
be adjusted in accordance with the provisions of the SPA.

Also, the shareholders attending the EGMS approved:

▪
The

completion

of

the

guarantee

structure

for

the

bridge

loan

up

to

RON

750,000,000

of

non-binding
nature

to

be

contracted

by

Electrica

from

a

consortium

of

banks

comprising

by

Erste

Bank

and

Raiffeisen
Bank

accompanied

by

an

engagement

letter

for

the

arrangement

of

a

bond

issue

(bond

issue

conditional
upon

obtaining

the

necessary

corporate

approvals)

to

finance

inorganic

growth

opportunities,

the
contracting

of

which

was

approved

by

Electrica’s

EGMS

resolution

no

1

of

28th

April

2021,

as

follows:

in
addition

to

the

mortgage

guarantee

on

the

bank

accounts

opened

by

Electrica

to

BCR

and

Raiffeisen

Bank,
which

will

be

made

up

for

a

maximum

amount

of

RON

825,000,000,

as

approved

by

Electrica’s

EGMS
resolution

no

1

of

28th

April

2021,

a

mortgage

on

the

present

and

future

receivables

of

Electrica,

resulting
from

the

intragroup

loan

agreements

that

will

be

concluded

with

its

subsidiaries

in

order

to

carry

out

the
inorganic

growth

transactions

granted

from

the

amounts

drawn

from

the

bridge

loan,

shall

be

constituted
as

a

guarantee

in

favour

of

the

banks,

subject

to

the

fulfilment

of

certain

conditions

detailed

in

the

bridge
loan

agreement,

this

being

to

be

constituted

for

a

maximum

value

that

will

not

exceed

the

total

ceiling

of

24

the previously approved guarantees, in the amount of RON 825,000,000.

■

#### Changes in the structure of ELSA’s Board of Directors (BoD) and its committees

At

the

beginning

of

2021,

the

composition

of

the

Board

of

Directors

was

as

follows:

Mrs.

Ramona

Ungur,

Mr.
Dragos

Andrei,

Mr.

Iulian

Cristian

Bosoanca,

Mr.

Bogdan

Iliescu,

Mr.

Gicu

Iorga,

Mr.

Radu

Mircea

Florescu

and
Mr.

Valentin

Radu.

On

22

April

2021,

the

Board

of

Directors

took

note

of

the

resignation

of

Mrs.

Ramona
Ungur as administrator of the Company.

Subsequently,

on

28

April

2021,

during

the

OGMS

meeting,

ELSA’s

shareholders

elected

the

following

BoD
members:

Mr.

Iulian

Cristian

Bosoanca,

Mr.

Gicu

Iorga,

Mr.

Ion-Cosmin

Petrescu,

Mr.

Adrian-Florin

Lotrean,
Mr. Radu Mircea Florescu, Mr. Dragos Valentin Neacsu and Mr. George Cristodorescu.

Regarding

the

position

of


#### Chairman of ELSA’s





#### BoD

,

it

was

occupied

by

Mr.

Iulian

Cristian

Bosoanca

being
elected

in

this

capacity

during

the

Board

meeting

of

15

December

2020

for

the

period

starting

from

1
st

January
2021

and

until

31

December

2021.

Subsequently,

as

result

of

the

change

of

the

BoD

structure,

during

the
meeting

of

6

May

2021,

Mr.

Iulian

Cristian

Bosoanca

was

re-elected

as

Chairman

of

the

Board

of

Directors
starting with 6 May 2021 and until 31 December 2021.

Regarding


#### the composition of ELSA’s






#### BoD consultative committees



,

it

underwent

changes

during

2021
by

the

decision

of

ELSA’s

BoD

dated

15

December

2020,

and

of

the

one

from

6

May

2021.

Thus,

as

of

31

of
December 2021, the composition of the consultative committees of ELSA’s BoD was the following:

▪
The Nomination and Remuneration Committee:

-
Mr.
Adrian-Florin Lotrean
– Chairman;

-
Mr. Radu Mircea Florescu – Member;

-
Mr. Ion Cosmin Petrescu – Member.

▪
The Audit and Risk Committee:

-
Ms.
Radu Mircea Florescu
– Chairman;

-
Mr.
Dragos-Valentin Neacsu
– Member;

-
Mr.
Iulian Cristian Bosoanca
– Member.

▪
The Strategy and Corporate Governance Committee:

-
Mr.
Gicu Iorga
– Chairman;

-
Mr.
George Cristodorescu
– Member;

-
Mr.
Adrian-Florin Lotrean
– Member.

In

accordance

with

the

decision

of

the

Board

of

Directors

of

15

December

2021,

the

composition

of

the
committees will remain the same during 2022.

#### Regarding ELSA’s executive management


during 2021, several changes occurred, as follows
:

▪
The

Board

of

Directors

approved

the

continuation

of

the

collaboration

with

Mrs.

Livioara

Șujdea

and
her

appointment

as

Chief

Distribution

Officer

(CDO),

starting

with

February

1
st
,

2021,

for

a

4

years
mandate.

▪
On

May

1
st
,

2021,

the

mandate

agreement

of

the

Chief

Corporate

Development

Officer,

Mrs.

Anamaria
Dana Acristini Georgescu,
has terminated, upon lapse of the mandate duration.

25

▪
During

the

meeting

held

on

September

22,

2021,

ELSA’s

Board

of

Directors

decided

the

appointment
of

Mr.

Stefan

Ionut

Pascu

as

Chief

Corporate

Development

Officer,

until

December

31,

2021.

During
the

meeting

held

on

December

22,

2021,

the

mandate

agreement

of

Mr.

Stefan

Ionut

Pascu

has
been extended until December 31, 2022.

▪
On

December

11,

2021,

the

mandate

agreement

of

the

Chief

Marketing

Officer,

Mrs.

Catalina

Popa,
has terminated, upon lapse of the mandate duration
.

▪
During

the

meeting

held

on

December

15,

2021,

ELSA’s

Board

of

Directors

revoked,

without

cause,
Mrs.

Bibiana

Constantin

from

the

position

of

Chief

Human

Resources

Officer,

starting

with

January
1
st
, 2022, December 31, 2021 being the last day of exercising the mandate agreement.

▪
During

the

meeting

held

on

December

15,

2021,

ELSA’s

Board

of

Directors

took

note

of

the

expiration
on

January

3
rd
,

2022

of

the

mandate

agreement

the

Company

and

the

Chief

Financial

Officer,

Mr.
Mihai Darie.

■

#### Other relevant events

#### During 2021

 the following main events took place:

•
Changes in the structure of shareholders within the subsidiaries of the Group

On

18

August

2021,

the

second

shareholder

was

introduced

within

DEER

and

SERV

(DEER

within

FISE
and

FISE

within

DEER)

in

compliance

with

the

assumed

term

by

the

Merger

Project

of

the

distribution
subsidiaries,

respectively

by

the

Merger

Project

of

energy

services

companies,

mergers

that

took

place
during the year 2020;

•
Amendments to the articles of association within the Group's subsidiaries

The

amendment

the

Article

of

Incorporation

of

SERV

by

reducing

down

to

3

the

number

of

members

for
SERV’s Board of Directors through EGMS of 30 December 2021.

•
Establishment of a new subsidiary of the Group

On

September

6,

2021,

a

new

legal

entity

is

established,

Electrica

Productie

Energie

S.A.,

organized

as

a
public

limited

company,

in

which

Electrica

SA

holds

a

percentage

of

99.9920%

of

the

share

capital

and
Electrica

Serv

S.A.

holds

a

percentage

of

0.0080%

of

the

share

capital.

The

object

of

the

activity

is

the
production

of

electricity

from

renewable

sources

through

the

acquisition

and

development

of

projects,
namely

the

operation

of

renewable

electricity

generation

parks,

combined

with

the

development

and
operation of independent storage solutions which they intend to develop in the near future.

•
Fitch Ratings

During

April

2021,

Electrica

has

received

confirmation

of

maintaining

the

corporate

rating

of

BBB
(Investment

Grade),

with

a

Negative

outlook,

from

the

rating

agency

Fitch

Ratings.

The

negative
perspective

is

imposed

by

the

rating

of

Romania

(BBB-

with

negative

perspective)

taking

into

account

that
Fitch

considers

that

the

rating

of

the

Company

must

be

limited

to

one

notch

above

that

of

the

Romanian
State,

its

main

shareholder.

Any

revision

of

the

Outlook

of

the

Romanian

sovereign

rating

back

to

Stable
would

result

in

a

similar

action

for

Electrica’s

rating.

In

Fitch

Ratings’

opinion,

the

BBB

rating

continues

to
reflect

Electrica

Group’s

solid

financial

profile,

adequate

liquidity,

low

gearing

level,

as

well

as

the

fact

that
the distribution segment dominates the Group’s activities.

Fitch

Ratings

also

viewed

as

positive

for

the

analysis

of

Electrica’s

credit

profile

the

consolidations

achieved

26

through

the

mergers

of

the

distribution

subsidiaries

and,

respectively,

of

the

energy

services

subsidiaries,
as

they

have

simplified

the

Group

structure

and

is

estimated

to

provide

costs

savings

and

an

improvement
of internal business processes.

Also,

in

the

rating

agency’s

opinion,

the

Group’s

business

profile

proved

to

be

solid,

resilient

to

the

COVID-
19

outbreak

and

related

economic

shock,

the

volumes

of

distributed

and

respectively

supplied

energy

in
2020

being

only

slightly

lower

than

in

2019,

while

the

investment

projects

in

the

distribution

area

were
unfolded according to the planning.

•
Investments in entities producing electricity from renewable sources

On

28

July

2021,

three

shares

sales

and

purchase

agreements

(“SPAs”)

were

signed

in

three

project
companies,

by

ELSA,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,

as

sellers,
having as main object of activity the production of energy from renewable sources, as follows:

-
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Crucea

Power

Park
SRL

for

an

estimated

total

price

of

EUR

8,470,000.

The

final

price

will

be

determined

by

adjusting
the

total

estimated

price

depending

on

the

production

capacity,

respectively

the

authorized
storage,

based

on

a

contractually

established

calculation

formula.

Crucea

Power

Park

SRL
develops

the

eolian

project

“Crucea

Est”,

with

a

designed

installed

capacity

of

121

MW

and

a
projected

electricity

storage

capacity

of

60

MWh

(15

MW

x

4h),

located

outside

the

Crucea
commune, Constanta county;

-
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Sunwind

Energy

SRL
for

a

total

estimated

price

of

EUR

1,485,000.

The

final

price

will

be

determined

by

adjusting

the
total

estimated

price

according

to

the

authorized

production

capacity,

based

on

a

contractually
established

calculation

formula.

Sunwind

Energy

SRL

is

developing

the

photovoltaic

project

"Satu
Mare 2" with a designed installed capacity of 27 MW, located near Satu Mare;

-
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

New

Trend

Energy
SRL

for

a

total

estimated

price

of

EUR

3,245,000.

The

final

price

will

be

determined

by

adjusting
the

total

estimated

price

according

to

the

authorized

production

capacity,

based

on

a

contractually
established

calculation

formula.

New

Trend

Energy

SRL

develops

the

photovoltaic

project

"Satu
Mare 3", with a designed capacity of 59 MW, located near Satu Mare.

On

7

December

2021,

Electrica

signed,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,
as

sellers,

a

shares

sales

and

purchase

agreement

(“SPAs”)

in

one

project

company

having

as

main

object

of
activity the production of energy from renewable sources.

The

SPA

concerns

the

acquisition

of

100%

of

the

shares

of

Foton

Power

Energy

S.R.L,

wholly

owned

by

the
sellers,

for

an

estimated

total

price

of

EUR

4,262,500.

The

final

price

will

be

determined

by

adjusting

the

total
estimated

price

depending

on

the

production

capacity,

respectively

the

authorized

storage,

based

on

a
contractually

established

calculation

formula.

Foton

Power

Energy

S.R.L.

develops

the

photovoltaic

project
“Bihor 1”, with a designed installed capacity of 77.5 MW, located near Oradea city.

The

SPAs

stipulate

the

acquisition

by

Electrica

of

the

shares

in

the

three

companies

and

the

payment

of

the
corresponding

price

in

four

stages;

in

the

first

stage,

when

signing

the

sale-purchase

agreements,

30%

of

the
share

capital

of

the

three

companies

will

be

acquired,

and

subsequently

the

rest

of

the

shares

will

be

acquired
depending on the development stage of the project and provided that the suspensive conditions are met.

27

•
Treasury matters

On

10

June

2021,

was

signed

the

Addendum

no.

1

to

the

Convention

no.

25/5

February

2020

concluded
by

ELSA

with

EFSA

on

Internal

Treasury,

by

which

the

amount

that

can

be

borrowed

by

EFSA

within

the
Convention is increased from up to RON 30 M to up to RON 180 M.

On

12

October

2021,

Electrica

concluded

with

DEER

an

Intragroup

Credit

Agreement,

valid

until

12
October

2029,

the

amount

that

can

be

borrowed

by

DEER

under

the

contract

being

up

to

RON
246,325,000.

On

22

October

2021,

was

signed

the

Addendum

no.

2

to

the

Convention

no.

25/5

February

2020

concluded
by

ELSA

with

EFSA

on

Internal

Treasury,

by

which

the

amount

that

can

be

borrowed

by

EFSA

within

the
Convention is increased from up to RON 180 M to up to RON 245 M.

■

#### IT&C activities

Using

the

strategic

advantage

obtained

in

2020

by

merging

the

IT&C

responsible

operational

entities

and
implementing

capabilities-based

departments

and

centers

of

excellence,

the

IT&C

organizations

of

Electrica
SA

and

its

subsidiaries

have

taken

over

the

needed

tasks

and

projects

to

further

consolidate

the

legal

merger
activities,

by

absorbtion.

In

turn,

there

were

triggered

projects

to

unify

the

system

and

data

used

by

each
merging

entities,

others

to

aligning

the

support

processes

and

preparing

the

expected

flexibility

to

exploit

the
economies of scale and scope. Hence, the following activities have been achieved:

➢
The

enrollments

into

the

National

Registry

of

Essential

Services

Operations

of

Distributie

Energie
Electrica Romania SA and Electrica Furnizare SA as Essential Services Operators.

➢
The

current

applications

(used

by

SDTN,

SDMN,

SDTS)

consolidation,

a

complex

process

involving

the
initial

evaluation

of

three

alternatives

in

use,

choosing

the

optimum

and

extend

its

utilization

to

the
other two operators.

➢
Merging

and

standardization

of

the

common

procurement

operations

for

IT&C

at

the

Group

level

in
order

to

cover

the

licensing

and

producer

support

needs

while

acquiring

the

expected

volume
discount.

➢
Preparation

of

the

projects

for

the

unification

of

complex

ERP

(Enterprise

Resource

Planning)

systems
at

DEER

(from

the

three

Distribution

Operators)

and

at

FISE

(from

the

two

Electrical

Services
organizations), in sync with the 2021 EFSA ERP system update.

➢
Maximize

the

existing

IT&C

resource

existing

in

Group

key

organizations,

DEER

and

EFSA,

in

order

to
implement digital solutions required to fulfill speed and flexibility expectations.

➢
The

IT&C

Governance

framework

alignment

in

order

to

respond

to

the

standardization

and

blending
the IT&C specific processes and projects.

■

#### Litigations

▪
On

3
rd

February

2021,

the

Bucharest

Court,

Civil

Section

VII,

confirmed

the

reorganization

plan

of

the
company

Transenergo

Com

S.A.

(Transenergo),

proposed

by

the

special

administrator

from

the

case

no.
1372/3/2017.

According

to

this

plan,

unsecured

creditors

will

not

benefit

from

any

distributions

of
amounts.

ELSA

holds

an

unsecured

receivable

in

amount

of

RON

37

M

composed

of

the

main

debit

of
RON

35.7

M

and

of

penalties

of

RON

1.3

M

calculated

until

the

date

of

insolvency

proceedings’

opening.
Since

ELSA

is

the

beneficiary

of

an

insurance

policy

in

amount

of

RON

4

M

having

as

object

the

guarantee
of

the

payment

obligations

of

Transenergo

resulting

from

the

BRP

Services

Agreement

no.

77/2005,

the

28

amount

of

RON

4

M

was

submitted

under

the

resolutive

condition

of

recovering

the

amounts

from

the
insurer.

ELSA

appealed

the

sentence

confirming

the

reorganization

plan,

appeal

that

was

the

object

of

file
no. 1372/3/2017/a35 of the Bucharest Court of Appeal.

On

23

June

2021,

the

court

definitely

rejected

the

appeal

filed

by

ELSA

against

the

decision

for

the
confirmation

of

the

reorganization

plan

of

Transenergo

Com

S.A.

no.

469/3

February

2021

issued

by
Bucharest Courthouse – Civil Section VII - in case no. 1372/3/2017.

Considering

that

the

exposure

registered

by

ELSA

in

relation

to

Transenergo

is

fully

provisioned,

this

file
resolution

has

no

negative

impact

on

the

company's

financial

results

for

2020

or

2021,

the

impact

being
recorded in the previous periods (2016 and 2017).

▪
By

the

conclusion

from

27

April

2021,

the

Bucharest

Courthouse

decided

to

suspend

the

trial

of

the

case
that

forms

the

object

of

file

no.

35729/3/2019

until

the

final

settlement

of

the

file

no.

2229/2/2017,
pending before the Bucharest Court of Appeal.

File

no.

35729/3/2019

has

as

object

the

patrimonial

liability

incurring

of

the

persons

who

have

held
positions

of

directors

and

respectively

of

executive

managers

of

ELSA,

for

not

fulfilled

and/or

improperly
fulfilled

obligations,

according

to

art.

155

of

Law

no.

31/1990,

which

determined

the

damages

retained
by

the

Romanian

Court

of

Accounts

by

Decision

no.

11/23

December

2016,

as

well

as

against

the
representative

of

the

Authority

of

Valuation

of

the

State

Assets

in

ELSA’s

OGMS

on

10

December

2008
and the issuer of the voting mandate for the respective OGMS.

▪
The

decision

no.

1368/18

December

2020

issued

in

retrial

of

case

no.

4804/2/2020

(former

no.
7341/2/2014)

of

the

Bucharest

Court

of

Appeal

by

which

it

dismissed

the

action

and

the

ancilary
intervention

requests

as

unfounded,

became

final

by

non-appealing

it

by

Fondul

Proprietatea.

The

object
of

the

case

is

Fondul

Proprietatea’s

request

for

the

cancellation

of

art.

I,

points

2,

3,

8,

9

and

10

of

ANRE
Order

no.

112/2014

for

amending

and

completing

the

Methodology

for

setting

the

electricity

distribution
service

tariffs,

approved

by

ANRE

Order

no.

72/2013.

ELSA

and

DEER

are

accessory

intervenients

in

the
case.

▪
On

18

October

2021,

the

Company,

as

Defendant,

has

received

a

statement

of

claim

of

Mrs.

Augusta
Romana

Alexandra

Borislavschi

Popescu,

who

was

Chief

of

Corporate

Governance

&

M&A

for

a

period

of
4 years, by which the plaintiff requests:

1.
Obligation

of

the

defendant

to

pay

to

the

plaintiff

the

amount

of

RON

166,738,

representing

the
percentage

of

55%

of

the

OAVT

package,

in

accordance

with

the

provisions

of

Annex

3

to

the

mandate
contract no. 42/10.08.2015;

2.
Obligation

of

the

defendant

to

pay

to

the

plaintiff

damages

for

non-execution

of

the

obligation

to

pay
the percentage of 55% of the OAVT package;

3.
Obligation

of

the

defendant

to

pay

the

amount

of

RON

11,973,

representing

the

annual

variable
remuneration for 2018;

4.
Obligation

of

the

defendant

to

pay

the

amount

of

RON

24,756,

representing

the

annual

variable
remuneration related to 2019;

5.
Updating

the

amounts

provided

in

the

previous

items,

with

penalizing

legal

interest.

The

asked
damages

should

be

calculated

as

the

legal

penalty

interest

plus

8%

payable

per

each

day

of

delay

as
of

the

date

of

the

registration

of

the

claim

until

the

payment

of

the

55%

of

OAVT

package

by

the

29

defendant.

6.
Obligation of the defendant to pay the expenses incurred by the request for arbitration.

The

case

was

registered

before

the

Vienna

International

Arbitral

Centre,

under

no.

ARB-5670

Borislavschi
(RO) vs Energetica Electrica (RO).

▪
In

case

no.

35647/3/2019,

on

13

December

2021,

Bucharest

Court

of

Appeal

rejected

as

unfounded

the
appeal

filed

by

Electrica

Furnizare

S.A.

(EFSA)

against

the

decision

pronounced

by

the

Bucharest

Court,
maintaining

as

legal

and

valid

the

sentence

pronounced

by

the

Bucharest

Court.

The

Decision

is

not

final,
it can be appealed within 30 days from the communication.

In

this

file

Societatea

Energetica

Electrica

S.A.

(Electrica)

has

the

legal

quality

of

being

called

in

warranty.

We

mention

that

Bucharest

Court

admitted

the

exceptions

of

limitation

periods

regarding

the

claim

filed
by

EFSA

and

consequently

rejected

as

devoid

of

purpose

the

warranty

claims

filed

by

Mircea

Patrascoiu,
Anca

Dobrica

and

Victoria

Lupu

in

file

no.

35647/3/2019

having

as

object

the

underscoring

of

the

liability
of

the

members

of

the

Board

of

Directors

and

the

Chief

Executive

Officer

of

EFSA,

claim

submitted

by

the
company

concerned,

following

the

damages

ascertained

by

the

Court

of

Accounts

of

Romania

in

the
Decision no. 11/23 December 2016 and in the Control Report no. 5799/29 November 2016.

■

#### Policies in force

On

7

May

2021,

Electrica

published

on

the

company’s

website,

in

the

section

Investors

->

Corporate
Governance

->

Corporate

policies

and

other

documents
,

the

updated

form

of

the

Remuneration

Policy

for
Directors and Executive Managers, following its approval within the OGMS dated 28 April 2021.

■

#### Measures adopted in COVID-19 context

In

the

context

of

the

crisis

generated

by

the

COVID-19

pandemic,

ELSA’s

representatives

communicated

with
stakeholders,

mostly

internally,

announcements

being

released

in

order

to

present

the

measures

taken

by

the
Group companies and COVID-19’s impact on activity.

In

the

fight

against

COVID-19

pandemic,

ELSA

has

adopted

all

the

necessary

measures

so

that

the


#### activity of the companies within the Group to continue to be carried out under conditions as close to normal as posible



















.

Ever

since

the

beginning

of

the

crisis,

the

resilience

plan

in

force

at

Group

level

was
constantly

updated

to

respond

to

the

pandemic

context

and

legal

framework

evolutions.

Essential

activities
and

critical

roles

have

been

identified,

staff

backup

has

been

insured

and

the

action

scenarios

on

escalation
levels

depending

on

the

situation

evolution

from

the

external

environment

of

the

company

have

been
redefined,

in

order

to

ensure

the

smooth

running

of

the

operations

and

the

continuity

in

the

electricity

supply,
as well as for the protection of the Group customers, employees and partners.

#### During accelerated growth and peaks periods of the pandemic, the activities that involve interaction with clients
















and/or

access

to

consumers’

homes

had

been

limited

and

the

scheduled

works

had
been

reprioritized,

in

order

for

the

scheduled

interruptions

in

the

electricity

supply

to

be

diminished.


#### EFSA’s customers had been encouraged to use digital instruments









(MyElectrica,

website,

digital

invoice)


#### offered or methods of mediated interaction







(by

e-mail,

by

telephone)

in

order

to

solve

the

various
requests, using also online payment methods (MyElectrica account, internet banking and mobile banking).

In

order

to

limit

the

spread

of

COVID-19

and


#### to protect the employees




,

firstly

for

the

frontline

ones,

various
measures

have

been

implemented,

such

as:

providing

medical

protection

devices

and

hygienic-sanitary

30

materials,

creation

of

a

rotation

system

to

minimize

meetings

between

teams,

work-from-home

–

where
feasible,

limiting

or

temporarily

suspending

access

to

certain

locations,

including

customer

relations

centers,
and

redirecting

communication

and

correspondence

to

alternative

electronic

channels,

disinfection

performed
in locations in the case of occurrence etc.

#### Social distancing measures have been recommended to the shareholders









,

who

have

been

guided

to
use electronic means/remote interaction for solving any requests regarding the activity of Electrica Group.

Regarding

the


#### electricity and natural gas supply segment






,

the

cash

collection

activities

through

own
cashiers,

the

activities

of

the

customer

relations

centers,

as

well

as

the

field

activities

for

B2B

customers
(Business-to-Business)

were

carried

out

in

strict

compliance

with

the

protection

measures

(use

of

the

mask,
distance,

limitation

of

the

number

of

people

present

in

the

premises)

and

with

the

monthly

assessment

of

the
situation

according

to

the

evolution

of

the

context

at

national/regional

level,

for

offering

all

services

in

safe
conditions.

#### The action plans of the distribution operators








consider

keeping

the

general

preventive

measures

for
their

own

staff,

users

and

collaborators,

as

well

as

the

organizational

measures

to

ensure

safe

management
and

operation

of

the

network

infrastructure,

at

a

superior

quality

level

for

the

electricity

distribution

service.
The

delays

in


#### investments and maintenance works




,

including

those

requiring

consumers’

interruption,

in
compliance with the Performance Standard for the distribution service, have been recovered.

The

management

permanently

monitors


#### the financial performance and liquidity of the Group companies









on

several

tiers,

in

order

to

ensure

the

availability

of

the

necessary

funds

for

carrying

out

the
activity,

by

analyzing

with

priority

the

cash

flow,

including

the

impact

that

the

legislative

changes

may

have
on

the

Group’s

activities.

The

aim

is

to

secure

the

receivables

collection

from

customers,

to

use

the

banking
structures

for

liquidity

concentration

(“cash-pooling”)

implemented

last

year,

as

well

as

the

available

financing
for the companies within the Group.

#### Distribution segment

At

the

end

of

2020,

Electrica

has

successfully

completed

the

merger

of

the

three

electricity

distribution
companies

within

the

Group.

Starting

with

1
st

January

2021,

the

new

company

Distributie

Energie

Electrica
Romania

S.A.

(DEER)

becomes

the

most

important

electricity

distribution

operator

at

national

level,

with

a
coverage of 40.7% of the Romanian territory, which serves over 3.8 million network users.

By

implementing

the

merger,

medium

and

long-term

benefits

could

be

obtained

for

all

stakeholders.The
current priorities for the distribution segment are:

▪
cost efficiency;

▪
accelerating the main business processes digitization;

▪
orientation towards the smart grid concept by promoting on a large scale the smart metering;

▪
operational performance

improving;

▪
distribution service quality increasing;

▪
distribution network losses reduction.

During

2021,

the

new

company

Distributie

Energie

Electrica

Romania

S.A.

(DEER),

created

by

the

merger

of
the

three

electricity

distribution

companies

within

the

Group,

started

the

implementation

of

a

multi-annual
legal

post-merger

integration

program,

having

as

objectives

the

continuous

improvement

in

the

operational
area

and

building

a

performance

based

culture

within

the

Electrica

Group,

in

a

customer-centric

paradigm,
keeping

costs

under

control.

The

long-term

goal

of

the

management

team

is

a

corporate

cultural
transformation

of

the

organization,

focused

on

efficiency

and

performance,

so

as

to

ensure

the

sustainability
of the business.

31

In this approach, efforts to maximize efficiency potential focus on three relevant areas:

1. an unified organizational structure and efficiency of support activities;

2.

the

optimization

of

imbalances

and

the

cost

of

purchasing

electricity

to

cover

losses

in

distribution

networks;

3. the optimization of the function of Information and Communication Technology and related components.

■

#### Distribution activity

#### ANRE


has

issued

documents

for

the

regulatory

framework

that

requires

additional

efforts

from

distribution
operators in order to comply with the new requirements:

a) Regulations regarding tariffs:

▪

#### The distribution tariffs approved for 2022







were

approved

by


#### ANRE



#### Order no.



119/24


#### November

2021,

the

regional

average

tariffs

for

DEER

having

the

following

increase

compared

to

the

2021

tariffs:
MN +8.1%; TN +10.4%; TS +7.4%.

-

▪

#### The distribution tariffs approved for 2022








ANRE

approved

the


#### Order no.



3/20


#### January


2021

regarding

the

amendment

of

the

Methodology

for

distribution

tariffs

setting

approved

by

ANRE

Order

no.
169/18 September 2018:

-
granting

a

2%

additional

incentive

to

RRR

for

investments

in

the

electrical

distribution

network

made
with

own

funds

within

projects

in

which

European

non-reimbursable

funds

were

also

attracted,

if

the
investments were made and put into operation by operators after 1
st
 February 2021;

-
if

for

certain

assets

categories,

the

primary

legislation

establishes

other

regulated

depreciation

periods
than

those

provided

by

the

Methodology

or

by

the

Catalogue

for

the

classification

and

normal

useful
lives

of

fixed

assets,

approved

by

Government

decision,

the

annual

regulated

depreciation

related

to
those

fixed

assets

is

calculated

based

on

the

regulated

depreciation

periods

established

by

the

primary
legislation.

▪
ANRE

approved

the


#### Order no.



101/30.09.2021

for

the

modification

and

completion

of

the

Methodology
for establishing the tariffs for the distribution service - in force since October 1
st
, 2021:

▪
Network losses price:



(i)

ANRE

has

the

right

to

correct

the

projection

of

distribution

tariffs

for

a
regulatory

period

or

for

one

year,

if

it

finds

that

there

have

been

significant

variations

in

prices

on

the
electricity

market,

which

lead

to

a

significant

change

in

distribution

service

costs;

(ii)

at

the

justified
request

of

the

DO,

the

regulated

income

of

year

t+1

may

include

a

cost

adjustment

with

regulated
network

losses

forecast

for

year

t+1,

by

changing

the

reference

price,

depending

on

the

evolution

of
prices

on

the

electricity

market

and

the

result

of

the

analysis

on

the

evolution

of

tariffs

for

the

current
regulatory period.

▪

#### Personnel costs



-

at

the

request

of

the

DO

accompanied

by

supporting

documents,

ANRE

may

accept
in

the

regulated

income

for

year

t+1

a

variation

of

the

personnel

costs

approved

for

year

t+1,
generated

by

the

appearance

of

unforeseen

conditions

during

the

substantiation

and

approval

of

the
forecast. costs.

▪

#### Destination of non-household consumption place






-

DO

are

obliged

to

find

non-compliance

with
the

obligation

of

non-household

users

to

keep

the

destination

of

a

place

of

consumption,

and

in

this
case

users

are

obliged

to

return

the

value

of

design

and

execution

works

paid

by

DO,

and

DO

excludes
fixed assets from RAB.

▪

#### Connection workings done by users






-

Fixed

assets

made

in

year

t

of

the

connection

workings

paid

32

by

users

are

not

included

in

the

RAB,

but

they

are

recognized

in

the

regulated

income

for

year

t+1,
by including one fifth of the refundable value.

▪
the

accounting

depreciation

of

the

fixed

assets

that

are

not

part

of

the

RAB

and

that

were

financed
from

own

resources

and

for

which

the

DO

has

assigned

the

use

to

a

third

party,

is

taken

into

account
to gross profit computation from other unregulated activities.

#### b) Investments Procedure

▪
ANRE Order no. 19/16 March 2021
- in force since
 19 March 2021:

-
the

amendment

considers

the

establishment

of

the

DSO

obligation

to

carry

out

the

connection
workings to the final customers,

#### additionally to the annual investment plan

.

#### c) Licenses

▪

#### ANRE



#### Order no.




#### 115/2021 for amendment and completion






The Regulation for granting licenses and authorizations for the electricity sector










approved

by

ANRE

Order

no.

12/2015

-

in
force since
2
nd
 of December 2021:

▪
DSOs have the obligation to send to ANRE:

▪
until

December

31,

2021

-

information

on

power

lines,

power

stations

and

medium

and

high

voltage
substations (technical data according to ANRE Order no. 181/2019);

▪
until

December

31,

2022

-

information

on

medium

and

high

voltage

power

lines,

according

to

ANRE
Order no. 115/2021 - including economic attributes;

▪
until

December

31,

2023

-

all

the

information

regarding

the

LV,

according

to

the

ANRE

Order

no.
115/2021 - including the economic attributes.

▪
Starting

with

01.01.2022,

enters

into

force

the

new

scheme

published

on

the

ANRE

website

regarding

the
GIS

information

in

the

national

stereographic

coordinate

system

1970,

which

has

attached

as

attributes
to

the

spatial

data

requested

within

the

GIS

application,

a

set

of

associated

data

to

presented

spatial

data,
which

includes

the

fixed

asset

number

and

value

for

the

electrical

transmission/distribution

network
components,

necessary

for

ANRE

to

verify

the

fixed

assets

made

by

the

licensees

in

order

to

recognize
them in RAB

d) Smart metering regulations (SM):

▪

#### ANRE approved




#### Order no.



94

/


#### 18.08.2021 for the amendment and completion of the Framework










#### Conditions for the realization of the implementation calendar of the intelligent electricity measurement systems at
















#### national level approved by ANRE







#### Order no.



177/2018


#### - in force since January 1

st
, 2022

▪
The

value

of

the

indicator

"Annual

average

of

the

daily

success

rates

of

data

transmission

from

meter
to

HES

/

MDMS"

of

at

least

80%.

The

indicator

taken

into

account

is

calculated

annually

on

each
transformation

station

in

the

areas

where

the

SMI

has

been

implemented.

In

case

of

non-fulfillment
of

this

condition,

ANRE

proceeds

to

the

non-recognition

of

the

depreciation

costs

and

profitability
corresponding

to

the

equipment

that

ensures

the

transmission

of

the

data

related

to

the

respective
transformation stations, for the respective year.

▪
The

DOs

have

the

obligation

to

fulfill

the

annual

targets

provided

in

the

implementation

schedule

of
the

SMI

at

national

approved

level,

in

proportion

of

at

least

90%

regarding

the

total

number

of

users
provided for integration, respecting all the areas planned for integration in that period.

▪
The

invoicing

of

the

distribution

service

to

be

performed

based

on

the

measurement

data

registered
by

SMI

for

the

users

whose

consumption

/

production

and

consumption

places

are

integrated

in

SMI.

33

▪
The

installation

of

meters

that

can

be

integrated

in

the

SMI

when

connecting

new

users

should

be
done

only

for

consumption

/

production

and

consumption

places

located

in

areas

where

the
implementation of the SMI is scheduled in the next 5 years.

#### e) Technical regulations

#### Network connection

▪
ANRE approved the orders regarding the connection activity:

▪

#### ANRE



#### Order no.



16/10


#### March


2021

-

amendment

of

the

Regulation

on

connecting

users

to

electricity
networks of public interest
 (ANRE Order no. 59/2013) - in force since 16 March 2021:

▪
the

introduction

of

provisions

regarding

reinforcement

works

-

the

introduction

of

the

DSO’s

obligation
to recalculate the value of the connection tariff component;

▪
elimination

of

the

ANRE

endorsement

of

the

procedures

regarding

the

users’

connection

to

the
network;

▪
clarification

of

the

termination

circumstances

of

the

effects

of

the

framework

convention

for

the
handing over of user-financed connection facilities in their ownership.

▪

#### ANRE



#### Order no.



17/10


#### March


2021

-

The

procedure

regarding

the

connection

to

the

electricity
networks

of

public

interest

of

the

consumption

places

belonging

to

the

non-household

final

customers
type

users

through

connection

installations

with

lengths

up

to

2,500

meters

and

household

customers

-
revision of ANRE Order no. 183/2020 - in force since 16 March 2021:

-
the

inclusion

of

household

customers

in

the

category

of

those

for

which

the

DSO

have

the

obligation
to finance and carry out the design and execution works of the connection installation;

-
the

possibility

for

household

and

non-household

customers

to

conclude

the

agreement

for

the
connection

installation

design

and

execution

directly

with

a

certified

economic

operator

chosen

by
them;

-
the

application

of

the

procedure

also

for

the

consumption

places

with

storage

facilities

or

consumption
and

production

places,

with

or

without

storage

facilities,

provided

with

installations

for

the

production
of electricity from renewable sources (prosumers);

-
applies to:

a.
household

users

who

have

submitted

connection

requests

to

the

concessionaire

distribution
operators after 19 December 2020;

b.
to

non-household

final

customers

type

users,

who

submitted

connection

requests

to

the
concessionaire distribution operators after 30 July 2020.

▪

#### ANRE



#### Order no.



45/2021

-

amendment

of

the

Regulation

on

connecting

users

to

electricity

networks
of public interest
 - in force since 23 June 2021:

-
Elimination

of

the

user's

obligation

to

send

to

the

network

operator

(NO),

through

the

documentation
attached

to

the

connection

request,

the

approved

zonal

urban

plan

(„PUZ”)

or

the

approved

detailed
urban plan („PUD”), if it was requested by the urbanism certificate;

▪

#### ANRE



#### Order no.



53/2021

for

the

approval

of

the

Methodology

for

evaluating

the

financing

conditions
of

the

investments

for

the

localities’

electrification

or

for

the

electricity

distribution

networks’

extension
approved by ANRE Order no. 36/2019 - in force since 28 June 2021:

-
also

applicable

if

an

association

of

public

authorities

requests

the

DSO

to

develop

the

electricity

34

network of public interest in order to connect based on regional development and urbanism plans;

-
the

definition

of

electricity

distribution

networks’

extensions

has

been

modified,

by

eliminating

the
phrase “urban” from its content;

-
for

the

situation

in

which

the

public

authority/user/group

of

users

decides

to

fully

finance

the
investment,

it

was

explicitly

introduced,

besides

the

term

for

returning

the

operators’

co-financing
quota,

also

the

term

for

taking

over

by

the

network

operator

the

elements

related

to

the

returned
quota.

It

is

mentioned

that

this

completion

is

an

explanation

because

the

restitution

of

the

quota

is
done simultaneously with the takeover;

-
clarifications

were

made

regarding

the

value

of

the

quota

returned

to

the

public

authority/user/group
of

users,

in

case

they

decide

to

fully

finance

the

investment,

by

establishing

the

quota

based

on

the
minimum

between

the

value

of

works

according

to

the

DSO

offer

and

the

value

of

works

specified

in
the reception documents for the works’ commissioning;

-
for

the

situation

in

which

the

public

authority/user/group

of

users

decides

to

fully

finance

the
investment,

it

was

specified

that

the

technical

project

and

the

request

for

proposal

are

carried

out

by
them, with an economic operator certified by ANRE;

-
based

on

the

technical

project

and

the

specifications,

the

public

authority/user/group

of

users

carries
out

the

works

regarding

the

development

of

the

electricity

distribution

network

for

electrifying

the
localities

or

for

extending

the

electricity

distribution

networks

with

an

economic

operator

certified

by
ANRE.

▪

#### ANRE



#### Order no.



85/2021

-

Order

for

the

amendment

and

completion

of

ANRE

Order

no.

74/2014

for
the

approval

of

the

Framework

Content

of

the

technical

connection

approvals

(TCA)

-

in

force

from

6

July
2021:

▪
the

elimination

of

the

DSO’s

obligation

to

send

to

ANRE

reports

regarding

the

users'

appeals

regarding
the issuance of TCA.

▪

#### ANRE



#### Order no.



137/2021



#### Order for the approval of the Procedure regarding the determination of the available capacity in the electrical networks



















#### for the connection of new installations of electricity production - in force starting with 1





st
 of March 2022:

-
rules

for

determining

the

capacity

available

in

the

electrical

transmission

network/electrical

distribution
network at the 110 kV voltage level;

-
rules for the data publication regarding available capacities;

-
deadlines

and

frequency

of

data

publication

regarding

available

capacities

by

network

operators:
monthly starting with 1
st
 of April 2022; twice a month starting with 1
st
 of July 2022.

#### Prosumers

▪

#### ANRE



#### Order no.



15/10


#### March


2021

-

Procedure

regarding

the

connection

to

the

electricity

networks
of

public

interest

of

the

consumption

and

production

places

belonging

to

the

prosumers

who

have
installations

for

electricity

production

from

renewable

sources

with

the

installed

power

of

at

most

100
kW/consumption place
 - in force since 16 March 2021:

▪
considering

the

legislative

amendments

brought

by

Law

no.

290/2020,

in

force

since

19

December
2020,

it

was

necessary

to

revise

the

previously

proposed

form

regarding

the

DSO's

obligations

to
finance

and

realize

the

design

and

execution

works

of

the

connection

installations

for

non-household
final

customers,

through

connection

installations

with

lengths

up

to

2,500

meters

and

the

design

and
execution of connection installations for household customers.

35

▪

#### ANRE



#### Order no.



50/2021

for

the

approval

of

the

trading

rules

for

the

electricity

produced

in

power
plants

from

renewable

sources

with

installed

power

of

up

to

100

kW

belonging

to

prosumers

-

in

force
since 1 July 2021:

-
repeals the ANRE Order no. 226/2018;

-
revised

as

a

result

of

the

amendments

brought

by

Law

nr.

155/2020

and

Ministry

of

the

Environment,
Waters

and

Forests

Order

no.

121/2021

amending

the

Financing

Guide

of

the

Program

regarding

the
installation

of

photovoltaic

panel

systems

for

electricity

production,

in

order

to

cover

the

necessary
consumption

and

the

surplus

delivery

in

the

national

network,

approved

by

Ministry

of

Environment
Order no. 1287/2018;

▪
elimination

of

the

reporting

models

from

Appendices

1

and

2

of

the

ANRE

Order

no.

226/2018,

with

their
full takeover in the draft revision order of ANRE Order no. 195/2019.

▪

#### ANRE



#### Order no.



52/2021

for

the

approval

of

the

Methodology

for

monitoring

the

system

for

promoting
the electricity from renewable energy sources production (RES)
 –
in force since 1
st
 July 2021:

-
repeals the ANRE Order no. 195/2019;

-
systematization

of

data

collection

by

integrating

the

information

and

data

contained

in

the

regulations
in the field of electricity promotion in RES;

-
completing

the

data

necessary

to

be

collected

for

the

monitoring

of

the

promotion

system

for

the
electricity

produced

in

RES

power

plants

with

installed

electrical

power

of

at

most

100

kW

belonging
to prosumers, through a dedicated software interface directly on the ANRE website;

-
introduces

the

DSO

obligation

to

publish

on

their

website,

on

a

monthly

basis,

information

on

the
prosumers connected to the electricity grid;

-
introduces

the

obligation

of

the

DSO

and

TSO,

as

appropriate,

to

publish

on

their

website,

on

a

monthly
basis,

the

information

on

technical

connection

approvals,

connection

contract

and

connection
certificates

issued

in

the

previous

month

for

power

plants

belonging

to

the

producers

of

electricity

from
renewable energy sources (E-RES) and prosumers.

#### Distribution service performance standard

▪

#### ANRE



#### Order no.



46/15


#### June


2021

for

the

approval

of

the

Distribution

Service

Performance

Standard

- in force since 1
st
 July 2021:

-
the

standard

imposes

additional

obligations

for

the

DSOs,

and

in

order

to

fulfill

them,

additional
investments and the increase of operating expenses will be necessary;

-
the

obligation

of

the

DSO

to

monitor

the

short

interruptions,

and

to

grant

compensations

for

non-
compliance

with

the

imposed

thresholds:

HV=300

RON

(>10

interruption/year),

MV

=10

RON

(>10
interruption/week), LV=5 RON (>10 interruption/week);

-
the

obligation

to

comply

with

the

90

day

deadline

for

commisioning

a

connection,

including

the
reception

and

commissioning

of

the

connection

installation,

the

compensation

for

non-compliance
being 100 RON;

-
the

obligation

of

the

DSO

to

ensure,

starting

with

1

January

2022,

reduced

voltage

deviations

for

LV
level

(from

+10%

to

+5%

of

the

nominal

voltage

value,

monitored

weekly),

the

compensations

being
for

legal

entities:

HV

-

270

RON,

MV

and

LV

-

130

RON

(for

each

monitoring

period),

and

for

individuals:
HV - 270 RON, MV and LV - 70 RON (for each monitoring period);

-
setting

an

implementation

calendar

for

the

quality

analyzers,

so

that

100%

of

the

power

stations

will
be

monitored

with

the

help

of

this

equipment

until

the

end

of

2026,

respectively

100%

of

the
transformation

stations

until

1
st

January

2028.

This

implementation

program

is

correlated

with

the
provisions of the SM implementation schedule;

-
setting

intervals

for

the

reception

of

telephone

calls

made

by

network

users

through

the

call

centers

36

managed by distribution operators, namely:

a)

maximum

30

seconds

from

the

call

initiation

by

the

user

until

it

is

taken

over,

without

the
intervention of the human operator;

b)

maximum

180

seconds

from

receiving

the

call

for

the

user

to

be

able

to

select

the

option

to

transfer
the call to a human operator;

c)

maximum

20

minutes

from

taking

over

the

call

to

start

the

user's

conversation

with

a

human
operator.

#### Commercial Regulations

▪

#### ANRE



#### Order no.



25/2021

regarding

the

amendment

of

the

Framework

Contract

for

the

distribution
service
 - in force since 1
st
 July 2021:

-
in

the

process

of

changing

the

supplier,

for

the

small

household

and

non-household

customers,

the
measurement

group

index

reading

for

settlement

related

to

a

consumption

place

is

performed

by

the
DSO, if the final customer does not send the self-read index;

-
the

DSO

has

the

obligation

to

inform

the

supplier

about

the

change

of

the

measuring

group

reading
period at least 60 days before the change date;

-
within

maximum

two

months

from

the

entry

into

force

of

this

order,

the

DSO

and

the

electricity
suppliers

update

the

electricity

distribution

service

contracts

according

to

the

provisions

of

the
framework

contract

from

the

Appendix

no.

1

to

the

ANRE

Order

no.

90/2015,

with

subsequent
amendments and completions;

▪

#### ANRE



#### Order no.



82/2021

for

the

amendment

and

completion

of

the

Regulation

for

the

supply

of
electricity

to

final

customers
,

approved

by

ANRE

Order

no.

235/2019

and

the

repeal

of

ANRE

Order

no.
130/2015

regarding

the

approval

of

the

Procedure

regarding

the

electricity

supply

of

the

DSO

own
consumption

places

–

in

force

from

1
st

July

2021

(except

for

the

provisions

of

art.

I

points

25-27,

33

and
34 which enter into force on 1
st
 January 2022):

-
in

case

of

the

electricity

supplier

change,

the

customers

can

communicate

to

the

new

supplier

the

self-
read

index

at

the

date

of

sending

the

change

of

supplier

notification;

the

supplier

has

the

obligation
to

take

over

and

send

to

the

DSO

the

index

self-read

by

the

final

customer;

the

self-read

index

is

taken
into

account

by

the

DSO

when

setting

the

electricity

consumption

in

the

process

of

changing

the
supplier;

-
if

the

final

customer

does

not

send

the

self-read

index,

the

DSO

has

the

obligation

to

read

the

index
of

the

measuring

equipment

in

the

period

between

the

date

of

sending

the

supplier

change

notification
and the date of the actual change of the supplier;

-
the

DSO

has

the

obligation

to

create

and

maintain

in

the

database,

for

each

consumption

place,

for
each

month

from

the

period

January

-

December,

information

on

the

estimated

active

electricity
consumption,

established

as

appropriate,

based

on:

(i)

consumption

of

electricity

recorded

at

the
consumption

place

in

the

similar

period

of

the

previous

year

or

of

the

determined

electricity
consumption

taking

into

account

the

most

recent

readings

made

by

the

DSO;

(ii)

the

specific
consumption

profile,

determined

by

the

DSO

for

the

respective

category

of

final

customer

if

there

is
no consumption history for the place of consumption.

-
the

DSO

has

the

obligation

to

allow

free

access

to

all

electricity

suppliers

to

the

data

in

the

database
and to inform them on how to access the data;

-

#### until


1
st


#### November


2021
,

the

DSOs

have

the

obligation

to

make

available

to

the

electricity

suppliers
the

consumption

data

provided

in

the

order

and

to

publish

on

its

own

web

pages

information

regarding
the way of accessing these data;

-

#### starting with 1



st


#### January


2022
,

in

the

case

of

consumption

places

for

which

consumer

agreements

37

are

concluded,

the

distribution

service

invoicing

will

be

performed

by

the

DSO,

based

on

these
agreements,

if

there

is

no

index

for

these

consumption

places

read

by

the

DSO

or

by

the

end

customer.

#### Compliance Regulation

▪

#### ANRE approved




#### Order no.



97

/

08.09.2021

approving

the

Regulation

on

establishing

the

compliance
program

and

designating

the

compliance

agent

by

the

electricity

/

natural

gas

distribution

operators

and
by

the

natural

gas

storage

operators

that

are

part

of

a

vertically

integrated

economic

operator

effective

#### January 1

st
, 2022
:

▪
designating

the

approval

and

activity

of

the

compliance

agents

-

DO

will

send

to

ANRE

the

nominations
of

the

compliance

agent

until

1
st

of

November

2021,

conditions:

(i)

at

least

3

years

before

the

date

of
designation

as

compliance

agent

and

for

the

entire

period

in

which

a

compliance

agent

is

appointed,
not

to

have

held

/

not

to

hold

any

professional

position

or

responsibility,

interest

or

business
relationship,

of

direct

or

indirect

order,

with

the

vertically

integrated

economic

operator

or

with

any
part thereof; (ii) have at least 5 years of experience in the field of electricity / natural gas;

▪
the

manner

of

elaboration

and

the

content

of

the

compliance

programs

drawn

up

by

the

DO

for
electricity / natural gas, respectively for the storage of natural gas;

▪
implementation

of

the

measures

provided

in

the

compliance

program

and

monitoring

the

application
of the compliance programs, respectively of the measures therein;

f) Primary legislation:

▪
On

24

July

2020,

the


#### Law no.



155/24


#### July


2020

was

approved

for

amending

and

completing

Law

no.
123/10 July 2012
:

▪
DSO

has

the

obligation

to

ensure

the

financing

and

the

realization

in

90

days

of

the

non-household
customers’ connections, having a length lower than 2,500 m;

▪
On

19

December

2020,

the


#### Law no.



290/15


#### December


2020

entered

into

force

for

the

amendment
and completion of Law 123/10 July 2012
:

▪
The

DSO

obligation

to

finance

the

connection

workings

of

the

household

customers

and

the
recovery

of

the

connection

costs

through

the

distribution

tariffs,

with

a

depreciation

period

of

5
years, in accordance with ANRE regulations.

▪

#### Energy law no.




123/2012

-

amended

by

Government

Emergency

Ordinance

“

#### GEO” no.



143/2021

-
in force starting with 31 of December 2021

▪
new

attributions

of

Ministry

of

Energy:

approves

the

development

plans

of

TSO

and

DOs

from

the
point

of

view

of

ensuring

the

concordance

with

the

provisions

of

the

energy

strategy

and

PNIESC
2021-2030; approves the reliability standard.

▪
Directly

negotiated

bilateral

transactions

can

be

concluded

on

the

wholesale

market

in

all

time
intervals;

▪
In

the

case

of

the

final

household

customer,

in

order

to

issue

the

regularization

invoice,

the

DO
has

the

obligation

to

ensure

the

reading

of

the

index

of

the

measuring

group

at

a

time

interval

of
maximum 3 months.

▪
Each

DO

acts

as

a

neutral

market

facilitator

in

electricity

acquisition

to

cover

NL,

in

accordance
with

transparent,

non-discriminatory,

and

market-based

procedures,

in

consideration

of

ANRE

38

regulations.

▪

#### household connections



-

In

the

case

of

household

customers,

when

commissioning

the
connection

workings,

DO

will

reimburse

the

applicant

the

effective

value

of

the

connection

design
and

execution

works,

up

to

an

average

value

of

a

connection,

established

according

to

a
methodology approved by ANRE. The assets resulting from the connection workings become the
property

of

the

distribution

operator

from

the

moment

of

commissioning,

through

the

effect

of
this

law,

at

the

value

reimbursed

to

the

household

customer,

being

recognized

by

ANRE

as

part
of the regulated assets base.

▪

#### non-household connections



-

In

the

case

of

non-household

customers,

the

value

of

the
connection

workings,

including

those

for

the

design

of

the

connection

/

connection

made,

is

fully
financed

by

them.

The

assets

resulting

from

the

connection

workings

enter

the

patrimony

of

the
distribution

operator

from

the

moment

of

commissioning,

through

the

effect

of

the

present

law,
without

being

recognized

by

ANRE

as

part

of

the

base

of

the

regulated

assets.

-in

case

the

final
customers

do

not

have

SMI,

OD

provides

them

with

individual

conventional

meters

that

accurately
measure

their

real

consumption.

OD

ensures

that

end

customers

have

the

ability

to

easily

read
their

conventional

meters,

either

directly

or

indirectly,

through

an

online

interface

or

another
appropriate interface that does not involve physical connection to the meter.

▪
GEO no. 84/2021
 - in force starting with August 6, 2021

▪
Repeals

the

provision

of

art.

72,

paragraph

(1)

from

GEO

nr.

70/2020,

according

to

which

DOs

and
TSO ensure the continuity of electricity supply in the alert state

The

cessation

of

the

provision

of

services

corresponding

to

the

non-payment

of

outstanding

debts
cannot be achieved earlier than 90 days from the entry into force of GEO no. 84/2021.

▪

#### Law no.




#### 259/29.10.2021 for the approval of GEO no.








118/2021 regarding the establishment of a compensation scheme for the consumption of electricity and natural gas for the


















#### cold season



#### 2021-2022, as well as for the completion of the Government












#### Ordinance no.




#### 27/1996 regarding providing facilities to persons residing or working in some localities in the Apuseni















#### Mountains and in the Biosphere Reserve "Danube Delta"

▪
For

the

period

November

1
st
,

2021

-

March

31,

2022,

a

support

scheme

was

established

for

the
payment

of

invoices

related

to

the

consumption

of

power

and

gas

for

several

categories

of

final
customers.

▪
In

order

to

regularize

the

amounts

related

to

the

support

scheme,


#### the electricity




#### / natural gas distribution operators have the obligation, in April-June











#### 2022, in addition to the readings established according to the regulations in force, to read the meter index to final




















#### customers


who

have

benefited

from

the

support

scheme

and

to

communicate

to

the

electricity

/
natural gas suppliers their measurement data.

▪
Exemption

of

some

categories

of

small

consumers

(SMEs,

PFA)

from

the

payment

of

distribution
tariffs, transport, green certificates, contribution for high efficiency cogeneration and excise.

g) Alignment with the European legislation - EU Regulation no. 943/2019:

#### 15 minutes settlement

▪

#### ANRE



#### Order no.



27/31


#### March


2021

-

ANRE

orders

amendment

-

settlement

interval

(SI)

to

15

minutes
- in force since 1
st
 April 2021:

▪
the

amendment

of

ANRE

orders

containing

references

to

trading/delivery/settlement

intervals

lasting

one

39

hour,

with

the

intent

to

modify

by

using

the

phrase

“settlement

interval”

and

setting

the

duration

of

this
interval

to

15

minutes.

The

settlement

interval

is

one

hour

until

1
st

July

2021,

respectively

15

minutes,
starting with 1
st
 July 2021.

#### Electricity market functioning

▪

#### ANRE



#### Order no.



26/31


#### March


2021

for

the

amendment

of

art.

VII

of

the

ANRE

Order

no.

65/2020

-
in force since 1
st
 April 2021:

▪
long-term

supply

contract

means

any

contract

with

a

delivery

duration

equal

to

or

higher

than

one
month;

▪
Draft order approving the balancing clauses and conditions -
public debate – phase III:

▪
the

purchase

by

the

TSO,

on

the

European

trading

platforms

for

balancing

energy,

of

energy

from
the balancing service providers from EU member countries;

▪
separate

activation

by

direction

of

the

balancing

energy

from

the

frequency

restoration

reserve

with
automatic activation (RRFa = the new term used to define the secondary setting);

▪
the

use

of

standard

balancing

energy

products

within

each

European

balancing

energy

platform,

which
have the same static characteristics for all balancing service providers from each EU member state;

▪
considering,

in

the

internal

balancing

market

settlement,

the

unintentional

electricity

trade

between
state members;

▪
the

emergence

of

the

capacity

market

for

frequency

recovery

reserves

(RSF

=

the

new

term

used

to
define the setting);

▪
enters into force starting with 1
st
 October 2022;

▪
the

ODs

collaborates

and

elaborates,

following

a

public

consultation

process,

a

unique

procedure
regarding

the

way

of

establishing,

verifying,

confirming

by

the

involved

parties

and

implementing

the
way

of

aggregating

the

measured

values

related

to

a

BM,

which

each

OD

then

publishes

on

its

own
website within three months from the publication of the order.

▪

#### ANRE



#### Order no.



128/2021

-


#### Order for the approval of suspension and re-establishment










#### Rules of market activities and for the applicable settlement










#### Rules



#### – in force since





1
st


#### of October


2022:

▪
determining

the

situations

and

conditions

in

which

TSO

can

suspend

market

activities

with

diminishing
the impact on the coupling of DAM and IM energy markets;

▪
identification

of

the

market

activities

that

can

be

suspended

and

of

the

procedure

of

their

suspension
and

restoration:

stages,

role

and

responsibilities

TSO

/

designated

electricity

market

operator

/

factors
involved;

▪
the communication procedure detailing the tasks and actions that each party must perform;

▪
the

suspension

during

the

collapse

period

and

the

restoration

from

collapse

of

SEN

of

all

contracts

on
the

wholesale

market

(including

transactions

concluded

on

DAM

and

IM),

and

its

sale

/

acquisition
will

be

made

at

a

single

restoration

price,

respectively

the

settlement

method

applicable

in

these
situations and the way of making payments and contesting the settlement.

▪
the

order

will

be

applied

starting

with

1
st

of

October

2022,

the

date

from

which

the

ANRE

Order

no.
23/2016 repeals.

▪

#### ANRE



#### Order



#### 3/2021 approving the Regulation on the organization and operation of the online supplier change platform
















#### (POSF) and for contracting the supply of electricity and natural gas












#### - in force since August 28, 2022

-
The

online

platform

(POSF)

is

unique

at

national

level,

end

customers

and

economic

operators

40

involved

in

changing

the

supplier

and

contracting

the

supply

have

the

obligation

to

use

exclusively
this platform.

-
Implementation of the platform starting with August 28, 2022.

-
Duration of the supplier change process 24 hours

-
The client is obliged to register the self-read index in POSF

-
The

client

uploads

the

self-read

index

at

the

beginning

of

the

supplier

change

process

and

a

second
self-read

index

at

the

date

of

the

actual

change

of

the

supplier.

If

the

end

customer

does

not

upload
the

index

on

the

date

of

the

actual

change

of

the

supplier,

OD

has

the

obligation

to

register

in

POSF,
within

5

days

from

the

date

of

the

actual

change

of

the

supplier

by

the

end

customer,

the

index

read
by OD or provided by the system. intelligent measurement.

-
The

regulation

details:

how

the

POSF

is

organized

and

operated,

the

content

of

the

POSF

database,
the

data

needed

to

create

the

POSF

access

account,

the

rights

and

obligations

of

POSF

users,

the
rules for concluding the supply contract, the actual supplier change procedure.

-
ANRE

is

the

administrator

and

operator

of

the

Online

Platform

intended

for

the

change

by

the

final
customer of the electricity and / or natural gas (POSF) supplier

-
In

the

period

between

the

date

of

entry

into

force

of

the

Order

and

August

28,

2022,

all

economic
operators

are

obliged

to

comply

with

any

ANRE

requssests

for

the

realization

and

implementation

of
POSF.

■

#### Investments

▪
In

2021,

the

operator

Distributie

Energie

Electrica

Romania

(DEER),

resulting

from

the

merger

in

2021

of
the

three

distribution

operators

of

Electrica

Group

realized

and

commissioned

investments

amounting

to
RON

541.4

M,

representing

96.69

%

of

the

commissioning

program

value

planned

for

2021

(eg.

RON
558.6

M,

of

which

RON

549.2

M

related

to

the

2021

plan

and

RON

9.4

M

for

values

carried

forward
related

to

2020;

RON

532.2

M

were

realized

in

the

first

category

related

to

2021

and

RON

8.2

M

were
related to 2020).

▪
In

2022,

Distributie

Energie

Electrica

Romania

(DEER),

will

continue

to

invest

in

distribution

infrastructure,
the

investments

to

be

commissioned

for

2022

by

DEER,

cumulating

RON

587.5

M

(of

which,

RON

558.5
M

plan

for

2022

and

RON

29

M

values

related

to

the

plan

for

2021).

In

addition

to

the

works

in

the
distribution

networks

provided

in

the

investment

plan

2022,

it

is

estimated

the

realization

of

works

for
connecting

users,

considering

the

new

legal

requirements

introduced

by

government

emergency
ordinance

OUG

nr.

143/2021

which

amended

and

supplemented

Energy

Law

no.

123/10

July

2012,

as
well as ammending other legislation.

▪
The

investment

plans

were

prepared

in

accordance

with

the

requirements

provided

by

ANRE

in

the
“
Procedure

regarding

the

elaboration

and

approval

of

the

investment

programs

of

the

concessionary
economic

operators

of

the

electricity

distribution

service
”

approved

by

ANRE

order

no.

204/14

November
2019 with subsequent amendments and completions.

■

#### Supply segment

■

#### Key Projects

▪
Starting

from

the

significant

changes

in

the

energy

market

regarding

the

regulatory

framework

and
growing

competition,

EFSA

finished

an

ambitious

internal

transformation

project

which

set

to

successfully
meet

the

current

and

future

challenges,

and

which

mainly

targeted

the

internal

reorganization

of

the
company,

in

terms

of

internal

and

external

work

processes

and

streamlining

the

customer

experience

in
all points of contact, as well as the development of new skills specific to the sales area.

41

▪
In

the

first

stage,

the

project

focused

on

developing

the

sales

strategy

and

in

the

second

stage,

the

effort
focused

on

internal

processes,

systems

and

technology

improvement,

and,

naturally,

on

upgrading
organizational

structures.

A

process

of

redesign

and

adjustment

to

present

market

challenges

came

next,
aiming

to

upgrade

and

re-think

relevant

activities

in

order

to

supply

customers

with

the

highest

level

of
services.

▪
In

2021,

EFSA

continued

its

efforts

to

transform

the

internal

processes

in

the

sales

and

customer

relations
areas, focusing on digitization and automation.

▪
The current priorities in the supply segment are:

-
improving operational performance;

-
speeding up the digitization of main business processes;

-
continuous development of value-added products and services;

-
increasing the quality of supply service.

■

#### Regulatory Framework a.

#### Primary legislation

In 2021, the following legal acts, with impact on the supply of electricity and gas, have been approved:

▪

#### Government



#### Emergency



#### Ordinance no.



143/2021

amending

Electricity

and

Gas

Law

no.

123/2012:

-
the

ordinance

primarily

aims

to

transpose

Directive

(EU)

944/2019

on

common

rules

for

the

internal
market for electricity
, bringing several amendments/additions concerning mainly the following:

-
universal

service

(US):

by

any

supplier

on

the

competitive

market

(who

shall

elaborate

US

offers

and
supply US to customers, if requested), exclusively to household customers;

-
electricity

end-user

price:

removal

of

all

provisions

concerning

regulation/approval

of

end-user

prices;
in

return,

the

ordinance

provides

for

the

possibility

of

public

interventions

in

the

price

setting

for

the
supply

of

electricity

to

vulnerable

or

energy

poor

customers,

under

certain

conditions

and

with
notification to the European Commission;

-
wholesale

electricity

market:

removal

of

exclusively

public

and

centralized

trading

obligation;

the

new
stipulations explicitly mentioned “the directly negotiated bilateral transactions”;

-
suppliers’

obligations:

removal

of

the

obligation

to

set

up

physical

customer

care

centers

for

US
customers at max. 50 km;

-
suppliers’

(misc.)

rights:

permission

to

charge

customers

(without

discrimination)

contract

termination
fees

where

those

customers

voluntarily

terminate

fixed-term,

fixed-price

electricity

supply

contracts
before

their

maturity
;

permission

to

charge

customers,

except

for

households

and

small

enterprises,
supplier switching fees
;

-
electricity

supplier

switching:

until

2026,

supplier

switching

shall

be

performed

in

24

h

at

the

latest,
in

any

working

day;

customers

shall

be

given

the

right

to

engage

in

collection

supplier

switching
schemes;

-
electricity

standard

offers/price

comparison

tool:

expansion

of

suppliers’

obligation

to

elaborate
standard

offers

also

for

microenterprises\*,

and

upload

them

to

ANRE

Price

Comparison

tool

(eg.

an
enterprise

which

employs

fewer

than

10

persons

and

whose

annual

turnover

and/or

annual

balance
sheet

total

does

not

exceed

EUR

2

million)

with

an

expected

yearly

consumption

of

below

100

000
kWh
;

-
misleading/incorrect

commercial

practices

in

the

field

of

electricity

and

gas

supply:

maintain

the
infringement

identified

by

ANRE

only

with

regard

to

non-household

customers;

also,

the

penalty

for
breach

of

obligation

calculated

as

percentage

of

the

annual

turnover

shall

be

replaced

with

a

lump
sum

penalty;

with

regard

to

household

customers,

the

non-compliance

will

be

assessed

by

the

42

National Consumer Protection Authority(NACP);

-
electricity

and

gas

billing:

settlement

bills

for

household

customers

shall

be

issued

once

every

3
months at the least; the breach of obligation shall be fined with a lump sum penalty;

-
prohibition

of

disconnection

for

electricity:

ANRE

shall

be

granted

the

right

to

identify

additional
categories of customers that cannot be disconnected, apart from the vulnerable ones;

-
offences:

the

repeated

breach

is

(again)

defined

as

at

least

2

breaches

occurring

in

12

consecutive
months (as opposed to at least 2 breaches);

-
prosumers:

prosumers

shall

benefit

also

from

net

metering,

in

addition

to

financial

settlement

before;
installed capacity limits have been increased.

▪
Law no. 226/2021
 approving social protection measures for the vulnerable energy consumers:

-
the law applies as of 1
st
 November 221;

-
the

following

financial

measures

have

been

approved

to

support

vulnerable

consumers:

the

aid

for
residential

heating,

during

the

cold

season,

eg.

1
st

November

–

31


March

(max.

500

lei/month

for
electricity,

and

250

lei/month

for

natural

gas);

the

energy

subsidy,

to

be

given

all

year

long

(30
lei/month

for

lighting

and

70

lei/month

in

case

electricity

is

the

only

source

of

energy

used,

and

10
lei/month

for

gas);

the

money

for

both

types

of

aid

shall

be

paid

directly

to

energy

suppliers,

and
deducted from the invoices;

-
consumers

fulfilling

the

income

related

eligibility

criteria

will

benefit

from

the

financial

protection:

the
maximum

monthly

net

average

income

that

qualifies

for

the

heating

aid

is

1,386

lei/person

for
families, and 2,053 lei for single persons.

▪

#### Government



#### Emergency



#### Ordinance



#### (OUG) no.



118/2021

establishing

a

compensation

scheme

for
the

consumption

of

electricty

and

gas

during

the

2021-2022

cold

season,

approved

with

amendments

by
Law No. 259/2021
:

-
the

support

scheme

shall

be

applied

for

the

consumption

of

electricity

and

gas

from

November

2021
to

March

2022,

and

has

been

approved

given

the

surge

in

international

energy

prices

and

the

impact
thereof on the Romanian population;

-
The following support mechanisms have been put in place:

-
compensation

for

household

customers

provided

they

fall

within

the

maximum

consumption

limits

set
for

the

whole

period

(eg.

1,500

kWh

for

electricity,

and

1,000

m
3

for

gas),

as

well

as

per

month,

and
within

the

reference

price

set

at

0.68

lei/kWh

for

electricity,

and

125

lei/MWh

for

gas;

the
compensation amounts to 0.291 lei/kWh for electricity, and 33% of the invoice for gas;

-
exemption

from

all

energy

regulated

tariffs

and

taxes

for

SMEs,

individual

medical

practices

and

other
liberal

professions,

microenterprises,

authorized

natural

persons,

individual

enterprises,

family
enterprises

(eg.

regulated

transmission

tariffs/cut-off

from

the

network,

distribution

tariff,

system
services

tariff,

transmission

tariffs,

green

certificates,

high

efficiency

cogeneration

contribution,
energy tax – for electricity; transmission costs, distribution tariff and energy tax – for gas);

-
capping

of

the

end-user

price

at

max.

1

leu/kWh

for

electricity

(out

of

which

max.

0.525

lei/kWh

will
be

the

energy

component),

and

max.

0.37

lei/kWh

for

gas

(out

of

which

max.

0.250

lei/kWh

will

be
the

energy

component)

for

household

customers,

public

and

private

hospitals,

public

and

private
schools, kindergartens for small babies, NGOs, churches, public and private social service providers;

-
moratorium

on

bills

–

upon

request,

only

for

vulnerable

consumers,

for

min.

1

month

and

max.

6
months;

-
the

legislation

also

provides

for

reimbursement

mechanisms

from

the

state

budget

to

electricity

and
gas suppliers.

▪

#### Order of the minister of labor and social protection










(No.

1.155/25.11.2021), minister of

43

#### energy


(no.


#### 1.240/25.11.2021) and minister of finance






(no.

1.480/26.11.2021)

approving

the
procedure for compensation of suppliers for the consumer support scheme set by OUG no.118/2021:

-
the order clarifies as to the implementation of support schemes and compensation of suppliers;

-
regarding

the

household

customers

support

scheme:

the

order

mentions

the

documents

to

be

sent
by suppliers for compensation and related deadlines;

-
scheme

for

exemption

of

non-household

customers

form

regulated

tariffs,

energy

tax,

contributions,
etc.

–

the

order

includes

the

following:

the

documents

to

be

sent

by

suppliers

for

compensation;

a
template

for

customers’

application

and

declaration;

the

fact

that

the

benefit

shall

be

granted

starting
with

the

month

of

the

application

(except

for

the

applications

made

in

December,

where

the

benefit
shall

be

granted

starting

with

November);

the

fact

that,

in

case

of

supplier

switching,

customers

shall
be compensated pro rata;

-
price

cap

–

the

order

mentions

that:

the

subscription

(the

value

of

subscription

services)

is

not

included
in

the

price

cap

(eg.

1

leu/kWh

for

electricity,

0,37

lei/kWh

for

gas);

the

average

price

in

the

suppliers’
compensation

formula

refers

to

procurements

made

by

each

supplier;

the

calculation

for

suppliers’
compensation

shall

be

calculated

on

a

monthly

basis,

and

a

settlement

shall

follow

at

the

end

of

the
scheme’s implementation period.

▪

#### Government



#### Emergency



#### Ordinance no.



130/2021

regarding

fiscal-budgetary

measures,

extension
of deadlines amending, inter alia, certain pieces of legislation:

-
the

ordinance

brought

several

changes

to

OUG

no.

118/2021

and

Law

no.

259/2021

concerning
mainly:

-
compensation

of

suppliers

for

the

energy

price

cap

scheme:

the

calculation

formula

shall

factor

in

the
average

price

of

ongoing

contracts

with

physical

deliveries

over

the

scheme’s

implementation

period;
procurements

related

to

supply

of

last

resort

shall

be

analyzed

separately

so

as

to

reflect

the

additional
volumes

purchased

for

the

supply

of

last

resort

to

customers;

underlying

documents

for

compensation
of

suppliers

shall

consist

in

volumes

and

prices

from

ongoing

procurement

contracts

with

physical
deliveries

over

the

scheme’s

implementation

period,

and

electricity/gas

volumes

delivered

to

cap
priced customers.

▪

#### Government



#### Decision no.



1077/2021

approving

the

preventive

action

plan

for

the

safeguard

of
security of gas supply in Romania

-
the
Plan
does not include important new elements as compared to the previous one;

-
the

suppliers

remain

under

the

obligation

to

secure,

in

emergency

situations,

continuity

of

gas

supply
to

protected

customers

in

the

three

crisis

cases

respectively

(eg.

househod

customers,

SMEs,

essential
service

providers,

district

heating

installations

supplying

heat

to

protected

customers

who

cannot
operate

with

other

fuels

and

supply

heat

to

the

protected

mentioned

customers);

gas

supply

cannot
be cut to the protected customers.

Regarding

the

legislation

related

to

the

energy

sector,

in

the

context

of

the

COVID-19

pandemic,

the
Government

has

decided

to

successively

extend

the

state

of

alert

initially

established

in

2020

(by

Decision

No
.
394/2020)
,

with

30

days

each

time,

as

follows:

starting

with

13

January

2021,

by

GD

no.

3/2021;

starting
with

12

February

2021,

by

GD

no.

35/2021;

starting

with

14

March

2021,

by

GD

no.

293/2021;

starting

with
13

April

2021,

by

GD

no.

432/2021;

starting

with

13

May

2021,

by

GD

no.

531/2021;

starting

with

12

June
2021,

by

GD

no.

636/2021;

starting

with

12

July

2021,

by

GD

no.

730/2021
;

starting

with

11

August

2021,
through

GD

no.

826/2021;

starting

with

10

September

2021,

by

GD

no.

932/2021;

starting

with

10

October
2021,

by

GD

no.

1090/2021;

starting

with

9

November

2021,

by

GD

no
.

1183/2021;

starting

with

9

December

44

2021, by GD no. 1242/2021; starting with 8 January 2022, by GD no. 34/2022
.

Correlatively,

until

6

August

2021,

this

implied

the

application

of

the

measures

with

impact

on

the

electricity
and

natural

gas

supply

activity

(i.e.,

the

obligation

of

the

transmission

and

distribution

operators

of

electricity
and

natural

gas

to

ensure

the

continuity

of

service

supply,

and,

in

case

a

situation

of

disconnection

occurs,
the postponement of performing this operation until the end of the state of alert).

As

of

6

august

2021,

when

GEO

no.

84/2021

had

been

enforced,

the

prohibition

to

disconnect

electricity

and
gas

customers

during

the

state

of

alert

had

been

removed
.

Regarding

the

supply

cessation

in

case

of

non-
payment

of

the

outstanding

debts,

according

to

GEO

no.

84/2021,

this

measure

could

not

have

been

taken
earlier than 90 days from the entry into force of GEO no. 84/2021.

b.

#### Secondary legislation

During

the

period

analyzed,

at

the

level

of

the

regulatory

framework,

there

were

changes

and

completions

in
the following areas of activity and regulation:

#### Liberalization of the electricity market

▪

#### ANRE



#### Order no.



5/2021

amending

the

ANRE

Order

No.

171/2020

for

the

approval

of

the

suppliers

of
last

resort

(SoLR)

electricity

supply

conditions

and

for

amending

and

supplementing

the

Framework
agreement

for

the

supply

of

electricity

to

SoLR

household

customers,

approved

by

the

ANRE

Order

No.
88/2015:

-
it

includes

provisions

regarding

the

discount

the

SoLRs

can

grant

to

household

customers

who

choose
a

competitive

supply

agreement.

This

discount,

equal

to

the

difference

between

the

price

in

the
universal

service

offer

applicable

between

1

January

-

30

June

2021

and

the

price

in

the

competitive
offer

with

the

lowest

value,

available

on

20

January

2021,

applies

for

the

period

from

1

January

2021
and until at least 30 June 2021;

-
New

information

obligations

have

been

introduced

for

SoLRs

for

household

customers

from

their

own
portfolio:

✓
until

30

June

2021,

accompanying

each

invoice

issued:

an

information

regarding

the

regulated
tariffs’

elimination,

as

well

as

an

offer

selection

form,

in

the

form

established

by

ANRE,

containing
the

competitive

offer

with

the

lowest

value,

a

competitive

alternative

offer

and

the

universal
service

offer,

offers

applicable

in

the

first

semester

of

2021,

as

well

as

the

value

of

the

commercial
discount granted and the application period, if applicable;

✓
between

1

May

-

30

June

2021,

monthly:

a

competitive

offer

and

the

universal

service

offer,

valid
as of 1 July 2021;

✓
in

the

second

semester

2021,

accompanying

each

invoice

issued:

notification

regarding

the
regulated tariffs’ elimination.

▪

#### ANRE



#### Order no.



6/2021

for

the

amendment

of

the

Regulation

for

the

electricity

SoLR

designation,
approved by ANRE Order No. 188/2020:

-
the

definition

of

the

non-household

customers

under

supply

of

last

resort

regime

(LR)

has

been
modified,

as

to

include

the

customers

who

are

taken

over

because

there

is

no

other

supply

source
ensured, as well as those who request the supply in LR regime.

#### Retail electricity/gas market – commercial regulations

▪

#### ANRE



#### Order no.




#### 82/2021 and no.




91/2021

amending

and

supplementing

the

Regulation

on

the

45

supply of electricity to final customers
:

-
the

amendments/completions

are

applicable,

as

a

general

rule,

from

1
st

July

2021,

and,

as

an
exception

(e.g.,

the

new

provisions

regarding

the

settlement

of

customer

complaints

regarding

the
invoice,

payment

of

compensations

due

based

on

the

Performance

Standard),

from

1
st

January

2022;

-
the

changes

concern

mainly:

the

content

and

publication

of

the

offer

and

the

supply

contract

(it

must
include

all

the

price

elements

and

it

is

published,

cumulatively,

in

the

ANRE

Price

Comparator,

on

the
website

and

at

the

single

point

of

contact),

the

determination

method

of

the

consumption

for

invoicing
in

the

absence

of

the

read/self-read

index

(estimation

of

consumption

by

the

supplier

based

on

the
most

recent

readings

or

consumption

from

the

previous

similar

period

being

allowed

only

until

the
end

of

2021,

afterwards

will

be

made

exclusively

based

on

the

consumption

agreement

issued

by

the
distributor

and

concluded

with

the

final

customer

by

the

supplier)
,

the

supply

agreement

conclusion
–

necessary

documents

(eg.

the

ownership

deed

is

no

longer

mandatory,

being

replaced

with

a
declaration

on

own

responsibility

on

the

ownership

right

over

the

consumption

place),

settlement

of
invoice-related

complaints

and

the

supply

contract

termination

for

non-payment

of

the

invoices
(without

being

mandatory

the

consumption

place

disconnection
),

completing

the

mandatory

content
of the disconnection notice.

▪
ANRE Order no. 83/2021
 approving
 the Performance Standard for the electricity/gas supply activity
:

-
the

Regulation

is

common

for

electricity

and

gas,

replaces

the

standards

in

force

for

the

two

areas
and

is

applicable

from

1
st

January

2022,

except

for

the

provisions

regarding

the

reception

of

telephone
calls

through

call

center

(applicable

from

1
st

July

2023,

respectively

from

1
st

January

2024

regarding
the compensations payment);

-
11

guaranteed

quality

indicators

are

established

regarding

the

response

times

to

requests

related

to:
supply

offer

communication
;

supply

contract

conclusion;

amendment/completion

of

the

supply
contract;

invoices;

supply

interruption/limitation

at

the

consumption

place,

as

the

case

may

be,
requested

by

supplier;

resumption

of

supply

at

the

consumption

place,

whose

interruption/limitation
was

ordered

by

the

supplier,

subject

related

to

the

field

of

activity

of

the

network

operator;
communication

of

responses

received

from

the

network

operator;

supplier

change

process;

supply
activity,

other

than

those

expressly

provided;

the

response

time

of

a

telephone

call

made

through

call
center service;

-
for

each

quality

indicator,

ANRE

has

established

a

guaranteed

level

that

the

suppliers

have

the
obligation

to

respect

and

for

whose

non-compliance

the

suppliers

will

automatically/legally

pay
compensations to all categories of final customers;

-
a

manner

of

evaluating

by

ANRE

the

activity

carried

out

by

the

suppliers

is

introduced,

through

a
scoring

system

established

considering

the

degree

of

observance

of

the

quality

indicators

guaranteed
levels, classification that will be made public through the ANRE Price Comparator;

-
in

conclusion,

by

comparison

with

the

current

standards:

the

scope

was

extended

in

terms

of
automatic

payment

of

compensations

to

all

categories

of

customers,

several

guaranteed

quality
indicators

were

introduced

(11

compared

to

8

for

electricity,

respectively

4

for

natural

gas,

currently),
the

compensation

levels

for

natural

gas

have

been

doubled/tripled,

the

suppliers’

classification

manner
according to the level of compliance with the guaranteed quality indicators has been introduced.

▪
ANRE Order no. 138/2021
 amending several ANRE orders
:

-
several

provisions

and

enforcement

deadlines

related

to

the

performance

standards

for

electricity/gas
supply have been changed as follows:

-
the

deadline

for

sending

customer

the

response

to

complaints

concerning

electricity

bills

has

been

46

changed to 15 working days (instead of 5 working days before);

-
the

deadline

for

sending

customer

the

response

to

complaints

concerning

gas

bills

has

been

changed
to 15 working days (instead of 15 calendar days before);

-
enforcement

of

certain

changes

brought

to

the

Electricity

Supply

Regulation,

by

ANRE

Order

no.
82/2021,

has

been

postponed

until

1
st

July

2022

(from

1
st

January

2022

before);

most

importantly,
the

enforcement

of

automatic

compensation

of

all

categories

of

customers

(not

only

US

customers)
in case of breach of obligations;

-
the

enforcement

of

the

new

performance

standard

for

the

supply

of

electricity/gas

(approved

by

ANRE
Order no. 83/2021) has been postponed until 1
st
 July 2022 (from 1
st
 January 2022 before).

▪

#### ANRE



#### Order no.



139/2021

amending

and

supplementing

the

gas

distribution

framework-

contract,

and
related

general

conditions

(approved

by

ANRE

Order

no.

78/2020),

as

well

as

the

Gas

Supply

Regulation

(as approved by ANRE Order no. 29/2016):

-
the

order

contains

changes

concerning

mainly

the

following:

documents

needed

for

signing

a

gas
supply

contract

(e.g.

a

self-declaration

shall

replace

the

deed

of

ownership

or

use

needed

before);
management

of

supplier-distributor

gas

distribution

contracts

(removal

of

the

obligation

to

sign
addenda

in

case

of

prolongation

or

change

of

contract)

;

metering

(distributor

shall

read

the

meter

at
the

beginning

and

end

of

the

supply,

including

in

case

of

supplier

switching;

a

standard

template

shall
be

used

for

the

data

sent

by

the

distributor

for

gas

measuring;

distribution

services

shall

be

invoiced
based on actual measurements or customers’ meter self-reading).

#### Supply of last resort

▪

#### ANRE



#### Order no.



125/2021

changing

the

Gas

Supply

of

last

Resort

Regulation

(approved

by

ANRE
Order no. 173/2020):

-
the order contains changes concerning mainly the following:

-
designation

of

suppliers

of

last

resort

(SoLR):

at

least

5

SoLRs,

with

an

aggregated

market

share

in
terms

of

customers

and

volumes

of

min.

70%

(as

opposed

to

at

least

3

SoLRs

with

no

associated
conditions);

-
conditions

under

which

a

supplier

may

relinquish

its

SoLR

quality

–

the

new

aggregated

conditions
for

the

SoLRs

appointed

on

the

basis

of

availability

and

eligibility

(such

as

Electrica

Furnizare)

are:
after

at

least

1

year

from

designation

(as

before);

not

to

have

any

customer

supplied

under

SoLR

at
the

date

of

the

relinquish

(newly

added

requitement);

with

prior

notification

of

ANRE

with

at

least

60
days before (compared to 45 days before);

-
duration

of

the

supply

of

last

resort:

min.

12

months

from

takeover

for

small

customers,

eg.

customers
with an annual consumption below or equal to 28 000 MWh (compared to 3 months before);

-
supply

of

last

resort

price:

supply

and

transmission

components

of

the

price

shall

be

maintained
unchanged

for

3

months

from

takeover

(as

opposed

to

monthly

setting

of

all

energy

price
components); exemption from this rule – where these components decrease;

-
criteria

for

selection

of

SoLRs

for

automatic

takeover

of

customers:

the

“lowest

cost”

criterion;

the
takeover

capacity

criterion,

under

which

the

number

of

customers

taken

over

may

not

exceed

30%
of

SoLR’s

number

of

customers;

the

availability

to

take

over

criterion,

in

case

SoLRs

do

not

meet
previously mentioned criterion (as compared to a single criterion, eg. “the lowest cost”, before).

▪

#### ANRE



#### Decisions


on

termination

of

several

gas

SoLRs

designation

decisions,

and

on

designation

of
several new gas SoLRs:

-
termination

of

SoLR

designation

decisions,

upon

request

of

the

suppliers

concerned

to

renounce

at

47

this

quality,

for:

CEZ

Vanzare

(starting

with

2

January

2022)

–

ANRE

Decision

no.

2233/2021,

CIS

Gaz
(starting with 14 December 2021) – ANRE Decision no. 2234/2021;

-
designation

of

new

SoLRs

(according

to

the

new

rules

introduced

by

ANRE

Order

no.

125/2021):

E.ON
Energie

Romania

–

ANRE

Decision

no.

2237/2021,

OMV

Petrom

–

ANRE

Decision

no.

2238/2021,

both
starting with
15 December 2021;

-
Electrica Furnizare still SoLR for gas.

#### Wholesale electricity/natural gas market

▪

#### ANRE



#### Order no.



7/2021

approving

the

Regulation

on

the

organized

framework

for

trading

standardized
products on the centralized natural gas markets managed by Romanian Commodities Exchange S.A.:

-
the

Regulation

includes

trading

rules

for

the

centralized

markets

related

to

short,

medium

and

long-
term products, as well as flexible medium and long-term products.

▪

#### ANRE order no.




26/2021

for

the

amendment

of

ANRE

Order

No.

65/2020

regarding

the

amendment
and completion of certain ANRE orders:

-
in

the

application

of

the

EU

Regulation

no.

943/2019

provisions

on

the

internal

electricity

market
(relating

to

the

over-the-counter

sale

of

energy),

the

long-term

supply

contract

was

redefined

as

any
contract

with

a

delivery

duration

greater

than

or

equal

to

one

month

(compared

to

one

year,

according
to previous regulations);

-
the

above-mentioned

contracts

are

concluded

in

compliance

with

the

competition

rules

and

are
reported

according

to

the

provisions

of

the

EU

Regulation

on

the

integrity

and

transparency

of

the
energy wholesale market
 (REMIT).

▪
ANRE Order no. 27/2021
 on amending and supplementing
of certain ANRE orders:

-
in

the

implementation

of

the

European

rules

regarding

the

settlement

interval

at

15

minutes,

nine
regulations

have

been

modified

that

establish

trading

rules

on

the

centralized

term

markets

for
electricity,

in

which

the

reference

to

the

duration

of

one

hour

will

be

replaced

with

the

reference

to
the

settlement

interval
,

and

this

duration

of

the

settlement

interval

should

be

one

hour

until

1

July
2021, respectively 15 minutes starting with 1
st
 July 2021.

▪

#### ANRE



#### Order no.



33/2021

regarding

the

amendment

and

completion

of

ANRE

Order

no.

213/2020

for
the

approval

of

the

Regulation

for

the

calculation

and

settlement

of

the

balance

responsible

parties’
imbalances - single imbalance price
:

-
the new rules apply starting with 1
st
 June 2021;

-
the

calculation

method

for

determining

the

imbalance

and

the

payment

obligations/collection

rights
used

in

the

imbalance

price

formula

is

replaced,

with

the

values

for

these

exchanges

received

by

TSO
from

the

European

platform;

the

remuneration

way

for

the

electricity

produced

in

production
capacities/electricity storage installations that are in the trial period is modified.

▪

#### ANRE



#### Order no.



37/2014

for

the

repealing

of

the

Regulation

on

the

organization

and

functioning

of
the

electricity

Day

Ahead

Market

(DAM),

respecting

the

mechanism

of

markets

price

coupling

and

the
amendment of some normative acts that regulate the electricity DAM:

-
the

repeal

enters

into

force

on

17

June

2021

and

occurs

in

the

context

of

the

application

of

harmonized
norms at European level in order to unify the day ahead markets.

▪

#### ANRE



#### Order no.



30/2021

regarding

the

amendment

and

completion

of

the

Methodology

for
regularizing

the

differences

between

the

allocations

and

the

quantities

of

distributed

natural

gas

approved

48

by ANRE Order no. 16/2020:

-
the

new

rules

apply

in

the

process

of

gas

system

balancing

and

regulate

the

situation

in

which

a
distribution

operator

does

not

transmit

to

a

network

user

the

differences

between

the

allocation

and
the

distributed

quantities

and/or

the

differences

between

the

final

monthly

allocation

and

the

sum

of
the

daily

allocated

quantities,

as

well

as

the

specification

of

the

weighted

average

price

that

applies
in case the distribution contract terminates during the respective gas year.

▪

#### ANRE



#### Order


No.

96/2021

ameding

the

Regulation

on

calculation

and

settlement

of

electricity
imbalances – the single imbalance price
, approved by ANRE Order No. 213/2020
:

the

following

elements

have

been

updated:

the

way

imbalances

are

determined;

the

formula

for

calculating
starting

short

and

long

prices;

the

deadline

for

the

subsmission

by

Transelectrica

of

preliminary

and

final

data
on

the

settlement

of

unintended

exchanges;

formula

for

calculationg

the

costs/revenues

and

actual

costs

for
the imbalance energy.

#### Renewable energy sources, green certificates, prosumers

▪
ANRE Order no. 9/2021

establishing the mandatory green certificate (GC) purchase quota for 2020:

-
the

quota

has

been

set

at

0.45074

GC/MWh

(as

compared

to

0.45061

GC/MWh

estimated

quota

for
2020 and 0.433548 GC/MWh mandatory quota for 2019).

▪

#### ANRE



#### Order no.



15/2021

for

the

approval

of

the

procedure

regarding

the

connection

to

the

public
interest

electricity

networks

of

the

consumption

and

production

places

belonging

to

the

prosumers

who
own

installations

for

the

electricity

production

from

renewable

sources

with

the

installed

power

of

at

most
100 kW/consumption place:

-
the

regulation

is

relevant

for

the

electricity

supplier

as

it

can

carry

out,

on

behalf

of

the

prosumer,

the
connection

related

procedures,

i.e.,

the

transmission

of

the

connection

request,

of

the

notification

for
connection work execution to the DSO, and of the request for the prosumer quality certification.

▪

#### ANRE



#### Order no.



50/2021

for

the

approval

of

the

rules

for

the

sale

of

electricity

produced

in

power
plants,

from

renewable

sources,

with

installed

electrical

power

of

no

more

than

100

kW

belonging

to
prosumers:

-
The new rules are applicable from 1
s
t
 July 2021;

-
it

is

introduced,

compared

to

the

previous

division

into

natural

persons

prosumers

and

legal

persons
prosumers,

the

division

into

natural

persons

prosumers

with

max.

27

kW

installed

power,

respectively
individual

prosumers

over

27

kW

and

max.

100

kW

and

legal

entities

max.

100

kW,

in

application

of
the

provisions

regarding:

determining

the

quantity

of

electricity

that

benefits

from

the

special
applicable

price,

transmitting

the

measurement

data

by

invoice

or

according

to

the

sale-purchase
contract concluded with the supplier and regularization in the invoice or between invoices.

▪

#### ANRE



#### Order no.



52/2021

for

the

approval

of

the

Methodology

on

monitoring

the

promoting

system

of
the electricity production from renewable energy sources:

-
the new Methodology is applicable from 1
st
 July 2021;

-
it

is

taken

over

from

the

Rules

for

selling

electricity

produced

by

prosumers

and

completed,

both

in
terms

of

transmission

methods

and

content,

the

obligation

of

suppliers

to

submit

monthly

to

ANRE
information on sales-purchase contracts concluded with prosumers.

▪

#### ANRE



#### Order no.



131/2021

setting

the

estimated

mandatory

green

certificates

purchase

quota

for

49

2022:

-
estimated

quota

set

at

0.5014313

green

certificates/MWh

(as

compared

to

the

estimated

quota

for
2021 of 0.4505 green certificates/MWh)

▪

#### ANRE



#### Order no.



117/2021

approving

the

rules

on

mitigating

green

certificate

annual

impact

in
electricity consumers’ bills:

-
the

order

sets

a

calculation

algorithm

aiming

at

maintaining

the

average

impact

of

green

certificates
in

electricity

consumer’s

bills

at

the

present

legal

value

of

14.5

euro/MWh

for

as

long

as

the

excess
of green certificates in the green certificates market in percentages is higher or equal to the average
value

of

the

previous

3

years.

In

case

the

excess

of

green

certificates

in

the

green

certificates

market,
in

percentages,

falls

below

the

average

of

the

3

previous

years,

the

average

impact

of

green
certificates in consumers’ bills shall be reduced.

▪

#### ANRE



#### Order no.



137/2021

approving

the

Procedure

on

determination

of

available

electricity

network
capacity for connection of new electricity generation facilities
:

-
the

procedure

has

been

drafted

given

the

European

Green

Deal

and

“Fit

for

55”

objectives,

which
Romania

shall

have

to

endorse,

and

that

calls

for

the

construction

of

new

electricity

generation
facilities.

It

consequently

became

necessary,

especially

in

the

absence

of

network

consolidation

works,
to determine the available electricity network capacity;

-
the

procedure

sets:

rules

for

determining

the

available

electricity

transmission

and

distribution

(110kV)
network

capacity;

rules

on

the

publication

in

a

transparent

and

periodic

manner

by

the

transmission
and

system

operator

of

data

concerning

the

available

capacities

in

the

electricity

transmission

and
distribution

(110kV)

networks;

deadlines

for

the

publication

by

networks

operators

of

data

on

available
capacities

(eg.

on

a

monthly

basis

as

of

1
st

April

2022;

twice

a

month

as

of

1
st

July

2022;

weekly

as
of 1
st
 October 2022).

#### Regulated tariffs, and other taxes and contributions

▪

#### ANRE



#### Order no.



10/2021

regarding

the

amendment

of

the

ANRE

Order

no.

214/2020

on

the

approval
of

the

average

tariff

for

the

transmission

service,

of

the

components

of

the

transmission

tariff

for

the
insertion

of

electricity

in

the

network

(TG)

and

for

the

extraction

of

electricity

from

the

network

(TL),

of
the

tariff

for

the

system

service

and

of

the

regulated

price

for

reactive

electricity

practiced

by
Transelectrica S.A.
:

-
the new tariffs are applicable from 1
st
 March 2021;

-
transmission

tariff

–

introducing

electricity

into

the

network

component

-

T
G

=

RON

1.3/MWh

(same
level as before);

-
transmission

tariff

–

electricity

extraction

from

the

network

component

-

T
L

=

RON

19.22/MWh

(same
level as before);

-
system service tariff = RON 10.82/MWh (lower by 9.5% compared to the previous level).

▪

#### ANRE



#### Order no.



21/2021

for

the

abrogation

of

the

ANRE

Order

No.

14/2019

on

the

approval

of

the

Methodology

establishing

the

regulated

tariffs

for

the

provision

of

underground

natural

gas

storage
services:

-
the

Order

aims

the

implementation

of

the

amendments

brought

in

2020

to

the

Law

on

electricity

and
natural

gas

No.

123/2020,

with

subsequent

amendments

and

completions
,

according

to

which,

after
2020-2021 extraction cycle, the natural gas storage will no longer be a regulated activity;

-
therefore,

starting

with

1

April

2021,

the

underground

natural

gas

storage

service

tariffs

are

no

longer

50

regulated

by

ANRE,

but

established

by

the

storage

operators,

and

the

access

to

the

storage

depots
(eg. the related conditions) will be negotiated between the storage operators and users.

▪

#### ANRE



#### Order


No.

111/2021

amending

ANRE

Order

No.

123/2017

approving

the

high

efficiency
cogeneration contribution:

-
The

new

contribution

is

applied

as

of

1

November

2021,

is

included

in

the

final

end-user

price

for
electricity, and is 50% higher than previous value (eg. 0.02554 lei/kWh from 0.01712 lei/kWh).

▪

#### ANRE



#### Orders no.



118-123/2021

approving

electricity

distribution

tariffs

and

the

price

for

reactive
electricity
:

-
the new tariffs are in place as of 1
st
 January 2022;

-
the

low

voltage

tariffs

for

Distributie

Energie

Electrica

Romania

are

10%

to

14%

higher

compared

to
2021.

▪

#### ANRE



#### Order no.



124/2021

approving

Transelectrica’s

average

electricity

transmission

tariff
,

the
injection

(T\_G)

and

withdrawal

transmission

charges

(T\_L),

the

system

service

tariff,

and

the

regulated
price for reactive energy:

-
the new tariffs are in place as of 1
st
 January 2022;

-
the average electricity transmission tariff is 16.6% higher than in 2021.

▪
ANRE Order no. 143/2021
 approving the fees and contributions charged by ANRE in 2022:

-
the annual contribution owed by suppliers amounts to 0.1% of the annual turnover for electricity (as
opposed to 0.2% in 2021), and 0.056 lei/MWH for gas;

-
given

the

implementation

of

customers’

support

schemes

approved

by

OUG

no.

118/2021,

as
approved

by

Law

no.

259/2021,

the

order

includes

clarification

as

to

the

calculation

of

the

turnover,
eg.

this

shall

be

calculated

as

a

net

turnover,

excluding

green

certificates

and

the

cogeneration

fee
from calculation.

#### Investigation on the energy market

▪


#### ANRE



#### Order no.



22/2021

on

amending

and

supplementing

the

Regulation

for

the

organization

and
development

of

the

investigation

activity

in

the

field

of

energy

regarding

the

functioning

of

the

wholesale
energy market, approved by the ANRE Order No. 25/2017
:

-
the

amendments

to

the

Regulation

refer

to,

among

others,

the

procedure

for

resolving
complaints/notifications,

providing

the

data,

information

and

documents

requested

by

ANRE,

the
rights of the investigation team members in relation to the market participants
.

#### Licenses and authorizations

▪
ANRE Order no. 24/2021
on amending and supplementing
certain ANRE orders:

-
changes

to

the

Validity

Conditions

associated

to

the

natural

gas

supply

license

have

been

approved:
e.g.

obligation

to

notify

ANRE,

within

5

working

days,

for

any

changes

of

the

name,

headquarters

or
contact

data;

elimination

of

the

obligation

to

notify

ANRE

on

the

decisions

to

change/establish/dissolve
the

main

or

secondary

headquarter/headquarters,

the

single

points

of

contact,

the

regional/local
information

points;

completing

the

ways

of

communicating

with

or

transmitting

information

to

ANRE
(e.g.

including

magnetic

support

-

CD/DVD/memory

stick

transmitted/deposited

at

the

ANRE

registry;
by uploading on the ANRE website etc.).

51

▪

#### ANRE



#### Order no.



42/2021

on

the

approval

of

the

Framework

conditions

for

validity

associated

with

the
license for the activity of natural gas trader:

the

rights

and

obligations

of

the

natural

gas

trader

license

holders

are

established,

with

the

mention

that

the
trader

license

is

absolutely

necessary

only

in

the

case

of

exclusive

development

of

this

activity,

otherwise,

the
natural gas supply license also allows the trading activity.

▪

#### ANRE



#### Orders no.




#### 103 and 112 of 2021






changing

the

gas

authorization

and

licensing

Regulation

(as
approved by ANRE Order no. 199/2020):

-
the

order

hardens

the

procedure

on

withdrawal

of

license

upon

request

(eg.

motivated

request

for
withdrawal,

confirmation

that

obligations

towards

ANE

had

been

met;

additionally,

for

the

gas

supply
license,

suppliers

need

to

actually

not

perform

the

activity

at

the

time

of

the

request).

As

regards

the
supply

license,

it

practically

becomes

close

to

impossible

to

have

the

license

withdrawn

upon

request.

▪

#### ANRE



#### Order no.



115/2021

changing

the

electricity

authorization

and

licensing

Regulation

(as

approved
by ANRE Order no. 12/2015):

-
the

order

hardens

the

procedure

on

withdrawal

of

license

upon

request;

from

the

holder’s

initiative
by

making

it

conditional

and

confirmation

that

obligations

towards

ANRE

had

been

met,

request

and
the

requirement

that

the

applicant

holding

a

license

for

supplying

electricity

no

longer

carry

out

the
activity, for which it holds the license, at the time of submitting the application;

-
the

order

also

provides

for

additional

documents

to

be

submitted

by

the

applicant

for

an

aggregation
license

(e.g.

a

description

of

the

activity

the

applicant

intends

to

perform,

including

the

electricity
market/markets it intends to participate in).

#### Smart metering for electricity

▪

#### ANRE



#### Order


No.

94/2021

amending

and

completing

the

Framework-conditions

for

the

implementation
of

smart

metering

in

Romania
,

approved

by

ANRE

Order

No.

177/2018,

and

ANRE

Order

No.

88/2015
approving the F
ramework-contracts for the supply of electricity by the suppliers of last resort
:

-
the

following

aspects,

applicable

as

of

1
st

January

2022,

impact

suppliers’

activity:

processing

of
personal

data,

collected

and

transited

via

the

smart

meter

(with

prior

consent

of

the

customer,

which,
in

case

of

contracts

with

network

regulated

services

included,

have

to

be

obtained

by

the

supplier);
customer

information

concerning

the

smart

meter

installation

(which

shall

be

carried

out

by

the

SoLRs
for

their

customers,

by

sending

them

a

related

appendix

to

the

supply

contract);

invoicing

of

the
consumption/consumption

and

production

sites

with

smart

meter

installed

(which

shall

be

carried

out
by

the

SoLRs

for

their

customers

solely

based

on

the

data

registered

by

the

smart

meter,

with

only
one

exception

to

the

rule

allowed);

invoicing

of

distribution

services

for

the

consumption

sites

with
smart

meters

installed

(which

shall

be

done

solely

based

on

the

measuring

data

registered

by

the
smart meter).

#### Unbundling of gas activities

▪

#### ANRE



#### Order



#### ANRE nr.



93/2021

amending

the

Regulation

on

unbundling

of

accounts

of

gas

activities
,
approved by ANRE Order No
. 21/2020
:

-
The

provisions

of

interest

to

our

activity

refer

to

the

gas

supply

of

las

resort,

an

unregulated

activity
according

to

ANRE

change

of

rules

in

2020;

in

this

respect,

the

obligation

to

keep

separate

accounts

52

and report to ANRE shall only apply in case of the supply of last resort at regulated prices.

■

#### Corporate image

■

In

2021,

Electrica

climbed

two

positions,

reaching

to

8th

place

in

the

ranking

of

the

most

valuable

Romanian
brands,

with

an

estimated

market

value

of

163

million

euros,

an

increase

of

19.2%

compared

to

the

previous
year,

representing

the

largest

growth

in

the

Top

10.

It

is

the

best

position

occupied

by

Electrica

in

this

top,
so far.

In

terms

of

transparency,

Electrica

remained

in

the

top

of

the

most

appreciated

companies,

launching,

for

the
fifth consecutive year, the Sustainability Report, awarded by the Romanian Investors Relations Association.

■
During

2021,

the

companies

within

Electrica

Group

granted

around

RON

1

M

in

donations

and
sponsorships in the amount
of, for various charity causes.

■

■

#### Certifications

During

April

2021,

DEER

succesfully

finalized

the

external

recertification

audit

for

its

Quality-Environment-SSO
Integrated

Management

System

implemented

according

to

ISO

9001:2015,

ISO

14001:2015

and

ISO
45001:2018

requirements

after

the

three

distribution

operators

merger

into

one

legal

entity. No

major

non-
conformities

were

identified

during

the

audit

and

the

new

distribution

company,

DEER,

obtained

the
certification

valid

until

2024,

annual

supervisory

audits

will

be

performed

by

the

certification

body

during

the
validity period.

■

■
In

the

second

half

of

September

2021,

EFSA

was

also

audited

by

the

external

certification

body

for
the

recertification

of

its

Integrated

Management

System

Quality

-

Environment

-

SSO

implemented

according
to

the

reference

standards

ISO

9001:

2015,

ISO

14001:

2015

and

ISO

45001:

2018,

successfully

completing
the certification.

■

The

other

companies

within

the

group,

being

inside

the

validity

period

of

the

certification

obtained

for

their
Integrated

Management

Systems

Quality

-

Environment

-

SSO

implemented

in

accordance

with

the
requirements

of

the

references

ISO

9001:

2015,

ISO

14001:

2015

and

ISO

45001:

2018,

have

only

undergone
annual supervisory audits
of the external certification body, completed without major non-compliances.

■

■

#### Ethics and Compliance

■
The

Code

of

Ethics

and

Professional

Conduct

was

updated

and

a

new

policy

was

adopted,

namely,
The Policy of preventing, combating and sanctioning any form of harassment in the workplace.

53

1.3.

#### Subsequent events

Below

are

the

relevant

events

that

took

place

at

the

Group

level

in

the

period

between

the

2020

financial

year
closing and the date of the present report.

#### Decisions of ELSA’S Board of Directors

▪
During

the

meeting

held

on

2
nd

February

2022,

the

Board

of

Directors

of

the

Company

approved

the
implementation

of

a

reorganization

process

of

the

Company's

personnel

structure

and

the

initiation

of

the
collective

dismissal

procedure

and

the

amendment

of

the

Company’s

organizational

structure

effective

as
of

1
st

March

2022,

the

notification

to

the

relevant

authorities

and

of

the

Trade

Union

regarding

the

final
decision

of

the

company

to

implement

the

reorganization

process

and

to

make

collective

dismissal

of
employees

currently

in

jobs

to

be

terminated,

as

well

as

the

transmission

of

all

data

and

information
provided

in

Article

72

of

the

Labor

Code,

including

the

outcome

of

the

information

and

consultation
process with the Trade Union.

Regarding

the

necessity

and

opportunity

to

carry

out

the

reorganization

process

of

the

Company's
personnel

structure,

it

is

mentioned

that

this

is

one

of

a

broader

and

complex

package

of

measures
considered

by

the

executive

management

and

the

Board

of

Directors

of

the

Company,

regarding

the

global
transformation

process

of

Electrica

Group,

designed

to

support

both

Electrica

and

each

of

its

subsidiaries
to

act

in

an

agile

manner

in

a

field

marked

by

volatility,

uncertainty

and

complexity,

to

face

the

challenges
of

the

internal

and

external

environment

and

to

strengthen

its

financial

performance,

so

that

the

Company
have

the

resources

to

transpose

the

development

projects,

on

which

shareholders

and

investors

are
informed in accordance with the principles of transparency adopted by the Company.

The

organizational

measures

provided

for

in

the

reorganization

plan

have

the

objectives

of

resizing

and
redefining

the

company's

staff

plan

and

its

organization

and

functioning

way,

in

order

to

adapt

optimally
the

number

of

staff

and

the

functions

performed

by

the

staff

to

the

current

conditions

of

activity

on

the
energy

market.

The

implementation

of

the

organizational

transformation

project

will

achieve:

a

reduction
from

an

existing

structure

of

120

jobs

to

a

future

structure

of

85

jobs

and

a

flat

structure

by

reducing

the
number

of

hierarchical

levels.

As

a

result

of

this

approach,

the

number

of

organizational

entities

within
the

company

will

decrease

significantly

-

a

decrease

of

19%,

while

the

number

of

management/
coordination positions will decrease even more - a decrease of 25%.

▪
During

the

meeting

held

on

31

January

2022,

the

Company’s

Board

of

Directors

endorsed

the

draft
amendment

of

Electrica’s

Articles

of

Association

that

is

submitted

for

stakeholders’

consultation

and

for
the

approval

by

the

General

Meeting

of

Shareholders,

subsequent

to

completion

of

the

consultation
process.

The

proposed

amendments

can

be

found

in

Appendix

1

of

the

Communication

published

on

February

1
st
,
2022

on

the

company’s

website

in

the

section:

Investors

–

Results

and

Reports

–

Current

Reports,

as

well
as

on

the

company’s

website,

together

with

the

Articles

of

Association

in

the

form

proposed

by

the
company’s board of directors, accessing the following link:

https://www.electrica.ro/investitori/guvernanta-corporativa/politici-corporative/

.

Documents may also be made available to interested parties in physical form at the company’s registry.

During

the

meeting

dated

28

January

2022,

the

Company’s

Board

of

Directors

decided

to

convene

the

54

Company’s

Extraordinary

General

Meeting

of

Shareholders


#### (EGMS) on 21





#### March


2022
,

regarding

the
approval

of

a

total

ceiling

of

short-term

financing

that

can

be

contracted

by

EFSA

during

the

financial

year
2022

from

banking

institutions

(commercial

banks

or

international

financial

institutions

–

IFI),

With
Electrica warranty.

▪
During

the

meeting

held

on

3
rd

January

2022,

the

Board

of

Directors

of

the

Company

decided

the
nomination

of

Mr.

Stefan-Alexandru

Frangulea,

Romanian

citizen,

as

interim

CFO,

starting

with

4
th

January
2022 until 31 December 2022.

■

#### Litigations

Case no. 887/90/2013

On

3
rd

February

2022,

the

final

updated

consolidated

table

of

the

debts

owed

by

Oltchim

S.A.

was

published
in

IPB

no.

2049/03.02.2022.

The

table

was

updated

mainly

because

of

the

decision

of

the

European

Tribunal
of

Justice

in

Luxembourg,

pronounced

on

15

December

2021,

in

case

T565/19,

a

decision

that

partially
annulled

the

Decision

of

the

European

Commission

no.

C

(2018)

8592

final,

dated

17.12.2018,

which
established

a

series

of

measures

regarding

the

recovery

by

Romania

of

the

state

aid

granted

to

Oltchim

SA,
in

violation

of

art.108

paragraph

3

of

the

TFEU,

through

some

companies,

including

Electrica.

In

its

ruling,
the

European

court

annulled

several

measures

to

recover

state

aid

established

by

the

European

Commission,
including

Measure

3,

which

also

refers

to

the

total

amount

of

RON

554,959,671.97

(RON

45,106,237.96
representing

the

secured

debt

and

the

amount

of

RON

509,853,434.01

representing

the

unsecured

debt),
considered state aid with which Electrica was listed in the table of debts.

The

decision

is

enforceable,

but

not

final,

and

can

be

contested

by

the

European

Commission

within

two
months since its communication.

In

the

final

updated

consolidated

table,

Electrica

is

registered

with

(i)

the

amount

of

RON

116,058,538
representing

the

secured

debt,

with

the

right

to

vote,

(ii)

the

amount

of

RON

45,106,237.96

lei

representing
the

secured

debt

registered

under

the

condition

precedent

of

pronouncing

a

final

decision

amending

the
decision

of

the

EU

Tribunal,

without

the

right

to

vote

and

(iii)

the

amount

of

RON

509,853,434.01

representing
the

unsecured

debt

registered

under

the

condition

precedent

of

the

pronouncement

of

a

final

decision
amending the decision of the EU Tribunal, without the right to vote.

Case no. ARB-5670 – Borislavschi (RO) vs Electrica (RO)

On

7

February

2022,

the

dispute

that

makes

the

object

of

file

no.

ARB-5670

-

Borislavschi

(RO)

vs

Electrica
(RO),

pending

before

the

International

Court

of

Arbitration

in

Vienna,

was

settled

amicably

by

concluding

a
transaction.

Detailed

information

on

the

object

of

the

case

can

be

found

in

Section

1.2.

–

Key

Events

–

Litigation

of

this
Report.

55

■

#### Transactions with related parties

Regarding

the

reporting

of

transaction

with

related

parties

during

the

period

between

the

period

between

the
end

of

the

financial

year

2021

and

the

date

of

this

report,

the

following

relevant

events

took

place

at

the

level
of the Group.

▪
Between

5

January

and

26

January

2022

were

reported

the

transactions,

in

line

with

Article

108

from

Law
no

24/2017,

transactions

performed

between

OPCOM

-

DEER,

OPCOM

-

EFSA,

DEER

-

EFSA,

and
Transelectrica

-

EFSA,

the

value

of

which

exceeds

the

threshold

of

5

%

of

ELSA

net

assets,

calculated

on
the

basis

of

Electrica's

individual

financial

statements

for

2020,

that

exceeds

the

value

of

RON
202.466.778.

▪
On

26

January

2022

the

financial

auditor's

limited

independent

assurance

report

was

published,

on

the
transactions reported by ELSA in the second half of 2021, under Article 108 of Law No 24/2017.

■

#### Supply segment

In

order

to

expand

the

economic

activities

of

Electrica

Furnizare

S.A.

(EFSA)

in

Hungary,

the

Electricity

Trading
License

was

granted

by

the

Hungarian

Energy

and

Public

Utilities

Regulatory

Authority

(MEKH)

for

Electricity
Supply, by Decision no. H879 / 2022.

This

license

will

allow

Electrica

Furnizare

to

register

and

trade

electricity

in

Hungary,

on

the

wholesale

market,
including the derivatives market, and the operations will take place at EFSA headquarters.

■

#### Legislation

▪

#### GEO no.



2/2022

regarding

the

establishment

of

social

protection

measures

for

employees

and

other
professional

categories

in

the

context

of

prohibition,

suspension

or

limitation

of

economic

activities,
determined

by

the

epidemiological

situation

generated

by

the

spread

of

SARS-CoV-2

coronavirus,

as

well
as for amending and supplementing normative acts :

- the ordinance provides for amendments and completions of GEO no. 118/2021 as follows:

•

extending

the

scope

of

application

of

the

ceiling

by

including

in

the

category

of

beneficiaries

the
public

cultural

institutions

and

cultural

establishments

subordinated

to

the

central

and

local

public
administration authorities;

•

the

provision

of

the

interdiction

to

disconnect

or

interrupt

the

supply

of

electricity

to

household
customers until 30.06.2022;

•

the

provision,

in

case

of

invoices

that

do

not

comply

with

the

legal

provisions

regarding

the
application

of

support

schemes

(compensation,

exemption,

capping),

of

their

ex

officio

redone

in

max.
15

days

from

the

date

of

issue.

For

the

invoices

already

issued,

the

deadline

for

their

redone

is

15
days

from

the

entry

into

force

of

this

GEO,

so

until

February

3,

2022

(inclusive).

Also,

the

execution
of

the

obligation

to

pay

the

invoices

being

recalculated

is

suspended,

until

the

issuance

of

the

new
invoices.

▪
GEO no. 3/2022
 for the amendment and completion of GEO no. 118/2021:

- the following amendments and completions of GEO no. 118/2021:

•

increasing

the

consumption

margin

for

granting

compensation,

from

300

kWh/month

(+

10%)

to
500 kWh / month (+ 10%) for electricity and from 200 m3/month to 300 m3/month for natural gas;

56

•

changing

the

capped

price

for

HOUSEHOLDS

(from

RON

1/kWh

to

RON

0.8

/kWh

for

electricity

and
from

RON

0.37

/kWh

to

RON

0.31/kWh

for

natural

gas)

and

introducing

the

capping

for

all

customers
non-household appliances (RON 1/kWh for electricity and RON 0.37/kWh for natural gas);

•

the

capping

still

targets

both

the

final

price

and

the

purchase

component

of

electricity/natural

gas:
for

households

–

RON

0.8/kWh

the

final

price

for

electricity,

out

of

which

RON

0.336

/kWh

is

the

price
component

of

electricity;

RON

0.31/kWh

final

price

for

natural

gas,

out

of

which

RON

0.200/kWh

is
the

natural

gas

price

component;

for

non-household

customers:

RON

1

/kWh

final

price

for

electricity,
out

of

which

RON

0.525/kWh

is

the

price

component

of

electricity;

RON

0.37/kWh

the

final

price

for
natural gas, out of which RON 0.250/kWh is the natural gas price component;

•

the

recovery

of

the

capped

amounts

will

be

made

according

to

the

thresholds

indicated

above,
corroborated

with

the

application

period:

from

1st

of

November

2021

to

31st

January

2022,

by

the
difference

between

the

average

monthly

purchase

price

and

the

threshold

of

RON

525/MWh

for
electricity

and

RON

250/MWh

for

natural

gas.

From

1st

of

February,

the

recovery

is

made:

for
household

customers

-

by

the

difference

between

the

average

monthly

purchase

price

and

the
threshold

of

RON

336/MWh

for

electricity

and

RON

200/MWh

for

natural

gas;

for

non-household
customers

-

due

to

the

difference

between

the

average

monthly

purchase

price

and

the

threshold

of
RON 525 for electricity and RON 250 /MWh for natural gas.

▪

#### ANRE



#### Order no.



1/2022

for

the

abrogation

of

ANRE

Order

no.

32/2016

on

the

approval

of

the
Methodology for drawing up the Annual Report by licensees in the electricity and heat sector:

-
the

obligation

of

licensees

(including

suppliers)

to

prepare

and

submit

to

ANRE

the

annual

report

on
the activities covered by the license has been eliminated.

▪

#### ANRE



#### Order no.



3/2022

for

the

approval

of

the

Regulation

on

the

organization

and

operation

of

the
online

platform

for

changing

the

electricity

and

natural

gas

supplier

and

for

contracting

the

supply

of
electricity and natural gas:

-
application deadline - August 28, 2022;

-
initiative

started

in

order

to

achieve

the

objective

provided

by

the

European

legislation

regarding

the
change of supplier in 24 hours, starting with the year 2026;

-
ANRE

is

the

administrator

and

operator

of

the

platform

in

which

data

will

be

uploaded

by

end
customers,

suppliers,

network

operators,

aggregators,

etc.

(including

standard

offers

of

suppliers),
which

will

facilitate

the

process

of

changing

the

supplier

by

going

through

the

necessary
administrative

and

technical

stages

and

through

which

customers

will

be

able

to

contract

a

new
supplier;

-
The

regulation

details

also

the

rules

regarding

the

conclusion

of

the

supply

contract,

respectively

the
effective procedure for changing the supplier, which will replace the procedure in force.

▪

#### ANRE



#### Order no.




#### 4/2022 for the amendment and completion of ANRE










#### Order no.




#### 143/2020 regarding the obligation to offer natural gas on the centralized markets of natural gas














producers whose annual production achieved in the previous year exceeds 3,000,000 MWh:

-
the

quantitative

weight

distributed

for

the

offer

on

each

of

the

standardized

products

was

modified,
provided

for

the

period

January

1

-December

31,

2022.

In

the

context

of

the

COVID-19

pandemic,
the

government

decided

to

successively

extend

the

state

of

alert

initially

established

in

2022

starting
with January 8, 2022, by GD no. 34/2022; starting with February 7, 2022, by GD no. 171/2022.

57

2

### Electrica Group

2.1.

#### Organizational structure

As

of

31

December

2021,

the

most

significant

shareholder

of

ELSA

is

the

Romanian

State,

represented

by

the
Ministry

of

Economy,

Energy

and

Business

Environment

(Ministry

of

Energy

at

the

report

date),

holding
48.79% (31 December 2020: 48.79%).

The table below shows ELSA’s investments in subsidiaries:

#### Subsidiary

#### Activity

#### Registra tion code

#### Headquarte rs

#### % shareholdings as of 31 December

2020

Distributie

Energie
Electrica

Romania

S.A.
(„DEER”)

Electricity

distribution

in
geographical

areas
Transilvania

Nord,
Transilvania

Sud

and
Muntenia Nord

14476722

Cluj-Napoca

99.99999929%

Electrica

Furnizare

S.A.
(“EFSA”)

Electricity

and

natural

gas
supply

28909028

Bucuresti

99.9998415011992%

Electrica

Serv

S.A.
(“SERV”)

Services

in

the

energy

sector
(maintenance,

repairs,
construction)

17329505

Bucuresti

99.99998095%

Electrica

Productie

Energie
S.A (“EPE”)

Production of electricity

44854129

Bucuresti

99.920%

Electrica

Energie

Verde

1
SRL\*

(„EEV1”

–

fosta

Long
Bridge Milenium SRL)

Production of electricity

19157481

Bucuresti

100%\*

Source: Electrica

\*indirect shareholding - Electrica Energie Verde 1 SRL is 100% owned by the subsidiary EFSA

As at 31 December 2021, the Company’s associates are the following:

Associate

Activitatea

Cod unic de inregistrare

Sediu social

% participatie la 31
decembrie 2021

Crucea Power Park S.R.L.

Production of electricity

25242042

Constanta

30%

Sunwind Energy S.R.L.

Production of electricity

42910478

Constanta

30%

New Trend Energy S.R.L.

Production of electricity

42921590

Constanta

30%

Foton Power Energy S.R.L.

Production of electricity

43652555

Constanta

30%

Sursa: Electrica

The

main

activities

of

the

Group

are

the

operation

and

development

of

electricity

distribution

networks

and
the

supply

of

electricity

and

natural

gas

supply

to

end

consumers.

The

Group

is

the

electricity

distribution
operator

and

the

main

electricity

supplier

in

North

Transylvania

(Cluj,

Maramures,

Satu

Mare,

Salaj,

Bihor

and
Bistrita-Nasaud

counties),

South

Transylvania

(Brasov,

Alba,

Sibiu,

Mures,

Harghita

and

Covasna

counties)
and

North

Muntenia

(Prahova,

Buzau,

Dambovita,

Braila,

Galati

and

Vrancea

counties),

ensuring

the

service
of

the

network

users

by

operating

installations

that

function

at

voltages

ranging

from

0.4

kV

to

110

kV

(power

58

lines, substations and electrical transformer stations).

The

distribution

operator

for

the

three

regions

-

TN,

TS

and

MN,

invoices

the

electricity

distribution

service

to
electricity

suppliers

(mainly

to

EFSA

subsidiary,

the

main

electricity

supplier

in

North

Muntenia,

North
Transylvania and South Transylvania), which further invoices the electricity consumption to end consumers.

EFSA

is

a

supplier

of

electricity

in

the

competitive

market

and

is

also

a

designated

supplier

of

last

resort

(SoLR)
at national level.

The

SoLR

ensures

the

supply

of

electricity

to

final

customers

who

benefit

of,

according

to

the

legal

framework,
universal

service,

non-household

customers

who

have

not

exercised

their

eligibility

right

and

non-household
customers taken over since they have not secured the electricity supply from any another source.

However,

EFSA

is

designated

as

supplier

of

last

resort

also

in

the

natural

gas

sector,

only

with

the

possibility
to take over the consumers left without supplier.

Regarding

the

electricity

production

segment,

this

is

represented

by

the

Electrica

Group

subsidiary,

EEV1,
which

owns

a

photovoltaic

park

in

Stanesti,

Giurgiu

County,

with

an

installed

capacity

of

7.5

MW

(operating
capacity

limited

to

6.8

MW).

During

2021,

four

renewable

energy

projects

acquired

by

ELSA

have

been

added
to

this

solar

power

project

(three

photovoltaic

parks

with

an

installed

capacity

of

163.5

Mw

and

a

wind

power
park with an installed capacity of 121 Mw, having attached a electricity storage capacity of 60 Mw)

2.2.

#### Mission, vision, values

Electrica

Group

substantiates

its

future

business

development

by

adapting

to

the

market

context

and
highlighting the specific elements of its companies.

#### Mission

Energy – anywhere, anytime, for anyone!

We bring energy where people materialize their dreams.

#### Vision

Excellence and robustness for the traditional segments, innovation and flexibility in new approaches.

Promoter of electrification and green energy.

#### Values

▪

#### Trust –

we are the partner you can rely on, now and in the future.

▪

#### Competence –

we build with skill. We are proud of the role our work gives us within society.

▪

#### Safety


–

we

are

always

careful

with

the

safety

of

our

employees,

collaborators

and

the

communities

in
which we work.

▪

#### Sustainability –

our solutions are long term and friendly for the enviroment as well as for the people.

2.3.

#### Key elements of the 2019 – 2023 Strategic Plan

The

Strategic

Plan

for

the

period

2019-2023,

which

reflects

the

Board

of

Directors’

vision

of

the

management
of

activities

in

the

stakeholders’

best

interest,

both

on

a

medium

and

a

long-term

horizon,

has

been

formulated
after an analysis of the following areas:

59

▪
the

external

environment,

to

determine

the

main

environmental

factors

affecting

the

electricity

market
and the key drivers that can significantly influence the evolution of the electricity market in the future;

▪
industry

analysis,

in

order

to

identify

trends

in

the

electricity

market,

assess

the

market

attractiveness

and
determine the critical success factors necessary for competing and surviving in this market;

▪
internal

analysis

of

the

Group,

to

assess

its

past

and

current

performance

(relative

to

other

market
players).

Electrica

Group

remains

dedicated

to

ensuring

the

balance

between

generating

value

for

its

customers

and
maximizing

profit

for

shareholders,

maintaining

its

ambition

to

become

a

regional

player

in

the

energy

sector,
within a culture of ethics, integrity and sustainability.

The

Group

aims

to

optimize

the

contribution

of

each

company

to

the

financial

objectives

of

the

group,

through
a

homogeneous

and

efficient

risk

management

system.

In

this

regard,

a

unitary

implementation

of

the
strategy will be ensured, within coordinated strategic projects, focused on achieving new defined objectives.

Governance

and

investor

relations

remain

priorities

for

the

Group,

aiming

the

constant

improvement

and

the
implementation of best practices in corporate governance and investor relations areas.

For the 2019-2023 period, the Group’s key objectives are:

▪
Expanding into related fields and obtaining synergies within the areas in which the Group operates;

▪
Improving

the

operational

performance

in

order

to

continuously

increase

the

quality

of

the

services

offered
to clients;

▪
Continuing investments in order to improve infrastructure reliability;

▪
Increasing the performance and strenghtening the sustainability of economic results.

In

addition

to

the

traditional

areas

of

interest,

namely

the

electricity

distribution,

electricity

supply

and

natural
gas

and

energy

services,

there

is

a

high

interest

for

the

development

of

new

activites,

based

on

innovative
technology,

while

continuing

to

monitor

and

analyze

the

opportunities

for

growth

through

mergers

and
acquisitions.

Also,

a

closer

relationship

with

the

clients

is

pursued,

based

on

the

development

of

competencies,
as well as on an offer of products and services in line with their needs.

In

order

to

ensure

the

implementation

of

the

strategic

plan

for

the

period

2019-2023,

the

company’s

HR
strategy

aims

to

provide

the

qualified

human

resources,

necessary

to

support

the

initiatives

that

ELSA

has
proposed

for

the

next

period,

considering

an

emphasized

dynamics

of

the

labor

market,

significantly

influenced
by

the

context

of

social

distancing
.

Thus,

the

HR

strategy

aims

to

ensure

staff

-

in

terms

of

quantity

and
professional

competence

-

to

increase

operational

performance

and

achieve

the

strategic

objectives

of

the
Group,

modernizing

the

organization

by

implementing

an

organizational

culture

having

as

central

elements
excellence

and

safety,

for

staff

and

collaborators,

modernizing

the

employer

image

and

implementing

a
coherent system for performance management and employee evaluation.

Considering

that

the

limitations

generated

by

the

pandemic

context

in

2021

were

extended,

the

calendars

of
some projects have been adapted to the current situation.

At

Group

level,

a

priority

is

to

ensure

the

necessary

human

resources

for

key

business

areas,

employees
training

and

capitalize

on

their

potential,

expertise,

and

aptitudes,

in

order

to

increase

labor

productivity

and
individual performance.

Also,

an

important

role

will

be

played

by

the

optimization

of

the

classic

IT&C

support

functions,

but

also

by
the

implementation

of

the

integrated

IT&C

organization

as

a

strategic

partner

for

the

business

lines;

IT&C
takes

over

the

responsibility

of

capitalizing

on

the

synergies,

but

also

of

supporting

the

specific

competencies
that

offer

strategic

advantages

to

the

business

segments.

In

this

context,

beyond

the

processes’

digitization

60

and

their

integration

in

IT

platforms,

the

development

of

smart

grids,

the

smart

meters’

integration

in

the
rhythm of their implementation plan, support for the operationalization of prosumers etc. are provided in the
distribution

area.

In

the

supply

area,

the

development

of

a

customer-friendly

interface,

the

automation

of
contracting,

reporting,

and

invoicing

processes

and

data

exchange

with

all

Romanian

distributors

are

critical
elements supported by IT&C as a strategic partner.

The

improvement

of

the

corporate

governance

framework

is

continued,

closely

following

the

Corporate
Governance Action Plan established with EBRD starting with 2014.

#### In the distribution segment




,

the

organizational

transformation

process,

started

since

2017,

has

been
developed

and

implemented,

through

the

operationalized

initiatives,

measures

aiming

the

efficiency

and
continuous improvement of the activity.

Moreover,

at

the

end

of

2019

the

implementation

of

the

newly

approved

strategy

at

the

Group

level

was
initiated

-

through

the

perspective

of

the

megatrends

that

mark

the

energy

industry

(decarbonisation,
decentralization,

digitalization),

which

reveals

a

significant

transformation

process,

accelerated

internationally,
but

initiated

nationally,

also.

The

economic

context

at

national

level,

which

brings

additional

pressure

on

the
regulated

activities,

and

the

strategic

priorities

assumed

in

the

field

of

energy

urgent

the

need

for
transformation

also

at

the

level

of

electricity

distribution

companies,

these

becoming

one

of

the

important
pillars

for

the

transformation

of

the

energy

system.

The

need

and

principles

for

transforming

the

business
model

were

analyzed

in

detail

from

the

perspective

of

several

implementation

scenarios

-

from

individual
optimization

to

the

legal

merger

of

the

three

distribution

operators.

The

latter,

achieved

at

the

end

of

2020,
through

the

proposed

organizational

model

and

the

initiation

of

the

legal

post-merger

integration

program,

is
likely

to

create

the

premises

for

compliance

with

the

current

requirements

of

the

framework

that

has

been

in
a

special

dynamic

lately,

ensuring

medium-term

operational

efficiency,

preparing

the

organization

for

the
challenges

related

to

the

energy

transition

and

capitalizing

on

new

medium

and

long-term

business
opportunities.

The

year

2021

represented

the

year

in

which

the

foundations

of

the

new

approach

were

laid

in

terms

of
reorganizing

the

business

and

organizational

model,

which

were

established

-

in

a

broad

conceptual

and
operationalization

effort

-

the

target

objectives,

as

well

as

the

method

and

tools

to

be

used

for

the

current
year

and

the

next

2

years,

the

implementation

being

started

in

several

areas:

(i)

the

unified

target
organizational

chart;

(ii)

reviewing

and

optimizing

the

processes

-

as

a

whole,

but

also

within

specific

Centers
of

Excellence,

prioritized

for

implementation

depending

on

the

impact

in

the

operational

area

and

the
interaction

with

the

client;

(iii)

the

identification

and

application

of

those

initiatives

and

optimization

measures
that

would

lead

to

the

strict

compliance

with

the

targets

approved

by

ANRE

regarding

the

operational

and
personnel

expenses

for

the

distribution

service;

improving

the

model

of

analysis

and

monitoring

of

the

results
obtained

compared

to

the

established

targets,

with

the

application

of

a

more

agile

approach

(iv)

IT&C
technology

area

-

with

a

decisive

role

in

transforming

the

company,

as

a

whole

and

in

implementing

all

defined
projects, as part of the program.

Following

the

application,

starting

with

1st

January

2022,

of

the

new

unified

target

organization

chart,

through
which

all

structures

in

the

area

of

strategic

activities

(asset

management,

energy

management,

integration
program

management,

IT&C,

strategic

project

management),

financial

and

support

were

reunited

under

a
unique

coordination

at

the

level

of

the

company

resulting

from

the

merger

-

Distributie

Energie

Electrica
Romania

SA

(DEER),

in

the

coming

years

will

continue

the

process

of

adaptation

and

continuous

technology
improvement of processes and support, as defined by the approved Strategy for the distribution segment.

61

#### Supply segment

The

company

has

focused

in

2021

on

increasing

the

profitability

of

the

customer

portofolio

by

developing
specific

measures

to

increase

customer

satisfaction,

by

restructuring

the

portfolio

and

by

competitive

and
dynamic

purchase

strategies,

in

the

context

of

a

volatile

and

unpredictable

electricity

market.

Additionally,

the
traditional

offer

electricity

supply

was

complemented

with

combined

packages

of

electricity,

gas

and

value-
added services.

The

measures

taken

during

2021

constitute

a

stable

foundation

for

the

Group’s

ambitions

to

be

a

market
leader

and

to

ensure,

in

a

sustainable

way,

profitability

and

satisfaction

for

customers

and

partners.

As

a
result,

the

transformation

project

was

started

for

the

supply

area

in

order

to

transform

EFSA

into

an
organization

capable

of

succesfully

responding

to

current

and

future

challenges

in

the

electricity

market,
including

the

improvement

of

the

financial

results,

improving

NPS,

defining

a

competitive

commercial
programme, improving the position and transforming the organization into a supple and agile company.

Thus,

during

the

first

half

of

2021,

the

progress

of

the

implementation

of

the

Transformation

Plan

was
evaluated

through

two

audit

exercises,

and

in

parallel,

the

implementation

of

the

initiatives

identified

for

the
efficiency of the supply segment activity continued, as follows:

- consolidating the position outside the traditional area for the non-household customer segment;

-

continuing

the

process

of

developing

and

optimizing

the

portfolio

of

products

/

services

adapted

to

the
clients' needs;

- implementation of an IT application for the management of the electricity acquisition activity;

- development and optimization of the invoicing and customer management application;

-

continued

implementation

of

the

Customer

Relationship

Management

(CRM)

system

-

the

first

two

phases
of the project were implemented;

- modernization of the integrated risk management system;

-

implementation

of

a

system

for

continuous

monitoring

of

customer

satisfaction

and

identification

of

measures
to improve the quality of services;

At

the

same

time,

as

part

of

the

priority

measures

for

modernization

and

adaptation

of

internal

information
systems,

in

2021

the

preparation

for

the

transition

to

the

SAP

HANA-ERP

system

and

the

migration

of

all
necessary data were made, so that the system became operational starting with January 2022.

In the energy services segment,





after

the

completion

of

the

merger

between

the

SERV

and

SEM
subsidiaries

on

30

November

2020,

it

was

necessary

the

developing

of

a

new

plan

of

measures

for

operational
optimization,

organizational

and

strategic

repositioning

of

the

integrated

company,

Electrica

Serv

SA.

The
proposed

measures

are

a

complex

and

detailed

response

based

on

the

currently

crisis

situation

of

the
company,

in

terms

of

losses

suffered

in

2020

and

the

estimation

of

the

final

financial

results

for

2021.

The
plan

contains

an

in-depth

multicriteria

analysis

of

the

company's

activities

and

highlights

the

underying

causes
of

the

deteriorating

financial

situation.

The

measures

included

in

the

recovery

plan

aim

at

aligning

costs

with
revenues,

returning

the

company

to

positive

financial

results

and

staff

restructuring,

with

the

ultimate

goal

of
increasing

labor

productivity

by

eliminating

production

flow

dysfunctions

and

redundancies

in

the

decision-
making

process.

The

recovery

plan

also

overviews

the

strategic

repositioning

of

the

company

by

developing
and

consolidating

new

activities

that

will

serve

both

the

companies

within

the

Group

and

companies

outside
it.

62

#### Ethics


remains

a

priority

for

the

organization,

as

a

preliminary

requirement

for

the

sustainable

development
of

the

Electrica

Group.

The

Policy

on

zero

tolerance

for

corruption,

fraud

and

money

laundering

has

been
revised

and

updated

accordingly

with

ISO

37001

standard.

On

medium

term,

it

is

desired

the

development

of
an

ethics

culture

within

Electrica

Group,

by

moving

from

the

reactive

stage

to

the

integrity

stage,

by
internalizing

the

ethical

standards

and

the

values

of

the

organization,

understanding

the

ethics

role

as

a

value
enhancing

factor

and

providing

a

permanent

internal

control

system

which

involves

the

entire

company’s
personnel.

The


#### CSR activites



still

remain

very

important

for

the

Electrica

Group,

with

multiple

key

areas

being
supported, with hundreds of projects registered annually to benefit from Electrica’s support.

Also,

an

important

role

will

be

played

by

the

optimization

of

the

classic


#### IT&C support functions



,

but

also
by

the

implementation

of

the

integrated

IT&C

organization

as

a

strategic

partner

for

the

business

lines;

IT&C
takes

over

the

responsibility

of

capitalizing

on

the

synergies,

but

also

of

supporting

the

specific

competencies
that

offer

strategic

advantages

to

the

business

units.

In

this

context,

beyond

the

processes’

digitization

and
their

integration

in

IT

platforms,

the

development

of

smart

grids,

the

smart

meters’

integration

in

the

rhythm
of

their

implementation

plan,

support

for

the

operationalization

of

prosumers

etc.

are

provided

in

the
distribution

area.

In

the

supply

area,

the

development

of

a

customer-friendly

interface,

the

automation

of
contracting,

reporting,

and

invoicing

processes

and

data

exchange

with

all

Romanian

distributors

are

critical
elements supported by IT&C as a strategic partner.

2.4.

#### Outlook

The

year

2021

continued

under

the

public

health

events

(on

11

March

2020,

the

OMS

declared

the

COVID-19
pandemic) and the impact of these events on the business and social environment.

Electrica

Group

activates

in

a

key

economic

sector

and

therefore

is

closely

monitoring

both

the

national

and
the

international

context,

in

order

to

make

the

best

decisions

in

the

following

period

and

for

addressing

the
challenges on the short and medium term.

Globally,

the

budgets

of

countries

where

the

number

of

pandemic

infestations

is

high

and

economic

sectors
such

as

services,

production,

transportation,

as

well

as

commerce

and

international

trade

are

affected,

all
these

elements

influencing

the

energy

demand,

the

consumers’

behavior,

as

well

as

the

measures

taken

by
the authorities, both for the energy sector and for the economic environment in general.

The

current

strategy

of

the

Electrica

Group

is

built

on

a

set

of

trends

and

assumptions,

and

the

acceleration
of

digitalization

is

one

of

its

objectives.

This

aspect

is

even

more

important

as

during

the

following

period

it

is
necessary

to

continue

to

support

the

measures

of

social

distancing,

the

need

for

remote

intervention

and
back-up,

as

very

relevant

aspects

for

its

activities.

Thus,

it

will

continue

the

efforts

already

started

to

support
investments

in

IT

tools

and

automation,

both

for

streamlining

processes

and

for

increasing

the

performance
of its distribution networks.

Considering

the

energy

policies

developed

at

both

EU

and

national

level,

as

well

as

the

international

context
of

the

energy

markets,

the

following

trends

are

expected

to

characterize

on

medium

and

long

term

the

local
electricity market:

▪
Volatility

of

electricity

price,

with

an

accentuated

increasing

trend

-

correlation

of

exogenous

factors

to
the

industry

-

tightening

of

the

environmental

conditions

in

which

producers

must

operate,

limiting

primary

63

energy

sources

through

imperative

policies,

the

lack

of

policies

to

stimulate

the

emergence

of

new
producers

–

as

well

as

some

endogenous

ones

-

the

tendency

to

sell

only

for

short

periods

and

congestion
in the balancing and peak area - accentuates price volatility and the increasing trend;

▪
Increased

competition

between

the

players

in

the

electricity

supply

market

at

national

level,

especially

in
terms

of

diversifying

the

portfolio

of

products

offered

to

customers

(offers

for

natural

gas,

insurance,
home

appliances

etc.)

and

digital

services

offered

(mobile

applications,

invoices

and

online

payments,
extending

the

customer

service

through

chat

solutions);

the

supply

market

liberalization

imposed

the
priorities’ rethinking and establishing strategies for maintaining the market share;

▪
The

new

legislation

introducing

provisions

related

to

the

non-regulated

market

transactions,

will

also
influence the electricity market and future strategies of the SoLR regarding portfolios’ management;

▪
In

the

electricity

distribution

area,

the

regulatory

trend

is

to

provide

remuneration

to

the

distribution
operator

considering

both

the

quality

of

the

service,

as

well

as

the

operational

costs

and

efficiency

based
on comparative analysis between DSOs;

▪
Electricity

distributed

generation

technologies

will

determine

the

distribution

operators

to

adapt

their
processes

and

strategies

regarding

the

upgrade

and

development

of

the

network

and

to

offer

solutions
to

the

independent

producers,

considering

the

appearance

of

prosumers,

which

are

active

participants

in
the

energy

market;

in

this

context,

significant

investments

are

necessary

in

order

to

improve

both

the
transmission and the distribution infrastructure;

▪
On

the

long

term,

full

electric

vehicles,

light

commercial

vehicles

and

electrification

of

railways

are
expected to increase the consumption of electricity in the transportation sector.

▪
Future development of technologies will support energy efficiency policies such as:

-
Development of transmission and distribution networks, including smart grid and smart metering;

-
End-use

energy

efficiency

(thermal

integrity

of

buildings,

lighting,

electric

appliances,

motor

drives,
heat pumps etc.);

▪
The

smart

metering

implementation

will

offer

complex

tariffs

options

to

the

consumers,

detailed
information

regarding

the

consumption

profile,

which

might

lead

to

increased

flexibility

and

demand
reduction

during

peak

periods.

Thus,

the

consumers

shall

be

better

informed

and

involved

in

decision-
making

process,

as

active

participants.

The

smart

metering

implementation

pace

depends

on

the
implementation calendar adopted at national level;

▪
The

significant

reduction

in

the

cost

of

photovoltaic

technologies

is

an

opportunity

for

the

development
of small-scale generation projects, especially in the domestic area;

▪
The

development

of

the

transmission

and

distribution

infrastructure

and

long-distance

interconnection

will
become

a

necessity.

The

electricity

market

target

model,

which

implies

the

development

of

Europe’s
internal

electricity

market,

will

continue

to

evolve

and

be

in

line

with

future

trends

and

challenges

in

the
energy industry.

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

Key drivers

Description

Impact on

GDP

evolution

and
industry structure

The

economic

growth

is

a

determinant

factor

of

electricity

demand.

Although

there

is

not
a

one-to-one

relationship

between

GDP

growth

rate

and

electricity

demand

growth

rate,
there

is

a

positive

correlation,

mainly

between

the

industrial

demand

for

electricity

and
economic

growth.

In

the

future,

household

and

industrial

electricity

demand

will

also

be
influenced by energy efficiency policies.

The

increase

of

electricity

consumption

was

a

constant

trend

in

Romania

in

the

last

years.

The

COVID-19

pandemic

has

temporarily

reduced

electricity

consumption,

but

the

general
upward trend will be maintained.

GDP evolution and
industry structure

Demographic

In

contrast

with

the

demographic

decline

recorded

at

EU

and

Romanian

level,

the

electricity

Electricity

64

Key drivers

Description

Impact on

evolution and
technology
development

consumption

is

positively

impacted

by

the

changes

in

the

consumer

behavior

and

the
increase

in

urbanization.

For

example,

the

massive

increase

in

the

number

of

connected
devices

and

implicitly,

in

a

less

accelerated

manner,

in

the

electricity

consumption,
maintains

the

increasing

trend

of

consumption.

However,

due

to

rising

prices,

the
percentage of the population affected by the energy poverty is expected to increase.

consumption

Changes

in
regulatory
framework

As

regards

the

supply

of

electricity,

2021

has

brought

several

changes

in

the

legal
framework with significant impact on this activity.

The

schemes

that

have

been

approved

in

order

to

support

customers

paying

their
electricity/gas

bills,

and

that

shall

be

implemented

from

1

November

2021

to

31

March
2022,

involve

the

ex-post

compensation

of

suppliers

for

the

implementation

of

the
schemes,

thus

risking

to

affect

the

activity

in

case

of

delays

in

the

recovery

of

the

costs
borne by suppliers or in case these costs are not fully recovered.

As

of

2022,

only

household

customers

shall

have

the

right

to

universal

service.

Therefore,
new

competitive

contracts

must

be

signed

with

non-household

customers

which

previously
benefitted

from

universal

service,

if

not,

these

customers

may

be

switched

to

a

supplier

of
last resort.

The

new

Performance

Standard

for

electricity/gas

supply

shall

be

enforced

in

2022,
bringing

higher

quality

requirements

for

the

supply

of

electricity,

as

well

as

higher
obligations

concerning

the

compensation

of

customers,

including

the

obligation

to

pay
compensations to all categories of customers in case of breach of quality standards.

Regarding

the

distribution

segment,

in

2019

the

4th

regulatory

period

began

(2019-2023),
and

ANRE

approved

significant

changes

to

the

Methodology

for

all

elements

of

the

tariff
(regulated

rate

of

return,

base

of

regulated

assets,

own

consumption

technological,
operating and maintenance costs, dynamic distribution tariffs starting with 2020).

The

energy

law

was

amended

in

the

period

2020-2021,

so

that:

in

2021

OD

financed

the
works

for

connecting

domestic

and

non-domestic

customers

with

lengths

of

less

than

2.5
km,

and

starting

with

2022,

the

free

for

non-domestic

customers

was

eliminated.
households,

and

for

households

the

obligation

to

finance

by

OD

only

a

connection

in
average value established by ANRE was maintained.

Electricity prices

The

evolution

of

the
electricity

price

in
the market

The

transactions

concluded

on

the

centralized

platforms

exceeded

the

threshold

of

700

lei
/

MWh

for

Year

2022

product

and

1000

lei

/

MWh

for

the

short-term

products

related

to
the

winter

period,

and

on

DAM

the

weighted

average

price

doubled

compared

to

the
beginning

of

the

year

2021.

Distribution

operators

purchase

energy

for

NL

at

a

price

double
than the ex-ante price approved in the distribution tariffs.

Electricity prices

Technological
development

Smart

networks

and

smart

meters

will

create

benefits

for

the

end

consumers,

distribution
operators

and

suppliers

in

terms

of

energy

efficiency,

resource

optimization

and

network
operation,

implementation

of

demand

response

etc.

It

is

necessary

to

prepare

the

networks
and

to

integrate

the

distributed

resources

(storage

solutions,

micro-grids,

local

production,
electric machines, etc.), also considering the management of their impact.

Electricity prices
and consumption

Increase

in
environmental
awareness

Romania

has

adopted

the

EU

20-20-20

targets,

aiming

to

reduce

greenhouse

gas
emissions,

improve

energy

efficiency

and

raise

the

share

of

renewable

energy.

Moreover,
the

2030

Framework

provides

even

more

ambitious

targets

and

therefore

more

efforts

are
needed from governments and market players to achieve them.

Electricity prices
and consumption,
regulatory
framework

Source: Electrica

#### The regulatory framework perspective and the impact on the energy market

The regulatory changes with significant impact in the

#### supply segment

 are the following:

▪
Enforcement

of

OUG

no.

143/2021

amending

the

Electricity

and

Gas

Law

no.

123/2012,

which

transposes
into

national

legislation

Directive

(EU)

944/2019

on

common

rules

for

the

internal

market

for

electricity
and

brings

new

rights

and

obligations

for

the

suppliers

of

electricity

concerning

inter

alia:

obligation

to
supply

universal

service

(US)

to

household

customers

only;

removal

of

the

obligation

to

set

up

physical

65

customer

care

centers

for

US

customers

at

max.

50

km;

obligation

to

issue

settlement

bills

for

household
customers

once

every

3

months

at

the

least;

right

to

conclude

directly

negotiated

bilateral

transactions
on

the

wholesale

markets

for

any

period

of

time;

obligation

to

procure

the

electricity

needed

to

cover
customers’

consumptions,

whose

breach

shall

be

sanctioned

with

a

fine

calculated

as

a

percentage

form
the annual turnover;

▪
Implementation,

from

1

November

2021

to

31

March

2022,

against

the

background

of

the

surge

in

the
energy

price

on

the

international

and

national

markets

and

the

impact

thereof

on

Romanian

customers,

of

the

customer

support

schemes

approved

by

OUG

no.

118/2021
,

as

approved

with

amendments

by

Law
no.

259/2021

and

amended

by

OUG

no.

130/2021.

The

way

the

schemes

shall

be

implemented,

i.e.
through

suppliers,

and

especially

the

way

suppliers

shall

be

compensated,

ex-post,

from

the

state

budget
for

the

costs

borne,

imply

cash

flow

constraints,

and

uncertainties

concerning

the

full

recovery

of

the
costs borne by suppliers with the implementation of the schemes;

▪
Enforcement,

in

2022,

of

the

new

Performance

Standard

for

the

supply

of

electricity/gas,

approved

by
ANRE

Order

no.

83/2021,

bringing

higher

quality

requirements

for

the

supply

of

electricity,

as

well

as
higher

obligations

concerning

the

compensation

of

customers,

including

the

obligation

to

pay
compensations

to

all

categories

of

customers

in

case

of

breach

of

the

quality

standards,

and

more
guaranteed quality indicators;

▪
Amendment

of

the

Electricity

Supply

Regulation
,

by

ANRE

Order

no.

82/2021

and

no.

91/2021,

according
to

which,

as

of

1

January

2022,

the

consumption

of

electricity

from

the

monthly

invoice

sent

by

the
network

operator

to

suppliers

shall

be

determined,

in

the

absence

of

the

meter

reading,

based

on

a
consumption

convention,

with

positive

impact

on

the

level

of

invoiced

consumption

and

the

value

of

the
distribution services priced according to the distribution tariff;

▪
Amendment

of

the

Gas

Supply

of

Last

Resort

Regulation

by

ANRE

Order

no.

125/2021,

making

more
difficult

for

suppliers

of

last

resort

(SoLRs)

to

voluntarily

relinquish

this

quality,

and

bringing

changes
concerning

the

duration

of

the

supply

of

last

resort

(min.

12

months

for

small

customers)

and

the

price
setting

mechanism

(i.e.

the

supply

and

transmission

components

of

the

final

price

must

be

kept

uchanged
for

at

least

3

months).

Also,

the

criteria

for

selection

of

SoLRs

for

automatic

takeover

of

customers

have
been

supplemented

with

the

takeover

capacity

criterion,

under

which

the

number

of

customers

taken

over
may not exceed 30% of SoLR’s number of customers.

For the distribution segment,



the

significant

changes

in

the

Romanian

legislation

were

detailed

at

chapter
1.2. Key Events.
 Based on these changes, the expected effects refer to:

▪
the

changes

brought

by

the

new

methodology

for

establishing

the

distribution

tariffs

and

the

RRR

level,
that

will

generate

a

negative

impact

on

the

operational

and

financial

performances

of

the

DSO,

as

a

result
of

the

ANRE

approval

of

the

operating

and

maintenance

costs

at

a

lower

level

than

the

necessary

costs
requested

by

the

DSO,

as

well

as

of

ANRE

annually

carrying

out

the

costs

and

forecast

investments
corrections.

▪
the

changes

brought

to

the

methodology

in

2020

regarding

the

regulation

of

some

aspects

in

case

of
mergers,

which

were

materialized

through

the

obligation

of

the

gross

benefits

annual

reporting,

as

well
as of the merger associated expenses;

▪
investments

in

electrical

distribution

network

-

ANRE

approved

Order

no.

3/20

January

2021

which

grants
a

2%

additional

incentive

to

RRR

for

investments

in

electrical

distribution

network

made

from

own

funds
in

projects

in

which

European

non-reimbursable

funds

were

attracted,

if

the

investments

were

made

and
commissioned by the operators after 1 February 2021;

▪
for

the

year

2021

it

has

been

introduced

the

DSO

obligation

to

perform,

in

addition

to

the

investment
plan,

the

connection

workings

of

the

household

and

non-household

customers;

and

starting

with

2022,
the

Energy

Law

was

amended

by

GEO

no.

143/2021,

the

connection

of

non-household

customers

will

no

66

longer

be

free

of

charge,

and

for

domestic

customers

the

Distributor

will

pay

only

the

average

value

of

a
connection, established by ANRE;

▪
ANRE

has

approved

the

Performance

Standard

for

the

electricity

distribution

service,

which

brings
additional

obligations

for

the

DSO

which

will

lead

to

operating

costs

and

investments

higher

than

the
values approved by ANRE.

The

regulatory

changes

with

significant

impact

in

the


#### supply segment



are

the

following:

until

31

December
2020,

for

household

customers

the

supply

of

electricity

is

done

in

conditions

regulated

by

ANRE;

starting

with
1 January 2021, the electricity market is liberalized for all categories of final customers.

#### The human resources area perspective

As

it

resulted

from

the

analyzes

used

in

the

elaboration

of

the

human

resources

strategy,

as

well

as

from
more

recent

analyzes,

the

labor

market

faces

new

challenges,

as

demographic

developments,

labor

migration,
and

the

evolution

of

the

economy

will

accentuate

the

shortage

of

skilled

labor.

Also,

the

acceleration

of
digitization,

generated

by

the

pandemic

context,

the

inherent

technological

changes,

as

well

as

the
process

of

succession

to

a

new

generation,

inherent

at

the

Group

level,

will

determine

the

transition
to

new

profiles

for

employees

that

include

a

mix

of

skills

and,

at

the

same

time,

real

challenges

in
recruiting new employees with a high level of expertise in the near future.

Electrica

Group

operates

in

a

competitive

market,

where

the

technological

progress

is

very

fast

and

at

a

time
when

the

approach

of

companies

and

employees

is

changing

towards

the

work

process,

as

it

was

defined

in
the

past.

Salary

packages

are

no

longer

the

only

motivational

lever.

Non-financial

benefits

and

the
organizational climate, are increasingly important to attract employees and retaining the valuable ones.

Career

opportunities,

broadening

the

area

of

competence

and

assigning

more

significant

responsibilities

must
be

part

of

the

strategies

and

tools

used.

At

the

same

time,

at

Group

level,

the

provision

of

the

necessary
human

resources

and

the

staff

training

in

key

business

areas

were

treated

as

priority

topics,

in

order

to
increase labor productivity and individual performance.

The

human

resources

strategy

took

into

account

these

aspects

and,

through

the

proposed

projects,

aimed

at
reducing the impact of the negative aspects in the retaining and development of the human resource.

At

the

same

time,

considering

the

evolution

of

the

financial

and

operational

performance,

registered

during
the

past

years,

as

well

as

the

transformations

and

the

trends

of

the

energy

sector,

it

was

decided

to

start

a
corporate

reorganization

plan

as

a

necessary

and

opportune

measure

to

adapt

to

the

market

context.

This
initiative pursues a series of strategic objectives, such as:

- increasing financial and operational performance;

-

the

organization

corporate

cultural

transformation,

focused

on

efficiency

and

performance,

in

order

to

ensure
the sustainability of the business;

- work efficiency, staff improvement and specialization;

-

accelerating

the

embracing

of

the

market’s

best

practices

and

new

technologies,

increasing

transparency
and reducing costs.

For

2022,

in

line

with

the

objectives

and

directions

included

in

the

IT&C

Strategy

approved

in

2019,

the

Group
aims

to

complete

the

consolidation

of

integrated

ERP

systems

from

the

Group's

subsidiaries,

synchronizing
these

requirements

with

the

needs,

decisions

and

initiatives

to

reorganize

divisions

and

operational

directions.
In

addition

to

traditional

IT&C

infrastructure

and

services,

the

Group

aims

to

continue

and

accelerate

67

digitization

initiatives

and

the

application

of

technologies

that

lead

to

faster,

more

flexible

and

customer-
friendly

interaction.

Last

but

not

least,

the

Group

set

out

to

analyze

the

options

for

the

next

stage

of
technological

development

and

harmonization;

the

future

Digitization

Strategy

should

take

over

the

results

of
the

current

phase

in

2023

and

place

full

emphasis

on

optimizing

internal

and

other

processes,

with

all
stakeholders, based on the Group's advanced Digital Transformation technologies.

2.5.

#### Key factors, directions and significant market trends affecting the operational results of Electrica Group

Considering

the

strategic

elements

defined

for

2019-2023,

the

company

analyzes

the

strategic

options

and
aims

to

implement

streamlining

measures,

including

through

restructuring

programs

and

transformation

of
Group’s

divisions,

training

and

staff

development

programs,

redesigning

business

models,

or

entering

new
business

segments,

in

order

to

improve

both

the

quality

of

the

services

offered,

as

well

as

the

financial
performance.

The most important

#### assumptions

 considered for the strategy review are the following:

▪
The

Romanian

energy

mix

is

changing

significantly,

being

heavily

disrupted

by

the

advent

of

renewables,
together with the emergence of the prosumers in the following years;

▪
Romanian GDP will have a stable long-term evolution;

▪
Different

trends

in

electricity

consumption

(increasing

trend

on

a

medium

term,

but

stagnation/reduction
on the long term);

▪
Romania

will

maintain

its

commitment

towards

the

accomplishment

of

the

20-20-20

strategy

regarding
the

climate

changes

and

the

implementation

of

the

new

Framework

for

the

period

2020-2030;

Moreover,
the

adoption

by

the

European

Comission

of

the

European

Ecological

Pact

(the

“Green

Deal”)

has

the
potential

to

significantly

modify

the

entire

macroeconomic

system,

leading

to

a

revision

of

the

strategy

in
the following period, depending on the local implementation;

▪
For

the

current

regulatory

period,

the

remuneration

mechanism,

the

type

of

tariff

and

the

method

of
applying

corrections

are

subject

to

modifications,

these

key

factors

being

considered

in

the

strategic
planning;

▪
The

supply

segment

will

experience

a

short

and

medium

term

repositioning

following

the

elimination

of
regulated tariffs and liberalization of the electricity market starting with 1 January 2021;

▪
The

impact

that

the

legislative

framework

changes

may

have,

as

well

as

the

lack

of

predictability

in

the
medium

and

short

term,

particularly

regarding

the

prices

and

supply

conditions

applicable

to

household
customers who currently benefit from universal service;

▪
No

major

geopolitical

turbulences

have

been

taken

into

account,

which

might

significantly

affect

the
Romanian electricity market;

▪
Financial

markets

will

allow

access

to

profitable

financing

sources

to

support

companies’

investment
programs
.

As

a

result

of

the

adoption

of

the

new

business

strategy

of

the

Electrica

Group

and

in

line

with

the

main
objectives

and

directions

established

by

it,

in

2019

a

process

of

analysis,

evaluation,

formulation

and

approval
of

a

specific

strategy

for

reorganizing

Group


#### IT&C activities



took

place.

This

strategy

has

clear

and
measurable

objectives

for

the

period

2020-2023

in

order

to

support

business

projects,

including

among

others
measures

to

extend

the

digital

transformation,

increase

the

cyber

security

level

at

the

Group

level,

develop
virtual

centers

of

excellence

based

on

the

use

of

best

practices

and

benefiting

from

economies

of

scale,

68

maximizing

the

economic

benefits.

During

the

year

2020,

the

implementation

of

the

IT&C

strategy

achieved
the

proposed

objectives

in

the

area

of

personnel

reorganization,

evaluation

of

technology

and

processes

and
setting the alignment plans that are already launched for 2021 and 2022.

In

the

distribution

segment,

the

focus

is

on

operational

efficiency,

by

reducing

technological

and

commercial
losses,

optimizing

internal

processes,

ensuring

an

optimal

level

of

resources

used,

on

user

orientation

and
ensuring

their

satisfaction,

by

improving

the

network

access

and

the

quality

of

service,

on

development

of
smart

grid

technologies

and

cost

recovery.

Increasing

the

operational

performance

will

lead

to

a

positive
impact

on

the

users’

experience,

ensuring

continuous

supply

security,

at

high

quality

and

high

standard
interactions

with

our

staff.

In

parallel,

exploiting

the

significant

optimization

potential

and

reducing

losses

by
streamlining

the

distribution

operators’

activities

are

key

factors

in

the

optimal

allocation

of

resources,

so
important in this regulatory period.

One

of

the

main

factors

influencing

the

strategic

decisions

for

the

Distribution

area

is

represented

by

the

trend
of

energy

market

prices

which

negatively

impacts

in

a

significant

way

the

cost

of

energy

acquisition

for

network
losses

and

for

which

there

are

no

premises

for

comeback,

with

a

significant

negative

impact

over

profitability.

The

supply

segment

will

focus

on

diversifying

the

activity

through

offers

and

services

adapted

to

customers'
needs,

on

operational

efficiency

through

optimized

processes

for

the

sale

and

purchase

of

electricity

and

on
customer

orientation

and

maximizing

satisfaction.

The

aim

is

to

increase

the

natural

gas

supply

segment,

to
offer value-added solutions (products and services) and to digitize specific operations and processes.

Please

note

that

other

factors

that

are

not

available

at

the

report

date

(eg.

legislation

and

regulatory

provisions

under
disscusions

etc.)

or

not

presented

above,

or

not

considered

by

the

Group

may

occur

and

may

have

a

significant

impact
on the implementation and evolution of the Group’s strategy.

Supply segment

Legal

framework

has

been

suffering

significant

changes

in

the

last

decade,

including

the

market

liberelization,
separation

of

activities,

the

implementation

of

support

scheme

for

renewable

energy,

supporting

to

electricity
prosumers.

Starting

with

1
st

of

January

2021,

together

with

elimination

of

regulated

final

prices

for

electricity,

the

elecricity
market

is

fully

liberalized

for

all

categories

of

customers.

As

a

result,

both

for

universal

service

offers

and

for
competitive market offers, the price is set up by suppliers in free market conditions.

At

the

same

time,

the

amendments

and

completions

brought

to

the

Law

on

electricity

and

natural

gas

no.
123/2012

by

GEO

no.

143/2021,

created

new

rights

and

obligations

for

electricity

suppliers,

among

which:
the

obligation

to

provide

universal

service

only

to

households;

elimination

of

the

obligation

regarding

the
establishment

of

single

physical

contact

points

at

max.

50

km

for

customers

receiving

universal

service;

the
obligation

regarding

the

issuance

of

the

regularization

invoice

for

the

households

once

at

max.

3

months;

the
right

to

carry

out,

on

the

wholesale

market,

directly

negotiated

bilateral

transactions

for

any

time

interval;

the
obligation

regarding

the

purchase

of

electricity

in

order

to

ensure

the

coverage

of

the

clients'

consumption,
the non-observance of which constitutes a contravention sanctioned with a fine applied to the turnover.

Moreover,

between

1
st

of

November

2021

and

31
st

of

March

2022,

in

the

context

of

the

increase

in

prices

on
the

electricity

and

natural

gas

markets

at

international

and

national

level,

as

well

as

the

effects

caused

by
these

increases

for

the

Romanian

population,

will

be

applied,

through

the

effect

GEO

no.

118/2021,

with
subsequent

amendments

and

completions,

a

series

of

support

schemes

for

electricity

/

natural

gas

customers.
In

particular,

given

the

manner

in

which

these

schemes

are

implemented

and

the

mechanism

for

settling

the

69

amounts

granted

as

support

for

customers,

ex

post,

from

the

state

budget

to

electricity

suppliers,

they

are
likely

to

generate

constraints

in

terms

of

cash

flows

,

as

well

as

uncertainties

regarding

the

full

recovery

of
the respective amounts by the suppliers.

In

this

context,

EFSA

is

reviewing

its

medium

and

long

term

strategy

such

as

to

manage

responsibly

and

in

a
sustainable

manner

the

impact

of

these

measures

on

the

company’s

activitities,

in

this

legal

framework

that
has successive and high impact changes lately.

Evolution of purchase prices

•
2021

was

a

year

characterized

by

an

abrupt

increase

of

prices

both

for

energy

and

natural

gas,
reaching historical maximum levels for trades.

•
There

have

been

recorded

increase

over

400%,

from

RON200-300/Mwh

energy

trading

price

in

2020
to over RON 1,000 /Mwh trading prices in 2021.

As

a

result

of

coupling

to

the

regional

markets,

the

trading

prices

from

wholesale

energy

market

have

been
alligned to those from region.

The main casues that favored the increase of prices:

✓
Increase of trading prices for carbon emission certificates, from EUR 20-0/ton to EUR 80-90/ton

✓
Increase

of

natural

gas

price

from

RON

60-70/Mwh

in

2020

to

RON

500-600/Mwh

in

2021

with

direct
impact

on

the

increase

of

the

production

costs

of

electrical

power

plants

that

uses

natural

gas

as

fuel;

✓
Lack of investments in new production capacities.

In

the

context

of

high

volatility

of

trading

prices

and

of

the

unpredictability

created

by

the

legal

framework,

it
is

difficult

to

assess

what

would

be

the

evolution

of

wholesale

energy

market

in

2022.

Due

to

the

lack

of

major
investments

in

new

production

capacities,

it

is

estimated

that

the

ascending

trend

will

be

maintained

on

the
energy and natural gas market.

The impact on customers

•
Continue

expansion

of

the

activity

through

opening

new

offices

in

the

non-traditional

business

activity
of

Electrica

Furnizare,

with

providing

consulting

to

clients

regarding

the

products

on

the

competitive
market and facilitating the conclusion of advantageous contracts;

•
Developing

partnerships

with

the

scope

of

open

approach

of

market

in

the

dynamic

context

created
by liberalization;

•
Modernization

of

many

centres

for

managing

clients

relationships,

out

of

which

are

those

from

Cluj-
Napoca, Brasov;

•
Acceleration of digitization and streamline of processes to optimize customer relations;

•
the

dynamic

of

energy

market

and

international

context

has

influenced

the

evolution

of

energy

market
in Romania, by simplifying the processes for bidding, contracting, supplier change;

•
Context

influenced

by

supporting

measures

given

to

companies

that

operates

in

the

sectors

impacted
by pandemic crisis (ex. HoReCa);

•
Insolvency

of

the

energy

suppliers

in

the

context

generated

by

pandemic,

that

triggered

the

transfer
of customers to last resort supply, generating imbalances of the competitive market.

70

3

### Electrica on the capital markets

3.1.

#### Ownership structure

Until

July

2014,

the

Romanian

State,

through

the

Ministry

of

Economy,

Energy

and

Business

Environment,
was

the

sole

shareholder

of

ELSA.

As

of

4

July

2014,

after

the

Initial

Public

Offering,

the

Company's

shares
are

listed

on

the

Bucharest

Stock

Exchange

(BSE

–

ticker

EL),

and

the

Global

Depositary

Receipts

are

listed
on the London Stock Exchange (LSE – ticker ELSA).

After

the

secondary

public

offer

that

ended

on

3

December

2019,

during

which

a

total

number

of

208,554
new

shares

were

subscribed,

with

a

nominal

value

of

RON

10

and

a

total

nominal

value

of

RON

2,085,540,
the

ownership

structure

according

to

the

Central

Depository

records

(Romanian:

Depozitarul

Central
)

as

of

31
December 2021 is the following:

Shareholder

Number of shares

Stake held

(% of the share capital)

Percent of voting
rights (%)

The

Romanian

State,

through

the

Ministry
Energy, Bucharest, Romania

169.046.299

48,7948%

49,7850%

The European Bank for Reconstruction and
Development

17.355.272

5,0096%

5,1112%

Electrica SA

6.890.593

1,9890%

0

BNY MELLON DRS, New York, USA

2.716.716

0,7842%

0,8001%

Other legal entities\*

132.970.836

38,3817%

39,1606%

Individuals

17.463.881

5,0409%

5,1432%

TOTAL

346.443.597

100,0000%

100,0000%

Source: Central Depository, Electrica

Note

1:

Shares

with

voting

rights

-

339,553,004,

representing

the

total

number

of

shares

(346,443,597)

without

the

number

of

own
shares held by Electrica (6,890,593), for which the voting right is suspended

\*

Paval

Holding,

NN

Group

NV

and

Allianz

SE

hold,

directly

or

indirectly,

between

5

and

10%

of

the

total

number

of

shares

with

voting
rights

The

shares

presented

to

be

held

by

the

Bank

of

New

York

Mellon

represent

the

global

depositary

receipts
(GDRs)

owned

by

ELSA

shareholders

that

are

traded

on

the

London

Stock

Exchange

(LSE).

A

global

depositary
receipt represents four shares. The Bank of New York Mellon is the depositary bank for these securities.

Following

the

stabilization

process

after

the

June

2014

IPO,

ELSA

owns

6,890,593

of

its

shares,

representing
1.989%

of

the

total

share

capital

at

31

December

2021,

with

suspended

voting

rights,

which

does

not

entitle
ELSA the right to receive dividends.

71

Figure 16: Ownership structure as of 31 December 2021

Source: Central Depository, Electrica

At

the

end

of

2021,

ELSA’s

shares

were

owned

by

a

total

of

10,090

shareholders,

of

which

264

legal

entities
and

9,826

individuals

from

over

30

countries.

89.43%

of

the

total

number

of

shares

(
309,808,734

shares)
were

held

by

Romanian

investors.

Thus,

foreign

shareholders

held

10.57%

of

the

share

capital

(36,634,863
shares),

the

largest

weight

being

represented

by

European

citizens.

Shareholders

in

the

United

Kingdom

and
Ireland

held

5.36%

of

share

capital,

while

those

in

the

USA

held

1.27%,

in

this

category

being

included

also
the GDR holders.

3.2.

#### Shares evolution on BSE and Global depository receipts










#### (GDRs) evolution on LSE

BSE:

ELSA's

shares

are

included

in

several

BSE

indices,

including

the

BET

index

(the

reference

index

for

the
Romanian

capital

market

reflecting

the

performance

of

the

most

traded

companies

on

the

BSE’s

regulated
market),

as

well

as

in

the

BET-NG

index

(the

sectorial

index

that

reflects

the

evolution

of

the

companies

listed
on BSE’s regulated market having as main activity energy and related utilities).

Between

4


#### July


2014

-

31


#### December


2021
,

ELSA’s

shares

recorded

a

minimum

price

of

RON

8.06

(16 March

2020)

and

a

maximum

price

of

RON

14.96

(12

May

2017),

therefore

the

weighted

average

price

was
RON 11.85.

The

gross

dividends

per

share

granted

by

ELSA

in

this

period

reached

a

cumulative

value

of

RON

5.2317.
Thus,

the

aggregate

yield

generated

by

ELSA’s

shares

(along

with

dividends)

from

the

IPO

and

until

the

end
of 2021 was 38.83%.

From

the

IPO

dated

4

July

2014

until

the

end

of

2021,

ELSA

shares

attracted

a

RON

3.92

bn

liquidity

on

BSE,
with

a

daily

average

of

RON

2.04

mn.

During

this

period

of

about

8

years,

332.03

mn

ELSA

shares

have

been
traded

(including

DEAL

transactions),

representing

95.84%

of

the

share

capital

and

97.79%

of

the

voting
rights

(total

shares

without

ELSA

shares).

Thus,

the

average

daily

turnover

during

this

period

on

BSE

was

of

![Image should be here]()

48.7948%

5.0096%

1.9890%

0.7842%

38.3817%

5.0409%

The Romanian state through the Ministry of
Economy, Energy and Business
Environment

EBRD, UK

Electrica SA

Bank of New York Mellon (DRS - LSE)

Other legal entities

Individuals

Total

shares
:
346,443,597

72

172.935 shares.

The

gross

dividend

per

share

granted

by

ELSA

in

2021

(for

2020)

was

RON

0.73,

in

line

with

those

granted

in
the previous years, with a yield of 5.72% (computed at the ex-date closing price from 3 June 2021).

During

2021,

ELSA

shares

attracted

a

liquidity

of

RON

217.15

mn

on

BSE,

with

a

daily

average

of

RON

858.29
th.,

dropping

by

61.18%

compared

to

2020,

the

tenth

in

top

by

trading

data

on

BVB.

The

volume

of

shares
traded

was

17.65

mn,

dropping

by

65.37%

compared

to

2020,

so

the

daily

average

volume

was

of

69.743
shares. The total volume of shares traded in 2021 accounted for 5.09% of the share capital.

In

order

to

support

the

liquidity

of

its

listed

shares,

ELSA

concluded

a


#### Market



#### Making services contract




with

Wood&Co,

starting

30

September

2020,

its

validity

being

extended

by

one

year,

starting

30

September
2021.

LSE:

#### The GDRs’ weight




in

ELSA's

total

share

capital

diminished

during

the

period

following

the

Initial

Public
Offering, reaching a level of 0.78% at the end of 2021, compared to 10.17% at 4 July 2014.

#### The maximum price




reached

by

the

GDRs

was

USD

15.3,

in

September

2014

and

the

minimum

price

was
USD

7.9

on

6

April

2020.

Subsequently,

the

GDRs’

price

followed

a

fluctuating

trend.

During

2021

the

trend
was a downward one, ending 2021 at a price of USD 9, dropping by 28% compared to the end of 2020.

In

the

period

since

IPO

and

until

the

end

of

2021,

12.6

mn

GDRs

have

been

traded,

out

of

which

35,304

GDRs
in 2021.

Figure 17: Evolution of the
adjusted closing
price
3

of ELSA’s shares
vs BET-TR index during 2021

Source: BSE, Electrica

![Image should be here]()

![Image should be here]()

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

Jan-21

Jan-21

Mar-21

Apr-21

May-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

BET-TR

Electrica's price adjusted with dividends

EL: -
14.52%
BET-TR: 39.46%

73

Figura 18:
 Volumul lunar tranzactionat si evolutia pretului mediu ponderat lunar al actiunilor pe BVB (in
RON) si GDR-urilor pe LSE (in USD) pe parcursul anului 2021

Source: BSE, LSE, Electrica

3.3.

#### Investor relations (IR)

As

in

every

year,

in

2021

ELSA's

management

team

continued

to

be

involved

in

numerous

activities

for
investors

and

analysts.

Although

the

crisis

generated

by

COVID-19

pandemic

led

to

the

impossibility

of
organizing

physical

meetings,

ELSA’s

representatives

continued

to

be

present

at

national

and

international
conferences

as

well

as

at

online

individual

meetings

and

attended

conference

calls

with

Romanian

or

foreign
investors and analysts.

During

the

year,

four

teleconferences

were

organized

to

present

the

annual,

quarterly

and

half-yearly

financial
results

of

the

Group.

The

events

have

been

streamed

live

through

webcasts,

both

the

supporting

documents
and

the

webconference

recordings

can

be

accessed

on

the

company's

website,

under

the

section

Investors

>
Results and Reports.

Among

the

conferences

that

took

place

during

2021

and

were

attended

by

ELSA’s

representatives,

we
mention:

▪
Institutional Investor Conference in Zürs, online event (12 April 2021);

▪
WOOD's EM Energy & Commodities Conference, online event (13 April 2021);

▪
Invest Talk - Investeste la Bursa, online event (2 June 2021)

![Image should be here]()

74

▪
Frontier Investor Days 2021 – Wood’s virtual conference, online event (2-3 September 2021);

▪
Wood’s Winter Wonderland EME Conference, online event (9-10 December 2021).

In

2021

ELSA

continued

to

be

associate

member

of

the

Romanian

Investors

Relations

Association

(ARIR),
being involved in numerous ongoing projects of the association.

To

inform

stakeholders

correctly,

continuously,

and

transparently,

the

Investor

Relations

Department

has
disseminated

a

large

number

of

current

reports

and

anouncements

on

the

platforms

of

the

Bucharest

Stock
Exchange

(BSE),

the

London

Stock

Exchange

(LSE),

the

Financial

Supervisory

Authority

(ASF

and

FCA),

as
well

as

on

ELSA’s

website.

All

these

documents

can

be

accessed

on

the

company’s

website,

under

Investors
section > Results and Reports.

All

the

actions

taken

during

2021,

as

well

as

the

plans

for

the

following

years,

have

as

main

objective

the
achievement

of

the

best-in-class

investor

program,

increasing

the

transparency

and

quality

of

communication
with

investors

and

analysts,

constantly

driving

shareholders’

retention

and

satisfaction.

Evidence

of

the
recognition

of

these

efforts

was

ELSA’s

positioning

in

the

top

listed

companies

in

terms

of

transparency

and
communication

in

investor

relations,

by

obtaining

a

score

of

10

on

Vektor

–

measure

of

the

communication

of
listed

companies

with

investors

(in

2021

only

10

companies

have

obtained

a

grade

above

9),

as

well

as

the
award granted by ARIR for the activity carried out by ELSA, at the category Best Sustainability Report.

3.4.

#### Related parties transactions

ELSA

has

the

obligation

to

report

the

significant

transactions

concluded

by

ELSA

or

its

subsidiaries

with

related
parties,

by

drawing

up

and

publishing

reports

on

this

aspect,

as

per

art.

108

of

law

no.

24/2017.

"Significant
transaction"

means

any

transfer

of

resources,

services

or

obligations,

whether

or

not

it

involves

the

payment
of

a

price,

the

individual

or

cumulative

value

of

which

represents

more

than

5%

of

ELSA's

net

assets,

according
to

the

latest

individual

financial

statements

published

by

ELSA

(in

this

case

on

31

December

2020,

RON 202,466,778).

The

current

reports

on

this

type

of

transactions

published

by

ELSA

in

2021

may

be

retrieved

on

the

company's
website, at

https://www.electrica.ro/en/investors/results-and-reports/current-reports-art-108/

.

3.5.

#### Dividends policy

ELSA’s

dividend

policy,

updated

in

February

2018,

can

be

accessed

on

the

company's

website

under

Investors
section > Corporate Governance > Corporate policies and other documents.

ELSA's

dividends

are

distributed

from

the

annual

net

distributable

profit

based

on

the

annual

individual

audited
financial

statements

after

their

approval

by

ELSA's

Ordinary

General

Shareholders'

Meeting

(OGMS)

and

the
approval

of

the

dividend

proposal

by

the

OGMS.

The

shareholders

receive

dividends

proportionally

to

their
share in the company’s paid-up capital.

Regarding

the

global

deposit

receipts

that

are

traded

on

the

London

Stock

Exchange,

ELSA

pays

dividends

to
the

GDRs

issuer

proportionally

to

its

holdings.

Holders

of

GDRs

will

then

receive

dividends

from

the

GDR
issuer, proportionally to their holdings.

According

to

the

policy

in

force,

the

dividend

distribution

that

the

Board

of

Directors

will

consider

in

formulating
the

proposal

to

ELSA’s

OGMS

will

be

between

65%

and

100%

of

its

distributable

net

profit.

In

case

there

are
deviations

outside

this

range,

they

will

be

documented

and

explained

to

shareholders

in

the

periods

in

which
they occur. The company will pay all dividends in RON.

75

The

dividend

payout

ratio

from

the

distributable

profit

of

the

Group

subsidiaries

shall

be

consistent

with

ELSA’s
present

dividend

policy.

The

dividends

paid

by

the

Group's

subsidiaries

to

ELSA

in

year

N

(related

to

year

N-
1

results)

are

recorded

as

finance

income

in

ELSA's

individual

financial

statements

in

year

N

and

thus

constitute
the

source

of

the

net

result

from

which

ELSA

declares

and

subsequently

pays

dividends

to

its

shareholders

in
year N+1 (related to the result of year N).

3.6.

#### Dividend distribution

Figure 19: Gross dividends distributed (2014-2020) - RON M

The

dividends

distributed
4

by

ELSA

fluctuated

in
the

period

2014

-

2020,

between

RON

244.7

M
and

RON

291.6M,

and

the

dividend

payout

ratio
5

was

96%

in

2014,

100%

each

year

between
2015-2017,

87%

in

2018

(RON

35.57

M

was
distributed

to

“Others

reserves”),

and

100%

in
2019.

The

dividend

payout

ratio

for

2020

was

87.5%
(RON

35.57

M

was

distributed

to

“Others
reserves”).

Source: Electrica

Figure 20: Gross dividend per share (RON) and dividend yield (%)

The

yield

of

the

dividend

paid

in

2021,

for

the
2020

results,

recorded

a

level

of

6.0%,

the

gross
dividend

per

share

paid

in

2021

being

RON

0.73.
The

dividend

yield

(%)

is

calculated

as

Gross
dividend

per

share/Closing

share

price

on

BSE

at
ex-date.

Thus,

Electrica

continues

to

offer

investors

a
stable

return,

which

is

at

a

level

between

5.2%
and

7.3%

for

each

year

in

the

period

2014-2020.

Source: Electrica

4

Dividends refer to each financial year indicated and are paid during the following year.

5

Dividend payout ratio is calculated as Gross Dividends/Net profit distributable to dividend, whereas Net profit distributable to dividend is Net profit
according to individual financial statements of ELSA less the required distributions to legal reserves.

244.7

291.6

251.4

245.4

247.5

246.1

247.9

2014

2015

2016

2017

2018

2019

2020

![Image should be here]()

![Image should be here]()

0.7217

0.8600

0.7415

0.7237

0.73

0.7248

0.73

6.1%

6.9%

5.2%

7.3%

6.8%

6.9%

6.0%

2014

2015

2016

2017

2018

2019

2020

76

3.7.

#### Own shares

In

July

2014,

ELSA

bought

back

for

price

stabilization

purposes,

5,206,593

ordinary

shares

and

421,000

Global
Depositary

Receipts,

equivalent

of

1,684,000

shares.

The

total

amount

paid

for

acquiring

the

shares

and
Global

Depositary

Receipts

was

RON

75,372

th.

There

were

no

changes

in

the

number

of

the

treasury

shares
until the date of the report.

4

### Corporate Governance in ELSA

ELSA

confers

a

great

importance

to

the

principles

of

good

corporate

governance,

considering

corporate
governance

a

key

element

for

the

sustainable

business

growth

and

for

the

enhancement

of

long-term

value
for shareholders.

ELSA

constantly

develops

and

adapts

its

corporate

governance

practices

and

model,

both

at

standalone,

as
well

as

at

Group

level,

so

that

it

can

align

with

the

increasingly

rigorous

capital

market

requirements

and

with
the

best

practices

in

corporate

governance

at

European

level,

and

also

for

creating

opportunities

and

increase
competitiveness.

The

corporate

governance

represents

the

set

of

principles

standing

at

the

basis

of

the

governance

framework
used

for

the

company’s

management

and

control.

Transposed

in

the

internal

rules

and

regulations,

these
principles

determine

the

efficiency

and

effectiveness

of

the

control

mechanisms

aiming

to

protect

and
harmonize

the

interests

of

all

the

stakeholders

–

shareholders,

directors,

executive

managers,

managers

of
different

structures

of

the

company,

employees

and

the

organizations

that

represent

their

interests,

customers
and business partners, suppliers, central and local authorities, regulators and capital markets operators etc.

ELSA’s

Code

of

Corporate

Governance

presents

primarily

the

main

work

methods,

attributions

and
responsibilities

of

the

management

and

supervisory

structures

of

the

company,

as

well

as

those

of

the
committees constituted to support these structures to fulfil their responsibilities.

ELSA

undertook,

from

the

moment

of

the

IPO

and

admission

to

trading

from

July

2014,

the

implementation
of

a

corporate

governance

action

plan,

as

part

of

the

framework

agreement

concluded

with

the

European
Bank

for

Reconstruction

and

Development.

The

standards

and

measures

provisioned

in

this

plan

have

been
implemented and continuously monitored. For more details about this Action plan, please see
chapter 4.10
.

4.1.

#### Corporate Governance Code

Starting

with

2014,

ELSA

adheres

to

and

applies

wilfully

the

provisions

of

the

Corporate

Governance

Code
issued

by

BSE,

reviewed

periodically.

This

code

can

be

accessed

on

the

BSE’s

website

at

the

following

address:

http://www.bvb.ro/Regulations/LegalFramework/BvbRegulations

.

In

order

to

ensure

high

standards

of

corporate

governance,

transparency

and

business

integrity,

ELSA

also
applies provisions of the LSE’s Corporate Governance Code.

Formally,

ELSA

adopted

the

Code

of

Corporate

Governance

(ELSA

CGC)

starting

with

February

2015

and

made
it available to all the interested parties on ELSA’s website, in the section
Investors > Corporate Governance
.

In

2020,

the

chapter

six

of

the

CGC

ELSA

regarding

the

risk

management

system

was

revised;

in

July

2020
the

amended

ELSA

CGC

was

published

on

the

company’s

website,

and

is

available

in

the

section

Investors

>
Corporate Governance
.

77

ELSA’s

compliance

with

BSE’s

Corporate

Governance

Code

is

being

thoroughly

assessed,

and

as

updates

and
developments

appear,

ELSA

promptly

reports

them

to

the

capital

market.

The

“Comply

or

Explain”

Corporate
Governance

Statement

from

chapter

4.9

presents

annually

the

company’s

compliance

level

with

the

provisions
of

BSE’s

CGC

code.

This

is

also

available

on

the

company’s

website

in

the

section

Investors

>

Corporate
Governance > Comply or Explain
.

ELSA

CGC

embeds

the

general

principles

and

conduct

rules

that

set

forth

and

regulate

the

corporate

values,
the responsibilities, the obligations and the business conduct of the company.

ELSA

CGC

contains

the

terms

of

reference

and

the

main

responsibilities

of

the

company’s

administrative

and
executive

management,

as

they

are

detailed

in

ELSA’s

Articles

of

Association,

the

organization

and

functioning
regulations of the Board of Directors and those of its committees.

ELSA

CGC

is

also

a

guide

on

business

conduct

and

corporate

governance

matters

for

the

management

and
for

the

employees

of

ELSA,

as

well

as

for

other

stakeholders,

and

provides

information

about

the

company’s
principles

and

policies.

The

corporate

policies

and

documents

referred

to

in

ELSA

CGC

can

be

accessed

on

the
company’s

website

in

the

section

Investors

>

Corporate

Governance

>

Corporate

policies

and

other
documents
.

During

2021

the

following

corporate

documents

have

been

revised

and

published

on

Electrica’s

website:

Remuneration

Policy

for

Directors

and

Executive

Managers


–

on

7

May

2021,

the

Code

of

Ethics

and

Professional

Conduct


–

on

31

December

2021

and

the

Articles

of

Association

–

on

16
September 2021.

Based

on

the

principles

set

out

in

the

Code

of

Ethics

and

Professional

Conduct,

corroborated

with

the

need

to
comply

with

legal

provisions

in

force,

ELSA

has

adopted,

starting

with

15

December

2021

and

entering

into
force

on

1

January

2022,

the


Policy

for

preventing,

combatting

and

sanctioning

of

any

type

of

workplace

harassment

.

This

corporate

policy

can

be

found

on

the

company's

website

in

the

section

Investors>

Corporate
Governance> Policies and other corporate documents.

In

compliance

with

company’s

policies

and

with

the

procedures

of

the

Code

of

Ethics

and

Professional

Conduct,
the

Audit

and

Risk

Committee

ensures

that

the

company’s

activity

is

carried

on

with

honesty

and

integrity,
including the implementation of the whistle-blower policy.

ELSA

has

implemented

a

procedure

for

reporting

ethical

deviations,

irregularities

and

any

other

aspects

of
non-compliance

with

the

law

that

otherwise

could

cause

image

and/or

commercial

prejudice

or

even

involve
legal

sanctions,

thus

damaging

the

prestige

and

profitability

of

the

company.

The

whistle-blowing

reporting
system

which

functions

according

to

this

procedure,

as

well

as

the

procedure

itself,

are

available

on

ELSA’s
website, in the
Whistleblowing
 section.

Since

ELSA’s

shares

are

allowed

for

trading

both

on

the

regulated

market

managed

by

Bucharest

Stock
Exchange

(BSE),

as

well

as

on

the

market

managed

by

the

London

Stock

Exchange

(LSE),

ELSA

is

subject

to
the

rules

imposed

by

the

national

and

European

laws

regarding

market

abuse

prevention

and

the

regime
applicable

to

inside

information.

Thus,

ELSA

has

implemented

a

Policy

on

preventing

the

misuse

of

inside
information,

unauthorized

disclosure

of

inside

information

and

market

manipulation

(
Policy

regarding

Market
Abuse
).

The

purpose

of

this

policy

is

to

prevent

violations

of

the

legal

provisions

regarding

the

misuse

of
inside

information,

by

increasing

the

awareness

of

all

persons

who

possess

inside

information

regarding

the
obligations,

restrictions

and

sanctions

applicable

in

case

of

possession

and

abusive

use

of

inside

information
or in case of market manipulation regarding ELSA’s securities.

All

the

owners

of

financial

instruments

of

the

same

type

and

class

issued

by

ELSA

are

entitled

to

equal

78

treatment.

In

order

to

ensure

efficient,

active

and

transparent

communication

with

its

shareholders,

within
ELSA

activates

the

investor

relations

department

and

related

processes

have

been

set

up

to

ensure

efficient
and

transparent

communication

with

investors,

in

compliance

with

the

legal

obligations

in

force,

which

can

be
found

in

the

Investor

Relation

Corporate

Disclosure

Policy
,

applicable

at

ELSA

level,

available,

in

the

updated
form,

on

the

company’s

website

since

25

August

2020.

The

company’s

rules

and

procedures

that

establish
the

framework

for

organizing

and

conducting

general

meetings

of

shareholders

are

contained

in

ELSA’s

GMS
Policy,

amended

on

25

August

2020

and

available

electronically

on

the

company’s

website

in

the

sections
Investors

>

General

Meeting

of

Shareholders

and

Investors

>

Corporate

Governance

>

Corporate

policies

and
other documents
.

The

section

dedicated

to

investors

is

available

on

ELSA’s

website

by

accessing

https://www.electrica.ro/en/investors/

.

Up-to-date

essential

information,

of

interest

for

the

investors,

can

be found

in

this

section,

providing

access

to

documents

governing

the

company,

in

accordance

with

the

provision
of

the

CGC

issued

by

BSE.

This

section

also

contains

the

name

and

contact

details

of

the

person

who

can
provide, upon request of interested parties, relevant information regarding the activity of the company.

4.2.

#### General Meeting of ELSA’s Shareholders

The

General

Meeting

of

Shareholders

(“GMS”)

is

the

main

corporate

governance

body

of

ELSA,

deciding

on
the

items

as

outlined

in

the

Articles

of

Association.

The

convening,

functioning,

voting

method,

as

well

as
other

provisions

regarding

the

GMS

are

detailed

in

ELSA’s

Articles

of

Association,

which

is

available

in

electronic
format on ELSA’s website, in the section
Group > About
.

Starting

with

1
st

February

2020,

ELSA

has

in

place

a

policy

on

organizing

and

conducting

the

general

meetings
of

shareholders

of

the

company,

which

presents

in

detail

aspects

of

interest

for

investors

regarding

the

way
of

organizing

and

carrying

out

the

GMS.

Its

update

was

carried

out

in

August

2020.

The

policy

is

available

on
the company’s website, under the section
Investors > Corporate Governance
.

#### ELSA’s ordinary general meeting of the shareholders (OGMS)

 has the following main duties:

a.
to

appoint

and

revoke

the

members

of

the

Board

and

establish

the

level

of

their

remuneration

and
other rights according to the legal provisions;

b.
to establish the income and expenses budget, to set out the activity schedule;

c.
to establish the income and expenses budget consolidated at the group level;

d.
to

discuss,

approve

or

amend

the

annual

financial

statements

according

to

the

reports

submitted

by
the Board and the financial auditors;

e.
to approve the profit distribution according to the law and to establish the dividend;

f.
to

decide

on

the

management

activity

of

the

directors

and

on

the

discharge

of

liability,

in

accordance
with the law;

g.
to

decide

to

file

legal

actions

against

the

directors,

managers

as

well

as

financial

auditors

for

damages
they caused to the Company by breaching their obligations towards the Company;

h.
to decide on mortgaging or leasing or closing of one or more units of the company;

i.
to

appoint

and

revokes

the

financial

auditor

and

to

set

the

minimum

term

of

the

financial

audit
contract;

j.
approves the
Remuneration Policy for Directors and Executive Managers;

k.
to carry out any other duties set out by the law.

79

#### ELSA’s extraordinary general meeting of the shareholders (EGMS)

 shall decide on the following:

a.
withdrawal

of

the

preference

right

of

shareholders

upon

subscription

of

new

shares

issued

by

the
Company;

b.
contracting

any

type

of

loans,

debts

or

obligations

representing

a

loan,

as

well

as

creating

real

or
personal

security

related

to

these

loans,

in

each

case

in

accordance

with

the

competence

limits
provided in Appendix 1 to these Articles of Association;

c.
operations

regarding

the

acquisition,

alienation,

exchange

or

creation

of

encumbrances

over

fixed
assets

of

the

Company

whose

value

exceeds,

individually

or

cumulated,

during

any

financial

year,
20%

of

the

total

fixed

assets,

less

receivables,

and

leases

of

tangible

assets

for

periods

longer

than
one

year,

whose

individual

or

cumulated

value

towards

the

same

co-contractor

or

involved

persons
or

with

whom

it

acts

in

concert

exceeds

20%

of

the

fixed

assets

value,

less

receivables

at

the

time

of
entering

in

the

relevant

operation,

as

well

as

joint

ventures

in

excess

of

the

same

value

and

with

a
duration of over one year;

d.
approving

investment

projects

in

which

the

Company

will

be

involved

in

accordance

with

the
competence

limits

provided

in

Appendix

1

to

these

Articles

of

Association,

other

than

the

ones
provided in the annual investment plan of the Company;

e.
approving

the

issuance

and

admission

to

trading

on

a

regulated

market

or

on

an

alternative

trading
system

of

shares,

deposit

certificates,

allotment

rights

or

other

similar

financial

instruments;

approving
the competencies delegated to the Board;

f.
changing the legal form;

g.
relocation of the registered office;

h.
changing the main or secondary business objects;

i.
increasing

the

share

capital,

as

well

as

decreasing

or

the

replenishment

of

the

share

capital

by

issuing
new shares, according to the law;

j.
the merger and the spin-off;

k.
the dissolution of the Company;

l.
carrying

out

any

bond

issue,

as

per

the

provisions

of

art.

10

of

the

Articles

of

Association,

or

conversion
of a category of bonds in a different category or in shares;

m.
approving

the

conversion

of

preferential

and

nominative

shares

from

one

category

to

another,
according to the law;

n.
any other amendment to the Articles of Association;

o.
the

establishment

or

dissolution

of

secondary

offices:

branches,

agencies,

representative

offices,
working points or other similar units without legal status, according to the legal provisions;

p.
participation in the establishment of new legal persons;

q.
approval of the eligibility and independence criteria with respect to the Board members;

r.
approval

of

the

corporate

governance

strategy

of

the

Company,

including

the

corporate

governance
action plan;

s.
donations

within

the

limits

of

the

competence

provided

in

Appendix

1

to

these

Articles

of

Association;
and

t.
approves granting of intragroup loans with a value of more than EUR 50 mil. per operation;

u.
any

other

decision

that

requires

the

approval

of

the

extraordinary

general

meeting

of

the
shareholders.

The

OGMS

is

convened

at

least

once

a

year,

within

a

maximum

of

four

months

from

the

end

of

the

financial

80

year.

Except

for

this

situation,

OGMS

and

EGMS

are

convened

as

many

times

as

needed,

being

convened

by
ELSA’s

Board

of

Directors

whenever

necessary

for

the

activity

of

Electrica

Group.

The

GMS

may

be

convened
also,

upon

the

request

of

shareholders

representing,

individually

or

cumulatively,

at

least

5%

of

the

share
capital.

In

this

case,

the

general

meeting

of

the

shareholders

shall

be

convened

by

the

Board

of

Directors
within

no

more

than

30

days

and

shall

meet

within

no

more

than

60

days

from

the

date

of

receiving

the
request.

4.3.

#### Shareholders’ rights

The

rights

of

all

ELSA’s

shareholders,

independent

of

their

holdings,

are

protected

according

to

the

relevant
legislation.

Shareholders

have,

amongst

other

rights

provided

under

the

company’s

Articles

of

Association

and
the

laws

and

regulations

in

force,

the

right

to

obtain

information

about

ELSA’s

operations

and

results,
regarding the exercise of voting rights and the voting results in the GMS.

Shareholders

have

also

the

right

to

participate

and

vote

in

the

GMS,

as

well

as

to

receive

dividends.

Except
for

the

shares

owned

by

ELSA

following

the

stabilization

after

the

IPO

in

2014,

there

are

no

shares

without
voting rights. There are no shares granting the right to more than one vote.

Moreover,

shareholders

have

the

right

to

challenge

the

decisions

of

GMS

or

to

withdraw

from

ELSA

and

to
request

the

Company

to

acquire

their

shares,

in

certain

conditions

mentioned

by

the

law.

Likewise,

one

or
more

shareholders

holding,

individually

or

jointly,

at

least

5%

of

the

share

capital,

may

request

the

calling

of
a

GMS.

Those

shareholders

have

also

the

right

to

add

new

items

to

the

agenda

of

a

GMS,

provided

that

those
proposals

are

accompanied

by

a

justification

or

a

draft

resolution

proposed

for

approval

and

copies

of

the
identification documents of the shareholders who make the proposals.

#### The rights and obligations of the holders of the shares










,

as

extracted

from

ELSA’s

Articles

of

Association,
are:

▪
Each

share

subscribed

and

fully

paid

in

by

the

shareholders,

in

accordance

with

the

law,

grants

the
shareholders

(i)

the

right

to

one

vote

in

the

general

meeting

of

the

shareholders,

(ii)

the

right

to

elect
the

management

bodies,

(iii)

the

right

to

participate

to

the

profit

distribution,

as

well

as

(iv)

other
rights provided by these Articles of Association and by the legal provisions;

▪
The

acquisition

of

the

property

right

over

a

share

by

a

person,

directly

or

indirectly,

has

as

effect

the
obtainment

of

the

capacity

of

shareholder

of

the

company

together

with

all

rights

and

obligations
deriving from this capacity, in accordance with the law and the Articles of Association;

▪
The

rights

and

obligations

deriving

from

the

shares

are

transferred

to

the

new

acquirers

together

with
the shares;

▪
When

a

nominative

share

becomes

the

property

of

several

persons,

the

transfer

shall

be

registered
only if they appoint a sole representative for exercising the rights derived from the shares;

▪
The

obligations

of

the

company

are

secured

by

its

social

patrimony,

and

the

liability

of

the
shareholders is limited to the subscribed share capital;

▪
The

shareholder

that

has,

in

a

certain

operation,

either

personally

or

as

representative

of

another
person,

an

interest

contrary

to

the

interest

of

the

company,

must

refrain

from

deliberations

regarding
the respective operation.

81

The exercise of the

#### rights by the holders of the depositary certificates

6
 is realized as follows:

▪
The

rights

and

obligations

related

to

the

underlying

shares

based

on

which

the

depositary

certificates
were

issued

are

exercised

by

the

holders

of

the

deposit

certificates,

proportionally

to

their

holdings

of
deposit

certificates

and

taking

into

account

the

conversion

rate

between

underlying

shares

and

the
deposit certificates;

▪
The

holder

of

the

deposit

certificates

issued

based

on

the

underlying

shares

is

the

shareholder

within
the

meaning

and

for

the

application

of

Law

24/2017

on

the

issuers

of

financial

instruments

and

market
operations.
The

issuer

of

the

deposit

certificates

is

fully

responsible

for

informing

the

holders

of

the
deposit

certificates

in

a

correct,

complete

and

timely

manner,

observing

the

provisions

of

the
documents

of

the

issue

of

the

deposit

certificates,

regarding

the

documents

and

the

informative
materials

related

to

a

general

meeting

of

shareholders,

as

made

available

by

the

company

to

the
shareholders;

▪
In

order

to

exercise

its

rights

and

obligations

related

to

a

general

meeting

of

shareholders,

a

holder
of

deposit

certificates

will

send

to

the

entity

where

it

has

opened

its

account

for

deposit

certificates
the

voting

instructions

for

the

topics

on

the

agenda

of

the

general

meeting

of

the

shareholders,

so
that the respective information is sent to the issuer of the depositary certificates;

▪
The

issuer

of

the

deposit

certificates

votes

in

the

general

meeting

of

the

shareholders

of

the

company
in

accordance

with

and

within

the

limits

of

the

instructions

of

the

holders

of

the

deposit

certificate
which have this quality at the reference date;

▪
The

issuer

of

the

deposit

certificates

may

cast

different

votes

for

certain

underlying

shares

in

the
general meeting of the shareholders than those expressed for other underlying shares;

▪
The

issuer

of

the

deposit

certificates

is

fully

responsible

for

taking

all

necessary

measures,

so

that

the
entity

which

keeps

the

records

of

the

holders

of

the

deposit

certificates,

the

intermediaries

involved
in

the

custody

services

for

holders

of

the

deposit

certificates

on

the

market

where

the

deposit
certificates

are

traded

and/or

any

other

entities

involved

in

recording

the

holders

of

the

deposit
certificates,

to

send

the

voting

instructions

of

the

holders

of

the

depositary

certificates

related

to

the
topics on the agenda of the general meeting of the shareholders;

▪
Any

reference

date

for

the

identification

of

the

shareholders

which

have

the

right

to

take

part

and

to
vote

in

the

general

meeting

of

the

shareholders

of

the

Company

and

any

registration

date

for

the
identification

of

the

shareholders

which

have

rights

deriving

from

their

shares,

as

well

as

any

other
similar

date

set

by

the

Company

related

to

any

corporate

events

of

the

Company

will

be

established
in

accordance

with

the

applicable

legal

provisions

and

with

a

prior

notice

sent

with

at

least

15

free
calendar

days

(in

Romanian,

zile

calendaristice

libere
)

to

the

issuer

of

the

deposit

certificates,

in

the
name

of

which

the

underlying

shares

are

registered

based

on

which

the

deposit

certificates

mentioned
above

are

issued.

The

reference

date

will

be

prior

with

at

least

15

working

days

to

the

deadline

for
submitting the power of attorney related to the vote.

#### Transfer of shares

The

shares

are

indivisible.

The

company

shall

recognize

a

sole

owner

per

each

share,

subject

to

the

provisions
of article 11 paragraph (4) from Articles of Association.

The

partial

or

total

transfer

of

shares

between

the

shareholders

or

to

third

parties

shall

be

carried

out
according

to

the

terms

and

procedure

provided

by

the

applicable

legal

provisions,

including

the

capital

markets
legislation.

6
 According to ELSA’s Articles of Association reflecting the dispositions of Law no. 24/2017 on issuers of financial instruments and market
operations.

82

4.4.

#### ELSA’s Board of Directors

ELSA

adopted

a

one-tier

(unitary)

corporate

governance

system,

in

accordance

with

the

principles

of

good
corporate

governance,

transparency

and

accountability

towards

its

shareholders

and

other

categories

of
stakeholders,

aiming

to

support

and

drive

the

business

development

and

the

efficient

exchange

of

relevant
corporate information.

The

Board

of

Directors

(BoD)

is

responsible

for

taking

all

the

necessary

measures

to

carry

out,

as

well

as

to
supervise

the

activity

of

the

company.

Its

structure,

organization,

duties

and

responsibilities

are

established
under the Articles of Association and the Charter (
organization and functioning regulations)
 of the BoD.

According

to

the

provisions

of

the

company’s

Articles

of

Association,

starting

with

14

December

2015,

the

BoD
is

composed

of

seven

non-executive

directors,

elected

by

the

Ordinary

General

Meeting

of

Shareholders

of
the

company

for

a

four

years

mandate,

out

of

which

four

must

meet

the

criteria

of

independence

provided

by
the Articles of Association.

During 2021, the Board of Directors’ structure has undergone several changes, as follows:

▪
At

the

beginning

of

the

year,

the

BoD

consisted

of

the

following

members:

Mr.

Iulian

Cristian

Bosoanca

–
Chairman,

Mrs.

Ramona

Ungur,

Mr.

Dragos

Andrei,

Mr.

Radu

Mircea

Florescu
,

Mr.

Bogdan

George

Iliescu,
Mr. Gicu Iorga and Mr. Valentin Radu;

▪
On

22

April

2021,

the

Company’s

Board

of

Directors

took

note

about

the

resignation

of

Ms.

Ramona

Ungur
as member of the Board of Directors;

▪
On

28

April

2021,

ELSA

OGMS

took

place,

when

ELSA

shareholders

elected

by

the

method

of

cumulative
voting,

the

following

members

of

the

Board

of

Directors:

Mr.

Iulian

Cristian

Bosoanca,

Mr.

George
Cristodorescu,

Mr.

Radu

Mircea

Florescu,

Mr.

Gicu

Iorga,

Mr.

Adrian-Florin

Lotrean,

Mr.

Dragos-Valentin
Neacsu and Mr. Ion-Cosmin Petrescu;

▪
As

a

result

of

the

changes

occurred

at

the

level

of

the

Board

of

Directors
,

on

6

May

2021,

the

members
of

the

Board

re-elected

Mr.

Iulian

Cristian

Bosoanca

as

Chairman

of

the

BoD

starting

with

06

May

2021
and until 31 December 2021.

At the beginning of 2021, the members of the BoD were the following:

No

Name

Term of office (until 27
April 2022)

Status

Starting date of the
first mandate

1.

Mr. Iulian Cristian
Bosoanca\*

~
2 years

Chairman, non-executive
director

29 April 2020

2.

Mrs. Ramona Ungur

4 years

non-executive director,
independent

27

April 2018

3.

Mr. Dragos Andrei

~
3 years and 5 months

non-executive director

1 December 2018

4.

Mr. Radu Mircea
Florescu

~
3 years and 3 months

non-executive director,
independent

7 February 2019

5.

Mr. Bogdan George
Iliescu

4 years

non-executive director,
independent

14 December 2015

6.

Mr. Gicu Iorga

4 years

non-executive director

1 May 2017

7.

Mr. Valentin Radu

4 years

non-executive director,
independent

27 April 2018

Source: Electrica

\*Mr.

Iulian

Cristian

Bosoanca

was

nominated

to

fill

the

vacancy,

following

the

resignation

of

the

non-independent

director

Niculae

Havrilet,

the

term

of

office

83

being equal to the period remaining until the expiration of the term related to the vacancy, respectively until 27 April 2022.

At

the

end

of

2021,

as

well

as

at

the

date

of

issuing

of

this

report,

the

members

of

the

Board

of

Directors
were the following:

No

Name

Term of office (until
27 April 2025)

Status

Starting date of the
first mandate

1.

Mr. Iulian Cristian
Bosoanca

4 years

Chairman, non-executive
director

29 April 2020

2.

Mr. George
Cristodorescu

4 years

non-executive director,
independent

28 April 2021

3.

Mr. Radu Mircea
Florescu

4 years

non-executive director,
independent

7 February 2019

4.

Mr. Gicu Iorga

4 years

non-executive director

1 May 2017

5.

Mr. Adrian-Florin
Lotrean

4 years

non-executive director,
independent

28 April 2021

6.

Mr. Dragos-Valentin
Neacsu

4 years

non-executive director,
independent

28 April 2021

7.

Mr. Ion-Cosmin
Petrescu

4 years

non-executive director

28 April 2021

More

details

on

the

Board

members’

biographies

can

be

found

on

the

Group’s

website

in

the

section

Investors
> Corporate Governance > Board of Directors
.

Below

are

presented


#### the most relevant aspects regarding the professional experience of the BoD members.

#### Iulian



#### Cristian



#### Bosoanca


is

non-executive

director

appointed

on

29

April

2020,

Chairman

of

the

Board

of
Directors since 18 July 2020 and member of the Risk and Audit Committee.

He

holds

relevant

professional

experience

in

the

economic

field,

especially

in

the

areas

of

finance,

accounting,
economic

financial

analysis

and

taxation,

having

over

20

years

of

practical

activity.

He

holds

competences

in
management,

compliance,

legal,

payroll

and

human

resources,

developed

in

practicing

his

activity

and
following as a result of specialized trainings.

The

basic

profession,

accounting

and

taxation,

he

carries

out

as

a

freelancer

ever

since

2008,

within

the
company

Expert

Contabilitate

&

Servicii

S.R.L.

(company

member

CECCAR)

but

also

within

the

Individual
Cabinet

of

Accounting

Expert

/

Fiscal

Consultant,

through

which

he

carries

out

activities

of

accounting,

fiscal
and judicial expert.

Starting

1998,

Mr.

Bosoanca

held

several

positions,

executive

or

management

positions,

being

also

a

member
of

the

Boards

of

Directors

in

various

companies

such

as:

CAZANELE

S.A.

in

the

period

August

2005

–
September

2006,

Mehedinti

County

Health

Insurance

House

in

the

period

May

2012

–

October

2014

and
SECOM

S.A.

in

the

period

September

2017

–

May

2018

(where

he

was

also

elected

Chairman

of

the

Board

of
Directors).

Since

2016,

Iulian

Cristian

Bosoanca

holds

the

function

of

President

of

the

Body

of

Expert

Accountants

and
Licensed of Romania (
C.E.C.C.A.R)
, Mehedinti Branch.

He

also

acted

as

a

lecturer

within

C.E.C.C.A.R.

and

starting

with

December

2020

he

holds

the

position

of

84

Director of the Ministry Cabinet within the Ministry of Energy.

#### George



#### Cristodorescu


is

non-executive,

independent

director

since

28

April

2021

and

Member

of

the
Strategy and Corporate Governance Committee.

He

holds

an

extensive

professional

experience

in

the

energy

field,

currently

holding

the

position

of

Head

of
Cluster

for

Energy

and

Climate

within

the

Deutsche

Gesellschaft

für

Internationale

Zusammenarbeit,

GIZ
GmbH, a company where he has a cumulative experience of 12 years.

Previously,

Mr.

Cristodorescu

acted

as

Partner

in

Stein

&

Partner,

Executive

Search

&

Management
Performance

and

freelancer,

being

manager

and

consultant

in

various

projects

of

energy

efficiency,
renewable, district heating and electrical networks.

Between

October

2013

–

May

2014,

Mr.

Cristodorescu

held

the

position

of

Chairman

of

the

Supervisory

Board
of

Hidroelectrica

SA,

where

he

coordinated

the

implementation

of

corporate

governance,

preparation

of

the
strategic development plan of the company and preparation of the company for the initial public offering.

Between

September

2005-2013

he

was

Deputy

CEO

of

E.ON

Romania,

Head

of

Division,

Head

of
Administrative

Boards

of

3

Companies

within

the

E.ON

Romania

Group

and

CEO

of

the

E.ON

Romania
Renewables

S.R.L,

period

in

which

he

coordinated,

among

others,

the

restructuring

of

the

E.ON

Romania
group

after

privatization,

the

strategic

development

of

the

gas

and

electricity

distribution

and

supply

activities
business

and,

as

director,

the

activity

of

corporate

governance

and

communications.

In

parallel,

he

was
appointed

as

member

of

the

core

group

strategy

group

for

E.ON

AG,

Düsseldorf,

member

of

the

policy

group
for E.ON AG, Brussels and President of the Association of Utility Companies in Romania.

#### Radu



#### Mircea



#### Florescu


is

an

independent

non-executive

director

since

7

February

2019,

Chair

of

the

Audit
and Risk Committee and member of the Nomination and Remuneration Committee

Radu

Mircea

Florescu

is

currently

the

CEO

of

Centrade

|

Cheil,

South

East

Europe,

the

regional

communications
hub for Cheil Worldwide, coordinating 11 markets in the Adriatic and Balkan region.

For

more

than

38

years,

Radu

Florescu

worked

in

top

multinational

companies

from

Fortune

500,

activating
in

emerging

countries,

including

programs

financed

from

EU

funds.

Mr.

Florescu

began

his

career

in

trading
at

NYMEX

where

he

coordinated

all

trading

activities

for

petroleum

products

and

precious

metals.

A

graduate
of

Marketing

and

Finance

from

Boston

College

with

a

Bachelor

of

Science

degree,

Radu

Mircea

Florescu

began
his

career

in

commodity

trading

with

Merrill

Lynch/EF

Hutton

at

NYMEX

(New

York

Mercantile

Exchange),

with
a

specific

focus

on

WTI

(West

Texas

Crude),

fuel

oil

and

gasoline.

In

1989,

he

co-founded

Centrade

USA

and
became

one

of

the

leading

pioneers

for

marketing

and

communication

services

on

the

Romanian

market

with
the launch of Saatchi & Saatchi, SSX, Chainsaw Studios, Cable Direct and Zenith Media.

Radu

Florescu

has

held

other

notable

positions

including

nomination

as

member

to

numerous

board

positions:
founding

member

and

board

member

of

IAA

Romania,

co-founder

and

member

of

the

Union

of

Advertising
Agencies

of

Romania

(UAAR),

member

of

the

European

Council

of

the

European

Association

of

Communication
Agencies

(EACA),

representing

Romania

and

Eastern

Europe

in

Brussels

(2012

-

2015,

2017

and

presently
Treasurer),

member

of

the

Board

of

Directors

and

vice-president

of

the

American

Chamber

of

Commerce

in
Romania

(2013

-

2015

and

2016

-

present),

member

of

TAROM’s

Board

of

Directors

(March

2015

-

June

2017),
coordinator

and

member

of

the

Steering

Committee

for

Coalition

for

Romania’s

Development

–

the

“umbrella”
group

and

leading

association

representing

the

business

community

and

trade

sections

from

key

foreign
embassies in Bucharest.

85

Radu Mircea Florescu is also active in the field of social responsibility, having a long history of contribution in
local community, presently acting as Member of the Board of Directors for different organizations such as
AIESEC Romania (International Association of Students in Economics), Junior Achievement Program,
OvidiuRo, Principesa Margareta Foundation, ASEBUSS and United Way Romania.

#### Gicu



#### Iorga


is

a

non-executive

director

since

1
st

May

2017

and

President

of

the

Strategy

and

Corporate
Governance Committee.

Gicu

Iorga

has

an

experience

of

over

35

years

in

the

field

of

economics

and

public

administration

and

currently
holds the position of Head of Customs Office within A.N.A.F. – D.G.V Bucharest.

Most

of

his

professional

activity

was

carried

out

in

institutions

such

as

National

Customs

Authority,

A.N.A.F

–
General

Customs

Directorate,

General

Public

Finances

Directorate

Bucharest

and

National

Sanitary

Veterinary
and Food Safety Authority
 (
A.N.S.V.S.A.).

Starting

with

April

2017

and

until

November

2019

Mr.

Gicu

Iorga

held

the

position

of

General

Secretary

within
the

Ministry

of

Energy

where

he

coordinated

the

good

functioning

of

the

departments

and

functional

activities
within

the

Ministry.

Further

to

that,

starting

March

2020

and

until

March

2021

he

occupied

the

position

of
Deputy General Secretary within the Ministry of Economy, Energy and Business Environment.

#### Adrian-Florin



#### Lotrean


is

a

non-executive,

independent

director

since

28

April

2021,

the

Chairman

of

the
Nomination

and

Remuneration

Committee

and

member

of

the

Strategy

and

Corporate

Governance

Committee.

Presently

Mr.

Lotrean

holds

the

position

of

President/interim

member

of

the

Board

within

the

Compania
Municipala

Termoenergetica

S.A

and

an

extensive

professional

experience

in

the

field

of

insolvency,
coordinating,

as

insolvency

practician

and

Associated

Lawyer

in

the

civil

professional

company

CITR

SPRL,

in
the

period

February

2010

–

December

2020,

complex

restructuring

projects

on

production

of

thermal

energy
and

electricity

in

cogeneration

(for

clients

such

as

CET

ARAD

SA,

Electrocentrale

Constanta

SA),

being
consultant

to

the

judicial

administrator

of

Electrocentrale

Bucuresti

SA

and

coordinating

the

restructuring
procedure of Hidroserv S.A.

Previously,

between

September

2019

–

December

2020,

Mr.

Lotrean

held

the

position

of

Member

of

the

Board
of

Directors

of

Electroplast

SA

Bistrita,

between

November

2007

and

February

2010

he

was

insolvency
practitioner

in

the

professional

civil

company

Casa

de

Insolvență

Transilvania

S.P.R.L

where

he

participated
in the management of projects for more than 50 commercial companies.

Between

January

2003

–

November

2007,

Mr.

Lotrean

held

the

position

of

Financial

Consultant

within
SC

Depofarm

SLR,

providing

consultancy

for

the

elaboration

of

projects

financed

from

European

funds,

the
elaboration

of

feasibility

studies,

business

plans

and

financial-fiscal

consultancy.

Previously,

between
November

2001

and

December

2002,

he

held

the

position

of

specialized

inspector

within

the

Fiscal

Control
Department of the General Directorate of Public Finance Satu Mare.

#### Dragos-Valentin



#### Neacsu


is

a

non-executive,

independent

director

since

28

April

2021,

and

member

of

the
Audit and Risk Committee.

Mr.

Neacsu

has

an

extensive

professional

experience

in

the

field

of

investment

management

and

financial
markets,

currently

holding

the

position

of

independent

member

of

the

Board,

member

of

the

Audit

Committee
and Chairman of the Appeals Commission of the Bucharest Stock Exchange S.A.

Mr.

Neacșu

is

also

the

CEO

of

the

GS1

Romania

Association,

part

of

a

global

network

of

115

not-for-profit

86

organizations,

with

an

activity

focused

on

elaborating

and

promotion

of

coding

systems,

serialization

and
traceability in business communication.

Until

October

2019,

Mr.

Neacșu

held

the

position

of

Chief

Executive

Officer,

Chairman

of

the

Board

of

SAI
Erste

Asset

Management

SA,

previously

being

Director,

Financial

Advisory

Services

of

Deloitte

Consultancy
SRL.

Between

February-September

2005

he

was

State

Secretary

Minister,

Head

of

State

Treasury

within

the
Ministry

of

Public

Finance.

Between

July

1998

and

February

2005,

he

held

the

position

of

President

–

CEO

of
SSIF Raiffeisen Capital & Investment S.A.

Among

other

relevant

positions

held

by

Mr.

Neacsu:

Member

of

the

Board

of

Governors

EFAMA

(European
Fund

and

Asset

Management

Association,

between

2013-2016),

Romania’s

representative

in

multilateral
financial

institutions

(Council

of

Europe

Bank

(BDCE),

Black

Sea

Trade

and

Development

Bank

(BSTDB)),

Vice-
president

and

then

President

of

the

Romanian

Association

of

Asset

Managers

(AAF,

between

2008-2016),
founding

member

and

first

Vice

President

of

the

Board

of

Romanian

Association

for

Privately

Managed

Pension
Funds

(APAPR

in

2004),

Independent

non-executive

member

of

the

Supervisory

Board

of

BCR

Pensii,

Private
Pension

Fund

Management

Company

S.A.

(between

2009-2019),

Non-executive

member

of

CEC

Bank

S.A
Board

(between

2005-2006),

Non-Executive

member

of

the

Bucharest

Stock

Exchange

Board

of

Governors
(2001-2005),

Independent

Non-Executive

Member

of

the

Board

of

FINS

IFN

SA

(2018-present),

Board

Member
of

the

Romanian

Business

Leaders

Foundation

(2017-present),

member

of

the

Board

of

“Merito”

educational
project.

He

is

part

of

the

first

generation

(1994-1995)

of

the

Romanian-Canadian

MBA

Program,

cooperation

of

UQAM
and

McGill

Canadian

universities,

together

with

Academy

of

Economic

Studies

in

Bucharest

and

holds

a

BA

in
Civil Engineering from Technical University Bucharest (1989).

#### Ion-Cosmin



#### Petrescu


is

a

non-executive

director

since

28

April

2021,

member

of

the

Nomination

and
Remuneration Committee.

Mr.

Cosmin

Petrescu

holds

an

extensive

professional

experience

in

business

development,

sales

and
management,

Mr.

Cosmin

Petrescu

presently

activates

in

FNGCIMM,

where

he

leads

the

activity

of

IT,

State
Aid

and

Reporting

Divisions.

Cosmin

Petrescu

is

also

the

President

of

the

working

groups

dedicated

to

the
program

IMMINVEST

ROMANIA

and

for

the

relation

with

the

European

Bank

of

Reconstruction

and
Development.

Starting

February

2021,

he

holds

the

position

of

Adviser

within

the

Chancellery

of

the

Prime

Minister,

on
digitization issues.

Previously,

starting

with

the

year

2001,

Mr.

Petrescu

held

different

positions

within

companies

acting

in

the
Oil & Gas sector where he proved competence in optimizing business processes (Lean Management).

Three

consultative

committees

support

the

activity

of

the

BoD,

respectively

the

Nomination

and

Remuneration
Committee,

the

Audit

and

Risk

Committee

and

the

Strategy

and

Corporate

Governance

Committee,

each

of
them

composed

of

three

directors

and

chaired

by

one

of

them.

The

majority

members

of

the

Nomination

and
Remuneration

Committee

and

of

the

Audit

and

Risk

Committee,

as

well

as

their

Chairs,

are

independent
directors.

The

consultative

committees’

members

are

elected

for

a

period

of

one

year.

Changes

in

the

composition

of

87

the

committees

during

this

period

may

intervene

with

the

vacancy

of

a

Board

position.

The

organization,
duties

and

responsibilities

of

each

committee

are

set

under

ELSA’s

Articles

of

Association,

respectively

in

the
committee Charters and in the Company’s Corporate Governance Code.

According

to

the

changes

registered

in

the

BoD

composition,

the

composition

of

the

committees

changed
during 2021, as it follows:

➢

#### 01 January – 28 April 2021

Nomination and Remuneration Committee:

-
Mr. Bogdan Iliescu – Chairman;

-
Mr. Valentin Radu – Member;

-
Mr. Gicu Iorga – Member

Audit and Risk Committee:

-
Mrs. Ramona Ungur – Chairman;

-
Mr. Bogdan Iliescu – Member;

-
Mr. Cristian Bosoanca – Member.

Strategy and Corporate Governance Committee:

-
Mr. Dragos Andrei – Chairman;

-
Mr. Radu Florescu – Member;

-
Mr. Valentin Radu – Member.

➢

#### 06 May – 31 December 2021

Nomination and Remuneration Committee:

-
Mr.
Adrian-Florin Lotrean
– Chairman;

-
Mr.
Radu Mircea Florescu
 – Member;

-
Mr.
Ion Cosmin Petrescu
– Member.

Audit and Risk Committee:

-
Mr.
Radu Mircea Florescu
- Chairman;

-
Mr.
Dragos-Valentin Neacsu
– Member;

-
Mr.
Iulian Cristian Bosoanca
– Member.

Strategy and Corporate Governance Committee:

-
Mr.
Gicu Iorga
- Chairman;

-
Mr.
George Cristodorescu
– Member;

-
Mr.
Adrian-Florin Lotrean
– Member.

➢

#### At the issue date of this report

, the composition of the BoD Committees is as follows:

Nomination and Remuneration Committee:

-
Mr.
Adrian-Florin Lotrean
– Chairman;

-
Mr.
Radu Mircea Florescu
 – Member;

-
Mr.
Ion Cosmin Petrescu
– Member.

88

Audit and Risk Committee:

-
Mr.
Radu Mircea Florescu
- Chairman;

-
Mr.
Dragos-Valentin Neacsu
– Member;

-
Mr. Cristian Bosoanca – Member.

Strategy and Corporate Governance Committee:

-
Mr.
Gicu Iorga
- Chairman;

-
Mr.
 George Cristodorescu
– Member;

-
Mr.
Adrian-Florin Lotrean
– Member.

According

to

the

available

information,

there

is

no

agreement,

understanding

or

family

relation

between

the
directors of the company and another person who may have contributed to their appointment as directors.

As

of

31

December

2021,

among

the

BoD

members,

Mr.

Dragos-Valentin

Neacsu

holds

a

number

of

20

ELSA
shares.

According

to

the

available

information,

the

BoD

members

were

not

involved

in

litigations

or

administrative
proceedings

regarding

their

activity

within

the

company

or

regarding

their

capacity

to

fulfil

their

duties

within
the company in the past five years.

4.5.


#### The activity of ELSA’s






#### Board of Directors and of its consultative committees in 2021

In

2021,

the

Board

of

Directors

met

28

times;

of

these,

21

meetings

were

organized

with

the

physical

presence
of

the

members

and

seven

were

held

by

conference

call,

in

accordance

with

Art.

18

para.

20

of

the

company’s
Articles of Association.

The

Board

members'

attendance

(in

person

or

by

conference

call)

in

the

meetings

of

the

Board

of

Directors
and its committees in 2021 is presented below:

Name

The Board of
Directors

(no. of
meetings 28)

The Audit and
Risk Committee

(no. of meetings
- 17)

The Nomination
and Remuneration
Committee

(no. of meetings -
23)

The Strategy and
Corporate
Governance
Committee (no. of
meetings - 21)

Iulian Cristian Bosoanca

28

17

-

-

Dragos Andrei\*

9

-

-

6

George Cristodorescu

19

-

-

15

Radu Mircea Florescu

28

12

14

6

Bogdan Iliescu\*

9

5

9

-

Gicu Iorga

28

-

9

15

Adrian-Florin Lotrean

19

-

14

15

Dragos Neacsu

19

12

-

-

Ion-Cosmin Petrescu

19

-

14

-

Valentin Radu\*

9

-

9

6

Ramona Ungur\*\*

9

5

-

-

Source: Electrica

89

\*

The mandates ended according to the OGMS Decision no. 1/28 April 2021;

\*\*

Mrs. Ramona Ungur resigned from the position of member of the Board of Directors on 22 April 2021.

The key decisions taken by the BoD during 2021 refer to:

▪
Election

of

the

chairman

of

the

BoD

and

establishing

the

composition

of

the

consultative

committees

and
election of their chairs (after the GMS has established the new structure);

▪
Revision

and

endorsement

of

ELSA’s

revenue

and

expenses

budget

at

standalone

and

consolidated

levels,
as

well

as

of

the

revenue

and

expenses

budgets

of

company's

subsidiaries

for

the

financial

year

of

2021;

▪
Analysis

and

endorsement

of

ELSA’s

financial

statements

at

individual

and

consolidated

level,

as

well

as
of

the

financial

statements

of

the

company's

subsidiaries,

for

the

financial

year

ended

at
31 December 2020;

▪
Quarterly analysis of the registered financial results and analysis of the budgetary execution;

▪
Approval of the financing lines at Group level;

▪
Endorsement of the establishment of Electrica Foundation;

▪
Endorsement

of

the

updated

Remuneration

Policy

for

Directors

and

Executive

Managers,

to

respond

to
changes in the legislative framework

▪
Participation

in

the

competitive

processes

of

acquisition

of

electricity

production

projects

from

renewable
sources,

acquisition

of

100%

of

the

shares

of

Crucea

Power

Park

(Crucea

Est

project

-

projected

capacity
of

121

MW

and

a

storage

capacity

of

60Mwh),

Sunwind

Energy

SRL

(Satu

Mare

2

project

-

projected
capacity

27

MW),

New

Trend

Energy

(project

Satu

Mare

3

-

projected

capacity

59

MW)

Foton

Power
Energy SRL (Bihor 1 project - projected capacity 77.5 MW);

▪
Establishment

of

the

ELSA

branch

for

the

development

and

operation

of

electricity

production

capacities;

▪
Endorsement

of

the

amended

ELSA’s

Articles

of

Association

and

approval

of

the

amendments

of

the
subsidiaries Articles of Association;

▪
Revision

of

the

Internal

Standard

Delegation

of

the

Authority

and

of

the

Regulation

of

organization

and
functioning at the company level;

▪
Updating

the

Code

of

Ethics

and

Professional

Conduct

and

adopting

the

Policy

for

preventing,

combating
and sanctioning any form of harassment at work;

▪
Initiation of the reorganization project of the Company;

▪
Initiation of the project to revise the Group Strategy;

Regarding

the

structuring and development of Group’s business portfolio,







the

BoD

analyzed

the
existing opportunities and decided the following:

▪
Continuous

analysis

of

investment

opportunities,

taking

into

account

the

energy

market

development,

the
impact

on

the

activity

of

the

group's

subsidiaries

and

competitive

advantages

of

the

competition

and
participation in various competitive processes for this purpose;

▪
Establishment

of

the

ELSA

branch

for

the

development

and

operation

of

electricity

production

capacities;

▪
Adoption of policies in the field of risk management;

▪
Approval of the consolidated annual investment plan at group level for 2021;

▪
Increasing the share capital of distribution and supply subsidiaries.

Regarding

the

human resources and the managerial competences,






the

BoD

took

the

following
measures:

▪
Awarding

a

new

mandate

in

the

position

of

CDO

for

a

period

of

4

years

to

Mrs.

Livioara

Sujdea

and
nominating

Mr.

Stefan-Ionut

Pascu

as

Interim

Executive

Director

of

the

Corporate

Development

Division
starting

with

October

1st,

2021,

initially

for

a

3

months

period;

subsequently,

the

term

of

the

mandate

90

was extended until 31 December 2022;

▪
Nomination of members in the Boards of Directors in the Subsidiaries;

▪
Adoption of the Succession Policy for ELSA;

▪
Endorsement of the Remuneration Policy for the Company's Directors and Executive Managers;

▪
Evaluating

the

performances

registered

by

ELSA

executive

directors

in

2020

and

establishing

new

KPIs
for 2021;

▪
Continuing the implementation of the Human Resources strategy at Electrica Group level.

The main aspects of

#### audit and financials areas

referred to
:

▪
Ensuring the necessary financing for the activity performed by the companies within the Group;

▪
Monitoring

the

internal

audit

plan

implementation

for

2021

and

approving

the

revised

audit

plan

for

2022;

Evaluation of the Board of Directors activity during 2021:

The

Board

evaluates

annually

its

activity

and

that

of

its

consultative

Committees

to

identify

areas

of
improvement,

and

to

increase

its

efficiency.

The

purpose

of

the

evaluation

is

to

provide

members

of

the

Board
with

an

overview

of

their

activity,

strengths/weaknesses,

performance

and

the

potential

of

collective

and
individual

development,

in

order

to

efficiently

and

effectively

fulfil

their

responsibilities

as

members

of

the
Board.

According

to

the

established

mechanism,

the

evaluation

is

conducted

either

with

the

support

of

a

consultant
or by self-evaluation.

At

the

beginning

of

2022,

The

Board

of

Directors

has

self-evaluated

its

activity

for

the

year

2021,

using

a
questionnaire, internally developed, discussed and agreed by the Board members.

The

members

of

the

Board

who

contributed

to

the

evaluation

are:

Mr.

Iulian

Cristian

Bosoanca

–

Chair

of

the
BoD,

Mr.

George

Cristodorescu,

Mr.

Radu

Mircea

Florescu,

Mr.

Gicu

Iorga,

Mr.

Adrian-Florin

Lotrean,

Mr.
Dragos Neacsu and Mr. Ion-Cosmin Petrescu.

The questionnaire used aimed at evaluating the Board activity on the following areas:

•
Specific

KPIs

as

provided

in

the

mandate

agreements

(the

main

objectives

defined

by

the

General

Meeting
of

Shareholders:

Group

strategy,

Corporate

Governance,

Placement

of

financial

investments

and
Investments achievement in the distribution companies);

•
Board Efficiency and Ways of Working of the Board;

•
Board interactions and activities’ dynamics;

•
Self-Assessment of each Board member;

•
Functioning of the Board Chair;

•
Board’s interactions with CEO/Management;

•
Board’s interactions with stakeholders.

After

analyzing

the

questionnaire’s

results,

the

general

conclusion

was

that

the

functioning

of

the

BoD

activity
during 2021 took place in good conditions, among the positive aspects the following were listed:

1.
Most

of

the

respondents

rated

the

overall

activity

of

the

Board

conducted

during

2021

as

good,

the
average score being 4, on a scale from 1-5;

91

2.
Regarding

the

performance

indicators

of

the

Board

members,

it

was

appreciated

that,

on

a

large

extent,
the

goal

of

implementing

corporate

governance

at

the

group

level

was

achieved.

Furthermore,

the
Board

undertook

implementing

a

project

of

revising

the

corporate

governance

framework,

expectations
being that will lead to further improvements in the relationship with the companies within the Group.

3.
Regarding

the

level

of

investments

during

2021,

the

established/expected

level

was

reached,

creating
the

premises

for

future

development

and

improvement

of

the

results

registered

by

the

distribution
subsidiary.

4.
In

line

with

previous

years,

the

ability

of

the

Board

to

identify

developments

in

the

business
environment

in

which

the

Company

operates

and

certain

potential

opportunities

was

exploited,

the
general

appreciation

being

that

the

competence

of

analysis

and

strategic

planning

is

at

a

higher

level,
fact to which contributed the resources made available to the members of the Board.

5.
Regarding

the

efficiency

and

the

operating

of

the

Board,

members

appreciated

that

their

contribution
to

the

development

of

the

company

is

substantial,

further

considering

that

it

is

necessary

to

focus

on
the

strategic

aspects

of

the

company.

Moreover,

the

current

composition

of

the

Board

was

appreciated
as optimum, benefiting from diversified expertise.

6.
Regarding

the

identification

and

mitigation

of

risks,

in

line

with

the

results

of

the

previous

evaluation,
Board

members

appreciated

that

the

main

risks

and

mitigation

mechanisms

have

been

identified.
Furthermore,

the

occurrence

of

some

risks

specific

to

the

sector

determined

the

need

to

further
optimize

the

business

processes,

so

that

it

would

result

in

increase

of

the

reaction

speed

and

adaptation
to market dynamics.

7.
Board

members

appreciated

their

personal

contribution

in

the

activity

they

conducted,

the

involvement
and the impact of the decisions adopted.

8.
Regarding

the

observance

of

the

corporate

governance

principles,

members

of

the

Board

appreciated
that this is done at high standards.

9.
Communication

within

the

Board

in

terms

of

the

frequency

and

intensity,

issues

addressed

as

well

as
transparency

and

sincerity

of

the

dialogue,

is

considered

positive

and,

according

to

the

opinion

of

most
members,

the

atmosphere

at

Board

level

encourages

the

expression

of

all

perspectives

and

open
debates, which constitutes base for substantiating the decisions adopted.

10.
Also,

in

the

context

of

the

atypical

events

that

took

place

during

2021,

the

Board

considers

that

it
performed

well

as

a

team,

each

of

the

members

bringing

added

value

and

contributing

to

the

activity
carried

out.

Moreover,

the

work

done

by

the

Chair

received

positive

feedback

from

all

respondents,
especially

regarding

the

facilitation

of

an

open

and

constructive

dialogue

during

the

Board

meetings.
Regarding

the

collaboration

with

the

General

Manager,

members

appreciated

that

the

Chair

maintains
a close and constructive professional relationship with him.

The following areas for improvement were suggested:

1.
It

is

still

necessary

to

improve

communication

with

the

public

and

strategic

communication

with
shareholders,

concrete

measures

are

needed

in

this

regard.

Moreover,

deriving

from

the

need

to
improve

communication

regarding

the

mission,

vision

and

strategic

directions

of

medium-term
development

of

the

company,

the

Board

started

an

extensive

process

of

revising

the

adopted

Strategy,
subsequently to that, to elaborate a plan for their communication.

2.
Board

members

believe

that

the

functionality

of

the

company's

management

system

can

be

improved
while

appreciating

the

changes

occurred

during

the

year

at

the

level

of

the

executive

management

can
be constituted as incentive for other employees.

3.
At

the

same

time,

the

Board

considers

as

critical

improvement

of

the

interaction

with

the

company's

92

subsidiaries,

major

changes

being

required

from

this

perspective

to

ensure

the

achievement

of

the
assumed strategic objectives.

4.
Paying

more

attention

to

succession

planning

at

the

Senior

Management

level

as

well

as

stimulating
its implementation remains a priority for the Board and its future activity.

5.
At

the

same

time,

the

BoD

considers

necessary

to

take

measures

to

improve

the

process

of

preparing
Board meetings, improving frequency and time allocated to debates.

In

continuation

of

the

effort

made

previously,

the

Board

allocates

particular

importance

to

occupational

health
and

safety

issues

within

the

Group,

aiming

to

devote

time

and

effort

in

2022

to

support

management

in
improving the company’s occupational safety culture.

■

#### The Nomination and Remuneration Committee

The

Nomination

and

Remuneration

Committee

consists

of

three

non-executive

BoD

members,

two

of

its
members are independent.

The

role

of

the

Committee

is

to

propose

candidates

for

the

BoD,

to

develop

and

propose

to

the

Board

the
selection

procedure

of

candidates

for

the

executive

managers’

positions

and

other

management

positions,

to
recommend

the

Board

candidates

for

these

positions,

to

formulate

proposals

on

the

managers’

and

other
management positions’ remuneration.

The Committee has the following responsibilities
concerning nomination matters:

▪
recommends

to

the

Board

a

nomination

policy,

including

a

target

Board

profile,

the

process

and

principles
to

be

considered

by

the

shareholders

when

proposing

candidates

for

company’s

directors,

and

advises
the Board regarding the nomination of interim directors in accordance with the policy;

▪
reviews

the

implementation

of

the

nomination

policy,

submits

a

report

to

the

Board

on

its

implementation
and presents a summary of this report in the Directors' Report;

▪
advises

the

Board

on

the

appointment

and

dismissal

of

the

Chief

Executive

Officer,

makes
recommendations

on

the

appointment

and

dismissal

of

the

company’s

executive

management

team

after
consulting

with

the

Chief

Executive

Officer,

and

makes

proposals

on

the

appointment

and

dismissal

of
subsidiaries’ board of directors members in accordance with the Group Governance Policy;

▪
recommends

to

the

Board

policies

in

the

human

resources

field,

including

those

covering

recruitment

and
dismissal,

talent

management

and

development

and

succession

planning

across

the

company

and

its
subsidiaries (the Group);

▪
recommends

to

the

Board

a

succession

policy,

both

for

the

members

of

the

board

and

for

the

executive
team

oversees

the

process

for

the

annual

evaluation

of

the

effectiveness

of

the

Board

and

its

consultative
committees;

▪
supervises

the

process

of

annual

evaluation

of

the

effectiveness

of

the

Council

and

its

advisory
committees;

▪
periodically

assesses

the

size,

composition

and

Committee’s

structure

and

makes

recommendations

to

the
Board with regard to any changes;

▪
advises

the

Board

on

continuous

skill

development

programmes

for

Board

members

and

executive
management;

▪
oversees

the

nomination

process

of

the

appointment

of

subsidiaries’

CEOs

and

executive

managers
according to the nomination and remuneration policy.

93

The Committee has the following duties
regarding remuneration:

▪
advises the Board in relation to the remuneration, incentive and compensation policies of the company;

▪
advises

the

Board

regarding

the

periodic

review

of

the

remuneration

policy

for

Board

members

and
executive managers;

▪
advises

the

Board

in

relation

to

the

remuneration

of

the

CEO

and

other

executive

managers,

including

the
main

remuneration

components,

annual

and

long

term

performance

objectives

and

regarding

evaluation
methodology;

▪
makes

recommendations

to

the

Board

on

the

remuneration

of

subsidiaries’

board

members

and

the
general limits of remuneration for subsidiaries’ executive management;

▪
monitors compensation trends within areas relevant to the Group;

▪
oversees

the

remuneration

process

of

the

subsidiaries’

chief

executive

officer

and

executive

managers
according to the nomination and remuneration policy at the Group level;

▪
verifies

at

least

once

a

year

the

number

of

mandates

held

in

other

companies

by

the

members

of

the
Board and by the executive managers, in order to evaluate their independence;

▪
Oversees the annual evaluation process of the Board of Directors’ activity.

#### The Nomination and Remuneration






#### Committee met




#### 23 times during




2021
,

among

the

main

aspects
on which the activity of the Committee focused, were the following:

✓
Analysis

of

ELSA

executive

managers’

KPIs

achievement

for

2020

and

establishing

of

the

KPIs

for

2021,
along with the performance evaluation methodology;

✓
Supervising the evaluation process of the Board of Directors’ activity during 2020;

✓
Endorsing the proposals regarding the nomination of the subsidiaries’ Board members;

✓
Endorsement

of

the

Board

Profile

and

of

the

eligibility

criteria

for

the

Board

members

of

the

companies
within the Group;

✓
Revision

of

the

Methodology

to

evaluate

the

achievement

level

of

short-term

Key

Performance

Indicators
(KPI)

and

endorsement

of

the

Methodology

to

evaluate

the

achievement

level

of

long-term

KPIs

applicable
to the Executive Managers at Electrica Group Level;

✓
Revision the Remuneration Policy for the Company's Directors and Executive managers;

✓
Endorsment of the Succession Policy for ELSA.

■

#### The Audit and Risk Committee

The

Committee

is

composed

of

three

non-executive

BoD

members,

two

of

them

being

independent.

The
Committee’s

composition

provided

the

necessary

expertise

in

finance

and

risk

management,

according

to

legal
requirements.

The

main

role

of

the

Committee

is

to

support

the

Board

in

fulfilling

its

duties

of

verifying

the

efficiency

of
company's

financial

reporting,

internal

control

and

risk

management.

While

fulfilling

this

role,

the

Committee
advises

the

Board

regarding

the

assessment

of

the

annual

report

and

annual

financial

statements,

whether
the

documents

are

accurate,

balanced

and

comprehensive

and

provide

all

the

necessary

information

for

the
shareholders’ evaluation of the financial performance.

The Committee has the following duties in
terms of financial reporting:

▪
examines

and

monitors

the

financial

reporting

process,

the

integrity

of

annual

and

interim

financial
statements, at standalone and consolidated levels, or of disclosures made by ELSA and its subsidiaries;

▪
reviews

press

releases

announcing

financial

or

operational

results

related

to

or

derived

from

such

financial
statements,

as

well

as

any

financial

information

or

earning

guidance,

to

be

provided

to

financial

analysts

94

or

rating

agencies,

by

analyzing

the

fairness

and

adequacy

of

the

content

and

presentation

of

such
statements or information;

▪
regularly reviews the adequacy of the Group’s accounting policies;

▪
reviewes

the

financial

forecast

policy

of

the

Company

and

recommends,

to

approval,

towards

Board

of
Directors.

▪
reviews

and

advises

the

Board

on

whether

the

content

of

the

annual

report,

taken

as

a

whole,

represents
a

fair,

balanced

and

understandable

account

for

shareholders

and

provides

them

with

the

information
necessary to assess the Company’s performance.

■
Regarding

the


#### audit and internal control matters





,

the

Committee

has

the

following
responsibilities:

▪
endorses,

for

the

Board’s

approval,

the

annual

plan

at

Group

level,

based

on

the

annual

risk

assessment,
as

well

as

any

significant

changes

to

the

plan

and

receives

periodic

reports

on

activities,

important

findings
and follow-up of internal audit reports;

▪
periodically reviews the charter and internal audit manual and submits them to the Board, for approval;

▪
advises

the

Board

on

the

appointment,

dismissal

and

remuneration

of

the

Head

of

Internal

Audit
Department;

▪
monitors the adequacy, effectiveness and independence of the internal audit function;

▪
makes

recommendations

to

the

Board

on

the

appointment,

rotation

or

dismissal

of

the

company’s

external
auditor;

▪
reviews the plan, activity and findings of the external auditor;

▪
assesses

the

independence

and

objectivity

of

the

external

auditor

and

monitors

the

compliance

with
relevant ethical and professional guidance, including the requirements on the rotation of audit partners;

▪
monitors the application of the legal standards and generally accepted internal audit standards;

▪
endorses

the

internal

audit

reports,

the

recommendations

made

by

the

internal

auditors

and

the

plans

of
measures for the implementation of the recommendations;

▪
performs any other activities established by the Board and the law;

▪
regularly

reviews

the

adequacy

of

the

key

internal

control

policies,

including

fraud

detection

and

bribe
prevention policies;

▪
reviews

the

operations

between

affiliated

parties

in

accordance

with

a

policy

drafted

by

the

Committee
and approved by the Board;

▪
analyzes

the

annual

report

prepared

by

the

Internal

Audit

Department

and/or

Risk

Management,

which
evaluates the effectiveness of the internal control system within the Group.

■

The Committee has the following responsibilities concerning
risk management matters:

▪
reviews

regularly

the

main

risks

facing

the

company

and

the

Group,

recommending

to

the

Board

adequate
policies for risks identification, mapping, management and mitigation;

▪
monitors

the

main

categories

of

risks

that

are

recorded

annually

in

the

management

report

in

order

to
reduce them and to evaluate the efficiency of the risk management system within the Group;

▪
makes

recommendations

to

the

Board

on

financing

methods,

including

proposals

for

contracting

any

type
of loans and securities associated with these loans;

▪
makes

recommendations

to

the

Board

regarding

major

economic

transactions

within

the

authority

of

the
General Meeting of Shareholders and assesses the associated risks regarding such transactions.

95

#### The Audit and Risk






#### Committee met




#### 17 times during




2021
,

among

the

main

aspects

on

which

the
activity of the Committee focused, being the following:

✓
Analysis

of

the

financial

statements

of

ELSA

at

standalone

and

consolidated

level

for

the

financial

year

of
2020,

as

well

as

the

financial

statements

of

company's

subsidiaries

for

the

financial

year

of

2020,

together
with the financial auditor report and recommendations, issued during the auditing process;

✓
ELSA’s budget execution, the consolidated budget execution and the quarterly financial results;

✓
Revision

of

the

internal

audit

plan

for

2021

and

analysis

of

its

achievement,

as

well

as

the

reports
submitted by the Internal Audit Department, proposing recommendations;

✓
Monitoring the implementation of the recommendations made by the internal audit department;

✓
Updating the Code of Ethics and Professional Conduct;

✓
Endorsement of the Know Your Customers Policy (clients and suppliers) and of the Security Policy;

The

internal

audit

activity

is

carried

out

by

a

structurally

separate

organizational

unit

(the

internal

audit
department),

within

the

Company.

To

ensure

the

fulfilment

of

its

main

functions,

it

reports

functionally

to

the
BoD through the Audit and Risk Committee and administratively to the CEO.

■

#### The Strategy and Corporate Governance Committee

The

Committee

is

composed

of

three

non-executive

BoD

members,

holding

the

necessary

expertise

in
performing the committee’s specific duties, two of them being independent.

The Committee has the following
duties in terms of strategy:

▪
makes

proposals

to

the

Board

on

the

development

of

the

medium-term

strategic

plan,

makes
recommendations

on

the

strategic

direction,

priorities

and

long

term

objectives

of

ELSA

and

its
subsidiaries;

▪
reviews

management

proposals

on

the

Group’s

consolidated

annual

budget,

subsidiaries’

annual

budgets,
investment plans of the Group companies and makes relevant recommendations to the Board;

▪
advises

the

Board

in

monitoring

and

assessing

the

Group’s

performance

in

relation

to

the

approved
strategic

plan,

budgets,

investment

plans,

industry

trends,

local

and

regional

market

trends,

company’s
competiveness and technological advances;

▪
periodically

reviews

the

overall

strategic

planning

process,

including

the

process

of

developing

the
medium-term

strategic

plan,

makes

recommendations

on

the

issues

that

can

be

improved

in

strategic
planning and provides feedback to the executive management;

▪
makes

recommendations

to

the

Board

regarding

the

proposed

acquisitions,

divestments,

investment
projects,

joint-ventures

and

collaboration

projects,

especially

assessing

their

alignment

with

the

Group’s
strategy;

▪
performs

any

other

activities

or

assume

responsibilities

regarding

strategic

matters

which

may

be
delegated periodically to the Committee by the Board.

■

Regarding the

#### tasks of the Committee on restructuring

, they mainly relate to the following:

▪
reviews

and

makes

recommendations

to

the

Board

with

respect

to

the

development

and

implementation
of

the

Group's

overall

restructuring

plans

and

objectives,

including

any

decision

regarding

the

conduct

or
efficiency of core businesses;

▪
regularly

reviews

the

organizational

structure

and

chart

of

the

company,

and

makes

recommendations

to
the Board in this regard;

▪
performs

any

other

activities

or

responsibilities

on

restructuring

matters

as

may

be

periodically

delegated

96

to the Committee by the Board.

■

Also, the Committee has duties in

#### terms of corporate governance

:

▪
oversees

and

monitors

the

company’s

compliance

with

legal

and

contractual

obligations

on

corporate
governance,

as

well

as

other

applicable

corporate

governance

principles

and

makes

recommendations

to
the Board;

▪
regularly

reviews

the

company’s

Corporate

Governance

Code,

the

Charter

of

the

Board

of

Directors

and
the

company’s

Articles

of

Association

and

makes

recommendations

to

the

Board

on

relevant

amendments
to the company’s corporate governance policy and documentation;

▪
submits the Group Governance Policy to the Board for approval and regularly reviews it thereafter;

▪
reviews

the

company’s

Delegation

of

Authorities

policy

and

the

company’s

Delegation

of

Authority
standard

in

order

to

ensure

that

the

delegation

of

authorities

to

management

allows

for

effective

and
efficient decision-making process, and makes recommendations to the Board in this respect;

▪
reviews

the

company’s

policy

for

corporate

social

responsibility

and

stakeholder

engagement,

and

makes
recommendations to the Board in this regard;

▪
makes

recommendations

to

the

Board

on

improving

the

quality

of

information

flows

to

the

Board,

including
the

improvement

of

reports

sent,

key

performance

indicators

presented

to

them,

and

guidelines

for
preparing Board documents and presentations;

▪
drafts reports or materials related to corporate governance, upon the Board request.

■

During

the

year

2021,


#### the Committee met




21 times,


among

the

main

aspects

on

which

the

activity

of

the
Committee focused, being the following:

✓
Analysis

of

the

opportunities

and

the

efficiency

of

investments

in

different

renewable

production

capacities
and participation in various competitive processes in this regard;

✓
Endorsement of the ELSA branch for the development and operation of electricity production capacities;

✓
Endorsement

of

the

amendments

to

the

ELSA’s

Articles

of

Association

and

those

of

the

the

Articles

of
Association of the subsidiaries;

✓
Revision

of

the

Internal

Standard

Delegation

of

the

Authority

and

of

the

Regulation

of

Organization

and
Functioning of SE Electrica SA;

✓
Endorsement of the reorganization process of the Company's personnel structure.

4.6. ELSA’s Executive management

In

accordance

with

ELSA’s

Articles

of

Association,

the

Board

of

Directors

(BoD)

appoints

and

revokes

the

CEO,
as well as the other executives with mandates and also approves their empowerments.

The

attributions

of

the

Company’s

executive

managers

(including

those

of

the

General

Manager)

are
established

by

the

mandate

agreements

based

on

which

the

directors

carry

out

their

activity

within

ELSA,

the
internal organization and functioning regulations of ELSA and the applicable legal provisions.

The

Board

of

Directors

approved

the

continuation

of

the

collaboration

with

Mrs.

Livioara

Șujdea

and

her
appointment as Chief Distribution Officer (CDO), starting with February 1, 2021, for a 4 years mandate.

On

1
st

of

May,

2021,

the

mandate

agreement

of

the

Chief

Corporate

Development

Officer,

Mrs.

Anamaria
Dana Acristini Georgescu,
has terminated, upon lapse of the mandate duration.

During

the

meeting

held

on

September

22,

2021,

ELSA’s

Board

of

Directors

decided

the

appointment

of

Mr.

97

Stefan

Ionut

Pascu

as

Chief

Corporate

Development

Officer,

until

December

31,

2021.

During

the

meeting
held

on

December

22nd,

2021,

the

mandate

agreement

of

Mr.

Stefan

Ionut

Pascu

has

been

extended

until
December 31, 2022.

On

December

11,

2021,

the

mandate

agreement

of

the

Chief

Marketing

Officer,

Mrs.

Catalina

Popa,

has
terminated, upon lapse of the mandate duration
.

During

the

meeting

held

on

December

15,

2021,

ELSA’s

Board

of

Directors

revoked,

without

cause,

Mrs.
Bibiana

Constantin

from

the

position

of

Chief

Human

Resources

Officer,

starting

with

January

1,

2022,
December 31, 2021 being the last day of exercising the mandate agreement.

During

the

meeting

held

on

December

15,

2021,

ELSA’s

Board

of

Directors

took

note

of

the

expiration

on
January 3, 2022 of the mandate agreement the Company and the Chief Financial Officer, Mr. Mihai Darie.

Following

these

changes,

during

2021,,

the

ELSA’s

executive

managers,

each

appointed

by

mandate
agreements, were:

Name

Function

The Executive Manager’s mandate

Georgeta Corina Popescu

Chief Executive Officer

1 February 2019 - 31 January 2023

Mihai Darie

Chief Financial Officer

3 January 2018 – 3 January 2022

Livioara Sujdea

Chief Distribution Officer

1

February

2017

–

31

January

2021,

the
mandate

being

renewed

for

a

period

of
4

years,

respectively

1

February

2021

-
31 January 2025

Anamaria Dana Acristini-
Georgescu

Chief Corporate Development Officer

1 May 2017 – 1 May 2021

Stefan Ionut Pascu

Chief Corporate Development Officer

1 October 2021 – 31 December 2021,

the mandate was renewed for a period
of 12 months, respectively 1 January
2022 – 31 December 2022

Catalina Popa

Chief Market Officer

12 December 2017 – 11 December
2021

Bibiana Constantin

Chief Human Resources Officer

1 February 2019 - 31 Decembre 2021\*

Mircea Toma Modran

Chief IT & C Officer

1 June 2019 - 1 June 2023

Source: Electrica

\*
Termination without cause of the mandate agreement.

More

details

on

the

in

place

executive

managers’

biographies

can

be

found

on

ELSA’s

website
(www.electrica.ro) in the section
Investors > Corporate Governance > Executive Management.

We

present

below

the

most

relevant

aspects

regarding

the

professional

experience

of

ELSA’s

executive
managers:

Name

Professional experience

Georgeta Corina
Popescu -
Chief
Executive Officer

Ms. Georgeta Corina Popescu is a top executive with an impressive experience in
the field of electricity and natural gas. Appointed CEO of SDMN, part of Electrica
Group, on
1
 June 2018
, Corina Popescu took over from 1 November 2018 the
position of interim CEO of ELSA. Starting with 1 February 2019, Corina Popescu

98

holds the CEO position of ELSA, for a 4 years period.

Graduate of the Faculty of Power Engineering at the University Politehnica of
Bucharest, specialized in Power Engineering Systems, Georgeta Corina Popescu
started her professional career in Sucursala de Distributie si Furnizare a Energiei
Electrice Bucuresti.

Since 2007, Georgeta Corina Popescu has worked in the private sector, holding
important positions in E.ON Romania Group and OMV Group.

Between December 2015 and February 2017, Corina Popescu held the position of
State Secretary within the Ministry of Energy, period during which she was also a
member of the BoD of ELSA. Starting with 1 May 2017, she was appointed in
Transelectrica’s Directorate, and during the June 2017 – April 2018 period she was
Transelectrica’s Directorate President.

Mihai Darie - Chief
Financial Officer

Mr. Mihai Darie has a 22 years professional experience in finance, acquired in
various fields such as energy, infrastructure, financial advisory, banking,
investment funds in executive as well as management positions, gained in
companies such as Nuclearelectrica SA, Fondul Proprietatea SA, Raiffeisen Bank
and BDO Romania.

Mihai Darie is a graduate of Finance and Banking Faculty within the Academy of
Economic Studies Bucharest, he is an expert accountant member of CECCAR, he is
a graduate of Asebuss Bucharest EMBA program and he is an ACCA UK member
as well as a CFA (Chartered Financial Analyst) certification holder.

Livioara Sujdea - Chief
Distribution Officer

With over 22 years of experience in energy field, Livioara Sujdea started her
activity as a Design Engineer at ELSA, subsequently occupying various top
management positions, including Deputy CEO and member in the BoD of E.ON
Moldova Distributie, E.ON Gas Distributie, E.ON Distributie Romania, Operation
and Maintenance Director at Delgaz Grid and Deputy CEO and member in the BoD
of E.ON Energie.

Livioara Sujdea graduated the Technical University “Gheorghe Asachi” of Iasi –
Faculty of Electrical Engineering and Energy, where she also obtained a master’s
degree in Business Management and Commercial Engineering, and she also has
an Executive MBA with specialization in General Management at the University of
Sheffield UK and a Strategic Management and Leadership Degree from the
Chartered Management Institute London, UK.

Anamaria Dana Acristini
–Georgescu -
Chief
Corporate Development
Officer

Mrs. Anamaria Acristini has an experience of over 14 years in the energy field, in
particular from the strategic and financial perspectives; the last position held was
as Strategy Director within E.ON Romania. Previously, she held important
positions in leading companies, such as Ernst&Young, Mazars and KPMG.

Anamaria Acristini is a graduate of the Bucharest Academy of Economic Studies,
has a master’s degree in International Project Management and holds an
Executive MBA from Sheffield University (U.K.). Moreover, she is also an affiliated
member of the ACCA UK.

The collaboration with Mrs. Anamaria Dana Acristini Georgescu ended on May 1,
2021,
upon lapse of the mandate duration.

Ionut - Stefan Pascu

Chief Corporate
Development
Officer

Mr. Pascu has an experience over 16 years of leadership and entrepreneurship in
the energy & utilities field of Central and Eastern Europe, telecommunications,
management consulting and non-profit sectors and has functional expertise in
several areas as: strategy, marketing & sales, digital transformation, innovation,
M&A, post-acquisition integrations, restructuring and cost reduction programs,
customer service and organizational excellence.

99

Graduate of the Faculty of International Economic Relations at ASE Bucharest, mr.
Pascu attended the courses of the program equivalent to the Executive MBA
(Program for Leadership Development), at Harvard Business School.

Prior to joining Electrica Group, mr. Pascu worked for Deutsche Telekom Group
Romania as Digital Director and previously, as a member of the management
team for Roland Berger in Romania, Central and Eastern Europe and the United
Kingdom.

Interested and directly involved in initiatives with social impact, Ștefan-Ionuț
Pascu is a founding member of The Social Incubator Association and Global
Dignity Association, two non-governmental organizations in Romania with social
and youth activities.

Catalina Popa - Chief
Market Officer

With an experience of more than 29 years in the field of electrical power and
natural gases, Catalina Popa started her activity as an engineer within Electrica.
Subsequently, she occupied several top management positions within E.ON,
among which Sales Management Executive Director, Director of Operations,
Financial Director and Director of Energy Network Performance Management.

Catalina Popa is a graduate of the Power Engineering Faculty within the University
Politehnica of Bucharest, holding a diploma as well in Management & Business
Administration from Codecs-Open University, Great Britain.

The collaboration with Mrs. Catalina Popa ended on Decembre 11, 2021,
upon
lapse of the mandate duration.

Bibiana Constantin
-
Chief Human Resources
Officer

Graduate of the Faculty of Psychology and Sociology – West University of
Timisoara and of a master’s degree in Human Resources Management and
Communication, as well as of a master’s degree in Psychology, Bibiana Constantin
has experience in consultancy and HR management for various industries,
including the energy field.

With more than 10 years of experience in managing company restructuring and
executive search projects, at national and international level, but also with a solid
knowledge of the human resources market, Bibiana Constantin has provided, in
the recent years, specialized consultancy and occupied positions in the top
management of large companies in the industry.

The collaboration with Mrs. Bibiana Constantin ended on Decembre 31, 2021, by
termination without cause of
 the mandate agreement.

Mircea Toma Modran -
Chief IT & C Officer

Starting with 1 June 2019, Mr. Mircea-Toma Modran has taken over the position of
Chief Information Officer within Electrica SA, for a 4 years’s period.

With more than 30 years of professional experience, he occupied for 20 years top
management positions for Romanian and foreign, private and state owned, listed
companies, operating in energy and utilities, oil and gas, chemical, aeronautics
and information technology, fulfilling a wide range of responsibilities, from the
classic IT and industrial automation to direct coordination of operational divisions
with strategic impact on financial results.

Mr. Mircea-Toma Modran graduated the Faculty of Electrical Engineering,
Department of Automation and Computers (currently the Faculty of Automation)
of the University of Craiova, with an Electrical Engineer degree, and the York
University Schulich School of Business Toronto, with a master’s degree in Business
Administration. He also attended postgraduate programs at Humber College and
the Niagara Institute in Canada, and the Ashridge-Hult and Edinburgh Universities
in UK.

Source: Electrica

100

According

to

the

information

held

by

ELSA,

there

is

no

contract,

understanding

or

family

relationship

between
the

executive

managers

of

the

Company

and

another

person

who

may

have

contributed

to

their

appointment
as executive managers.

According

to

available

information,

ELSA’s

executive

managers

mentioned

in

this

chapter

have

not

been
involved,

in

the

last

five

years,

in

any

litigations

or

administrative

proceedings

related

to

their

activity

within
the company and neither to their capacity to fulfil their work-related duties in the Group.

4.7.


#### Remuneration of the Directors and of the Executive










#### Managers with mandate agreements

The

Directive

828/2017

of

the

Council

and

the

European

Parliament,

amending

Directive

2007/36

/

EC

as
regards

the

encouragement

of

long-term

involvement

of

shareholders,

was

transposed

into

national

legislation
by

Law

no.

24/2017,

regarding

the

exercise

of

certain

rights

within

the

listed

companies

and

aims

to

ensure
the long-term sustainability of the listed companies.

On

the

ELSA’s

Ordinary

General

Meeting

of

Shareholders

(OGMS)

held

on

April

28,

2021,

was

approved

the
Remuneration

Policy

for

Directors

and

Executive

Managers,

without

any

changes

being

made

to

the

previously
established

remuneration

limits.

The

amendments

concern

the

additions

as

a

result

of

the

new

legislative
provisions,

in

order

to

present

in

a

transparent

way

the

elements

of

fixed

and

variable

remuneration,

including
financial and non-financial benefits, in any form, which are granted to Directors and Executive Managers.

As

well,

the

elaboration

of

the

Remuneration

Policy,

considered

the

good

practices

used

at

international

and
national level for similar companies as ELSA, as they were identified after the ELSA’s listing process.
.

According

to

ELSA’s

Corporate

Governance

Code,


#### the Nomination and Remuneration






#### Committee



#### (NRC)


established within the BoD has the following responsibilities related to remuneration:

▪
makes

recommendations

to

the

Board

on

the

remuneration,

incentive

and

severance

compensation
policies of the Company;

▪
makes

recommendations

to

the

Board

on

the

regular

review

of

the

remuneration

policy

for

Directors

and
Executive Managers;

▪
makes

recommendations

to

the

Board

on

the

remuneration

of

the

CEO

and

other

executive

managers,
including

the

main

remuneration

components,

annual

and

long

term

performance

objectives

and

the
evaluation methodology;

▪
makes

recommendations

to

the

Board

on

the

remuneration

of

subsidiaries’

board

members

and

the
remuneration

policy

for

the

subsidiaries’

executive

managers

in

order

to

express

ELSA’s

vote

at

the
subsidiaries’ general meetings of the shareholders;

▪
monitors compensation trends within industries relevant to the Group;

▪
verifies

at

least

once

a

year,

the

number

of

mandates

held

by

the

members

of

the

Board

of

Directors

and
by

the

members

of

the

Executive

Management

in

other

companies,

in

order

to

evaluate

their
independence;

▪
supervises the annual evaluation process of the activity of the Board of Directors.

The

Remuneration

Policy

for

Directors

and

Executive

Managers

is

subject

to

annual

review

by

the

NRC

and
describes

the

main

pillars

of

remuneration,

as

well

as

the

terms,

conditions

and

non-financial

benefits
approved by the corporate bodies of ELSA.

101

#### The Remuneration Policy

has the following objectives:

▪
to establish clear guidelines and thresholds on remuneration matters;

▪
to establish the remuneration structure;

▪
to ensure the correlation between the remuneration levels within ELSA..

The

#### principles governing this policy

 are:

According

to

best

practice,

the

remuneration

structure

is

defined

separately

for

Directors

and

Executive
Managers.

The principles of the Directors’ remuneration structure are the following:

1.
Ensuring

a

level

of

remuneration

adapted

both

to

the

labour

market

level,

and

to

the

level

of

dedication,
qualification and responsibility required by these positions;

2.
The

level

of

remuneration

should

be

sufficiently

motivating,

in

a

manner

that

would

ensure

the
commitment

of

directors

towards

the

interests

of

the

company,

while

not

representing

an

impediment
in ensuring their independence.

The remuneration principles of the remuneration structure of Executive Managers are the following:

1.
Ensuring

correlation

of

remuneration

to

the

achievement

of

strategic

objectives

and

delivery

value

to
shareholders,

a

significant

part

of

the

remuneration

package

being

related

to

achievement

of
performance objectives (on short and long term);

2.
Ensuring

a

competitive,

fair,

and

non-discriminatory

level

of

remuneration

(irrespective

of

gender,

race,
ethnicity, religion, or sexual orientation), in order to attract and retain valuable management staff.

In determining the level of remuneration, the following factors are considered:

1.
External factors:

-
the

remuneration

system

includes

a

fixed

component

and

a

variable

performance-based

component,
in line with market practices; in addition, it includes also other non-financial benefits;

-
the

reference

values

were

established

considering

both

data

regarding

the

remuneration

practiced

in
international

companies

of

comparable

size

active

within

the

Romanian

energy

sector,

but

also

based
on data from other industries (e.g. petroleum industry) and other EEA countries;

-
the

design

and

customization

of

the

remuneration

packages,

at

company

level,

are

realized

in

order

to
align

and

reflect

the

company's

corporate

governance

philosophy,

ownership

structure,

level

of
autonomy, role and impact of the Board of Directors and Executive Managers.

2.
Internal factors

-
the

remuneration

policy

follows

principles

similar

to

those

of

the

employee

remuneration

and

describes
the

various

elements

of

fixed

and

variable

remuneration,

including

other

financial

and

non-financial
benefits.

In

establishing

these

principles,

internal

equity

is

maintained,

by

applying

the

principle

of
proportionality

regarding

the

various

categories

of

staff,

the

level

of

remuneration

being

set

at

the
market median for all hierarchical levels;

-
while

carrying

out

a

considerable

part

of

the

business

in

a

regulated

environment,

the

remuneration
policy

induces

certain

particularities

in

determining

the

level

of

the

monthly

gross

fixed

remuneration
and of the structure of the remuneration package, as a whole;

-
the

remuneration

policy

establishes

clear,

complete,

and

varied

criteria

of

granting

variable
remuneration, these being established according to the Company’s strategy and business objectives.

102

A.

#### Board of Directors

The

BoD

members’

remuneration

has

as

main

pillars

a

monthly

fixed

remuneration

and

an

attendance

fee

for
participating at meetings (Board of Directors and its Committees) as follows:

▪
the

fixed

monthly

remuneration

is

differentiated

between

the

Chair

and

the

Board

members,

respectively
EUR 4,985 gross for the Chair and EUR 3,630 gross for the BoD members;

▪
the

attendance

fee

to

the

Board

and

its

committees’

meetings

is

differentiated

as

well

between

the
members

and

the

committees’

Chairs,

respectively

EUR

1,200

gross

for

the

Board/committees’

members
and

EUR

1,445

gross

for

the

committees’

chairs.

The

annual

number

of

meetings

to

be

remunerated

is
limited to 12 for BoD and to 6 of each committee.

▪
Additional

committee

meetings

can

be

organized

only

in

exceptional

situations,

upon

the

Chairs’

decision,
who

are

responsible

to

efficiently

organize

the

agenda

and

activity.

However,

only

one

such

additional
meeting

shall

be

remunerated,

for

each

committee.

The

meeting

attendance

fee

has

the

specific

role

to
recognize

the

additional

effort

required

for

the

contribution

made

and

the

support

provided

during

the
meetings.

Also

the

Remuneration

Policy

provides

for

a

series

of

financial

and

non-financial

benefits

granted

to

the
Directors, as follows:

▪
reimbursement of the reasonable expenses related to the execution of the mandate;

▪
“Directors

&

officers

liability”

(D&O)

insurance

policy,

with

an

insured

value

of

EUR

10

million

/

person/
event,

according

to

the

market

terms,

up

to

a

limit

of

EUR

40

million

/

company.

The

policy

will

also

cover
a

period

of

maximum

5

(five)

years

from

the

date

of

termination

of

the

Mandate

Agreement,

for

events
that

occurred

as

a

result

of

the

activity

carried

out

by

the

Directors,

during

their

term

of

office.

The
company will borne and pay the cost of the premiums of this insurance;

▪
same

package

of

medical

services

and

/

or

medical

insurance

contracted

by

the

Company

for

the
employees;

▪
other

legal

expenses

incurred

by

the

Director

in

defending

against

a

third-party

claim

made

against

the
Director

in

relation

to

the

performance

of

the

duties

according

to

the

mandate

agreement,

the

Articles

of
Association,

the

BoD

Charter

or

the

Legal

Framework,

shall

be

borne

by

the

Company,

to

the

extent

these
are

not

already

covered

by

the

“Directors

&

Officers

liability”

(D&O)

insurance

policy

in

force

at

the

time;

▪
a compensation in case of unjustified revocation, detailed at point 5.4;

▪
any

other

equipment

/

resources,

in

connection

with

and

necessary

for

the

proper

execution

of

the
attributions

and

obligations

provided

by

the

Mandate

Agreement

(equipment

/

resources

of

long-distance
communication, travel expenses etc.)

B.

#### The Executive Management

B.1
.

#### General remuneration limits for ELSA’s CEO

The

remuneration

of

ELSA

CEO

is

comprised

of:

(a)

a

fixed

monthly

remuneration,

(b)

a

variable

yearly
remuneration

depending

on

the

achievement

of

the

performance

indicators

and

(c)

a

package

of

options

of
virtual shares (hereinafter referred to as “OAVT”), as follows:

a.
the

fixed

monthly

remuneration

is

between

EUR

9,000

and

EUR

13,050

gross.

This

remuneration

is
established by the BoD within limits approved by the GMS;

b.
The

variable

yearly

compensation

is

between

30%

and

50%

of

the

fixed

annual

remuneration.

The
percentage

is

established

by

the

BoD,

within

the

limits

approved

by

the

GMS.

The

value

of

the

annual
variable

remuneration

shall

be

determined

depending

on

the

degree

of

achievement

of

the

KPIs,

103

established for the respective year;

c.
the

OAVT

package,

granted

at

the

beginning

of

the

mandate,

will

have

a

value

between

150%

and

200%
of

the

annual

fixed

remuneration

(calculated

as

monthly

gross

fixed

remuneration

at

the

time

of

signing
the

mandate

agreement

x

12),

in

compliance

with

the

provisions

of

the

Remuneration

Policy

for

Directors
and Executive Managers.

B.2. General remuneration limits for ELSA’s Executive Managers (mandated by the BoD)

The

remuneration

of

the

executive

managers

consists

of:

(a)

a

fixed

monthly

remuneration,

(b)

a

variable
yearly

compensation

depending

on

the

achievement

of

KPIs

and

(c)

a

package

of

options

of

virtual

shares
(hereinafter referred to as “OAVT”), as follows:

a.
the

fixed

monthly

remuneration

approved

by

the

GMS

will

be

between

EUR

6,980

and

EUR

11,700

gross.
The remuneration is established by the BoD within the limits approved by the GMS;

b.
the

annual

variable

remuneration

it

is

between

15%

and

40%

of

the

annual

fixed

remuneration.

The

final
percentage

it

is

decided

by

the

Board

of

Directors

within

the

limits

approved

by

the

GMS.

The

value

of
the

annual

variable

remuneration

shall

be

determined

depending

on

the

degree

of

achievement

of

the
KPIs, established for the respective year;

c.
to

each

executive

manager

(unless

mandated

on

interim

or

on

a

short-term

basis)

it

is

granted

at

the
beginning

of

the

term

an

OAVT

package.

The

value

of

the

OAVT

package

will

be

between

60%

and

160%
of

the

annual

fixed

remuneration

(calculated

as

monthly

gross

fixed

remuneration

at

the

time

of

signing
the mandate agreement x 12), within the limits approved by the GMS

d.
The

executive

manager

is

entitled

to

cash

the

value

of

the

OAVT

package

upon

the

expiration

of

the
Duration

of

the

Mandate

Agreement

or

in

the

last

6

months

remaining

until

its

expiration,

in

case

the
mandate

agreement

terminates

during

this

period,

excepting

for

the

resignation

or

revocation

of

mandate
agreement with just cause.

At

the

beginning

of

the

Executive

Manager’s

mandate

(including

the

CEO),

the

BoD

will

set

up

the

long-term
KPIs

(for

the

duration

of

the

mandate).

At

the

end

of

the

term,

the

Board

will

review

the

achievement

of

the
long-term

KPIs

and

will

adjust

the

final

value

of

the

OAVT

package

paid

out

to

the

executive

manager,
including the CEO.

The

Executive

Managers

cannot

receive

more

than

one

remuneration

from

the

Group

companies

and

for

those
who

occupy/exercise

other

roles/positions

within

the

Group

companies,

the

remuneration

can

be

increased
temporarily,

only

during

the

exercise

of

those

roles/functions.

The

total

of

the

monthly

fixed

and

additional
remuneration

cannot

exceed

the

limit

of

the

monthly

fixed

remuneration

established

by

the

GMS

for

the
position of executive managers.

#### The limits of the benefits granted to the Executive Managers

▪
the

Executive

Managers

benefit

from

a

D&O

professional

insurance

policy,

having

an

insured

value
amounting

to

EUR

10

million

/

person

/

event,

according

to

market

terms,

within

the

limit

of

EUR

40
million / Company.

▪
The

policy

will

cover

a

period

of

maximum

5

(five)

years

from

the

date

of

termination

of

the

Mandate
Agreement,

for

events

that

occurred

as

a

result

of

the

activity

carried

out

by

the

executive

managers,
during their term of office. The company will borne and pay the cost of premiums of this insurance;

▪
the

Company

provides

the

specific

equipment,

as

well

as

other

types

of

necessary

support,

in

order
for

the

executive

manger

to

fulfil

the

responsibilities,

in

an

adequate

and

safety

manner,

including

a
company

car

or

a

car

in

company’s

use,

mobile

phone,

laptop,

equipment

that

will

be

returned

by

the

104

executive managers at termination of the mandate agreement;

▪
reimbursement

of

the

reasonable

expenses

related

to

the

execution

of

the

mandate,

based

on

the
supporting documents;

▪
same

medical

services

and/or

medical

insurance

package

contracted

by

the

Company

for

the
employees;

▪
mobility

package

up

to

the

value

of

EUR

1,000

gross

/

month,

amount

that

will

be

within

the

limits

of
monthly

fixed

remuneration

and

which

is

granted

for

a

maximum

period

of

12

months

from

the

signing
date

of

the

addendum

to

the

mandate

agreement,

only

if

the

executive

manager

resides

at

a

distance
of

more

than

100

km

from

the

Company's

headquarters

and

does

not

have

or

did

not

have

resided

in
the

city

of

the

workplace

in

the

last

12

months

from

the

signing

date

of

the

addendum

to

the

mandate
agreement. For successive mandates, relocation to the same city will be paid only once;

▪
maternity leave paid for a maximum period of 6 months during the mandate agreement;

▪
maximum 30 working days of holidays per year;

B.3.


#### General remuneration limits for the Executive








#### Managers within the Company’s subsidiaries






#### (mandated by the BoD)

The

remuneration

of

the

executive

managers

is

comprised

of:

(a)

a

fixed

monthly

remuneration,

(b)

a

variable
yearly

compensation

depending

on

the

achievement

of

KPIs

and

(c)

a

long-term

gross

variable

compensation,
granted at the conclusion of a full term of four years, as follows:

a.
The

fixed

monthly

remuneration

for

the

DEER’s

CEO

is

between

EUR

6.593

and

EUR

11.000

gross;

the
remuneration for the DEER’s Deputy CEO is between EUR 5,300 and EUR 10.300 gross.

The

fixed

monthly

remuneration

for

EFSA’s

CEO

is

between

EUR

6.593

and

EUR

10.257

gross.

The
remuneration for EFSA’s Deputy CEO is between EUR 5.300 and EUR 9.231;

The

fixed

monthly

remuneration

for

SERV’s

CEO

is

between

EUR

5.558

EUR

and

8.718

EUR

gross.

The
remuneration for SERV’s Deputy CEO is between EUR 5.300 EUR and 7.846 EUR gross.

The

final

remuneration

will

be

established

by

the

BoD

within

the

limits

presented

above,

approved

by

the
GMS of each subsidiary.

b.
The

fixed

monthly

remuneration

for

an

DEERs

Executive

Manager

is

between

EUR

5,128

EUR

and

EUR
9.231 gross.

The

fixed

monthly

remuneration

for

an

EFSA

ans

SERVs

Executive

Manager

is

between

EUR

5.128

and
6.837

gross.The

final

remuneration

will

be

established

by

the

BoD

within

the

limits

presented

above,
approved by the GMS of each subsidiary.

c.
The

variable

yearly

remuneration

of

an

executive

manager

is

between

15%

and

40%

of

the

fixed

yearly
remuneration.

The

final

percentage

is

established

by

BoD

within

the

limits

presented

above,

approved

by
the

GMS

of

each

subsidiary
.

Granting

the

variable

yearly

compensation

(partially

or

in

full)

depends

on
the achievement of the KPIs set for the respective year.

d.
The

long-term

gross

variable

remuneration,

granted

at

the

conclusion

of

a

full

term

of

four

years

is
between

60%

and

120%

of

the

fixed

yearly

remuneration

(limits

approved

by

the

GMS

of

each

subsidiary)
.

At

the

beginning

of

the

executive

managers’

mandate

(including

the

CEO),

the

BoD

will

set

up

the

long-term
KPIs

(for

the

duration

of

the

mandate).

At

the

end

of

the

term,

the

Board

will

review

the

long-term

KPIs’
achievement and will grant accordingly the final value of the
the long-term gross variable compensation.

In

order

to

perform

more

efficiently

their

duties

and

obligations,

in

a

proper

and

safe

manner,

the

mandate
agreements

of

the

executive

managers

(including

the

CEO

and

deputy

CEO),

approved

by

the

BoD

stipulate

105

the

specific

equipments

that

the

company

makes

available

(e.g.:

company

car,

mobile

phone,

laptop),

the
rules

to

use

it,

as

well

as

other

kind

of

related

benefits

(e.g.:

r
eimbursement

of

reasonable

expenses

related
to the execution of the mandate, a “directors & officers’ liability” insurance policy, mobility package
).

4.8. Corporate Governance in ELSA’s subsidiaries

#### The Board of Directors of ELSA’s subsidiaries

During

2021

and

until

the

date

of

this

report,

all

the

Boards

of

Directors

of

ELSA’s

subsidiaries

were

composed
of

non-executive

directors,

which

are

executive

managers

or

employees

of

ELSA,

and,

according

to

ELSA’s
policy,

do

not

receive

any

remuneration

from

the

subsidiaries

for

the

quality

of

member

of

their

Board

of
Directors.

During

2021

and

until

the

date

of

this

report,

the

composition

of

the

Boards

of

Directors

of

ELSA’s

subsidiaries
were as follows:

#### The distribution subsidiary DEER – 1 January 2021 – date of the report

#### 1 January –

31


#### January

2021

#### 1 February –

22


#### August

2021

23 August -

16

#### September

2021

17

#### September


-
17


#### October

2021

#### 18 October –

29


#### December

2021

30


#### December

#### 2021 – date of the report

Georgeta
Corina

Popescu
– Chair

Livioara

Sujdea

–
Chair

starting
with

8

February
2021

Livioara

Sujdea
– Chair

Livioara

Sujdea
– Chair

Stefan
Alexandru
Frangulea

Stefan
Alexandru
Frangulea

Livioara Sujdea

Stefan

Alexandru
Frangulea

Stefan
Alexandru
Frangulea

Stefan
Alexandru
Frangulea

Mirela

Dimbean
Creta

Mirela
Dimbean Creta

Stefan
Alexandru
Frangulea

Mircea

Toma
Modran

Mirela

Dimbean
Creta

Mirela
Dimbean Creta

Maria

Cristina
Manda

Maria

Cristina
Manda

Mircea

Toma
Modran

Mirela

Dimbean
Creta

Maria

Cristina
Manda

Ligia Costin

Mirela
Dimbean Creta

Geanina Dumitru

Stefan

Valeriu
Ivan

Chair
starting

with
31.01.2022

Source: Electrica

The end date of the mandates of DEER’s directors at the date of this report is 31 January 2025 in the case
of Mrs. Maria Cristina Manda, Mrs. Mirela Dimbean Creta and Mr. Stefan Alexandru Frangulea, and
respectively 30 June 2022 in the case of the other two directors, Mrs. Ligia Costin and Mr. Stefan Valeriu
Ivan.

106

#### The supply subsidiary EFSA – 1 January 2020 – date of the report

#### 1 January –

1


#### February

2021

#### 2 February –

#### 26 April 2021

#### 27 April –

7


#### September

2021

8


#### September

–

11

#### December

2021

12


#### December

–

29


#### December

2021

30


#### December

–

31


#### December

2021

Mihai

Darie

–
Chair

Georgeta

Corina
Popescu

–

Chair
starting

with

9
February 2021

Georgeta

Corina
Popescu – Chair

Georgeta
Corina
Popescu

–
Chair

Georgeta
Corina

Popescu
– Chair

Georgeta
Corina

Popescu
– Chair

Bibiana
Constantin

Mihai Darie

Mihai Darie

Mihai Darie

Mihai Darie

Mihai Darie

Maria

Cristina
Manda

Bibiana
Constantin

Bibiana
Constantin

Bibiana
Constantin

Bibiana
Constantin

Bibiana
Constantin

Laura

Mihaela
Nastasescu

Maria

Cristina
Manda

Maria

Cristina
Manda

Catalina Popa

Stefan

Ionut
Pascu

Laura

Mihaela
Nastasescu

Catalina Popa

Razvan Tudor

Source: Electrica

1


#### January


2022

–

#### 3 January 2022

#### 4 January 2022 –

#### 3 February 2022

#### 3 February 202 – date of the report

Georgeta

Corina
Popescu – Chair

Georgeta

Corina
Popescu – Chair

Stefan

Ionut

Pascu

–
President

starting
from 8 Februay 2022

Mihai Darie

Stefan Ionut Pascu

Razvan Tudor

Stefan Ionut Pascu

Razvan Tudor

Mihai Ioanitescu

Razvan Tudor

Mircea Toma Modran

Mircea

Toma
Modran

Mihai Ioanitescu

Source: Electrica

The end date of the mandates of EFSA’s directors at the date of this report is 30 June 2022

#### The energy services subsidiary SERV – 1 January 2020 – date of the report

Through the Decision of SERV GMS from 30 December 2021, the articles of association of SERV was
amended
in the sense of reducing to 3 the number of members of the Board of Directors of SERV.

#### 1 January –

#### 17 January 2021

#### 18 January –

#### 14 February 2021

#### 15 February –

#### 29 April 2021

#### 30 April –

#### 24 June 2021

Stefan

Valeriu

Ivan-

Mihai Darie

Georgeta

Corina
Popescu

–

Chair

starting

Georgeta

Corina

107

#### 1 January –

#### 17 January 2021

#### 18 January –

#### 14 February 2021

#### 15 February –

#### 29 April 2021

#### 30 April –

#### 24 June 2021

Chair

with
 16 February 2021

Popescu -
Chair

Mihai Darie

Bibiana Constantin

Mihai Darie

Mihai Darie

Bibiana Constantin

Anamaria-Dana
Acristini-Georgescu

Bibiana Constantin

Bibiana Constantin

Anamaria-Dana
Acristini-Georgescu

Irina Clima

Anamaria-Dana
Acristini-Georgescu

Irina Clima

Irina Clima

Irina Clima

Source: Electrica

#### 25 June –

#### 7 September 2021

#### 8 September –

#### 31 December 2021

#### 1 January 2022 –

#### 3 January 2022

4


#### January


2022


#### – date of the report

Georgeta

Corina

Popescu
-
Chair

Georgeta

Corina

Popescu
-
Chair

Georgeta

Corina
Popescu -
Chair

Georgeta

Corina
Popescu -
Chair

Mihai Darie

Mihai Darie

Mihai Darie

Irina Clima

Bibiana Constantin

Bibiana

Constantin

–
interim

between

12
December

–

31
December 2021

Irina Clima

Stefan Ionut Pascu

Irina Clima

Irina

Clima

–

interim
between

12

December
2021 – 3 January 2022

Stefan Ionut Pascu

Maria Cristina Manda

Source: Electrica

The end dates of the mandates of SERV’s directors at the date of this report is 30 June 2022.

#### The electricity production subsidiary






#### EPE


–

3


#### September


2021


#### (date of the establishment of the subsidiary) – date of the report

Through

the

Decision

of

EPE

GMS

from

3

January

2022,

the

articles

of

association

of

EPE

was

amended

in

the
sense of reducing to 3 the number of members of the Board of Directors of EPE.

3


#### September


–

8


#### September

2021

9


#### September


–

11


#### December

2021

12


#### December

–

31


#### December

2021

1


#### January

2022–

2


#### January

2022

3


#### January

2022

4


#### January

2022


#### – date of the report

Georgeta

Corina
Popescu

–

Chair
starting

with

8

Georgeta

Corina
Popescu – Chair

Georgeta
Corina

Popescu

Georgeta
Corina
Popescu

–

Georgeta
Corina
Popescu

–

Georgeta
Corina
Popescu

–

108

3


#### September


–

8


#### September

2021

9


#### September


–

11


#### December

2021

12


#### December

–

31


#### December

2021

1


#### January

2022–

2


#### January

2022

3


#### January

2022

4


#### January

2022


#### – date of the report

September

2021

– Chair

Chair

Chair

Chair

Mihai Darie

Mihai Darie

Mihai Darie

Mihai Darie

Mihai Darie

Mihai
Ioanitescu

Bibiana
Constantin

Bibiana
Constantin

Bibiana
Constantin

Mircea

Toma
Modran

Mihai
Ioanitescu

Razvan
Tudor

Maria

Cristina
Manda

Catalina Popa

Mircea

Toma
Modran

–
interim
between

12
Dcember

2021
–

3

January
2022

Catalina Popa

Source: Electrica

The

end

date

of

the

mandates

of

EPE’s

directors

at

the

date

of

this

report

is

3

September

2023

in

the

case

of
Mrs.

Georgeta

Corina

Popescu,

and

respectively

30

June

2022

in

the

case

of

the

other

two

directors,

Mr.

Mihai
Ioanitescu and Mr. Razvan Tudor.

#### Executive management of ELSA’s subsidiaries

The

tables

below

show

the

subsidiaries’

executive

managers

with

delegated

management

duties

by

Board

of
Directors of ELSA subsidiaries in 2021, as well as until the date of this report, as follows:

#### The distribution subsidiary DEER

#### – 1 January 2021 – date of the report

#### Name

#### Period

#### (day month year)

#### Function

#### Mandate until the date

#### (for acting executive managers at the date of the report)

#### (day month year)

Emil Merdan

1

January

2021

–

30
June 2021

General Manager

Valentin Branescu

2 July 2021 –

26 September 2021

Inerim

General Manager

With

attribution

of

Deputy
General

Manager

coordinating
Network

Development

Division
and

Network

Operations

Division

109

Niculae Havrilet

27

September

2021

-
present

General Manager

26 March 2022

Sinan Mustafa

1

January

2021

-
present

Deputy

General

Manager
coordinating

Energy
Management

Division

and

Asset
Management Division

26 August 2022

Valentin Branescu

1

January

2021

-
present

Deputy

General

Manager
coordinating

Network
Development

Division

and
Network Operations Division

1 May 2023

Dragos
Eduard Staicu

1

January

2021

-
present

Integration Division Manager

30 June 2022

Diana Moldovan

1

January

2021

-
present

Business

Support

Division
Manager

31 March 2023

Dora Fataceanu

1 January 2021 –

8 July 2021

Financial Division Manager

Raluca

Florentina
Dumitriu

9 July 2021 –

31 January 2022

Financial Division Manager

Dragos

Eduard
Staicu

1

February

2022

–
present

Interim

Financial

Division
Manager

Executes

and

takes

over

the
functions

of

Integration

Division
Manager

30

April

2022

or

untill
the

appointment

of
Financial

Division
Manager

if

the
appointment

is

before
30 April 2022

Monica

Mariana
Radulescu

1

January

2021

-
present

Procurement

Operations
Manager

31 July 2022

Raul Toma

1

January

2021

-
present

Energy

Management

Division
Manager

14 October 2022

Gabriela Dobrescu

1

January

2021

-
present

Asset

Management

Division
Manager

24 September 2022

Nicolae

Catalin
Mihai

1

January

2021

–

31
December 2021

Innovation

Engineering

Manager

Mihaela

Rodica
Suciu

1

January

2021

–
present

Network

Development

Division
Manager

31 December 2024

Vasile

Caudiu
Tudose

1

January

2021

-
present

TN

Power

Construction

Unit
Manager

1 September 2022

Alexandru Nine

1

January

2021

-
present

TS

Power

Construction

Unit
Manager

30 June 2023

Ilie Marin

1

January

2021

-
present

MN

Power

Construction

Unit
Manager

1 September 2022

Vasile Farcas

1

January

2021

-
present

Network

Operations

Division
Manager

31 January 2023

Sorin

Viorel
Muresan

1

January

2021

–

31
December 2021

TN

Network

Operations

Unit
Manager

110

Simon Lajos Attila

1

January

2021

–

15
June 2021

TS

Network

Operations

Unit
Manager

Marius

Raduta
Petrescu

1

January

2021

-
present

MN

Network

Operations

Unit
Manager

1 September 2022

Source: Electrica

#### The supply subsidiary EFSA – until the date of the report

#### Name

#### Period

#### (day month year)

#### Function

#### Mandate until the date

#### (for acting executive managers at the date of the report)

#### (day month year)

Darius
Dumitru
Mesca

1

October

2019

-
present

General Manager

30 September 2023

Claudiu

Daniel
Radulescu

10

March

2020

–
present

Interim

Deputy General Manager

31 March 2022

Silvia

Cristina
Macedon

13

April

2020

-
present

Sales Division Manager

12 April 2024

Corina
Cristina
Drumeanu

16

October

2019

-
present

Portfoliu Management Manager

15 October 2023

Bogdan

Ionut
Vlad

15

December

2020

–
present

Financial Division Manager

23 februarie 2022

Cristian

Eugen
Radu

1

March

2020

–
present

Interim

Marketing Division Manager

31 March 2022

Viorel Pintea

6

October

2021

–
present

(vacancy

position

until
5 October 2021)

Operations Division Manager

31 December 2022

Source: Electrica

111

#### The energy services subsidiary SERV

#### – until the date of the report

#### Name

#### Period

#### (day month year)

#### Function

#### Mandate until the date

#### (for acting executive managers at the date of the report)

#### (day month year)

Beatrice Ambro

15 December 2020 -

15 January 2021

General Manager

Vasile

Ionel

Bujorel
Oprean

16 January 2021 –

16 July 2021

General

Manager
\*

with

delegated
attributions

Florian Velicu

17 July 2021 -

15 December 2022

General Manager

15 December 2022

Marius Guran

6 May 2020 –

31 Dcember 2021

Deputy General Manager

Vasile

Ionel

Bujorel
Oprean

1 December 2017 -

16 December 2023

Property

Management
and

Product

Development
Manager

16 December 2023

Gheorghe Batir

1 June 2018 -

31 March 2021

Starting

with

1

April

2021

on

the
basis

of

an

individual

labor
agreement

Technical Manager

Ioana Lavinia Panu

15 December 2020 –

15 January 2021

Financial Manager

Alexandrina Rusu

20 January 2021-

31 August 2021

Financial

Manager
\*with

delegated
attribution

on

the

basis

of
an

individual

labor
agreement

Ioana Lavinia Panu

1 September 2021-

30 June 2022

Financial Manager

30 June 2022

Source: Electrica

112

#### The electricity production subsidiary






#### EPE


–

3


#### September


2021


#### (date of the establishment of the subsidiary) – date of the report

The

Board

of

Directors

did

not

appoint

executive

managers

within

the

subsidiary

during

the

period

from

the
establishment until the date of the report.

#### Number of shares owned by the managers of Electrica Group

The

table

below

shows

the

situation

of

ELSA

shares

held

by

the

executive

managers

of

the

companies

in

the
Group

which

were

mentioned

in

this

chapter,

a

situation

valid

both

on

31

December

2021,

as

well

as

on

16
February 2022 (last update):

#### Item no.

#### Name

#### Number of shares

#### Weight in the share capital





(%)

1

Niculae Havrilet

199

0.000057%

Source: Depozitarul Central, Electrica

According

to

information

held

by

ELSA,

there

is

no

contract,

understanding

or

family

relationship

between

the
executive

managers

of

the

Group

companies

mentioned

in

this

chapter

and

another

person

who

may

have
contributed to their appointment as executive managers.

According

to

available

information,

the

members

of

the

BoD

and

the

executive

managers

of

the

Group
companies

mentioned

in

this

chapter

have

not

been

involved,

in

the

last

five

years,

in

any

litigations

or
administrative

procedures

related

to

their

activity

within

the

Group

and

to

their

capacity

to

fulfil

their

work-
related duties within the Group.

#### General Meetings of Shareholders of ELSA subsidiaries

Corporate

approvals

at

GMS/BoD

level

in

the

case

of

ELSA’s

subsidiaries

are

regulated

through

their

articles
of association, as well as through the implemented corporate policies.

Corporate

approvals

at

GMS/BoD

level

in

the

case

of

ELSA’s

subsidiaries

are

regulated

through

their

articles
of association, as well as through the implemented corporate policies.

ELSA,

as

majority

shareholder

of

its

subsidiaries,

voted

in

their

GMS

in

2021

on

various

topics,

amongst

which
the most important are related to:

▪
revenue

and

expenses

budgets,

financial

statements,

financial

part

of

the

individual

annual

investment
plan, profit appropriation;

▪
contracting

a

term

loan

from

the

EIB

and

a

term

loan

from

the

EBRD

to

finance

the

investment

plan

for
the

period

2021-2023

by

DEER,

guaranteed

by

ELSA;

contracting

a

multi-product

credit

line

(cash

/
overdraft

and

non-cash

/

letters

of

bank

guarantee)

and

a

line

of

credit

for

issuing

letters

of

guarantee
(non-cash) from commercial banks to finance the current activity by EFSA, with guarantee by ELSA
;

113

▪
general debt limit in case of EFSA;

▪
amendments/improvements of the articles of association of the subsidiaries;

▪
increases

in

the

share

capital

with

land

plots

in

the

case

of

DEER

and

EFSA

(initiations

of

the

increases

in
the

share

capital

in

case

of

DEER

and

EFSA

and

a

completion

of

the

increase

in

the

share

capital

initiated
in 2020 in case of EFSA);

▪
introduction of the second shareholder within DEER and SERV;

▪
SERV

participation,

together

with

ELSA,

in

the

establishment

of

a

new

legal

entity,

ELSA

subsidiary
 for
electricity production, Electrica Productie Energie S.A., in the case of SERV;

▪
SERV participation, together with ELSA, in the establishment of the Electrica Foundation;

▪
changing the name of DEER subsidiaries;

▪
extension

of

the

mandate

of

the

financial

auditor

Deloitte

Audit

SRL

for

a

period

of

two

years,

in

case

of
DEER, EFSA, SERV;

▪
the

acquisition

of

printing

services,

the

services

for

fold

up

the

electricity

/

natural

gas

bills

and

other
documents,

as

well

as

the

opportunity

to

purchase

postal

services

for

the

distribution

of

correspondence,
parcels

and

computer

archiving

services

of

documents

resulting

from

the

distribution

of

disconnection
notices, in case of EFSA;

▪
appointment of the directors in the Board of Directors of the subsidiaries;

▪
amending

the

articles

of

association

of

SERV

and

EPE

in

the

sense

of

reducing

to

3

the

number

of

members
of the Boards of Directors of SERV and EPE.

Starting

with

the

end

of

2019/beginning

of

2020,

a

unitary

policy

was

implemented

within

the

Group’s
subsidiaries,

regarding

the

organization

and

conduct

of

the

General

Meetings

of

Shareholders

of

the

Electrica
Group

companies,

whose

objectives

are

for

each

company

to

obtain

the

corporate

approvals

in

the
competence

of

the

GMS

in

a

timely

manner,

in

order

to

carry

out

in

good

conditions

the

operational

activity,
in

compliance

with

all

legal

and

statutory

provisions,

implementation

of

a

unitary

system

of

convening,
organizing,

carrying

out

the

GMS

meetings

in

Electrica

Group,

as

well

as

better

tracking

of

the

implementation
of GMS resolutions.

4.9.


#### Statement regarding the corporate governance







#### “Comply or Explain”

The

present

Statement

reflects

ELSA’s

status

of

compliance

with

the

new

BSE

Corporate

Governance

Code

as
of 28 February 2022.

Note:

considering

the

fact

that

there

are

no

mentions

for

“Reason

for

non-compliance”,

the

corresponding
column has been removed from the table below.

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

Section
A

Responsibilities

A.1.

All

companies

must

have

an
internal

Board

regulation

which
includes

the

terms

of
reference/responsibilities

of

the
Board

and

the

key

management
functions

of

the

company,

and
which

applies,

among

other

things,
the

General

Principles

of

this
Section.

YES

The

company

had

elaborated
ever

since

February

2015

ELSA’s
Corporate

Governance

Code
(ELSA’s

CGC)

that

included

the
Articles

of

Association

of

the
Company,

the

rules

of
organization

and

functioning

of
the

BoD

and

of

its

committees.
All

these

documents

mentioned

114

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

above

contain

the

terms

of
reference/the

responsibility

of
BoD,

as

well

as

those

of

the

key
management

functions

of

the
company.

In

2016,

the

Board

carried

out
an

extensive

project

to

review
the

Articles

of

Association

and
the

above-mentioned
regulations

in

order

to

detail

the
responsibilities

of

the

Board,

of
its

committees

and

of

the
management

team,

taking

into
account

the

recommendations
made

in

the

Evaluation

Report
of

the

Board’s

activity
in the previous year.

In

recent

years,

these
documents

have

undergone
successive

revisions

to

align
with

domestic

and

international
best practices.

The

most

recent

versions

of

the
Articles

of

Associations,

ELSA’s
CGC

and

the

Charter

of

the

BoD
and

its

Committees

are

available
on

the

company’s

website

in

the
section

“Investors

->

Corporate
Governance”.

A.2.

Provisions

for

the

management

of
conflict

of

interest

should

be
included in the Board regulation.

YES

Such

provisions

are
mentioned

in

ELSA's

CGC,

in
the

Articles

of

Association,

in
the

Code

of

Ethics

and
Professional

Conduct,

and

in
the

BoD

organization

and
functioning regulation.

A.3.

The

Board

of

Directors

must
consist of at least five members.

YES

ELSA's

BoD

consists

of

seven
members

since

14

December
2015.

115

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

A.4.

The

majority

of

the

members

of
the

Board

of

Directors

must

have
no

executive

function.

In

the

case
of

Premium

Companies

no

less
than

two

non-executive

members
of

the

Board

of

Directors

should

be
independent.

Each

independent
member

of

the

Board

of

Directors
should

submit

a

declaration

at

the
time

of

its

nomination

for

election
or

re-election

as

well

as

when

any
change

in

its

status

occurs,
indicating

the

elements

on

the
basis

of

which

it

is

considered
independent

in

terms

of

its
character

and

judgement

and
according

to

the

following

criteria:
A.4.1.

is

not

the

General
Manager/Executive

Director

of

the
company

or

a

company

controlled
by

it

and

has

not

held

such

a
position

for

the

past

five

(5)

years;
A.4.2.

is

not

an

employee

of

the
company

or

a

company

controlled
by

it

and

has

not

held

such

a
position

for

the

past

five

(5)

years;
A.4.3.

does

not

and

did

not

receive
additional

remuneration

or

other
advantages

from

the

company

or
from

a

company

controlled

by

it,
other

than

those

corresponding

to
the

quality

of

a

non-executive
director;

A.4.4.

is

not

or

has

not
been

an

employee

or

has

not

had
a

contractual

relationship,

during
the

previous

year,

with

a
significant

shareholder

of

the
company,

shareholder

who
controls

more

than

10%

of

voting
rights

or

with

a

company
controlled

by

him;

A.4.5.

does

not
have

and

did

not

have

in

the
previous

year

a

business

or
professional

relationship

with

the
company

or

with

a

company
controlled

by

it,

either

directly

or
as

a

customer,

partner,
shareholder,

member

of

the
Board/Administrator,

General

YES

All

the

members

of

ELSA's
BoD

are

non-executive.
According

to

the

Articles

of
Association,

at

least

four

out
of

seven

members

must

be
independent.

The
independence

criteria
stipulated

in

the

Articles

of
Association

are

similar

and
even

more

restrictive

than
those

in

the

BSE’s

Corporate
Governance

Code.

Currently,
four

out

of

seven

members
are

independent.

All
independent

members
submitted

a

declaration

of
independence,

at

the

time

of
their

appointment

by

the
OGMS.

116

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

Manger/Executive

Director

or
employee

of

a

company

if,

by

its
substantial

nature,

this

report

may
affect

its

objectivity;

A.4.6.

is

not
and

has

not

been

for

the

last

three
years

the

external

or

internal
auditor

or

partner

or

associate
employee

of

the

current

external
financial

or

internal

auditor

of

the
company

or

a

company

controlled
by

it;

A.4.7.

is

not

the

general
manager/executive

director

of
another

company

where

another
general

manger/executive

director
of

the

company

is

a

non-executive
director;

A.4.8.

has

not

been

a
non-executive

director

of

the
company

for

more

than

twelve
years;

A.4.9.

has

no

family

ties

to
a

person

in

the

situations
mentioned

in

points

A.4.1.

and
A.4.4.

A.5.

Other

relatively

permanent
professional

commitments

and
obligations

of

a

Board

member,
including

executive

and

non-
executive

Board

positions

in
companies

and

not-for-profit
institutions,

must

be

disclosed

to
shareholders

and

potential
investors

before

appointment

and
during his/her term of office.

YES

The

professional

background
of

the

proposed

candidates,
as

well

as

of

the

current

Board
members

are

available

on
ELSA’s

website

in

the
Investors

>

General

Meeting
of

Shareholders

section.

Their
biographies

contain

all

the
relevant

information
requested

by

this

provision

of
the

Code.

The

updated
biographies

of

each

member
of

the

Board

are

presented
annually

in

the

Directors’
Report

and

on

the

company's
website

in

the

section
Investors>

Corporate
Governance>

Board

of
Directors.

A.6.

Any

member

of

the

Board

should
submit

to

the

Board

information

on
any

relationship

with

a

shareholder
who

holds,

directly

or

indirectly,
shares

representing

more

than

5%
of all voting rights.

YES

When

a

Board

member

has
entered

into

a

relation

with

a
shareholder

who

directly

or
indirectly

holds

shares
representing

more

than

5%

of
all

voting

rights,

he/she
promptly

informed

the

entire
Board.

117

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

A.7.

The

company

should

appoint

a
Board

secretary

responsible

for
supporting the Board’s work.

YES

The

company

has

established
the

General

Secretary
Department,

which

is

directly
subordinated

to

the

Board

of
Directors.

A.8.

The

corporate

governance
statement

will

inform

whether

an
evaluation

of

the

Board

has

taken
place

under

the

leadership

of

the
chair

or

the

nomination

committee
and,

if

so,

will

summarize

the

key
measures

and

changes

resulting
from

it.

The

company

should

have
a

policy/guide

regarding

the
evaluation

of

the

Board

including
the

purpose,

criteria

and

frequency
of the evaluation process.

YES

This

provision

was

applied
starting

with

2015,

the

BoD
carrying

out

an

annual
assessment

process

of

its
activity

with

the

support

of

an
external

consultant

(in

2015,
2017

and

2020),

or

using

a
self-assessment
questionnaire

(in

2016,

2018,
2019 and 2021)

More

details

are

provided

in
the

2015-2017

Annual
Reports

in

chapters

6.1

and
6.2
,

for

2018

and

2019,

2020
and 2021 in
chapter 4.5
.

A.9.

The

corporate

governance
statement

must

contain
information

on

the

number

of
meetings

of

the

Board

and
committees

during

the

last

year,
directors’

attendance

(in

person

or
absent)

and

a

report

of

the

Board
and committees on their activities.

YES

Details

regarding

the
compliance

with

this

provision
are

presented

in

the

Annual
Report,

in

the

Corporate
governance

chapter.

For
2021, please see
chapter 4.5
.

A.10.

The

corporate

governance
statement

must

contain
information

on

the

exact

number
of

the

independent

members

of
the Board of Directors.

YES

Four

out

of

seven

members

of
the

BoD

are

independent

and
this

is

specified

in

the

Annual
Report.

More

details

are
provided

in

the

Annual

Reports
for
 2021 in chapter 4.4
.

On

ELSA’s

website,

in

the
section

Investors

>

Corporate
Governance

>

Board

of
Directors
,

it

is

specified
exactly

which

members

are
independent.

A.11.

The

Board

of

Premium

Companies
must

set

up

a

nomination
committee

of

non-executive
members

that

will

lead

the
procedure

of

nomination

of

new
members

to

the

Board

and

will
make

recommendations

to

the

YES

The

Articles

of

Association
and

ELSA's

CGC

highlight

the
existence

of

this

committee
(Nomination

and
Remuneration

Committee

-
NRC),

its

members

and
responsibilities.

The

NRC

118

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

Board

on

the

appointment

and

the
revocation

of

the

Chief

Executive
Officer

and

the

management
team.

The

majority

of

the
members

of

the

nomination
committee must be independent.

composition

is

reviewed
annually,

in

accordance

with
the

NRC

organization

and
functioning

regulation
(Charter)

and

at

the
beginning

of

each

new
mandate

of

the

BoD.

In

May
2021,

its

structure

was
revised

according

to

the
changes

that

occurred

in

the
board

structure.

According

to
the

NRC’s

Charter,

in
December

2021

the

current
structure

of

the

NRC

was
established,

two

of

the
members

being

independent.
Details

regarding

the

NRC
structure

are

presented

in
chapter 4.4.

Section
B

Risk

management

and

internal
control system

B.1.

The

Board

must

set

up

an

audit
committee

in

which

at

least

one
member

must

be

an

independent
non-executive

director.

A

majority
of

members,

including

the
chairman,

must

have

proven

that
they

are

adequately

qualified
relevant

to

the

functions

and
responsibilities

of

the

committee.
At

least

one

member
of

the

audit

committee

must

have
proven

and

appropriate

audit

or
accounting

experience.

In

the

case
of

Premium

Companies,

the

audit
committee

must

consist

of

at

least
three

members

and

the

majority

of
the

audit

committee

must

be
independent.

YES

The

Articles

of

Association

and
ELSA's

CGC

highlight

the
existence

of

this

committee
(Audit

and

Risk

Committee

-
ARC),

its

structure
and responsibilities.

The

ARC

structure

is

reviewed
annually,

according

to

ARC
Charter

and

at

the

beginning

of
each new mandate of the BoD.

In

May

2021,

its

structure

was
revised

according

to

changes

in
the

BoD

structure.

In
accordance

with

the

ARC
Charter
,

the

current
composition

of

the

ARC

was
voted

in

December

2021,

in
which

two

of

the

members

are
independent.

Details

of

this

are
presented in
chapter 4.4
.

B.2.

The

chairman

of

the

audit
committee

must

be

an
independent

non-executive
member.

YES

On

the

6

May

2021

and
subsequently,

on

15
December

2021,

Mr.

Radu
Mircea

Florescu,

independent
non-executive

board

member
was

elected

and

respectively
re-elected

as

Chairman

of

the

119

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

Audit and Risk Committee.

B.3.

Among

its

responsibilities,

the
audit

committee

must

carry

out

an
annual

assessment

of

the

internal
control system.

YES

According

to

the

organization
and

functioning

regulation
,
the

Audit

and

Risk

Committee
(ARC)

has

the

following
responsibilities

on

internal
control

issues:
(i)

regularly

review

the
adequacy

and

implementation
of

key

internal

control
policies,

including

fraud
detection

and

bribery
prevention

policies;

(ii)
reviewing

related

parties
transactions

in

accordance
with

a

policy

developed

by

the
Committee

and

approved

by
the

Board;

(iii)

analysis

of

the
annual

report

prepared

by

the
Internal

Audit

Department
and/or

Risk

Management
Department

assessing

the
effectiveness

of

the

internal
control

system

within

the
Group.

B.4.

The

assessment

must

consider

the
effectiveness

and

purpose

of

the
internal

audit

function,

the
adequacy

of

risk

management

and
internal

control

reports

submitted
to

the

audit

committee

of

the
Board,

the

promptness

and
effectiveness

with

which

the
executive

management

solves

the
deficiencies

or

weaknesses
identified

as

a

result

of

the

internal
control

and

the

submission

of
relevant

reports

to

the

Board’s
attention.

YES

Such

reports

are

annually
presented.

The

assessment
report

for

2021

specified

in
the

CGC

was

presented

and
discussed

by

the

Audit

and
Risk

Committee

in

the
meeting

on

24

February

2022.

B.5.

The

audit

committee

must

assess
conflicts

of

interests

in

connection
with

the

transactions

of

the
company

and

its

subsidiaries

with
related parties.

YES

The

assessment

is

carried

out
annually.

The

assessment
report

for

2021

specified

in
the

CGC

was

presented

and
discussed

by

the

Audit

and
Risk

Committee

during

at

its
meeting

on

24

February

2022.

120

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

B.6.

The

audit

committee

must

assess
the

effectiveness

of

the

internal
control

system

and

risk
management system.

YES

The

ARC

has

at

least

the
following

responsibilities

on

risk
management issues:

(i)

regularly

review

of

the

main
risks

to

which

the

company

and
the

Group

are

exposed,
recommending

to

the

Board
appropriate

policies

for
identifying,

mapping,
management

and

risk
reduction;

(ii)

annual

analysis

of

a
management

report

that
assesses

the

effectiveness

of
the

risk

management

system
within the Group.

Based

on

the

ARC

Charter’s
provisions,

the

evaluation

report
for

the

year

2021

was

presented
and

discussed

by

the

Audit

and
Risk

Committee

at

its

meeting
on 24 February 2022.

Details

regarding

the

ARC
activity

for

year

2021

are
presented

in

chapter

4.5

of

the
Annual Report.

B.7.

The

audit

committee

must

monitor
the

application

of

legal

standards
and

generally

accepted

internal
audit

standards.

The

audit
committee

must

receive

and
assess

the

reports

of

the

internal
audit team.

YES

The

ARC

has

the

following
responsibilities

on

internal

audit
issues:
(i)

approval

of

an

annual

audit
plan

at

Group

level,

based

on

an
annual

risk

assessment,

as

well
as

any

significant

changes

to

the
plan

and

receipt

of

periodic
reports

on

activities,

key
findings

and

follow

up

of
internal audit reports;

(ii)

advising

the

Board

on

the
appointment,

revocation

and
remuneration

of

the

Head

of
Internal Audit Department;

(iii)

monitoring

the

adequacy,
effectiveness,

and
independence

of

the

internal

121

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

audit function.

Details

regarding

the

ARC
activity

are

presented

in
chapter 4.5

of

the

Annual
Report
.

B.8.

Whenever

the

Code

mentions
reports

or

analysis

initiated

by

the
Audit

Committee,

these

must

be
followed

by

regular

(at

least
annual)

or

ad-hoc

reports

to

be
submitted

to

the

Board

afterwards.

YES

B.9.

No

shareholder

may

be

granted
preferential

treatment

over

other
shareholders

with

regards

to
transactions

and

agreements
concluded

by

the

company

with
shareholders

and

their

related
parties.

YES

Provisions

on

this

matter

are
included

in

ELSA's

CGC

and

in
the

Policy

on

Transactions
with Related Parties.

B.10.

The

Board

must

adopt

a

policy

to
ensure

that

any

transaction

of

the
company

with

any

of

the
companies

with

which

it

has

close
relations

whose

value

is

equal

to

or
more

than

5%

of

the

net

assets

of
the

company

(according

to

the
latest

financial

report),

is

approved
by

the

Board

following

a
mandatory

opinion

of

the

Board's
audit

committee

and

fairly
disclosed

to

shareholders

and
potential

investors,

to

the

extent
that

these

transactions

fall

under
the

category

of

events

subject

to
reporting requirements.

YES

The

Policy

regarding

the
transactions

with

Related
Parties,

has

been

updated

in
July

2020

and

covers

all

the
required aspects.

B.11.

Internal

audits

must

be

carried

out
by

a

separate

structural

division
(internal

audit

department)

within
the

company

or

by

hiring

an

YES

The

internal

audit

is

carried
out

by

the

Internal

Audit
Department,

a

structurally
separate entity.

122

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

independent third-party entity.

B.12.

In

order

to

ensure

the
performance

of

the

main

functions
of

the

internal

audit

department,

it
must

report

functionally

to

the
Board

through

the

audit
committee.

For

administrative
purposes

and

within

the
framework

of

management’s
obligations

to

monitor

and

reduce
risks

it

must

report

directly

to

the
chief executive officer.

YES

The

Internal

Audit
Department

reports
functionally

to

the

BoD
through

the

ARC,

while
administratively

reports

to

the
CEO.

Section
C

Fair rewards and motivation

C.1.

The

company

must

publish

on

its
website

the

remuneration

policy,
and

include

in

its

annual

report

a
statement

of

the

remuneration
policy

during

the

annual

period
under

review.

The

remuneration
policy

must

be

formulated

in

such
a

way

as

to

allow

shareholders

to
understand

the

principles

and
arguments

underlying

the
remuneration

of

the

members

of
the

Board

and

the

CEO,

as

well

as
the

members

of

the

Management
Board

in

two-tier

board

systems.

It
should

describe

how

the

process

is
managed

and

decision-making

on
remuneration,

detail

the
components

of

executive
management

remuneration

(such
as

salaries,

annual

bonus,

long
term

incentives

related

to

the
value

of

shares,

benefits

in

kind,
pensions,

and

others)

and

describe
the

purpose,

principles

and
assumptions

underlying

each
component

(including

general
performance

criteria

for

any

form
of

variable

remuneration).

In
addition,

the

remuneration

policy
must

specify

the

duration

of

the
executive

manager’s

contract

and
the

notice

period

provided

for

in

YES

In

accordance

with

Law
24/2017,

as

amended

and
subsequently

supplemented
by

Law

no.

158/2020

(Art.92
^

1),on

28

April

2021,

ELSA
GMS

approved

the

updated

Remuneration

Policy

for

Directors

and

Executive

Managers

,

in

which

all

the
aspects

stipulated

by

this
statement

are

detailed

.

The

Remuneration

Policy

for

Directors

and

Executive

Managers


is

available

on

ELSA
website,

under

Investors

>
Corporate

Governance

>
Corporate

Policies

and

other
documents.

In

previous

years,

issues
related

to

the

implementation
of

the

Remuneration

Policy
were

presented

in

the

annual
report.

For

the

year

2021
ELSA

has

prepared

an
independent

report

on

the
remuneration

of

the
administrators

and

executive
directors

to

be

submitted

to
the

consultative

vote

of

the
ELSA

GMS,

according

to

the
applicable

legislative

123

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

the

contract

as

well

as

any
compensation

for

revocation
without

just

cause.

The
remuneration

report

must

present
the

implementation

of

the
remuneration

policy

for

the
persons

identified

in

the
remuneration

policy

during

the
annual

period

under

review.
Any

essential

change

in

the
remuneration

policy

must

be
published

in

a

timely

manner

on
the company’s website.

provisions.

Section
D

Building

value

through
investors’ relations

D.1.

The

company

must

have

an
Investor

Relations

function

–
indicating

to

the

public

the
person(s)

responsible

or

the
organizational

unit.

In

addition

to
the

information

required

by

legal
provisions,

the

company

must
include

on

its

website

a

section
dedicated

to

Investor

Relations,
both

in

Romanian

and

English,
with

all

relevant

information

of
interest

to

investors,

including:
D.1.1.

Main

corporate

regulations:
the

articles

of

association,

the
procedures

regarding

the

general
meetings

of

shareholders.
D.1.2.

Professional

CVs

of
members

of

the

company’s
management

bodies,

other
professional

commitments

of

the
board

members,

including
executive

and

non-executive
positions

on

board

of

directors

of
companies

or

non-profit
institutions
D.1.3.

Current

and

periodic

reports
(quarterly,

semi

-

annual

and
annual

reports);
D.1.4.

Information

related

to
general

meetings

of

shareholders;
D.1.5.

Information

on

corporate
events;
D.1.6.

The

name

and

contact
details

of

a

person

who

should

be

YES

The

company

has

both

an
Investor

Relations
department

and

a

section
dedicated

to

Investor
Relations

on

its

website

(in
both

Romanian

and

English).
All

relevant

information

for
investors

is

published

under
the

Investors

section

on
ELSA's website.

124

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

able

to

provide

relevant
information

upon

request;
D.1.7.

Corporate

presentations
(e.g.

investors

presentations,
quarterly

results

presentations,
etc.),

financial

statements
(quarterly,

semi

-

annual,

annual),
audit reports and annual reports.

D.2.

The

company

will

have

a

policy

on
the

annual

distribution

of
dividends

or

other

benefits

to
shareholders,

proposed

by

the
CEO

or

the

Management

Board
and

adopted

by

the

Board,

in

the
form

of

a

set

of

guidelines

that

the
company

intends

to

follow
regarding

the

distribution

of

net
profit.

The

principles

of

the

annual
distribution

policy

to

shareholders
will

be

published

on

the

company's
website.

YES

The

BoD

last

revised

the
Dividends

Policy

at

its
meeting

on

14

February

2018.
It

is

published

on

ELSA's
website,

in

the

Investors

>
Corporate

Governance

>
Corporate

Policies

and

other
documents
 section.

D.3.

The

company

will

adopt

a

policy
regarding

the

forecasts,

whether
they

are

made

public

or

not.

The
forecasts

refer

to

quantified
conclusions

of

studies

aimed

at
determining

the

overall

impact

of

a
number

of

factors

for

a

future
period

(so

called

assumptions):

by
its

nature,

this

projection

has

a
high

level

of

uncertainty,

the
actual

results

may

differ
significantly

from

the

forecasts
initially

presented.

The

forecast
policy

will

determine

the
frequency,

period

envisaged

and
the

content

of

the

forecasts.
Forecasts,

if

published,

may

only
be

part

of

annual,

semi

-annual

or
quarterly

reports.

The

forecast
policy

should

be

published

on

the
company's website.

YES

The

BoD

last

revised

the
Forecasts

Policy

in

its

meeting
on

14

February

2018.

It

is
published

on

ELSA

website,

in
the

Investors

>

Corporate
Governance

>

Corporate
Policies

and

other

documents
section.

D.4.

The

rules

of

general

meetings

of
shareholders

should

not

limit

the
participation

of

shareholders

in
general

meetings

and

the

exercise
of

their

rights.

Changes

to

the
rules

will

take

effect

at

the

earliest,
starting

with

the

next

general

YES

ELSA

rules

and

procedures
that

establish

the

framework
for

the

organization

and
conduct

of

general

meetings
of

shareholders

are

part

of
ELSA’s

Policy

on

organizing
and

running

the

General

125

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

meeting of shareholders

Meetings

of

Shareholders,
available

from

the

beginning
of

2020

and

in

updated

form
from

August

2020,

in
electronic

form

on

ELSA
website

in

the

section
Investors

>

Corporate
Governance

>

Corporate
Policies

and

other

documents.

Also,

the

rules

of

general
meetings

of

shareholders

are
mentioned

in

each

convening
notice,

published

in
accordance

with

the

legal

and
statutory requirements
approximately

45

days

before
each meeting.

D.5.

The

external

auditors

should
attend

the

general

meetings

of
shareholders

when

their

reports
are presented.

YES

External

auditors

attend

each
OGMS

in

which

the

financial
situations

and

annual

reports
are approved.

D.6.

The

Board

will

present

to

the
annual

general

meeting

of
shareholders

a

brief

assessment

of
the

systems

of

internal

control

and
significant

risks

management,

as
well

as

opinions

on

issues

subject
to

the

decision

of

the

general
meeting.

YES

The

directors'

annual

report,
presented

to

the

annual
general

meeting

of
shareholders

together

with
the

financial

statements,
contains

the

BoD's
assessments

on

the

systems
of

internal

controls

and
significant risk management.

As

a

practice,

all

the
documents

subject

of

the
GSM

approval

are

endorsed
by

the

BoD;

this

is

clearly
stated

in

the

documents
presented

to

the
shareholders.

D.7.

Any

professional,

consultant,
expert

or

financial

analyst

may
attend

the

shareholders’

meeting
on

the

bases

of

a

prior

invitation
from

the

Board.

Accredited
journalists

may

also

attend

the
general

meeting

of

shareholders,
unless

the

Chair

of

the

Board
decides otherwise.

YES

In

this

respect,

the

agreement
of

the

shareholders

present

at
the

General

Meetings

was
requested

each

time

it

was
the case.

126

No.

Provisions of the BSE
Corporate Governance Code

Compliance
YES/NO/PARTIALLY

Other remarks

D.8.

The

quarterly

and

semi-annual
financial

reports

will

include
information

in

both

Romanian

and
English

on

key

factors

influencing
changes

in

sales

levels,

operating
profit,

net

profit

and

other

relevant
financial

indicators,

both

from
quarter

to

quarter

as

well

as

from
one year to another.

YES

The

quarterly

and

half-yearly
financial

reports

can

be
consulted

on

the

company's
website

in

the

section
Investors>

Results

and
Reports> Financial results

D.9.

A

company

will

hold

at

least

two
meetings/teleconferences

with
analysts

and

investors

each

year.
The

information

presented

on
these

occasions

will

be

published
in

the

investor

relations

section

of
the

company’s

website

at

the

date
of the meetings/teleconferences.

YES

ELSA

organizes

quarterly
teleconferences

with

analysts
and

investors

and

publishes
presentations

and

audio
recordings

of

the
teleconference

on

the

ELSA
website,

in

the

section
Investors

>

Results

and
Reports

>

Presentations

and
other information
.

D.10.

If

a

company

supports

different
forms

of

artistic

and

cultural
expression,

sport

activities,
educational

or

scientific

activities,
and

considers

that

their

impact

on
the

innovative

character

and
competitiveness

of

the

company
part

of

its

mission

and
development

strategy,

it

will
publish

the

policy

regarding

its
activity in this area.

YES

Information

regarding

the
CSR

activities

can

be

found
online

on

the

company’s
website,

in

the

CSR

section.
The

Grants

Program

is
annually

reviewed

and
approved by the BoD.

The

projects

and

activities
supported

each

year

are
presented

in

ELSA's

annual
Sustainability

Reports,
available

on

the

ELSA
website,

in

the

CSR

section

>
Non-financial Reporting.

Sursa: Electrica

4.10.


#### Implementing action plans undertaken by signing the framework agreement with EBRD

The

company’s

initial

public

offering

and

dual

listing

process

involved

the

signing

of

a

framework

agreement
with

the

European

Bank

for

Reconstruction

and

Development

(EBRD),

which

includes

action

plans

aiming

at
key

dimensions

for

the

company’s

transformation:

developing

a

culture

of

integrity

and

compliance,

adopting
best practices regarding corporate governance and incorporating the sustainability principles at Group level.

As

for

the

development

of

a

culture

of

integrity

and

compliance

at

Electrica

Group

level,

in

line

with

the

EBRD
standards,

the

year

2021

meant

maintaining

the

compliance

framework

from

an

ethical

perspective

and
updating

it

in

accordance

with

the

evolutions

of

the

social

and

legal

context

in

which

the

organization

operates,

127

through concerted actions on four main directions:

▪
maintaining

the

organizational

structures

dedicated

to

ethics

and

compliance

and

increasing

their
awareness on their role within the organization;

▪
updating

the

compliance

framework

-

The

Code

of

Ethics

and

Profesional

Conduct,

as

well

as,

adopting
The Policy of preventing, combating and sanctioning any form of harassment in the workplace
;

▪
informing,

through

the

information

channel

available

to

all

employees,

about

updating

the

compliance
framework

–

The

Code

of

Ethics

and

Professional

Conduct
,

as

well

as,

about

implementing,

promoting
and disseminating these documents at the level of all employees from the organization;

▪
monitoring

the

compliance

in

relation

to

the

framework

defined

by

the

Code

of

Ethics

and

Professional
Conduct
 and subsequent policies and procedures.

Having

mainly

a

preventive

role

in

relation

to

the

risks

to

which

the

organization

is

exposed,

compliance

adds
value

to

each

business,

but,

in

order

to

be

effective,

the

compliance

framework

must

be

adapted

to

the
organization

transformations

and

to

be

aligned

permanently

with

legislative

changes,

external

environment
trends and business ethics’ best practices.

The

information

and

awareness

activities

regarding

the

provisions

of

the

compliance

framework

from

the
ethical

perspective

of

the

organization's

staff

were

carried

out

exclusively

through

the

online

environment,
due to the restrictions generated by the existing health situation.

Regarding

the

organizational

structures

dedicated

to

ethics

and

compliance,

these

exist

at

each

company

level
from the Group.

Regarding

the

donations,

in

2021

Electrica

Group

f
ocused

on

donations

in

the

health

field

in

order

to

support
the situation created by the COVID-19 pandemic.

#### The action plan regarding corporate governance

The

implementation

of

the

Corporate

Governance

Action

Plan,

assumed

as

part

of

the

Framework

Agreement
with

EBRD,

has

been

considered

since

the

IPO

and

the

company’s

listing.

The

standards

and

measures

it
envisaged have been implemented, maintained and continuously monitored.

#### Selection of independent directors

The

EBRD

guidelines

were

included

in

ELSA’s

Articles

of

Association

adopted

on

4

July

2014,

being

maintained
in

the

context

of

increasing

the

total

number

of

directors

from

five

to

seven,

by

adopting

the

Extraordinary
General

Meeting

of

Shareholders

decision

from

10

November

2015;

out

of

the

seven

directors,

four

must

meet
the independence criteria.

For

details

about

ELSA’s

Board

of

Directors,

its

members

and

the

election

of

its

members,

please

see

chapter
4.4.

#### Nomination and Remuneration Policies

ELSA

uses

nomination

and

remuneration

principles

in

accordance

with

best

practices

for

the

appointment

and
remuneration

of

directors,

executive

management

and

other

members

of

its

staff.

In

this

respect,

the

Profile
of the Board of Directors and the Policy for the nomination of the executive managers

were elaborated.

The

Nomination

and

Remuneration

Committee

periodically

reviews

The

Remuneration

Policy

for

ELSA
’s
Directors

and

Executive

Management

which

describes

the

main

pillars

of

remuneration,

as

well

as

the

terms,
conditions and non-financial benefits approved by
ELSA
's corporate governance bodies.

128

As

a

result

of

the

change

of

the

European

and

national

legal

framework,

according

to

the

European

Directive
no.

828/2017,

transposed

into

national

legislation

by

Law

no.

24/2017,

as

it

was

subsequently

amended

and
supplemented

by

Law

no.

158/2020

(Art.92

^

1),

in

2021

the

Remuneration

Policy

for

the

Administrators

and
Executive Directors of ELSA was submitted for the approval of the GMS.

Remuneration

Policy

approved

by

HAGOA

no.

1

of

April

28,

2021

does

not

change

the

limits

of

remuneration
established

by

HAGOA

no.

2

of

July

9,

2015,

HAGOA

no.

1

of

31.03.2016

and

HAGOA

1

/

09.02.2018,

but,
based

on

the

new

legislative

provisions,

transparently

presents

the

elements

of

fixed

and

variable
remuneration,

including

financial

and

non-financial

benefits,

in

any

form,

that

may

be

granted

to

Directors
and ELSA Executive Directors.

For

details

regarding

the

remuneration

of

the

Board

members

and

of

the

executive

management

of

ELSA,
please see
chapter 4.7.

#### Advisory Committees of the Board of Directors

In

order

to

increase

the

effectiveness

of

its

activity,

ELSA’s

Board

of

Directors

has

established

the

following
committees

with

advisory

role:

the

Nomination

and

Remuneration

Committee,

the

Audit

and

Risk

Committee
and the Strategy and Corporate Governance Committee. For details, please see
chapter 4.5.

#### Internal Control and Audit Framework

During

2021,

the

documentation

governing

the

internal

audit

activity

at

Electrica

Group

level

approved

in
November

2019

was

maintained

and

applied.

This

documentation

was

approved

in

its

first

version

by

the

BoD
at

the

beginning

of

2015

and

includes

the

Internal

Audit

Charter,

the

Audit

Manual

and

the

Auditor's

Code

of
Ethics,

its

last

update

dating

from

2019.

The

documents

are

available

on

ELSA’s

website

in

the

section

The
group

>

Internal

Audit
.

For

details

about

the

internal

audit

please

see

chapter

4.11.

and

for

more

details

on
the internal control, please see
chapter 6.8.

#### ELSA’s Articles of Association

EBRD guidelines were included in the Articles of Association of ELSA adopted on 4 July 2014.

In

2021,

ELSA’s

Articles

of

Association

were

updated

according

to

ELSA

Board

of

Directors
’

decisions

from

11
August

2021,

following

the

increase

of

the

company’s

share

capital.

All

versions

of

the

ELSA

Articles

of
Association

adopted

since

the

listing

of

the

company

are

available

on

its

website

in

the

section

The

group

>
About > Articles of Association
.

#### Clear lines of competence and responsibility

To

define

the

reporting

system

and

to

set

responsibilities

and

competences

at

the

level

of

the

group

and

its
’
companies
,

ELSA

and

its

subsidiaries

carried

out

projects

for

processes’

mapping

both

in

distribution

and

in
supply

areas,

benefiting

from

external

consultancy

in

this

regard.

In

the

context

of

the

2018

–

2020
organizational

transformation,

the

applicable

procedural

framework,

and

the

documentation

of

the

Quality

–
Environment

-

OHS

Integrated

Management

Systems

implemented

at

each

Group

company

level

have

been
fully

revised,

maintaining

their

certifications

in

accordance

with

ISO

9001:2015,

ISO

14001:2015

and

ISO
45001:2018 following the audit performed during 2020 by the SRAC CERT certification body, IQNet affiliate.

#### Code of Conduct

EBRD

requirements

are

covered

by

the

Code

of

Ethics

and

professional

Conduct,

which

has

been

updated

in
accordance

with

the

new

Strategy

adopted

by

the

Electrica

Group.

Regarding

the

Whistleblowing

Policy,

it

has
been updated and is available on the company's website.

129

During

2021,

follow-up

actions

were

carried

out

in

relation

to

the

provisions

of

the

Code

at

group

level,

after
it was disseminated and implemented in its new version within the Group.

#### Compliance with BSE Corporate Governance Code

On

4

January

2016,

the

new

BSE

Corporate

Governance

Code

entered

into

force

and,

on

this

occasion,

ELSA
published

on

8

January

2016

the

"Corporate

Governance

Code

Apply

or

Explain"

statement

according

to

the
new

provisions.

ELSA

publishes

the

updated

statement

yearly

and

reports

promptly

to

the

capital

market

any
update of its compliance.

On

its

turn,

ELSA

adopted

its

own

Corporate

Governance

Code

since

the

beginning

of

2015,

its

last

update
being

approved

by

the

BoD

on

23

June

2020.

This

version,

as

well

as

the

policies

and

other

corporate
documents

referred

to

by

the

Corporate

Governance

Code

of

ELSA

are

available

on

the

company's

website

in
the

Investors

>

Corporate

Governance

section

(

https://www.electrica.ro/en/investors/corporate-

governance/

).

For details, please consider
chapters 4.9 and 4.1.

Electrica Group continues to have a
Market Abuse Policy
 adopted by all companies within the Group.

#### The Environmental and Social Action Plan (ESAP)

During

2021

the

Environmental

and

Social

Action

Plan

was

updated

by

SAP

as

part

of

the

Loan
Agreement

signed

by

DEER

with

EBRD

and

guaranteed

by

Electrica

S.A.

for

financing

DEER’s

CAPEX
Plan

2021

–

2023.

The

revised

ESAP

includes

the

following

actions,

their

status

of

implementation
being also mentioned in the following section

#### Organogram of EHS management structure and update certification

Develop

an

organogram

presenting

the

EHS

management

structure

from

Group-level

management,

to
County-level

implementation

within

DEER.

Make

this

accessible

on

the

Group

intranet

portal,

alongside

the
existing E&S Policy, under their management systems page and shared with all staff.

Organogram

presenting

the

EHS

management

structure

in

course

of

elaboration

due

to

delays

in

DEER
transformation project; responsible persons were appointed at the level of ELSA/DEER

DEER

to

gain

ISO14001

certifications.

Integrate

the

management

systems

of

the

previous

DSOs

and

gain
certification as a single Company.

ISO 14001 Certificate for DEER was obtained in April 2021.

#### Project-Specific Risk Assessments

Develop

and

implement

a

standardized

new

H&S,

environment

and

social

risk

assessments

instrument
(methodology)

and

apply

the

methodology

for

works

categories/works

included

in

the

2021-2023

CAPEX

Plan,
prior to construction commencement, if not launched.

E&S

and

H&S

risks

and

mitigation

meaures

are

included

in

all

DEER

projects

(technical

execution
documentation)

for

investment

works;

the

methodology

is

being

developed

for

ensuring

an

unified

approach
for all projects

130

#### EIA Screening

Continue

environmental

screening

of

projects

under

the

CAPEX

Plan.

If

DEER

must

develop

and

implement
national

EIAs

for

certain

unforeseen

installations

(including

cutting

of

protected

tree

species),

these

must

be
developed to EU standards.

Inform

EBRD

if

any

EIAs

is

carried

out

by

sharing

the

link

on

DEER

website.

Include

a

summary

of

the

EIAs
undertaken

in

the

annual

Electrica

Sustainability

Report,

also

referring

to

the

NTS’

published

on

their

website.
Inform EBRD if CAPEX related work would be carried out in Natura 2000 sites and protected areas.

No

environmental

Impact

studies

were

required

for

developing

electrical

distribution

networks

included

in
CAPEX Plan, yet, according to law no. 292/2018 Annex 5E.

#### Permits

DEER

to

ensure

needed

permits

are

acquired

from

Ministry

of

Culture,

according

to

Building

Planning

Permit,
if

works

affect

protected

buildings,

and

obtain

the

environmental

authorisations

according

to

the

Building
Planning Permit (including cutting of protected trees, if needed) from Local Authorities.

All

necessary

permits

were

acquired

for

investment

projects

included

in

CAPEX

Plan

according

to

Building
Planning Permit

#### Cascading of E&S requirement

Construction

Environmental

Management

Plans

(CEMPs)

should

be

developed

by

contractors

before

they
begin

works,

in

line

with

Electrica

risk

assessments

and

instructions.

These

CEMPs

shall

then

be

cascaded

to
any

sub-contractors

engaged.

The

CEMP

shall

includes

measure

to

control

noise

and

dust

emissions

and
wastewater during construction period.

The

projects

(technical

execution

documentation)

with

E&S

and

H&S

risks

and

mitigation

meaures

included
are part of the contract signed with the contractors mandatory to be respected.

#### Worker accommodation

Review

accommodation

provided

for

workers

not

able

to

return

home

daily

(where

relevant),

ensuring

it

is

of
suitable quality and in line with EBRD/IFC Guidance Note
7
.

Accommodation

for

own

peronnel

is

reviewed

and

controlled;DEER

is

reviewing

its

H&S

Control

Procedure
in order to include reviewing accommodation during its controls for contracted work.

#### Gender-Based Violence and Harassment (GBVH) Policy

Update

Code

of

Ethics

and

Professional

Conduct

to

include

a

GBVH

Policy

in

line

with

international

best
practice.

The

Policy

for

preventing

combating

and

sanctioning

any

form

of

harassmenent

at

work

was

adopteded

by
ELSA

and

DEER

and

it

is

in

process

of

approval

for

the

others

companies

within

Electrica

Group.

Code

of
Ethics and Professional Conduct was reviewed in order to include references to this policy.

7


https://www.ebrd.com/downloads/about/sustainability/Workers\_accomodation.pdf

131

#### Retrenchment

The

Company

will

develop

and

maintain

corporate

retrenchment

provisions

within

Collective

Bargaining
Agreement

and

plan

retrenchment

initiatives

in

line

with

EBRD

retrenchment

guidelines

to

minimise

social
and

economic

impact

of

staff

reductions,

if

such

are

required.

This

will

be

developed

in

line

with

best

practice,
and

will

comply

with

relevant

national

requirements.

The

Company

will

inform

the

Bank

of

any

major
retrenchment

(over

500

staff)

and

submit

a

specific

mitigation

plan

at

least

one

month

before

employees

are
actually

terminated.

Retrenchment

programmes

affecting

over

100

staff

but

less

than

500

will

be

reported

in
the annual report.

The

provisions

regarding

the

reorganization/restructuring

activities

inside

the

Group

are

part

of

the

Collective
Bargaining Agreement signed with the trade unions which is renegotiated every 2 years.

There

is

no

major

retrenchment

programme

implemented

yet,

and

the

retrenchment

programmes

affecting
staff during 2022 will be reported in the 2022 Annual Report.

#### Greenhouse gas emissions analysis

Prepare

a

study

on

the

greenhouse

gas

(GHG)

emissions

of

Electrica

Group

operations

and

identify

areas

to
cut

emissions,

with

the

results

to

be

published

in

the

2021

Sustainability

Report.

Yearly

update

on
implementation and continuous improvement in the Sustainability Report.

The

a

project

for

calculating

greenhouse

gas

(GHG)

emissions

of

Electrica

Group

operations

and

identifying
areas

to

cut

emissions

was

elaborated

by

Electrica

and

its

implementation

will

start

early

in

2022.

The

results
will be published in the Group’s Sustainability Report.

#### Energy management

Electrica

Group

and

DEER

to

implement

an

integrated

approach

to

energy

management

in

line

with

ISO
50001 and gain certification by the end of 2024.

The

energy

management

system

implementation

is

planned

for

DEER

after

the

post

–

merger

organizational
transformation project in order to gain certification during 2024.

#### PCBs

Electrica

DSO

is

currently

in

the

process

of

eliminating

PCBs

from

electrical

installations

in

operation.

DEER
to continue the process to meet the 2028 deadline and report annually to EBRD.

The

process

of

PCB

-

polychlorinated

biphenyls

-

elimination

from

operating

electrical

installations

continued
in

2021.

However,

the

number

of

operating

electrical

equipment

containing

PCBs

is

relatively

low

for

two

of
the

DEER’

regions,

and

the

rate

of

decrease

for

the

third

region

is

accelerated,

which

ensures

the

comfort

of
the

company

in

implementing

the

national

program

of

elimination

within

the

term

2028,

according

to

the

GD
1497/2008.

The

process

in

monitored

based

on

annual

reports

and

the

information

is

published

in

the

Group’
Sustainability Report.

#### Health and Safety System and Policy

DEER

to

maintain

ISO

45001:2018

certification.

Revise

the

integrated

HSE

Policy

to

capture

the

DSOs

merger

DEER

obtained

ISO

45001:2018

certification

in

April

2021

and

revised

its

Declaration

of

policy

in

order

to
capture the DSOs merger during the first quarter of 2021.

132

#### Asbestos

Conduct

an

Asbestos-containing

Materials

(ACM)

survey

at

the

proposed

substations

and

develop

an

Asbestos
Management

Plan

(AMP)

for

the

sites

included

in

the

CAPEX

Plan.

In

order

to

facilitate

a

comprehensive
investigation,

DEER

should

also

ensure

that

all

electrical

equipment

is

isolated

and

made

safe

for

the

surveys.
The

construction

waste

management

procedures

within

the

CEMP

for

this

Project

should

incorporate
preventive

measures

/

approaches

if

asbestos

is

identified

during

the

works

and

should

follow

the

AMP.
Maintain a corporate asbestos risk assessment and elimination plan.

The

majority

of

sites

included

in

the

CAPEX

Plan

are

Asbestos

free,

but

DEER

is

analysing

all

the

sites

I

order
to develop an Asbestos Management Plan (AMP), where necessary.

#### Community Health & Safety

Following

the

CAPEX

implementation,

inspect

local

distribution

infrastructure

and

ensure

that

equipment

is
suitably

installed

and

protects

the

community

from

harm

(e.g.

trips

and

electrocution),

as

part

of

the
infrastructure

maintenance

plan.

Any

unprotected

equipment

that

could

cause

harm

to

the

local

community
should be reported and repaired.

During

maintenance

plan

implementation

DEER

teams

are

constantly

inspect

local

distribution

infrastructure
and

ensure

that

equipment

is

suitably

installed

and

protects

the

community

from

harm.

Any

identified
unprotected equipment that could cause harm to the local community is instantly repaired.

#### Working at Height and Lockout/Grounding Instruction

Ensure

H&S

instruction

for

deactivating

and

properly

grounding

live

power

distribution

lines

complies

national
regulations. Finalise the new Working at Height /Grounding instruction.

HSW

instruction

for

deactivating

and

properly

grounding

live

power

distribution

lines

and

for

working

at

height
is in place and complies national regulations.

#### Visual Impacts

Assess

the

potential

visual

impacts

of

the

new

lines

and

develop

mitigation

measures

e.g.

moving

the

lines
underground,

altering

the

proposed

line

alignment,

taking

into

account

local

communities’

sensitivities

to

their
construction (through the SEP) according to national legislation provisions.

During

designing

faze,

DEER

adopts

technical

solutions

considering

the

visual

impact

of

its

future

instalations
(replacing over head power line with subteran power line) according to national legislation provisions.

#### Emergency Preparedness and Response

Survey

all

offices

and

substations

for

their

fire

extinguishers

and

emergency

plans,

ensuring

that

all

are

up
to date, according to the legislation in force.

For

all

premises

owned

by

DEER

there

are

Fire

Safety

Plans

defined.

Prevention

measures

were

implemented
,consisting

in

:

control

of

compliance

with

legal

requirements

by

own

authorized

personnel;

periodic

training
for

all

categories

of

staff,

according

to

the

approved

training

programs;

performing

intervention

and
evacuation

exercises

in

emergency

situations;

maintenance

of

fire

protection

facilities

and

of

fire-fighting
equipment

and

devices

for

each

location,

with

authorized

companies;

maintain

free

access

to

evacuation

133

routes; supplementary measures for fire prevention during the hot and the cold seasons.

#### Noise monitoring

Monitor

noise

levels

at

highly

sensitive

receptor

areas

that

complain

of

ongoing

noise

from

their

equipment
(such

as

densely

populated

areas,

hospitals

and

schools)

and

develop

and

implement

noise-cancelling
solutions

if

the

monitoring

show

some

exceedances

(or

other

noise

control

measures

such

as

the

restriction
of drilling during certain hours if the exceedance is related to construction works).

The

new

instruction

for

environment

controls

that

includs

monitoring

noise

levels

activities

was

elaborated
and approved by DEER.

#### Electromagnetic Fields

Continue

monitoring

potential

impacts

from

electromagnetic

fields

(EMF)

from

transformer

stations

and
transmission lines. Ensure compliance with National legislation with respect to EMF.

There

are

studies

regarding

DEER’

distribution

infrastructure

(grids

and

power

plants)

electromagnetic

fields
indicating

complies

with

the

National

legislation

with

respect

to

EMF.

DEER

is

analysing

options

for

including
new project EMF measurements in the commissioning procedure and for independent future studies.

#### Land Acquisition Framework

If

there

is

a

need

to

acquire

some

land

within

the

CAPEX

Plan,

develop

a

Land

Acquisition

Framework

(LAF),
presenting

Electrica’s

policy

of

fair

compensation

and

the

acquisition

process

in

line

with

national

legislation
and PR5. Ensure the CAPEX Plan installations follow this Framework.

No new land acquisition

was required for electrical distribution infrastructures included in CAPEX Plan, yet.

#### Bird death monitoring

Develop

and

implement

a

bird

mortality

monitoring

system

according

to

the

relevant

EU

legislation

that
provides yearly estimations of bird deaths.

DEER

developed

a

bird

mortality

monitoring

instruction

that

is

in

the

process

of

approval,

based

on

SCADA
systems alerts and local ground search surveys with carcass detection.

#### Avoiding and mitigating against bird deaths

Continue

to

install

new

lines

with

electrical

insulating

sheaths

in

areas

of

significant

bird

activity

defined

by
relevant

NGOs

and

environmental

authorities.

DEER

to

continue

to

install

special

brackets

(nests)

on

the
pillars

of

the

low

and

medium

voltage

overhead

lines.

Conduct

biodiversity

sensitivity

mapping.

Where
necessary,

implement

bird

markers

and

reduce

risk

of

electrification

of

birds

with

appropriate

design

of

electric
insulators. Ensure any new lines or modernized lines include bird friendly designs.

During

designing

faze

DEER

adopts

technical

solutions

for

biodiversity

protection

and

considers

replacing
overhead

power

lines

with

subteran

power

lines,

replacing

uninsulated

conductors

with

insulated

conductors,
mounting

electric

insulated

sheaths

for

its

new/modernise

power

lines.

A

document

regarding

technical
guidelines

that

will

insure

an

unitary

approach

for

designinig

power

lines

is

to

be

elaborated

at

DEER

level
including standard protection measures for birds.

134

#### Chance Find Procedure

Set

up

a

Chance

Find

Protocol

to

effectively

identify

and

manage

any

culturally

significant

findings
encountered

unexpectedly

during

project

implementation.

Such

provisions

shall

include

internal
communication

chaine,

notification

of

relevant

competent

bodies

of

found

objects

or

sites,

alerting

project
personnel

to

the

possibility

of

chance

finds

being

discovered

and

fencing

off

the

area

of

finds

to

avoid

any
further

disturbance

and

destruction,

where

needed.

This

Protocol

will

be

in

line

with

the

methodological

norm
for application of Law #50 dated 1991 regarding the authorisation of construction works.

Chance

Finds

Protocol

is

included

all

contracts/agreements

provisions

as

a

distinct

chapter/clause.

The
contract/agreement section will be published on DEER website by the end of first quarter 2022.

#### Update Stakeholder Engagement Policy (SEP)

Update

the

engagement

methods

used

in

the

SEP

to

align

with

what

is

currently

being

carried

out

and

update
the whistleblowing and grievance section.

Considering

the

unbundling

contex,

DEER

is

working

to

finalise

its

own

Stakeholder

Engagement

Policy

at
with

all

its

relevant

departments.

The

policy

will

be

published

on

DEER

website

after

obtaining

all

corporate
approvals needed.

#### Stakeholder Engagement for the 2021-2023 CAPEX Plan

Develop

a

CAPEX

Plan-specific

stakeholder

engagement

plan

(for

the

overall

CAPEX

program)

to

ensure

that
all

the

necessary

engagement

activities

will

be

undertaken

during

the

implementation

of

the

upcoming

works
being financed by EBRD.

DEER

has

an

Stakeholders

Engagement

Plan

and

the

section

regarding

the

CAPEX

program

will

be

published
on DEER website.

#### Integrate the public grievance processes into one mechanism

Develop

and

implement

an

IT

system

for

logging,

tracking

and

solving

grievances

and

revise

the

response
time

according

to

regulations

in

force

(ANRE).

Complaints

lodged

with

DEER

directly

to

be

acknowledged

and
solved

according

to

regulations

in

force

(ANRE)

(15

days

to

30

days

to

respond

depending

on

the

nature

of
the complaint).

Grievance

mechanism

is

published

on

DEER

website

and

is

in

line

with

regulation

in

force.

Records

of
complaints are maintained and presented to the regulater (ANRE) by request or during inspections.

#### Community H&S Guide

Develop

a

community

guide

for

H&S

around

power

lines

and

distribute.

This

guide

should

include

other
information

for

communities

served

by

DEER,

including:

details

of

DEER

emergency

procedure

for

safe

re-
erection

of

fallen

telegraph

poles;

details

of

stakeholder

engagement

activities

and

the

grievance

mechanism;
information

on

H&S

in

relation

to

substations

and

transformers,

and

underground

cables;

information

on
electromagnetic

fields

and

health

impacts;

and

information

on

risk

related

to

electricity

theft.

In

addition,
consider

other

options

to

implement

community

awareness

programs

regarding

energy

use

and

electricity
safety

(trhough

the

European

Commission

“Energy

Saving”

(“Economie

la

energie”)

programme

for

instance).

The

community

guide

is

included

in

DEER

Communication

Strategy

and

Plan

and

is

intended

to

be

launched

135

by the end of first quarter 2022.

Ensure

disclosure

and

reporting

in

line

with

the

EU

Non-Financial

Disclosure

Directive

with

relevant
information

on

climate

impacts

in

line

with

the

EU

guidance

line

July

2019
8
.

From

2022

include

information
on EU Green and Social Taxonomy in annual ESG/Sustainability reporting.

Electrica

Group

yearly

publishes

its

Sustainability

Report

in

line

with

the

EU

Non-Financial

Disclosure

Directive
and will include information on EU Green and Social Taxonomy starting with 2022.

4.11. Internal audit activity report for 2021

The

Internal

Audit

Department

is

responsible

for

conducting

risk-based

audit

missions

at

Group

companies’
level.

The

Internal

Audit

Department

performs

its

activity

based

on

an

audit

plan,

which

is

endorsed

by

the

Audit
and

Risk

Committee,

and

subsequently

approved

by

the

Board

of

Directors.

The

2021

Audit

Plan

included
assurance

missions,

operational,

as

well

as

ad-hoc

audit

missions

started

after

their

validation

by

the

Audit
and

Risk

Committee.

The

audit

plan

is

aligned

with

the

risk

register

at

Group

level

and

prioritizes

the

main
risks identified for the major business areas.

During

2021,

assurance

audit

missions

were

carried

out,

as

well

as

various

ad-hoc

missions

on

the

most
important

business

activities.

The

audit

missions

were

performed

on

major

projects

or

events

within

the
Group,

but

also

on

human

resources

activity,

fixed

assets,

occupational

safety

and

health

&

integrated

sistem
management

and

other

areas.

The

Audit

and

Risk

Committee

together

with

the

Board

of

Directors

analyzed
the audit reports regarding the findings identified, as well as the action plans established to remedy them.

Throughout

2021,

the

internal

audit

department

team

consisted

of

four

internal

auditors,

out

of

which

one
has a management role, and another 2 people with a part time work.

Among the most important audit missions carried out in 2021 are:

1.
Evaluation

and

audit

of

the

human

resources

activity

at

ELSA

and

SERV.

Two

audit

reports

were

prepared,
containing 18 findings regarding the human resources activity, of which 4 with high impact;

2.
Evaluation

and

audit

of

fixed

assets

management

areas,

carried

out

at

ELSA

and

SERV.

Two

audit

reports
were prepared containing 10 findings, of which 2 with high impact;

3.
Evaluation

and

audit

of

the

activity

regarding

the

physical

security

and

integrated

system

management

at
ELSA. An audit report was prepared containing 3 findings, of which 0 with high impact;

4.
Three

“follow-up’'

missions

were

carried

out

at

Group

level,

which

aimed

to

identify

and

monitor

the
implementation degree of the audit recommendations related to the issued reports
;

5.
Based

on

the

procedure

for

analysing

integrity

warnings,

51

warnings

were

received

through

the

“whistle-
blower”

system.

Out

of

the

total

number

of

warnings

received

during

the

year

2021,

ELSA

Internal

Audit
Department analysed 7 warnings received in 2021, and other 7 warnings received at the end of 2020.

The

audit

reports

are

submitted

to

and

agreed

by

the

audited

companies
’

management

and

further

submitted

8

(

https://ec.europa.eu/finance/docs/policy/190618-climate-related-information-reporting-guidelines\_en.pdf

)

136

to

the

Audit

and

Risk

Committee

of

ELSA,

as

well

as

to

the

Board

of

Directors.

Following

the

conclusion

of

the
audit

engagements

and

after

agreeing

the

audit

recommendations

with

the

responsible

persons,

the

Internal
Audit

Department

works

together

with

the

audited

structures

in

order

to

draw

up

the

action

plans

aimed

to
reduce or eliminate the identified risks.

137

5

### Operating activity of Electrica in 2021

5.1.

#### Operating segments

The operations of each reportable segment are summarized below.

Segments

Operations

Electricity and gas supply

Purchasing

and

supplying

electricity

and

gas

to

end

consumers

(EFSA,

including

the
trading

and

representation

activity

on

the

Balancing

Market

as

Balance

Responsible
Party – BRP)

Electricity distribution

Electricity

distribution

service

(include

DEER

and

activity

performed

by

SERV

within
distribution segment)

Electricity generation

Production of electricity from renewable sources (photovoltaic panels)

External electricity network
services

Repairs,

maintenance,

and

other

services

for

electricity

networks

owned

by

other
distributors

(includes

Electrica

SERV

SA

activity

without

the

one

mentioned

above
for the distribution segment)

Headquarters

Includes corporate services at parent level

Source: Electrica

The

figure

below

shows

the

areas

covered

by

the

Group

subsidiaries

and

the

number

of

customers/users

they
serve.

Figure 21: The geographical coverage of the companies in the Electrica Group in 2021

Source: Electrica

Note: The figure refers to the company’s number of consumption places/users at 31 December 2021

#### DISTRIBUTION SEGMENT

Electrica

Group’s

distribution

segment,

starting

with

1
st

of

January

2021

refers

to

the

activity

of

DEER

(with
the following network areas:
Transylvania North, Transylvania South and Muntenia North
) and SERV.

![Image should be here]()

![Image should be here]()

Network

area

of

Transilvania

North
1.32

mn

users

![Image should be here]()

Network

area

of

Transilvania

South
1.18

mn

users

![Image should be here]()

Network

area

of

Muntenia

North
1.32

mn

users

Electrica

Furnizare

(EF)
3.5

mn

consumption

places

138

The

electricity

distribution

segment

is

a

regulated

area

of

activity,

in

which

operations

are

conducted

in

a
geographically

limited

area

in

accordance

with

the

concession

agreement,

the

nature

of

the

services

provided,
and

the

specific

obligations

are

stipulated

in

the

license

conditions

of

the

concessionaire

operator.

Thus,

the
electricity

distribution

subsidiary

of

Electrica

Group

is

the

energy

distribution

operator

in

Transylvania

North
(Cluj,

Maramures,

Satu

Mare,

Salaj,

Bihor

and

Bistrita-Nasaud

counties),

Transylvania

South

(Brasov,

Alba,
Sibiu,

Mures,

Harghita

and

Covasna

counties)

and

Muntenia

North

(Prahova,

Buzau,

Dambovita,

Braila,

Galati
and Vrancea counties), operating electrical installation with voltages between 0.4 kV and 110 kV.

DEER

holds

the

exclusive

electricity

distribution

license

in

these

regions

of

network

areas

valid

for

the

next
seven

years

with

an

extension

clause

for

another

25

years.

Within

its

service

for

distribution

activity,

SERV
provides

maintenance,

repair

and

various

services

to

group

companies

(car

rental,

rental

of

buildings

etc.)

as
well as repairs and other related services to third parties.

The

specific

distribution

tariffs

are

determined

and

approved

by

ANRE

based

on

the

“tariff

basket

cap”

method
as

set

out

in

ANRE

Order

no.

169/18

September

2018

regarding

the

approval

of

the

tariff

setting

methodology
for

the

electricity

distribution

service

(applicable

in

the

fourth

regulatory

period

2019

-

2023),

with

subsequent
amendments,

and

respectively

GEO

no.

1/15

January

2020

and

ANRE

Order

no.

75/6

May

2020

regarding

the
establishment of RRR applied to the approval of tariffs for the electricity distribution service.

The

regulatory

method

“tariff

basket

cap”

aims

to

avoid

significant

fluctuations

in

the

tariffs

applied

to

the
users

for

electricity

distribution. The

model

for

determining

the

regulated

income

is

based

on

the

principle

of
remunerating

in

tariffs

the

justifiable

costs

recorded

by

the

distribution

system

operator,

the

main

source

of
profit of the distribution company being the rate of return of capital invested in the distribution activity.

The

tariffs

are

adjusted

annually,

taking

into

account

the

operational

performance

achieved,

the

quantities

of
electricity

distributed,

the

quantities

and

the

purchase

price

of

electricity

needed

to

cover

network

losses

(NL),
controllable

and

noncontrollable

costs,

the

change

in

reactive

energy

revenues

from

forecasted

values,

the
depreciation

and

carrying

out

expected

capitalizable

expenses,

the

changes

in

actual

gross

profit

from

other
activities

compared

to

the

forecasted

one,

as

well

as

the

corrections

in previous

periods

carried

out

according
to the methodology.

As

of

31

December

2021,

the

Group

is

in

an

estimated

under

recovery

position

of

approximately

(RON

273
mn

(representing

corrections

related

to

the

year

2021)),

which

will

be

recovered

from

the

distribution

tariffs
of the following years.

The

current

regulatory

period

(the

fourth

regulatory

period

–

RP4)

began

on

1

January

2019

and

will

end

on
31

December

2023.

the

rules

on

RAB

and

distribution

tariffs

determination

are

expected

to

remain

unchanged
until

the

end

of

2023. ANRE

sets

the

annual

level

of

distribution

tariffs

in

RON

per

MWh

for

each

distribution
company,

respectively

on

each

network

area

in

case

of

a

merged

DSO

and

for

each

voltage

level

(high,
medium

and

low). The

invoiced

tariffs

are

summed

up

according

to

the

related

voltage

level

(e.g.,

the

medium
voltage

tariff

includes

the

high

voltage

tariff,

and

the

low

voltage

tariff

includes

the

high

voltage

and

medium
voltage tariff).

ANRE

determines

the

regulated

annual

income

required

for

each

year

of

the

regulatory

period

based

on
projections

submitted

by

distribution

operators

in

accordance

with

the

methodology

requirements,

at

the
beginning of the regulatory period.

139

The electricity distribution tariffs approved by ANRE for 2022 are as follows (RON/MWh):

Applicable starting with 1 January 2022

Tariff

(RON/MWh)

ANRE Order no.

High

Voltage

Medium

Voltage

Low

Voltage

MN

21,02

43,54

140,68

TN

21,79

48,13

122,78

TS

119/25 November 2021

22,34

45,49

127,04

Source: ANRE

#### SUPPLY SEGMENT

Electrica

Group

operates

on

the

electricity

supply

segment

through

its

subsidiary,

EFSA,

both

on

the

regulated
electricity

market

(as

SoLR

in

the

territorial

areas

where

the

Group’s

distribution

subsidiaries

operate),

and

on
the

competitive

market,

at

a

national

level.

EFSA

holds

an

electricity

supply

license

that

covers

the

entire
Romanian

territory,

valid

until

2021,

with

the

possibility

of

extension.

Additionally,

holds

a

license

for

supplying
natural gas, valid until 2022.

The

electricity

market

is

split

between

the

regulated

market

(through

suppliers

of

last

resort)

and

the
competitive market. On both markets, electricity can be sold/purchased wholesale or retail.

#### Last resort supliers market

Currently,

EFSA

is

a

supplier

of

last

resort

for

approximately

2mn

customers

with

1.9mn

consumption

places.

#### Competitive market

In

2021,

the

trading

on

the

wholesale

competitive

market

is

transparent,

public,

centralized

and

non-
discriminatory

and

takes

place

on

OPCOM

platforms;

prices

can

be

freely

negotiated

by

the

parties

on

the
competitive

retail

market.

The

participants

on

the

wholesale

market

can

trade

electricity

based

on

bilateral
contracts concluded on the markets managed by OPCOM or on the spot markets also managed by OPCOM.

#### BRP Electrica - Balance Responsible Party

The

activity

of

representation

in

the

Balancing

Market

as

the

Balance

Responsible

Party

(BRP)

took

place
within EFSA.

Starting

with

1

April

2018,

the

client

portfolio

is

diversified,

consisting

of

producers

(hydro,

thermal,

wind,
photovoltaic,

biogas,

biomass),

suppliers

and

distribution

operators,

ensuring

the

balancing

service

of

over
24% of total electricity consumption from Romania.

The distribution companies within Electrica Group have delegated their responsibility to BRP EFSA.

The

Balancing

Market,

a

component

of

the

wholesale

energy

market,

is

a

market

for

which

each

licensee

must
either

assume

the

balancing

responsibility

or

transfer

the

balancing

responsibility

to

a

BRP.

By

transferring
the

responsibility

to

a

balance

responsible

party,

there

is

the

advantage

of

aggregating

imbalances,

in

the
sense

of

reducing

costs

on

the

Balancing

Market

compared

to

the

situation

where

the
producer/supplier/distributor would be itself a Balance Responsible Party.

#### ENERGY SERVICES SEGMENT

The

Group's

portfolio

also

includes

the

energy

services

segment

(equipment

maintenance,

repairs

and

other
additional

services

related

to

the

network),

performed

almost

entirely

for

the

distribution

companies

outside

140

the Group.

Until

30

November

2020,

the

segment

was

represented

by

SEM,

and

after

the

merger

by

absorption

between
SERV and SEM, the segment includes the energy services activity within SERV.

5.2.

#### Fixed assets

The

number

of

users

and

volume

of

installations

as

of

31

December

2021

at

the

level

of

the

three

distribution
regions

(
North

Transylvania

area

-

TN

area,

South

Transylvania

area

-

TS

area

and

North

Muntenia

area

-

MN
area) and total DEER (Romania Electrical Energy Distribution) are quantified as follows:

UM

TN

MN

TS

Total

Geographical coverage

km²

34.162

28.962

34.072

97.196

Number of users, of which:

no.

1.325.82
8

1.324.32
4

1.177.03
9

3.827.19
1

high voltage (HV – 110 Kv)

no.

34

40

46

120

medium voltage (MV)

no.

4.363

4.387

2.984

11.734

low voltage (LV)

no.

1.321.431

1.319.897

1.174.009

3.815.337

Overhead power lines length, out of which:

km

53.146

59.548

45.850

158.544

high voltage (HV – 110 Kv)

km

2.196

2.146

3.149

7.491

medium voltage (MV)

km

11.906

12.647

10.502

35.055

low voltage (LV)

km

39.044

44.754

32.200

115.999

out of which connections

km

18.280

24.340

17.455

60.075

Underground power lines length, out of which:

km

17.505

12.297

12.736

42.538

high voltage (HV – 110 Kv)

km

30

17

63

110

medium voltage (MV)

km

4.234

3.537

3.636

11.407

low voltage (LV)

km

13.241

8.743

9.037

31.021

out of which connections

km

7.772

2.329

2.921

13.023

Cumulative power of transformers/power AT

MVA

6.269

8.810

6.819

21.898

in power stations

(HV/MV + MV/MV), out of which:

MVA

3.760

5.770

4.143

13.673

in HV/MV power stations

MVA

3.712

5.421

4.075

13.208

in MV/MV power stations

MVA

48

349

69

466

Switching stations/Transformer stations

MVA

2.509

3.040

2.676

8.226

No. of substations, out of which:

pcs

121

213

105

439

HV/MT power stations

pcs

92

125

101

318

MT/MT power stations

pcs

29

88

4

121

Number of switching stations and transformer
stations

pcs

9.280

10.710

9.548

29.538

Source: Electrica

Most

of

the

distribution

installations

currently

in

the

patrimony

of

the

electricity

distribution

company

(detailed
by

geographical

areas)

within

Electrica

Group,

about

80%

of

the

total

volume,

was

built

in

the

period

1960-
1990,

in

the

successive

stages

of

development

of

the

National

Energy

System.

This

has

led

to

a

wide

variety
of

equipment

currently

in

operation.

These

represent

installations

made

with

Romanian

technology

in

the
period

1960

-

2000,

where

there

is

a

high

degree

of

physical

and

moral

wear

and

tear.

It

should

be

noted
that

the

installations

put

into

operation

between

1980

-

2000

(approximately

10%)

gradually

exceed

the
normal operating time.

141

A

relatively

small

category,

representing

about

20%

of

the

total

installations,

is

represented

by

the

new
installations,

put

into

operation

after

2000

and

which

are

made

to

technical

standards

that

meet

the

current
requirements.

Depending

on

the

voltage

level,

categories

of

installations,

the

year

of

commissioning

and

the

specific
operating conditions, the degree of wear and tear of the installations can be assessed as follows:

TN

MN

TS

High voltage power lines (110 kV)

Underground power lines

25%

45%

50%

Overhead power lines

74%

64%

75%

Medium voltage power lines

Underground power lines

48%

63%

65%

Overhead power lines

57%

58%

60%

Low voltage power lines

Underground power lines

52%

68%

75%

Overhead power lines

57%

63%

68%

Substations

69%

73%

60%

Transformers

Pole - mounted

44%

48%

50%

Concrete enclosure

50%

65%

75%

Pad - mounted

69%

75%

20%

Underground

15%

95%

85%

Concrete base

10%

8%

12%

Source: Electrica

#### Investments

The

investments

at

Electrica

Group

level

have

been

prioritized

considering

especially

the

distribution
company’s

assets

degree

of

wear,

and

with

a

particular

focus

on

the

improvement

of

the

distribution

service
quality, the safety in operations, as well as the increase in efficiency.

The

Group

will

continue

to

modernize

and

to

develop

the

smart

distribution

network

by

installing

smart
network

infrastructure

systems,

such

as

SCADA,

SAD,

electricity

measurement

systems

etc.,

in

order

to
improve

the

energetic

and

operational

efficiency,

to

improve

the

network

flexibility,

the

distribution

service
quality and to ensure the continuity in the electricity supply and the networks’ safety.

■
In

the

investments’

program

implementation,

the

Group's

strategy

and

in

particular

the

following
criteria are ensured:

▪
tracking the inclusion of regulated investments in the RAB;

▪
non-regulated

investments

of

the

Group

must

provide

an

internal

rate

of

return

higher

than

the

weighted
average cost of capital;

▪
the

proposed

investment

program

must

follow

the

Group’s

financial

strategy

of

maintaining

a

solid

capital
structure.

Thus,

those

categories

of

capital

expenses

that

contribute

to

the

development

of

a

profitable

and

sustainable
distribution

activity,

as

well

as

to

the

creation

of

the

conditions

of

access

to

the

electricity

distribution

network
for

the

consumers

and

electricity

producers,

in

accordance

with

market

requirements,

are

prioritized,

based
in particular on:

▪
distribution automation by integrating of the installation in SCADA, SAD, DMS etc.;

▪
modernizing the equipment from the transformer substations and the medium voltage network;

▪
introducing

equipment

with

reduced

technological

losses,

higher

operating

efficiencies

and
environmentally friendly;

▪
modernizing of the medium and low voltage distribution network and of the connections;

142

▪
expansion of modern systems for measuring electricity consumption and transmitting consumption data.

■

At

the

same

time,

the

Group

is

considering

investments

in

the

upgrade

of

IT

infrastructure

and

IT

systems,
considering

both

the

legal

requirements

regarding

data

protection

and

the

positive

effect

on

the

quality

of

the
services provided.

The

following

table

presents

the

investment

program

approved

by

ANRE

for

the

distribution

area

within
Electrica Group for the period 2019 - 2023 (in 2018 real terms):

Commissioning program approved by ANRE for the period 2019 - 2023 (RON mn)

2019

2020

2021

2022

2023

Total

SDTN

190

175

170

160

160

855

SDTS

200

190

170

170

160

890

SDMN

200

190

160

160

165

875

Total

590

555

500

490

485

2,620

Source: ANRE

In 2021, Electrica Group companies realized the following investments, compared to the planned values:

Electrica Group subsidiary (RON mn)

Planned 2021

Achieved 2021

DEER, TN area

214,7

182,1

DEER, TS area

222

158,2

DEER MN area

202,2

160,0

EFSA

51,2

9,4

SERV

11,6

1,5

SEM
9

-

-

ELSA

10,7

4,5

Total

712.4

515.9

Source: Electrica

At

Electrica

Group

level,

in

2021,

the

consolidated

CAPEX

plan

was

achieved

at

a

rate

of

72,4%

compared

to
the

plan

approved

by

the

Board

of

Directors

of

ELSA

in

February

2021,

and

for

the

distribution

subsidiary
DEER, the average degree of achievement is of 96,9% compared to the approved plan.

The

synthetic

structure

of

investments

achieved

(CAPEX)

by

the

distribution

subsidiary

in

2021

is

presented
in the table below (for details of the most important investments see Appendix 2):

Category of works (RON mn)

Total

Efficiency, out of which:

195

Energy efficiency/NL

132

Operational efficiency

63

Quality of distribution service, out of which:

212

Continuity of supply

89

Energy quality

69

Legal obligations (network extention/reinforcement, new connection)

53

Other categories, out of which:

77

Endowment, Independent equipment (including vehicles & IT)

65

Studies and projects for the coming years

12

143

Category of works (RON mn)

Total

Total

484

Source: Electrica

\* does not include additional CAPEX for connection

The

main

investments

of

the

Electrica

Group

were

focused

in

2021

on

improving

the

quality

of

the

distribution
service, as well as on increasing the energy and operational efficiency.

Figure

22:

The

structure

of

CAPEX

achievements

for

distribution

operator

within

the

Group,

in

2021

(RON
mn)

Source: Electrica

\* Does not include additional CAPEX for connection

The


#### approved plan of investments to be commissioned








for

2021

was

in

total

amont

of

RON

662,5

mn
(RON

558.6

mn

without

connections),

this

value

also

including

investments

carried

forward,

for

the

year

2020
(RON 9.4 mn).

From

the

investment

plan

for

2021

the

distribution

company

of

Electrica

group

–

DEER,

carried

out

and
commissioned

investments

of

RON

533.3

mn,

and

from

the

RON

9.4

mn

of

deferred

investments

related

to
2020, carried out and commissioned RON 8.2 mn.

Thus,

the

total

value

of

the

investments

carried

out

and

commissioned

in

2021

is

RON

541.1

mn,

representing
an average percentage of 82% compared to the total planned value of RON 662.5 mn.

DEER (RON mn)

Total 2021 plan

Total achieved 2021

Total percentage of
achievement %

MN area

212.0

171.0

81%

![Image should be here]()

Energy efficiency/NL

Operational efficiency
63
mil
13%

Continuity of supply
89
mil

Energy quality
69 mil

Legal obligations

(network ext./reinforcement,
new connections)

Endowment, independent
equipment (incl. vehicles & IT)

Studies and projects for the
coming years

144

TS area

227.6

183.0

80%

TN area

222.9

187.3

84%

Total DEER

662,5

541,1

82%

Source: Electrica

As

a

result

of

investments

made

during

2014-2021,

the

value

of

the

Regulated

Assets

Base

of

the

Group’s
distribution operators has progressively changed, with an increasing evolution, and is as follows:

RAB (RON mn)

2014
10

2015

2016

2017

2018

2019
11

2020
12

SDTN

1,331

1,420

1,519

1,624

1,728

1,856

1,952

SDTS

1,333

1,377

1,388

1,475

1,521

1,691

1,778

SDMN

1,486

1,543

1,581

1,679

1,769

1,913

2,035

Total

4,150

4,340

4,488

4,779

5,019

5,460

5,764

Source: Electrica

5.3.

#### Procurement

The

procurement

activity

is

carried

out

in

accordance

with

the

legal

provisions

in

force,

as

well

as

in

accordance
with

own

procedures

and

regulations,

as

appropriate,

aiming

to

cover

the

needs

of

goods,

services

and

works,
in

order

to

carry

out

in

good

conditions

the

Group's

activities.

In

some

cases,

purchases

are

carried

out
centralized,

by

delegating

the

purchase’

coordination

to

a

Group

company,

with

the

primary

goal

of

reducing
costs, optimizing the procurement and ensuring a unified policy within the Group.

5.4.

#### Sales activity

Electrica

Group’s

revenues

are

influenced

mainly

by

the

distribution

and

supply

segments.

The

contribution

of
the

distribution

segment

to

the

total

revenues

was

of

22.9%

in

2020

(2019:

24.2%),

while

the

contribution
of the supply segment was of
76.6
% in 2020 (2019: 75.4%).

The

Group’s

distribution

operators

(one

operator

from

1

January

2021)

are

natural

monopolies

in

their
respective

markets

and

as

such,

they

hold

a

dominant

position.

In

addition,

the

Group’s

distribution

operators
have

a

legal

monopoly

in

their

relevant

regions;

hence,

other

entities

cannot

set

up

a

competing

electricity
distribution business.

The

following

figure

shows

the

national

market

share

(based

on

the

quantities

of

distributed

electricity)

held
by

the

Group’s

subsidiaries

in

the

electricity

distribution

segment,

according

to

the

2019

ANRE

report

for
performance indicators’ monitoring.

10
 In 2018, ANRE communicated the final value of the investments recognised for 2014, due to this reason starting with 2014 the RAB values have
been modified.

11

The values estimated as of 31 December 2019 may suffer corrections/changes, following ANRE's analysis process.

12

The values estimated as of 31 December 2020 may suffer corrections/changes following ANRE's analysis process.

145

Figure 23: Market share of distribution segment in 2020

Source: ANRE Report for performance indicators’ monitoring 2020

Regarding

the

supply

segment,

although

it

holds

a

strong

position

on

the

electricity

supply

market,

EFSA

is
facing growing competition on its market.

The

figures

below

shows

Electrica

market

shares

for

the

supply

activity

as

of

30

November

2021

(based

on
the quantities supplied):

Figure 24: Last Resort suppliers market,
2021

Figure 25: Competitive Market, 2021s

![Image should be here]()

Source: ANRE monthly report (November 2021)

Source: ANRE monthly report, November 2021

Note: ʺOthersʺ category includes suppliers whose individual market shares are
below 4%

![Image should be here]()

Figure 26: Volume of electricity supplied on the
retail market (TWh)

Figure 27: Evolution in number of costumers (th)

![Image should be here]()

DEER TN,
12.51%

DEER TS,
14.02%

DEER MN
13.10%

Altii,
60.37%

146

Figure 28: Customers by electricity supplied
volume, 2021

Figure 29: Customers by revenues, 2021

![Image should be here]()

![Image should be here]()

Source: Electrica

Source: Electrica

#### Major customers exposure

EFSA

does

not

have

a

significant

exposure

/

concentration

to

a

particular

customer

or

group

of

customers

that
could

have

a

major

influence

on

its

business.

The

leader

position

provides

an

inherent

advantage

to

have

very
large

portfolio

of

customers

and

to

obtain

the

dispersion

of

risk,

and

as

such

there

is

no

risk

concentration.
This

advantage

has

been

confirmed

during

the

pandemic

period,

proving

that

the

economic

sectors

impacted
by

the

pandemic,

despite

they

generate

significant

exposures,

they

cannot

represent

systemic

dangers

to

the
entire company’ s portfolio.

However,

certain

consumers,

as

hospitals,

ambulance

stations,

schools,

kindergarten

and

nurseries,

air

and
maritime

traffic

services

are

considered

to

have

a

special

importance

and

they

cannot

be

disconnected

by

the
electricity

suppliers.

Customers

who

fall

under

the

insolvency

law

can

benefit

from

its

protection

against

its
creditors,

and

therefore

possibly

also

from

electricity

suppliers

for

the

electricity

supply

contracts

in

force

at
the date of initiation of insolvency procedures.

Source: Electrica

Source: Electrica

![Image should be here]()

5.2

5.0

4.9

4.9

5.1

3.8

5.4

4.2

3.6

4.4

4.2

5.6

10.6

9.2

8.5

9.2

9.3

9.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0

2

4

6

8

10

12

2016

2017

2018

2019

2020

2021

Regulated market

Competitive market

![Image should be here]()

3,470

3,362

3,288

3,284

3,269

1,953

131

215

253

269

314

1,556

3,601

3,577

3,541

3,553

3,583

3,510

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

3,460

3,480

3,500

3,520

3,540

3,560

3,580

3,600

3,620

2016

2017

2018

2019

2020

2021

Regulated market

Competitive market

147

#### BRP Electrica - Balance Responsible Party

The

representation

activity

as

Balance

Responsible

Party

(“BPR”)

on

the

Balancing

Market

was

performed
within EFSA.

In

2021,

all

market

participants

(cca.

920)

were

established

as

Balance

Responsible

Parties

at

Transelectrica
S.A.,

out

of

which

68

participants

assumed

the

responsibility

of

balancing

in

their

own

name

as

well

as

for
other licensees.

Starting

with

1

April

2018,

the

client

portfolio

is

diversified,

consisting

of

producers

(hydro,

thermal,

wind,
photovoltaic,

biogas,

biomass),

suppliers

and

distribution

operators,

ensuring

the

balancing

service

of

over
24% of total electricity consumption from Romania.

The

distribution

companies

from

Electrica

Group,

respectively

respectiv

SDEE

Muntenia

Nord

SA,

SDEE
Transilvania

Sud

SA

and

SDEE

Transilvania

Nord

SA,

which

gave

delegated

the

responsibility

to

BRP

EFSA,
have

merged

starting

with

1st

of

January

2021,

under

the

name

of

Distributie

Energie

Electrica

Romania

SA.

At the end of 2021, about 96 licensed participants have delegated their responsibility to EFSA, out of which:

•
8 suppliers, representing 8.33% out of total BRP;

•
6 distribution operators, representing 4.17% out of total BRP, and

•
84 producers, representing 87.5% out of total BRP,

compared to the end of 2020, when about 98 licensed participants were registered.

In

2021,

the

average

number

of

customers

was

about

97,

equal

to

the

average

of

2020

and

an

average
number

of

over

300

bilateral

contracts,

respectively

exchanges

with

OPCOM,

were

notified.

Starting

with
February

2021,

the

settlement

in

EM

is

performed

at

an

interval

of

15

minutes

using

the

methodology

of
unique

price

in

accordance

with

the

ANRE

Order

no.

213/2020.

These

intervals

with

unique

price

do

not

allow
compensations, and those with dual price are reduced.

In

the

period

February

–

December

2021,

out

of

32,064

intervals

a

dual

price

was

applied

to

3,739

intervals
(11.66%),

resulting

a

compensation

degree

between

positive

and

negative

imbalances

of

approximately

47%.

In

2021,

as

a

result

of

internal

compensations

of

imbalances,

within

BRP

EFSA,

it

was

resulted

an

improvement
of

surplus

and

deficit

prices

by

41.67

RON/Mwh

compared

to

the

imbalance

prices

calculated

by

OTS/OPCOM.

Year 2021

OPCOM Average surplus price

PRE EFSA Average surplus price

426.17

467.67

OPCOM Average deficit price

PRE EFSA Average deficit price

622.87

581.20

Electrica

Furnizare

SA,

through

BRP

service

has

been

acting

on

the

Intraday

market

starting

with

February
2021 in order to buy/sell electricy quantity not transacted on DAM (Day Ahead Market).

For

the

period

February

–

December

2021,

the

results

for

the

trades

in

IM

(Intraday

Market)

are

the

followings:

•
Buy – quantity of 56,468.07 MWh at an average price of 651.50 RON/MWh;

•
Sell - quantity of 51,924.38 MWh at an average price of 562.20 RON/MWh.

Out

of

total

traded

of

107,523.52

MWh

(at

an

average

price

of

585.17

RON/MWh)

on

Buy

in

IM-OPCOM,

EFSA

148

traded

a

quantity

of

56.468,07

MWh,

representing

approx.

53%,

and

out

of

the

total

traded

of

115,262.22
MWh

(at

an

average

price

of

481.22

RON/MWh)

on

Sell

in

IM-OPCOM,

EFSA

traded

a

quantity

of

51.924,38
MW, representing approx. 45%.

In

accordance

with

EU

Regulation

943/2019

REGULATION

(EU)

2019/943

OF

THE

EUROPEAN

PARLIAMENT
AND

OF

THE

COUNCIL

of

5

June

2019

on

the

internal

market

for

electricity,

ANRE

approved

many

orders
detailed in the sub-chapter 1.2.

■

5.5.

#### Personnel

On

31

December

2021,

Electrica

Group

had

8,013

employees.

The

table

below

provides

an

overview

of

the
employment

in

the

Group,

by

business

segments,

at

the

end

of

the

specified

years.

Starting

with

2020,

the
figures include also the mandate contracts.

2021\*

2020\*

2019

Electricity distribution segment - DEER

6,454

7.213

6.972

DEER - MN

2.156

2.184

2.191

DEER - TN

2.259

2.248

2.233

DEER - TS

2.039

2.087

2.085

Services segment - SERV

612

694

463

Supply segment – EFSA

838

793

896

Services

related

to

other

distribution

networks

–

SEM
(included in SERV starting December 2020)

0

0

296

Headquarters – ELSA

109

120

128

Total

8,013

8,126

8,292

Source: Electrica

\*According

to

the

modified

reporting

methodology

to

INS,

the

employees

number

from

31.12.2021

also

includes

23

persons

who

worked
based on a mandate agreement.

In

addition

to

the

traditional

areas

of

interest,

new

ones

appeared,

such

as

the

development

of

new

activities,
based

on

innovative

technology,

the

development

of

a

closer

relationship

with

customers,

based

on

the
development

of

competencies,

but

also

on

an

offer

of

products

and

services

aligned

with

their

needs,

which
led to an increase in the number of employees within the Group.

Also,

ensuring

the

necessary

human

resources

(from

internal

resources

or

through

specific

recruitment)

for
key

business

areas

and

training

staff

and

capitalizing

on

its

potential,

expertise

and

skills,

in

order

to

increase
labor productivity and individual performance, are treated as priority topics.

As

of

31

December

2021,

approximately

52%

of

the

Group's

employees

represent

directly

productive

staff,
and

48%

represent

indirectly

productive

staff,

including

technical,

economic,

social

and

administrative
personnel.

The table below presents the Group’s employment by age, as follows
:

Age category

31 December 2021

31 December 2010

under 18

0.00%

0.01%

18-30

4.76%

4.60%

31-40

16.06%

16.32%

41-50

34.96%

36.99%

51-60

41.44%

39.26%

149

Age category

31 December 2021

31 December 2010

over 60 years old

2.85%

2.82%

Total

100%

100%

Source: Electrica

As

of

31

December

2021,

about

98,5%

of

the

Group’s

employees

are

union

members

and

their

employment
conditions

are

governed

by

the

Collective

Labor

Agreement,

which

will

expire

on

3

April

2022

for

ELSA

and
has

expired

on

31

December

2021

for

the

Group’s

subsidiaries.

According

to

the

legislative

provisions,

the
negotiations

for

the

elaboration

of

a

new

CLA

for

DEER,

FISE

and

EFSA

have

started;

as

well,

the

negotiations
were extended in 2022.

In

the

same

context

of

transformations,

in

2021,

Group’s

subsidiaries

did

not

run

a

voluntary

leave

program
with

compensatory

payments
,

these

continuing

the

processes

of

identifying

the

personnel

with

expertise

in
order

to

ensure

the

performance

and

efficiency

of

the

activities

at

the

level

required

by

the

regulatory
authorities and the energy market.

In

alignment

with

the

Group

strategic

objectives,

one

of

the

objectives

that

resulted

from

the

Human
Resources

Strategy,

is

"Education

and

training

to

ensure

the

need

for

quality

human

resources".

Thus,

it

was
considered

of

major

importance

the

organization

and

operation

of

a

formalized

internal

model,

at

the

level

of
the

Group,

of

professional

and

extra-professional

training.

One

of

the

projects

related

to

the

strategy

was

the
creation

of

a

team

of

internal

trainers

for

the

companies

within

the

Electrica

Group.

The

"Training

of

Trainers"
courses lasted 180 hours.

The

Group

is

involved

in

the

life

of

the

communities

in

which

it

operates,

supporting

children

of

families

with
modest

material

possibilities

to

remain

in

the

education

system,

and

at

the

same

time,

forming

a

solid

base
of

young

electricians

who

will

be

able

in

the

future

to

join

the

distribution

company,

depending

on

the
workforce need.

Both

ELSA

and

its

subsidiaries

prepared

and

updated

policies,

procedures

and

internal

regulations

that

contain
provisions

regarding

employment,

non-discrimination,

occupational

health

and

safety,

employer

and
employees’

rights

and

obligations,

the

procedure

for

solving

the

employees'

complaints,

the

labor

discipline,
disciplinary

sanctions

and

deviations,

rules

regarding

the

disciplinary

procedure,

criteria

and

procedures

for
the professional evaluation of employees, succession and final provisions.

Achieving

the

best

possible

correlation

between

the

future

needs

of

the

organization

and

the

competencies,
experience

and

career

aspirations

of

its

members,

led

to

the

definition

of

the

guidelines

of

the

succession

in
the company concept.

Also,

the

improvement

and

continuous

development

of

the

performance

management

system

contributes

to
the

achievement

of

Electrica

Group

key

objectives,

set

for

the

2019-2023

period

(
Improving

operational
performance

to

continuously

increase

the

quality

of

customer

service

and

Increasing

performance

and
strengthening

the

sustainability

of

economic

results

By

adopting

the

human

resources

strategy,

the

Group
aims

to

ensure

the

qualified

resources

necessary

to

support

the

initiatives

for

the

next

period,

in

the

conditions
of an accentuated dynamics of the labor market.

Another

desideratum,

established

by

the

strategic

objective

regarding

the

modernization,

is

the

increase

of
the

employees'

trust

in

the

employer

and

the

creation

of

a

suitable

working

environment

for

collaboration

and
obtaining

the

envisaged

performances.

Thus,

in

order

to

improve

the

interactions

of

the

Electrica

Group
employees

with

the

human

resources

departments,

to

increase

the

employee

retention

and

to

improve

the
perception on the organizational culture.

150

Also,

in

order

to

improve

the

employer’s

image

and

the

continuation

of

the

pandemic

context

during

2021,
the

„work

from

home”

system

continued

within

the

Electrica

Group,

following

the

authorities’
recommendations

in

the

state

of

prolonging

the

alert

context

and

complying

with

the

internally

defined
processes, regarding workplace safety and human resources activity management.

The

organizational

culture

modernization,

having

as

central

elements

"excellence"

and

"safety",

is

one

of

the
strategic

objectives,

and

one

of

the

projects

in

this

area

is

represented

by

the

program

"Change

agents"

in
the

distribution

regions,

with

the

role

of

supporting

organizational

change

that

occured

following

the

merger
of

the

distribution

companies.

This

program

aims

to

promote

opening

to

the

new

challenges

and

to

encourage
employees

to

propose

solutions

to

solve

the

problems

they

face

at

work.

Change

agents

are

employees

who
not only accept the change, but seek solutions and support its implementation.

Another

objective

of

major

interest

is

the

performance

management,

as

a

coherent

system

that

evaluates

as
objectively

as

possible

the

activity

of

the

employees,

in

close

correlation

with

the

system

of

compensations
and benefits and the professional development one.

Thus,

the

Group’s

Key

Performance

Indicators

Catalogue

was

elaborated,

as

a

tool

that

ensures

the

objective
and

professional

evaluation

of

Electrica's

strategic

objectives

achievement

on

each

main

area

of

activity.
Additionally,

a

framework

methodology

for

the

application

of

the

KPIs

Catalogue

and

performance
management

according

to

best

practices

has

been

developed,

which

is

to

be

adapted

to

each

company.

The
project

also

included

a

series

of

applied

workshops,

training

sessions

on

setting

and

evaluating

performance
indicators,

as

well

as

other

discussions

aimed

at

transferring

knowledge

for

methodological

alignment

at

all
hierarchical levels and expressing expectations to strengthen internal teams.

Additionally,

it

was

continued

the

methodological

and

conceptual

framework

for

the

application

of

international
best

practices

was

developed

in

order

to

increase

the

maturity

of

the

performance

management

system

within
Electrica,

which

considers

the

continuous

improvement

of

the

employee

evaluation

process

and

the
development of the necessary tools to build a solid performance-based system.

The

training

programs

carried

out

at

the

Electrica

Group

level

took

into

account

both

the

constant

evolution
and the improvement of the Group employees' skills.

The

company's

management

supports

the

principle

of

development

through

continuous

training

by

involving
employees in these programs, thus supporting them to effectively address their professional challenges.

#### HEALTH AND SAFETY AT WORK

The

Integrated

Quality-Environment-OSH

Management

System,

implemented,

certified

and

supervised

at

the
level

of

each

company

within

the

Electrica

Group

by

the

SRAC

Cert

certification

body,

ensures

the

companies'
compliance

with

the

legal

requirements

for

occupational

safety

and

health

and

for

those

of

the

SR

ISO
reference

standard

45001:

2018,

and

enhances

the

providing

of

professional

services

and

conducting

the
business processes in a safely manner for the organization and contractor staff, but also for customers.

#### The work accidents situation and specific indicators at Electrica Group level

In 2021 there were no fatal work accidents at Electrica Group level.

The

total

number

of

work

accidents

at

the

group

level

decreased

with

20%

compared

with

the

previous

year,
4 work accidents being recorded compared to 5 accidents recorded in 2020.

The

complex

of

complementary

causes

and

favourable

factors

that

determined

the

occurrence

of

each

of
these

accidents

was

analysed

by

legally

constituted

commissions

at

company

level

and

the

investigation

files

151

include

prevention

measures

that

need

to

be

implemented

by

the

company.

Two

of

the

work

accidents
registered

at

group

level

were

generated

by

the

mechanical

risk

materialised

during

traffic

accidents,

one

was
caused by physical aggression of a third party and another by stumbling and falling from the same level.

An

OSH

event

produced

because

of

preexistent

health

condition

of

the

staff,

without

being

classified

as

work
accident

according

to

the

DEER

communication,

took

place

in

August

2021

and

resulted

in

the

death

of

a
DEER

employee.

The

investigation

of

the

event

is

carried

out

by

the

competent

authorities

(ITM

Galați)

and
depending on the results of the research, the event could be reclassified as a work accident.

#### The frequency index




(FI),

expressed

as

the

number

of

injured

people

returning

to

1000

employees

is

for
2021

at

Electrica

Group

level

0.63

‰,

increasing

compared

to

2020

based

on

the

sensible

decrease

of
headcount in 2020 at the Group level.

IF

is

a

statistical

indicator

recommended

by

the

International

Labor

Organization

(ILO)

through

The

Resolution
on

Accidents

at

Work

adopted

in

October

1998,

as

it

correlates

the

number

of

accidents

with

the

number

of
workers,

increasing

the
comparability

of

HSW
organizations'
performance

and
eliminating

distortions
generated

by

the

size

of
these

organizations

(the
number

of

staff

in

each
organization).

Starting

with

2018

and
continued

in

the

following
years,

the

FI

for

the
Electrica

Group

was
constantly

below

the
national

value

of

the
indicator

and

well

below
the level registered for the industry in which it operates.

#### Aspects regarding the employees health

No

occupational

diseases

were

registered

at

Electrica

Group

level,

neither

in

the

reference

year

nor

in

the
previous years.

Prevention,

monitoring

and

health

security

at

the

work

place

was

performed

by

doctors

specialized

in
occupational

medicine

based

on

dedicated

service

agreements

and

was

whached

by

ELSA,

for

portfolio
companies, through half-yearly reports.

#### Actions to improve safety and health of employees at work place

A

sustained

effort

by

the

HSW

teams

of

each

group
’

company,

coordinated

by

ELSA
’s

IMS&HSW

Department
was

needed

throughout

2021

for


ensuring

the

prevention

and

monitoring

of

SARS-CoV-2

infections

in

the
context

of

the

COVID-19

pandemic,

the

main

actions

defined

and

managed

by

HSW

professionals

consisted
in:

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

0.72

0.5

0.4

0.63

1.06

0.95

0.66

0.75

2.12

2.53

1.84

1.93

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2018

2019

2020

2021

Electrica Grup

![Image should be here]()

National

![Image should be here]()

Industry

![Image should be here]()

#### Frequency Index

؉

152

▪
defining

and

constantly

reviewing

the

regulatory

framework

necessary

to

prevent

the

new

coronavirus
spread

at

the

level

of

group

companies

(rules

for

collaboration

and

use

of

common

areas,

rules

for
sanitation

of

equipment

and

work

devices,

rules

for

travel

in

the

interest

of

service,

intervention

protocols
in

self-isolation

locations

or

quarantine,

disease

management

protocols,

direct

/

indirect

contact,

return
from risk areas, etc.);

▪
internal

communication

of

relevant

aspects

in

the

context

of

developments

in

the

external

and

internal
environment;

▪
ensuring

staff

awareness

and

training

in

order

to

reduce

the

risk

of

contamination

at

work

(hygiene

rules,
legal

obligations,

use

of

medical

devices

dedicated

to

prevention,

new

regulations,

teleworking

system
etc.);

▪
ensuring

the

equipment

and

services

necessary

for

the

personnel

protection

(hygienic-sanitary

materials
and services, medical devices, markings and signals, testing services and kits, etc.).

In

2021

the

total

number

of

HSW

training

hours

performed

increased

by

1%,

reaching

to

315,295

hours

from
312,100 HSW
-ES
 training hours in 2020

Given

the

context

of

the

COVID-19

pandemic
,

to

avoid

a

possible

transmission

of

the

virus

from

one

area

to
another

because

of

differentiated

developments

at

regional

level,

for

2021

the

HSW

dropped

the

cross-control
concept,

regardless

its

proven

effectiveness.


#### The aforemntioned



causes


#### have


limited


#### the total number of HSW inspections






to

2,085

performed

at

Electrica

Group

level

by


#### its


own

staff,

in

order

to

identify
deficiencies

that

could

generate


#### health and safety




risks

for

employees,

these

inspections

being

followed

by
the immediate treatment of

#### irregularities

 found.

Although

during

the

reference

period

there

were

numerous

inspections

performed

by

the

Territorial

Labor
Inspectorates

and

Inspectorates

for

Emergency

Situations,

some

of

them

concerning

the

implementation

and
compliance


#### degree


with

the

new

legal

regulations

intended

to

limit

the

COVID-19


#### spread

,

in

2021

no
sanctions were imposed for any of the Group companies.

The

year

2021

ment

the

alignment

of

safety

and

health

activities

and

practices

at

work

place

between

regions
for

the

distribution

area,

following

the

merger

of

the

three

operators,

by

unitary

review

and

adoption

more
than

100

HSW

instructions,

since

the

high-level

alignment

of

the

processes

and

subprocesses

in

the

previous
years.

During

the

year,

all

companies

from

Electrica

Group

have

performed

external

audits

carried

out

by

the
certification

body,

either

for

the

supervision,

or

for

the

certification

of

the

Integrated

Quality

-

Environmental
-

OSH

Management

System

implemented

in

accordance

with

the

new

standard

ISO

45001:2018,

all

companies
obtained or maintained their certification.

5.6.

#### Environmental considerations

In

2021,

Electrica

Group

invested

in

the

field

of

environmental

protection

over

RON

14.899

mn
13
,

the

value
recording an increase of almost 4% compared to the 2020 level of RON 14.36 mn.

The

consolidated

non-financial

statement

is

included

in

the

Group's

Sustainability

Report,

which

is

published
within a maximum of 6 months from the date of the Directors' Report.

Continuing

the

practice

of

previous

years

in

identifying

and

evaluating

all

real

and

potential

environmental

13
 considering estimated value for December 2021

153

aspects

with

positive

and

negative

effects,

associated

with

specific

processes,

both

in

normal

operating
conditions,

as

well

as

in

abnormal

operating

conditions

and

emergency

situations

at

the

level

of

each

company,
Electrica

Group

has

defined

and

promoted

its

main

concerns

in

order

to

increase

environmental

performance,
as follows:

▪
reducing or limiting the impact of services and infrastructure on the environment;

▪
responsible

waste

management

with

safe

disposal

of

generated

waste,

especially

of

those

the

highly
polluting ones;

▪
conservation of biodiversity and resources.

Figure 31: PCB capacitors in operation at the end of 2021

Subsumed

to

the

concern

for

reducing

or
limiting

the

impact

of

services

and
infrastructure

on

the

environment,

at
the

Group
’

distribution

operator

–

DEER
–

level

the

program

for

PCBs
(polychlorinated

biphenyls)

elimination
of

from

the

operating

electrical
distribution

infrastructure

was

continued
in

2021,

with

results

represented

in

the
left

chart.

The

implementation

pace
ensures

the

comfort

of

finalizing

the
elimination

program

within

the

national
legiferated

term

of

2028,

according

to
GD no. 1497/2008, for the company.

Source: Electrica

For

responsible

waste

management

and

the

safe

disposal

of

the

generated

waste,

especially

highly

polluting
waste,

a

unified

process

has

been

defined

and

implemented

at

the

level

of

Electrica

Group,

governed

by

the
principles

of

selective

collection

and

recycling

–

when

its

requirements

are

met

-

or

destruction

with

authorised
operators.

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

![Image should be here]()

186

475

1,215

1,876

102

475

1,179

1,756

Zona TN

Zona TS

Zona MN

Total

-

500

1,000

1,500

2,000

2021

20202

154

Figure 32: Waste processing

Source: Electrica

In

this

regard,

all

Group’s

companies

agreed

contracts

with

authorized

providers

for

processing/storage

of

all
categories

of

generated

waste,

the

transport

being

carried

out

by

these

respective

contractors

as

part

of

the
contracted

services.

Based

on

these

contracts,

at

Electrica

Group

level

was

selected

and

managed

in

2021

a
total amount of 18532,18
14
 tons of waste, most of them, over 77%, being recycled.

During

2021

there

were

no

incidents

with

environmental

impact,

but

there

was

a

non-compliance

with

the
provisions

of

Law

211/2011

on

waste

regime

caused

by

exceeding

the

perimeter

of

controlled

waste

storage
properly

organized

at

the

regional

structure

Sibiu

in

the

South

Transylvania

area

of

DEER.

This

was

reported
to

the

National

Environmental

Guard,

which

carried

out

two

successive

inspections.

On

the

date

of

the

first
inspection

carried

out

on

February

18
th

2021,

the

foudings

indicated

that

the

steps

to

release

the

unorganized
space

from

mixed

waste

stored

were

started

and

the

second

inspection

carried

out

on

February

22
nd

2021
concluded

that

DEER

-

SR

Sibiu

released

and

sanitized

the

perimeter

notified

for

uncontrolled

storage

of

mixt
waste,

proceeding

also

to

waste

disposal

or

recicling

with

an

authorized

economic

operator.

As

a

result

no
fines were applied by the authorities.

The

measures

implemented

have

ensured

the

fast

and

complete

elimination

of

the

effects

of

the

non-
compliance
.

Protecting

biodiversity

and

decreasing

the

effects

of

the

Group’s

activities

and

assets

on

flora

and

fauna

has
also

been

maintained

as

a

priority

direction

of

action

for

2021,

the

amount

allocated

by

Electrica

Group

in

this
regard increasing to RON 8,846 mn.

Thus,

during

2021,

at

Electrica

Group

level

continued

the

implementation

of

practices

and

solutions
harmonized with the environmental protection norms and the principles of sustainable development.

For

distribution

and

supply

activities

no

environment

authorisations

are

required,

and

the

energy

services

14
 considering estimated values for December 2021

![Image should be here]()

14,288.5

237.0

2,356.8

1,649.8

Recycling

Incineration

Final storage

Temporary storage

155

company

within

Electrica

Group,

have

the

environmental

authorisations

needed

for

the

operation

of

more
than

85%

of

the

locations

and

in

the

case

of

three

locations

(15%)

for

which

the

authorisation

had

expired
by

the

end

of

2021,

the

documentation

for

re-authorization

was

already

submitted,

in

accordance

with

the
legislation in force.

Following

external

certification/

supervisory

audits

carried

out

by

the

certification

body

SRAC

Cert,

companies
within

Electrica

Gro
u
p

obtained

or

maintained

in

2021

the

certifications

for

their

Integrated

Management
Systems

Quality

–

Environment

–

OHS

through

which

the

environmental

aspects

specific

to

the

performed
activities

are

managed

in

a

responsible

and

efficient

manner,

in

accordance

with

the

provisions

of

the
international standard ISO 14001:2015.

5.7.

#### Research and development activities

Electrica

Group

is

promoting

technological

innovation

by

participating

in

research

and

development

projects
financed/co-financed

through

European

funds,

having

the

possibility

to

test

new

technologies

to

manage

and
optimize

energy

efficiency.

Also,

the

electricity

distribution

networks

integrate

a

high

level

of

distributed
generation sources.

By

participating

in

these

research,

development

and

innovation

projects

with

financing/co-financing

through
non-reimbursable funds, Electrica Group has the following benefits:

▪
having

access

to

cutting-edge

technologies

in

the

field

of

optimizing

the

operating

regimes

of

the

electricity
distribution

network

(EDN)

in

terms

of

network

connection

of

renewable

electricity

production

sources
(distributed or concentrated);

▪
the

improvement

of

the

safety

and

reliability

of

isolated

electrical

systems,

of

the

quality

of

electricity
supplied by providing quick and low-cost reserves through flexible loads;

▪
the

possibility

of

identifying

certain

criteria

to

promote

smart

grids

and

smart

metering

solutions

in

terms
of the requirements of the new data protection measurement code and encryption methods;

▪
the use of opportunities to develop the self-financing business portfolio of group companies;

▪
developing new competencies through the transfer of know-how;

▪
compliance with the best practices of similar companies in Europe;

▪
creating

new

opportunities

for

the

group

companies

to

participate

in

projects

funded

by

the

European
Union.

■

Thus,

Electrica

participated

in

the

European

inteGRIDY

project

"integrated

Smart

GRID

Cross-Functional
Solutions

for

Optimized

Synergetic

Energy

Distribution,

Utilization

Storage

Technologies",

carried

out

within
the

research

and

innovation

program

of

the

European

Union

"Horizon

2020",

which

was

successfully
completed in the year 2021.

The

inteGRIDy

project

aimed

to

integrate

cutting-edge

technologies,

solutions

and

mechanisms

in

a

scalable
Cross-Functional

Platform

connecting

energy

networks

with

diverse

stakeholders,

facilitating

optimal

and
dynamic

operation

of

the

Distribution

Grid

(DG),

fostering

the

stability

and

coordination

of

distributed

energy
resources and enabling collaborative storage schemes within an increasing share of renewables.

The

proposed

solutions

were

tested

in

10

demonstration

sites

across

Europe

(Lisboa,

Xanthi,

Ploiesti,

Thessaloniki, Isle of Wight, Terni, San Severino Marche, Barcelona, St-Jean, Nicosia).

Electrica's

participation

was

achieved

through

the

Ploiești

Pilot,

where

a

demand

response

(DR)

solution

was
implemented

in

an

EIIS

system

(Energy

Integrated

Information

System)

where

building

energy

management
and control systems operate based on critical peak pricing and intelligent DR programs / algorithms.

156

By deploying the Ploiesti pilot, four major objectives of the project were achieved:

DR solution based on intelligent algorithms and programs (focused on the residential area);

Smart grid readiness;

Energy management;

For consumer, educating and increasing awareness about energy consumption and energy behaviour.

■

■
Another

important

endeavour

of

Electrica

Group

in

promoting

technological

innovation

is

to
disseminate

the

solutions

of

electricity

networks’

modernization

using

the

smart

grid

concept.

The
communications

take

place

at

the

international

conferences/symposiums

where

Electrica

Group

participates
or organizes internally to align development plans with available new technologies.

157

6

### Electrica financial reporting for 2021

The

overview

of

the

company’s

consolidated

financials

is

in

accordance

with

the

consolidated

financial
statements

that

have

been

prepared

in

accordance

with

the

International

Financial

Reporting

Standards
(“IFRS”)

adopted

by

the

European

Union

("IFRS-EU").

These

consolidated

financial

statements

are

presented
in RON, which is the functional currency of all companies within the Group.

6.1.

#### Consolidated statement of the financial position

The following table presents the consolidated statement of the financial position (amounts in RON mn):

#### 31 December

2021

#### 31 December

2020

#### Variation

ASSETS

Non-current assets

Intangible assets related to concession
agreements

5,514.6

5,455.2

1.1%

Other intangible assets

9.0

7.2

25.0%

Property, plant and equipment

505.4

508.1

-0.5%

Investments in associates

25.8

-

-

Deferred tax assets

83.5

19.7

323.9%

Other non-current assets

1.7

1.2

41.7%

Right of use assets

20.9

27.1

-22.9%

Total non-current assets

6,160.9

6,018.5

2.4%

Current assets

Trade receivables

1,344.6

1,029.8

30.6%

Other receivables

48.6

32.5

49.5%

Cash and cash equivalents

221.8

570.9

-61.1%

Restricted cash

-

320.0

-

Inventories

73.0

70.1

4.1%

Prepayments

5.0

2.8

78.6%

Current income tax receivable

23.8

1.8

1,222.2%

Assets held for sale

5.4

15.5

-65.2%

Total current assets

1,722.2

2,043.4

-15.7%

Total assets

7,883.1

8,061.8

-2.2%

EQUITY AND LIABILITIES

Equity

Share capital

3,464.4

3,464.4

-

Share premium

103.0

103.0

-

Treasury shares reserves

(75.4)

(75.4)

-

Revaluation reserve

102.8

116.4

-11.7%

Legal reserves

408.4

392.3

4.1%

Retained earnings

950.2

1,759.6

-46.0%

Total

equity

attributable

to
shareholders of the Company

4,953.6

5,760.3

-14.0%

158

#### 31 December

2021

#### 31 December

2020

#### Variation

Total equity attributable to
shareholders of the Company

4,953.6

5,760.3

-14.0%

Liabilities

Non-current liabilities

Lease liability – long term

12.1

16.9

-28.3%

Deferred tax liabilities

161.9

177.8

-4.1%

Employee benefits

149.2

143.9

3.7%

Other liabilities

32.7

33.9

-3.4%

Long-term bank borrowings

452.3

400.3

33.4%

Total non-current liabilities

808.3

772.7

4.6%

Current liabilities

Lease liability – short term

9.4

10.7

-12.1%

Bank overdrafts

627.4

165.0

280.3%

Trade payables

891.3

607.2

46.8%

Other payables

271.3

240.9

12.6%

Deferred revenue

9.7

5.6

73.2%

Employee benefits

101.1

92.3

9.5%

Provisions

34.9

19.2

81.5%

Current income tax liability

-

9.2

-

Current

portion

of

long-term

bank
borrowings

176.1

378.6

-53.5%

Total current liabilities

2,121.3

1,528.8

38.8%

Total liabilities

2,929.6

2,301.5

27.3%

Total equity and liabilities

7,883.1

8,061.8

-2.2%

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

#### Non-current assets

The

non-current

assets

increased

with

RON

142.4

mn

in

2021,

or

2.4%,

from

RON

6,018.5

mn

as

of

31
December 2020, to RON 6,160.9 mn at 31 December 2021, this variation being the cumulated effect of:

-
Increase

with

RON

59.4

mn

of

network

investments

made

by

distribution

subsidiaries

(most

relevant
values of investments and put into function are presented in Annex 2);

-
Increase

of

financial

assets

with

RON

25.8

mn

thanks

to

new

investments

in

associate

entities,

which
develop

renewable

energy

production

capacities

(
Crucea

Power

Park

S.R.L.,

Sunwind

Energy

S.R.L.,

New
Trend Energy S.R.L., Foton Power Energy S.R.L.) – see details in Chapter 1.2 Key events of this report.

-
Increase

of

deferred

tax

by

RON

63.8

mil.

in

2021,

or

323.9%

from

RON

19.7

mil

as

of

31

December
2020, effect generated in principal by fiscal position for 2021.

#### Current assets

In

2021,

current

assets

decreased

by

RON

321,2

mn

compared

to

2020,

or

15.7%,

from

RON

2,043.3

mn

to
RON 1,722.2 mn, this evolution being mainly the net effect of

-
Value

of

collateral

deposits

of

RON

320

mn

have

decreased

because

the

long

term

loan

from

BRD

–

Group

159

Societe Generale has been reimbursed;

-
Value

of

cash

and

cash

equivalents

decreased

with

RON

349.1

mn

due

to

reduction

of

short

term

deposits
and

cash

at

banks,

both

of

them

representing

the

impact

of

increase

of

electricity

prices

as

well

as

of
investments in associates and the cash pooling structure (liquidities are used in cash pooling system);

-
trade

receivables

have

increased

with

RON

314.8

mn

in

2021,

mainly

due

to

the

supply

segment

corellated
with the increase in sales.

Trade receivables

Trade

receivables

increased

by

RON

314.8

mn

during

2021,

or

30.6%,

to

RON

1,344.6

mn,

from

RON

1,029.8
mn

as

at

31

December

2020.

This

variation

is

generated

by

increase

of

sales

especially

in

the

supply

segment
to which the impact of COVID-19 on the receivables collection is added.

Cash and cash equivalents

Cash and cash equivalents include cash balances, call deposits and bank accounts.

Their

value

decreased

by

RON

349.1

mn

in

2021,

or

61%,

reaching

RON

221.8

mn,

from

RON

571

mn

in
2020,

due

to

reduction

of

short

term

deposits

and

cash

at

banks,

both

of

them

representing

the

impact

of
increase

of

electricity

prices

as

well

as

of

investments

in

associates

and

the

cash

pooling

structure

(liquidities
are used in cash pooling system).

(RON mn)

31 December 2021

31 December 2020

Bank current accounts

167.8

179.4

Call deposits

53.9

391.5

Cash in hand

0.1

0.1

Total

cash

and

cash

equivalents

in

the

consolidated
statement of financial position

221.8

570.9

Overdrafts used for cash management purposes

(627.4)

(165.0)

Total

cash

and

cash

equivalents

in

the

consolidated
statement of cash flows

(405.6)

406.0

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

Restricted cash

As

of

31

December

2021,

the

restricted

cash

balance

previously

presented

as

long-term,

representing

a
guarantee

for

the

loan

from

BRD,

reclassified

in

the

category

of

current

assets

has

a

nil

balance,

as

the

loan
was repaid in Q4 2021.

#### Share capital and share premium

The

issued

share

capital

in

nominal

terms

consists

of

346,443,597

ordinary

shares

at

31

December

2021

and
2020 with a nominal value of RON 10 per share.

The

company

recognizes

the

changes

in

its

share

capital

only

after

their

approval

in

the

General

Meeting

of
Shareholders

and

their

registration

with

the

Trade

Register.

Contributions

made

by

the

shareholder,

which
are

not

registered

with

the

Trade

Register

at

the

end

of

the

year,

are

recognized

as

“Pre-paid

capital
contributions in kind from shareholders”.

There were no changes in the number of shares in 2021.

160

Number of ordinary shares

2021

2020

Number of shares at 1 January

346,443,597

345,939,929

Shares issued during the year

-

-

Number of shares at 31 December

346,443,597

346,443,597

Source: Electrica

#### Revaluation reserves

The

reconciliation

between

the

opening

balance

and

the

closing

balance

of

the

revaluation

reserve

is

presented
below:

(RON mn)

2021

2020

Balance at 1 January

116.4

87.7

Revaluation surplus of land, land improvements and buildings

-

43.8

Release

of

revaluation

reserve

to

retained

earnings
corresponding

to

depreciation

and

disposals

of

property,

plant
and equipment

(13.5)

(7.2)

Deferred

tax

liability

arising

on

revaluation

of

land,

land
improvements and buildings

-

(7.9)

Balance at 31 December

102.8

116.4

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

#### Legal reserves

The

legal

reserves

are

established

as

5%

of

the

profit

before

tax

according

to

the

individual

statutory

financial
statements

of

companies

within

the

Group,

until

the

total

legal

reserves

reach

20%

of

the

paid-up

share
capital

of

each

company,

according

to

legal

provisions.

These

reserves

are

deductible

for

income

tax

purposes
and are not distributable.

(RON mn)

Legal reserves

Balance at 1 January 2020

371.8

Set-up of legal reserves

20.4

Balance at 31 December 2020

392.3

Set-up of legal reserves

16.1

Balance at 31 December 2021

408.4

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

#### Non-current liabilities

The

non-current

liabilities

have

considerably

increased

from

RON

772.7

mn

as

per

31

December

2020

to

the
value of RON 808.3 mn as per 31 December 2021.

This

evolution

is

a

net

effect

of

the

main

non-current

liabilities

categories

variation,

of

which

the

most
significant

relates

to

long-term

borrowings,

which

increased

due

to

withdraws

performed

in

2021

(RON

30.0
mn

from

BRD/2020

loan,

RON

40.0

mn

from

BRD/2021

loan

and

RON

83

mn

from

BCR/2020

loan),

mainly

to
finance

the

investments

in

the

distribution

network

on

one

hand,

partially

compensated

with

the

decrease

of
leasing debts following the reimbursement.

161

#### Current liabilities

In

2021,

the

current

liabilities

increased

by

RON

592.5

mn,

to

RON

2,121.3

mn,

from

RON

1,528.8

mn

at

the
end of 2020
, mainly as a result of the changes in the categories listed below.

Current portion of long-term bank borrowings

The

current

portion

of

long-term

bank

borrowings

decreased

by

RON

202.5

mn,

following

the

reimbursement
of long term loans, reclassified as such at the end of 2021.

Overdrafts

The

overdrafts

considerably

increased

in

2021

by

RON

462.4

mn,

reaching

RON

627.4

mn,

from

RON

165.0
mn

at

the

end

of

2020,

as

the

Group

has

adapted

its

financing

methods

for

working

capital,

including

the
implementation of a cash pooling structure, according to operational activity priorities and emergencies.

Trade payables

As

of

31

December

2021,

the

trade

payables

increased

by

approx.

RON

284.1

mn,

to

RON

891.3

mn,

from
RON

607.2

mn

at

31

December

2020,

mainly

due

to

increase

of

suppliers’

balances

following

the

changes

on
the electricity market.

6.2.

#### Consolidated statement of profit or loss

The

following

table

presents

the

consolidated

statement

of

profit

or

loss

of

Electrica

Group

for

2021

and

2020
(amounts in RON mn):

2021

2020

Variation
2021/2020

Revenue

7,178.9

6,501.1

10.4%

Other income

195.8

165.4

18.4%

Electricity and natural gas purchased

(5,694.7)

(3,905.7)

45.8%

Construction costs related to concession arrangements

(485,8)

(676.0)

-28.1%

Employee benefits

(802,7)

(774.5)

3.6%

Repairs, maintenance and materials

(102,4)

(104.6)

-2.1%

Depreciation and amortization

(480,8)

(490.9)

-2.1%

Reversal

of

impairment/(Impairment)

for

trade

and

other
receivables, net

(70,6)

62.2

-

Other operating expenses

(343,2)

(325.1)

5.6%

Operating profit

(605.5)

451.9

-

Gain from bargain purchase of subsidiaries\*

-

7.5

-

Finance income

2.6

9.7

-73.1%

Finance costs

(29.5)

(26.7)

10.4%

Net finance cost

(26.9)

(17.1)

57.3%

Profit before tax

(632.4)

442.3

Income tax expense

79.5

(54.8)

Profit for the year

(552.9)

387.5

162

2021

2020

Variation
2021/2020

Earnings per share

Basic and diluted earnings per share (RON)

(1.63)

1.14

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

\*the value is included in EBIT, is separated only for disclosure purposes

Key financial indicators for 2021 and their y-o-y evolution:

▪

#### Revenues

:

#### RON 7.2 bn

, an increase of RON 677.8 mn, or 10.4%;

▪

#### EBITDA

: loss

#### RON 128.0 mn

, a RON 1,081.1 mn decrease;s

▪

#### EBIT

: loss

#### RON 605.5 mn

, lower by RON 1,064.9 mn;

▪

#### EBT

: loss

#### RON 632.4 mn

, a decrease of RON 1,074.7 mn;

▪

#### Net result

: loss of

#### RON 552.9 mn

, lower with RON 940.4 mn.

#### Revenues and other income

In

2021,

Electrica

recorded

total

revenues

(including

other

income)

of

RON

7,374.6

mn,

increasing

by

RON
708.2

mn

or

10.6%,

from

RON

6,666.5

mn

in

2020;

the

variation

is

generated

mainly

by

the

revenues’
evolution, the other operating income recording only a slight increase of RON 30.4 mn.

#### Revenues

Figure 33: Revenue for 2021/Q4 2021 and comparative information (RON mn)

Source: Electrica

The revenues increased by RON 677.8 mn, or 10.4%, being the net effect of the following main factors:

▪
increase of RON 757.2 mn on the supply segment;

▪
RON 20 mn decrease of the distribution segment’s revenues;

▪
Increase

with

RON

137.8

mn

of

revenues

from

energy

services,

mainly

due

to

presentation

of

SERV

![Image should be here]()

5,944

1,577

6,594

2,034

557

148

585

127

6,501

1,725

7,179

2,161

2020

T4 2020

2021

T4 2021

Revenues (ex-Green Certificates)

Revenues from Green Certificates

Revenues

163

revenues in this segment starting with 2021, following the merger of SEM and SERV.

#### Electricity and natural gas purchased

In

2021,

the

expense

for

electricity

purchased

increased

by

RON

1,789.0

mn,

or

45.8%,

to

RON

5,694.7

mn,
from RON 3,905.7 mn in the comparative period.

This

variation

is

mainly

generated

by

the

increase

of

electricity

costs

and

natural

gas

needed

for

the

supply
activity and to cover NL, as well as of green certificates cost (pass-through cost).

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

(RON mn)

2021

2020

VAR %

Electricity purchased to cover network losses

1,087.1

694.0

56.6%

Electricity and natural gas purchased for supply

3,750.0

2,377.2

57.8%

Transmission and system services related to supply activities

275.9

277.3

-0.5%

Green certificates

581.3

557.2

4.1%

Total electricity and natural gas purchased

5,694.7

3,905.7

45.8%

Source: Electrica

#### Construction costs

In

2021,

the

network

construction

costs

related

to

concession

arrangements

decreased

by

RON

190.2,

mn

or
28.1%,

to

RON

485.8

mn,

from

RON

676.0

mn

recorded

in

2020,

being

correlated

with

the

evolution

of

the
investments recognizable in RAB realized in 2021, which were at a lower level compared to 2020.

#### Employee benefits

The

expenses

for

salaries

and

employee

benefits

increased

by

RON

28.2

mn,

or

3.6%,

reaching

RON

802.7
mn in 2021, from RON 774.5

mn in the same period of the previous year.

#### Repairs, maintenance and materials

In

2021,

the

expenses

with

repairs,

maintenance

and

materials

recorded

only

a

slight

decrease

of

RON

2.2
mn, or 2.1%, reaching RON 102.4 mn from RON 104.6 mn.

#### Reversal of impairment/(Impairment) for trade and other receivables, net

In

2021,

the

impairment

adjustments

for

the

depreciation

of

trade

receivables

had

a

net

negative

effect

of
RON

70.6

mn,

reaching

the

value

of

RON

132.8

mn,

from

RON

a

positive

impact

of

62.2

mn,

in

2020.

This
evolution is generated mainly by:

-
impairment

adjustments

for

the

depreciation

of

trade

receivables,

with

a

negative

impact

of

approx.

RON
18

mn,

recognized

as

a

result

of

the

receivables’

recoverability

assessment

for

the

supply

and

distribution
segments;

-
positive

impact

of

approx.

RON

105

mn

booked

in

2020,

following

the

reversal

of

the

impairment
adjustments

for

uncollected

VAT

related

to

the

uncertain

receivables

from

Oltchim

for

which

there

is

no
correspondent amount in 2021.

164

#### Other operating expenses

The

other

operating

expenses

increased

in

2021

by

RON

18.1

mn,

or

5.6%,

to

RON

343.2

mn,

from

RON
325.1

mn

in

2020,

mainly

from

the

unfavourable

impact

of

changes

in

net

provisions,

of

about

RON

16

mn,
big

impact

representing

the

provision

recognized

for

the

supply

subsidiary’

obligations

-

compensations
following

the

application

of

Performance

Standard

for

energy

supply

according

to

ANRE

Order

no.

6/2017,
following

the

complete

market

liberalization

started

at

1
st

January

2021,

to

which

a

slight

increase

of

provisions
for the distribution segment is added.

EBITDA and EBITDA margin

Figure 34: EBITDA and EBITDA margin for 2021/Q4 2021 and comparative information (RON mn and %)

Source: Electrica

#### Operating profit

The

Group

EBIT

decreased

by

approx.

RON

1,064.9

mn

y-o-y,

adding

to

the

EBITDA

evolution

mainly

the
favorable impact of the depreciation and amortization, e.g., its decrease of RON 10.1 mn, or 2.1%.

Figure 35: EBIT and EBIT margin for 2021/Q4 2021 and comparative information (RON mn and %)

Source: Electrica

![Image should be here]()

![Image should be here]()

953

124

(128)

(603)

15%

7%

-1.8%

-28%

2020

T4 2020

2021

T4 2021

![Image should be here]()

459

(2)

(606)

(721)

7%

0%

-8.5%

-33%

2020

T4 2020

2021

T4 2021

165

#### Net finance cost

The

net

finance

cost

at

group

level

increased

by

RON

9.8

mn

in

2021

compared

to

2020,

as

a

result

of

the
increase

in

external

financing,

but

also

from

the

reduction

in

finance

income,

following

the

deposits’

decrease.

#### Profit before tax

The

Group

has

registered

a

gross

loss

of

RON

632.4

mn

in

2021,

compared

with

the

gross

profit

of

RON

442.3

mn in 2020, following the factors mentioned above.

#### Income tax expense

The tax on income was a revenue of RON 79.5 mn in 2021, generated by the incurred gross loss.

#### Net result for the year

As

a

result

of

the

above-described

factors,

in

2021,

the

net

result

is

a

loss

of

RON

552.9

mn,

representing

a
decrease of RON 940.4s mn compared to RON 387.5

mn in 2020.

Figure

36:

Net

profit

and

Net

profit

margin

for

2021/Q4

2021

and

comparative

information

(RON

mn

and

%)

Source: Electrica

![Image should be here]()

![Image should be here]()

388

(9)

(553)

(625)

6%

0%

-7%

-29%

2020

T4 2020

2021

T4 2021

Profit net Group

Profit net Margin

![Image should be here]()

166

#### SEGMENT REPORTING - DISTRIBUTION

#### Key indicators - The distribution segment

Figure 37: Revenues w/o conso adjustments

(RON mn)

Figure

38:

EBITDA

w/o

conso

adjustments

(RON
mn)

Source: Electrica

Source: Electrica

Figure 39: Net result - w/o conso adjustments

(RON mn)

Figure 40: Net debt/(cash) (RON mn)

Source: Electrica

Source: Electrica

The

following

table

presents

elements

from

the

reporting

of

the

statement

of

profit

or

loss

of

the

Group’s
distribution segment, for the period 2021 – 2020:

(RON mn)

2021

2020

External revenues

1,389.4

1,486.6

Inter-segment revenue

1,341.5

1,264.2

Segment revenue

2,730.8

2,750.8

2.741

2.751

2.731

2019

2020

2021

607

624

372

2019

2020

2021

106

77

(148)

2019

2020

2021

657

781

706

20192

20202

2021

167

(RON mn)

2021

2020

Segment profit/(loss) before tax

(153.0)

95.1

Net finance (cost)/income

(73.5)

(65.1)

Depreciation, amortization and impairment, net

(451.9)

(465.8)

EBITDA

372.4

624.0

Net profit/(loss) of the segment

(139.0)

77.1

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

#### Revenues

In

2021,

the

revenues

from

the

electricity

distribution

segment

decreased

by

approx.

RON

20.0

mn,

or

0.7%,
to RON 2,730.8 mn, from RON 2,750.8 mn in 2020, as a result of the following factors:

-
favorable

impact

of

approx.

RON

197.7

mn,

from

the

increase

of

distribution

tariffs,

compared

to

2020,
and of the quantity of distributed electricity by approx. 5.7%;

-
negative

impact

from

the

evolution

of

revenues

from

the

construction

of

assets

recognized

in

accordance
with

IFRIC

12,

since

the

revenues

from

electricity

distribution

segment

are

influenced

by

the

recognition
of

investments

into

the

network

under

concession

agreements,

these

revenues

decreasing

in

2021

by
RON 195.9 mn, compared to 2020;

-
negative

impact

from

presenting

SERV’s

activity

in

the

energy

services

segment,

compared

with

2020
when it was presented under distribution segment.

#### Electricity purchased

In

2021,

the

cost

of

the

electricity

purchased

to

cover

network

losses

increased

by

RON

393.1

mn,

or

56.7%,
to

RON

1,087.1

mn,

from

RON

694.0

mn,

the

evolution

being

mainly

generated

by

the

increase

in

the
electricity

purchase

prices

(negative

effect

of

RON

386.3

mn),

as

well

as

by

the

increase

in

the

quantity

of
electricity needed to cover network losses (positive impact of RON 6.9 mn).

#### Employee benefits

The

expenses

with

employee

benefits

slightly

increased

by

RON

10.2

mn,

or

1.7%,

to

RON

622.5

mn

in

2021,
from RON 612.3 mn in 2020.

#### Other operating expenses

The

operating

expenses

on

the

distribution

segment

increased

by

RON

19.0

mn

or

10%

to

RON

213.9

mn

in
2021,

from

RON

194.1

mn

in

2020,

being

the

cumulated

effect

of

a

slight

increase

of

provisions

for

the
distribution segment of RON 9.6 mn and other operating expenses of RON 9.4 mn.

#### EBITDA

The

increased

expenses

and

especially

the

favorable

variation

of

the

operating

expenses

were

the

main
elements that negatively influenced EBITDA with a decrease of RON 251.6 mn, or 40.3%.

#### Net finance cost

The

net

finance

cost

recorded

an

increase

in

2021

of

approx.

RON

8.4

mn

compared

to

the

previous

year,

the
main

factor

being

the

growth

of

the

external

financing

through

loans

at

the

level

of

the

three

distribution
companies, mainly for the investment works realized in 2021.

#### Net profit of the segment

168

The

net

profit

is

supplementary

influenced

by

the

adjustments

for

the

depreciation

of

tangible

and

intangible
assets, which generates a decrease of RON 216.1 mn.

#### SEGMENT REPORTING – SUPPLY

#### Key indicators - the supply segment

Figure 41: Revenues – supply segment (RON mn)

Figure 42: EBITDA - supply segment (RON mn)

Source: Electrica

Source: Electrica

Figure 43: Net profit – supply segment (RON mn)

Figure

44:

Net

debt/(cash)

–

supply

segment
(RON mn)

Source: Electrica

Source: Electrica

The

following

table

presents

the

elements

from

the

reporting

of

the

statement

of

profit

or

loss

of

the

Group`s
supply segment for 2021 and 2020:

![Image should be here]()

4,250

4,458

5,190

518

557

582

4,769

5,015

5,772

2019

2020

2021

Revenues from green certificates

Revenues (w/o green certificates)

![Image should be here]()

139

265

(440)

2,9%

5,3%

-7.6%

(500)

(400)

(300)

(200)

(100)

-

100

200

300

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2019

2020

2021

EBITDA

Marja EBITDA

![Image should be here]()

104

214

(390)

2,2%

4,3%

-6.8%

(500)

(400)

(300)

(200)

(100)

-

100

200

300

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2019

2020

2021

Profit net

Net profit margin

(257)

(183)

242

2019

2020

2021

Net debt / (cash)

169

(RON mn)

2021

2020

External revenues

5,741.5

4,980.6

Inter-segment revenues

30.9

34.5

Segment revenue

5,772.4

5,015.1

Segment profit/(loss) before tax

453.6

255.9

Net finance (cost)/income

0.3

4.2

Depreciation, amortization and impairment, net

(14.2)

(12.8)

EBITDA

(439.7)

265.5

Net Profit/(loss) of the segment

(389.7)

214.2

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

#### Revenues

The

revenues

from

the

electricity

and

natural

gas

supply

activity

increased

in

2021

by

approx.

RON

757.2

mn,
or

15.1%,

to

RON

5,772.8

mn,

from

RON

5,015.1

mn

in

2020.

The

variation

of

the

supply

segment

revenue
is

mainly

driven

by

the

increase

of

the

retail

sale

prices

by

12.5%

and

of

the

volume

of

electricity

supplied

on
the retail market by 1%.

The

green

certificates

value

included

in

final

consumer

invoice,

set

by

ANRE,

increased

from

RON

62.88/MWh
in 2020 to RON 63.96/MWh in 2021.

#### Electricity and natural gas purchased

The

cost

of

electricity

and

natural

gas

purchased

for

the

supply

segment

increased

by

RON

1,451.4

mn,

or
36.8%, to RON 5,397.7 mn in 2021, from RON
3,946.3
 mn recorded in 2020.

The evolution is mainly determined by:

-
the

increase

of

the

cost

of

the

electricity

purchased

for

supply

(including

transmission

and

system

services)
both

on

the

free

market

but

also

as

a

last

instance

supplier,

which

in

2020

was

a

regulated

segment,

and
it

was

impacted

by

the

recover

(positive

corrections)

of

some

of

the

losses

from

previous

years

,

when
the

ANRE

tarrifs

were

under

the

actual

purchase

prices,

effect

which

did

not

existed

in

2021.

There

was
also

a

decrease

of

5.9%

of

the

purchased

quantity

of

electricity

from

the

market,

compared

with

the
previous period.

Green

certificates’

(GC)

cost

is

recognized

in

the

statement

of

profit

and

loss

based

on

the

quantitative

quota
set

by

the

regulatory

authority

and

influenced

by

GC

amount

that

the

Group

has

to

purchase

for

the

current
year and GC purchase price on the centralized market. The green certificates cost is a pass-through cost.

In

2021,

the

cost

of

GC

increased

by

RON

24.5

mn,

or

4.4%,

to

RON

581.7

mn,

from

RON

557.2

mn

in

2020.

The increase was mainly influenced by:

▪
higher

supplied

volumes,

for

which

there

is

an

obligation

to

purchase

green

certificates,

by

3.3%

(negative
impact of RON 18.5 mn);

▪
2.0%

increase

in

the

GC

average

purchase

price

from

RON 139.5/GC in

2020

to

RON

142.2/GC

in

2021,
(negative impact of RON 9.9 mn);

▪
the regularization impact – positive variance of RON 4.8 mn, reflected in both revenue and expenses.

#### Impairment losses on trade and other receivables

The

net

impairment

adjustments

for

trade

receivables

recorded

a

negative

variation

at

the

end

of

2021

170

compared with 2020, of RON 27.8 mn, being mainly the effect of the
receivables’ recoverability.

#### EBITDA

The

above

presented

factors

led

to

an

EBITDA

decrease

of

RON

705.2

mn

in

2021

compared

with

the

previous
period.

#### Segment net profit

The

net

profit

decreased

by

RON

603.8

mn

compared

to

2020,

the

evolution

of

EBITDA

being

mainly
influenced by the decrease of the corporate income tax by approx. RON 30 mn.

6.3.

#### Consolidated cash flow statement

The

following

table

presents

the

consolidated

statement

of

cash

flows

of

Electrica

Group,

for

2021

and

2020
(amounts in RON mn):

2021

2020

Variation

2021/2020

Cash flows from operating activities

Profit for the year

(552.9)

387.5

Adjustments for:

Depreciation

21.1

27.9

-24.2%

Amortization

459.7

463.1

-0.7%

Impairment

of

property,

plant

and

equipment

and

intangible
assets, net

(3.9)

0
.6

-

Gain

on

disposal

of

property,

plant

and

equipment

and
intangible assets

2.7

(0.3)

-

Evaluation of fixed assets recognized in profit, net

-

2.4

-

(Reversal

of

impairment)/Impairment

of

trade

and

other
receivables, net

70.6

(62.2)

-

(Reversal of impairment)/Impairment of assets held for sale

0.6

(0.2)

-

Change in provisions, net

15.7

(0.3)

-

Net finance cost

26.9

17.1

57.3%

Changes in employee benefits obligations

5.1

-

-

Gain from bargain acquisition of subsidiaries

-

(7.5)

-

Corporate income tax expense

(7
9.5
)

54.8

-

(3
4.0
)

882.9

-

Changes in:

Trade receivables

(3
91.4
)

(87.2)

3
48.6
%

Other receivables

(22.9)

3.8

-

Prepayments

(2.2)

0.6

-

Inventories

(2.9)

4.3

-

Trade payables

274.8

(76.0)

-

Other payables

3
2.5

(2.3)

-

Employee benefits

3.2

14.7

-78.5%

Deferred revenue

4.0

(1.3)

-

Cash generated from operating activities

(
138.9)

739.5

-

Interest paid

(24.1)

(19.9)

171

2021

2020

Variation

2021/2020

Income tax paid

(31.4)

(51.7)

Net cash from operating activities

(194.4)

667.9

-

Cash flows from investing activities

Payments for purchases of property, plant and equipment

(10.5)

(6.7)

55.9%

Payments

for

network

construction

related

to

concession
agreements

(483.9)

(638.0)

-24.2%

Payments for purchase of other intangible assets

(6.3)

(2.2)

183.3%

Proceeds from sale of property, plant and equipment

1.5

5.0

-70.7%

Proceeds from deposits with maturity of 3 months or longer

-

66.4

-

Interest received

1.8

9.0

-80.3%

Restricted cash

320.0

-

-

Net

cash

effect

from

gain

of

control

over

the

acquired
subsidiary

-

5.6

-

Payment for acquisition of associated

(25.8)

-

-

Payment for acquisition of subsidiaries

-

(8.0)

-

Net cash used in investing activities

(203.2)

(568.9)

-64.3%

Cash flows from financing activities

Proceeds from long term bank borrowings

234.7

354.3

-33.8%

Repayment of long term bank loans

(385.9)

(29.1)

1,224.6%

Payment of lease liabilities

(15.2)

(29.3)

-48.1%

Dividends paid

(247.6)

(245.8)

-0.7%

Net cash from/(used in) financing activities

(414.0)

50.1

-

Net (decrease)/increase in cash and cash equivalents

(811.5)

149.1

-

Cash and cash equivalents at 1 January

406.0

256.9

58.0%

Cash and cash equivalents at 31 December

(405.6)

406.0

-

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

In 2021

, the net decrease in cash and cash equivalents amounted to RON
811.5
mn.

The

net

cash

generated

by

the

operating

activity

was

loss

of

RON

(138.9)

mn.

The

net

loss

of

the

period

was
RON

(522.9)

mn;

the

main

net

profit’s

adjustments

for

non-monetary

elements

were:

adding

the

depreciation
and

amortization

of

RON

480.8

mn,

eliminating

the

impact

of

the

impairment

of

trade

receivables

of

RON

70.6
mn, adding the income tax of RON
79.5
 mn and the net finance cost of RON 26.9 mn.

Changes

in

working

capital

had

a

negative

effect,

of

RON

138.9

mn,

the

most

significant

impact

being
generated

by

the

negative

change

in

trade

and

other

receivables,

in

the

amount

of

RON

414.3

mn,

and

in
trade

and

other

payables

of

RON

314.5

mn

(out

of

which,

the

change

in

employee

benefits

of

RON

3.2

mn,
having a positive impact). Income tax paid and interest paid amounted to RON
55.5
mn.

For

the

investment

activity,

the

cash

used

was

of

RON

203.2

mn,

the

most

significant

values

being

related

to
the

payments

for

the

network

construction

in

connection

with

the

concession

agreements

of

RON

483.9

mn,
these being reduced y-o-y, but also to the investments in associates of RON 25.8 mn.

The

financing

activity

generated

a

decrease

in

cash

and

cash

equivalents

of

RON

203.2

mn,

the

main

factors

172

being

the

proceeds

from

long

term

bank

borrowings

of

RON

234.7

mn,

reimbursement

of

loans

of

RON

385.9
mn and the dividends paid to the shareholders, of RON 247.6 mn.

In
2020
, the net increase in cash and cash equivalents amounted to RON
149.1

mn.

The

net

cash

generated

by

the

operating

activity

was

of

RON

667.9

mn.

The

net

profit

of

the

period

was

RON
387.5

mn;

the

main

net

profit’s

adjustments

for

non-monetary

elements

were:

adding

the

depreciation

and
amortization

of

RON

490.9

mn,

adding

the

income

tax

of

RON

54.8

mn

and

deducting

the

impact

of

the
change in employee benefits obligations of RON 54.8 mn.

Changes

in

working

capital

had

a

favorable

effect,

of

RON

143.4

mn,

the

most

significant

impact

being
generated

by

the

change

in

trade

and

other

receivables,

having

a

negative

impact,

in

the

amount

of

RON

83.4
mn,

and

the

positive

change

in

trade

and

other

payables

of

RON

64.3

mn

(out

of

which,

the

change

in
employee benefits of RON 1
4.7
 mn). Income tax paid and interest paid amounted to RON
71.6
mn.

For

the

investment

activity,

the

cash

used

was

of

RON

568
.9

mn,

the

most

significant

values

being

related

to
the

payments

for

the

network

construction

in

connection

with

the

concession

agreements,

of

RON

638.0

mn;
these have recorded a slight increase y-o-y.

The

financing

activity

generated

an

increase

in

cash

and

cash

equivalents

of

RON

50.1

mn,

the

main

factors
being

the

dividends

paid

to

the

shareholders,

of

RON

245.8

mn,

withdraws

from

loans

of

RON

354.4

mn

and
the payments related to leasing contracts, as a result of IFRS 16 application.

6.4.

#### Separate statement of the financial position

Financial

information

selected

from

company's

separate

statement

of

financial

position

(amounts

in

RON

mn):

31 December
2021

31 December
2020

Variation

2021/2020

ASSETS

Non-current assets

Property, plant and equipment

100.1

96
.
9

3.3%

Intangible assets

0.1

0
.
3

-80.3%

Investments in subsidiaries

2
,
285
.
2

2
,
284
.
9

0.0%

Investments in associates

25.8

-

-

Loans granted to subsidiaries – long term

1,276.3

1
,
030.0

23.9%

Right of use assets

0.5

1
.
4

-65.9%

Total non-current assets

3,688.0

3
,
413
.
5

8.0%

Current assets

Cash and cash equivalents

5.8

193
.
5

-97.0%

Deposits

with

maturity

date

more

than

three
months

-

-

-

Restricted cash

-

320
.
0

-

Trade receivables

0.9

0
.
4

124.8%

Other receivables

584.8

180
.
8

223.5%

Inventories

-

-

-

Prepayments

0.8

0
.
4

79.0%

Assets held for sale

0.3

-

-

Loans granted to subsidiaries – short term

30.0

-

-

173

31 December
2021

31 December
2020

Variation

2021/2020

Total current assets

622.5

695
.
1

-10.4%

TOTAL ASSETS

4,310.5

4,108
.
6

4.9%

EQUITY AND LIABILITIES

Equity

Share capital

3,464.4

3,464.4

-

Share premium

103
.
1

103
.
1

-

Treasury shares reserve

(75
.
4)

(75
.
4)

-

Revaluation reserves

12
.
4

12
.
6

-1.6%

Legal reserves

228.2

212.0

7.6%

Other reserves

71.2

35
.
6

-

Retained earnings

319.6

297.0

7.6%

Total equity

4,123
.
5

4,049
.
3

1.8%

Liabilities

Non-current liabilities

Lease liability – long term

0
.
1

0.5

-75.6%

Employee benefits

1.1

1.5

-27.7%

Total non-current liabilities

1.2

2.0

-39.7%

Current liabilities

Credit lines

120.5

-

-

Lease liability – short term

0.4

1.0

-59.2%

Trade payables

4.0

7.2

-43.9%

Other payables

44.0

36.0

22.2%

Deferred revenue

0
.
4

0
.
2

152.1%

Employee benefits

12.2

7
.1

69.6%

Provisions

4.2

5
.
8

-27.2%

Total current liabilities

185.8

57
.
3

223.9%

Total liabilities

186.9

59
.
3

215.4%

Total equity and liabilities

4,310.5

4,108.6

4.9%

Source: Separate financial statements of ELSA as of 31 December 2021

#### Non-current assets

On

31

December

2021,

as

compared

to

31

December

2020,

fixed

assets

increased

with

RON

274.4

mn

or
8.0%, from RON 3,413.5 mn to RON 3,688.0 mn.

At

the

end

of

2021,

the

land

and

buildings

situation

is

similar

to

the

previous

period.

They

include

the
administrative

headquarter

of

the

company

and

the

corresponding

land,

the

plots

of

land

over

which

the
company

has

obtained

title

deeds

and

the

land

and

buildings

acquired

in

2020

from

the

subsidiary

SEM.

The
increase

registered

in

2021

in

the

amount

of

3.1

mil.

RON

is

due

to

the

modernizations

and

renovations

made
to the administrative headquarters.

Investments in assciates

174

On

28

July

2021

and

7

December

2021,

Electrica

SA

has

concluded

four

contracts

for

sale

–

purchase

of
shares

in

four

project-based

companies,

having

as

main

object

the

production

of

electricity

from

renewable
resources.

The

sale

–

purchases

agreements

mention

that

at

first

stage,

the

Group

received

30%

from

the
share

capital

of

the

four

companies,

following

which,

it

will

obtain

the

70%

difference,

after

certain

conditions
mentioned in the contracts are met.

The cost of investment, at the acquisition date, total value of RON 25.8 mn are detailed below:

Crucea
Power Park
S.R.L.

New Trend
Energy S.R.L.

Sunwind
Energy

S.R.L.

Foton
Power
Energy

S.R.L.

Acquisition date

31.07.2021

31.07.2021

31.07.2021

31.12.2021

Percentage

at

the

acquisition
date

30%

30%

30%

30%

Net value at the acquisition date

(0.2)

(0.005)

(0.005)

(0.007)

Percentage

of

the

Group

from

net
(30%)

(0.07)

(0.002)

(0.002)

(0.002)

Goodwill

12.6

4.8

2.2

6.3

Investment

cost

at

acquisition
date

12.5

4.8

2.2

6.3

#### Other receivables

Cash-pooling

receivables

comprise

the

receivable

of

Electrica

SA

as

at

31

December

2021

as

cash

pool

leader
in

the

two

cash-pooling

systems

set

up

at

Group

level.

The

increase

in

2021

is

due

to

liquidity

requirements

of
subsidiaries

included

in

the

cash

pooling

scheme

by

the

Company

(correlate

with

the

decrease

of

cash
equivalent)

#### Trade receivables

As

of

31

December

2021,

the

company’s

trade

receivables

increased

by

RON

0.5

mn,

or

124,8%,

to

RON

0.9
mn,

from

RON

0.4

mn

on

31

December

2020,

mainly

because

the

revenues

from

AMR

services

are

no

longer
obtained.

#### Cash, restricted cash and short-term investments

As

of

31

December

2021,

the

cash

and

cash

equivalents

decreased

by

RON

187.7

mn

or

97.0%,

to

RON

5.7
mn from RON 193.5 mn on 31 December 2020.

(RON mn)

31 December

2021

31 December

2020

Bank current accounts

3.0

18.4

Call deposits

2.7

175.1

Total

cash

and

cash

equivalents

in

the

separate

statement
of

financial

position

and

in

the

separate

statement

of

cash
flow

5.7

193.5

Source: Separate financial statements of ELSA as of 31 December 2021

Value

of

cash

and

cash

equivalents

decreased

with

RON

187.7

mn

due

to

the

decrease

of

short

term

deposits
and

cask

at

banks,

both

coming

from

investment

acquisitions

in

associates

and

the

cash

pooling

structure
(liquidities used for cash pooling).

175

#### Loans granted to subsidiaries

(RON mn)

31 December
2021

31 December
2020

DEER (long term loan granted) \*

1,276.0

1,030.0

EFSA

30.0

-

Total loans granted to subsidiaries

1,306.0

1,030.0

Source: Separate financial statements of ELSA as of 31 December 2021

(\*)Starting

with

31

December

2020

the

three

distribution

companies

merged

into

one

single

distribution

company

named

Distributie
Energie Electrica Romania S.A. („DEER”)

The

closing

balance

of

the

loans

granted

to

subsidiaries

are

related

to

intragroup

loans

granted

in

2017

and
2018 as follows:

▪
Intragroup

loan

agreement

concluded

with

SDMN

in

April

2018.

The

main

provisions

are:

the

maximum
amount

of

the

loan:

RON

230

mn;

the

purpose

of

the

loan:

financing

the

investment

program

of

2018;
interest

rate:

4.7%

per

year;

maturity:

84

months;

period

allowed

for

disbursements:

12

months;

full
repayment

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of

the
period

of

use.

As

of

31

December

2021,

loan

balance

is

RON

230

mn

(31

December

2020:

RON

230

mn);

▪
Intragroup

loan

agreement

concluded

with

SDTN

in

April

2018.

The

main

provisions

are:

the

maximum
amount

of

the

loan:

RON

160

mn;

the

purpose

of

the

loan:

financing

the

investment

program

of

2018;
interest

rate:

4.7%

per

year;

maturity:

84

months;

period

allowed

for

disbursements:

12

months;

full
repayment

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of

the
period

of

use.

As

of

31

December

2021,

loan

balance

is

RON

160

mn

(31

December

2020:

RON

160

mn);

▪
Intragroup

loan

agreement

concluded

with

SDTS

in

April

2018.

The

main

provisions

are:

the

maximum
amount

of

the

loan:

RON

130

mn;

the

purpose

of

the

loan:

financing

the

investment

program

of

2018;
interest

rate:

4.7%

per

year;

maturity:

84

months;

period

allowed

for

disbursements:

12

months;

full
repayment

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of

the
period

of

use.

As

of

31

December

2021,

loan

balance

is

RON

130

mn

(31

December

2020:

RON

130

mn);

▪
Intragroup

loan

agreement

with

SDMN

concluded

in

November

2017.

The

main

provisions

are:

the
maximum

loan

amount:

RON

150

mn;

the

purpose

of

the

loan:

financing

the

investment

program

of

2017,
Interest

rate:

2.79%

per

year,

maturity:

84

months,

period

allowed

for

disbursements:

12

months.
Repayment

in

full

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of
the

period

of

use.

As

at

31

December

2021,

the

outstanding

balance

is

of

RON

150

mn

(31

December
2020: RON 150 mn);

▪
Intragroup

loan

agreement

with

SDTN

concluded

in

November

2017.

The

main

provisions

are:

the
maximum

loan

amount:

RON

200

mn;

the

purpose

of

the

loan:

financing

the

investment

program

of

2017,
interest

rate:

2.79%

per

year,

maturity:

84

months;

period

allowed

for

disbursements:

12

months.

Full
repayment

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of

the
period

of

use.

As

of

31

December

2021,

the

outstanding

balance

is

of

RON

200

mn

(31

December

2020:
RON 200 mn);

▪
Intragroup

loan

agreement

with

SDTS

concluded

in

November

2017.

The

main

provisions

are:

the
maximum

loan

amount:

RON

160

mn.

Purpose

of

the

loan:

financing

the

investment

program

of

2017;
interest

rate:

2.79%

per

year,

maturity:

84

months,

period

allowed

for

disbursements:

12

months.
Repayment

in

full

at

maturity;

reimbursement

in

advance

allowed,

but

not

earlier

than

the

12

months

of
the

period

of

use.

As

of

31

December

2021,

the

outstanding

balance

is

of

RON

160

mn

(31

December
2020: RON 160 mn);

▪
Intragroup

loan

agreement

on

short

term

concluded

with

ELSA

in

December

2021

for

financing

the

current
activity

in

amount

of

RON

90.0

mn,

out

of

which

RON

60.0

mn

have

been

reimbursed.

As

of

31

December

176

2021 the outstanding balance is of RON 30.0 mn. Interest rate: 3,51% per year.

■

Multi-borrower credit agreements

On

1

April

2019,

between

Banca

Comerciala

Romana,

as

lender

and

ELSA,

as

guarantor

and

borrower,
together

with

its

distribution

subsidiaries

(SDMN,

SDTN

and

SDTS,

currently

DEER

SA),

as

borrowers,

was
concluded

a

contract

for

a

multi-product

revolving

facility,

as

follows:

maximum

loan

amount:

RON

125

mn;
purpose

of

the

loan:

financing

the

current

activity;

interest

rate:

0.77%

+

ROBOR

1M

p.a.;

initial

maturity:

16
March

2020,

prolonged

for

one

year

up

to

16

March

2021,

under

the

same

terms.

Repayment:

in

full,

at
maturity. As at 31 December 2020, the outstanding balance of the facility for the Company is nil.

On

16

April

2019,

between

BNP

PARIBAS,

as

lender,

and

ELSA,

as

guarantor

and

borrower,

together

with

its
subsidiaries,

EFSA

and

SERV,

as

borrowers,

was

concluded

a

contract

for

a

credit

facility

in

the

form

of

a

credit
line

from

the

current

accounts

opened

by

the

borrowers

to

the

lender,

as

follows:

maximum

loan

amount:
RON

160

mn.

Purpose

of

the

loan:

financing

the

current

activity;

interest

rate:

0.60%

+

ROBOR

1M

p.a.;
initial

maturity:

16

March

2020,

prolonged

for

one

year

up

to

16

March

2021,

under

the

same

terms.
Repayment:

in

full,

at

maturity.

As

of

31

December

2020,

the

outstanding

balance

of

the

facility

for

the
Company is nil.

Intragroup

loan

contract

with

DEER

SA

was

concluded

on

October

2021.

Main

provisions:

loan

amount:

RON
246.3

mn;

purpose

of

the

loan:

to

reimburse

the

loans

from

BRD

obtained

in

2016

for

financing

the

investment
plan

from

2016,

which

were

due

in

2021;

interest

rate:

3.51%

p.a.;

initial

maturity:

96

months

up

to

12
October

2029.

Withdraws:

12

months.

Repayment:

in

full,

at

maturity;

advance

reimbursement

is

allowed

but
no

sooner

than

12

months

from

utilization

date.

As

of

31

December

2021,

the

outstanding

balance

of

the

loan
is RON 246.3 mn.

Cash pooling system at Group level

On

20

December

2019,

between

ING

Bank

N.V.,

ELSA

and

its

subsidiaries

were

concluded

two

agreements
for the implementation of

#### two cash pooling schemes

, as follows:

▪

#### a first system




involving

ELSA,

as

cash

pool

leader,

and

its

distribution

subsidiaries

(
SDMN,

SDTN

and
SDTS
), as participants.

The credit facility offered by the pool leader to each participant is up to the amount of RON 180 mn, and the
credit

facility

offered

by

each

participant

to

the

pool

leader

is

up

to

the

amount

of

RON

50

mn.

The

interest
rate

is

ROBOR

1M

+

0.07%

p.a.

However,

if

the

amounts

drawn

by

the

participants

are

covered

both

by

the
internal

liquidity

of

ELSA,

and

by

drawing

from

the

credit

line

granted

to

ELSA,

the

amount

of

interest

due

by
the

participants

to

ELSA

will

be

calculated

using

a

weighted

interest

rate,

calculated

based

on

the

ROBOR
internal

rate

1M

+0.07%

p.a.

and

the

ROBOR

bank

rate

1M

+

0.8%

p.a.

The

initial

due

date

was

20

December
2020, the convention being automatically extended for a period of 1 year.

▪

#### a second system




involving

ELSA,

as

cash

pool

leader

and

its

subsidiaries,

EFSA,

SERV

and

SEM,

as
participants
.

The

credit

facility

offered

by

the

participants

to

the

pool

leader

is

up

to

the

amount

of

RON

180

mn

for

EFSA,
RON

50

mn

for

SERV

and

RON

2

mn

for

SEM.

The

credit

facility

offered

by

the

pool

leader

to

the

participants
is

up

to

the

amount

of

RON

30

mn

in

the

case

of

EFSA,

RON

10

mn

in

the

case

of

SERV

and

RON

2

mn

in

the
case

of

SEM.

The

interest

rate

is

ROBOR

1M

+

0.07%

p.a.

However,

if

the

amounts

drawn

by

the

participants
are

covered

both

by

the

internal

liquidity

of

ELSA,

and

by

drawing

from

the

credit

line

granted

to

ELSA,

the
amount

of

interest

due

by

the

participants

to

ELSA

will

be

calculated

using

a

weighted

interest

rate,

calculated
based

on

the

ROBOR

internal

rate

1M

+0.07%

p.a.

and

the

ROBOR

bank

rate

1M

+

0.8%

p.a.

The

initial

due

177

date was 20 December 2020, the convention being automatically extended for a period of 1 year.

T
hrough

these

systems,

the

bank

will

automatically

transfer

all

available

amounts

existing

at

the

end

of

each
day

in

the

current

bank

accounts

of

the

participants

to

the

master

bank

account

of

ELSA.

In

case

the

current
bank

accounts

of

the

participants

have

a

negative

balance

at

the

end

of

the

day,

the

bank

will

transfer

the
necessary

amounts

from

the

master

bank

account

of

ELSA

to

the

current

bank

accounts

of

the

participants,
so

as

at

the

end

of

each

day

the

balance

of

the

current

bank

accounts

of

the

participants

is

nil.

In

case

the
balance

of

the

master

bank

account

of

ELSA

is

not

sufficient

to

cover

the

negative

balance

of

the

current

bank
accounts

of

the

participants,

the

bank

will

make

available

the

necessary

funds

from

the

overdraft

facility

that
will be signed between the bank and ELSA.

On 30 December 2020,
Electrica Energie Verde 1
 (EEV1)
,
 entered the second cash pooling system.

The

credit

facility

that

can

be

borrowed

by

EEV1

under

the

agreement

is

up

to

RON

15

mn

and

the

amount
that

can

be

borrowed

by

ELSA

under

the

convention

is

up

to

RON

10

mn.

The

i
nterest

rate

is

ROBOR

1M

+
0.07%

p.a.

However,

if

the

amounts

drawn

by

EEV1

are

covered

both

by

the

internal

liquidity

of

ELSA,

and
by

drawing

from

the

credit

line

granted

to

ELSA,

the

amount

of

interest

due

to

ELSA

will

be

calculated

using
a

weighted

interest

rate,

calculated

based

on

the

ROBOR

i
nternal

r
ate

1M

+0.07%

p.a.

and

the

ROBOR

b
ank
r
ate

1M

+

0.8%

p.a.

The

agreement

has

as

due

date

28

January

2022
,

with

the

option

of

automatic

renewal
for successive periods of 1 (one) year.

#### Share Capital

The

issued

share

capital

in

nominal

terms

consists

of

346,443,597

ordinary

shares

as

at

31

December

2021
(346,443,597

ordinary

shares

as

of

31

December

2020)

with

a

nominal

value

of

RON

10

per

share.

Ordinary
shares

offer

the

right

to

dividends

and

the

right

to

one

vote

per

share

in

the

company’s

shareholder

meetings,
except

for

the

6,890,593

shares

redeemed

by

the

Company

in

July

2014,

for

the

purpose

of

prices

stabilization.
All

shares

confer

equal

rights

in

the

company’s

net

assets,

except

for

the

6,890,593

shares

redeemed

by

the
company, in July 2014.

ELSA

recognizes

changes

in

share

capital

only

after

their

approval

in

the

General

Shareholders

Meeting

and
their registration in the Trade Register.

#### Dividends

The

company

may

distribute

dividends

from

the

statutory

profit,

according

to

the

audited

individual

financial
statements prepared in accordance with Romanian accounting regulations.

The

dividends

distributed

by

the

Company

in

the

years

2021

and

2020

(from

previous

years’

profits)

were

as
follows:

(RON mn)

2021

2020

Dividends distributed

247.8

246.1

Source: Separate financial statements of ELSA as of 31 December 2021

178

On

28

April

2021,

the

General

Meeting

of

Shareholders

of

ELSA

approved

the

distribution

of

dividends

in

the
amount

of

RON

247.8

mn,

legal

reserves

in

amount

of

RON

14.9

mn

and

other

reserves

in

amount

of

RON
35.6

mn.

The

value

of

dividends

per

share

distributed

to

the

shareholders

of

the

Company

were:

RON

0.7248
per share (2020: RON 0.7248 per share).

Out

of

the

dividends

distributed

by

the

Company

of

RON

247.8

mn

(2020:

RON

246.1

mn)

the

dividends

paid
were

RON

246.6

mn

(2020:

RON

245.8

mn),

the

difference

representing

dividends

uncollected

by

the
shareholders.

#### Provisions

#### (RON mn)

Litigations and other risks

Balance at 1 January 2021

5.8

Provisions made

0.08

Provisions utilised

(1.1)

Provisions reversed

(0.5)

Balance at 31 December 2021

4.2

Source: Separate financial statements of ELSA as of 31 December 2021

The

provisions

in

amount

of

RON

4.2

mn

as

at

31

December

2021

(31

December

2020:

RON

5.8

mn)

refer
mainly to the benefits granted upon the termination of executive managers' contracts.

6.5.

#### Separate statement of profit or loss

Financial information selected from the company’s separate statement of profit or loss (RON mn):

2021

2020

Variation

2021/2020

Revenues

-

3.3

-

Other income

0.8

14.5

-94.4%

Employee benefits

(39.2)

(31.8)

23.3%

Depreciation and amortization

(2.3)

(13.1)

-82.0%

Reversal

of

impairment

of

trade

and

other

receivables,
net

-

98.6

-

Impairment of
property, plant and equipment, net

3.8

(10)

-

Impairment of assets held for sale

(0.5)

-

-

Change

in

provisions

for

legal

cases

and

non-compete
clauses, net

1.6

(2.5)

-

Other operating expenses

(19.9)

(23.9)

-16.6%

Profit/(loss) before financing result

(55.6)

35.1

-

Finance income

377.7

260.3

45.1%

Finance costs

(0.3)

(0.1)

111.8%

Share of results of associates

(0)

-

0%

Net finance income

377.4

260.2

45.1%

Profit before tax

321.8

295.3

9.0%

179

2021

2020

Variation

2021/2020

Income tax benefit/(expense)

-

3.1

-98.6%

Profit for the year

321.8

298.4

7.9%

Earnings per share

0.95

0.88

7.7%

Source: Separate financial statements of ELSA as of 31 December 2021

#### Revenues

During

the

year

2021,

ELSA

has

no

lomger

recorded

revenues

compared

with

2020

when

it

recorded

revenues
of

RON

3.3

mn.

The

revenues

obtained

by

the

Company

are

represented

by

revenues

from

service

agreements
related

to

the

AMR

system

concluded

with

the

distribution

subsidiaries

that

include

automatic

meter

reading
services,

communications

and

monitoring

of

the

quality

parameters

of

electricity

services.

Starting

with

1

July
2020,

the

company

no

longer

registered

this

type

of

revenues,

as

a

result

of

the

AMR

system

assets

transfer
to the distribution subsidiaries by contribution to their share capital.

#### Other income

During

the

financial

year

ended

31

December

2021,

the

other

income

mainly

includes

income

from
compensations/refunds

of

certain

amounts

as

a

result

of

favorable

court

sentences,

to

which

rent

revenue
and proceeds from disposal of assets are added.

Revenues

from

compensations

consist

mainly

of

the

amount

of

RON

12.8

mn

collected

in

2020

by

ELSA

from
the

National

Agency

for

Fiscal

Administration

(“NAFA”)

as

a

result

of

the

final

civil

sentence

obtained

in

Court,
which ordered the cancellation of certain enforceable titles as well as fiscal decisions.

#### Depreciation and amortization of tangible and intangible assets

The

depreciation

and

amortization

expense

is

RON

2.3

mn

in

2021,

compared

to

RON

13.1

mn

in

2020,

as

a
result

of

the

assets

related

to

the

AMR

system

transfer

to

the

distribution

subsidiaries

in

June

2020,
representing

the

assets

for

which

it

was

recorded

the

most

significant

part

of

the

depreciation

expense

at

the
company level.

#### Employee benefits

In

2021,

employee

benefits

increased

by

RON

7.4

mn

to

RON

39.2

mn

from

RON

31.8

mn

in

2020.

The
variation

is

the

result

of

several

factors,

mainly

changes

in

the

structure

of

benefits

granted

to

employees,

as
a

result

of

the

provisions

of

the

Collective

Labor

Agreement

entered

into

force

on

1

April

2020,

the

payments
related

to

the

project

to

streamline

the

staff

structure

of

the

company,

the

plan

to

change

the

organizational
structure by transforming business structures with specialized staff.

#### Impairment of trade receivables and other receivables

Impairment

adjustments

for

other

receivables

recognized

during

2020

are

in

amount

of

RON

98.6

mn

and
mainly

represent

the

reversal

of

the

impairment

adjustments

for

uncollected

VAT

related

to

the

uncertain
receivables

from

Oltchim;

in

the

previous

years,

ELSA

recognized

impairment

adjustments

for

the

total

amount
of

receivables

from

Oltchim,

and

based

on

the

sentence

opening

for

the

bankruptcy

proceedings

and

on

the
provisions

of

the

Fiscal

Code,

reversed

the

impairment

adjustments

related

to

uncollected

VAT,

simultaneously
with the VAT adjustment.

180

#### Impairment of property, plant and equipment

Impairment

adjustments

recorded

during

2021

for

property,

plant

and

equipment

are

in

amount

of

RON

3.8
mn,

compared

to

the

amount

of

RON

10.0

mn

in

2020.

These

mainly

refer

to

impairment

adjustment

reversal
recorded following the AMR system assets reclassified as non-current assets held for sale.

#### Other operating expenses

In

2021,

ELSA

recorded

other

operating

expenses

in

the

amount

of

RON

19.9

mn,

compared

to

the

amount
of

RON

23.9

mn

in

2020.

The

evolution

was

mainly

determined

by

the

increase

of

consulting

services

expenses
related to the projects carried out at the company level.

#### Profit/(loss) before financing result

As

a

result

of

the

above-mentioned

factors,

ELSA

recorded

in

2021

a

loss

before

financing

result

in

amount
of RON 55.6 mn, while in 2020 it recorded a profit amounting RON 35.1 mn.

#### Net finance income

ELSA’s main financial income is provided by the dividends distributed by its subsidiaries.

During

the

financial

year

ended

31

December

2021,

ELSA

recorded

dividend

income

from

its

subsidiaries

in
the amount of RON 329.5 mn (2020: RON 215.0 mn), structured as follows:

(RON mn)

2021

2020

SDMN

33.3

2.7

SDTS

10.2

6.9

SDTN

52.7

54.1

EFSA

233.3

124.0

SERV

-

27.3

Total

329.5

215.0

Source: Separate financial statements of ELSA as of 31 December 2021

Another

category

of

financial

income

related

to

its

subsidiaries

is

represented

by

interest

income

related

to
the

loans

granted,

which

slightly

increased

to

RON

41.2

mn

in

2021

compared

to

RON

39.4

mn

in

2020,
according to the detail:

(RON mn)

2021

2020

SDMN

15.7

15.2

SDTN

11.5

13.3

SDTS

14.0

10.8

SEM

-

0.1

Total

41.2

39.4

Source: Separate financial statements of ELSA as of 31 December 2021

In

2020

the

liquidity

concentration

structure

(cash

pooling)

was

implemented

within

the

Electrica

Group,

which
ensures

that

the

current

liquidity

needs

of

the

Group’s

subsidiaries

are

covered.

By

implementing

the

cash
pooling scheme, the following financial revenues and expenses were recorded by ELSA:

(RON mn)

2021

2020

SDMN

-

0.6

SDTS

1.4

2.1

SDTN

2.0

1.3

181

(RON mn)

2021

2020

EFSA

1.2

(1.3)

SERV

(0.6)

(0.7)

Total

4.0

2.0

Source: Separate financial statements of ELSA as of 31 December 2021

#### Profit before tax

In

2021,

profit

before

tax

increased

by

RON

26.5

mn

or

9.0%

to

RON

321.8

mn

from

RON

295.3

mn

in

2020.

#### Income tax benefit/(expense)

In

2021,

the

company

recorded

insignificant

income

tax

benefit

(2020:

expense

of

RON

3.1

mn),

mainly

due
to the registration of deferred income tax revenues.

#### Net profit for the year

As

a

result

of

the

factors

presented

above,

the

2021

net

profit

recorded

an

increase

of

7.9%

compared

to
2020, to RON 321.8 mn from RON 298.4 mn.

6.6.

#### Separate cash flow statement

Financial information selected from the cash flow statement of the company (RON mn):

Indicator

2021

2020

Variation

2021/2020

Cash flows from operating activities

Profit for the year

321.8

298.4

7.9%

Adjustments for:

Depreciation

1.1

11.2

-90.0%

Amortization

1.2

1.9

-39.5%

Impairment of property, plant and equipment, net

(3.8)

10.0

-

Loss/(Gain) from the disposal of tangible assets

3.1

0.6

393.1%

Reversal

of

impairment

of

trade

and

other
receivables, net

-

(98.6)

-

Net finance income

(377.4)

(260.2)

45.1%

Changes in employee benefits obligations

5.1

(0.4)

-1,394.9%

Changes in provisions, net

(1.5)

2.5

-

Income tax expense/(benefit)

-

(3.1)

-

(50.2)

(37.7)

33.1%

Changes in:

Trade receivables

(0.4)

103.2

-

Other receivables

3.2

4.3

-26.5%

Trade
payables

(2.9)

1.8

-

Other
payables

0.3

(0.4)

-

Employee benefits

(0.3)

-1.9

-

Cash

generated/(used

in)

from

operating
activities

(
50.5)

73.1

-169.1%

Interest paid

0

0

-

182

Indicator

2021

2020

Variation

2021/2020

Net cash from/(used in) operating activities

(50.7)

73.1

-

Cash flows from investing activities

Payments

for

purchases

of

property,

plant

and
equipment

(4.8)

(4.0)

20.0%

Proceeds

from

the

sale

of

property,

plant

and
equipment

0.0

0.2

-89.0%

Proceeds

from

deposits

with

maturity

of

3

months
or longer

-

66.4

-83.5%

Cash pooling net position

(393.6)

(132.2)

197.8%

Loans granted to subsidiaries

(336.3)

-

-

Proceeds from loans given to subsidiaries

60.0

-

100.0%

Payments for shares in associates

(25.8)

-

-

Payments for acquisition of subsidiaries

(0.1)

-

-

Restricted cash

320.0

-

-

Interest earned

42.2

41.4

1.9%

Dividends received

329.5

215.0

53.3%

Net cash from investing activities

(8.9)

186.8

-

Cash flows from financing activities

Proceeds from issue of share capital, net

-

-

-

Dividends paid

(247.6)

(245.8)

0.8%

Payment of lease liabilities

(1.0)

(0.9)

9.5%

Net cash used in financing activities

(248.6)

(246.7)

0.8%

Net increase in cash and cash equivalents

(308.3)

13.2

-

Cash and cash equivalents at 1 January

193.5

180.3

7.3%

Cash and cash equivalents at 31 December

(114.8)

193.5

-

Source: Separate financial statements of ELSA as of 31 December 2021

In
2021
,
the net decrease in cash and cash equivalents amounted to RON
308.3
mn.

The

net

cash

generated

by

the

operating

activity

was

of

RON

(50.5)

mn.

The

net

profit

of

the

period

was

RON
321.8

mn;

the

main

non-monetary

elements

adjustments

for

the

net

profit

were:

adding

the

amortization

and
depreciation

of

tangible

and

intangible

assets

in

the

amount

of

RON

2.3

mn,

adding

the

impact

of

tangible
assets

disposal

in

net

amount

of

RON

0.7

mn,

reducing

the

variation

of

the

change

in

provisions

of

RON

1.6
mn,

eliminating

the

impact

of

the

impairment

of

trade

receivables

and

deduction

of

the

income

tax

benefit
which were immaterial
. The net financial result of RON 377.4 mn was deducted
.

Changes

in

working

capital

had

a

favorable

effect,

of

RON

320.8

mn,

the

most

significant

impact

being
generated

by

the

restricted

cash

of

RON

320.0

mn,

positive

change

in

trade

and

other

receivables,

in

the
amount

of

RON

2.7

mn,

and

in

trade

and

other

payables

of

RON

2.7

mn

(out

of

which,

a

RON

0.3

mn

positive
impact from the change in employee benefits).

For

the

investment

activity,

the

cash

used

was

of

RON

329.1

mn,

the

most

significant

values

being

related

to
the

dividends

received

in

amount

of

RON

329.5

mn,

to

the

loans

granted

to

affiliates

in

amount

of

RON

336.3
mn,

to

interest

received

in

amount

of

RON

41.4

mn,

but

also

to

the

payments

for

purchases

of

shares

in
subsidiares

in

amount

of

RON

25.8

mn,

but

also

cash

received

from

loans

given

to

subsidiares

in

amount

of

183

RON

60.0

mn

and

the

amounts

paid

within

the

cash

pooling

scheme,

implemented

at

the

Group

level,
amounting to RON 393.6 mn.

The

financing

activity

generated

a

decrease

in

cash

and

cash

equivalents

of

RON

248.6

mn,

mainly

from

the
dividends paid to the shareholders - RON 247.6 mn
.

In
2020
,
the net increase in cash and cash equivalents amounted to RON
13.2
 mn.

The

net

cash

generated

by

the

operating

activity

was

of

RON

73.0

mn.

The

net

profit

of

the

period

was

RON
298.4

mn;

the

main

non-monetary

elements

adjustments

for

the

net

profit

were:

adding

the

amortization

and
depreciation

of

tangible

and

intangible

assets

in

the

amount

of

RON

13.0

mn,

impairment

adjustments

for
tangible

assets

of

RON

10.0

mil.

RON,

eliminating

the

impact

of

the

impairment

of

trade

and

other

receivables
of RON 99.0 mn
and
deduction of a net financial result of RON 260.2 mn.

Changes

in

working

capital

had

a

favorable

effect,

of

RON

110.0

mn,

the

most

significant

impact

being
generated

by

the

positive

change

in

trade

and

other

receivables,

in

the

amount

of

RON

107.0

mn,

positive
effect

reduced

by

the

change

on

payable

and

other

payables

with

a

negative

effect

of

RON

3.2

mn

(out

of
which, a RON 1.9 mn from the change in employee benefits). Interest paid was RON 0.2 mn.

The

investment

activity

generated

a

decrease

of

cash

and

cash

equivalents

of

RON

246.7

mn,

main

factor
being payment of dividends to the shareholders in amount of RON 245.8 mn.

6.7.

#### Risk management

#### For the Electrica





#### Group, year



2021, from a risk management perspective was one of consolidation of previous year’s initiatives and new projects,

















#### initiated on the basis of internal needs or at the request of third parties.













This

year

also

marks


#### an important milestone




for

the

risk

management
competence

througout

the

Electrica

Group

in

that


#### the first consultancy project in this area to be implemented outside the Group has been concluded.

Thus,


#### regarding consolidation


,

the

Risk

Management

Procedure

was

implemented

throughout

the

Group,
which

allowed,

for

the

first

time

to

have

homogeneous

aggregate

reporting,

from

the

point

of

view

of
exposures

at

Group

level.

Instructions

and

specific

documentation

were

prepared

for

each

branch

office,

the
largest

effort

being

allocated

to

the

risks

to

be

managed

in

sales,

receivables

and

treasury

related

risks

for
supply activities.

Regarding internal needs,



combined

with

applicable

legal

requirements,

the


#### Policy on Knowing





#### Your

#### Business



#### Partners


(clients

and

suppliers)

was

prepared

and

implemented

for

the

most

part.

The

purpose

of
this

initiative

is

to

fulfil

the

legal

requirements

in

cases

where

the

Group

companies

are

designated

as

reporting
entities

under

Law

no

129/2019,

and

also

to

help

the

natural

and

necessary

development

of

the

counterparty
default risk assessment in an aggregate manner, based on knowledge of the partners.

Under

the

same

internal

needs,

a

large

project

was

implemented

at

Electrica

Furnizare,

moderated

by

risk
management

team,

with

the

principal

aim

of


#### analysing the causes and circumstances of market risk exposure









for

several

key

processes,

as

well

as

the

controls

that

could

be

implemented.

The

project

identified
additional

previously

unrecorded

risks

and

a

large

number

of

actions

to

be

analysed

and

implemented

by

the
relevant business lines.

In

line

with

the

needs

that

the

market

risk

has

raised

throughout

2021,

an

initiative

to

evaluate

the

impact

of

#### market risk upon the internal technological consumption








recorded

under

DEER

was

also

implemented.
This

was

a

multi-disciplinary

project

at

Group

level,

which

produced

risk

management

observations

and
recommendations for dealing with risks in drafting the procurement/purchasing strategy.

184

Another

internal

project

was

implemented

under

DEER,

whereby

the

risk

management

team

facilitated

the

#### Resilience



#### Plan



#### Update

,

resulting

in

the

final

document

“The

Resilience

Plan

in

the

Context

of

COVID

19
Outbreak and DEER Expansion”.

#### The projects implemented upon the request of third parties










were

implemented

with

the

assistance

of
the

DEER

risk

management

team

and

were

intended

to

prepare,

in

two

iterations,

the

evaluations

and

the
Energy

Sector

Risk

Preparation

Plan

in

accordance

with

(EU)

2019/941

Regulation

of

the

European

Parliament
and

the

Council.

The

methodology

of

the

entire

project

was

based

on

several

scenarios

developed

and
described

by

ENTSOE,

with

an

impact

scale

and

the

specific

probabilities

of

transport

and

distribution

activities.
The

same

category

included


#### the risk evaluation initiative regarding relevant infrastructure ownership risks









for

the

safety

of

electric

power

supply,

based

on

(EU)

2019/941

Regulation

of

the

European
Parliament

and

the

Council,

upon

the

request

of

the

Competent

Authority

of

Electric

Power

Supply

under

the
Ministry of Energy.

Year

2021

also

meant

significant


#### communication efforts



due

to

pandemic

work

conditions,

as

well

as
significant internal training and consulting efforts,
at group level

There

were


#### numerous risk management challenges in 2021






,

in

that

the

materialisation

of

certain

risks,
such

as

market

risk

(electricity

and

natural

gas

prices,

in

particular),

regulatory

risk

(regarding

client

invoicing),
operational risk (IT systems, electric power theft), had multiple causes and sometimes unpredictable effects.

For

the

next

year

we

aim

to

increase

agility

and,

where

possible,

to

automate

the

risk

management

system,
to

transform

this

Group

level

competence

into

a

point

of

best

practice,

and

to

align

and

implement

the
necessay instruments of risk management with and into the strategic and operational goals of the Group.

#### FINANCIAL RISK MANAGEMENT

The

Group

is

exposed

to

the

following

risks

resulting

from

the

use

of

financial

instruments:

credit

risk,

liquidity
risk and market risk.

■

#### Credit risk

Credit

risk

is

the

risk

that

the

Group

will

register

a

financial

loss

if

a

customer

or

counterparty

to

a

financial
instrument

fails

to

meet

its

contractual

obligations,

and

arises

principally

from

the

Group’s

receivables

from
customers, cash and cash equivalents, restricted cash and bank deposits.

The

Group’s

exposure

to

credit

risk

is

mainly

influenced

by

the

individual

characteristics

of

each

customer.

In
the past, the Group had a high credit risk mainly from State-owned companies.

Cash

and

bank

deposits

are

placed

in

financial

institutions

that

are

considered

to

have

to

have

low

risk

of
default.

The carrying amount of financial assets represents the maximum credit exposure.

Trade receivables

The

Group’s

credit

risk

in

respect

of

receivables

was

concentrated

in

the

past

around

state-controlled
companies

and

in

the

recent

years

refers

to

clients

that

are

facing

financial

difficulties

in

their

industries

due
to

specific

changes

in

circumstances

in

their

industry

sector.

The

Group

has

set

up

a

policy

regarding

risk
management

and

it

has

taken

into

account

the

insurance

of

the

trade

receivables.

Also

the

electricity

supply
contracts include termination clauses in certain circumstances.

The

Group

establishes

an

allowance

for

impairment

that

represents

the

amount

of

expected

credit

losses,
calculated based on the expected loss rates.

Impairment

185

The

following

table

provides

information

on

the

exposure

to

credit

risk

and

expected

credit

losses

for

trade
receivables as of 31 December 2021:

(RON mn)

31 December 2021

Expected
credit loss
rates
(“ECL”)

Gross
value

Lifetime
ECL

Net trade
receivables

Credit
impaired

Neither past due nor impaired

2%

1,080.1

(16.6)

1,063.5

No

Past due 1-30 days

5%

228.5

(10.6)

217.9

No

Past due 31-60 days

15%

36.7

(5.3)

31.4

No

Past due 61-90 days

38%

15.4

(5.9)

9.5

No

Past due more than 90 days

98%

964.7

(942.4)

22.3

Yes

Total

2,325.4

(980.8)

1,344.6

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

The

following

table

provides

information

on

the

exposure

to

credit

risk

and

expected

credit

losses

for

trade
receivables as of 31 December 2020:

(RON mn)

31 December 2020

Expected credit
loss rates
(“ECL”)

Gross
value

Lifetime
ECL

Net trade
receivables

Credit
impaired

Neither past due nor impaired

2%

812.9

(13.1)

799.8

No

Past due 1-30 days

1%

163.4

(2.3)

161.1

No

Past due 31-60 days

12%

49.0

(5.8)

43.2

No

Past due 61-90 days

33%

17.4

(5.7)

11.8

No

Past due more than 90 days

99%

936.6

(922.7)

13.9

Yes

Total

1,979.3

(949.6)

1,029.8

Source: Consolidated financial statements of Electrica Group as of 31 December 2020

■

#### Liquidity risk

Liquidity

risk

is

the

risk

that

the

Group

will

encounter

difficulties

in

meeting

the

obligations

associated

with

its
financial

liabilities

that

are

settled

by

transferring

cash

or

another

financial

asset.

The

Group’s

liquidity
management

policy

is

to

maintain,

as

far

as

possible,

sufficient

liquidity

to

meet

its

obligations

when

they

are
due, under both normal and stressed conditions, to avoid unacceptable losses.

The

Group

aims

to

maintain

the

level

of

its

cash

and

cash

equivalents

at

an

amount

in

excess

of

expected
cash

outflows

on

financial

liabilities.

The

Group

also

monitors

the

level

of

expected

cash

inflows

on

trade
receivables

together

with

expected

cash

outflows

on

trade

and

other

payables.

In

addition,

the

Group
maintains overdrafts facilities.

Exposure to liquidity risk

The

following

are

the

remaining

contractual

maturities

of

financial

liabilities

at

the

reporting

date.

The

amounts
are gross and undiscounted, and include estimated interest payments.

(RON mn)

Contractual cash flows

Financial liabilities

Carrying
amount

Total

less than 1
year

1-2 years

2-5 years

More
than 5
years

31 December 2021

Bank overdrafts

627.4

627.4

627.4

-

-

-

Lease liability

21.5

21.5

9.4

4.9

5.1

2.1

186

(RON mn)

Contractual cash flows

Financial liabilities

Carrying
amount

Total

less than 1
year

1-2 years

2-5 years

More
than 5
years

Long term bank borrowings

628.5

628.5

176
.2

92.9

278.8

80.6

Trade payables

891.3

891.3

891.3

-

-

-

Total

2,168.7

2,168.7

1,704.3

97.8

283.9

82.7

31 December 2020

Bank overdrafts

165.0

165.0

165.0

-

-

-

Lease liability

27.6

27.6

10.7

6.8

10.0

0.1

Long term bank borrowings

778.9

778.9

378.6

70.8

212.5

117.0

Trade payables

607.2

607.2

607.2

-

-

-

Total

1,578.7

1,578.7

1,161.5

77.6

222.5

117.1

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

■

#### Market risk

Market

risk

is

the

risk

that

changes

in

market

prices

–

foreign

exchange

rates

and

interest

rates

–

will

affect
the

Group’s

income

or

the

value

of

its

financial

instruments

held.

The

osssbjective

of

market

risk

management
is to manage and control market risk exposures within acceptable parameters, while optimising the return.

#### Currency risk

The

Group

has

exposure

to

currency

risk

to

the

extent

that

there

is

a

mismatch

between

the

currencies

in
which

sales,

purchases

and

borrowings

are

denominated

and

the

functional

currency

of

the

Group.

The
functional currency of all entities belonging to the Group is the Romanian Leu (RON).

The

currency

in

which

these

transactions

are

primarily

denominated

is

RON.

Certain

liabilities

are

denominated
in

foreign

currency

(EUR).

The

Group

also

holds

deposits

and

bank

accounts

denominated

in

foreign

currency
(EUR).

The

Group's

policy

is

to

use

the

local

currency

in

its

transactions

as

far

as

practically

possible.

The
Group does not use derivative or hedging instruments.

Exposure to currency risk

The summary of quantitative information on the Group’s exposure to currency risk is given below:

(RON mn)

31 December 2021

31 December 2020

EUR

EUR

Cash and cash equivalents

0.8

3.3

(19.1)(24.5)Lease liability

(19.1)

(24.4)

Net statement of financial position exposure

(18.3)

(21.1)

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

The following significant exchange rates have been applied during the year:

Average rate

Year-end spot rate

2021

2020

2021

2020

EUR/RON

4.9204

4.8371

4.9481

4.8694

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

Sensitivity analysis

A

reasonably

possible

strengthening

(weakening)

of

the

EUR

against

RON

at

31

December

would

have

affected
the

measurement

of

financial

instruments

denominated

in

a

foreign

currency

and

profit

before

tax

by

the
amounts

shown

below.

The

analysis

assumes

that

all

other

variables,

in

particular

interest

rates,

remain

187

constant and ignores any impact of forecast sales and purchases.

(RON mn)

Profit before tax

Effect

Strengthening

Weakening

31 December 2020

EUR (5% movement)

(0.9)

0.9

31 December 2020

EUR (5% movement)

(1.1)

1.1)

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

Exposure to interest rate risk

The interest rate profile of the Group’s interest-bearing financial instruments is as follows:

(mil. RON)

31 December
2021

31 December
2020

Fixed-rate instruments

Financial assets

Call deposits

53.9

391.5

Deposits with maturity date more than three months

-

-

Financial liabilities

Financing for network construction related to concession agreements

-

-

Long-term bank borrowings

(418.9)

(728.9)

Lease liability

(8.3)

(9.1)

Total

(373.3)

(346.5)

Variable-rate instruments

Financial liabilities

Lease liability

(13.3)

(18.6)

Long-term bank borrowings

(209.6)

(49.9)

Bank overdrafts

(627.4)

(165.0)

Total

(850.3)

(233.5)

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

Fair value sensitivity analysis for fixed-rate instruments

The

Group

does

not

account

for

any

fixed-rate

financial

assets

or

financial

liabilities

at

fair

value

through

profit
or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

A

reasonably

possible

change

of

50

basis

points

in

interest

rates

at

the

reporting

date

would

have

increased
(decreased)

profit

before

tax

by

the

amounts

shown

below.

This

analysis

assumes

that

all

other

variables,

in
particular foreign currency exchange rates, remain constant.

(RON mn)

Profit before tax

50 bp increase

50 bp decrease

31 December 2021

Variable-rate instruments

(4.3)

4.3

188

(RON mn)

Profit before tax

50 bp increase

50 bp decrease

31 December 2020

Variable-rate instruments

(1.2)

1.2

Source: Consolidated financial statements of Electrica Group as of 31 December 2021

6.8.

#### Description of the main features of internal control and risk management systems in relation to the financial reporting


















#### process

The

internal

control

represents

all

measures,

procedures

and

policies

adopted

by

ELSA

management

and

their
implementation

by

the

employees,

regarding

the

organizational

structure,

applied

procedures,

methods,
techniques

and

instruments,

for

the

purpose

of

implementation

of

company

strategy

and

objectives.

The
internal

control

includes

all

control

forms

performed

at

company

level,

such

as

preventive

financial

control,
internal and managerial control, compliance control.

The

internal

control

activity

represents

a

way

of

analysis

of

ELSA

activities,

of

adopting

and

applying

the
internal

management,

also

associated

with

the

knowledge

activity,

which

allows

the

Company's

management
to coordinate the activities within the organization in an efficient manner.

In

this

respect,

through

the

internal

control

the

monitoring

and

verification

is

carried

out,

in

accordance

with
the

legislation

in

force

and

the

specific

procedures,

in

compliance

with

the

legal

framework

that

regulates

the
activities carried out in the checked entities, according to the approved control objectives and themes.

Through

internal

control,

the

Company’s

management

ascertains

the

deviations

resulting

from

the

established
objectives, analyzes the causes and orders the corrective or preventive measures that are required.

■
The internal control and the risk management systems have the following main goals:

▪
protecting organizational resources against losses due to waste, negligence, abuses, fraud etc.;

▪
compliance with the applicable legislation and the internal regulations;

▪
the reliability of financial reporting (accuracy, completeness and correctness of the information);

▪
ensuring

an

environment

based

on

identifying,

understanding

and

controlling

risks,

environment

which
will contribute to achieving the organizational goals;

▪
efficient and effective business operations and use of resources;

▪
applying the BoD and executive management resolutions and follow-up.

The achievement of these goals was performed in 2021 as follows:

▪
in

order

to

ensure

internally

the

compliance

with

the

competition

and

state

aid

rules,

there

were

held
several training sessions and practical verification;

▪
clear

definition

and

responsibilities

segregation

for

each

person

involved

in

the

organizational

process;
segregation

of

duties

regarding

the

carrying

out

the

operations

among

the

personnel,

so

that

the

approval,
control

and

registration

duties

are

adequately

assigned

to

different

persons

(as

per

the

Company’s
organizational chart);

▪
elaboration, update and implementation of regulations, policies, procedures, forms etc;

▪
the

existence

of

a

Guide

for

Accounting

Policies,

elaborated

in

accordance

with

the

requirements

of

the
legislation in force, approved by the Board of Directors;

▪
the

existence

of

a

schedule

and

a

well-defined

process

regarding

the

elaboration

of

accounting

and
financial

information

in

accordance

with

the

reporting

requirements

(financial

reports,

including

financial

189

statements,

annual

and

interim

reports,

budget

etc)

and

their

appropriate

verification

and

approval

by
the Board of Directors, for the purpose of endorsing and release for publication.

The framework of ELSA’s internal control system consists of the following elements:

■

✓

#### Control environment



–

The

existence

of

a

control

environment

represents

the

basis

of

an

efficient
internal

control

system.

It

consists

of

the

commitment

towards

integrity

and

ethical

values

(for

this
purpose,

a

series

of

policies

on

zero

tolerance

towards

corruption,

anti-fraud

and

anti-money-laundering,
avoidance

and

fighting

against

conflicts

of

interest,

gifts

policy,

protocol

expenses,

and

forbidding
facilitating

payments,

transparency

and

the

involvement

of

stakeholders),

as

well

as

organizational
measures (policies on the delegation of authority and responsibilities);

✓

#### Evaluation of risks




–

Generally,

all

processes

are

within

the

scope

of

the

internal

control

system.

An
identification

process

is

carried

out

regarding

major

or

critical

risks,

related

to

particular

activities

for
stimulating internal control methods;

✓

#### Control activities meant to reduce the risks








–

Control

activities

have

different

forms

(managerial
control,

general

control,

preventive

financial

control,

etc.)

and

they

are

implemented

and

carried

out

with
the purpose of reducing significant operational and compliance risks;

✓

#### Information and communication




–

Information

helps

all

other

components

of

the

internal

control
system

by

communicating

to

employees

their

responsibilities

for

controling

and

providing

information

in
an

adequate

and

timely

manner,

so

that

all

employees

may

be

able

to

fulfill

their

duties.

Internal
communication

occurs

by

means

of

disseminating

information

to

all

levels,

while

the

external

one

implies
the

dissemination

of

information

to

external

parties,

in

accordance

with

the

requirements

and
expectations;

✓

#### Monitoring activities



–

the

Audit

and

Risk

Committee

together

with

the

Internal

Audit

Department
assess the efficiency and the effective implementation of the internal control system.

■

The

Company’s

management

monitors

the

functioning

of

internal

controls

by

means

of

periodical

analyzes;
for

instance,

the

execution

of

the

budget,

the

monitoring

of

security

incidents,

internal

and

external

audit
reports and internal control reports.

Deficiencies

in

the

implementation

or

functioning

of

internal

controls

are

documented

into

the

internal

control
reports,

respectively

in

internal

audit

reports

and

briefing

notes,

and

they

are

presented

to

the

management,
with the purpose of issuing the corrective actions.

190

### Appendix 1 – Litigations

Electrica Group litigations in 2021:

1.

#### Disputes with ANRE

Crt.
no.

Parties/Case
file number

Subject matter

Court

Case status

1

Plaintiff: ELSA

Defendant: ANRE

192/2/2015

Cancellation

of

ANRE’s

President

Order
no.

146/2014

regarding

the
establishment

of

the

regulated

rate

of
return

considered

to

the

approval

of

the
tariffs

for

the

electricity

distribution
service

provided

by

concessionary

DSOs
starting

with

1st

January

2015

and

the
abrogation

of

Art.

122

of

the

Tariff
Setting

Methodology

for

Electricity
Distribution

Service,

approved

by

the
ANRE Order no. 72/2013.

High Court
of
Cassation
and Justice

Appeal

–

a

reinstatement
request

was

filed

–

term:
30.03.2022.

2

Plaintiff: ELSA;

Defendant: ANRE;

361/2/2015

Cancellation

of

ANRE

Order

no.
155/2014

regarding

the

approval

of

the
specific

tariffs

for

the

electricity
distribution

service

and

the

price

for

the
reactive

energy

for

DEER

(formr.

SDTN).

High Court
of
Cassation
and Justice

Suspended

until

the

settlement
of

the

case

file

no.

192/2/2015.

3

Plaintiff: ELSA;

Defendant: ANRE;

360/2/2015

Cancellation

of

ANRE

Order

no.
156/2014

regarding

the

approval

of

the
specific

tariffs

for

the

electricity
distribution

service

and

the

price

for

the
reactive

energy

for

DEER

(former.
SDTS).

High Court
of
Cassation
and Justice

Suspended

until

the

settlement
of

the

case

file

no.

192/2/2015.

4

Plaintiff: ELSA;

Defendant: ANRE;

340/2/2016

Action

for

partial

annulment

(regarding
the

special

tariffs)

of

the

administrative
act – ANRE Order 171/2015.

High Court
of
Cassation
and Justice

Appeal

-

Suspended

until

the
settlement

of

the

case

file

no.
192/2/2015.

5

Plaintiff: ELSA;

Defendant: ANRE;

342/2/2016

Action

for

partial

annulment

(regarding
the

special

tariffs)

of

the

administrative
act – ANRE Order. No. 172/2015.

High Court
of
Cassation
and Justice

Appeal

-

Suspended

until

the
settlement

of

the

case

file

no.
192/2/2015.

6

Plaintiff:

ELSA;
DEER

Defendant: ANRE;

7614/2/2018

Action

for

partial

annulment

of

ANRE
Order

no.

169/2018

regarding

the
approval

of

the

Tariff

Setting
Methodology

for

the

Electricity
Distribution Service
.

Bucharest
Court of
Appeal

In course of settlement.

7

Plaintiff:

ELSA;
DEER

Defendant: ANRE

7591/2/2018

Action

for

the

annulment

of

the

ANRE
Order

no.

168/2018

regarding

the
regulatory

rate

of

return

and

obliging
ANRE to issue a new order.

Bucharest
Court of
Appeal

Suspended

until

de

final
settlement

of

case

no.
541/36/2018

of

the

Bucharest
Court of Appeal.

8

Plaintiff:

Fondul
Proprietatea

Defendant: ANRE

Intervenient:
ELSA; DEER

4804/2/2020

(former

Legal

action

for

the

partial

annulment

of
ANRE

Order

no.

112/2014

regarding

the
amendment

and

completion

of

the

tariff
setting

methodology

for

the

electricity
distribution

service
,

approved

by

the
ANRE Order no. 72/2013.

Bucharest
Court of
Appeal

Retrial

–

the

action

was
dismissed

as

unfounded.

The
decision

is

definitive

by

non
appleal by the plaintiff.

191

Crt.
no.

Parties/Case
file number

Subject matter

Court

Case status

7341/2/2014)

9

Plaintiff:

ELSA,
DEER

Defendant: ANRE

434/2/2019

Legal

action

for

annulment

of

ANRE
Order

197/2018

regarding

the

approval
of

the

specific

tariffs

for

the

electricity
distribution

service

and

the

price

for

the
reactive

electric

energy

for

DEER
(formerSDMN).

Bucharest
Court of
Appeal

In course of settlement.

10

Plaintiff:

ELSA,
DEER

Defendant: ANRE

435/2/2019

Legal

action

for

annulment

of

ANRE
Order

199/2018

regarding

the

approval
of

the

specific

tariffs

for

the

electricity
distribution

service

and

the

price

for

the
reactive energy for DEER former SDTS).

High Court
of
Cassation
and Justice

On

9

June

2020,

the

court
rejected

the

action

as
unfounded.

An

appeal

was

filed,
term on 09.03.2023.

11

Plaintiff:

ELSA,
DEER

Defendant: ANRE

436/2/2019

Legal

action

for

annulment

of

ANRE
Order

198/2018

regarding

the

approval
of

the

specific

tariffs

for

the

electricity
distribution

service

and

the

price

for

the
reactive

energy

for

DEER

former

SDTN).

Bucharest
Court of
Appeal

In course of settlement.

12

Plaintiff: DEER

Defendant: ANRE

184/2/2015

Contentious

administrative

litigation

–
Cancellation

of

ANRE

Order

no.
146/2014

regarding

the

setting

of

the
regulated

rate

of

return

applied

at

the
approval

of

the

tariffs

for

the

electricity
distribution

service

provided

by

the
DSOs

starting

with

1st

January

2015

and
the

abrogation

of

art.

122

of

the

tariff
setting

methodology

for

the

electricity
distribution

service
,

approved

by

the
ANRE order no. 72/2013.

High Court
of
Cassation
and Justice

A

reinstatement

request

was
filed - term 15.02.2022.

13

Plaintiff: DEER

Defendant: ANRE

309/2/2020

Judicial

action

on

the

cancellation

of
documents

issued

by

regulatory
authorities

–

Order

no.

227/2019
regarding

the

approval

of

the

tariffs

for

the

electricity

distribution

service

and
the

price

for

the

reactive

energy

for
DEER (former. SDMN).

Bucharest
Court of
Appeal

In course of settlement.

14

Plaintiff: DEER

Defendant: ANRE

213/2/2015

Cancellation

of

ANRE

Order

no.
146/2014

regarding

the

establishment
of

the

regulated

rate

of

return

applied

to
the

approval

of

the

tariffs

for

the
electricity

distribution

service

provided
by

the

DSOs

from

1st

January

2015

and
the

abrogation

of

Art.

122

of

the

Tariff
Setting

Methodology

for

Electricity
Distribution

Service,

approved

by

the
ANRE Order no. 72/2013.

High Court
of
Cassation
and Justice

Appeal

–a

reinstatement
request

was

filed

-

term
24.02.2022.

15

Plaintiff: DEER

Defendant: ANRE

305/2/2020

Action

for

the

cancellation

of

ANRE’s
President

Order

no.

228/2019

regarding
the

approval

of

the

of

the

specific

tariffs
for

the

electricity

distribution

service

and
the

price

for

the

reactive

energy

for
DEER (formerSDTN).

Bucharest
Court of
Appeal

Action

dismissed

on

merits,
appealable

within

15

days

from
its communication.

16

Plaintiff: DEER

Cancellation

of

the

ANRE’s

President

Bucharest

Suspended

until

the

settlement

192

Crt.
no.

Parties/Case
file number

Subject matter

Court

Case status

Defendant: ANRE

371/2/2015

Order

no.

156/2014

regarding

the
approval

of

the

specific

tariffs

for

the
electricity

distribution

service

and

the
price

for

the

reactive

energy

for

DEER
(former SDTS).

Court of
Appeal

of

the

case

file

no.

208/2/2015.

17

Plaintiff: DEER

Defendant: ANRE

208/2/2015

Cancellation

of

the

ANRE’s

President
Order

no.

146/2014

regarding

the
establishment

of

the

regulated

rate

of
return

applied

to

the

approval

of

the
tariffs

for

the

electricity

distribution
service

provided

by

DSOs

from

1st
January

2015

and

the

abrogation

of

Art.
122

of

the

Tariff

Pricing

Methodology

for
Electricity

Distribution

Service,

approved
by the ANRE Order no. 72/2013.

Bucharest
Court of
Appeal

A

reinstatement

request

was
filed.

18

Plaintiff: DEER

Defendant: ANRE

303/2/2020

Cancellation

of

the

ANRE’s

President
Order

no.

229/2019

regarding

the
approval

of

the

specific

tariffs

for

the
electricity

distribution

service

and

the
price

for

the

reactive

energy

for

DEER
(former. SDTS).

Bucharest
Court of
Appeal

In course of settlement.

Source: Electrica

2.

#### Fiscal matter disputes

Crt.

no.

Parties/Case file
number

Object

Court

Case status

1

Plaintiff: ELSA

Defendant: NAFA

17237/299/2017

1.

Suspension

of

forced

execution
initiated

by

NAFA-DGAMC

in

the
enforcement

file

no.

13267221

under

the
enforceable

order

no.

13725/3rd

May
2017

and

of

the

no.

13739/3rd

May

2017;

2.

Cancellation

of

the

enforcement

order
no.

13725/3rd

May

2017,

of

the

no.
61/90/1/2017/263129

(which

also

bears
the

No.

13739/3rd

May

2017)

issued

by
NAFA-DGAMC

for

the

amount

of

RON
39,248,818

and

all

subsequent

execution
orders

issued

in

connection

with

the
forced

execution

of

the

amount

of

RON
39,248,818

in

the

execution

file

no.
13267221.

District

1
Court

Suspended

until

the

final
settlement

of

case

no.
9131/2/2017.

2

Plaintiff: ELSA

Defendant: NAFA

9131/2/2017

Annulment

of

the

tax

decisions

issued

by
NAFA

and

communicated

to

the

company
by

address

no.

665/17

March

2017,

new
accessories

amounting

to

RON
39,053,522.

High

Court
of
Cassation
and Justice

Action

admitted

on

merits.
NAFA

filed

an

appeal,

in
course of settlement.

3

Plaintiff: ELSA

Defendant: NAFA

6043/2/2018

1.

Obligation

of

NAFA

to

correct

the
evidence

of

tax

receivables,

so

that

it
reflects

the

decisions

given

by

the

courts
in

the

disputes

between

the

parties,
through

decisions

that

have

come

into
the

power

of

the

judicial

work.

2.

In
particular,

in

order

to

adjust

the

fiscal

High

Court
of
Cassation
and Justice

In

first

instance,

Electrica’s
action

was

admitted.

NAFA
filed

an

appeal,

dismissed

as
unfounded.

193

Crt.

no.

Parties/Case file
number

Object

Court

Case status

statement

in

the

sense

indicated

in
paragraph

1,

the

NAFA

shall

be

obliged

to
draw

up

those

corrective

administrative
acts

or

operations

which:
a)

to

reflect

in

the

fiscal

file

the
extinguishment

by

prescription

of

the
amount

of

RON

16,915,950

representing
the

profit

tax

registered

in

Decision

no.
3/2008

(the

"Main

Claim")

and

the
removal

from

its

tax

records,

‘
b)

to

reflect

in

the

fiscal

file

the
corresponding

extinction

of

all

the
accessories

calculated

by

NAFA

in

the
Main

Claim

(extinguished

by

prescription)
and

the

removal

from

their

tax

records
(including

the

amount

of

RON

30,777,354
included in the Decision no. 357/2008).

4

Plaintiff: ELSA

Defendant:

NAFA

-
DGAMC

25091/299/2018

Appeal

to

execution

and

suspension

of
forced

execution

-

cancellation

of

the
enforcement

order

no.

13566/22

June
2018

and

the

notice

13567/22

June

2018,
issued

in

the

execution

file

no.
13267221/61/90/1/2018/278530,
amounting

to

RON

10,024,825
(representing

the

partial

fine

from

the
Competition Council).

District

1
Court

Suspended

until

the
settlement

of

case

no.
3889/2/2018.

5

Plaintiff: ELSA

Defendant:

NAFA

-
DGAMC

2444/2/2021

1.

Obligation

of

NAFA

to

correct

the
evidence

of

tax

receivables,

held
according

to

art.

153

FPC

so

that

it
reflects

the

decisions

given

by

the

courts
in

the

disputes

between

the

parties,
through

decisions

that

have

come

into
the

power

of

the

judicial

work,
respectively

by:

a)

Decision

no.
1078/17.04.2015

issued

by

the

Bucharest
Court

of

Appeal

in

case

no.

5433/2/2013;
b)

Decision

no.

5154/26.06.2017

issued
by

Bucharest

District

1

Court

in

case

no.
51817/299/2016\*;

c)

Decision

no.
624/06.03.2015

issued

by

the

Bucharest
Court

of

Appeal

in

case

no.

7614/2/2013
;
Obligation

of

NAFA

to

draw

up

those

acts
or

administrative

correction

operations
which:

-

to

reflect

Electrica’s

right

to

the
reimbursement

of

RON

5,860,080
representing

fiscal

obligation

unlawfully
reinstated

in

the

fiscal

evidence;

-

to
reflect

Electrica’s

right

to

the
reimbursement

of

RON

817,521

which
was

not

object

of

the

reimbursement
made

by

NAFA

on

22

September

2020,
arising

from

the

annulment

of

the

fiscal
decision

in

case

mentioned

in

item

1
above,

let.

a);

2.

Obligation

of

NAFA

to

Bucharest
Court

of
Appeal

In course of settlement.

194

Crt.

no.

Parties/Case file
number

Object

Court

Case status

pay

the

legal

interests

related

to

the
period

12.12.2016

–

21.09.2020,
calculated

in

a

percentage

of

0.02%/day
of

delay

for

the

debt

amount

of

RON
18,687,515

reimbursed

on

22.09.2020,

in
total

amount

of

RON

5,161,491.64;

3.
Establishing

a

15

days

term

from

the
decision

so

that

NAFA-DGAMC

to

settle
the

fiscal

file

as

indicated

above,
imposing

late

penalties

of

RON

1,000/day
of

delay

for

exceeding

this

term,

due

to
Electrica by DGAMC.

6

Plaintiff: DEER

Defendant:

NAFA

-
DGAMC

359/2/2021
(former

1018/2/2016\*)

Cancellation

of

administrative

act

–
Decision

no.

462/23

November

2015,
litigation

amount

of

RON

7,731,693

(RON
4,689,686

income

tax

+

RON

3,042,007
VAT)

and

for

the

amount

of

RON
6,154,799

(RON

3,991,503
interests/penalties

and

late

fees

related
to

income

tax

+

RON

2,163,296
interests/penalties

and

delay

fees

related
to the VAT).

Bucharest
Court

of
Appeal

-
retrial

The

court

of

first

instance
rejected

the

action

as
unfounded.

The

plaintiff

filed
an

appeal,

admitted

by

the
court,

which

quashes

the
contested

decisions

and,

re-
judging,

partially

admits

the
action.

Partially

annuls
Decision

no.

462

/

23.11.2015
issued

by

A.N.A.F

–DGSC,
regarding

point

3.

Obliges

the
defendant

A.N.A.F

–DGSC

to
settle

on

the

merits

the

claim
regarding

the

amount

of

RON
10,091,323.

It

sends

for

retrial
to

the

same

court

the

request
regarding

the

other

fiscal
obligations

retained

by

the
fiscal

body,

amounting

RON
13,886,492.

Final

(file

no.
1018/2/2016

\*).

In

retrial,
case

no.

1018/2/2016\*

was
registered

with

a

new

number,
359/2/2021

-

in

course

of
settlement.

DGAMG

-

ANAF

rejected

by
Solution

Decision

no.

154

/
02.07.2020,

the

appeal
regarding

the

amount

of

RON
10,091,323

(Point

3

of
Decision

no.

462/2015)
reason

for

which

an

action

for
annulment

was

filed

on
22.12.2020

(file

no.

641/42

/
2020).

7

Plaintiff: DEER

Defendant:

DGAMC
– NAFA

641/42/2020

641/42/2020

Annulment

of

the

administrative

act

of
the

SettlementDecision

154/02.07.2020
for

the

amount

of

RON

10,091,323

(point
3 of the Decision no. 462 / 23.11.2015)

Ploiesti
Court

of
Appeal

In course of settlement.

8

Plaintiff: DEER

Defendant:

Galati
City

Hall

-

DITVL
Galati

Cancellation

of

administrative

documents
issued

by

the

fiscal

bodies

within

the
Galati

City

Hall

-

DITVL

Galati,
respectively

Fiscal

inspection

report,

Ploiesti
Court

of
Appeal

In course of settlement.

195

Crt.

no.

Parties/Case file
number

Object

Court

Case status

263/42/2020

taxation

decision

and

decision

to

resolve
the

appeal.

According

to

the

Fiscal
Inspection

Report,

the

control

team
determined

an

additional

tax

on
buildings,

together

with

the

related
accessories,

in

a

total

amount

of

RON
24,831,293, for the 2012-2015 period.

9

Plaintiff:

EL

SERV
Defendant: NAFA

5786/2/2018

Cancellation

of

administrative

act

NAFA
RIF

2017

and

decision

no.

305/30

May
2017,

amounting

to

RON

46,260,952,

the
amount

by

which

the

fiscal

loss

of

the
Company

was

diminished;

RON
7,563,561

established

as

additional

VAT
for

payment

by

the

refusal

to

deduct

the
VAT + related accessories.

High

Court
of
Cassation
and Justice

By

decision

2145/2019

dated
03.07.2019,

the

court

admits
the

request.

Partially

annuls
Decision

no.

22

/

18.01.2018
regarding

the

settlement

of
the

appeal,

Taxation

Decision
no.

F-MC

305

/

30.05.2017,
The

provision

regarding

the
measures

established

by

the
fiscal

inspection

bodies

no.
115046

/

30.05.2017

and

RIF
no.

F-MC

177

/

30.05.2017,
regarding

the

amount

of

RON
7,264,463

VAT

with

the
related

accessories,

illegally
retained

as

non-deductible,
respectively

regarding

the
amount

of

RON

37,083,657
with

which

the

fiscal

loss

was
illegally

diminished.

In

the
case,

an

appeal

was

filed

by
both

parties,

in

course

of
settlement.

10

Plaintiff: EL SERV

Defendant: NAFA

31945/3/2018

Cancellation

of

administrative

decision
no.

221/19

July

2017

-

cancellation

of
penalties

related

to

the

decision

no.
305/2017 from above, RON 118,215.

Bucharest
Court

Suspended

until

the

final
settlement

of

the

case

no.
5786/2/2018.

11

Plaintiff: DEER

Defendant:

MFP-
NAFA

–

DGRFP

Cluj
– AJFP Maramures

371/33/2017

Appeal

of

tax

decision

no.

F-MM-
180/2016

regarding

additional

tax

and
VAT,

as

well

as

interest/late

payment
increases

and

late

payment

penalties.
Preliminary

administrative

procedures
were

conducted

in

2017,

prior

to

the

case
filing. Amount: RON 32,295,033.

High

Court
of
Cassation
and Justice

Appeal

–

in

course

of
settlement.

12

Plaintiff: EFSA

Defendant:

NAFA

–
DGAMC

8709/2/2018

Cancellation of:

•
DGSC

Decision

no.

325/26

June
2018

•
Decision

F-MC

678/28

December
2017

•
Report

F-MC

385/28

December
2017

•
Decision no. 511/24 October 2018

•
Decision no. 21095/24 July 2018

Value: RON 11,483,652

Bucharest
Court

of
Appeal

In course of settlement.

Source: Electrica

196

3.

#### Other significant litigations (with a value higher than EUR 500 thousand)

Crt.
no.

Parties/Case file
number

Object

Court

Case status

1

Plaintiff:

SPEEH
Hidroelectrica S.A.

Defendant: ELSA

13268/3/2015\*

Obligation

of

Electrica

to

pay

to

SPEEH
Hidroelectrica

SA

the

amount

of

RON
5,444,761

(the

loss

suffered

by

selling
energy

at

an

average

price

per

MWh
under

the

production

cost

of

1

MWh);
partial

obligation

to

pay

the

unrealized
benefit

of

Hidroelectrica

by

selling

the
total

amount

of

398,300

MWh,
calculated

according

to

the

ANRE
regulations

(RON

9,646,826,

according
to

the

written

instructions

dated

5

May
2015/RON

5,444,761

according

to

the
applicant’s

conclusions

mentioned

in

the
Conclusion

of

15

March

2017);

ordering
the

defendant

to

pay

the

legal

interest
from

the

date

of

the

decision

until

the
effective payment, court costs.

Bucharest
Court

of
Appeal

The

court

of

first

instance
rejects

the

exception

of

the
prescription

of

the

material

right
to

action

as

unreasonable

and
the action as unfounded.

Both

parties

have

appealed,
dismissed

as

unfounded.

Both
parties

filed

an

appeal.
Hidroelectrica's

appeal

was
rejected.

The

ELSA

appeal

was
admitted,

the

case

being

sent
for

retrial

to

the

Bucharest

Court
of

Appeal.

In

the

retrial,

the
court

admits

ELSA

appeal,
changes

the

appealed

sentence
in

the

sense

that

it

admits

the
exception

of

the

prescription

of
the

material

right

to

action

and
rejects

the

action

as

prescribed.
With

appeal

within

30

days

from
the communication.

2

Creditor: ELSA

Debtor:

Petprod

S.A.

47478/3/2012/a1

Insolvency

proceedings,

registering

to
the

list

of

creditors

for

the

amount

of
RON 2,591,163

Bucharest
Court

Ongoing procedure.

3

Creditor: ELSA

Debtor:

CET

Braila
S.A.

2712/113/2013

Bankruptcy,

registering

to

the

list

of
creditors in amount of RON 3,826,035.

Braila Court

Ongoing procedure.

4

Creditor:

ELSA,
AAAS,

BCR

SA

and
others

Debtor: Oltchim S.A.

887/90/2013

Bankruptcy,

remaining

amount

to

be
recovered – RON
671,018,210.

Valcea
Court

Ongoing

procedure.

On
15.12.2021,

the

Court

of

the
European

Union

ruled

on

the
appeal

filed

by

the

debtor
Oltchim

S.A.

against

the
Decision

of

the

European
Commission

of

17.12.2018

by
which

it

was

established

that
Oltchim

S.A.

benefited

from
illegal

state

aid

from

a

numberof
Romanian

companies,

including
ELECTRICA

S.A.

By

its

decision,
the

Court

of

First

Instance

of

the
European

Union

cancelled
Articles

1

letter

a

and

c

of

the
Decision

of

the

European
Commission,

as

well

as

articles
3-6

and

art.

7

paragraph

2

of
the

same

Decision.

Thus,

the
consequence

for

ELSA

is

the
cancellation

of

the

ELSA

claim
representing

state

aid,

in

the
amount

of

RON

498,065,828.38
and

the

interest

calculated

on

197

Crt.
no.

Parties/Case file
number

Object

Court

Case status

the

principal

until

the

date

of
bankruptcy,

in

the

amount

of
RON

56,893,843.59.

The
decision

is

not

final,

it

can

be
challenged

by

the

European
Commission.

The

term

of

appeal
expires,

according

to

the
information

of

the

liquidators,
on 01.03.2022.

5

Creditor: ELSA

Debtor:

Romenergy
Industry SRL

2088/107/2016

Bankruptcy,

registering

to

the

list

of
creditors in amount of RON 2,917,266.

Alba Court

Ongoing procedure.

6

Creditor: ELSA

Debtor:
Transenergo

Com
S.A.

1372/3/2017

Insolvency

proceedings.

Amount

RON
37,088,830.

Bucharest
Court

Ongoing

reorganization
procedure.

On

03.02.2021,

the
Debtor's

reorganization

plan
was

confirmed,

according

to
which

unsecured

receivables

do
not

participate

in

distributions.
ELSA’s

appeal

against

the
sentence

confirming

the
reorganization

plan

was
definitively dismissed.

7

Creditor: ELSA

Debtor:

Electra
Management

&
Supply SRL

41095/3/2016

Bankruptcy. Amount: RON 6,027,537.

Bucharest
Court

Ongoing procedure

8

Creditor: ELSA

Debtor:

Fidelis
Energy SRL

3052/99/2017

Insolvency

proceedings.

Amount:

RON
11,354,912.

Iasi Court

Ongoing procedure

9

Plaintiff:

EL

SERV
Defendant: ELSA

5930/3/2016\*

Obligation

to

increase

the

share

capital
of

SEM,

with

the

value

of

the

lands
located

in

Dobroiesti,

71,

Zorilor

Street
Ilfov

County

("Deposits

land

and
Fundeni

thermal

power

station"),

with
an

area

of

6,480

sqm,

CADP

M03

no.
10982/2008,

respectively

from
Bucharest,

104,

Timisoara

Boulevard.,
district

6

("Land

for

energy

equipment
repair

shop”,

with

an

area

of

8,745

sqm,
CADP

M03

no.

12917/2014

–

amounting
to RON 7,344,390.

Bucharest
Court

of
Appeal

Retrial:

By

the

decision

of
20.10.2020,

the

court

dismissed
SEM

appeal,

as

unfounded,

so
that

the

sentence

on

merits

was
maintained

by

which

the
exception

of

prescription

was
admitted.

With

appeal

within

30
days

from

the

communication.
Considering

the

EGMS

SEM
Decision

no.

9

/

07.11.2019

by
which

the

share

capital

of

SEM
was

increased

with

these

2
lands,

the

request

will

remain
without object.

The

decision

no.

1369/2020
21.10.2020

pronounced

by

the
CAB

by

which

the

appeal
formulated

by

SEM

was
rejected,

decision

remained
final

by

not

exercising

the

198

Crt.
no.

Parties/Case file
number

Object

Court

Case status

appeal,

considering

the

lack

of
interest

of

SEM

(the

share
capital

was

increased

with

the

2
lands).

10

Plaintiff:

ELSA
Defendant:
Competition

Council
3889/2/2018

Administrative

litigation

-

annulment

of
Competition

Council

Decision

no.

77/20
December

2017,

by

which

an

ELSA
charge

is

set

through

a

fine

of

RON
10,800,984

and,

in

the

subsidiary,

the
reduction

of

the

fine

set

up

to

the

legal
minimum

of

0.5%

of

ELSA's

turnover,

by
re-individualizing

the

alleged
anticompetitive

facts,

with

the

retention
and

full

use

of

all

mitigating
circumstances applicable to ELSA.

High

Court
of

Cassation
and Justice

The

court

dismissed

ELSA’s
action

as

unfounded;

ELSA

filed
an

appeal

–

in

course

of
settlement.

11

Plaintiff:

ELSA
Defendant: EL SERV

39968/3/2018

Action

for

damages

-

request

payment
of

penalty

interest

in

the

amount

of

RON
6,782,891
,

related

to

the

amount

of
RON 10,327,442.

High

Court
of

Cassation
and Justice

The

first

court

partly

admitted
the

action

and

ordered

the
payment

of

the

legal

interest
calculated

for

the

period
20.11.2015-22.05.2018.

EL
SERV

filed

an

appeal,

dismissed
as

unfunded.

EL

SERV

filled

a
recourse,

in

course

of
settlement.

12

Plaintiff:

ELSA
Defendant:

Elite
Insurance

Company
44380/3/2018

Claims

-

request

for

equivalent

value

of
the

insurance

policy

issued

to

guarantee
the

obligations

of

Transenergo

Com
S.A., in the amount of RON 4,000,000.

Bucharest
Court

Suspended

based

on

art.

307
Civil Procedure Code.

13

Plaintiff: ELSA

Transenergo

Com
S.A.

Defendant:

Zurich
Broker

de

Asigurare
Reasigurare SRL

3310/3/2020

Claims

–

RON

4,000,000

(ELSA)

and
RON

97,350

and

the

bearing

of

any
damage

related

to

the

non-fulfilment

of
its

obligation

(Transenergo

Com)

–
regarding

the

insurance

policy

issued

to
guarantee

the

payment

obligations

of
Trasenergo Com

Bucharest
Court

The

court

rejected

the

request
as

unfounded,

and

Transenergo
Com

request

as

directed

against
a

person

without

passive
procedural

capacity.

With
appeal

within

30

days

from
communication.

To

this

file

was
connected

the

case

no.
3474/299/2020.

14

Plaintiff: ELSA

Defendant:

former
directors

and
administrators

of
ELSA

35729/3/2019

Claims

-

claim

for

damages

calculated

as
a

result

of

the

control

of

the

Court

of
Accounts,

amounting

RON

322,835,121.

Bucharest
Court

Suspended

untill

the

final
settlement

of

case
2229/2/2017.

15

Plaintiff:

VIR
Company
International S.R.L.

Defendant: DEER

Claims

-

the

amount

requested

by

VIR
Company

International

SRL

consists

of:
-

EUR

5,000,000,

damage

caused

by
delayed

issuance

of

the

connection

Prahova
Court

In course of settlement.

199

Crt.
no.

Parties/Case file
number

Object

Court

Case status

7507/105/2017

certificate

for

the

photovoltaic

plant
located

in

Valea

Calugareasca
commune,

Darvari

village;
-

EUR

155,000,

equivalent

of

the
amount

of

electricity

produced

by

the
plant

during

the

technological

tests
period;
-

EUR

145,000,

green

certificates

related
to

the

amount

of

energy

produced

by
the

photovoltaic

plant

during

the
technological

tests

period.
In

addition,

it

requires

to

DEER

to

pay
the

penalty

interest

of

5.75%/year

for
all

the

amounts

of

money

claimed

and
court costs.

16

Creditor: DEER

Debtor:
Transenergo

Com
S.A.

1372/3/2017

Insolvency

proceedings.

Amount:

RON
9,274,831.

Bucharest
Court

Ongoing

proceedings.

On

3
February

2021,

the

Debtor's
reorganization

plan

was
confirmed,

according

to

which
unsecured

receivables

do

not
participate

in

distributions.

The
Debit

represents

the
accumulated

receivables

as

a
result

of

the

distribution
subsidiaries merger.

17

Plaintiff: DEER

Debtor: ELSA

(
18976/3/2020)

33763/3/2019

Claims,

according

to

the

Court

of
Accounts

Decision,

representing
payments

not

owed

of

RON

20,350,189
made by DEER (former SDMN).

Bucharest
Court

Suspended

until

the

final
settlement

of

case

no.
1677/105/2017.

18

Plaintiff:

Tutu

Daniel
and Tudori Ionel

Dedendant: DEER

180/233/2020

Claims

-

equivalent

value

of

land

related
to

the

Galati

Center

Transformation
Station
– RON 2,500,000.

Galati Court

In course of settlement.

19

Plaintiff:

Sinaia

City
Hall

Defendant: DEER

3719/105/2020

Action

in

"Obligation

to

do"
administrative

litigation.

Sinaia

City

Hall
requests:

-mainly:

obliging

MN

to

comply

with

LCD
113/2015

in

the

sense

of

executing

the
works

regarding

the

underground
location

of

the

technical-municipal
networks

for

the

project

"Energy
efficiency

and

lighting

extension

of

the
historic area - Sinaia"

-

in

the

alternative:

in

case

MN

will

not
execute

the

works

in

due

time

and

the
City

Hall

will

execute

the

works

in

our
name

and

on

our

behalf,

MN

will

be
obliged

to

pay

RON

7,659,402.72

+

VAT
(RON 9,101,192);

-

updating

the

amount

requested

in
subsidiary

with

the

inflation

rate

and
legal interest.

Prahova
Court

In course of settlement.

200

Crt.
no.

Parties/Case file
number

Object

Court

Case status

20

Plaintiff: DEER

Defendant:
Romenergy

Industry
S.A.

2088/107/2016

Bankruptcy

-

amount:

RON
9,224,595.51.

Alba Court

Ongoing

proceedings.

The

debit
represents

the

accumulated
receivables

as

a

result

of

the
distribution

subsidiaries

merger.

21

Plaintiff:

Asirom
Vienna

Insurance
Group S.A.

Defendant: DEER

439/111/2017

Recourse

claims

–

for

RON

2,842,347,
representing

the

compensation

paid

by
the

plaintiff

to

the

insured

company

SC
Ciocorom

SRL

following

a

fire

that
occurred

on

7

March

2013.

DEER
(former

SDTN)

fault

is

invoked

for

the
overvoltage after a power outage.

Bihor Court

In course of settlement.

22

Plaintiff:

Energo
Proiect SRL

Defendant: DEER

374/1285/2018

Claims of RON 2,387,357.

High

Court
of

Cassation
and Justice

In

first

court,

the

case

was
dismissed.

In

the

appeal,

the
court

admitted

the

plaintiff's
appeal,

partially

annulling

the
sentence

on

the

merits

by
rejecting

the

exception

of

the
lack

of

capacity

to

use

the
Oradea

Branch

and

retrying,
rejecting

the

exception

of
illegality

of

ANRE

Decision

no.
1285/05.09.2017

invoked

by
the

defendant

DEER.

Dismisses
as

unfounded

the

request

for

a
lawsuit

filed

by

the

plaintiff

in
contradiction

with

DEER

and

the
Oradea

Branch.

The

plaintiff
filed

an

appeal,

which

is

in

the
filter procedure.

23

Plaintiff: DEER

Defendant:
Romenergy

Industry
S.A.

3086/62/2016

Payment

ordinance

-

amount:

RON
2,806,318.

Brasov
Court

Ceased

under

art.

75

para.

1
final

thesis

from

Law

no.
85/2014

(as

a

result

of

the
finality

of

the

decision

to

open
the

bankruptcy

procedure

of
Romenergy

Industry

S.A.

(file
no. 2088/107/2016).

24

Plaintiff: DEER

Defendant: ELSA

4469/62/2018

Claims

according

to

the

Courts

of
Account findings – RON 8,951,811

Brasov
Court

First

instance.

The

High

Court
of

Cassation

and

Justice

solved
the

negative

competence
conflict

between

Brasov

Court
and

Bucharest

Court,

the

case
being

in

course

of

settlement

at
Brasov Court.

25

Plaintiff: DEER

Defendant:

directors
and managers

342/62/2020\*

Claims

against

the

former

general
managers

of

the

company,

as

a

result

of
the

non-fulfillment

of

some

measures
ordered

by

the

Court

of

Accounts

for

the
amount of RON 8,951,812.

Brasov
Court

Suspended

untill

the

final
settlement

of

case

no.
4469/62/2018.

201

Crt.
no.

Parties/Case file
number

Object

Court

Case status

26

Plaintiff: EL SERV

Defendant:

Best
Recuperare

Creante
SRL

2253/3/2011
(former
58348/3/2010)

Insolvency

–

amount

to

be

recovered:
RON 3,938,811.

Bucharest
Court

Procedure

closed.

It

was
ordered

the

deregistration

of
the

debtor

from

ORC

Bucharest.

27

Plaintiff: EL SERV

Defendant:

National
Leasing IFN S.A.

18711/3/2010

Bankruptcy

–

amount

admitted

to

the
list

of

creditors:

RON

21,663,983.27
(guaranteed

RON

17,580,203.48

and
unsecured RON 4,083,779.79).

Bucharest
Court

Ongoing proceedings.

28

Plaintiff: EL SERV

Defendant:

Servicii
Energetice

Banat
S.A.

8776/30/2013

(joint
with

cu
2982/30/2014)

Bankruptcy

-

amount

admitted

to

the

list
of creditors RON 72,180,439.68.

Timis Court

Ongoing proceedings.

29

Plaintiff: EL SERV

Defendant: SEO

2570/63/2014

Bankruptcy

-

amount

admitted

to

the

list
of creditors RON
 26,533,446.

Dolj Court

Ongoing proceedings.

30

Plaintiff: EL SERV

Defendant: SED

8785/118/2014

Bankruptcy

-

amount

admitted

to

the

list
of creditors: RON
15,130,315.27
.

Constanta
Court

Ongoing proceedings.

31

Plaintiff: EL SERV

Defendant:

SE
Moldova

4435/110/2015

Bankruptcy

–

amount:

admitted

to

the
list of creditors RON 73,708,082.90.

Bacau

Court

Ongoing proceedings.

32

Plaintiff: EL SERV

Defendant:

New
Koppel Romania

20376/3/2016

Claims

–

EUR

655,164,

equivalent

of
RON
3,210,305.75.

Bucharest
Court

Ongoing proceedings.

33

Plaintiff:

Integrator
S.A.

Defendant:

EL

SERV,

SAP Romania

34479/3/2016\*\*

Claims

–

EUR

1.277.435,25

EUR

license
+

2.650.855,68

EUR

maintenance

–
RON equivalent 19,321,005.11

Bucharest
Court

of
Appeal

The

case

was

suspended

on
12.06.2019

until

the

jurisdiction
was

established

in

case

3O
266/2017

registered

with

the
Karlsruhe

Court

and

declined

in
favor of the Mannheim Court.

34

Plaintiff: EL SERV

Defendant: SED

8785/118/2014/a1

Bankruptcy

–

opposition

to

the
preliminary

table

-

debt

RON

3,025,622.

Constanta
Court

Appeal

admitted

in

part,

the
court

ordering

the

registration
of

the

appellant

in

the
preliminary

table

of

the

debtor's
obligations

with

the

amount

of
RON

18,807.37,

representing
leasing

rates

and

maintenance
services. Definitively settled.

35

Plaintiff: EL SERV

Defendant:

directors

Action

in

attracting

the

liability

of
directors

and

administrators

-

measure

Bucharest
Court

of

The

court

dismissed

the

action
as

prescribed,

ordering

the

202

Crt.
no.

Parties/Case file
number

Object

Court

Case status

and

administrators
2013-2014

35815/3/2019

II.7

of

Decision

no.

13/27.12.2016
issued

by

the

Romanian

Court

of
Accounts–

RON

7,165,549

+

legal
interest of RON 4,485,340.29.

Appeal

plaintiff

to

pay

the

judicial

costs.
Appeal in course of settlement.

36

Plaintiff: EL SERV

Defendant:

directors
and

administrators
2010-2014

35828/3/2019

Action

in

attracting

the

liability

of
directors

and

administrators

-

measure
II.8

of

Decision

no.13/27.12.2016
issued

by

the

Romanian

Court

of
Accounts

for

the

amount

of

RON
19,611,812

+

Legal

penalties

of

RON
14,475,832.43.

Bucharest
Court

The

court

dismissed

the

action
as

it

has

been

modifed

and
specified,

as

prescribed.

Orders
the

plaintiff

to

pay

the

judicial
costs.

An

appeal

was

filed,

no
term was established.

37

Creditor: EFSA

Debtor:

Apaterm
S.A. Galati

4783/121/2011\*

Bankruptcy

–

registering

to

the

list

of
creditors

for

the

amount

of

RON
2,547,551.

Galati Court

Ongoing proceedings.

38

Creditor: EFSA

Debtor:

Vegetal
Trading SRL Braila

1653/113/2014

Insolvency

proceedings

-

registering

to
the

list

of

creditors

for

the

amount

of
RON 1,851,392.

Braila Court

Ongoing proceedings.

39

Creditor: EFSA

Debtor:

Ariesmin
S.A. Branch

7375/107/2008

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
20,711,588.

Alba Court

Ongoing proceedings.

40

Creditor: EFSA

Debtor:

Zlatmin

S.A.
Branch

6/107/2003

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
9,314,176.

Alba Court

Ongoing proceedings.

41

Creditor: EFSA

Debtor:
Hidromecanica S.A.

3836/62/2009

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
4,792,026.

Brasov
Court

Ongoing proceedings.

42

Creditor: EFSA

Debtor:

Nitramonia
S.A.

1183/62/2004

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
2,321,847

Brasov
Court

Ongoing proceedings.

43

Creditor: EFSA

Debtor: Remin S.A.

32/100/2009

Insolvency

proceedings

-

registering

to
the

list

of

creditors

for

the

amount

of
RON 71,443,402.

Timisoara
Court

Ongoing proceedings.

44

Creditor: EFSA

Debtor: Oltchim S.A.

887/90/2013

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
56,533,826.

Valcea
Court

Ongoing proceedings.

203

Crt.
no.

Parties/Case file
number

Object

Court

Case status

45

Creditor: EFSA

Debtor:

Energon
Power

and

Gas
S.R.L.

53/1285/2017

Insolvency

proceedings

-

registering

to
the

list

of

creditors

for

the

amount

of
RON 2,421,236.

Cluj
Specialized
Court

Ongoing proceedings.

46

Creditor: EFSA

Debtor: CUG S.A.

2145/1285/2005

Bankruptcy

-

registering

to

the

list

of
creditors

for

the

amount

of

RON
7,880,857.

Cluj
Specialized
Court

Ongoing proceedings.

47

Plaintiff: EFSA

Defendant: ELSA

6665/3/2019

Claims:

request

of

payment

rearding

the
invoices

paid

without

supporting
documents,

as

it

has

been

stated

by

the
Court of Account

– RON 7,025,632.

Bucharest
Court

The

First

Instance

court
dismissedthe

claim

of

EFSA

.
The

Decision

can

be

appealed
within

30

days

of

it’s
communication.

48

Plaintiff: EFSA

Defendant:

natural
persons

Called in guarantee:

ELSA

35647/3/2019

Claims

according

to

art.

155

of
Companies

Law

no.

31/1990

for

the
amount of RON 7,128,509.

Bucharest
Court

of
Appeal

Dismisses

as

prescribed

the
action

filed

by

the

plaintiff

EFSA.
and

dismisses

as

objectless

the
waranty

claims

issued

by

the
defendants,

two

former
directors

and

one

former
general

manager,

against

ELSA
.
The

amount

for

which

ELSA

was
called

as

collateral

is

around
RON

6,232,398,

representing
the

main

debit,

to

which

are
added

interest

and

payment

of
any

other

amounts

that

the
court

may

charge.

EFSA

filed
appeal,

dismissed

as
unfounded.

The

decision

can

be
appealed

(recourse)

within

30
days of it’s communication.

49

Plaintiff: EL SERV

Defendant:

ENEL
DISTRIBUTIE
MUNTENIA

S.A.
4233/2/2020
(former

no.
24088/3/2015)

Claims.

Late

payment

penalties
regarting

the

litigation

with

Autocourier
S.R.L.

in

amount

of

RON

3,068,929.67
according

to

the

Agreement

no.
1055/2002

as

well

as

delay

penalties

for
the

main

debt

of

RON

5,605,351.26
calculated

after

30.06.2015

untill

the
entire payment of the main debt.

High

Court
of

Cassation
and Justice.

Case

admitted

in

retrial

on
merits.

The

appeal

filed

by

Enel
against

the

decision

favorable

to
SEM

was

dismissed.

E-
Distributie filed an appeal.

50

Plaintiff:

IVAN
LAURA

IONELA
IVAN

CORNEL

Civil

liability

-

work

accident

resulting

in
employee

death

(amount

of

Bucharest

Case

suspended

according

to
art.

413

alin.

1

par.

1

Civil

204

Crt.
no.

Parties/Case file
number

Object

Court

Case status

IONUT
IVAN

VLADIMIR
MIHAI

Defendant:

EL

SERV

34705/3/2015

compensation claims – EUR 3 million).

Court

Procedure

Code.

(criminal

case
ongoing).

51

Plaintiff:

CAZACU
MARIA

Defendant: DEER

7212/200/2020

Liability

of

the

principal

for

the

act

of

the
defendant-

work

accident

resulting

in
death

of

an

AISE

employee

(amount

of
compensation claimed: EUR 510,000)

Buzau
Court

In course of settlement.

52

Plaintiff:

PRICOPIE
STEFAN

Defendant: DEER

12807/231/2019

Faulty

killing

(art.192

NCP)

-

third

party
electric

shock

(amount

of

damages
claimed: EUR 500,000)

Focsani
Court

In

course

of

settlement.
Decision

on

merits

on
11.02.2022.

53

Plaintiff:

DEER

–
Defendant:

COS
Targoviste

1906/120/2013

Insolvency

–

banckrupcy

–

total
amount:

RON

5,589,482.51

out

of

which
RON

1,357,789.92

–

amount

at

the

list
of

creditors

and

RON

4,231,692.59

-
current receivables.

Dambovita
Court

Ongoing

procedure.

From

the
total

receivables,

the

amount

of
RON

3,255,350.39

represents
the

current

receivables,

for
which

a

payment

request

was
formulated

which

is

the

object
of

the

file

2478/120/2021,
admitted

on

merits;

the
decission is not final.

54

Plaintiff: DEER

Defendant

:

Prutul
SA

4798/121/2019\*\*

Claims: RON 4,343,437

High Court
of
Cassation
and Justice

On

the

merits,

the

court
admitted

the

exception

of
inadmissibility.

The

solution

was
confirmed

in

the

appealed.

A
recourse was filed.

55

Plaintiff:

Verta

Tel
SRL

Defendant: DEER

4106/3/2021

Claims

–

contractual

liability:

RON
2,009,233

Bucharest
Tribunal

Case

dismissed

on

merits.

The
decision is appealable.

56

Plaintiff: DEER

Defendant:

Getica
95 SRL

1666/114/2021

Insolvency

–

registration

at

the

list

of
creditors

for

the

amount

of

RON
26,283,220.67

Buzau
Tribunal

Ongoing proceedings.

57

Plaintiff: DEER

Defendant:

AEM

S.A.

1347/119/2021

Claims

–

contractual

liability

–

RON
2,851,297.30

Covasna
Court

In course of settlement.

Source: Electrica

205

4.

#### Litigations against the Romanian Court of Accounts

Crt.
no.

Parties/Case file
number

Object

Court

Case status

1

Plaintiff: ELSA

Defendant:
Romanian

Court

of
Accounts

2268/2/2014\*

Suspension

and

cancellation

of

the
administrative

act:

Decision

no.

3/14
January

2014

and

the

Resolution

no.
23/17 March 2014.

High

Court
of

Cassation
and Justice

First

court:

the

claim

is

partly
admitted,

partially

cancels

the
Resolution

no.

23

of

17

March
2014

regarding

the

items

1

and
5

and

the

Decision

no.

3/14
January

2014

regarding

the
items

4

and

8.

Dismisses,

as
ungrounded

the

claim

regarding
items

2,

3

and

4

in

the

Resolution
no.

23/17

March

2014

and

items
5,

6

and

7

in

the

Decision

no

3/14
January

2014.

Rejects

the
request

to

suspend

the

execution
of

Decision

no.

3/14

January
2014,

as

unfounded.

ELSA

and
CCR

filed

an

appeal,

both

being
admitted.

The

court

partly
admitsELSA’s

request

and

sent
the

case

for

retrial

to

the

first
instance,

regarding

the
annulment

of

point

5

of

the
Decision

no.

23/17

March

2014,
related

to

point

8

of

the

Decision
no.

3/14

January

2014.

Retrial
phase:

On

first

instance,

the
court

rejected

the

plaintiff's
request

for

annulment

of

point

5
of

the

Resolution

no.
23/17.03.2014,

with
correspondent

in

point

8

of

the
Decision

no.

3/14.01.2014

issued
by

the

defendant.

With

appeal
within

15

days

from

its
communication.

ELSA

has
appealed

the

case,

with

term

on
25.03.2022.

2

Plaintiff: ELSA

Defendant:
Romanian

Court

of
Accounts

2229/2/2017

Partial

annulment

of

Decision

no.

12/27
December

2016,

issued

by

the

director

of
the

2
nd

Direction

from

the

IV
th

Department

of

the

Romanian

Court

of
Accounts,

regarding

the

faults

from

point
1

to

8,

with

the

consequence

of
dismissing

the

actions

from

point

1,

3

to
9

inclusive,

imposed

to

ELSA

by

the
disputed

Decision;

the

partial

annulment
of

the

conclusion

no.

12/27

February
2017

of

the

Romanian

Court

of

Accounts,
rejecting

the

objection

raised

by

ELSA
against

Decision

no.

12,

regarding

the
faults

and

orders

mentioned

above.

In
subsidiary,

the

extension

of

the

deadlines
for

carrying

out

all

the

measures

ordered
by

ELSA

through

Decision

no.

12/27

Bucharest
Court

of
Appeal

In course of settlement.

206

Crt.
no.

Parties/Case file
number

Object

Court

Case status

December

2016

with

at

least

12

months;
the

suspension

of

the

enforceability

of
Decision

no.

12

until

final

settlement

of
the present dispute.

3

Plaintiff: ELSA

Defendant:
Romanian

Court

of
Accounts

7780/2/2018

Administrative

litigation

for

annulment

of
Decision

no.

38/9

October

2018,

the
annulment

of

the

conclusion

by

which
the

appeal

imposed

by

Decision

no.

12/1
of

27

December

2016

was

dismissed,

the
revocation

of

the

Decision

no.

12/1

and
the cessation of any CCR control act.

High

Court
of

Cassation
and Justice

The

court

of

first

instance
dismissed

the

action

as
inadmissible.

ELSA

filed

an
appeal,

with

term

on

26.05.2022.

4

Plaintiff: EFSA

Defendant:
Romanian

Court

of
Accounts

2213/2/2017

Disputes

with

the

Romanian

Court

of
Accounts

(Law

no.

94/1992),

action

for
the

annulment

of

the

Decision

no.
11/2016,

of

the

Decision

no.

23/2017
and

of

the

Control

Report

no.

5799/2016.

High

Court
of

Cassation
and Justice

The

court

definitively

dismissed
the request filed by EFSA.

5

Plaintiff: EL SERV

Defendant:
Romanian

Court

of
Accounts

2098/2/2017

Litigations

with

the

Romanian

Court

of
Accounts

for

the

annulment

of

the
administrative

act

–

Decision

no.

11/27
February 2017.

Bucharest
Court

of
Appeal

In course of settlement.

6

Plaintiff: DEER

Defendant:
Romanian

Court

of
Accounts

Intervenient: SERV

1677/105/2017

Suspension

and

annulment

of

the
measures

imposed

by

the

Decision

of
Prahova

Court

of

Accounts

no.

45/2016,
following

the

Control

Report

of

the
Prahova

Court

of

Accounts

no.

6618/11
November 2016.

Prahova
Court

In course of settlement.

Source: Electrica

5
.

#### Other litigations with significant impact

Crt.

no.

Parties/Case file
number

Object

Court

Case status

1

Plaintiff:

Niculescu
Vladimir

Defendant:

DEER,
City

Hall

Valenii

de
Munte

1580/105/2008\*\*

Claim

under

Law

no.

10/2001

–

for

a
land

of

1,558

sqm

and

built

area

of

202
sqm,

located

in

Valenii

de

Munte,

129,
N.

Iorga

street

and

being

used

by

the
Exploitation Center Valeni.

Prahova
Court

In

first

instance,

the

plaintiff's
action

was

partly

admitted,

it

is
acknowledged

the

right

to
reparative

measures

by
equivalent

for

the

land

of
1,402

sqm

located

in

Valenii

de
Munte,

129,

Boulevard.
Nicolae

Iorga

(currently

no.
131),

Prahova

County.
The

Plaintiff

and

Valenii

de
Munte

Town

Hall

filed

an
appeal.

The

Plaintiff’s

appeal
was

admitted

and

the

case

was
sent

for

retrial

to

the

first
instance.

In

the

retrial,

the

first
instance

court

admitted

the
right

of

the

plaintiff

to
compensatory

measures

under

207

Crt.

no.

Parties/Case file
number

Object

Court

Case status

the

law

regarding

some
measures

for

completing

the
restitution

process

of

the
buildings

taken

over

abusively,
for

the

land

with

an

area

of
1,402

sqm.

With

appeal

within
15

days

from

the
communication.

2

Plaintiff: DEER

Defendant:

Local
Council

of

Oradea
City, RCS&RDS

3340/111/2015

Cancellation

of

Oradea

LCD

no.

108/17
February

2014

regarding

the
organization

of

the

public

auction

for

the
concession

of

the

100,000

sqm

land
area,

in

order

to

realize

an

underground
sewerage

for

the

placement

of

electronic
and

electrical

communications

networks.

Bihor Court

At

the

request

of

RCS-RDS,

the
case

was

suspended

until

the
case

file

2414/2/2016

was
settled

with

Delalina

SRL,

a

file
that

is

in

the

role

of

the
Bucharest Court of Appeal.

3

Plaintiff:

Delalina
S.R.L.

Defendant: DEER

910/111/2016

The

obligation

to

issue

technical

permit
for

connection

in

the

favour

of

SC
Delalina SRL.

Bihor Court

The

case

file

was

suspended
until

the

settlement

of

the

case
file

no.

2414/2/2016

with
Delalina

SRL,

case

file

on

the
lawsuit

of

the

Bucharest

Court
of Appeal.

4

Plaintiff:

Carei

City
and others

Defendant: DEER

15600/211/2016\*

Claims

-

it

is

requested

to

grant
compensation

in

the

form

of

material
and

moral

damages,

caused,

by
interrupting

the

supply

of

electricity

to
the

consumers,

in

the

Carei

municipality,
during 31.12.2014-02.01.2015.

Cluj
Specialized
Court

On

21.04.2021,

the

court
rejects

the

action

of

a

plaintiff
asa

result

of

admitting

the
exception

of

lack

of

capacity

to
use,

rejects

the

exception

of
lack

of

active

procedural
quality

of

plaintiffs,

invoked

by
defendants,

rejects

the
exception

of

lack

of

passive
procedural

quality

of
defendant

DEER,

rejects

the
exception

of

lack

of

procedural
quality

liabilities

of

the
defendant

Electrica

Furnizare
SA

and

admits

in

part

the
action

in

contradiction

with

the
defendant

ELECTRICA
FURNIZARE

SA.

Dismisses

as
unfounded

the

request

for
formal

proceedings

by

the
applicants

in

the

preceding
paragraph

in

contradiction
with

DEER.

Obliges

the
defendant

ELECTRICA
FURNIZARE

S.A.,

to

pay

the
moral

damages

in

favor

of

the
plaintiffs

in

a

differentiated
way,

in

the

amount

of

500

RON
for

some

of

the

plaintiffs,

750
RON

and

1000

RON

for

other
plaintiffs,

rejecting

at

the

same
time

the

moral

damages

for
other

plaintiffs.

Appeal

filed

by

208

Crt.

no.

Parties/Case file
number

Object

Court

Case status

Electrica

Furnizare

–

in

course
of settlement.

5

Plaintiff:

Delalina
S.R.L.,

Foto
Distributie S.R.L.

Defendant:

DEER,
ANRE,

Romanian
Government,
Ministry

of
Economy,
Commerce

and
Relationships

with
the

Business
Environment,
Ministry

of

Energy,
Banat

Enel
Distribution,
Muntenia

Enel
Distribution,
Dobrogea

Enel
Distribution

2414/2/2016

Cancellation

of

administrative

acts
(Order

73/2014,

Concession
agreements).

High

Court

of
Cassation
and Justice

First

court

has

rejected

the
exceptions

and

the

action

filed
by

the

plaintiffs,

which

have
initiated

an

appeal;

On
22.03.2021,

the

court

ruled

in
favor

of

the

company,

stating
that

DEER’s

(former

SDTN)
incident

appeal

was

invalid

and
rejected

as

unfounded

the
main

appeal

filed

by

Foto
Distributie

SRL

si

Delalina

SRL.
The

court

rejected

as
unfounded

the

appeals

filedby
E-Distributie

Muntenia

SA
(former

Enel

Distributie
Muntenia),

E-Distributie

Banat
SA

(former

Enel

Distributie
Banat)

si

E-Distributie
Dobrogea

SA

(former

Enel
Distributie

Dobrogea).
Dismisses,

as

unfounded,

the
cross

-

appeal

brought

by

the
appellant

-

defendant

Ministry
of

Economy,

Entrepreneurship
and

Tourism

(Ministry

of
Economy)

and

the

cross

-
appeal

filed

by

the

Ministry

of
Energy

against

the

same
sentence. Final.

6

Plaintiff:

Delalina
S.R.L.,

Foto
Distributie S.R.L.

Defendant:
ANRE

Intervener: DEER

4013/2/2016

The

cancellation

of

the

ANRE

decision

on
refusal

to

give

licenses

for

electricity
distribution.

Court

of
Appeal
Bucharest

In course of settlement.

7

Plaintiff: ELSA

Defendant:

E

–
Distributie

Banat
S.A.

30399/325/2018\*

Obligation

to

do

-

Mainly

obliging

the
defendant

to

hand

over

the
documentation

for

the

land

in

Bocsa.

In
subsidiary,

the

obligation

to

draw

up

the
CADP

documentation

and

payment

of
damages.

Timisoara
Court

of
Appeal

Case

rejected

by

first

and
second

court.

ELSA

filed

an appeal,

admitted

by

court.

The
appeal

court

quashes

the
contested

decision

and,

re-
judging,

admits

the

appeal,
partially

changes

the

sentence
of

the

first

instance

in

the
sense

that

it

partially

admits
the

action

and

obliges

the
defendant

to

fulfill

the
formalities

imposed

by

H.G.
834/1991

in

order

to

obtain
the

Certificate

of

Attestation

of
the

Property

Right

and

to

hand
over

the

documentation

for

209

Crt.

no.

Parties/Case file
number

Object

Court

Case status

obtaining

the

certificate.
Maintains

the

sentence
regarding

the

rejection

of

the
principal

claim

regarding

the
obligation

of

the

defendant

to
hand

over

the

prepared
documentation,

as

well

as
regarding

the

obligation

of

the
defendant

to

pay

the
comminatory

damages.
Dismisses

the

defendant's
cross-appeal

against

the

same
judgment. Definitive.

8

Plaintiff:

ELSA
Defendant:

Baile
Herculane City

4572/208/2018\*

Claim

for

land

Lot

1-NC

32024

(area

of
259

sqm)

and

lot

2

NC

31944

(with

a
surface

of

1,394

sqm),

both

located

in
Baile

Herculane,

1,

Uzinei

street

and

FC
rectification.

Caras
Severin
Court

The

first

court

admits

the
exception

of

the

lack

of

active
procedural

quality

of

ELSA

and
dismisses

the

action.

ELSA
filed

an

appeal,

dismissed

as
unfounded.

ELSA

filled

an
appeal,

admitted

by

court,
which

sends

the

case

for

retrial
to

Caras

Severin

Court.

Retrial
– in course of settlement.

9

Plaintiff:

E-
Distributie Banat

Defendant: ELSA

12857/3/2019

(i)

ELSA's

compliance

with

the

obligation
of

not

to

do

regarding

the

share

capital
and

the

AoA

of

the

EDB

and

the
termination

of

abusive

actions

consisting
of

the

requests

addressed

to

the

ONRC
to

change

the

structure

of

the

share
capital

and

the

articles

of

association

of
the

EDB

by

increasing

the

share

capital
with

the

value

of

the

land

in

the
Certificates

of

attestation

of

the

property
right

held

by

ELSA

on

the

land

used

by
EDB

in

order

to

carry

out

the

activity;

(ii)
Stating

the

fact

that

Electrica

does

not
hold

the

quality

of

public

authority
involved

in

the

privatization

process

and,
consequently,

acknowledging

the
absence

of

the

right

of

ELSA

to

request
ONRC

to

modify

the

constitutive

act

of
the

EDB

by

increasing

the

share

capital
with

the

value

of

the

land

owned

by
ELSA

based

on

CADP

on

the

used

land
from

EDB;

(iii)

As

against

to

the

abusive
actions

taken

in

the

EDB's

opinion,
ELSA's

obligation

to

pay

the

damages
whose

existence

and

amount

will

be
proved by the deadline provided by law.

Bucharest
Court

In course of settlement.

10

Plaintiff:

ELSA,
SAPE

Defendant:

E-
Distributie Banat

Action

for

the

annulment

of
Shareholders

resolution

5/06.12.2018
(share capital increase for SAPE).

Timis Court

In

course

of

settlement.

At

this
case

was

connected

the

case
no. 988/30/2019.

210

Crt.

no.

Parties/Case file
number

Object

Court

Case status

949/39/2019

11

Plaintiff:

E-
Distributie Banat

Defendant: ELSA

1994/30/2019/a1

Complaint

against

the

resolution

of

the
ORC director.

Timisoara
Court

of
Appeal

The

request

was

rejected
definitively.

E-Distributie

Banat
filed

an

appeal

for

annulment
(case.

793/59/2021),

rejected.
E-Distributie

Banat

filed

a
request

for

review

(case.
880/59/2021),

dismissed

by
the court.

12

Plaintiff: ELSA

Defendant:

UAT
Targu Neamt

122/321/2020

1.

obliging

the

defendant

to

leave

us

in
full

ownership

and

possession

of

the
land

with

an

area

of

3,389

sqm,

located
in

Targu

Neamt,
2.

rectification

of

the

entries

from

the
land

book

no.

55409

of

the

City

of

Targu
Neamt,

in

the

sense

of

elimination

of

the
inappropriate

registrations

made

in

it,

in
order

to

agree

the

tabular

status

with
the

real

legal

situation

of

the

building,
respectively

the

cancellation

of

the
property

right

of

the

tabular

owner
Targu

Neamt

City

and

the

registration

of
the

property

right

of

the

Energy
Company

Electrica

SA
3.

Order

the

defendant

to

pay

the

court
costs.

Bacau

Court
of Appeal

The

action

was

dismissed

on
merits.

ELSA

filed

an

appeal,
dismissed

as

unfounded.

The
decision was appealed.

13

Plaintiff: ELSA

Defendant:

UAT
Bicaz

91/188/2020

1.obliging

the

defendant

to

leave

us

in
full

ownership

and

possession

of

the
land

in

the

area

of

10,524

sqm

(from
documents

22,265

sqm),

located

in
Bicaz,,

Neamt

county.
2.

rectification

of

the

entries

from

the
land

book

no.

52954

of

Bicaz

City,

in

the
sense

of

elimination

of

inappropriate
entries

made

in

it,

in

order

to

agree

on
the

tabular

status

with

the

real

legal
situation

of

the

building,

respectively

the
cancellation

of

the

property

right

of

the
tabular

owner

Bicaz

City

and

the
registration

of

the

property

right

of
Societatea

Energetice

Electrice

Electrica
S.A.
3.

Order

the

defendant

to

pay

the

court
costs.

Neamt
Tribunal

The

court

of

first

instance
partially

annuls

the

Decision

of
the

Local

Council

of

Bicaz

no.
94

/

25.08.2016,

respectively
regarding

the

surface

of
10,524

sqm

of

urban

land

3,
Bicaz,

Energiei

street

(former
Plant),

located

at

the

last
position

of

the

table

in

the
Annex

to

HCL

no.

94

/
25.08.2016,

following

the
admission

of

the

exception

of
illegality,

invoked

by

the
plaintiff.

Dismisses

the

action
brought

by

ELSA

as
unfounded.

Admits

in

part

the
action

in

the

rectification

of

the
land

book.

It

orders

the
rectification

of

the

Land

Book
no.

52954

of

the

City

of

Bicaz,
regarding

the

land

with

an
area

of

10,524

sqm,

located

in
Bicaz,

3,

Energiei

street,

,
Neamţ

County

(former

Uzinei),
in

the

sense

of

deleting

the
property

right

of

the

defendant

211

Crt.

no.

Parties/Case file
number

Object

Court

Case status

Bicaz

city,

as

a

result

of

the
partial

annulment

of

HCL

no.
94

/

25.08.2016,

regarding

this
land.

Rejects

as

unfounded

the
applicant's

request

to

order

the
rectification

of

the

Land

Book
no.

52954

of

the

City

of

Bicaz,
regarding

the

land

with

an
area

of

10,524

sqm,

located

in
Bicaz,

3,

Energiei

street,

,
Neamţ

County

(former

Uzinei),
in

the

sense

of

registering

the
ELSA

property

right

over

the
above

mentioned

land.

ELSA
appealed.

14

Plaintiff: ELSA

Defendant:

Videle
City,

through

Mayor

948/335/2020

1.obliging

the

defendants

to

leave

us

in
full

ownership

and

possession

of

the
land

surfaces

that

overlap

with

the

land
located

in

1,

Aleea

FRE

street,

Videle,
Teleorman

county,

for

which

we

hold
CADP.
2.

the

delimitation

of

the

above-
mentioned

properties,

by

establishing
the

boundary

line

according

to

the
property

deeds

of

the

parties;
3.

rectification

of

the

entries

in

the

land
book

and

registration

of

the

property
right

of

the

plaintiff

ELSA

on

this

area

of
land

Videle Court

Admits

in

part

the

request

for
summons

and

consequently:
establishes

the

land

line
boundary

of

the

plaintiff's
property

(ELSA)

on

the

current
boundarylines,

outlined

on

the
situation

plan

related

to

the
completion

of

the

expert
report,

with

the

coordinates
indicated

by

the

expert,

land
delimited

points

1-2-3-4-5-6-7-
8-9-10-11-12-13-14-15-16-17-
18-19-20-21-22-23.

It

orders
the

rectification

of

the

land
book

no.

23176

by
repositioning,

in

order

to
eliminate

any

virtual

overlap
between

the

land

belonging

to
the

plaintiff,

with

the

boundary
line

as

previously

established,
and

the

land

registered

in

this
land

book.

Dismisses

the
action as unfounded.

15

Plaintiff: DEER

Defendant:

ANARC
(ANCOM)
andTelekom
Romania
Communications

SA

7407/2/2020

Appeal

against

Decision

no.

1177

/
13.11.2020

of

the

ANARC

President.

It
was

requested

the

partial

annulment

of
the

ANCOM

decision

and

the

complete
rejection

of

the

Telekom

Romania
request.

Bucharest
Court

of
Appeal

In course of settlement.

16

Plaintiff:

Valenii

de
Munte City Hall

Defendant: DEER

2848/105/2020

Valenii

de

Munte

City

Hall

requests

the
obligation

of

DEER

(Ploiesti)

to

take

over
public

lighting

installations

and

to

pay
their equivalent value of RON 466,880.

Prahova
Court

In course of settlement.

17

Plaintiff

:

ELSA

and
the subsidiaries

Defendant:
Romanian
Government

Annulment

of

administrative

act:
Government

Decision

1041/2003

on
some

measures

to

regulate

the

facilities
granted

to

pensioners

in

the

electricity

High

Court

of
Cassation
and Justice

Case

dismissed

on

merits;

it
was

filed

an

appeal,

term

on
23.02.2023.

212

Crt.

no.

Parties/Case file
number

Object

Court

Case status

3781/2/2020

sector.

18

Plaintiff:

Grup

4
Instalatii

Defendant:

DEER
375/1285/2021

The

obligation

of

DEER

to

recognize,

to
respect

the

property

right

of

G4Installatii
regarding

the

buildings

located

in

Cluj
Napoca,

28A,

Ilie

Macelaru

Street

.

and
2,

Uzinei

Electrice

Street.

,

registered

in
land

book

297841

Cluj

Napoca

with

no.
297841,

consisting

of

land

with

an

area
of

10720

sqm

and

constructions:
construction

registered

in

land

book

with
no.

297841-C1,

construction

of
administrative

headquarters

with

an
area

of

1560

sqm;

body

A,

construction
no.

297841-

C2

-

512

sqm,

building

B,
construction

no.

297841

-

C3

-

171

sqm,
building

C,

construction

no.

297841

-

C4
-

338

sqm,

building

D,

construction

no..
297841-C6

-

348

sqm

-

110/10

Kw
Transformation

Station.

It

is

requested
the

handing

over

of

the

above

buildings
and

the

rectification

of

the

land

book
registrations

in

the

sense

of:

the
annulment

of

the

tabulation

conclusions
by

which

the

DEER

property

right

was
registered,

the

deregistration

of

the

land
book

property

right,

the

registration

of
the property right in favor of G4I.

Cluj Tribunal

The

court

admits

the

exception
of

the

material

incompetence
of

the

Cluj

Specialized
Tribunal,

an

exception

invoked
ex

officio

and

consequently
declines

the

competence

to
resolve

the

request

for
summons

in

favor

of

the

Cluj
Tribunal-Civil

Section.

Pending
settlement in this court.

19

Plaintiff: ELSA

Defendant:
Kaufland

Romania
SCS,

Deva

City,
through

the

Mayor
and

Deva

City
Council

156/221/2021

1.

obliging

the

defendants

to

leave

us

in
full

ownership

and

possession

of

the
land

surfaces

that

overlap

with

the

ELSA
land

located

in

Deva

municipality,

1,
Dorobanți

street,

Hunedoara

county,

as
follows:

(a)

Kaufland

Romania

SCS

-

land
areas

of

15

sqm

and

50

sqm

(part

of

the
Kaufland

Deva

parking

lot),

identified

by
IE

68452,

which

overlap

to

the

N-W

with
the

land

owned

by

Electrica;

(b)

Deva
Municipality,

through

the

Mayor

and

the
Local

Council

of

Deva

Municipality

-

land
areas:

(i)

2

sqm

(part

of

the

“Playground
for

children”),

identified

by

IE

71851,
which

overlaps

to

the

NE

with

the

land
in

the

ownership

of

Electrica

and

(ii)

of
23

sqm

(part

of

“Calea

Zarandului”),
identified

by

IE

75973,

which

overlaps

to
the

SW

with

the

land

owned

by

Electrica;
2.

the

delimitation

of

the

above-
mentioned

properties,

by

establishing
the

boundary

line

according

to

the
property

deeds

of

the

parties;

3.
rectification

of

the

entries

in

the

land
book

regarding

the

above-mentioned
land

areas,

in

the

sense

of

eliminating
the

inappropriate

entries

made,

in

order

Deva Court

In course of settlement.

213

Crt.

no.

Parties/Case file
number

Object

Court

Case status

to

reconcile

the

tabular

status

with

the
real

legal

situation

of

the

real

estate,
respectively

of

the

cancellation

of

the
property

right

tabular

owners

and

the
registration

of

the

property

right

of

the
applicant ELSA over these land areas.

20

Plaintiff: ELSA

Defendant:

UAT
Chisineu Cris

2143/210/2020

1.

obliging

the

defendant

to

leave

us

in
full

ownership

and

possession

of

the
land

with

an

area

of

529

sqm

identified
with

Cadastral

no.

306526,

registered

in
the

land

book

no.

306526

Of

Chisineu
Cris,.

County

Arad,

located

in

Chișineu
Criș,

63,

Înfrățirii

street.

,

Arad

county,
as

well

as

the

land

with

an

area

of

121
sqm,

identified

with

Cadastral

no.
306527,

registered

in

the

lank

booj

no.
306527

of

Chisineu

Cris,.

County

Arad,
located

in

Chișineu

Criș,

63,

Înfrățirii
street. , Arad County.

2.

rectification

of

the

entries

in

the

land
books

no.

306526

and

306527

of

the
City

of

Chisinau

Cris,

in

the

sense

of
eliminating

the

inappropriate

entries
made,

in

order

to

reconcile

the

tabular
status

with

the

real

legal

situation

of

the
buildings,

respectively

the

cancellation
of

the

property

right

of

the

tabular
owner

Chisinau

Cris

City

and

registration
of

the

property

right

of

ELSA

3.

Order
the defendant to pay the costs.

Arad
Tribunal

Case

dismissed

on

merits.

It
was

filed

an

appeal

–

in

course
of settlement.

21

Plaintiff:

Alexandra
Borislavschi

Defendant: ELSA

ARB - 5670

1.Obligation

of

the

defendant

to

pay

to
the

plaintiff

the

amount

of

166,738

lei,
representing

the

percentage

of

55%

of
the

OAVT

package,

in

accordance

with
the

provisions

of

Annex

3

to

the
mandate

contract

no.

42/10.08.2015.

2.
Obligation

of

the

defendant

to

pay

to

the
plaintiff

damages

for

non-execution

of
the

obligation

to

pay

the

percentage

of
55%

of

the

OAVT

package.

3.

Obligation
of

the

defendant

to

pay

the

amount

of
11,973

lei,

representing

the

annual
variable

remuneration

for

2018.

4.
Obligation

of

the

defendant

to

pay

the
amount

of

24,756

lei,

representing

the
annual

variable

remuneration

related

to
2019.

5.

Updating

the

amounts

provided
in

the

preceding

items,

with

penalizing
legal

interest.

The

asked

damages
should

be

calculated

as

the

legal

penalty
interest

plus

8%

payable

per

each

day

of
delay

as

of

the

date

of

the

registration

of
the

claim

until

the

payment

of

the

55%
of

OAVT

package

by

the

defendant.

6.

Vienna
International
Arbitral
Centre

No term was settled.

214

Crt.

no.

Parties/Case file
number

Object

Court

Case status

Obligation

of

the

defendant

to

pay

the
expenses

incurred

by

the

request

for
arbitration.

Source: Electrica

215

### Appendix


2

–


### Details of the main investments of Electrica Group during 2020







In 2021 the most significant investments of Electrica Group are the following
:

DESCRIERE

Valoare

(mil. RON)

MUNTENIA NORD

Modernization and SCADA system integration of 110/20 kV Ianca Substation

2.61

Modernization

of

poll

mounted

transformer

substation,

LV

OHL

equipment

and

LV

connections
in

Cobia

commune,

localities:

Gherghitesti,

Frasin

Vale,

Frasin

Deal,

Manastirea,

Mislea,
Capsuna, Craciunesti, Closcani, Blidari

1.89

Voltage level improvements in Tudor Vladimirescu locality, Galati County

2.09

Upgrading

of

110kV

protection

system

and

SCADA

system

integration

for

Ploiesti

Sud
Substation

3.98

Voltage

level

improvements

for

consumers

in

Mogosani

commune,

localities

Mogosani,

Meri,
Chirca, Cojocaru, Zavoiu

2.85

Modernization

of

electricity

distribution

installations

belonging

to

Buzau

branch,

at

blocks

of
flats in Brosteni neighborhood, Buzau County

4.03

Extension and modernization of 110/20/6 kV Tecuci Substation, Galati County

1.65

Modernization

of

20kV

OHL

by

replacing

the

insulation

and

conductors

(20kV

OHL

Urleasca

-
SR

Ramnicelu,

20kV

OHL

Lacu

Sarat

-

SRPD

1-4,

20kV

OHL

Romanu

-

T.

Vladimirescu

and

20kV
OHL Gropeni – Tichilesti)

3.51

Modernization and SCADA system integration of 110/20 kV Magura Substation

1.19

Extension

of

SMART

Metering

System

(SMS)

in

Vrancea

county,

localities

Marasesti,

Gologanu,
Slobozia

Ciorasti,

Jiliste,

Balta

Ratei,

Liesti,

Gura

Calitei,

Cocosari,

Groapa

Tufei,

Rasca,
Sotarcari,

Rachitosu,

Bicestii

de

Jos,

Vulturu,

Popesti,

Tamboiesti,

nanesti,

Vitanesti

de

sub
Magura,

Urechesti,

Sarbi,

Biliesti,

Mircestii

NOi,

Dragosloveni,

Budesti,

Valea

Cotesti,
Hangulesti,

Ciorasti,

Codresti,

Spatareasa,

Ciuslea,

Bordesti,

Bordestii

de

Jos,

Bordestii

de

Sus,
Chiojdeni,

Maracini,

Seciu,

Lojnita,

Martinesti,

Jitia,

Candesti,

Candesti

Deal,

Candesti

Vale,
Precistanu,

Poiana

Cristei,

Mihalceni,

Armeni,

Belciugele,

Coroteni,

Balesti,

Faurei,

Bordeasca
Veche

1.27

Modernization

of

distribution

networks

in

area

of

poll

mounted

transformer

substations:

7087
no.

1,

7083

no.

2,

7084

no.

4,

7085

no.

5,

7088

no.

6,

7188

nr.

7

and

7082

SMA

from

Chiraftei
locality, Mastacani commune, Galati County

1.15

Modernization of distribution networks in Voetin, Sihlea, Vrancea County

2.17

Increasing

the

supply

reliability

of

20

kV

OHL

Petresti-Irigatii

2,

from

110/20

kV

Crovu
Substation, Arges river crossing

0.95

Modernization

of

LV

OHL

and

LV

connections

for

consumers

of

Stefan

cel

Mare

Street,

Braila
city

1.01

Modernization

of

transformer

substations

powered

from

20

kV

Independenta

underground
cable line, Unirii, 24 Ianuarie, Substatia Obor, Patinoar, in Buzau city

0.89

Modernization

of

20

kV

OHL

by

replacing

insulation

and

conductors

20

kV

OHL

Pisc

-

SPP

4,
20kV OHL Cuza Voda - Tufesti, 20kV OHL maxeni Scortaru, 20kV OHL Romanu - Traianu

1.73

Modernization and integration in SCADA of 110/20/6 kV Buzau Est substation

3.40

Modernizationof distribution Network in Gugesti locality, Vrancea county

3.90

Upgrading

to

20kV

the

Transformer

subtaition

in

Galati

municipality

-

Cartier

Traian

Nord

area,
Galati county;

1.37

Execution

of

coexistence

conditions

with

the

existing

electrical

networks

necessary

to

obtain
the

location

permit

for

Traian

Vuia

street,

H.

Coanda

street,

blv.

G.

Cosbuc,

1

Decembrie

1918
Street and Al. Butcher mun. Galati

4.41

Integration in SCADA of the Berceni 110/20 kV substation

1.54

Modernization

of

Transformer

substation

PTZ

0065

and

0.4

kV

OHL

in

the

related

area,

Campina
city

1.00

Modernization

pole

mounted

transformer

substations

(PTA),

LV

OHL

and

connections

in

Morteni

1.47

216

DESCRIERE

Valoare

(mil. RON)

commune, localities, Neajlov, Morteni, Florica.

Voltage

level

improvement

for

consumers

in

Dambovita

county,

commune

Uliesti,

localities
Uliesti, Croitori, Jugureni, Olteni, Manastioara, Stravapolia.

2.46

Voltage

level

improvement

for

consumers

in

commune

Petresti

–

localities

Coada

Izvorului,
Greci, Puntea de Greci, Gherghesti, Ionesti, Potlogeni Deal

2.40

Voltage

level

improvement

for

consumers

in

commune

Ciocanesti,

localities

Ciocanesti,

Cretu,
Vizuresti

1.96

Voltage

level

improvement

for

consumers

in

Costesti

Vale,

Tomsani

localities,

Costesti

Vale

commune
, Dambovita county.

2.18

Voltage

level

improvement

for

consumers

in

localities

Dragodana,

Straosti,

Burduca,

Cuparu,
commune
 Dragodana, Dambovita county

1.59

Voltage

level

improvement

for

consumers

in

localities

Contesti,

Savesti,

Crangasi,

Mereni,
Calugareni, Boteni, commune Contesti

1.75

TRANSILVANIA SUD

Integration

of

substations

from

Alba

110

kV

Operations

Centre

into

the

SCADA

DMS

system

of
SDTS

13.30

Modernization

of

transformer

substations

by

replacing

MV

cells,

TDRIs

(indoor

network
distribution

board

for

transformer

stations),

integration

in

SAD

and

repairing

buildings

related
to transformer stations in Sacele municipality, Brasov County

7.32

Voltage

level

improvements

and

modernization

of

LV

OHL

and

LV

electrical

connections

in
Sancraiu de Mures and Nazna, Mures county

4.74

Modernization of LV OHL Marsa locality, Sibiu County

2.78

Modernization of LV OHL Hipodrom 1, 2, 3 area, Sibiu municipality, Sibiu County

4.55

Modernization

of

distribution

network

20/0,4

kV,

LV

connection

securing,

locality

Feldioara,
Brasov County - Stage 1 area related to transformer substations no.11 and 30

2.85

Modernization of LV OHL Bistra, Bistra commune, Alba County

2.56

Modernization

of

MV

network

and

of

LV

OHL,

voltage

level

improvements

and

security

and
systematization

of

LV

connections

-

Doamna

Stanca

street

and

related

streets,

Fagaras
municipality, Brasov County

2.03

Works at 110 kV OHL South Sibiu - Ucea 1 + 2, Sibiu County

1.40

Voltage

level

improvements

and

modernization

of

electrical

distribution

network,

LV

OHL

and
LV connections of Stejerisului, Cibinului, Calea Poienii streets, Brasov locality, Brasov County

1.87

Modernization

of

distribution

networks

on

Dozsa

Gyorgy,

Belchiei,

Pescarilor,

Rozelor

streets,
Gheorgheni municipality, Harghita County

2.46

Backup power 20 kV busbars - Sanpaul Station, Mures County

1.30

Modernization of distribution network 20kV Sovata - Oras 2, Sovata
locality
, Mures county

1.50

Modernization

of

the

protection

system,

in

order

to

reduce

the

number

of

consumers

affected
in

case

of

defects

with

grounding

on

the

20

kV

distributors

of

(pole

mounted

transformer
substations) PAs that supply electricity to users from Sibiu municipality, Sibiu County

1.10

Modernization

of

OHL

0,4

kV

Blaj,

str.

Eroilor

(partial),

Fabricii,

Locomotivei,

Fochistilor,
Ceferistilor,

Dr.

V.

Suciu,

I.M.

Klein,

Gh.

Sincai

and

A.

Muresanu,

Blaj

municipality
,

Alba

County

– stage 3

1.20

Modernization

of

OHL

0,4

kV

Blaj,

streets.

Eroilor

Fabricii,

Locomotivei,

Fochistilor,

Ceferistilor,
Dr.

V.

Suciu,

I.M.

Klein,

Gh.

Sincai

si

A.

Muresanu,

Blaj

municipality
,

Alba

county-

stages

1,2

si
4

2.30

Modernization

of

electricity

supply

installations

in

Medias

City

–

Vitrometan

neighbourhood
,
Sibiu County

5.44

Voltage

level

improvement

and

modernization

of

OHL

0.4

kV.

streets
.

Avram

Iancu

and

Motilor,.
Aiud locality, Alba
County

2.30

Decentralization

of

the

MV

network,

voltage

level

improvement

and

conductors

replacement

in
LV

network,

modernization

and

security

of

connections

to

Zarand,

Cetinii,

Genral

Traian

Mosoiu
streets, Brasov
locality
, Brasov County

1.90

Voltage level improving and modernization of OHL LV Parau, Brasov county

1.08

217

DESCRIERE

Valoare

(mil. RON)

Voltage level improving area PTA 9 Harman, neighborhood Domnitorilor, Brasov County

1.80

Voltage level improving

and securing connections Vatava locality, Mures county

1.32

Increasing safety of supply and voltage level in 20kV network Regin, Mures county

1.65

Voltage level improving and modernization of connections in Saulia de Campie, Mures county

1.97

Voltage

level

improving

and

modernization

of

LV

OHL

and

connections

Deda

locality,

Mures
County

2.59

Implementation of Smart Metering System
Brasov branch area

4.94

TRANSILVANIA NORD

Integrated security, monitoring and intervention System for the substations of SDTN

6.14

Construction

of

new

MV

underground

cable

line

to

increase

the

security

of

electricity

supply

in
area of Cihei locality, Sanmartin commune

2.70

Modernization

of

transformer

substations

belonging

to

Cluj-Napoca

branch,

Cluj

County

-

Vol.2
- Gherla area

1.98

Modernization of 110/20 kV Nistru Substation

3.39

Reservation

of

20kV

busbar

for

Satu

Mare

2

Substation

from

Carpati

Substation,

Satu

Mare
municipality

1.95

Modernization of 110/20/10 kV Baciu Substation

2.20

Modernization of Satu Mare 2 110 kV Substation and introduction of 20kV busbar

2.24

Modernization

of

the

electrical

distribution

networks

in

the

Municipality

of

Cluj-Napoca,

21
Decembrie 1989 boulevard area and the adjacent streets, Cluj County

2.65

Modernization of neutral treatment groups in Carei 1 Substation

1.47

Modernization

OHL

20KV

Pump

between

S.S.

6350

and

FBT

transformer

substation

-
reconstruction

of

poll

mounted

transformer

station

Moara

Jibou

and

voltage

level

normalization
on Campului street, Jibou locality

1.46

Network

decentralization

and

power

injection

in

the

area

of

Spicului

street,

Cluj

Napoca
municipality, Cluj county

1.85

Modernization of pole mounted transformer substations (PTA) Oradea branch

1.12

Modernization of 20 kV OHL Palota - Cheresig

1.11

Power injection Bufet Expres area, Madach Imre street, Oradea locality, Bihor county

2.02

Increasing the safety of electricity supply in Coada Lacului area - Stana de Vale

1.74

Modernization of substation 110/20 kV SASAR

1.16

Modernization of substation 110/20/6 kV Prundu Bargaului

3.41

Modernization of OHL 110kV Nasaud- Rodna poles 79-128 Bistrita Nasaud county

1.22

Modernization of substation 110/20 KV Sarmasag

2.51

In

anul

2021,

cele

mai

mari

transferuri

din

imobilizari

corporale

in

curs

la

imobilizari

corporale

reprezentand,

in

principal,
punerea in functiune a obiectivelor de investitii, sunt urmatoarele:

DESCRIERE

Valoare

(mil. RON)

MUNTENIA NORD

Extension and modernization of 110/20/6 kV Tecuci Substation, Galati County

3.68

Upgrading

of

110kV

protection

system

and

SCADA

system

integration

for

Ploiesti

Sud
Substation

7.12

Modernization

of

transformer

station

equipments,

LV

OHL

equipments

and

LV

connections

in
Cobia

commune,

localities:

Gherghitesti,

Frasin

Vale,

Frasin

Deal,

Manastirea,

Mislea,

Capsuna,
Craciunesti, Closcani, Blidari

1.95

Increasing

the

network

voltage

from

6

kV

to

20

kV

in

Tecuci

city,

stage

III

–

neighbourhoods
N.Balcescu, Gh.Petrascu and Criviteni, Galati county

1.90

Increasing

the

supply

reliability

of

20

kV

OHL

Petresti-Irigatii

2,

from

110/20

kV

Crovu
Substation, Arges river crossing

1.83

Upgrading

protections

of

110

kV

and

6

kV

cells,

installation

of

the

second

neutral

earthing
group

by

resistor

at

20

kV

and

SCADA

system

integration

in

110/27,5/20/6

kV

Ploiesti

Nord
Substation

2.68

218

DESCRIERE

Valoare

(mil. RON)

Modernization and SCADA system integration of 110/20 kV Mizil Substation

2.39

Modernization and SCADA system integration of Magura Substation

1.41

Modernization

of

electrical

distribution

networks

in

area

of

poll

mounted

transformer
substations:

7087

no.

1,

7083

no.

2,

7084

no.

4,

7085

no.

5,

7088

no.

6,

7188

nr.

7

and

7082
SMA from Chiraftei locality, Mastacani commune, Galati County

1.32

Modernization

of

electricity

distribution

installations

belonging

to

Buzau

branch,

at

blocks

of
flats in Brosteni neighborhood, Buzau County

3.83

Extension

of

SMART

Metering

System

(SMS)

in

Vrancea

county,

localities

Marasesti,

Gologanu,
Slobozia

Ciorasti,

Jiliste,

Balta

Ratei,

Liesti,

Gura

Calitei,

Cocosari,

Groapa

Tufei,

Rasca,
Sotarcari,

Rachitosu,

Bicestii

de

Jos,

Vulturu,

Popesti,

Tamboiesti,

nanesti,

Vitanesti

de

sub
Magura,

Urechesti,

Sarbi,

Biliesti,

Mircestii

NOi,

Dragosloveni,

Budesti,

Valea

Cotesti,
Hangulesti,

Ciorasti,

Codresti,

Spatareasa,

Ciuslea,

Bordesti,

Bordestii

de

Jos,

Bordestii

de

Sus,
Chiojdeni,

Maracini,

Seciu,

Lojnita,

Martinesti,

Jitia,

Candesti,

Candesti

Deal,

Candesti

Vale,
Precistanu,

Poiana

Cristei,

Mihalceni,

Armeni,

Belciugele,

Coroteni,

Balesti,

Faurei,

Bordeasca
Veche

1.39

Modernization and SCADA system integration of 110/20 kV Ianca Substation

3.51

Modernization

of

20kV

OHL

by

replacing

the

insulation

and

conductors

(20kV

OHL

Urleasca

-
SR

Ramnicelu,

20kV

OHL

Lacu

Sarat

-

SRPD

1-4,

20kV

OHL

Romanu

-

T.

Vladimirescu

and

20kV
OHL Gropeni – Tichilesti)

3.97

Modernization

of

LV

OHL

and

LV

connections

for

consumers

of

Stefan

cel

Mare

Street,

Braila
city

1.60

Modernization

of

transformer

substations

powered

from

20

kV

Independenta

underground
cable line, Unirii, 24 Ianuarie, Substatia Obor, Patinoar, in Buzau city

1.31

Modernization and integration in SCADA of 110/20/6 kV Buzau Est substation

2.95

Modernization of distribution networks in Voetin, Sihlea, Vrancea County

2.44

Modernizationof distribution network in Gugesti locality, Vrancea county

4.24

Voltage level improvements in Tudor Vladimirescu locality, Galati County

2.40

Upgrading

to

20kV

the

Transformer

subtaition

in

Galati

municipality

-

Cartier

Traian

Nord

area,
Galati county

1.45

Realization

of

coexistence

conditions

with

the

existing

electrical

networks

necessary

to

obtain
the

location

permit

for

Traian

Vuia

street,

H.

Coanda

street,

blv.

G.

Cosbuc,

1

Decembrie

1918
Street and Al. Macelaru street, Galati municipality

4.40

Modernization and SCADA integration substation 110/20 kV Valea Larga

1.47

Integration in SCADA of the Berceni 110/20 kV substation

2.71

Modernization

pole

mounted

transformer

substations

(PTA),

LV

OHL

and

connections

in

Morteni
commune, localities, Neajlov, Morteni, Florica.

1.48

Voltage

level

improvement

for

consumers

in

Dambovita

county,

commune

Uliesti,

localities
Uliesti, Croitori, Jugureni, Olteni, Manastioara, Stravapolia.

2.36

Voltage

level

improvement

for

consumers

in

commune

Petresti

–

localities

Coada

Izvorului,
Greci, Puntea de Greci, Gherghesti, Ionesti, Potlogeni Deal

2.86

Voltage

level

improvement

for

consumers

in

commune

Ciocanesti,

localities

Ciocanesti,

Cretu,
Vizuresti

2.03

Voltage

level

improvements

for

consumers

in

Mogosani

commune,

localities

Mogosani,

Meri,
Chirca, Cojocaru, Zavoiu

2.95

Voltage

level

improvement

for

consumers

in

Costesti

Vale,

Tomsani

localities,

Costesti

Vale
commune, Dambovita county.

2.31

Voltage

level

improvement

for

consumers

in

localities

Dragodana,

Straosti,

Burduca,

Cuparu,
commune Dragodana, Dambovita county

1.96

Voltage

level

improvement

for

consumers

in

localities

Contesti,

Savesti,

Crangasi,

Mereni,
Calugareni, Boteni, commune Contesti

1.54

Modernization

of

20

kV

OHL

by

replacing

insulation

and

conductors

20

kV

OHL

Pisc

-

SPP

4,
20kV OHL Cuza Voda - Tufesti, 20kV OHL Maxeni Scortaru, 20kV OHL Romanu - Traianu

2.61

TRANSILVANIA SUD

Integration

of

substations

from

Alba

110

kV

Operations

Centre

into

the

SCADA

DMS

system

of

21.52

219

DESCRIERE

Valoare

(mil. RON)

SDTS

Works at 110 kV OHL South Sibiu - Ucea 1 + 2, Sibiu County

1.54

Modernization of LV OHL Bistra, Bistra commune, Alba County

2.55

Modernization

of

transformer

substations

by

replacing

MV

cells,

TDRIs

(indoor

network
distribution

board

for

transformer

stations),

integration

in

SAD

and

repairing

buildings

related
to transformer stations in Sacele municipality, Brasov County

8.97

Voltage

level

improvements

and

modernization

of

LV

OHL

and

LV

electrical

connections

in
Sancraiu de Mures and Nazna, Mures county

4.99

Increasing

the

security

of

electricity

supply

20

kV

OHL

Gabud,

by

integration

with

the

20

kV
derivation Gheja, Mures county

1.27

Backup power 20 kV busbars - Sanpaul Station, Mures County

1.46

Modernization of distribution network 20kV Sovata - Oras 2, Sovata
locality
, Mures county

1.43

Modernization of OHL 0.4 kV and connections, Teius city, Alba county

1.48

Modernization

of

OHL

0.4

kV

Blaj,

streets.

Eroilor

Fabricii,

Locomotivei,

Fochistilor,

Ceferistilor,
Dr. V. Suciu, I.M. Klein, Gh. Sincai si A. Muresanu, Blaj
municipality
, Alba county- stage 3

1.40

Modernization

of

OHL

0,4

kV

Blaj,

streets.

Eroilor

Fabricii,

Locomotivei,

Fochistilor,

Ceferistilor,
Dr.

V.

Suciu,

I.M.

Klein,

Gh.

Sincai

si

A.

Muresanu,

Blaj

municipality
,

Alba

county-

stages

1,2
end 4

2.50

Voltage

level

improvements

and

modernization

of

electrical

distribution

network,

LV

OHL

and
LV connections of Stejerisului, Cibinului, Calea Poienii streets, Brasov locality, Brasov County

3.24

Modernization

of

MV

network

and

of

LV

OHL,

voltage

level

improvements

and

security

and
systematization

of

LV

connections

-

Doamna

Stanca

street

and

related

streets,

Fagaras
municipality, Brasov County

3.80

Modernization

of

distribution

network

20/0,4

kV,

LV

connection

securing,

locality

Feldioara,
Brasov County - Stage 1 area related to transformer substations PT 11 and PT 30

4.60

Modernization of distribution network in Mediascity – Vitrometan
neighbourhood
,Sibiu county

5.40

Modernization of LV OHL Hipodrom 1, 2, 3 area, Sibiu municipality, Sibiu County

4.00

Modernization of LV OHL Marsa locality, Sibiu County

3.20

Voltage

level

improvement

and

modernization

of

OHL

0.4

kV

Avram

Iancu

end

Motilor

streets,
Aiud locality, Alba county

2.64

Decentralization

of

the

MV

network,

voltage

level

improvement

and

conductors

replacement

in
LV

network,

modernization

and

security

of

connections

to

Zarand,

Cetinii

,

Genral

Traian

Mosoiu
streets, Brasov locality, Brasov County

1.99

Voltage level improving and modernization of OHL LV Parau, Brasov county

1.40

Voltage

level

improving

area

PTA

27

Stupinii

Harmanului

-

Salcamilor

neighborhood,

Izvor,
Tarlungeni locality, Brasov county

1.38

Modernization of 0.4 kV network Fundata, PTA 6 area, Brasov county

1.19

Modernization

of

distribution

networks

on

Dozsa

Gyorgy,

Belchiei,

Pescarilor,

Rozelor

streets,
Gheorgheni municipality, Harghita County

2.70

Voltage level improving

and securing connections Vatava locality, Mures county

1.44

Voltage level and security of supply improving in 20 kV network Reghin, Mures county

1.72

Voltage

level

improving

and

modernization

of

connections

in

Saulia

de

Campie

locality,

Mures
county

2.00

Voltage

level

improving

and

modernization

of

LV

OHL

and

connections

Deda

locality,

Mures
County

2.50

Increasing

distribution

capacity

and

safety

in

the

developing

area,

adjacent

to

the

future
objective

Clinical

Hospital

BV:

Construction

of

a

110/20

kV

substation

in

the

110

kV

OHL

axis
Bartolomeu-FS

Rasnov

joint

circuit

with

110

kV

OHL

ICA

Ghimbav-Ghimbav

in

area

poles

no.54-
56, Brasov county

14.47

Implementation of Smart Metering System
Brasov branch area

3.00

Backup infrastructure upgrade (Disk backup system)

1.60

Integration

in

SCADA-DMS

of

the

transforer

stations

provided

with

preparation

for

UCMT

1.80

220

DESCRIERE

Valoare

(mil. RON)

installation

TRANSILVANIA NORD

Regulating 110 kV OHL of Oradea metropolitan area

7.11

Modernization of 110/20/10 kV Baciu Substation

8.08

Increasing

the

quality

of

the

distribution

service

vol.2A

-

modernization

of

32

wall

cabin
transformation

substations

from

Baia

Mare,

Somcuta

Mare,

Targu

Lapus,

Ulmeni

localities,
Maramures county

3.98

Integrated security, monitoring and intervention System for the substations of SDTN

7.15

Increasing the degree of security in the electricity supply, Stana de Vale area

2.62

Modernization

of

transformer

substations

belonging

to

Cluj-Napoca

branch,

Cluj

County

-

Vol.2
- Gherla
 area

2.35

Modernization of Satu Mare 2 110 kV Substation and introduction of 20kV busbar

6.07

Modernization of transformer substations belonging to Bistrita branch

1.66

Modernization of 110/20/6 kV Prundu Bargaului Substation

4.08

Modernization

of

pole

mounted

transformer

substations

Ciresoaia

1,

Ciresoaia

3,

Ciresoaia

CAP
as

well

as

modernization

of

LV

OHL

and

LV

connections

in

the

area

Ciresoaia

PMTS

1,3,

CAP,
Ciresoaia locality, Bistrita County

1.36

Construction

of

new

MV

underground

cable

line

to

increase

safety

in

electricity

supply,

for

the
area

related

to

MV

distributors

-

Dej1,

Dej2,

Dej3

powered

from

Dej

Cuzdrioara

Substation,

Dej
locality, Cluj County

1.35

Modernization

of

pole

mounted

transformer

substations

belonging

to

Cluj-Napoca

branch,

Cluj
County -
Vol.2 - Gherla
 area

1.31

Modernization

of

transformer

substations

in

metal

construction

Sarmasag,

Sarmasg

Mine
Colony, LV OHL regulation and LV connections in the
Coloniei Minei
 area

1.29

Modernization

of

LV

OHL

and

LV

connection

in

Finteusu

Mic

locality,

pole

mounted

transformer
substation no.1 and 2 area

1.25

Modernization of pole mounted transformer substations belonging to Oradea branch

1.40

Increasing

the

safety

in

the

supply

of

electricity

to

consumers

from

S-axis

Pericei,
modernization

of

pole

mounted

transformer

substation

no.

4

and

power

injection

in

Pericei
locality, Salaj county

1.21

Development

of

the

SAP

IT

system

to

implement

the

regulations

regarding

the

change

of

the
settlement interval of the load curves from 60 min to 15 min.

1.16

Integration in SCADA of the installations within Oradea branch

1.14

Conductor

replacements

of

OHL

0,4

kV

and

power

injection

OHL

0,4

kV

in

Viseul

de

Jos

locality
– poll mounted transformer substation PTA 6 area

1.13

Modernization of 20 kV OHL Tg. Lapus – Lapusul Romanesc vol.I

1.01

Modernization

of

the

electrical

distribution

networks

in

the

Municipality

of

Cluj-Napoca,

21
Decembrie 1989 boulevard area and the adjacent streets, Cluj County

1.79

Modernization

of

transformation

substations

PTA1,

PTA2,

PTA3

Burzuc,

LV

network

and
connections Burzuc locality, Bihor county

1.67

Power injection and LV network modernization Rosia
locality
, area Curatura, Bihor county

1.35

Power injection Bufet Expres area, Madach Imre street, Oradea locality, Bihor county

3.60

Modernization of 110/20 kV Nistru Substation

2.01

Modernization of substation 110/20 kV SASAR

4.20

Modernization of neutral treatment groups in Carei 1 Substation

1.57

Reservation

of

20kV

busbar

for

Satu

Mare

2

Substation

from

Carpati

Substation,

Satu

Mare
municipality

3.28

Modernization of OHL 110kV Nasaud- Rodna poles 79-128 Bistrita Nasaud county

1.55

Power

injection

in

LV

OHL

streets

Compozitorilor,

Enescu

and

Dinu

Lipati,

Bistrita

locality
,
Bistrita Nasaud county

1.05

Modernization

OHL

20KV

Pump

between

S.S.

6350

and

FBT

transformer

substation

-
reconstruction

of

poll

mounted

transformer

station

Moara

Jibou

and

voltage

level

normalization
on Campului street, Jibou locality

1.48

Sursa
: DEER

221

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222

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223

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224

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225

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226

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227

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

#### Consolidated Financial Statements as at and for the year ended

#### 31 December 2021 prepared in accordance with International Financial Reporting Standards

#### as adopted by the European Union

![Image should be here]()

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE
EUROPEAN UNION

228

Contents

Consolidated statement of financial position
1

Consolidated statement of profit or loss
3

Consolidated statement of comprehensive income
4

Consolidated statement of changes in equity
5

Consolidated statement of cash flows
7

Notes to the consolidated financial statements

Basis of preparation

1.
Reporting entity and general information
 9

2.
Basis of accounting
19

3.
Functional and presentation currency
19

4.
Use of judgments and estimates
19

Accounting policies

5.
Basis of measurement
21

6.
Significant accounting policies
21

7.
Adoption of new and revised standards

35

Performance for the year

8.
Operating segments
37

9.
Revenue
40

10.
Electricity and natural gas purchased

40

11.
Other income and expenses
41

12.
Net finance result
42

13.
Earnings per share
42

Employee benefits

14.
Short-term employee benefits
42

15.
Post-employment and other long-term employee benefits
43

16.
Employee benefit expenses
47

Income taxes

17.
Income taxes
47

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE
EUROPEAN UNION

229

Assets

18.
Trade receivables
49

19.
Other receivables
50

20.
Cash and cash equivalents
50

21.
Assets held for sale
51

22.
Inventories
51

23.
Property, plant and equipment
53

24.
Intangible assets
56

25.
Investments in associates 57

Equity and liabilities

26.
Capital and reserves
59

27.
Trade payables
61

28.
Other payables
61

29.
Provisions
61

30.
Long-term bank borrowings
62

Financial instruments

31.
Financial instruments - Fair values and risk management
65

Other information

32.
Acquisition of subsidiaries
69

33.
Related parties
70

34.
Contingencies
72

35.
Commitments
74

36.
Subsequent events 75

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

230

Note

31 December
2021

31 December

2020

ASSETS

Non-current assets

Intangible assets related to concession arrangements

24

5,514,557

5,455,185

Other intangible assets

24

8,983

7,213

Property, plant and equipment

23

505,419

508,130

Investments in associates

25

25,810

-

Deferred tax assets

17

83,531

19,666

Other non-current assets

1,661

1,173

Right of use assets

20,945

27,091

Total non-current assets

6,160,906

6,018,458

Current assets

Trade receivables

18

1,344,619

1,029,775

Other receivables

19

48,600

32,460

Cash and cash equivalents

20

221,830

570,929

Restricted cash

20

-

320,000

Inventories

22

72,958

70,066

Prepayments

5,034

2,817

Current income tax receivable

23,777

1,837

Assets held for sale

21

5,412

15,476

Total current assets

1,722,230

2,043,360

Total assets

7,883,136

8,061,818

EQUITY AND LIABILITIES

Equity

Share capital

26

3,464,436

3,464,436

Share premium

26

103,049

103,049

Treasury shares reserve

26

(
75,372
)

(
75,372
)

Pre-paid capital contributions in kind from shareholders

26

7

7

Revaluation reserve

26

102,829

116,372

Legal reserves

26

408,405

392,276

Retained earnings

950,228

1,759,506

Total equity attributable to the owners of the
Company

4,953,582

5,760,274

Total equity

4,953,582

5,760,274

(continued on page 2)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

231

Note

31 December
2021

31 December

2020

Liabilities

Non-current liabilities

Lease liability – long term

12,102

16,875

Deferred tax liabilities

17

161,926

177,787

Employee benefits

15

149,177

143,876

Other payables

28

32,732

33,873

Long-term bank borrowings

30

118,756

400,296

Total non-current liabilities

474,693

772,707

Current liabilities

Lease liability – short term

9,442

10,747

Bank overdrafts

20

627,402

164,966

Trade payables

27

891,335

607,195

Other payables

28

271,263

240,946

Deferred revenue

9,662

5,629

Employee benefits

14,15

101,102

92,292

Provisions

29

34,922

19,238

Current income tax liability

-

9,211

Current portion of long-term bank borrowings

30

509,733

378,613

Total current liabilities

2,454,861

1,528,837

Total liabilities

2,929,554

2,301,544

Total equity and liabilities

7,883,136

8,061,818

The accompanying notes are an integral part of these consolidated financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, except per share data)

232

Note

2021

2020

Revenue

9

7,178,864

6,501,100

Other income

11

195,771

165,422

Electricity and natural gas purchased

10

(
5,694,724
)

(
3,905,705
)

Construction costs related to concession agreements

24

(
485,813
)

(
675,967
)

Employee benefits

16

(
802,676
)

(
774,501
)

Repairs, maintenance and materials

(
102,356
)

(
104,577
)

Depreciation and amortization

23,24

(
480,830
)

(
490,918
)

(Impairment)/ Reversal of impairment for trade and
other receivables, net

18,19

(
70,616
)

62,167

Other operating expenses

11

(
343,147
)

(
325,104
)

Operating (loss)/ profit

(
605,527
)

451,917

Gain from bargain purchase of subsidiaries

32

-

7,477

Finance income

12

2,647

9,651

Finance costs

12

(
29,528
)

(
26,736
)

Net finance cost

(
26,881
)

(
17,085
)

Share of results of associates

25

(
3
)

-

(Loss)/ Profit before tax

(
632,411
)

442,309

Income tax benefit/(expense)

17

79,529

(
54,766
)

(Loss)/ Profit for the year

(
552,882
)

387,543

(Loss)/ Profit for the year attributable to:

-
owners of the Company

(
552,882
)

387,543

(Loss)/ Profit for the year

(
552,882
)

387,543

(Loss)/Earnings per share

Basic and diluted (loss)/earnings per share (RON)

13

(
1.63
)

1.14

The accompanying notes are an integral part of these consolidated financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA SA

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

233

Note

2021

2020

(Loss)/ Profit for the year

(
552,882
)

387,543

Other comprehensive income

Items that will not be reclassified to profit or loss

Re-measurements of the defined benefit liability

15

(
5,891
)

(
7,152
)

Tax related to re-measurements of the defined benefit
liability

17

(
45
)

572

Revaluation of property, plant and equipment

23

-

43,823

Tax related to revaluation of property, plant and equipment

17

-

(
7,931
)

Other comprehensive (loss)/income, net of tax

(
5,936
)

29,312

Total comprehensive (loss)/income

(
558,818
)

416,855

Total comprehensive (loss)/income attributable to:

-
owners of the Company

(
558,818
)

416,855

Total comprehensive (loss)/income

(
558,818
)

416,855

The accompanying notes are an integral part of these consolidated financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

234

Note

Share capital

Share
premium

Treasury
shares reserve

Pre-paid capital
contributions in
kind from
shareholders

Revaluation
reserve

Legal
reserves

Retained
earnings

Total equity

Balance at 1 January 2021

3,464,436

103,049

(
75,372
)

7

116,372

392,276

1,759,506

5,760,274

Comprehensive income

Loss for the year

-

-

-

-

-

-

(
552,882
)

(
552,882
)

Other comprehensive loss

-

-

-

-

-

-

(
5,936
)

(
5,936
)

Total comprehensive loss

-

-

-

-

-

-

(
558,818
)

(
558,818
)

Transactions with owners of the
Company

Contributions and distributions

Dividends to the owners of the Company

26

-

-

-

-

-

-

(
247,874
)

(
247,874
)

Total transactions with owners of the
Company

-

-

-

-

-

-

(
247,874
)

(
247,874
)

Other changes in equity

Set up of legal reserves

26

-

-

-

-

-

16,129

(
16,129
)

-

Transfer of revaluation reserve to retained
earnings due to depreciation and disposals
of property, plant and equipment

26

-

-

-

-

(
13,543
)

-

13,543

-

Balance at 31 December 2021

3,464,436

103,049

(
75,372
)

7

102,829

408,405

950,228

4,953,582

(continued on page 6)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

235

Note

Share capital

Share
premium

Treasury
shares reserve

Pre-paid capital
contributions in
kind from
shareholders

Revaluation
reserve

Legal
reserves

Retained
earnings

Total equity

Balance at 1 January 2020

3,464,436

103,049

(
75,372
)

7

87,665

371,833

1,637,909

5,589,527

Comprehensive income

Profit for the year

-

-

-

-

-

-

387,543

387,543

Other comprehensive income

-

-

-

-

35,892

-

(
6,580
)

29,312

Total comprehensive income

-

-

-

-

35,892

-

380,963

416,855

Transactions with owners of the
Company

Contributions and distributions

Dividends to the owners of the Company

26

-

-

-

-

-

-

(
246,108
)

(
246,108
)

Total transactions with owners of the
Company

-

-

-

-

-

-

(
246,108
)

(
246,108
)

Other changes in equity

Set up of legal reserves

26

-

-

-

-

-

20,443

(
20,443
)

-

Transfer of revaluation reserve to retained
earnings due to depreciation and disposals
of property, plant and equipment

26

-

-

-

-

(
7,185
)

-

7,185

-

Balance at 31 December 2020

3,464,436

103,049

(
75,372
)

7

116,372

392,276

1,759,506

5,760,274

The accompanying notes are an integral part of these consolidated financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

236

Note

2021

2020

Cash flows from operating activities

(Loss)/Profit for the year

(
552,882
)

387,543

Adjustments for:

Depreciation

23

21,118

27,850

Amortisation

24

459,712

463,068

(Reversal of impairment)/Impairment of property,
plant and equipment and intangible assets, net

23,24

(
3,942
)

3,025

Loss/(Gain) on disposal of property, plant and
equipment and intangible assets

23,24

2,651

(
285
)

Impairment/(Reversal of impairment) of trade and
other receivables, net

18,19

70,616

(
62,167
)

Impairment/(Reversal of impairment) of assets held
for sale

21

646

(
188
)

Change in provisions, net

29

15,684

(
320
)

Net finance cost

12

26,881

17,085

Changes due to employee benefits

14

5,054

-

Gain from bargain acquisition of subsidiaries

32

-

(
7,477
)

Share of loss of associates

25

3

-

Income tax (benefit)/expense

17

(
79,529
)

54,766

(
33,988
)

882,900

Changes in:

Trade receivables

(
391,401
)

(
87,249
)

Other receivables

(
22,904
)

3,837

Prepayments

(
2,217
)

593

Inventories

(
2,892
)

4,307

Trade payables

274,825

(
76,010
)

Other payables

32,504

(
2,331
)

Employee benefits

3,166

14,735

Deferred revenue

4,033

(
1,289
)

Cash (used in)/generated from operating
activities

(
138,874
)

739,493

Interest paid

(
24,110
)

(
19,953
)

Income tax paid

(
31,366
)

(
51,672
)

Net cash flow (used in)/generated from
operating activities

(
194,350
)

667,868

(Continued on page 8)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

237

Note

2021

2020

Cash flows from investing activities

Payments for purchases of property, plant and
equipment

(
10,490
)

(
6,730
)

Payments for network construction related to
concession agreements

24

(
483,808
)

(
637,996
)

Payments for purchase of other intangible assets

(
6,306
)

(
2,226
)

Proceeds from sale of property, plant and
equipment

1,469

5,012

Proceeds from deposits with maturity of 3 months
or longer

-

66,471

Interest received

1,765

8,962

Net cash effect from gain of control over the
acquired subsidiary

32

-

5,577

Payment for acquisition of investment in associate

25

(
25,813
)

-

Payment for acquisition of subsidiaries

32

-

(
8,006
)

Restricted cash

20

320,000

-

Net cash flow used in investing activities

(
203,183
)

(
568,936
)

Cash flows from financing activities

Proceeds from long-term bank borrowings

30

234,690

354,383

Repayment of long-term bank loans

30

(
385,851
)

(
29,130
)

Payment of lease liabilities

(
15,226
)

(
29,324
)

Dividends paid

26

(
247,615
)

(
245,780
)

Net cash (used in)/ generated from financing
activities

(
414,002
)

50,149

Net (decrease)/ increase in cash and cash
equivalents

(
811,535
)

149,081

Cash and cash equivalents at 1 January

20

405,963

256,882

Cash and cash equivalents at 31 December

20

(
405,572
)

405,963

The accompanying notes are an integral part of these consolidated financial statements.

The non-cash transactions are disclosed in Note 20.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

238

1
Reporting entity and general information

(a)
General information about the Group

These

financial

statements

are

the

consolidated

financial

statements

of

Societatea Energetica Electrica S.A.

(“the

Company”
or “Electrica
SA
”) and its subsidiaries (together “the Group”) as at and for the year ended 31 December 2021.

The

registered

office

of

the

Company

is

no. 9, Grigore Alexandrescu Street, District 1, Bucharest, Romania
.

The

Company
has sole registration code
13267221
 and Trade Register registration number J40/7425/2000.

As

at

31

December

2021

and

31

December

2020,

the

major

shareholder

of

Societatea

Energetica

Electrica

S.A.

is

the
Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital.

The

Company’s

shares

are

listed

on

the

Bucharest

Stock

Exchange

and

the

global

depository

receipts

(“GDRs”)

are

listed
on

the

London

Stock

Exchange.

The

shares

traded

on

the

London

Stock

Exchange

are

the

global

depositary

receipts,

one
global

depositary

receipt

representing

four

shares.

The

Bank

of

New

York

Mellon

is

the

depositary

bank

for

these

securities.

As at 31 December 2021 and 31 December 2020, the Company’s subsidiaries are the following:

Subsidiary

Activity

Sole
registration
code

Head
Office

% shareholding as at
31 December 2021

% shareholding as at
31 December 2020

Distributie Energie Electrica
Romania S.A. (
“
DEER”)

Electricity distribution
in geographical areas
Transilvania Nord,
Transilvania Sud and
Muntenia Nord

14476722

Cluj-
Napoca

99.99999929%

100%

Electrica Furnizare S.A.

Electricity and natural
gas supply

28909028

Bucuresti

99.9998415011992%

99.9998409513906%

Electrica Serv S.A.

Services in the energy
sector (maintenance,
repairs, construction)

17329505

Bucuresti

99.99998095%

100%

Electrica Producție Energie
S.A

Electricity generation

44854129

Bucuresti

99.9920%

-

Electrica Energie Verde 1
SRL\* (“EEV1” – formerly
Long Bridge Milenium SRL)

Electricity generation

19157481

Bucuresti

100%\*

100%\*

\*indirect shareholding - Electrica Energie Verde 1 SRL is 100% owned by the subsidiary Electrica Furnizare S.A.

As at 31 December 2021, the Company’s associates are the following:

Associate

Activity

Sole
registration
code

Head
Office

% shareholding as at
31 December 2021

Crucea Power Park SRL

Electricity generation

25242042

Constanta

30%

Sunwind Energy SRL

Electricity generation

42910478

Constanta

30%

New Trend Energy SRL

Electricity generation

42921590

Constanta

30%

Foton Power Energy S.R.L.

Electricity generation

43652555

Constanta

30%

As of December 31, 2020, the Company had no investments in associates.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

239

Changes in Group structure during 2021

Establishment of a new Group’s subsidiary

On

6

September

2021,

the

Group

set

up

a

new

legal

entity,

Electrica

Productie

Energie

S.A.,

organized

as

a

joint

stock
company,

in

which

Electrica

SA

holds

a

percentage

of

99.9920%

of

the

share

capital

and

Electrica

Serv

S.A.

holds

a
percentage

of

0.0080%

of

the

share

capital.

The

Company’s

activity

is

the

production

of

electricity

from

renewable

sources
through

the

acquisition

and

development

of

projects,

respectively

the

operation

of

electricity

generation

parks

from
renewable

sources,

alongside

with

the

development

and

operation

of

independent

storage

solutions

that

it

intends

to
develop in the near future.

Investment in associates

On

28

July

2021,

Electrica

SA

signed,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,

as

sellers,

three
share

sale

and

purchase

agreements

(“SPAs”)

in

three

project

companies

having

as

their

main

activity

the

production

of
energy from renewable sources, as follows:

i.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Crucea

Power

Park

SRL

for

an
estimated

total

price

of

EUR

8,470,000.

The

final

price

will

be

determined

by

adjusting

the

total

estimated
price

depending

on

the

production

capacity,

respectively

the

authorized

storage,

based

on

a

contractually
established

calculation

formula.

Crucea

Power

Park

SRL

develops

the

wind

project

“Crucea

Est”,

with

a
designed

installed

capacity

of

121

MW

and

a

projected

electricity

storage

capacity

of

60

MWh

(15

MW

x

4h),
located outside the Crucea commune, Constanta county.

ii.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Sunwind

Energy

SRL

for

a

total
estimated

price

of

EUR

1,485,000.

The

final

price

will

be

determined

by

adjusting

the

total

estimated

price
according

to

the

authorized

production

capacity,

based

on

a

contractually

established

calculation

formula.
Sunwind

Energy

SRL

is

developing

the

photovoltaic

project

"Satu

Mare

2"

with

a

designed

installed

capacity
of 27 MW, located near Satu Mare.

iii.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

New

Trend

Energy

SRL

for

a
total

estimated

price

of

EUR

3,245,000.

The

final

price

will

be

determined

by

adjusting

the

total

estimated
price

according

to

the

authorized

production

capacity,

based

on

a

contractually

established

calculation
formula.

New

Trend

Energy

SRL

develops

the

photovoltaic

project

"Satu

Mare

3",

with

a

designed

capacity
of 59 MW, located near Satu Mare

The

SPAs

stipulate

the

acquisition

by

Electrica

SA

of

shares

in

the

three

companies

and

the

payment

of

the

corresponding
price

in

four

stages,

structured

according

to

the

development

stage

of

the

project

and

the

fulfilment

of

certain

conditions
precedent.

The

total

estimated

value

of

the

transaction

is

EUR

13,200

thousand.

The

sale

purchase

agreements

concluded

as

of

28
July

2021

stipulate

that

at

the

initial

stage,

the

Group

acquires

30%

of

the

share

capital

of

the

three

Companies,

and

in
the

subsequent

stages

the

remaining

70%

of

the

share

capital

provided

that

certain

conditions

stipulated

in

the

sale
purchase agreements are met.

On

7

December

2021,

Electrica

SA,

signed,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,

as

sellers,
a

share

sales

and

purchase

agreement

(“SPAs”)

in

one

project

company

having

as

their

main

activity

the

production

of
energy from renewable sources.

The

SPA

concerns

the

acquisition

of

100%

of

the

shares

of

Foton

Power

Energy

S.R.L,

wholly

owned

by

the

sellers,

for
an

estimated

total

price

of

EUR

4,262,500.

The

final

price

will

be

determined

by

adjusting

the

total

estimated

price
depending

on

the

production

capacity,

respectively

the

authorized

storage,

based

on

a

contractually

established

calculation
formula.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

240

Foton

Power

Energy

S.R.L.

develops

the

photovoltaic

project

“Bihor

1”,

with

a

designed

installed

capacity

of

77.5

MW,
located near Oradea city.

The

SPAs

stipulate

the

acquisition

by

Electrica

SA

of

company’s

shares

and

the

payment

of

the

corresponding

price

in

four
stages, structured according to the development stage of the project and the fulfilment of certain conditions.

As

of

31

December

2021,

with

a

30%

shareholding

in

each

company,

the

Group

has

a

significant

influence

over

the

four
companies,

which

are

presented

as

investments

in

associates.

The

acquisition

value

of

the

30%

shares

is

RON

25,813
thousand. (for further details please refer to Note 25).

The

establishment

of

the

new

subsidiary

together

with

the

investments

in

the

four

entities

are

part

of

the

Electrica

Group's
strategy

which

aims

to

develop

a

portfolio

of

electricity

generation

capacities

from

renewable

sources

(wind

and
photovoltaic)

with

a

cumulative

capacity

of

400

MW,

in

parallel

with

electricity

storage

capacities

with

an

installed

capacity
of up to 100 MW.

Changes in Group structure during 2020

Merger of the three distribution companies within the Group

On

27

May

2020,

Electrica

SA’s

Board

of

Directors

approved

in

principle

the

merger

through

absorption

between

Societatea
de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.
and

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

the

absorbing

entity

being

Societatea

de

Distributie
a Energiei Electrice Transilvania Nord S.A..

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

31

December

2020,

when

SDEE

Transilvania
Sud

S.A.

and

SDEE

Muntenia

Nord

S.A.

as

the

absorbed

entities

ceased

to

exist,

being

dissolved

without

going

into
liquidation.

Consequently,

all

of

their

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by

absorption
to

SDEE

Transilvania

Nord

S.A.,

as

the

absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the

share

capital

of
SDEE Transilvania Nord S.A. in favour of the shareholder of the absorbed entities, namely Electrica SA.

Thus,

on

31

December

2020,

Distributie

Energie

Electrica

Romania

SA,

formed

by

the

merger

of

the

three

former

electricity
distribution companies was recorded on the National Trade Register Office.

Also,

based

on

the

Romanian

Energy

Regulatory

Authority

decision

no.

2461

dated

23

December

2020,

the

electricity
distribution

licenses

granted

by

the

regulator

to

the

absorbed

companies

for

the

areas

Muntenia

Nord

and

Transilvania
Sud

were

transferred

to

the

absorbing

company,

Distributie

Energie

Electrica

Romania

S.A.,

starting

with

1

January

2021.

Merger of the two energy services companies within the Group

On

27

March

2020,

Electrica

SA’s

Board

of

Directors

approved

in

principle

the

merger

through

absorption

between

Electrica
Serv

S.A.

and

Servicii

Energetice

Muntenia

S.A.

and

the

participation

of

the

companies

to

the

merger,

with

Electrica

Serv
S.A. as absorbing company.

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

30

November

2020,

when

Servicii

Energetice
Muntenia

S.A.,

as

the

absorbed

entity,

ceased

to

exist,

being

dissolved

without

going

into

liquidation.

Consequently,

all

of
its

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by

absorption

to

Electrica

Serv

S.A.,

as

the
absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the

share

capital

of

Electrica

Serv

S.A.

in

favour

of

the
shareholder of the absorbed entity, namely Electrica SA.

Thus,

starting

with

1

December

2020,

the

merger

between

the

aforementioned

companies

was

finalised

and

the

Group’s
energy

services

will

be

carried

out

only

under

the

umbrella

of

Electrica

Serv.

The

registration

on

the

National

Trade
Register Office took place on 2 December 2020, with effective date 30 November 2020.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

241

Both

mergers

that

took

place

within

the

Group

during

2020

consist

only

in

reorganization

of

the

subsidiaries

and

have

no
impact

on

the

consolidated

financial

statements,

Electrica

SA

remaining

the

parent

company

with

the

same

%

of
ownership.

Acquisition of a photovoltaic park

On

23

June

2020,

Electrica

Furnizare

S.A.

signed

a

sale

purchase

agreement

for

the

acquisition

of

100%

of

the

share
capital

of

Long

Bridge

Milenium

SRL,

a

company

that

owns

a

photovoltaic

park

located

in

Stanesti,

Giurgiu

County,

with
an

installed

capacity

of

MW

7.5

(operational

power

limited

at

MW

6.8).

The

photovoltaic

park

was

built

between

October
2012

and

January

2013

and

has

been

delivering

electricity

into

the

national

grid

since

February

2013.

Closing

of

the
transaction and the transfer of shares’ ownership to Electrica Furnizare S.A. took place on 31 August 2020.

On 24 November 2020, the company Long Bridge Milenium SRL changed its name to
Electrica Energie Verde 1 SRL.

Group’s main activities

The main activities of the Group include operation and construction of electricity distribution networks and electricity and natural gas supply to final consumer as well as energy production from renewable sources
.

The

Group

is

the

electricity
distribution

operator

and

the

main

electricity

supplier

in

Muntenia

Nord

area

(Prahova,

Buzau,

Dambovita,

Braila,

Galati
and

Vrancea

counties),

Transilvania

Nord

area

(Cluj,

Maramures,

Satu

Mare,

Salaj,

Bihor

and

BistritaNasaud

counties)

and
Transilvania

Sud

area

(Brasov,

Alba,

Sibiu,

Mures,

Harghita

and

Covasna

counties),

operating

with

transformation

station
and 0.4 kV to 110 kV power lines.

The

Company’s

distribution

subsidiary,

Distributie

Energie

Electrica

Romania

S.A.

which

resulted

from

the

merger

through
absorption

of

the

three

distribution

subsidiaries

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.,
Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.

and

Societatea

de

Distributie

a

Energiei

Electrice
Transilvania

Sud

S.A.

now

operates

electric

lines

in

18

counties,

from

three

geographical

areas

of

the

country,

representing
40.7%

of

the

Romanian

territory,

and

serves

over

3.8

million

users.

It

invoices

the

electricity

distribution

service

to

electricity
suppliers

(mainly

to

Electrica

Furnizare

S.A.

subsidiary)

which

further

invoices

the

electricity

consumption

to

final
consumers.

Electrica

Furnizare

S.A.

is

active

on

both

the

competitive

market

and

as

the

supplier

of

last

resort

for

aprox.

3.1

million
clients

(defined

as

supplier

designated

by

the

regulatory

authority

to

deliver

the

universal

service

of

electricity

supply
under specific regulated conditions) in Muntenia Nord, Transilvania Nord and Transilvania Sud areas.

According

to

the

regulations

issued

by

the

National

Authority

for

Energy

Regulation

(“ANRE”),

the

suppliers

of

last

resort
have

the

obligation

to

ensure

electricity

supply

to

final

consumers

which

have

not

exercised

their

eligibility

right

–

the
right

to

choose

their

electricity

supplier

(hereinafter

named

captive

consumers).

Starting

from

1

January

2021,

as

a

result
of

the

changes

in

the

regulatory

framework,

Electrica

Furnizare

S.A.

is

designated

as

supplier

of

last

resort

(“SoLR”)

at
national

level,

continuing

to

supply

the

existing

consumers

in

the

universal

service

regime,

but

also

with

the

possibility

to
take

over

in

the

supply

of

last

resort

regime

the

consumers

who

are

left

without

a

supplier

from

any

network

area

on

the
Romanian territory.

At

the

same

time,

Electrica

Furnizare

S.A.

is

also

designated

as

SoLR

for

natural

gas

at

national

level,

but

only

with

the
possibility of taking over the consumers left without a supplier.

Through

the

acquisition

of

the

new

subsidiary

Electrica

Energie

Verde

1

S.R.L.

(formerly

Long

Bridge

Milenium

S.R.L.)

as
of

31

August

2020,

establishment

of

a

new

legal

entity

Electrica

Productie

Energie

S.A.

and

also

the

four

shares

sales

and
purchase

agreements

in

four

project

companies

having

as

main

activity

the

production

of

energy

from

renewable

sources

the Group entered on the electricity generation segment, in particular from renewable sources.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

242

Electrica

Energie

Verde

1

S.R.L.

is

a

producer

of

electricity

from

renewable

sources,

operating

a

photovoltaic

park

in
Stanesti,

Giurgiu

county,

with

an

installed

capacity

of

MW

7.5

(operating

capacity

limited

MW

to

6.8).

In

2021

the

operation
of

the

plant

was

continuous,

with

no

significant

events

leading

to

production

shutdowns,

producing

in

total

MWh

9,767
(2020:

MWh

10,131).

According

to

Law

no.

220/2008

and

based

on

the

accreditation

issued

by

ANRE,

Stanesti

park

receives
a

number

of

6

green

certificates

(“GC”)

for

each

MWh

produced

and

delivered,

of

which

until

2020,

4

GC

were

issued

for
trading

and

2

GC

were

postponed

(the

amendment

is

introduced

by

Law

no.

184/2018).

The

postponed

green

certificates
will be reinserted starting from 1 January 2021, in equal monthly tranches until 31 December 2030.

(b)
Regulations in the energy sector

Regulatory environment

The activity in the energy sector is regulated by the Romanian Energy Regulatory Authority.

Some

of

the

main

responsibilities

of

ANRE

are

to

approve

prices

and

tariffs

and

to

issue

substantiation

methodologies

used
to set regulated prices and tariffs.

Electricity distribution

Electricity

distribution

is

a

monopoly

activity.

Distribution

tariffs

are

established

through

a

“tariff

basket-price

cap”
mechanism.

The

methodology

for

setting

the

electricity

distribution

tariffs

applicable

for

the

years

ended

2020

and

2021
was

approved

by

ANRE

Order

no.

169/2018

with

subsequent

amendments

(Orders

no.

193/2018,

no.

60/2019,

no.
203/2019,
no. 207/2020, no. 3/2021, no. 101/2021
).

The

specific

distribution

tariffs

applicable

for

the

three

voltage

levels

(high,

medium

and

low)

by

regions,

for

the

years

2020
and

2021,

were

approved

by

ANRE

orders

as

follows

(RON/MWh,

presented

cumulatively

for

medium

and

low

voltage
levels):

Order 228,229,227/16.12.2019

1 January-15 January 2020

High voltage

Medium voltage

Low voltage

SDEE Transilvania Nord S.A.

19.11

65.48

171.98

SDEE Transilvania Sud S.A.

20.69

62.49

169.01

SDEE Muntenia Nord S.A.

16.97

54.09

180.15

Order 8,9,7/15.01.2020

16 January-31 December 2020

High voltage

Medium voltage

Low voltage

SDEE Transilvania Nord S.A.

18.77

64.31

168.91

SDEE Transilvania Sud S.A.

20.31

61.34

165.90

SDEE Muntenia Nord S.A.

16.68

53.16

177.06

Order 220,221,222/09.12.2020

1
January
 2021
-31 December 2021

High voltage

Medium voltage

Low voltage

Transilvania Nord
Area

19.23

66.35

173.93

Transilvania Sud
Area

22.23

67.47

178.78

Muntenia Nord Area

18.72

56.87

184.75

In

2019,

a

new

regulatory

period

began,

governed

by

the

provisions

of

ANRE

Order

no.

169/2018

for

the

approval

of

the
Methodology for establishing the tariffs for the electricity distribution service (IV regulatory period: 2019-2023).

The

following

items

are

considered

by

ANRE

when

setting

the

target

revenue

for

one

year

of

the

regulatory

period:

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

243

controllable

and

non-controllable

operating

and

maintenance

costs;

costs

of

electricity

purchased

for

own

technological
consumption

(distribution

network

losses);

regulated

depreciation

charge;

the

return

on

the

regulated

assets

base

(“RAB”);
revenues from reactive energy and revenues from other activities, as well as corrections from previous periods.

Starting

with

2019,

the

regulated

rate

of

return

(“RRR”)

on

RAB

was

5.66%,

according

to

ANRE

Order

no.

168/2018.

For
the

investments

in

the

electricity

distribution

networks

commissioned

during

the

period

2019-2023,

an

incentive

of

1
percentage

point

is

granted

over

the

regulated

rate

of

return

approved

by

the

ANRE

Order

no.

168/2018.

Subsequently,
according to Government Emergency Ordinance no. 19/2019, the approved regulated rate of return was 6.9%.

On 9 January 2020 was issued the Government Emergency Ordinance no. 1 which modified:

•
The

Energy

Law

regarding

the

cancellation

of

the

article

approving

the

regulated

rate

of

return

of

6.9%

starting
with 30 April 2020;

•
ANRE

functioning

law,

imposing

the

establishment

of

the

value

of

the

contribution

charged

by

ANRE

(thus

by
ANRE Order no. 1/2020, the contribution has changed from 2% to 0.2%).

ANRE

Order

no.

75/2020

for

establishing

the

regulated

rate

of

return

for

the

electricity

and

natural

gas

distribution

and
transport tariffs until the end of the fourth regulatory period entered into force on 13 May 2020.

Thus, for the year 2020, the regulated rate of return is as follow:

•
For the period 1 January 2020 – 29 April 2020: 6.9%;

•
For the period 30 April 2020 – 12 May 2020: 5.66% plus an incentive of 1% for new investments;

•
For the period 13 May 2020 – 31 December 2020: 6.39% plus an incentive of 1% for new investments.

The

Methodology

for

establishing

the

distribution

tariffs

approved

by

ANRE

Order

no.

169/2018

was

modified

by

ANRE
Orders no. 207/2020 and no. 3/2021 as follows:

•
granting

a

2%

RRR

incentive

for

investments

in

the

electricity

distribution

network

financed

from

own

funds

in
projects

in

which

European

non-reimbursable

funds

are

also

attracted,

if

the

investments

are

performed

and

put
into function by operators after 1 February 2021;

•
in

cases

where,

for

certain

categories

of

tangible/intangible

assets,

the

regulated

legislation

establishes

other
regulated

useful

lives

than

those

provided

by

the

Methodology

or

in

the

Catalogue

on

the

classification

and
normal

operating

useful

lives

of

fixed

assets,

approved

by

Government

decision,

the

annual

regulated
depreciation

of

those

assets

is

calculated

on

the

basis

of

the

regulated

useful

lives

established

by

the

primary
legislation.

ANRE

approved

Order

no.

101

/

30.09.2021

for

changes

of

the

Methodology

for

establishing

the

distribution

tariffs

approved
by

ANRE

Order

no.

169/2018

with

the

date

of

entry

into

force

1

October

2021.

Regarding

the

network

losses

prices,

ANRE
has

the

right

to

correct

the

projection

of

distribution

tariffs

for

a

regulatory

period

or

for

one

year,

if

there

have

been
significant

variations

in

prices

on

the

electricity

market,

which

lead

to

a

significant

change

in

distribution

service

costs;

at
the

justified

request

of

the

Distribution

Operator,

the

adjusted

revenue

of

year

t

+

1

may

include

a

cost

adjustment

with
the

regulated

network

losses

forecast

for

year

t

+

1,

by

changing

the

reference

price,

depending

on

the

evolution

of

prices
on the electricity market and the result of the analysis of the evolution of tariffs for the current regulatory period;

Energy

law

no.

123/2012

was

amended

by

Order

no.

143/2021,

in

force

starting

with

31

December

2021

stipulating

among
others the followings:

•
household

connections

-

In

the

case

of

household

consumers,

upon

commissioning

of

the

connection

works
performed,

Distribution

Operator

will

reimburse

the

applicant

the

effective

value

of

the

connection

design

and
execution

works,

up

to

an

average

value

of

a

connection,

established

according

to

a

methodology

approved

by
ANRE.

The

assets

resulting

from

the

connection

works

become

the

property

of

the

distribution

operator

from

the
moment

of

commissioning,

through

the

effect

of

this

law,

to

the

value

reimbursed

to

the

household

consumer,
being recognized by ANRE as part of the regulated assets base.

•
non-household

connections

-

In

the

case

of

non-household

consumer,

the

value

of

the

connection

works,

including
those

for

the

design

of

the

connection

/

connection

made,

is

fully

borne

by

the

consumers.

The

assets

resulting

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

244

from

the

connection

works

enter

the

patrimony

of

the

Distribution

Operator

from

the

moment

of

commissioning,
through

the

effect

of

the

present

law,

without

being

recognized

by

ANRE

as

part

of

the

base

of

the

regulated
assets.

Starting

with

16

March

2021,

it

was

approved,

by

ANRE

Order

no.

17/2021,

the

Connection

to

the

Electrical

Distribution
Network

Procedure

regarding

the

connection

of

the

consumption

places

belonging

to

the

non-household

final

consumers
through

connection

installations

with

lengths

up

to

2,500

meters

and

household

consumers,

through

which

the

distribution
operators

have

the

obligation

to

finance

and

carry

out

the

design

and

execution

works

of

the

connection

installation

for
household

consumers

with

lengths

up

to

2,500

meters.

By

referring

to

the

Connection

to

the

Electrical

Distribution

Network
Procedure,

ANRE

approved

the

ANRE

Order

no.

19/20.01.2021,

in

force

on

19

March

2021,

by

which

it

modified

the
Investment

Procedure

approved

by

the

ANRE

Order

no.

204/2019

and

established

the

obligation

of

distribution

operators,
to carry out the connection works to the final consumers, in addition to the annual investment plan.

Regulatory asset base (“RAB”)

In

accordance

with

the

old

tariff

methodology

for

electricity

distribution

approved

by

ANRE

Order

no.

72/2013

with
subsequent

amendments

(Orders

no.

112/2014,

no.

146/2014

and

no.

165/2015),

and

the

new

tariff

methodology

of
electricity

distribution

approved

by

ANRE

Order

no.

169/2018

with

subsequent

amendments

(ANRE

Orders

no.

193/2018,
no.

60/2019,

no.

203/2019,

no.

207/2020,

no.

3/2021

and

no.

101/2021
),

hereinafter

referred

to

as

Methodology,

the
determination

of

the

distribution

tariffs

is

based

on,

inter

alia,

the

RAB.

The

RAB

calculation

is

based

on

capital

expenditure.

The

regulatory

asset

base

at

the

beginning

of

the

first

regulatory

period

(1

January

2005)

(“initial

RAB”)

includes

the

net
book

value

of

the

property,

plant

and

equipment

and

intangible

assets

as

approved

by

ANRE

and

used

only

for

regulated
electricity distribution.

The

subsequently

calculated

RAB

includes

besides

the

initial

RAB,

as

a

net

value,

the

net

value

of

the

tangible

and

intangible
assets

subsequently

acquired

through

investments

approved

by

ANRE.

The

RAB

does

not

include

the

fixed

assets

financed
from

donations

or

other

non-reimbursable

funds,

including

the

connection

fee

received

from

the

new

users

of

the

electricity
distribution network.

Tariff adjustments

Annually,

ANRE

makes

revenue

corrections

due

to:

change

in

the

quantities

of

electricity

distributed

compared

to

the
forecast;

change

in

quantities

and

acquisition

price

for

the

regulated

own

technological

consumption

(distribution

network
losses)

compared

to

the

forecast;

the

annual

change

in

controllable

operating

and

maintenance

costs,

realized

and

accepted
against

the

forecast;

annual

change

in

uncontrollable

operating

and

maintenance

costs

compared

to

the

forecast;

changes
in

revenues

from

reactive

energy

compared

to

the

forecast;

failure

to

meet/exceeding

the

approved

investments
programme;

revenues

generated

from

other

operations

made

by

the

distribution

operator

and

the

quantity

of

electricity
recovered from recalculations.

In

regulated

activities,

the

regulator

establishes

through

the

tariff

adjustment

mechanism

(as

presented

above),

the

criteria
to

recognise

over

or

under

recoveries

of

one

period

in

future

periods.

The

Group

does

not

recognise

regulatory

assets

and
liabilities

in

respect

of

these

under

or

over

recoveries,

as

these

differences

are

recovered

or

returned

through

the

tariffs
charged in subsequent periods.

Electricity supply

Regulated market

Starting

with

the

1

January

2018,

the

total

liberalization

of

the

energy

market

was

achieved

and

conditions

were

created
for

the

transition

to

eligibility

of

a

larger

number

of

household

consumers.

There

were

significant

migrations

of

domestic
consumers

between

suppliers,

which

led

to

a

change

in

the

structure

of

their

portfolio.

Furthermore,

in

2019

there

was

an
increase

in

the

number

of

products

offered

by

suppliers

to

final

consumers

and

consumers

options

for

offers

that

combine
electricity, natural gas and/or telecommunications services.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

245

However,

after

the

total

aforementioned

liberalization

from

1

January

2018,

the

regulatory

framework

for

the

supply

activity
has

been

modified

starting

with

1

March

2019,

in

accordance

with

the

provisions

of

the

Government

Emergency

Ordinance
(GEO)

no.

114/2018.

The

new

secondary

legislation

approved

by

ANRE

has

reintroduced

the

regulated

contracts

with

the
electricity

producers

and

modified

the

pricing

methodology

for

the

household

consumers

in

the

regulated

segment.
Subsequently,

by

Government

Emergency

Ordinance

no.

1/2020,

the

period

of

application

of

regulated

tariffs

to

household
consumers

was

shortened,

respectively

until

31

December

2020.

The

secondary

legislation

issued

by

ANRE

approved

a
series

of

rules

and

conditions

for

the

liberalization

of

the

electricity

market

with

regards

to

the

manner

and

frequency

of
informing

and

offering

the

final

consumers

beneficiaries

of

universal

service,

the

supply

in

last

resort

regime,

the

applicable
framework

contracts

and

the

possibility

to

grant

a

commercial

discount

to

the

domestic

clients,

at

least

until

30

June

2021.

The

abovementioned

regulatory

changes

are

applicable

for

consumers

in

the

regulated

market.

Taking

into

account

the
provisions

of

the

Electricity

Law

and

the

European

Directive

no.

54/2003,

the

electricity

market

is

fully

liberalised

starting
with

1

July

2007

and

all

consumers

were

declared

eligible.

The

eligible

consumers

are

free

to

choose

their

electricity

supplier
from

which

they

purchase

electricity

at

negotiated

prices.

For

the

other

consumers

(including

those

that

did

not

exert

their
eligibility

right),

as

mentioned

before,

the

tariffs/prices

have

been

regulated/approved

on

the

basis

of

ANRE

orders,

until
31

December 2019 for non-household consumers and 31 December 2020 for household consumers.

Through

ANRE

Order

no.

188/2020

for

the

approval

of

the

Regulation

for

the

designation

of

suppliers

of

last

resort,

the
notion

of

obligatory

SoLR

and

optional

SoLR

disappears.

The

designation

of

a

supplier

as

SoLR

is

made

at

national

level
and

not

on

network

areas,

as

previously

provided.

SoLRs

are

designated

for

an

indefinite

period,

starting

with

1

January
2021,

and

in

the

designation

process

the

eligibility

criterion

based

on

serving

a

number

of

at

least

2,000

consumption
places at national level is no longer applied, so that any supplier can become SoLR.

Through

ANRE

Decision

no.

2123/2020,

Electrica

Furnizare

S.A.

was

designated

as

a

supplier

of

last

resort

for

an

indefinite
period,

starting

with

1

January

2021,

for

all

network

areas

in

Romania.

The

criterion

for

taking

over

a

consumer

as

a

last
resort

supplier

will

be

the

"lowest

cost",

regardless

of

whether

they

are

domestic

or

non-domestic

consumer.

The

lowest
cost

is

established

by

ANRE

monthly,

for

each

network

area,

by

consulting

the

offers

published

by

SoLR

on

their

own

web
pages.

As

of

1

January

2021,

regulated

end-user

prices

for

electricity

had

been

removed

and

the

market

fully

liberalized

for

all
types of consumers. Therefore, both universal service prices and competitive prices are set freely by suppliers
.

Also,

for

2021,

ANRE

had

set

a

series

of

specific

obligations

concerning

notification

of

consumers

and

the

offers

sent

to
them for the suppliers of last resort which had regulated consumers at the end of 2020.

Competitive market

Transactions

on

the

competitive

wholesale

market

are

transparent,

public,

centralised

and

non-discriminatory.

Participants
to the wholesale market can trade electricity based on the bilateral contracts concluded on the dedicated markets.

The

supply

of

electricity

to

consumers

on

the

competitive

market

is

based

on

negotiated

contracts

(within

the

limits

of

the
regulations

in

force).

Electricity

consumption

is

invoiced,

according

to

the

contractual

provisions,

at

negotiated

tariffs

with
the final consumer.

Changes in legislation

Over

2021,

several

changes

have

been

brought

to

the

legislation,

having

a

significant

impact

on

the

supply

of

electricity,
as follows:

▪
Enforcement

of

Order

no.

143/2021

amending

the

Electricity

and

Gas

Law

no.

123/2012,

which

transposes

into
national

legislation

Directive

(EU)

944/2019

on

common

rules

for

the

internal

market

for

electricity

and

brings

new
rights

and

obligations

for

the

suppliers

of

electricity

concerning

inter

alia:

obligation

to

supply

universal

service

(US)
to

household

consumer

only;

removal

of

the

obligation

to

set

up

physical

customer

care

centers

for

US

customers

at
max.

50

km;

obligation

to

issue

settlement

bills

for

household

consumer

once

every

3

months

at

the

least;

right

to
conclude

directly

negotiated

bilateral

transactions

on

the

wholesale

markets

for

any

period

of

time;

obligation

to

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

246

procure

the

electricity

needed

to

cover

customers’

consumptions,

whose

breach

shall

be

sanctioned

with

a

fine
calculated as a percentage of the annual turnover;

▪
Implementation,

from

1

November

2021

to

31

March

2022,

due

to

the

increase

in

energy

price

on

the

international
and

national

markets

and

the

impact

thereof

on

Romanian

consumers,

of

the

consumers

support

schemes

approved
by

Order

no.

118/2021
,

as

approved

with

amendments

by

Law

no.

259/2021

and

amended

by

Order

no.

130/2021,
Order

no.

2/2022,

and

Order

no.

3/2022.

T
he

following

support

mechanisms

have

been

put

in

place
:

compensation
of

household

consumers

for

part

of

the

costs

borne

with

the

electricity

invoices,

exemption

(until

31

January

2022)
of

several

types

of

non-household

consumers

from

payment

of

regulated

tariffs

and

other

taxes/contributions,

capping
the

selling

price

for

household

and

non-household

consumers

(until

31

January

for

certain

types

of

non-household
consumers,

as

of

1

February

2022

for

all

non-household

consumers)
,

suspending

the

invoice

payment

for

vulnerable
consumers.

The

amounts

compensated

will

be

received

from

the

the

National

Agency

for

Payments

and

Social
Inspection

for

household

consumers

and

a

from

the

Ministry

of

Energy

for

non-household

consumers.

The

amounts
will

be

recovered

in

30

days

after

submitting

the

required

documentation

to

the

National

Agency

for

Payments

and
Social Inspection or Ministry of Energy.
(
for further details please refer to Note 18)

Green certificates

Electricity

suppliers

have

a

legal

obligation

to

purchase

green

certificates

from

producers

of

electricity

from

renewable
sources,

based

on

annual

targets

or

quotas

set

by

law,

which

are

applied

to

the

quantity

of

electricity

purchased

and
supplied

to

final

consumers.

The

cost

of

green

certificates

is

invoiced

to

final

consumers

separately

from

the

tariffs

for
electricity.

For

2021,

the

mandatory

estimated

annual

quota

for

green

certificates

was

established

by

ANRE

through

Order

no.
237/2020 (0.4505 GC/MWh) following that until 1 March 2022, ANRE will establish also through another order, the annual
mandatory

quota

for

the

acquisition

of

green

certificates

related

to

2021,

based

on

the

quantities

of

electricity

from
renewable

sources

and

the

final

consumption

of

electricity

of

the

previous

year.

For

2020,

the

mandatory

quota

of

green
certificates was established by ANRE through Order no. 9/2021, at the value of 0.45074 GC/MWh.

Electricity generation

Green certificates

Electricity

producers

are

entitled

by

to

receive

a

certain

number

of

green

certificates

for

each

MWh

of

electricity

produced
from

renewable

sources

and

injected

into

the

network,

according

to

Law

No.

220/2008

and

based

on

the

accreditation
issued

by

ANRE.

Photovoltaic

Stanesti

Park

is

accredited

to

receive

a

number

of

6

GC

for

each

MWh

produced

and

delivered,
of

which

by

2020

4

GC

were

issued

for

trading

and

2

GC

postponed

(the

postponement

is

introduced

by

Law

no.

184/2018).

The

green

certificates

can

be

sold

on

the

spot

market,

term

market

or

a

combination

of

both.

The

selling

price

must

fall
between

the

minimum

and

maximum

values

set

by

Law

no.

220/2008

for

establishing

the

system

for

promoting

the
production of electricity from renewable energy sources, republished, with subsequent amendments.

The

trading

value

of

green

certificates

on

the

markets

in

accordance

with

the

provisions

of

Law

no.

220/2008,

republished,
with subsequent amendments and additions from Order no 24/2017, falls between:

(a) a minimum trading value of EUR 29.4/GC and

(b) a maximum trading value of EUR 35/GC.

For

the

year

2021

and

2020,

the

trading

of

green

certificates

was

carried

out

at

the

minimum

price

on

all

markets,

as

a
result of the excess GC offered for sale compared to the suppliers' purchasing obligations.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

247

COVID-19 impact

On

11

March

2020

the

World

Health

Organization

(hereinafter

“WHO”)

declared

the

COVID-19

outbreak

a

pandemic

and
on

16

March

2020

Romania

entered

into

a

state

of

emergency.

Measures

taken

by

the

Romanian

Government

included
restrictions

on

the

cross-border

movement

of

people,

entry

restrictions

on

foreign

visitors

and

lock-down

of

certain
industries.

Furthermore,

significant

key

players

on

the

market

decided

to

shut

down

their

operations,

especially

in

the
automotive

and

heavy

industries,

while

some

smaller

businesses

decided

to

curtail

or

temporarily

suspend

their

operations.
Therefore,

on

a

macroeconomic

level,

the

COVID-19

pandemic

generated

a

downturn

of

the

economy

leading

to

a
decrease in the demand for electricity, especially from non-household consumers.

In

the

fight

against

the

COVID-19

pandemic,

the

Group

has

adopted

all

the

necessary

measures

for

the

activity

of

the
companies

within

the

Group

to

continue

to

be

carried

out

under

normal

conditions

and

issued

guidelines

aimed

at
preventing

and/or

mitigating

the

effects

of

contagion

at

the

workplace.

Most

important

measures

included

strict

adherence
to

hygiene

and

social

distancing

rules

as

well

as

working

from

home

where

possible.

In

addition,

technicians

who

perform
field

work

received

special

equipment

in

order

to

minimize

the

risk

of

infection.

A

resilience

plan

was

developed

for

each
company

within

the

Group,

identifying

essential

activities

and

critical

roles

through

scenario

analysis

and

ensuring

staff
backup.

All

the

aforementioned

resilience

plans

were

integrated

at

Group

level

in

order

to

ensure

that

actions

taken

were
appropriate

for

each

company

individually

as

well

as

for

the

Group

overall.

As

a

result

all

key

functions

of

the

Group

were
maintained,

enabling

the

Group

to

provide

secure

energy

distribution

and

supply

services

while

maintaining

the

safety

of
employees and consumer.

Moreover,

the

Group

will

build

on

its

policy

to

promptly

and

transparently

communicate

any

information

that

is

reasonably
expected

to

affect

investor’s

perception

and

as

further

effects

of

the

COVID-19

pandemic

over

the

financial

results

of

the
Group

can

be

established,

such

information

will

be

included

in

the

future

financial

statements

and

will

be

made

available
to investors.

Increase in Energy price impact

Following

the

total

liberalization

of

the

electricity

market

from

1

January

2021

for

all

types

of

consumers,

the

international
context

of

the

energy

markets

characterized

by

an

imbalance

between

supply

and

demand

at

European

level,

corroborated
with

the

energy

policies

developed

both

at

EU

and

national

level,

has

led

to

an

increase

in

electricity

prices.

Moreover,

the
strong

increase

in

energy

prices

is

both

the

result

of

external

factors,

such

as

the

exponential

increase

in

the

price

of
emission

allowances,

and

of

internal

factors,

such

as

the

high

share

of

energy

traded

on

the

spot

market

(DAM).
 The
entire energy sector was affected by the increased energy price.

The

aforementioned

difficult

conditions

led

to

an

increase

in

operating

expenses,

mainly

for

the

acquisition

of

energy

for
network

losses

and

for

supplying

activity.

The

unstable

economic

environment,

led

to

a

decrease

in

financial

performance
for

2021,

as

compared

with

the

previous

year

but

with

no

significant

difficulties

in

receivables

collection

and

consequently
payment of debts being noted.

The

Group

actively

reviews

and

implements

policies

and

strategies

to

recover

from

the

loss

generated

by

the

increase

in
energy

price,

strategies

which

mainly

aim

in

revising

the

method

of

generating

the

selling

price

for

final

consumers,
concluding

agreements

with

specific

clauses

ensuring

new

financing

facilities,

closely

monitoring

suppliers

and

consumers
payment terms, monitoring daily cash flow and forecasted cash flow.

Therefore,

considering

the

actions

already

implemented

and

the

strategies

which

will

be

applied,

the

Group

anticipate

a
recovery

on

its

financial

performance

and

its

operations

in

the

foreseeable

future.

The

Group

continues

to

closely

monitor
the

macroeconomic

outlook

and

as

additional

information

will

be

available,

their

effects

on

the

activity

of

Group

companies
and over the financial results will be analyzed.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

248

2
Basis of accounting

These

annual

consolidated

financial

statements

have

been

prepared

in

accordance

with

International

Financial

Reporting
Standards

(“IFRS”)

as

adopted

by

the

European

Union

(“IFRS-EU”).

The

consolidated

financial

statements

were

authorized
for

issue

by

the

Board

of

Directors

on

28

February

2022

and

will

be

submitted

for

shareholders’

approval

in

the

meeting
scheduled on 20 April 2022.

The

Company

also

issues

an

original

version

of

the

consolidated

financial

statements

prepared

in

accordance

with

IFRS-EU
in

Romanian

language,

that

will

be

used

for

submitting

to

the

Bucharest

Stock

Exchange,

which

is

the

original

binding
version.

Details

of

the

Group’s

accounting

policies

are

included

in

Note

6.

The

Group

has

consistently

applied

the

accounting

policies
to all periods presented in these consolidated financial statements.

3
Functional and presentation currency

These

consolidated

financial

statements

are

presented

in

Romanian

Lei

(RON),

which

is

the

functional

currency

of

all

Group
companies. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

4
Use of judgements and estimates

In

preparing

these

consolidated

financial

statements,

management

has

made

judgements,

estimates

and

assumptions

that
affect

the

application

of

the

Group’s

accounting

policies

and

the

reported

amounts

of

assets,

liabilities,

income

and
expenses.

Actual

results

may

differ

from

these

estimates.

Estimates

and

underlying

assumptions

are

reviewed

on

an
ongoing basis. Revisions to estimates are recognised prospectively.

(a)
Judgements

Information

about

judgements

made

in

applying

accounting

policies

that

have

the

most

significant

effects

on

the

amounts
recognised in the consolidated financial statements is included below.

Revenue recognition

The

Group

assesses

its

revenue

arrangements

based

on

specific

criteria

to

determine

if

it

is

acting

as

a

principal

or

an
agent.

In

applying

IFRS

15,

the

Group

has

identified

that

it

acts

in

the

capacity

of

an

agent

in

case

of

transactions

as
Balancing

Responsible

Party

(“BRP”)

and

thus

recognises

revenue

as

the

net

amount

of

the

commission

earned

by

the
Group. The Group concluded that it is acting as a principal in all other revenue arrangements.

Service Concession Arrangements

The

distribution

subsidiaries

(as

operators)

that

merged

into

one

single

distribution

operator

as

of

31

December

2020
concluded

concession

contracts

with

the

Ministry

of

Economy

(as

grantor)

in

2005,

updated

by

subsequent

addendums.
These

contracts

concern

the

operation

of

electricity

distribution

service

in

the

established

territory

(Transilvania

Nord,
Transilvania

Sud,

Muntenia

Nord),

on

the

risk

and

responsibility

of

the

operators

and

taking

into

account

the

regulations
applicable

to

the

operation,

modernization,

rehabilitation

and

development

of

energy

distribution

networks

specified

in

the
Electricity

Law,

the

terms

and

conditions

of

the

licenses

for

electricity

distribution

and

the

regulations

issued

by

ANRE.

The
distribution

operator

resulting

from

the

merger

of

the

three

distribution

operators

within

the

Group,

Distributie

Energie
Electrica

Romania

concluded

addendums

to

the

concession

agreements

signed

with

the

Ministry

of

Economy

for

the
operation of electricity distribution service in all three areas.

IFRIC

12

“
Service

Concession

Arrangements”

deals

with

public-to-private

service

concession

arrangements.

IFRIC

12
applies to public-to-private service concession arrangements if:

(a)

the

grantor

controls

or

regulates

what

services

the

operator

must

provide

with

the

infrastructure,

to

whom

it

must
provide them, and at what price; and

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

249

(b)

the

grantor

controls

-

through

ownership,

beneficial

entitlement

or

otherwise

-

any

significant

residual

interest

in

the
infrastructure at the end of the term of the arrangement.

The

control

or

regulation

referred

to

in

condition

(a)

could

be

by

contract

or

otherwise

(such

as

through

a

regulator).

The
activities of the electricity distribution operators, including distribution tariffs, are regulated by ANRE.

The

concession

contracts

are

concluded

for

a

period

of

49

years

and

may

be

extended

for

a

period

equal

to

no

more

than
half

of

that

period.

As

a

price

for

the

concession,

the

operators

pay

an

annual

royalty

fee

recognized

in

the

distribution
tariff

of

1/1000

of

the

revenues

from

electricity

distribution.

According

to

the

concession

contracts,

the

operators

use

the
assets

representing

the

distribution

network

owned

by

them

located

in

the

above-mentioned

territory

for

electricity
distribution.

According

to

the

concession

contracts,

the

grantor

will

buy

at

the

end

of

the

term

of

concession

contract

the
ownership

right

of

the

"relevant

assets",

that

are

mainly

the

electricity

distribution

networks,

at

a

price

equal

to

the

value
of the regulated assets base at the end of the concession.

Within

the

arrangements,

the

Group

incurs

significant

expenditure

in

relation

to

the

development

and

maintenance

of

the
infrastructure.

The

construction

works

are

either

outsourced

by

the

Group

to

sub-contractors,

or

performed

internally.
Significant

management

judgment

is

involved

in

accounting

for

the

concession

arrangements

under

IFRIC

12,

including
those

in

respect

of

the

recognition

of

revenue

based

on

the

separation

of

construction

or

upgrade

services

from

operation
services.

The

concessionaires

act

as

service

suppliers

(they

build,

modernize

and

maintain

the

distribution

network)

and

the
revenues

related

to

the

construction

or

improvement

of

infrastructure

is

recorded

according

to

IFRS

15.

This

results

in
revenues

and

expenditures

being

recognized

in

the

profit

and

loss

account

(related

to

the

construction

and

modernization
of

infrastructure),

as

well

as

of

a

margin

resulting

from

rendering

the

construction

services

establised

by

the

Group.

The
3% margin applied is determined based on the Group’s experience in working with external contractors.

(b)
Assumptions and estimation uncertainties

Information

about

assumptions

and

estimation

uncertainties

that

may

result

in

a

material

adjustment

in

the

subsequent twelve month period is included in the following notes:

•
Note 6 l) – assumptions regarding the useful life of the intangible assets related to concession arrangements;

•
Nota

6

c)

–

assumptions

regarding

recognition

of

revenue

from

supply

and

distribution

of

electricity

to

consumers
based on estimates for electricity delivered and for which no reading was performed yet
;

•
Notes

18

and

31

–

assumptions

and

estimates

about

measurement

of

the

allowance

for

trade

receivables

at

the

level
of expected credit losses (ECL), respectively in determining the loss rates;

•
Note 23 – assumptions regarding the revalued amount of property, plant and equipment;

•
Notes 29 and 34 – recognition and measurement of provisions and contingencies;

•
Notes 17 – recognition of deferred tax asset;

•
Note

18

–

assumptions

and

estimates

of

amounts

to

be

received

from

the

state

following

the

application

of

the
compensation and capping scheme.

Measurement of fair values

A

number

of

the

Group’s

accounting

policies

and

disclosures

require

the

measurement

of

fair

values,

for

both

financial

and
non-financial assets and liabilities.

When

measuring

the

fair

value

of

an

asset

or

a

liability,

the

Group

uses

market

observable

data

as

far

as

possible.

Fair
values

are

categorised

into

different

levels

in

a

fair

value

hierarchy

based

on

the

inputs

used

in

the

valuation

techniques

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

250

as follows:

•
Level

1:

quoted

prices

(unadjusted)

in

active

markets

for

identical

assets

or

liabilities,

which

the

Group

can

access;

•
Level

2:

inputs

other

than

quoted

prices

included

in

Level

1

that

are

observable

for

the

asset

or

liability,

either
directly (i.e. as prices) or indirectly (i.e. derived from prices);

•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If

the

inputs

used

to

measure

the

fair

value

of

an

asset

or

a

liability

might

be

categorised

in

different

levels

of

the

fair

value
hierarchy,

then

the

fair

value

measurement

is

categorised

in

its

entirety

in

the

same

level

of

the

fair

value

hierarchy

as

the
lowest level input that is significant to the entire measurement.

The

Group

recognises

transfers

between

levels

of

the

fair

value

hierarchy

at

the

end

of

the

reporting

period

during

which
the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

•
Note 31 – Financial instruments;

•
Note 23 – Property, plant and equipment.

5
Basis of measurement

The

consolidated

financial

statements

have

been

prepared

on

the

historical

cost

basis

except

for

the

land

and

buildings
which are measured based on the revaluation model.

6
Significant accounting policies

The

Group

has

consistently

applied

the

following

accounting

policies

to

all

periods

presented

in

these

consolidated

financial
statements.

The

new

amendments

to

existing

standards

that

are

effective

starting

with

1

January

2021

do

not

have

a
significant impact over the
Group’s consolidated financial statements.

(a)
Going concern

The

consolidated

financial

statements

have

been

prepared

on

the

going

concern

basis.

In

making

this

judgement
management

considers

current

trading

performance

and

access

to

finance

resources.

The

Group

has

prepared

a

forecast
that includes the following assumptions:

•
A

return

to

positive

operating

cash

flow

from

May

2022,

following

with

the

assumption

that

the

effects

of

the

law
118/2021

will

no

longer

continue

past

March

31,

2022.

The

consequence

would

be

that

the

price

for

the

end
customers will no longer be capped;

•
The

utilisation

of

confirmed

debt

facilities

up

to

a

limit

of

RON

2,537,223

thousand,

including

RON

1,830,000
thousand total overdraft limits (please see Note 20 and 36) and RON 707,223 thousand long term loans (please
see Note 30);

•
The

utilisation

of

not

yet

confirmed

facilities

amounting

to

RON

840,000

thousand

which

would

be

drawn

down
during the forecast period;

•
The

Group

has

received

the

waiver

letter

from

EBRD

on

24

February

2022

(Note

36),

however

this

is

subject

of
obtaining

the

waiver

letters

also

from

EIB

and

BCR

for

which

the

Group

was

non

compliant

as

at

31

December
2021;

The

management

of

the

Group

is

of

the

opinion

that

based

on

the

discussions

with

EIB

and

BCR

the

waiver
letter will be obtained also from these 2 banks;

At

the

present

time

the

projections

are

based

on

the

latest

assumptions

that

include

the

ending

of

the

Law

no.

118/2021
regarding

the

compensation

and

ceiling

scheme

in

March

2022.

At

the

date

of

issuance

of

these

consolidated

financial
statements

the

regulatory

position

is

under

review

and

there

may

be

further

laws

enacted

which

could

adversely

impact
the

Groups

operating

cash

flows

beyond

the

1
st

of

April

2022.

Given

the

current

market

uncertainties,

the

Group

has
outlined

a

proposal

to

be

approved

in

the

forthcoming

annual

shareholders

meeting

regarding

the

approval

of

a

total

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

251

ceiling

of

short-term

financing

up

to

RON

1,500,000

thousand.
 In

light

of

the

importance

of

the

Group

as

the

supplier

and
distributed

of

electricity

on

the

Romanian

market,

having

39.6%

(according

to

the

latest

ANRE

report

2020

for

the
distribution

segment)

as

market

share

on

the

electricity

distribution

and

18.39%

(according

to

the

latest

ANRE

report
November

2021

for

the

supply

segment)

as

market

share

on

the

electricity

supply

market

and

having

as

main

shareholder
of

Electrica

SA

the

Romanian

State,

the

management

believes

sufficient

financing

will

be

made

available

to

cover

any
financing requirements arising from this uncertainty and Group will be able to meet its obligations as they fall due.

Based

upon

the

above

projections

and

other

information,

given

the

measures

already

implemented

and

the

strategies

to
reduce

the

risks

which

may

occur

due

to

the

instability

of

the

economic

environment,

the

Board

of

Directors

has,

at

the
time

of

approving

the

consolidated

financial

statements,

a

reasonable

expectation

that

the

Group

has

adequate

resources
to

continue

in

operational

existence

for

the

foreseeable

future.

Thus

they

continue

to

adopt

the

going

concern

basis

of
accounting in preparing the consolidated financial statements.

(b)
Basis of consolidation

(i)
Subsidiaries

Subsidiaries

are

entities

controlled

by

the

Group.

The

Group

controls

an

entity

when

it

is

exposed

to,

or

has

rights

to,
variable

returns

from

its

involvement

with

the

entity

and

has

the

ability

to

affect

those

returns

through

its

power

over

the
entity.

Subsidiaries

are

included

in

the

consolidation

perimeter

from

the

date

that

control

commences

until

the

date

on
which control ceases.

(ii)
Loss of control

On

the

loss

of

control,

the

Group

derecognizes

the

assets

and

liabilities

of

the

subsidiary,

any

non-controlling

interests

and
the

other

components

of

equity

related

to

the

subsidiary.

Any

surplus

or

deficit

arising

on

the

loss

of

control

is

recognized
in

profit

or

loss.

If

the

Group

retains

any

interest

in

the

previous

subsidiary,

then

such

interest

is

measured

at

fair

value

at
the

date

that

control

is

lost.

Subsequently

that

retained

interest

is

accounted

for

as

an

equity-accounted

investee

or

as

an
available-for-sale financial asset depending on the level of influence retained.

(iii)
Non-controlling interests

The

Group

measures

any

non-controlling

interests

in

the

subsidiary

at

their

proportionate

share

of

the

subsidiary’s
identifiable net assets.

Changes

in

the

Group’s

interest

in

a

subsidiary

that

do

not

result

in

a

loss

of

control

are

accounted

for

as

equity

transactions.
Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

(iv)
Transactions eliminated on consolidation

Intra-group

balances

and

transactions,

and

any

unrealized

income

and

expenses

arising

from

intra-group

transactions,

are
eliminated in preparing the consolidated financial statements.

Unrealized

gains

arising

from

transactions

with

equity-accounted

investees

are

eliminated

against

the

investment

to

the
extent

of

the

Group’s

interest

in

the

investee.

Unrealized

losses

are

eliminated

in

the

same

way

as

unrealized

gains,

but
only to the extent that there is no evidence of impairment.

(c)
Revenue

The Group recognize the revenues from contracts with customers in accordance with IFRS 15.

Under

the

standard,

revenue

is

recognized

when

or

as

the

customer

acquires

control

over

the

goods

or

services

rendered,
at

the

amount

which

reflects

the

price

at

which

the

Group

is

expected

to

be

entitled

to

receive

in

exchange

of

those

goods
or

services.

Revenue

is

recognized

at

the

fair

value

of

the

services

rendered

or

goods

delivered,

net

of

VAT,

excises

or
other taxes related to the sale.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

252

Supply and distribution of electricity

The

revenue
 from

supply

and

distribution

of

electricity

to

consumers

is

recognized

when

electricity

is

delivered

to

consumers
(consumed

by

consumers),

based

on

meter

readings

and

based

on

estimates

for

electricity

delivered

and

for

which

no
reading

was

performed

yet.

The

invoicing

of

electricity

sales

is

performed

on

a

monthly

basis.

Monthly

electricity

invoices
are

based

on

meter

readings

or

on

estimated

consumptions

based

on

the

historical

data

of

each

consumer.

Electricity
supplied

to

consumers

which

is

not

yet

billed

as

at

the

reporting

date

is

accrued

on

the

basis

of

recent

average

consumption
or

based

on

subsequent

meter

readings.

Differences

between

estimated

and

actual

amounts

are

recorded

in

subsequent
periods.

Revenues

from

electricity

distribution

and

supply

also

include

the

cost

of

green

certificates

recharged

by

the

Group

to

final
consumers (see paragraph (k)).

The

Group

acts

in

the

capacity

of

an

agent

in

case

of

transactions

as

Balancing

Responsible

Party

(“BRP”).

Thus,

in

its
quality

as

an

agent,

the

Group

recognizes

revenue

for

the

commission

earned

in

exchange

for

facilitating

the

transfer

of
goods

or

services.

Any

holder

of

a

production/supply/distribution

license

must

be

established

as

a

Balancing

Responsible
Party

or

must

delegate

this

responsibility

to

a

Balancing

Responsible

Party.

By

delegating

this

responsibility

to

a

BRP,

there
is

the

benefit

of

imbalance

aggregation

in

the

meaning

of

Balancing

Market

cost

reduction

by

comparison

with

the

case
where the producer/supplier/distributor would act itself as a Balancing Responsible Party.

Electrica

Furnizare

S.A.

acts

as

BRP

for

a

large

number

of

participants,

electricity

producers

as

well

as

electricity

suppliers
and

distribution

operators. For

the

settlement

of

imbalances,

BRP

Electrica

is

using

the

“method

of

internal

redistribution
of

payments”,

ensuring

benefits

of

imbalance

aggregation

for

all

the

participants

included

in

the

BRP.

BRP

Electrica
provides

the

transmission

of

physical

notifications

to

CNTEE

Transelectrica

SA

and

its

role

is

to

balance

the

differences
between the electricity contracted and the electricity measured at the level of the entire BRP.

Generation and sale of electricity

The

electricity

produced

by

the

Group

is

mainly

sold

on

the

Day

Ahead

Market

and

the

revenue

is

recognized

when

the
electricity is injected into the network and is being sold on the market.

Sale of green certificates

Electricity

suppliers

have

a

legal

obligation

to

purchase

green

certificates

from

producers

of

electricity

from

renewable
sources,

based

on

annual

targets

or

quotas

set

by

law,

which

are

applied

to

the

quantity

of

electricity

purchased

and
supplied

to

final

customers.

Cost

of

green

certificates

is

invoiced

to

final

customers

separately

from

the

tariffs

for

electricity.

Electricity

producers

are

entitled

by

the

law

in

force

to

receive

a

certain

number

of

green

certificates

for

each

MWH

of
electricity

produced

from

renewable

sources

and

injected

into

the

network.

The

green

certificates

can

be

sold

on

the

spot
market,

term

market

or

a

combination

of

both.

The

selling

price

must

fall

between

the

minimum

and

maximum

values

set
by

Law

no.

220/2008

for

establishing

the

system

for

promoting

the

production

of

electricity

from

renewable

energy
sources,

republished,

with

subsequent

amendments.

Revenue

from

green

certificates

is

recognized

in

the

profit

or

loss
statement when the green certificates are sold on the trading market.

Rendering of services

Revenues

related

to

services

rendered

are

recognised

in

the

period

in

which

the

services

were

rendered

based

on
statements of work performed, regardless of when paid or received, in accordance with the accrual basis.

Sales of goods

Revenue

from

sale

of

goods

is

recognized

when

the

control

of

the

goods

has

been

transferred

to

a

customer.

Control

refers
to the customer's ability to direct the use of and obtain substantially all of the remaining benefits from, an asset.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

253

Service concession arrangement

Revenue

related

to

construction

or

upgrade

services

under

service

concession

arrangement

is

recognised

based

on

the
stage

of

completion

of

the

work

performed,

consistent

with

the

accounting

policy

on

recognising

revenue

on

construction
contracts, as follows:

•
Revenue

in

respect

of

variations

to

contracts

and

incentive

payments

is

recognised

when

there

is

an

enforceable
right

to

payment

and

it

is

highly

probable

it

will

be

agreed

by

the

customer.

Variable

consideration

is

assessed
on

a

contract

by

contract

basis

according

to

the

facts,

circumstances

and

terms

of

each

project

and

only
recognised

to

the

extent

that

it

is

highly

probable

not

to

significantly

reverse

in

the

future.

Revenue

in

respect
of claims is recognised only if it is highly probable not to reverse in future periods.

•
If

the

outcome

of

a

construction

contract

can

be

estimated

reliably,

then

contract

revenue

is

recognised

in

profit
or

loss

in

proportion

to

the

stage

of

completion

of

the

contract.

The

stage

of

completion

is

assessed

with

reference
to

surveys

of

work

performed.

Otherwise,

contract

revenue

is

recognized

only

to

the

extent

of

contract

costs
incurred that are likely to be recoverable.

•
Contract

expenses

are

recognized

as

incurred

unless

they

create

an

asset

related

to

future

contract

activity.

An
expected loss on a contract is recognised immediately as expense.

(d)
Commissions

The

Group

assesses

its

revenue

arrangements

against

specific

criteria

to

determine

if

it

is

acting

as

principal

or

agent.

The
Group

has

concluded

that

it

is

acting

as

a

principal

in

all

of

its

revenue

arrangements

except

for

the

transactions

acting

as
Balancing

Responsible

Party.

If

the

Group

acts

in

the

capacity

of

an

agent

rather

than

as

the

principal

in

a

transaction,

then
the income recognised is the net amount of commission earned by the Group.

(e)
Finance income and finance costs

The Group’s finance income and finance costs include:

•
interest income;

•
interest expense;

•
foreign currency gains or losses on financial assets and financial liabilities;

•
impairment losses recognised on financial assets (other than trade receivables).

Interest income or expense is recognised using the effective interest method.

(f)
Foreign currency transactions

Transactions

in

foreign

currencies

are

translated

to

the

functional

currency

at

the

exchange

rates

at

the

dates

of

the
transactions.

Monetary

assets

and

liabilities

denominated

in

foreign

currencies

are

translated

to

the

functional

currency

at

the

exchange
rate

at

the

reporting

date,

as

communicated

by

the

National

Bank

of

Romania.

Non-monetary

assets

and

liabilities

that

are
measured

at

fair

value

in

a

foreign

currency

are

translated

to

the

functional

currency

at

the

exchange

rate

when

the

fair
value

was

determined.

Foreign

currency

differences

are

recognised

in

profit

or

loss.

Non-monetary

items

that

are

measured
based on historical cost in a foreign currency are not translated to the functional currency.

(g)
Employee benefits

(i)
Short-term employee benefits

Short-term

employee

benefits

are

measured

on

an

undiscounted

basis

and

are

expensed

as

the

related

service

is

provided.
A

liability

is

recognised

for

the

amount

expected

to

be

paid

if

the

Group

has

a

present

legal

or

constructive

obligation

to
pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

254

(ii)
Defined benefit plans

The

Group’s

net

obligation

in

respect

of

defined

benefit

plans

is

calculated

separately

for

each

plan

by

estimating

the
amount of future benefit that employees have earned in the current and prior periods, discounting that amount.

The

calculation

of

defined

benefit

obligations

is

performed

annually

by

a

qualified

actuary

using

the

projected

unit

credit
method.

Re-measurements

of

the

net

defined

benefit

liability,

which

comprise

actuarial

gains

and

losses,

are

recognised

immediately
in

other

comprehensive

income.

The

Group

determines

the

net

interest

expense/(income)

on

the

net

defined

benefit

liability
for

the

period

by

applying

the

discount

rate

used

to

measure

the

defined

benefit

obligation

at

the

beginning

of

the

annual
period

to

the

then-net

defined

benefit

liability,

taking

into

account

any

changes

in

the

net

defined

benefit

liability

during
the

period

as

a

result

of

contributions

and

benefit

payments.

Net

interest

expense

and

other

expenses

related

to

defined
benefit plans are recognised in profit or loss.

When

the

benefits

of

a

plan

are

changed

or

when

a

plan

is

curtailed,

the

resulting

change

in

benefit

that

relates

to

past
service

or

the

gain

or

loss

on

curtailment

is

recognised

immediately

in

profit

or

loss.

The

Group

recognises

gains

and

losses
on the settlement of a defined benefit plan when the settlement occurs.

(iii)
Other long-term employee benefits

The

Group’s

net

obligation

in

respect

of

long-term

employee

benefits

is

the

amount

of

future

benefit

that

employees

have
earned

in

return

for

their

service

in

the

current

and

prior

periods.

That

benefit

is

discounted

to

determine

its

present

value.
Re-measurements are recognised in profit or loss in the period in which they arise.

(iv)
Termination benefits

Termination

benefits

are

expensed

at

the

earlier

of

when

the

Group

can

no

longer

withdraw

the

offer

of

those

benefits

and
when

the

Group

recognises

costs

for

a

restructuring.

If

benefits

are

not

expected

to

be

settled

wholly

within

12 months

of
the end of the reporting period, then they are discounted.

(h)
Income tax

Income

tax

expense

comprises

current

and

deferred

tax.

It

is

recognised

in

profit

or

loss

except

to

the

extent

that

it

relates
to a business combination or items recognised directly in equity or in other comprehensive income.

(i)
Current tax

Current

tax

comprises

the

expected

tax

payable

or

receivable

on

the

taxable

income

or

loss

for

the

year

and

any

adjustment
to

tax

payable

or

receivable

in

respect

of

previous

years.

It

is

measured

using

tax

rates

enacted

or

substantively

enacted
at the reporting date. Current tax also includes any tax arising from dividends.

(ii)
Deferred tax

Deferred

tax

is

recognised

in

respect

of

temporary

differences

between

the

carrying

amounts

of

assets

and

liabilities

for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

•
temporary

differences

on

the

initial

recognition

of

assets

or

liabilities

in

a

transaction

that

is

not

a

business

combination
and that affects neither accounting nor taxable profit or loss;

•
temporary

differences

related

to

investments

in

subsidiaries,

associates

and

joint

arrangements

to

the

extent

that

the
Group

is

able

to

control

the

timing

of

the

reversal

of

the

temporary

differences

and

it

is

probable

that

they

will

not
reverse in the foreseeable future; and

•
taxable temporary differences arising on the initial recognition of goodwill.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

255

Deferred

tax

assets

are

recognised

for

unused

tax

losses,

unused

tax

credits

and

deductible

temporary

differences

to

the
extent

that

it

is

probable

that

future

taxable

profits

will

be

available

against

which

they

can

be

used.

Deferred

tax

assets
are

reviewed

at

each

reporting

date

and

are

reduced

to

the

extent

that

it

is

no

longer

probable

that

the

related

tax

benefit
will be realised.

Deferred

tax

is

measured

at

the

tax

rates

that

are

expected

to

be

applied

to

temporary

differences

when

they

reverse,
using tax rates enacted or substantively enacted at the reporting date.

The

measurement

of

deferred

tax

reflects

the

tax

consequences

that

would

follow

from

the

manner

in

which

the

Group
expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

Unrecognized

deferred

tax

assets

are

reassessed

at

each

reporting

date

and

recognized

to

the

extent

that

it

has

become
probable that the future taxable profits will be available against which they can be used.

The

Group

applies

IFRIC

23

„Uncertainty

over

Income

Tax

Treatments”.

IFRIC

23

clarifies

how

to

apply

the

recognition
and measurement requirements in IAS 12 when there is uncertainty over income tax treatments.

In

such

a

circumstance,

the

Group

shall

recognise

and

measure

its

current

or

deferred

tax

asset

or

liability

applying

the
requirements

in

IAS

12

based

on

taxable

profit

(tax

loss),

tax

bases,

unused

tax

losses,

unused

tax

credits

and

tax

rates
determined applying this interpretation.

The

Group

assesses

whether

it

is

probable

(more

than

50%

chances)

that

a

tax

authority

will

accept

an

uncertain

tax
treatment.

Thus,

the

Group

shall

reflect

the

effect

of

uncertainty

for

each

uncertain

tax

treatment

by

using

either

of

the

following
methods, depending on which method the entity expects to better predict the resolution of the uncertainty:

(a)

the

most

likely

amount

-

the

single

most

likely

amount

in

a

range

of

possible

outcomes.

The

most

likely

amount

may
better predict the resolution of the uncertainty if the possible outcomes are binary or are concentrated on one value.

(b)

the

expected

value

-

the

sum

of

the

probability‑weighted

amounts

in

a

range

of

possible

outcomes.

The

expected
value

may

better

predict

the

resolution

of

the

uncertainty

if

there

is

a

range

of

possible

outcomes

that

are

neither

binary
nor concentrated on one value.

(i)
Green certificates

Electricity supply

Electricity

suppliers

have

a

legal

obligation

to

purchase

green

certificates

from

producers

of

electricity

from

renewable
sources,

based

on

annual

targets

or

quotas

set

by

law,

which

are

applied

to

the

quantity

of

electricity

purchased

and
supplied to final customers.

The

cost

of

green

certificates

is

accrued

in

the

profit

or

loss

based

on

the

quantitative

quota

determined

by

the

regulator
representing

the

quantity

of

the

green

certificates

that

the

Group

has

to

purchase

for

the

year

and

based

on

the

price

of
green

certificates

acquired

on

the

centralized

market.

The

obligation

for

covering

the

annual

acquisition

quota

is

accrued
in profit or loss.

Electricity generation

Electricity

producers

are

entitled

by

the

law

in

force

to

receive

a

certain

number

of

green

certificates

for

each

MWH

of
electricity produced from renewable sources and injected into the network.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

256

Green

certificates

are

recognized

as

inventories

when

the

producer

has

the

right

to

receive

as

a

result

of

energy

produced
and

delivered

into

the

network,

at

nil

nominal

value.

Recognition

in

the

profit

and

loss

account

is

done

at

the

time

of

their
sale.

(j)
Inventories

Inventories

consist

mainly

of

spare

parts

that

do

not

meet

the

recognition

criteria

for

property,

plant

and

equipment,
consumables, goods for resale, other inventories and
the natural gas storage.

Inventories are measured at the lower of cost and net realizable value.

The

cost

of

inventories

is

based

on

the

weighted

average

cost

method.

The

cost

of

inventories

includes

all

the

acquisition
costs and other expenses related to bringing the inventories to their current place and condition.

Consumables

used

for

the

repairs

and

maintenance

of

the

electricity

network

are

included

in

profit

and

loss

when

consumed
and presented in “
Repairs, maintenance and materials
”.

(k)
Property, plant and equipment

(i)
Recognition and measurement

Property,

plant

and

equipment

are

stated

initially

at

cost,

which

includes

purchase

price

and

other

costs

directly

attributable
to acquisition and bringing the asset to the location and condition necessary for their intended use.

After

initial

recognition,

land

and

buildings

are

measured

at

revalued

amounts

less

any

accumulated

depreciation

and

any
accumulated

impairment

losses

since

the

most

recent

valuation.

The

other

items

of

property,

plant

and

equipment

are
measured at cost less any accumulated depreciation and any accumulated impairment losses.

Revaluations

of

land

and

buildings

are

made

with

sufficient

regularity

to

ensure

that

the

carrying

amount

does

not

differ
materially from the one that would be determined using the fair value at the end of the reporting period.

When

a

building

is

revalued,

the

accumulated

depreciation

is

eliminated

against

the

gross

carrying

amount

of

that

item,
and the net amount is restated to the revalued amount of the asset.

If

significant

parts

of

an

item

of

property,

plant

and

equipment

have

different

useful

lives,

then

they

are

accounted

for

as
separate items (major components) of property, plant and equipment.

Spare

parts,

stand-by

and

servicing

equipment

are

classified

as

property,

plant

and

equipment

if

they

are

expected

to

be
used during more than one period or can be used only in connection with an item of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

(ii)
Subsequent expenditure

Subsequent

expenditure

is

capitalised

only

if

it

is

probable

that

the

future

economic

benefits

associated

with

the

expenditure
will flow to the Group.

(iii)
Depreciation

Depreciation

is

calculated

to

write

off

the

cost

of

items

of

property,

plant

and

equipment

less

their

estimated

residual

values
using

the

straight-line

method

over

their

estimated

useful

lives,

and

is

recognised

in

profit

or

loss.

Leased

assets

are
depreciated

over

the

shorter

of

the

lease

term

and

their

useful

lives

unless

it

is

reasonably

certain

that

the

Group

will

obtain
ownership by the end of the lease term. Land and construction in progress are not depreciated.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

257

The estimated useful lives of property, plant and equipment are as follows:

Category

Useful lives (years)

Buildings

45-70

Equipment

3-25

Motor vehicles and office equipment

3-10

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(l)
Intangible asset in a service concession arrangement

(i)
 Recognition and measurement

The

Group

recognises

an

intangible

asset

arising

from

a

service

concession

arrangement

when

it

has

a

right

to

charge

for
use

of

the

concession

infrastructure.

An

intangible

asset

received

as

consideration

for

providing

construction

or

upgrade
services

in

a

service

concession

arrangement

is

measured

at

fair

value

on

initial

recognition

with

reference

to

the

fair

value
of

the

services

provided.

Subsequent

to

initial

recognition,

the

intangible

asset

is

measured

at

cost,

less

accumulated
amortization and accumulated impairment losses.

(ii) Amortization

The

amortization

method

used

is

selected

on

the

basis

of

the

expected

pattern

of

consumption

of

the

expected

future
economic

benefits

embodied

in

the

asset,

and

is

applied

consistently

from

period

to

period,

unless

there

is

a

change

in

the
expected

pattern

of

consumption

of

those

future

economic

benefits.

The

Group

determined

that

the

amortization

method
that

reflects

appropriately

the

expected

pattern

of

consumption

of

the

expected

future

economic

benefits

is

correlated

with
the amortisation of the regulated asset base “RAB”.

(m)
Connection fees

According

to

art.

25

paragraph

(1)

of

Law

no.

123/2012

on

electricity

and

natural

gas,

as

subsequently

amended

and
supplemented,

access

to

power

grids

of

public

interest

is

a

mandatory

service

provided

under

regulatory

conditions,

which
the transmission and system operator as well as the distribution operators must ensure.

At

the

request

of

a

new

or

pre-existing

customer,

the

distribution

operators

are

obliged

to

communicate

the

technical

and
economic

conditions

for

the

connection

network

and

to

cooperate

with

the

applicant

to

choose

the

most

advantageous
technical

and

economic

solution.

Afterwards,

a

connection

contract

is

concluded

between

the

distribution

operator

and

the
customer

at

a

regulated

tariff.

The

actual

construction

of

the

connection

installation

is

carried

out

by

a

construction

supplier
certified by ANRE.

The

Group

collects

cash

from

customers,

which

is

used

only

to

pay

for

the

construction

of

the

connection

station,

and

the
Group

must

then

use

this

asset

to

connect

customers

to

the

network.

According

to

ANRE

Order

no.

59/2013,

with
subsequent amendments, these assets remain in the ownership of the network operator.

The

Group

recognizes

the

assets

at

nil

value,

net

of

the

amount

of

the

deferred

income

representing

the

contributions
from

customers.

The

assets

financed

from

connection

fees

received

from

the

new

users

of

the

distribution

network

are
not

included

in

the

RAB.

At

the

end

of

the

concession

contract,

the

assets

built

from

the

connection

tariff

will

be

transferred
to the concessionaire free of charge together with the assets part of RAB.

Starting

with

2021,

according

to

ANRE

Order

no.

160/2020

amending

ANRE

Order

no.59/2013,

the

connection

installations
that

are

financed

by

the

customers

will

remain

in

their

ownership

and

are

being

exploited

by

the

network

operator.

However,
according

to

ANRE

Order

no.

17/2021

for

the

connection

installations

of

all

household

consumers

and

of

the

non-household
with

lengths

less

than

2.5

km,

the

distribution

operator

has

the

obligation

to

finance

them

and

these

will

remain

in

the
ownership of the
 network operator.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

258

(n)
 Other intangible assets

(i)
Recognition and measurement

Other

intangible

assets

that

are

acquired

by

the

Group

and

have

finite

useful

lives

are

measured

at

cost

less

accumulated
amortization and any accumulated impairment losses.

(ii)
Subsequent expenditure

Subsequent

expenditure

is

capitalised

only

when

it

increases

the

future

economic

benefits

embodied

in

the

specific

asset
to

which

it

relates.

All

other

expenditure,

including

expenditure

on

internally

generated

goodwill

and

brands,

is

recognised
in profit or loss as incurred.

(iii)
Amortization

Amortization

is

calculated

to

write

off

the

cost

of

intangible

assets

less

their

estimated

residual

values

using

the

straight-
line method over their estimated useful lives and is generally recognised in profit or loss.

The estimated useful lives of software and licenses are 3-5 years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(o)
Assets held for sale

Non-current

assets

or

disposal

groups

comprising

assets

and

liabilities,

are

classified

as

held-for-sale

if

it

is

highly

probable
that they will be recovered primarily through sale rather than through continuing use.

Such

assets,

or

disposal

groups,

are

generally

measured

at

the

lower

of

their

carrying

amount

and

fair

value

less

costs

to
sell.

Impairment

losses

on

initial

classification

as

held-for-sale

and

subsequent

gains

and

losses

on

remeasurement

are
recognised in profit or loss.

Once

classified

as

held-for-sale,

intangible

assets

and

property,

plant

and

equipment

are

no

longer

amortised

or
depreciated, and any equity-accounted investee is no longer equity accounted.

(p)
Financial instruments

Financial

assets

and

financial

liabilities

are

recognised

in

the

Group’s

statement

of

financial

position

when

the

Group
becomes a party to the contractual provisions of the instrument.

Financial

assets

and

financial

liabilities

are

initially

measured

at

fair

value.

Transaction

costs

that

are

directly

attributable
to

the

acquisition

or

issue

of

financial

assets

and

financial

liabilities

(other

than

financial

assets

and

financial

liabilities

at
fair

value

through

profit

or

loss)

are

added

to

or

deducted

from

the

fair

value

of

the

financial

assets

or

financial

liabilities,
as

appropriate,

on

initial

recognition.

Transaction

costs

directly

attributable

to

the

acquisition

of

financial

assets

or

financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i)
Financial assets

All

regular

way

purchases

or

sales

of

financial

assets

are

recognised

and

derecognised

on

a

trade

date

basis.

Regular

way
purchases

or

sales

are

purchases

or

sales

of

financial

assets

that

require

delivery

of

assets

within

the

time

frame

established
by

regulation

or

convention

in

the

marketplace.

All

recognised

financial

assets

are

measured

subsequently

in

their

entirety
at either amortised cost or fair value, depending on the classification of the financial assets.

Financial

assets

are

initially

measured

at

fair

value

and

subsequently

at

amortized

cost

in

accordance

with

IFRS

9,

as

they
are

held

in

a

business

model

to

collect

contractual

cash

flows

and

these

cash

flows

consist

solely

of

payments

of

principal
and interest on the principal amount outstanding.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

259

The

amortized

cost

of

a

financial

asset

is

the

amount

at

which

the

financial

asset

is

measured

at

initial

recognition

minus
the

principal

reimbursements,

plus

the

cumulative

amortization

using

the

effective

interest

method

of

any

difference
between

that

initial

amount

and

the

maturity

amount,

adjusted

for

any

loss

allowance.

The

gross

carrying

amount

of

a
financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.

Foreign exchange gains and losses

The

carrying

amount

of

financial

assets

that

are

denominated

in

a

foreign

currency

is

determined

in

that

foreign

currency
and translated at the spot rate at the end of each reporting period.

Loans and receivables

These

assets

are

initially

recognised

at

fair

value

plus

any

directly

attributable

transaction

costs.

Subsequent

to

initial
recognition,

they

are

measured

at

amortised

cost

using

the

effective

interest

method.

The

amortised

cost

is

reduced

by
impairment losses.

Loans and receivables comprise trade receivables, cash and cash equivalents and deposits.

Trade receivables

Trade

receivables

include

mainly

unsettled

invoices

issued

until

reporting

date

for

supply

and

distribution

of

electricity

and
services,

late

payment

penalties

and

accrued

revenue

for

electricity

delivered

and

services

rendered

until

the

end

of

the
year, but invoiced after the end of the year.

Cash and cash equivalents

Cash

and

cash

equivalents

comprise

cash

balances,

call

deposits

and

deposits

with

maturities

of

three

months

or

less

from
the

set-up

date

that

are

subject

to

an

insignificant

risk

of

changes

in

their

fair

value,

and

are

used

by

the

Group

in

the
management of its short-term commitments.

(ii)
Financial liabilities

All

financial

liabilities

are

measured

subsequently

at

amortised

cost

using

the

effective

interest

method

or

at

fair

value
through profit or loss.

Financial

liabilities

that

are

not

(i)

contingent

consideration

of

an

acquirer

in

a

business

combination,

(ii)

held‑for‑trading,
or (iii) valued as at fair value, are measured subsequently at amortised cost using the effective interest method.

The

effective

interest

method

is

a

method

of

calculating

the

amortised

cost

of

a

financial

liability

and

of

allocating

interest
expense

over

the

relevant

period.

The

effective

interest

rate

is

the

rate

that

exactly

discounts

estimated

future

cash
payments

(including

all

fees

and

points

paid

or

received

that

form

an

integral

part

of

the

effective

interest

rate,

transaction
costs

and

other

premiums

or

discounts)

through

the

expected

life

of

the

financial

liability,

or

(where

appropriate)

a

shorter
period, to the amortised cost of a financial liability.

Other

financial

liabilities

include

bank

borrowings,

bank

overdrafts,

financing

for

network

construction

related

to

concession
agreements and trade payables.

Bank

overdrafts

that

are

repayable

on

demand

and

form

an

integral

part

of

the

Group’s

cash

management

are

included

as
a component of cash and cash equivalents in the statement of cash flows.

(iii)
 Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares, net of
any tax effects, are recognised as a deduction from equity.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

260

Repurchase and reissue of ordinary shares (treasury shares)

When

shares

recognised

as

equity

are

repurchased,

the

amount

of

the

consideration

paid,

which

includes

directly
attributable

costs,

net

of

any

tax

effects,

is

recognised

as

a

deduction

from

equity.

Repurchased

shares

are

classified

as
treasury shares and are presented in the treasury share reserve.

When

treasury

shares

are

sold

or

reissued

subsequently,

the

amount

received

is

recognised

as

an

increase

in

equity

and
the resulting surplus or deficit on the transaction is presented within share premium.

(iv)
Impairment

Impairment of financial assets

The

Group

recognizes

a

loss

allowance

for

expected

credit

losses

on

investments

in

debt

instruments

that

are

measured
at

amortized

cost

or

at

fair

value

through

other

comprehensive

income.

The

amount

of

expected

credit

losses

is

updated
at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The

Group

always

recognizes

lifetime

expected

credit

losses

for

trade

receivables.

The

expected

credit

losses

on

these
financial

assets

are

estimated

using

a

provision

matrix

based

on

the

Group’s

historical

credit

loss

experience,

adjusted

for
factors

that

are

specific

to

the

debtors,

general

economic

conditions

and

an

assessment

of

both

the

current

as

well

as

the
forecast direction of conditions at the reporting date, including time value of money where appropriate.

i) Significant increase in credit risk

In

assessing

whether

the

credit

risk

on

a

financial

instrument

has

increased

significantly

since

initial

recognition,

the

Group
compares

the

risk

of

a

default

occurring

on

the

financial

instrument

at

the

reporting

date

with

the

risk

of

a

default

occurring
on the financial instrument at the date of initial recognition.

Irrespective

of

the

above

analysis,

the

Group

considers

that

default

has

occurred

when

a

financial

asset

is

more

than

90
days

past

due

unless

the

Group

has

reasonable

and

supportable

information

to

demonstrate

that

a

more

lagging

default
criterion is more appropriate.

(ii) Write‑off policy

The

Group

writes

off

a

financial

asset

after

the

finalization

of

the

bankruptcy

proceedings.

Financial

assets

written

off

may
still

be

subject

to

enforcement

activities

under

the

Group’s

recovery

procedures,

taking

into

account

legal

advice

where
appropriate. Any recoveries made are recognised in profit or loss.

(iii) Measurement and recognition of expected credit losses

The

measurement

of

expected

credit

losses

is

a

function

of

the

probability

of

default,

loss

given

default

(i.e.

the

magnitude
of

the

loss

if

there

is

a

default)

and

the

exposure

at

default.

The

assessment

of

the

probability

of

default

and

loss

given
default

is

based

on

historical

data

adjusted

by

forward‑looking

information

as

described

above.

As

for

the

exposure

at
default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date.

For

financial

assets,

the

expected

credit

loss

is

estimated

as

the

difference

between

all

contractual

cash

flows

that

are

due
to

the

Group

in

accordance

with

the

contract

and

all

the

cash

flows

that

the

Group

expects

to

receive,

discounted

at

the
original effective interest rate.

Derecognition of financial assets

The

Group

derecognises

a

financial

asset

only

when

the

contractual

rights

to

the

cash

flows

from

the

asset

expire,

or
when

it

transfers

the

financial

asset

and

substantially

all

the

risks

and

rewards

of

ownership

of

the

asset

to

another

entity.
If

the

Group

neither

transfers

nor

retains

substantially

all

the

risks

and

rewards

of

ownership

and

continues

to

control

the
transferred

asset,

the

Group

recognises

its

retained

interest

in

the

asset

and

an

associated

liability

for

amounts

it

may

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

261

have

to

pay.

If

the

Group

retains

substantially

all

the

risks

and

rewards

of

ownership

of

a

transferred

financial

asset,

the
Group

continues

to

recognise

the

financial

asset

and

also

recognises

a

collateralised

borrowing

for

the

proceeds

received.

(q)
Revaluation reserve

The

difference

between

the

revalued

amount

and

the

net

carrying

amount

of

property,

plant

and

equipment

is

recognised
as revaluation reserve included in equity.

If

an

asset’s

carrying

amount

is

increased

as

a

result

of

a

revaluation,

the

increase

is

recognised

and

accumulated

in

equity
under

the

heading

of

revaluation

reserve.

However,

the

increase

is

recognised

in

profit

and

loss

to

the

extent

that

it

reverses
a revaluation decrease of the same amount of the asset previously recognised in profit and loss.

If

an

asset’s

carrying

amount

is

decreased

as

a

result

of

a

revaluation,

the

decrease

is

recognised

in

profit

or

loss.

However,
the

decrease

is

recognized

in

equity

in

revaluation

reserves

if

there

is

any

credit

balance

existing

in

the

revaluation

reserve
in respect of that asset.

The

revaluation

reserve

is

transferred

to

retained

earnings

in

an

amount

corresponding

to

the

use

of

the

asset

(as

the

asset
is depreciated) and upon disposal of the asset.

(r)
Dividends

Dividends

are

recognized

as

a

deduction

from

equity

in

the

period

in

which

their

distribution

is

approved

and

recognised
as

a

liability

to

the

extent

it

is

unpaid

at

the

reporting

date.

Dividends

are

disclosed

in

the

notes

to

financial

statements
when

their

distribution

is

proposed

after

the

reporting

date

and

before

the

date

of

the

issuance

of

the

financial

statements.

(s)
Pre-paid capital contributions in kind from shareholders

These

contributions

from

a

shareholder

represent

pre-paid

contributions

of

land

for

which

the

Company

obtained

title

deeds
in respect of future issuance of shares. The amounts recorded are based on the fair value of the land.

(t)
Provisions

A

provision

is

recognised

if,

as

a

result

of

a

past

event,

the

Group

has

a

present,

legal

or

constructive

obligation

that

can
be

estimated

reliably,

and

it

is

probable

that

an

outflow

of

economic

benefits

will

be

required

to

settle

the

obligation.
Provisions

are

determined

by

discounting

the

expected

future

cash

flows

at

a

pre-tax

rate

that

reflects

current

market
assessments

of

the

time

value

of

money

and

the

risks

specific

to

the

liability.

The

unwinding

of

the

discount

is

recognised
as finance cost.

A

provision

for

restructuring

is

recognised

when

the

Group

has

approved

a

detailed

and

formal

restructuring

plan,

and

the
restructuring either has commenced or has been announced publicly. Future operating losses are not provided for.

(u)
Contingent assets and liabilities

A contingent liability is:

(a)
a

possible

obligation

that

arises

from

past

events

and

whose

existence

will

be

confirmed

only

by

the

occurrence

or
non-occurrence of one or more uncertain future events not wholly within the control of the Group; or

(b) a present obligation that arises from past events that is not recognised because:

i. it

is

not

probable

that

an

outflow

of

resources

embodying

economic

benefits

will

be

required

to

settle

the
obligation; or

ii. the amount of the obligation cannot be measured with sufficient reliability.

Contingent

liabilities

are

not

recognized

in

the

Group’s

financial

statements,

but

disclosed

unless

the

possibility

of

an

outflow
of resources embodying economic benefits is remote.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

262

A

contingent

asset

is

a

possible

asset

that

arises

from

past

events

and

whose

existence

will

be

confirmed

only

by

the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

A

contingent

asset

is

not

recognized

in

the

Group’s

financial

statements,

but

disclosed

when

an

inflow

of

economic

benefits
is probable.

(v)
Leases

(i) The Group as lessee

The Group applies IFRS 16 „Leases”.

The

Group

assesses

whether

a

contract

is

or

contains

a

lease,

at

inception

of

the

contract.

The

Group

recognises

a

right-
of-use

asset

and

a

corresponding

lease

liability

with

respect

to

all

lease

arrangements

in

which

it

is

the

lessee,

except

for
short-term

leases

(with

a

lease

term

of

12

months

or

less)

and

leases

of

low

value

assets

(
of

less

than

USD

5,000)
.

For
these

leases,

the

Group

recognises

the

lease

payments

as

an

operating

expense

on

a

straight-line

basis

over

the

term

of
the

lease

unless

another

systematic

basis

is

more

representative

of

the

time

pattern

in

which

economic

benefits

from

the
leased assets are consumed.

The

lease

liability

is

initially

measured

at

the

present

value

of

the

lease

payments

that

are

not

paid

at

the

commencement
date,

discounted

by

using

the

default

rate

in

the

lease.

If

this

rate

cannot

be

readily

determined,

the

Group

uses

its
incremental borrowing rate.

The

lease

liability

is

presented

as

a

separate

line

in

the

consolidated

statement

of

financial

position.

The

lease

liability

is
subsequently

measured

by

increasing

the

carrying

amount

to

reflect

interest

on

the

lease

liability

(using

the

effective
interest method) and by reducing the carrying amount to reflect the lease payments made.

The

Group

remeasures

the

lease

liability

(and

makes

a

corresponding

adjustment

to

the

related

right-of-use

asset)
whenever:

•
the

lease

term

has

changed

or

there

is

a

significant

event

or

change

in

circumstances

resulting

in

a

change

in

the
assessment

of

exercise

of

a

purchase

option,

in

which

case

the

lease

liability

is

remeasured

by

discounting

the

revised
lease payments using a revised discount rate;

•
the

lease

payments

change

due

to

changes

in

an

index

or

rate

or

a

change

in

expected

payment

under

a

guaranteed
residual

value,

in

which

cases

the

lease

liability

is

remeasured

by

discounting

the

revised

lease

payments

using

an
unchanged

discount

rate

(unless

the

lease

payments

change

is

due

to

a

change

in

a

floating

interest

rate,

in

which
case a revised discount rate is used);

•
a

lease

contract

is

modified

and

the

lease

modification

is

not

accounted

for

as

a

separate

lease,

in

which

case

the

lease
liability

is

remeasured

based

on

the

lease

term

of

the

modified

lease

by

discounting

the

revised

lease

payments

using
a revised discount rate at the effective date of the modification.

Right-of-use

assets

are

depreciated

over

the

shorter

period

of

lease

term

and

useful

life

of

the

underlying

asset.

If

a

lease
transfers

ownership

of

the

underlying

asset

or

the

cost

of

the

right-of-use

asset

reflects

that

the

Group

expects

to

exercise
a

purchase

option,

the

related

right-of-use

asset

is

depreciated

over

the

useful

life

of

the

underlying

asset.

The

depreciation
starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the consolidated statement of financial position.

(ii) Rental income

Rental

income

from

property,

plant

and

equipment

other

than

investment

property

is

recognised

as

Other

income
.

Rental
income is recognised on a straight-line basis over the term of the lease.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

263

(w)
Investment in associates

An

associate

is

an

entity

over

which

the

Group

has

significant

influence

and

that

is

neither

a

subsidiary

nor

an

interest

in

a
joint

venture.

Significant

influence

is

the

power

to

participate

in

the

financial

and

operating

policy

decisions

of

the

investee
but is not control or joint control over those policies.

The

results

and

assets

and

liabilities

of

associates

are

incorporated

in

these

consolidated

financial

statements

using

the
equity

method

of

accounting,

except

when

the

investment

is

classified

as

held

for

sale,

in

which

case

it

is

accounted

for

in
accordance with IFRS 5.

Under

the

equity

method,

an

investment

in

an

associate

is

recognised

initially

in

the

consolidated

statement

of

financial
position

at

cost

and

adjusted

thereafter

to

recognise

the

Group’s

share

of

the

profit

or

loss

and

other

comprehensive

income
of the associate.

When

the

Group’s

share

of

losses

of

an

associate

exceeds

the

Group’s

interest

in

that

associate

(which

includes

any

long-
term

interests

that,

in

substance,

form

part

of

the

Group’s

net

investment

in

the

associate),

the

Group

discontinues
recognising

its

share

of

further

losses.

Additional

losses

are

recognised

only

to

the

extent

that

the

Group

has

incurred

legal
or constructive obligations or made payments on behalf of the associate.

An

investment

in

an

associate

is

accounted

for

using

the

equity

method

from

the

date

on

which

the

investee

becomes

an
associate.

On

acquisition

of

the

investment

in

an

associate,

any

excess

of

the

cost

of

the

investment

over

the

Group’s

share
of

the

net

fair

value

of

the

identifiable

assets

and

liabilities

of

the

investee

is

recognised

as

goodwill,

which

is

included
within the carrying amount of the investment.

Any

excess

of

the

Group’s

share

of

the

net

fair

value

of

the

identifiable

assets

and

liabilities

over

the

cost

of

the

investment,
after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The

requirements

of

IAS

36

are

applied

to

determine

whether

it

is

necessary

to

recognise

any

impairment

loss

with

respect
to

the

Group’s

investment

in

an

associate.

When

necessary,

the

entire

carrying

amount

of

the

investment

(including
goodwill)

is

tested

for

impairment

in

accordance

with

IAS

36

as

a

single

asset

by

comparing

its

recoverable

amount

(higher
of

value

in

use

and

fair

value

less

costs

of

disposal)

with

its

carrying

amount.

Any

impairment

loss

recognised

is

not

allocated
to

any

asset,

including

goodwill

that

forms

part

of

the

carrying

amount

of

the

investment.

Any

reversal

of

that

impairment
loss

is

recognised

in

accordance

with

IAS

36

to

the

extent

that

the

recoverable

amount

of

the

investment

subsequently
increases.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate.

(x)
Segment reporting

Segment

results

that

are

reported

to

the

Company’s

Board

of

Directors

(the

chief

operating

decision

maker)

include

items
directly attributable to a segment as well as those that can be allocated on a reasonable basis.

(y)
 Subsequent events

Events

occurring

after

the

reporting

date

31

December

2021,

which

provide

additional

information

about

conditions
prevailing

at

the

reporting

date

(adjusting

events)

are

reflected

in

the

consolidated

financial

statements.

Events

occurring
after

the

reporting

date

that

provide

information

on

events

that

occurred

after

the

reporting

date

(non-adjusting

events),
when

material,

are

disclosed

in

the

notes

to

the

consolidated

financial

statements.

When

the

going

concern

assumption

is
no

longer

appropriate

at

or

after

the

reporting

period,

the

financial

statements

are

not

prepared

on

a

going

concern

basis.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

264

7
Adoption of new and revised standards and interpretations

Initial application of new amendments to the existing standards effective for the current reporting period

The

following

amendments

to

the

existing

standards

issued

by

the

International

Accounting

Standards

Board

(IASB)

and
adopted by the EU are effective for the current reporting period:

•
Amendments

to

IFRS

9

“Financial

Instruments”,

IAS

39

“Financial

Instruments:

Recognition

and

Measurement”,

IFRS
7

“Financial

Instruments:

Disclosures”,

IFRS

4

“Insurance

Contracts”

and

IFRS

16

“Leases”

–

Interest

Rate

Benchmark
Reform

—

Phase

2

adopted

by

the

EU

on

13

January

2021

(effective

for

annual

periods

beginning

on

or

after

1
January 2021),

•
Amendments

to

IFRS

16

“Leases”

–

Covid-19-Related

Rent

Concessions

beyond

30

June

2021

adopted

by

the

EU

on
30 August 2021 (effective from 1 April 2021 for financial years starting, at the latest, on or after 1 January 2021),

•
Amendments to IFRS 4 Insurance Contracts “Extension of the Temporary Exemption from Applying IFRS 9” adopted
by the EU on 16 December 2020 (the expiry date for the temporary exemption from IFRS 9 was extended from 1
January 2021 to annual periods beginning on or after 1 January 2023).

The

adoption

of

amendments

to

the

existing

standards

has

not

led

to

any

material

changes

in

the

Group’s

consolidated
financial statements.

Standards

and

amendments

to

the

existing

standards

issued

by

IASB

and

adopted

by

the

EU

but

not

yet
effective

At

the

date

of

authorization

of

these

consolidated

financial

statements,

the

following

amendments

to

the

existing

standards
were issued by IASB and adopted by the EU and which are not yet effective:

•
Amendments

to

IAS

16

“Property,

Plant

and

Equipment”

–

Proceeds

before

Intended

Use

adopted

by

the

EU

on

28
June 2021 (effective for annual periods beginning on or after 1 January 2022),

•
Amendments

to

IAS

37

“Provisions,

Contingent

Liabilities

and

Contingent

Assets”

-

Onerous

Contracts

–

Cost

of
Fulfilling

a

Contract

adopted

by

the

EU

on

28

June

2021

(effective

for

annual

periods

beginning

on

or

after

1

January
2022),

•
Amendments

to

IFRS

3

“Business

Combinations”

–

Reference

to

the

Conceptual

Framework

with

amendments

to
IFRS 3 adopted by the EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),

•
IFRS

17

“Insurance

Contracts”

including

amendments

to

IFRS

17

issued

by

IASB

on

25

June

2020

–

adopted

by

the
EU on 19 November 2021 (effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

various

standards

due

to

“Improvements

to

IFRSs

(cycle

2018

-2020)”

resulting

from

the

annual
improvement

project

of

IFRS

(IFRS

1,

IFRS

9,

IFRS

16

and

IAS

41)

primarily

with

a

view

to

removing

inconsistencies
and

clarifying

wording

–

adopted

by

the

EU

on

28

June

2021

(The

amendments

to

IFRS

1,

IFRS

9

and

IAS

41

are
effective

for

annual

periods

beginning

on

or

after

1

January

2022.

The

amendment

to

IFRS

16

only

regards

an
illustrative example, so no effective date is stated.).

The

Group

has

elected

not

to

adopt

the

amendments

to

existing

standards

in

advance

of

their

effective

dates.

The

Group
anticipates

that

the

adoption

of

these

amendments

to

existing

standards

will

have

no

material

impact

on

the

financial
statements of the Group in the period of initial application.

New standards and amendments to the existing standards issued by IASB but not yet adopted by the EU

At

present,

IFRS

as

adopted

by

the

EU

do

not

significantly

differ

from

regulations

adopted

by

the

International

Accounting
Standards

Board

(IASB)

except

for

the

following

new

standards

and

amendments

to

the

existing

standards,

which

were
not

endorsed

for

use

in

EU

as

at

the

date

of

publication

of

these

consolidated

financial

statements

(the

effective

dates
stated below is for IFRS as issued by IASB):

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

265

•
IFRS

14

“Regulatory

Deferral

Accounts”

(effective

for

annual

periods

beginning

on

or

after

1

January

2016)

–

the
European

Commission

has

decided

not

to

launch

the

endorsement

process

of

this

interim

standard

and

to

wait

for
the final standard,

•
Amendments

to

IAS

1

“Presentation

of

Financial

Statements”

–

Classification

of

Liabilities

as

Current

or

Non-Current
(effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

1

“Presentation

of

Financial

Statements”

-

Disclosure

of

Accounting

Policies

(effective

for

annual
periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

8

“Accounting

Policies,

Changes

in

Accounting

Estimates

and

Errors”

-

Definition

of

Accounting
Estimates (effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

12

“Income

Taxes”

-

Deferred

Tax

related

to

Assets

and

Liabilities

arising

from

a

Single
Transaction (effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

IFRS

10

“Consolidated

Financial

Statements”

and

IAS

28

“Investments

in

Associates

and

Joint
Ventures”

-

Sale

or

Contribution

of

Assets

between

an

Investor

and

its

Associate

or

Joint

Venture

and

further
amendments

(effective

date

deferred

indefinitely

until

the

research

project

on

the

equity

method

has

been
concluded),

•
Amendments

to

IFRS

17

“Insurance

contracts”

-

Initial

Application

of

IFRS

17

and

IFRS

9

–

Comparative

Information
(effective for annual periods beginning on or after 1 January 2023).

The Group anticipates that the adoption of these new standards and amendments to the existing standards will have no
material impact on the consolidated financial statements of the Group in the period of initial application.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

266

8
Operating segments

(a)
Basis for segmentation

The following summary describes the operations of each reportable segment:

Reportable segments

Operations

Electricity and natural gas supply

Buying

and

supplying

electricity

and

natural

gas

to

final

consumers

(includes
Electrica Furnizare S.A.)

Electricity distribution

Until

31

December

2020,

the

electricity

distribution

service

included

the

former
Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

Societatea

de
Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.

and

Societatea

de

Distributie
a

Energiei

Electrice

Muntenia

Nord

S.A.,

currently

Distributie

Energie

Electrica
Romania

S.A.

(that

covers

the

all

three

distribution

areas:

Transilvania

Sud,
Transilvania

Nord

and

Muntenia

Nord),

Electrica

Serv

S.A.

and

the

activity
performed

by

Societatea

Energetica

Electrica

S.A.

within

the

distribution

network
until June 2020.

Starting

with

2021,

the

electricity

distribution

service

includes

the

activity

of
Societatea

de

Distributie

Energie

Electrica

Romania

S.A.

and

the

activity

performed
by
Electrica Serv S.A
 within the distribution network.

Electricity generation

Production

of

electricity

from

renewable

sources

(photovoltaic

panels)

(includes
Electrica

Energie

Verde

1

SRL

and

s
tarting

with

September

2021

includes

Electrica
Productie Energie S.A.).

External electricity network
maintenance

Repairs,

maintenance

and

other

services

for

electricity

networks

owned

by

other
distributors.

Until

31

December

2020,

included

the

activity

of

Servicii

Energetice
Muntenia S.A. (until 30 November 2020) and a part of Electrica Serv S.A..

Starting

with

2021,

includes

the

activity

of

Electrica

Serv

S.A.,

without

the

activity
performed in
the distribution network.

The

Board

of

Directors

of

the

Company

reviews

management

reports

of

each

segment.

Segment

earnings

before

interest,
tax,

depreciation

and

amortisation

(“EBITDA”)

is

used

to

measure

performance

because

management

believes

that

such
information is one of the most relevant in evaluating the results of the segments.

There

are

varying

levels

of

integration

between

the

Electricity

supply,

Electricity

distribution

and

External

electricity

network
maintenance

segments.

This

integration

includes

electricity

distribution

and

shared

electricity

network

maintenance
services. Inter-segment pricing policy is determined on an arm’s length basis.

All assets are allocated to reportable segments, except for investments in associates and deferred tax assets.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

267

(b)
Information about reportable segments

Year ended

31 December 2021

Electricity and
natural gas
supply

Electricity
distribution

Electricity
generation

External
electricity
network
maintenance

Total for
reportable
segments

Headquarter

Consolidation
eliminations
and
adjustments

Consolidated
total

External revenues

5,741,460

1,389,389

6,024

41,991

7,178,864

-

-

7,178,864

Inter-segment revenue

30,907

1,341,456

2,949

26,127

1,401,439

-

(1,401,439)

-

Segment revenue

5,772,367

2,730,845

8,973

68,118

8,580,303

-

(1,401,439)

7,178,864

Segment (loss)/ profit before tax

(453,610)

(153,003)

1,544

(17,868)

(622,937)

321,779

(331,253)

(632,411)

Net finance income/(cost)

336

(73,498)

(738)

850

(73,050)

377,419

(331,250)

(26,881)

Amortization and depreciation

(14,228)

(451,945)

(2,290)

(10,092)

(478,555)

(2,275)

-

(480,830)

Reversal of impairment of property, plant
and equipment and intangible assets, net

-

-

-

137

137

3,805

-

3,942

Impairment of assets held for sale

-

-

-

(154)

(154)

(492)

-

(646)

Adjusted EBITDA\*

(439,718)

372,440

4,572

(8,609)

(71,315)

(56,678)

(3)

(127,996)

(Impairment)/ Reversal of impairment of
trade and other receivables, net

(37,767)

(32,707)

-

(212)

(70,686)

70

-

(70,616)

Segment (loss)/ profit after tax

(389,678)

(139,040)

1,300

(16,033)

(543,451)

321,822

(331,253)

(552,882)

Employee benefits

(106,107)

(622,492)

(47)

(34,790)

(763,436)

(39,240)

-

(802,676)

Capital expenditure

9,374

500,387

8

1,552

511,321

4,539

-

515,860

Segment assets

1,422,316

8,085,802

41,206

417,744

9,967,068

182,509

(2,266,441)

7,883,136

Trade and other receivables

1,216,895

1,057,157

998

85,924

2,360,974

75,106

(1,042,861)

1,393,219

Cash and cash equivalents

60,231

145,741

2,635

7,466

216,073

5,757

-

221,830

Trade and other payables and short term
employee benefits

1,380,664

826,256

24,373

27,917

2,259,210

53,551

(1,016,329)

1,296,432

Bank overdrafts

298,602

208,109

-

-

506,711

120,691

-

627,402

Lease liability

3,270

15,147

-

2,614

21,031

513

-

21,544

Bank borrowings

-

628,489

-

-

628,489

-

-

628,489

\*Adjusted

EBITDA

(Earnings

before

interest,

tax,

depreciation

and

amortisation

or

namely

EBITDA)

for

operating

segments

is

defined

and

calculated

as

segment

profit/(loss)

before

tax

of

a
given

operating

segment

adjusted

for

i)

depreciation,

amortization

and

impairment/reversal

of

impairment

of

property,

plant

and

equipment

and

intangible

assets

in

the

operating

segment,
ii)

impairment

of

assets

held

for

sale

and

iii)

net

finance

income

in

the

operating

segment.

EBITDA

is

not

an

IFRS

measure

and

should

not

be

treated

as

an

alternative

to

IFRS

measures.
Moreover,

EBITDA

is

not

uniformly

defined.

The

method

used

to

calculate

EBITDA

by

other

companies

may

differ

significantly

from

that

used

by

the

Group.

As

a

consequence,

the

EBITDA
presented in this note cannot, as such, be relied upon for the purpose of comparison to EBITDA of other companies.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

268

Year ended

31 December 2020

Electricity
and natural
gas supply

Electricity
distribution

Electricity
generation

External
electricity
network
maintenance

Total for
reportable
segments

Headquarter

Consolidation
eliminations
and
adjustments

Consolidated
total

External revenues

4,980,587

1,486,629

3,736

30,148

6,501,100

-

-

6,501,100

Inter-segment revenue

34,553

1,264,197

-

159

1,298,909

-

(1,298,909)

-

Segment revenue

5,015,140

2,750,826

3,736

30,307

7,800,009

-

(1,298,909)

6,501,100

Segment profit/(loss) before tax

255,862

95,094

(705)

(5,186)

345,065

304,737

(207,493)

442,309

Net finance income/(cost)

4,228

(65,090)

(1,318)

(118)

(62,298)

260,183

(214,970)

(17,085)

Amortization and depreciation

(12,827)

(465,793)

(717)

(1,065)

(480,402)

(10,516)

-

(490,918)

(Impairment)/Reversal of impairment of property,
plant and equipment and intangible assets, net

(1,037)

1,785

(1,500)

(537)

(1,289)

(1,736)

-

(3,025)

Reversal of impairment of assets held for sale

-

188

-

-

188

-

-

188

Adjusted EBITDA\*

265,498

624,004

2,830

(3,466)

888,866

56,806

7,477

953,149

Reversal of impairment/(Impairment) of trade and
other receivables, net

(31,880)

(4,126)

(237)

(173)

(36,416)

98,583

-

62,167

Segment profit/(loss) after tax

214,152

77,099

(617)

(3,412)

287,222

307,814

(207,493)

387,543

Employee benefits

(112,603)

(612,326)

-

(17,752)

(742,681)

(31,820)

-

(774,501)

Capital expenditure

4,564

601,756

24

236

606,580

1,060

-

607,640

Segment assets

1,203,027

7,531,380

44,658

98,432

8,877,497

768,206

(1,583,885)

8,061,818

Trade and other receivables

893,180

529,842

109

7,797

1,430,928

165,323

(534,016)

1,062,235

Cash and cash equivalents

185,423

185,498

4,808

1,715

377,444

193,485

-

570,929

Restricted cash (short term)

-

-

-

-

-

320,000

-

320,000

Trade and other payables and short term employee
benefits

821,440

625,335

27,786

3,579

1,478,140

11,615

(515,449)

974,306

Bank overdrafts

-

164,966

-

-

164,966

-

-

164,966

Lease liability

2,782

23,032

-

354

26,168

1,454

-

27,622

Bank borrowings

-

778,909

-

-

778,909

-

-

778,909

\*Adjusted

EBITDA

(Earnings

before

interest,

tax,

depreciation

and

amortisation

or

namely

EBITDA)

for

operating

segments

is

defined

and

calculated

as

segment

profit/(loss)

before

tax

of

a
given

operating

segment

adjusted

for

i)

depreciation,

amortization

and

impairment/reversal

of

impairment

of

property,

plant

and

equipment

and

intangible

assets

in

the

operating

segment,
ii)

impairment

of

assets

held

for

sale

and

iii)

net

finance

income

in

the

operating

segment.

EBITDA

is

not

an

IFRS

measure

and

should

not

be

treated

as

an

alternative

to

IFRS

measures.
Moreover,

EBITDA

is

not

uniformly

defined.

The

method

used

to

calculate

EBITDA

by

other

companies

may

differ

significantly

from

that

used

by

the

Group.

As

a

consequence,

the

EBITDA
presented in this note cannot, as such, be relied upon for the purpose of comparison to EBITDA of other companies.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

269

(c)
Reconciliation of information on reportable segments to consolidated amounts

31 December

2021

31 December
2020

Total assets

Total assets for reportable segments

10,149,577

9,645,703

Elimination of inter-segment assets

(2,375,782)

(1,603,551)

Unallocated amounts

109,341

19,666

Consolidated total assets

7,883,136

8,061,818

Trade and other receivables

Trade and other receivables for reportable segments

2,436,080

1,596,251

Elimination of inter-segment trade and other receivables

(1,042,861)

(534,016)

Consolidated trade and other receivables

1,393,219

1,062,235

Trade and other payables and short term employee benefits

Trade and other payables and short term employee benefits for
reportable segments

2,312,761

1,489,755

Elimination of inter-segment trade and other payables and short term
employee benefits

(1,016,329)

(515,449)

Consolidated trade and other payables and short term employee
benefits

1,296,432

974,306

9
Revenue

2021

2020

Electricity distribution and supply

6,517,777

5,697,668

Supply of natural gas

98,503

42,362

Construction revenue related to concession agreements (Note 24)

500,387

696,246

Repairs, maintenance and other services rendered

59,854

54,472

Proceeds from sale of green certificates

1,138

3,163

Re-connection fees

1,205

2,673

Sales of merchandise

-

4,516

Total

7,178,864

6,501,100

In

respect

to

the

timing

of

the

revenue

recognition,

most

of

the

Group’s

services

provided

are

transferred

to

the
customer

over

time,

only

a

small

part

amounting

to

RON

2,081

thousand

(2020:

RON

2,131

thousand)

being

transferred
at

a

point

in

time

(e.g.

metering

services

provided

by

the

distribution

companies,

providing

periodic

data

analysis

to
the customer for certain taxes collected on behalf of them).

10
Electricity and natural gas purchased

2021

2020

Electricity purchased

4,967,315

3,298,325

Green certificates purchased

581,729

557,222

Natural gas purchased

145,680

50,158

Total

5,694,724

3,905,705

The

cost

of

electricity

and

natural

gas

purchased

includes

the

cost

of

the

green

certificates

purchased

by

the

supply
subsidiary

which

has

a

legal

obligation

to

purchase

green

certificates

from

producers

of

electricity

from

renewable
sources,

based

on

annual

targets

or

quotas

set

by

law,

which

are

applied

to

the

quantity

of

electricity

purchased

and
supplied

to

final

customers.

The

cost

of

green

certificates

is

then

invoiced

to

final

customers

separately

from

electricity

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

270

tariffs.

11
Other income and expenses

(a)
Other income

2021

2020

Rental income

93,143

93,753

Late payment penalties from customers

28,356

26,872

Revenues from indemnities and compensations

47,499

17,153

Revenue from notices

5,943

6,018

Other

20,830

21,626

Total

195,771

165,422

Rental income refers mainly to the rental of the electricity poles by the distribution subsidiary to telecom operators.

In

2021

revenues

from

indemnities

and

compensations

consists

mainly

of

compensations

invoiced,

following

the

early
termination of energy contracts by suppliers.

(b)
Other operating expenses

2021

2020

Other taxes and duties

43,211

42,388

Utilities

39,697

40,753

Printing and distribution of invoices services

36,960

38,720

IT services

30,411

29,106

Security services

26,718

27,012

Meters reading expenses

22,219

19,514

Cash collection services

15,819

16,079

Rent

12,205

4,992

Postage and telecommunication services

11,680

7,307

Call centre services

11,011

10,678

Marketing expenses for the supply activity

7,836

4,859

Cleaning expenses

5,078

5,145

Expenses with clients notified

2,197

1,224

Sponsorships and donations

1,039

3,611

Expenses with services from subcontractors

-

7,989

Cost of merchandise sold

733

4,994

Other

76,333

60,733

Total

343,147

325,104

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

271

12
Net finance result

2021

2020

Interest income

1,765

8,962

Other finance income

882

689

Total finance income

2,647

9,651

Interest expense

(24,110)

(20,710)

Interest cost for employee benefits (Note 15)

(5,007)

(5,883)

Foreign exchange losses, net

(411)

(143)

Total finance costs

(29,528)

(26,736)

Net finance cost

(26,881)

(17,085)

13
(Loss)/Earnings per share

The

calculation

of

basic

and

diluted

(loss)/earnings

per

share

has

been

based

on

the

following

profit

attributable

to
Company’s shareholders and weighted-average number of ordinary shares outstanding:

(Loss)/Profit attributable to shareholders

2021

2020

(Loss)/Profit for the year attributable to the owners of the Company

(552,882)

387,543

Profit attributable to
shareholders of the Company

(552,882)

387,543

Number of ordinary shares (in number of shares)

2021

2020

Number of ordinary shares at 31 December

339,553,004

339,553,004

For

the

calculation

of

basic

and

diluted

earnings

per

share,

treasury

shares

(6,890,593

shares)

were

not

treated

as
outstanding ordinary shares and were deducted from the number of issued ordinary shares.

(Loss)/Earnings per share

2021

2020

Basic and diluted (loss)/earnings per share (RON)

(1.63)

1.14

14
Short-term employee benefits

31 December
2021

31 December
2020

Personnel payables

52,419

52,573

Current portion of defined benefit liability and other employee benefits

18,257

10,420

Social security charges

25,342

24,531

Tax on salaries

5,084

4,768

Total

101,102

92,292

For details of the related employee benefit expenses, see Notes 15 and 16.

In

Romania,

all

employers

and

employees,

as

well

as

other

persons,

are

contributors

to

the

State

social

security

system.
The

social

security

system

covers

pensions,

child

benefit,

temporary

inability

to

work

situations,

risks

of

work

accidents
and

professional

diseases

and

other

social

assistance

services,

redundancy

payments

and

incentives

granted

to
employers for creating new jobs.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

272

15
Post-employment and other long-term employee benefits

The

Group

provides

cash

benefits

to

employees

depending

on

seniority

in

the

form

of

jubilee

bonuses

and

depending
on

the

years

of

service

at

retirement

in

the

form

of

retirement

bonuses.

The

post-employment

and

other

long-term
employee benefits are stipulated in the Collective Labour Contracts.

Also,

in

accordance

with

Government

Decisions

no.

1041/2003

and

no.

1461/2003,

the

Group

provides

also,

as

benefit
in

kind,

free

of

charge

electricity

in

quantity

of

KWh

1,200

per

year

to

employees

who

retired

before

30

September

2000
from the companies that belonged to the former Minister of Energy.

From

all

the

Collective

Labour

Contracts

of

the

Group

companies

the

benefit

in

kind

consisting

of

free

of

charge

electricity
granted

to

employees

who

retired

was

excluded.

This

benefit

was

stipulated

in

the

Collective

Labour

Contracts

valid
until

31

December

2019

for

all

subsidiaries

and

until

31

March

2020

for

Electrica

SA.

Thus,

the

Group

management
considers

that

legally,

the

companies

belonging

to

the

Electrica

Group

have

the

obligation

to

continue

to

grant

the

free
quota

of

electricity

to

the

persons

retired

before

30

September

2000

and

who

fulfil

the

conditions

stipulated

in

the
Government

Decision

no.

1041/2003,

this

right

resulting

from

the

stipulations

of

the

Government

Decision

no.
1041/2003.

The

free

of

charge

electricity

benefit

granted

to

employees

who

retired

from

the

Group

after

30

September
2000

or

who

will

retire

in

the

future

from

the

Group

is

no

longer

granted

starting

with

1

January

2020

in

case

of

all
subsidiaries

and

1

April

2020

in

case

of

Electrica

SA,

due

to

the

fact

that

the

aforementioned

benefit

was

expressly
excluded from the Collective Labour Contracts.

In

the

same

time,

in

order

to

compensate

for

the

exclusion

of

the

benefit

in

the

form

of

free

of

charge

electricity,

as

per
the

new

Collective

Labour

Contracts

in

force

starting

1

January

2020,

respectively

1

April

2020,

the

retirement

bonus
increased by 1 gross monthly base salary on all three levels of seniority.

On

20

December

2021

the

Board

of

Directors

of

Electrica

SA

approved

the

implementation

of

a

reorganization

process
of

the

Headquarters’

personnel

structure

and

the

initiation

of

the

collective

dismissal

procedure,

formally

communicated
to

all

employees

on

23

December

2021.

On

2

February

2022,

the

Board

of

Directors

approved

the

amendment

of

the
Headquarters’

organizational

structure

effective

as

of

1

March

2022

and

the

notification

of

relevant

authorities

and

of
the

Trade

Union

regarding

the

final

decision

to

implement

the

reorganization

process

and

to

carry

out

the

collective
dismissal

of

the

employees

who

currently

occupy

the

positions

to

be

cancelled.

According

to

the

Collective

Labour
Contract,

based

on

seniority,

the

employees

who

currently

occupy

the

positions

to

be

cancelled

are

entitled

to

receive
a

number

of

gross

average

base

salary

(Note

15

b)).

The

estimated

termination

benefit

amounts

to

RON

5,054

thousand.

In

2021

and

2020,

employee

benefit

obligations

were

computed

by

an

independent

actuary

using

the

projected

unit
credit method with benefits calculated proportionally to the period of service.

31 December

2021

31 December

2020

Defined benefit liability

79,078

68,101

Other long-term employee benefits

88,356

86,195

Total

167,434

154,296

- Current portion\*

18,257

10,420

- Non-current portion

149,177

143,876

\*
included

in Personnel payables in Note 14

(i)
Movement in the defined benefit liability and other long-term employee benefits

The

following

tables

shows

a

reconciliation

from

the

opening

balances

to

the

closing

balances

for

the

defined

benefit
liability and other long-term employee benefits and its components. There are no plan assets.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

273

Other long-term employee benefits

2021

2020

Balance at 1 January

86,195

80,547

Included in profit or loss

Current service cost

8,285

8,482

Past service cost

-

767

Actuarial (gain)/ loss

(1,859)

1,645

Interest cost

2,814

3,390

Other

Benefits paid

(7,079)

(8,636)

Balance at 31 December

88,356

86,195

Defined benefits refer to the retirement bonuses granted according to the seniority within the Group and other long-
term benefits refer to the jubilee bonuses granted for seniority.

(ii)
Actuarial assumptio
ns

The following were the main actuarial assumptions at each reporting date:

(a) Macroeconomic assumptions:

•
inflation. The actuary used information from the
National Commission for Strategy and Prognosis:

Year

Valuation date

31 December 2021

Valuation date

31 December 2020

2021

7.5%

2.5%

2022

5.9%

2.5%

2023

3.2%

2.5%

2024

3.0%

2.5%

2025

2.8%

2.5%

2026+

2.5%

2.5%

•
the

discount

rate

used

is

based

on

the

yield

of

the

Romanian

Government

bonds

at

the

reporting

date,

therefore
the weighted average discount rate is 5% for the year 2021 (2020: 3.3%);

•
the

electricity

price

per

KWh

used

for

2022

is

RON

1
.129673
,

for

2023

it

was

considered

a

tendency

to

recover
from the energy crisis, and starting with 2024 is adjusted with inflation (2020: RON/KWh 0.525110);

•
the

mortality

rate

published

by

the

National

Institute

of

Statistics

was

adjusted

to

90%

to

approximate

the

mortality
rates by generations;

•
taxes and social charges are those in force as at the reporting date.

Defined benefit liability

2021

2020

Balance at 1 January

68,101

59,698

Included in profit or loss

Current service cost

5,158

4,519

Past service cost

5,054

(346)

Interest cost

2,194

2,493

Included in
other comprehensive income

Remeasurements loss

- Actuarial loss

5,891

7,152

Other

Benefits paid

(7,320)

(5,415)

Balance at 31 December

79,078

68,101

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

274

(b)
Group specific assumptions:

•
For

the

year

2022

were

taken

into

consideration

the

salaries’

growth

rates

budgeted

by

the

Group.

Starting

with
the year 2023, salaries’ growth is forecasted at
the inflation rate;

•
Employees’ turnover: based on historical data;

•
Jubilee and retirement bonuses granted based on seniority as per the collective labour contracts, as follows:

Jubilee bonus based on years of service in the Group

No of gross monthly base salaries

Seniority

31 December 2021

31 December 2020

20 years

1

1

30 years

2

2

35 years

3

3

40 years

4

4

45 years

5

5

Retirement bonus based on years of service in the Group

No of gross monthly base salaries

Seniority

31 December 2021

31 December 2020

Between 8 and 10 years

2

2

Between 10 and 25 years

3

3

More than 25 years

4

4

The

Group

provides

also

as

benefit

free

of

charge

electricity

in

quantity

of

kWh

1,200

per

year

to

employees

who

retired
before

30

September

2000

who

fulfill

the

conditions

stipulated

in

the

Government

Decision

no.

1041/2003.

In

the

event
of pensioner’s death, the husband/wife is entitled to receive the same benefit until he/she will marry again.

Termination benefits

(a)
Termination benefits for individual lay-offs at the Group’s initiative

In

accordance

with

the

Collective

Labour

Contracts

concluded

between

the

Group

and

the

Unions,

when

individual

labour
contract

are

terminated

at

the

Group’s

initiative,

the

Group

pays

termination

benefits

to

the

employees

depending

on
their period of service, as follows:

Period of service

No of gross monthly base
salaries

No of gross monthly base
salaries

31 December 2021

31 December 2020

1 - 2 years

2

2

2 - 5 years

3

3

5 - 10 years

4

4

10 - 20 years

5

5

More than 20 years

8

8

(b)
Termination benefits for collective lay-offs at the Group’s initiative

For

collective

lay-offs,

according

to

the

Collective

Labour

Contracts,

the

Group

pays

termination

benefits

to

the
employees depending on their period of service, as follows:

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

275

Period of service

No of gross monthly base
salaries

No of gross monthly base
salaries

31 December 2021

31 December 2020

1 - 3 years

3

3

3 - 5 years

6

6

5 - 10 years

7

7

10 - 20 years

11

11

More than 20 years

16

16

The

above

mentioned

stipulations

do

not

apply

to

employees

with

individual

labour

contract

concluded

for

a

determined
period.

The

above

stipulations

do

not

apply

to

employees

that

obtained

other

higher

cumulative

salary

compensation
rights,

provided

by

legal

regulations

regarding

the

Group’s

reorganization

and

restructuring.

Employees

who

are

re-
employed within the Group after lay-off are not entitled to the above-mentioned benefits.

(c)
Termination benefits for voluntary redundancies

In

accordance

with

the

Agreements

signed

between

the

Group

and

the

Unions

and

the

Addendums

to

Collective

Labour
Contracts,

in

case

the

individual

labour

contract

is

terminated

as

voluntary

redundancy

from

the

employee,

the

Group
pays

termination

benefits

depending

on

the

period

to

reach

the

standard

retirement

age,

the

period

of

service

in

the
Group

and

the

seniority.

The

number

of

gross

monthly

base

salaries

paid

as

termination

benefits

vary

between

5

and
23.

(iii)
Sensitivity analysis

Significant

actuarial

assumptions

for

the

determination

of

the

benefit

obligation

are

the

discount

rate,

expected

salary
increase

and

retirement

age.

The

sensitivity

analysis

below

has

been

determined

based

on

reasonably

possible

changes
of

the

respective

assumptions

occurring

at

the

end

of

the

reporting

period,

while

holding

all

other

assumptions

constant.

Increase by 1%

Decrease by 1%

2021

2020

2021

2020

Discount rate

(12,489)

(13,216)

12,489

13,216

Salary growth

12,957

13,561

(12,957)

(13,561)

Increase by 1 year

Decrease by 1 year

2021

2020

2021

2020

Retirement age

3,677

3,367

(3,677)

(3,367)

The

sensitivity

analysis

presented

above

may

not

be

representative

of

the

actual

change

in

the

benefit

obligation

as

it
is

unlikely

that

the

changes

in

assumptions

would

occur

in

isolation

of

one

another

as

some

of

the

assumptions

may

be
correlated.

In

presenting

the

above

sensitivity

analysis,

the

present

value

of

the

benefit

obligation

has

been

calculated
using

the

projected

unit

credit

method

at

the

end

of

the

reporting

period,

which

is

the

same

as

that

applied

in

calculating
the benefit obligation liability recognized in the statement of financial position.

16
 Employee benefit expenses

2021

2020

Average number of employees

7,919

8,053

Number of employees at 31 December

8,020

8,126

2021

2020

Wages and salaries\*

796,137

738,009

Social security contributions

19,486

17,133

Meal tickets

33,585

27,080

Termination benefits

6,135

25,751

Total employees benefits for the year

855,343

807,973

Capitalised employee benefit expenses

(52,667)

(33,472)

Total employees benefits in the statement of profit or loss

802,676

774,501

\*
Wages and salaries includes also current service cost, defined benefits and other long-term employee benefits.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

276

Management remuneration is disclosed in
Note 33 b) Related parties
.

17
 Income taxes

In

determining

the

amount

of

current

and

deferred

tax,

the

Group

takes

into

account

the

impact

of

uncertain

tax
positions

and

whether

additional

taxes

and

interest

may

be

due.

This

assessment

relies

on

estimates

and

assumptions
and

may

involve

a

series

of

judgments

about

future

events.

The

Group

considers

that

the

accounting

records

for

taxes
due

are

adequate

for

all

open

tax

years,

based

on

assessment

made

by

management

taking

into

account

various

factors,
including

the

interpretation

of

tax

legislation

and

previous

experience.

New

information

may

become

available

that
causes

the

Group

to

change

its

judgment

regarding

the

adequacy

of

existing

tax

liabilities;

such

changes

to

tax

liabilities
will impact tax expense in the period when such a determination is made.

(i)
Amounts recognised in profit or loss

2021

2020

Current tax expense

242

53,928

Deferred tax (benefit)/expense

(79,771)

838

Total (benefit)/expense related to income tax

(79,529)

54,766

(ii)
Amounts recognised in
other comprehensive income

2021

2020

Before tax

Tax
expense

Net of tax

Before tax

Tax
(expense)/
benefit

Net of

tax

Revaluation of land, land
improvements and buildings

-

-

-

43,823

(7,931)

35,892

Remeasurement of defined
benefit liability

(5,891)

(45)

(5,936)

(7,152)

572

(6,580)

Total

(5,891)

(45)

(5,936)

36,671

(7,359)

29,312

(iii)
 Reconciliation of effective tax rate

2021

2020

(Loss)/Profit before tax

(632,411)

442,309

(Benefit)/Tax using Company’s domestic tax rate

16%

(101,186)

16%

70,769

Non-deductible expenses

-7%

45,558

6%

27,453

Non-taxable income

3%

(15,878)

-5%

(20,537)

Deduction of legal reserves

0%

(2,574)

-1%

(3,244)

Other tax effects

0%

(1,607)

0%

(402)

Recognition of tax effect of previously unrecognised tax
losses

1%

(3,842)

-4%

(19,273)

Income tax (benefit)/expense

13%

(79,529)

12%

54,766

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

277

(iv)
Movement in deferred tax balances

Balance at 31 December 2021

2021

Net balance at 1
January 2021

Recognised in
profit or loss

Recognised in
other
comprehensive income

Net

Deferred
tax assets

Deferred
tax
liabilities

Property, plant and
equipment

41,757

(1,919)

-

39,838

-

39,838

Intangible assets related to
concession agreements

171,712

15,788

-

187,500

-

187,500

Employee benefits

(22,603)

(1,382)

45

(23,940)

(23,940)

-

Impairment of trade
receivables

(20,859)

(3,873)

-

(24,732)

(24,732)

-

Tax loss carried forward

(7,765)

(88,207)

-

(95,972)

(95,972)

-

Other items

(4,121)

(178)

-

(4,299)

(4,299)

-

Tax liabilities/(assets)
before set-off

158,121

(79,771)

45

78,395

(148,943)

227,338

Set off of tax

65,412

(65,412)

Net tax
liabilities/(assets)

(83,531)

161,926

The

Group

recognised

a

deferred

tax

asset

in

amount

of

RON

88,207

thousand

in

relation

to

the

suffered

loss

from
2021.

The

recognition

was

based

on

the

latest

management

assumptions

and

judgements

in

which

the

subsidiaries

for
which

a

deferred

tax

asset

was

recognised,

will

generate

future

taxable

profit

in

the

next

7

years

will,

against

which

the
subsidiaries

can

use

the

benefits

therefrom
.

The

7-year

period

is

the

maximum

period

in

which

the

Group

is

allowed

to
use the benefit in the current tax jurisdiction.

Balance at 31 December 2020

2020

Net
balance at
1 January
2020

Recognised
in profit or
loss

Recognised in
other
comprehensive
income

Acquisition of
subsidiaries\*

Net

Deferred
tax assets

Deferred tax
liabilities

Property, plant and
equipment

35,828

(4,876)

7,931

2,874

41,757

-

41,757

Intangible assets related to
concession agreements

162,923

8,789

-

-

171,712

-

171,712

Employee benefits

(20,203)

(1,828)

(572)

-

(22,603)

(22,603)

-

Impairment of trade
receivables

(19,402)

(1,457)

-

-

(20,859)

(20,859)

-

Tax loss carried forward

(6,959)

395

-

(1,201)

(7,765)

(7,765)

-

Other items

(3,936)

(185)

-

-

(4,121)

(4,121)

-

Tax liabilities/(assets)
before set-off

148,251

838

7,359

1,673

158,121

(55,348)

213,469

Set off of tax

35,682

(35,682)

Net tax
liabilities/(assets)

(19,666)

177,787

\*
see Note 32

(v)
Unrecognised deferred tax assets

Deferred

tax

assets

have

not

been

recognised

in

respect

of

the

certain

tax

losses

generated

by

the

Company,

because
it

is

not

probable

that

future

taxable

profit

will

be

available

against

which

the

entity

generating

it

can

use

the

benefits
therefrom.

2021

2020

Tax losses

356,623

371,426

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

278

18
Trade receivables

31 December 2021

31 December 2020

Trade receivables, gross

2,325,477

1,979,348

Bad debt allowance

(980,858)

(949,573)

Total trade receivables, net

1,344,619

1,029,775

Trade receivables from related parties are presented in Note 33.

Trade receivables, gross, comprise:

31 December 2021

31 December 2020

Electricity distribution and supply

1,323,732

1,026,525

Late payment penalties receivable

81,311

84,729

Customers with judicial execution titles

766,109

760,229

Repairs, maintenance and other services

17,700

12,624

Other

136,625

95,241

Total trade receivables, gross

2,325,477

1,979,348

Following

the

adoption

of

the

Order

no.

118/2021

with

subsequent

amendments

approved

by

Law

no.

259/2021

with
subsequent

amendments

and

Order

no.

226/2021

concerning

the

capping

and

compensation

mechanism,

part

of

the
receivables

due

to

the

subsidiary

Electrica

Frunizare

S.A.

for

the

sale

of

electricity

and

gas

are

against

the

Romanian
State

through

National

Agency

for

Payments

and

Social

Inspection

and

Ministry

of

Energy.

The

amounts

estimated

to
be

received

are

of

RON

59,271

thousand

from

the

National

Agency

for

Payments

and

Social

Inspection

for

household
consumers and of RON 11,420 thousand from the Ministry of Energy for non-household consumers.

The

amounts

will

be

recovered

in

30

days

after

submitting

the

required

documentation

to

the

National

Agency

for
Payments

and

Social

Inspection

or

Ministry

of

Energy,

depending

on

the

case.

The

receivables

are

booked

under

the
caption “
Electricity distribution and supply”.

The

reconciliation

between

the

opening

balances

and

the

closing

balances

of

the

impairment

for

trade

receivables

in
the form of lifetime expected credit losses is as follows:

Lifetime expected credit losses

2021

2020

Balance as at 1 January

949,573

1,022,140

Loss allowance recognized

94,400

60,773

Decrease in loss allowance

(22,944)

(121,176)

Amounts written off

(40,171)

(12,164)

Balance as at 31 December

980,858

949,573

The aging of trade receivables is presented in Note 31.

Loss

allowances

are

determined

according

to

IFRS

9

“Financial

instruments”

based

on

“expected

credit

loss”

model.

In
applying

IFRS

9,

the

Group

has

identified

5

clusters

of

customers

based

on

shared

risk

characteristics:

3

separate
clusters for the distribution subsidiaries and 2 clusters (households and non-households) for the supply subsidiary.

A

significant

part

of

the

bad

debt

allowances

refers

to

clients

in

litigation,

insolvency

or

bankruptcy

procedures,

many
of

them

being

older

than

five

years.

The

Group

will

derecognize

these

receivables

together

with

the

related

allowances
after

the

finalization

of

the

bankruptcy

process.

These

receivables

were

treated

separately

in

computing

the

allowance
according to IFRS 9.

Amounts written off refer mainly to clients for which the bankruptcy procedure was finalized.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

279

Oltchim

(a

state-controlled

company)

was

an

important

customer

of

Electrica

S.A.

until

January

2012,

when

the
Company

transferred

the

contract

to

Electrica

Furnizare

S.A..

In

January

2013,

Oltchim

entered

into

insolvency
procedures

and

subsequently

in

May

2019

started

the

bankruptcy

procedures.

Due

to

the

uncertainties

regarding

the
recoverability

of

the

amounts

owed

by

this

customer,

the

Group

recognized

in

prior

years

a

bad

debt

allowance

for

the
entire

amount

receivable.

During

2020,

the

Group

adjusted

the

uncollected

VAT

in

amount

of

RON

105,042

thousand
related

to

the

doubtful

receivables

from

Oltchim,

based

on

the

sentence

of

starting

the

bankruptcy

procedures

and

the
provisions

of

art.

287

of

the

Fiscal

Code.
 As

the

entire

amount

was

recovered

during

2020,

by

offsetting

the

VAT
positions

to

be

recovered

with

the

payment

position

at

the

level

of

the

VAT

group

to

which

the

companies

in

the
Electrica

Group

belong,

the

bad

debt

allowance

was

reversed

with

the

same

amount.

During

2021,

receivable

for
Oltchim

in

amount

of

RON

29,329

thousand

was

written

off

as

it

was

not

recognised

in

the

final

bankruptcy

table.

The
bad debt allowance was also adjusted with the same amount.

In

the

light

of

the

impact

generated

by

COVID-19

pandemic,

the

Group

has

identified

the

probability

of

default,

taking
into

account

a

number

of

factors

to

ensure

that

the

classification

to

default

is

done

not

only

based

on

the

historical
expected

credit

loss

but

also

based

on

circumstances

according

to

which

economic

losses

are

likely

to

occur.

IFRS

9

is
based

on

a

set

of

principles

that,

by

nature

are

not

mechanical

and

require

the

application

of

a

certain

degree

of
professional

judgement.

In

applying

IFRS

9

as

of

31

December

2021,

the

Group

has

considered

all

the

information
available

without

undue

costs

(including

forward

looking

information)

that

may

affect

the

credit

risk

of

its

receivables
since original recognition, thus recording a bad debt allowance in amount of RON
94,400
 thousand.

19
Other receivables

31 December 2021

31 December 2020

VAT receivable

12,566

12,565

Interest receivable

18

77

Other receivables

56,140

40,782

Lifetime expected credit losses

(20,124)

(20,964)

Total other receivables, net

48,600

32,460

Other

receivables

include

mainly

guarantees

and

receivables

to

be

recovered

from

state

authorities

in

respect

to

medical
leave indemnities.

The reconciliation between the opening balances and the closing balances of the impairment for other receivables is
as
follows:

Loss allowance

2021

2020

Balance as at 1 January

20,964

22,728

Loss allowance recognized

-

237

Decrease in loss allowance

(840)

(2,001)

Balance as at 31 December

20,124

20,964

20
Cash and cash equivalents

31 December

2021

31 December

2020

Bank current accounts

167,859

179,362

Call deposits

53,897

391,514

Cash in hand

74

53

Total cash and cash equivalents in the consolidated
statement of financial position

221,830

570,929

Overdrafts used for cash management purposes

(627,402)

(164,966)

Total cash and cash equivalents in the consolidated
statement of cash flows

(405,572)

405,963

Restricted cash – short-term

-

320,000

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

280

On

16

October

2021

the

long

term

borrowings

from

BRD

–

Groupe

Societe

Generale

were

repaid
,

so

the

amount

of

the
collateral

deposits

in

amount

of

RON

320,000

thousand

presented

in

the

consolidated

statement

of

financial

position
as short-term restricted cash as at 31 December 2020, were released.

Until

the

authorization

for

issue

of

these

Consolidated

Financial

Statements

by

the

Board

of

Directors,

the

Group

has
overdrafts

from

various

banks

(ING

Bank

N.V.,

Raiffeisen

Bank,

Banca

Comerciala

Romana,

Banca

Transilvania,

BNP
Paribas,

Intesa

Sanpaolo

Bank

and

BRD

–

Groupe

Societe

Generale

S.A.)

with

a

total

overdraft

limit

of

up

to

RON
1,830,000

thousand

and

maturities

ranging

from

January

2022

to

December

2023

out

of

which

overdrafts

in

amount
of

RON

760,000

thousand

were

signed

subsequently

in

the

period

between

31

December

2021

and

28

February

2022
.
(for further details please see Note 36)

The

overdraft

facilities

are

used

for

cash

management

purposes

and

are

not

financial

in

nature

from

the

perspective
of

presenting

in

the

consolidated

statement

of

cash

flows.

The

outstanding

balance

of

the

overdraft

facilities

as

at

31
December 2021 is of RON 627,402 thousand (31 December 2020: RON 164,966).

The

following

information

is

relevant

in

the

context

of

the

consolidated

statement

of

cash

flows.

Non-cash

activity
includes:

•
set-off

between

trade

receivables

and

trade

payables

of

RON

5,941

thousand

in

2021

(2020:

RON

9,734

thousand).

21
Assets held for sale

Electrica

Serv

S.A.’s

Board

of

Directors

approved

the

selling

plan

of

part

of

their

available

assets

and

accordingly,

those
assets

were

presented

as

Assets

held

for

sale,

being

expected

to

be

sold

in

the

following

period.

During

2021

were

sold
a number of 4 assets (8 in 2020) in amount RON 478 thousand (RON 1,735 thousand in 2020).

In

November

2021,

due

to

the

fact

that

Electrica

Serv

S.A.

did

not

managed

to

sell

some

of

the

assets

approved

in

the
initial

selling

plan

in

2019,

the

market

conditions

for

selling

being

limited

by

the

COVID

pandemic

resulting

in

difficulties
in

finding

an

active

buyer,

a

new

plan

was

approved

with

the

assets

for

which

the

sale

is

highly

probably,

offers

being
received

and

are

available

for

immediate

sale

in

current

conditions;

the

rest

of

the

assets

in

amount

of

RON

10,190
were reclassified to Property Plant and Equipment (Note 23).

The assets held for sale comprise:

31 December
2021

31 December
2020

Land and buildings

5,132

15,476

Equipment

280

-

Total assets held for sale

5,412

15,476

22
Inventories

As at 31 December 2021 and 31 December 2020, inventories are as follows:

31 December
2021

31 December
2020

Spare parts

28,569

40,582

Consumables and other materials

33,399

22,672

Natural gas

5,367

1,725

Other inventories

13,938

23,868

Allowance for impairment of inventories

(8,315)

(18,781)

Total inventories

72,958

70,066

Inventories

include

mainly

spare

parts,

consumables

and

the

natural

gas

storage

(applicable

only

for

the

supply
subsidiary)

that

was

set

up

according

to

ANRE’s

regulations.

Spare

parts

refer

mainly

to

items

such

as

cables,

conductors,

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

281

sockets, switches which are used for the distribution network.

As

at

31

December

2021,

the

remaining

quantity

of

natural

gas

stored

is

of

MWh

12,186

(31

December

2020:

MWh
20,307), amounting to RON 5,367 thousand (31 December 2020: RON 1,725 thousand).

With

the

acquisition

of

Electrica

Energie

Verde

1

(former

Long

Bridge

Milenium

S.R.L)

(please

refer

to

Note

32),

the
Group took over the balance of green certificates existing at the acquisition date, respectively 31 August 2020.

The

photovoltaic

park

receives

a

number

of

six

green

certificates

for

each

MWh

of

electricity

produced

and

delivered,
out

of

which

for

the

period

2013-2020,

two

green

certificates

were

postponed

for

trading,

following

to

be

recovered

in
equal tranches from 1 January 2021 to 31 December 2030.

Green

certificates

are

recognized

in

the

caption

“
Other

inventories”

when

they

energy

is

produced

and

injected

into
the network, at Nil nominal value.

On

31

December

2021,

Electrica

Energie

Verde

1

SRL

holds

a

total

of

181,850

green

certificates

(31

December

2020:
148,581),

out

of

which

125,825

are

postponed

for

trading

(31

December

2020:

139,805)

and

the

remaining

56,025
are

tradeable

green

certificates

(31

December

2020:

8,776).

Starting

with

January

2021,

the

recovery

of

the

postponed
green certificates began, in equal tranches of 1,165 green certificates on a monthly basis, for ten years.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

282

23
Property, plant and equipment

The movements in property, plant and equipment in 2021 and 2020 are as follows:

Land and land
improvements

Buildings

Equipment

Vehicles,
furniture and
office equipment

Construction
in progress

Total

Gross carrying amount

Balance at 1 January 2020

232,386

192,728

287,174

93,424

27,742

833,454

Additions

85

157

1,997

1,259

2,986

6,484

Transfer from construction in progress

-

1,269

-

622

(1,891)

-

Transfer to intangible assets related to
concession agreements

(1,442)

-

(213,590)

-

(2,567)

(217,599)

Disposals

(920)

(1,471)

(11,419)

(1,048)

(45)

(14,903)

Revaluation recognized in other
comprehensive income

15,834

27,989

-

-

-

43,823

Revaluation recognized in profit or loss

(126)

(2,294)

-

-

-

(2,420)

Gross book value netted off against
the accumulated depreciation at
revaluation

-

(26,563)

-

-

-

(26,563)

Acquisition of subsidiary (Note 32)

258

5,333

34,734

1,079

-

41,404

Balance at 31 December 2020

246,075

197,148

98,896

95,336

26,225

663,680

Additions

-

167

482

150

8,368

9,167

Transfer from construction in progress

-

1,257

2,001

1,967

(5,225)

-

Disposals

(46)

(383)

(7,664)

(503)

(180)

(8,776)

Reclassification from/(to) assets held
for sale (Note 21)

6,769

4,368

(1,914)

-

-

9,223

Balance at 31 December 2021

252,798

202,557

91,801

96,950

29,188

673,294

Accumulated depreciation and impairment losses

Balance at 1 January 2020

-

24,152

163,883

82,446

18,875

289,356

Depreciation

-

5,922

17,058

4,870

-

27,850

Accumulated depreciation of disposals

-

(403)

(11,321)

(766)

-

(12,490)

Impairment loss

-

1,905

-

-

-

1,905

Reversal of impairment loss

-

-

(1,196)

-

(104)

(1,300)

Accumulated depreciation netted off
against gross book value at
revaluation

-

(26,563)

-

-

-

(26,563)

Transfer to intangible assets related to
concession agreements

-

-

(123,208)

-

-

(123,208)

Balance at 31 December 2020

-

5,013

45,216

86,550

18,771

155,550

Depreciation

-

7,532

8,865

4,721

-

21,118

Accumulated depreciation of disposals

-

(14)

(4,546)

(96)

-

(4,656)

Reversal of impairment loss

-

-

(3,805)

-

(137)

(3,942)

Reclassification from/(to) assets held
for sale
 (Note 21)

-

947

(1,142)

-

-

(195)

Balance at 31 December 2021

-

13,478

44,588

91,175

18,634

167,875

Net carrying amounts

At 1 January 2020

232,386

168,576

123,291

10,978

8,867

544,098

At 31 December 2020

246,075

192,135

53,680

8,786

7,454

508,130

At 31 December 2021

252,798

189,079

47,213

5,775

10,554

505,419

Tangible assets include mainly land, buildings and equipment.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

283

In

2021,

following

the

changes

made

in

the

in

the

selling

plan

for

Electrica

SERV

there

were

reclassified

from

assets
held

for

sale

to

Property

Plant

and

Equipment,

land

and

buildings

having

as

net

book

value

RON

10,190

thousand.

(
see
further details in Note 21
).

In

2020

transfers

to

intangible

assets

related

to

concession

agreements

in

the

net

amount

of

RON

94,391

thousand
refer to:

-
the

AMR

system

(Automatic

Meter

Reading)

equipment

consisting

of

electricity

measuring

equipment

in

amount

of
RON 92,949 thousand;

-
2 plots of land in the total surface of 28,696.79 sqm in amount of RON 1,442 thousand

that

were

contributed

in

kind

by

Electrica

SA

to

the

share

capital

of

its

distribution

subsidiaries

(SDEE

Transilvania

Nord
S.A.,

SDEE

Transilvania

Sud

S.A.,

SDEE

Muntenia

Nord

S.A.),

these

assets

being

part

of

the

distribution

network

(see
Note 24).

As

at

31

December

2020,

the

Group

performed

the

revaluation

at

fair

value

of

tangible

assets

consisting

of

land,

land
improvements

and

buildings.

The

revaluation

was

performed

by

an

independent

authorized

evaluator

Darian

DRS

S.A..

Following

the

revaluation

the

gain

charged

to

other

comprehensive

income

was

in

amount

of

RON

43,823

thousand

and
the loss recognized in profit or loss was in amount of RON 2,420 thousand.

Measurement of fair value

The

Group
’
s

land,

land

improvements

and

buildings

are

stated

at

their

revalued

amounts,

being

the

fair

value

at

the
date

of

revaluation,

less

any

subsequent

accumulated

depreciation

and

subsequent

accumulated

impairment

losses.

The
fair

value

measurements

of

the

Group
’
s

land,

land

improvements

and

buildings

as

at

31

December

2020

were

performed
by

Darian

DRS

S.A.,

an

independent

valuer

not

related

to

the

Group.

Darian

DRS

S.A.

is

member

of

the

National
Association

of

Authorised

Romanian

Valuers

and

has

appropriate

qualifications

and

recent

experience

in

the

fair

value
measurement

of

properties

in

the

relevant

locations.

The

valuation

conforms

to

International

Valuation

Standards

and
was

based

on

recent

market

transactions

on

arm
’
s

length

terms

for

similar

properties,

whenever

possible

and

discounted
cash-flows method.

There

has

been

no

change

to

the

valuation

technique

during

the

period

between

the

present

revaluation

performed

as
at 31 December 2020 and the previous one, performed as at 31 December 2017.

The

following

table

shows

the

valuation

techniques

used

in

measuring

fair

values

(Level

3),

as

well

as

the

significant
unobservable inputs used.

Category

Valuation technique

Significant unobservable
inputs

Inter-relationship
between key
unobservable inputs and
fair value measurement

Land and land
improvements

Market approach

The fair value is estimated based on
selling price per square meter of land of
similar characteristics (i.e. ownership,
legal limitations, financing and selling
conditions, location, physical and
economical properties and best use). The
market price is mainly based on recent
transactions.

•
Adjustment for liquidity,
location, size.

The estimated fair value
would increase/(decrease) if:

•
Adjustment for liquidity,
location or size would be
lower/(higher)

Buildings

Market approach and discounted cash-
flows (DCF) method

Buildings were evaluated using the
following methods, depending on the best

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

284

Category

Valuation technique

Significant unobservable
inputs

Inter-relationship
between key
unobservable inputs and
fair value measurement

use and the availability and credibility of
available market information:

Market approach

The market approach is based on the
selling price per square meter for
buildings with similar characteristics (i.e.
ownership, legal limitations, financing and
selling conditions, location, physical and
economical properties, and best use),
adjusted for liquidity, location, size etc.

The DCF method

The valuation model based on the DCF
method estimates the present value of net
cash flows to be generated by a building
taking into account occupancy rate and
annual rent. The discount rate estimation
considers, inter alia, the quality of a
building and its location.

•
Adjustment for liquidity,
location, size.

Office space rent

•
Occupancy rates
(between 80% and 90%)

•
Yield rates (between 7%
and 10%)

•
Annual rent per sqm
(between 9 and 19
EUR/sqm), depending on
location;

Commercial space rent

•
Occupancy rates
(between 85% and 90%)

•
Yield rates (between
7.25% and 11.5%)

•
Annual rent per sqm
(between 10 and 60
EUR/sqm), depending on
location;

•
Adjustment for liquidity,
location or size would be
lower/(higher)

•
Occupancy rates were
higher/(lower)

•
Yield rates were
lower/(higher)

•
Annual rent per sqm was
higher/(lower)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

285

24
Intangible assets

Intangible

assets

include

mainly

intangible

assets

related

to

distribution

service

concession

agreements

recorded

in
accordance

with

IFRIC

12

“Service

Concession

Arrangements”,

as

well

as

licenses

and

costs

of

SAP

ERP

implementation,
customer management and billing system and other software, as follows:

Intangible assets
related to concession
agreements

Software and
licenses

Intangible
assets in
progress

Total

Gross book value

Balance at 1 January 2020

8,934,136

191,424

1,669

9,127,229

Additions

598,930

2,226

-

601,156

Transfers from property, plant and
equipment

91,824

-

-

91,824

Transfers from intangible assets in
progress

-

302

(302)

-

Transfers from property, plant and
equipment in progress

2,567

-

-

2,567

Reclassification to intangible assets
related to concession agreements

4,503

(4,503)

-

-

Disposals

-

(770)

-

(770)

Balance at 31 December 2020

9,631,960

188,679

1,367

9,822,006

Additions

500,387

5,730

576

506,693

Transfers from intangible assets in
progress

-

34

(34)

-

Disposals

-

(1,042)

-

(1,042)

Balance at 31 December 2021

10,132,347

193,401

1,909

10,327,657

Accumulated amortization and
impairment losses

Balance at 1 January 2020

3,745,981

179,683

-

3,925,664

Amortization

429,216

5,498

-

434,714

Reclassification to intangible assets
related to concession agreements

1,578

(1,578)

-

-

Accumulated amortization of
disposals

-

(770)

-

(770)

Balance at 31 December 2020

4,176,775

182,833

-

4,359,608

Amortization

441,015

4,536

-

445,551

Accumulated amortization of
disposals

-

(1,042)

-

(1,042)

Balance at 31 December 2021

4,617,790

186,327

-

4,804,117

Net carrying amounts

At 1 January 2020

5,188,155

11,741

1,669

5,201,565

At 31 December 2020

5,455,185

5,846

1,367

5,462,398

At 31 December 2021

5,514,557

7,074

1,909

5,523,540

The

distribution

subsidiaries

(as

operators)

that

merged

into

one

single

distribution

operator

as

of

31

December

2020
concluded

concession

contracts

with

the

Ministry

of

Economy

concerning

the

operation

of

electricity

distribution

service
in

the

established

territory

(
Transilvania

Nord,

Transilvania

Sud,

Muntenia

Nord
),

on

the

risk

and

responsibility

of

the
operator

and

taking

into

account

the

technical

regulations

applicable

to

the

operation,

modernization,

rehabilitation

and
development

of

energy

distribution

networks

specified

in

the

Electricity

Law,

the

terms

and

conditions

of

the

licenses
for electricity distribution and the regulations issued by ANRE.

The

distribution

operator

resulting

from

the

merger

of

the

three

distribution

operators

within

the

Group,

Distributie
Energie

Electrica

Romania

concluded

addendums

to

the

concession

agreements

signed

with

the

Ministry

of

Economy

for
the

operation

of

electricity

distribution

service

in

all

three

areas

starting

with

1

January

2021,

taking

over

all

the

rights
and obligations from the three former electricity distribution companies.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

286

The

Group

applies

IFRIC

12

for

the

accounting

of

the

transactions

under

these

concession

contracts.

(See

further

details
in Notes
4, 6(c) and 6(l)).

For

the

year

ended

31

December

2021,

the

Group

has

recognized

construction

revenue

related

to

the

concession
agreements

of

RON

500,387

thousand

(2020:

RON

696,246

thousand)

and

construction

costs

of

RON

485,813

thousand
(2020: RON 675,967 thousand).

The

main

information

related

to

the

current

concession

contracts

agreements

and

the

intangible

assets

amounts
recognized for each network distribution area is summarized below:

Network
distribution areas

Contract

date

Concession
period
(years)

Contract
expiry
date

Concession
period
remaining
(years)

Renewal
option

Net carrying
amount at 31
December
2021

Net carrying
amount at 31
December
2020

Muntenia Nord area

2005

49

2054

33

Yes

1,915,567

1,893,208

Transilvania Nord area

2005

49

2054

33

Yes

1,836,161

1,810,611

Transilvania Sud area

2005

49

2054

33

Yes

1,762,829

1,751,366

Total

5,514,557

5,455,185

The concession contracts can be prolonged for a period up to half of the initial established period of 49 years.

The

investments

in

relation

to

the

development

and

modernization

of

the

infrastructure

incurred

in

2021

refers

mainly
to:

-
Modernization

of

the

current

transformer

points

and

stations,

current

underground

and

overhead

power

lines

in
amount of RON 164,465 thousand (2020: RON 165,480 thousand);

-
Investments

related

to

improvements

for

electricity

distribution

network

in

amount

of

RON

143,965

thousand

(2020:
RON 51,190 thousand).

-
Significant

construction

works

of

new

transformer

stations,

new

underground

and

overhead

power

lines

in

amount
of 2020: RON 97,449 thousand (2020: RON 36,470 thousand);

-
Acquisition

of

own

car

fleet,

including

utilities

vehicles

and

specialized

vehicles

in

amount

of

RON

63,009

thousand;
(2020: RON 56,220 thousand);

-
Modernization

and

inclusion

in

SCADA

(which

is

an

automatic

control

system

which

monitors

the

equipment)

of
transformers points and stations, in amount of RON 2,430 thousand (2020: RON 78,980 thousand);

25
Investments in associates

On

28

July

2021

and

on

7

December

2021,

Electrica

SA

concluded

four

agreements

for

the

sale-purchase

of

shares

in
four

project

companies

having

as

main

activity

the

production

of

electricity

from

renewable

sources.

The

sale-purchase
agreements

concluded,

mention

the

fact

that

in

the

first

stage

the

Group

acquires

30%

of

the

share

capital

of

the

four
companies,

remaining

that

in

the

following

stages,

to

acquire

the

remaining

70%

of

the

share

capital

after

the

conditions
provided in the sale-purchase agreements will be fulfilled.

The four companies are as follows:

-

Crucea

Power

Park

SRL
,

develops

the

wind

project

"Crucea

Est",

with

a

projected

installed

capacity
of

121

MW

and

a

projected

electricity

storage

capacity

of

60

MWh

(15

MW

x

4h),

located

outside

the
Crucea

area,

Constanta

County.

The

estimated

purchase

price

for

the

"Crucea

Est"

wind

project

is

70
thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

8,470

thousand

EUR.

On

28
July

2021,

Electrica

SA

paid

the

amount

of

EUR

2,541

thousand

representing

30%

of

the

project

value,
respectively 30% of the shares of Crucea Power Park SRL.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

287

-

Sunwind

Energy

SRL
,

develops

the

photovoltaic

project

"Satu

Mare

2"

with

a

designed

installed
capacity

of

27

MW,

located

near

Satu

Mare

city.

The

estimated

purchase

price

for

the

photovoltaic

project
"Satu

Mare

2"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

1,485
thousand

EUR.

On

28

July

2021,

Electrica

SA

paid

the

amount

of

EUR

445.5

thousand

representing

30%
of the project value, respectively 30% of the shares of Sunwind Energy SRL.

-

New

Trend

Energy

SRL
,

develops

the

photovoltaic

project

"Satu

Mare

3",

with

a

projected

capacity

of
59

MW,

located

near

Satu

Mare

city.

The

estimated

purchase

price

for

the

photovoltaic

project

"Satu

Mare
3"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

3,245

thousand

EUR.
On

28

July

2021,

Electrica

SA

paid

the

amount

of

EUR

973.5

thousand

representing

30%

of

the

project
value, respectively 30% of the shares of New Trend Energy SRL.

-

Foton

Power

Energy

SRL
,

develops

the

photovoltaic

project

"Bihor

1",

with

a

projected

capacity

of
77.5

MW,

located

near

Inand

city,

Bihor

County.

The

estimated

purchase

price

for

the

photovoltaic

project
"Bihor

1"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

4,262.5
thousand

EUR.

On

7

December

2021,

Electrica

SA

paid

the

amount

of

EUR

1,279

thousand

representing
30% of the project value, respectively 30% of the shares of Foton Power Energy SRL.

Considering

the

holding

percentage

of

30%,

as

at

31

December

2021,

the

4

entities

are

accounted

for

using

the

equity
method in these consolidated financial statements as provided in the Group's accounting policies in note 6.

The cost of the investments at acquisition date, totalling the amount of
RON 25,813
 thousand, is detailed as follows:

Crucea Power
Park S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

Acquisition date

31.07.2021

31.07.2021

31.07.2021

31.12.2021

Percentage ownership and
voting rights at acquisition
date

30%

30%

30%

30%

Net assets at acquisition date

(242)

(5)

(5)

(7)

Group’s share of net assets

(73)

(2)

(2)

(2)

Goodwill

12,573

4,791

2,194

6,334

Cost of investment at
acquisition date

12,500

4,789

2,192

6,332

Summarised financial information in respect of each of the Group’s associates is set out below:

Crucea
Power Park
S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

31.12.2021

31.12.2021

31.12.2021

31.12.2021

Non-current assets

7,078

249

161

142

Current assets

945

47

21

23

Non-current liabilities

(6,904)

(303)

(190)

(168)

Current liabilities

(1,364)

(2)

(1)

(4)

Net assets

(245)

(9)

(9)

(7)

Reconciliation to carrying amounts:

Opening net assets at acquisition date

(242)

(5)

(7)

(7)

Loss for the period

(3)

(4)

(4)

-

Closing net assets 31.12.2021

(245)

(9)

(11)

(7)

Reconciliation of the above summarised financial information to the carrying amount of the interest in associates recognised
in the consolidated financial statements:

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

288

Crucea
Power Park
S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

Closing net assets of associates
31.12.2021

(245)

(9)

(11)

(7)

Group’s share in associates %

30%

30%

30%

30%

Group’s share of net assets as at
31.12.2021

(74)

(3)

(3)

(2)

Goodwill

12,573

4,791

2,194

6,334

Carrying amount of interest in associate
31.12.2021

12,499

4,788

2,191

6,332

The

share

loss

in

amount

of

RON

3

thousand

for

the

period

was

recognized

in

the

consolidated

statement

of

profit

and
loss for the year ended as at 31 December 2021.

26
Capital and reserves

(a)
Share capital and share premium

The

issued

share

capital

in

nominal

terms

consists

of

346,443,597

ordinary

shares

as

at

31

December

2021

(31
December

2020:

346,443,597)

with

a

nominal

value

of

RON

10

per

share.

As

of

4

July

2014,

after

the

Initial

Public
Offering

(“IPO”),

the

Company’s

shares

are

listed

on

the

Bucharest

Stock

Exchange

and

the

Global

Depositary

Receipts
are listed on the London Stock Exchange.

The

shares

owned

by

the

Company’s

shareholders

that

are

traded

on

the

London

Stock

Exchange

are

the

global
depositary

receipts

(GDRs).

A

global

depositary

receipt

represents

four

shares.

The

Bank

of

New

York

Mellon

is

the
depositary

bank

for

these

securities.

The

GDRs’

weight

in

Electrica’s

total

share

capital

diminished

following

the

Initial
Public Offering, reaching a level of 0.7842% at the end of 2021 as compared to 10.17% at 4 July 2014.

The

holders

of

ordinary

shares

are

entitled

to

receive

dividends

as

declared

and

are

entitled

to

one

vote

per

share

in
the

shareholders’

meetings

of

the

Company,

except

for

the

6,890,593

treasury

shares

purchased

by

the

Company

in
July

2014

in

order

to

stabilize

the

price.

All

shares

rank

equally

and

confer

equal

rights

to

the

net

assets

of

the

Company’s,
except for treasury shares.

The

Company

recognizes

changes

in

share

capital

only

after

their

approval

in

the

General

Shareholders

Meeting

and
their

registration

by

the

Trade

Register.

The

contributions

made

by

the

shareholders

which

are

not

yet

registered

with
the Trade Register at year end are recognized as pre-paid capital contributions from shareholders.

The

share

premium

resulted

at

IPO

was

RON

171,128

thousand.

The

transaction

costs

of

RON

68,079

thousand

were
deducted from the share premium.

Following

the

SPO

that

took

place

in

November

2019,

the

share

capital

of

Electrica

SA

was

increased

by

in

kind

and

in
cash

contribution,

with

the

amount

of

RON

5,037

thousand,

from

the

amount

of

RON

3,459,399

thousand

to

the
amount

of

RON

3,464,436

thousand,

by

issuing

a

number

of

503,668

new

nominative

and

dematerialized

shares

with
a nominal value of 10 RON/share
.

The

costs

generated

by

the

secondary

public

offering

were

in

amount

of

RON

964

thousand.

Also,

the

Company
recorded

gains

referring

to

share

issue

of

RON

2,186

thousand,

resulting

from

the

difference

between

the

contribution
value of the plots of land and their value recorded as pre-paid capital contributions in kind from shareholders.

(b)
Treasury shares reserve

In

July

2014,

the

Company

purchased

5,206,593

ordinary

shares

and

421,000

Global

Depositary

Receipts,

equivalent

to
1,684,000

shares

(totalling

6,890,593

shares).

The

total

amount

paid

for

acquiring

the

shares

and

Global

Depositary
Receipts was RON 75,372 thousand.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

289

(c)
Revaluation reserve

The reconciliation between opening and closing balance of revaluation reserve is as follows:

2021

2020

Balance at 1 January

116,372

87,665

Revaluation surplus of land, land improvements and buildings

-

43,823

Deferred tax liability arising on revaluation of land, land improvements
and buildings

-

(7,931)

Release of revaluation reserve to retained earnings corresponding to
depreciation and disposals of property, plant and equipment

(13,543)

(7,185)

Balance as at 31 December

102,829

116,372

As

at

31

December

2020,

the

Group

performed

the

revaluation

of

land,

land

improvements

and

buildings

at

fair

value.
The previous revaluation was performed as at 31 December 2017 (please see Note 23).

(d)
Legal reserves

Legal

reserves

are

set

up

as

5%

of

the

gross

profit

for

the

year

in

the

statutory

individual

financial

statements

of

the
companies

within

the

Group,

until

the

total

legal

reserves

reach

20%

of

the

paid-up

nominal

share

capital

of

each
company,

according

to

the

legislation.

These

reserves

are

deductible

for

income

tax

purposes

and

are

not

distributable.

Legal reserves

Balance at 1 January 2020

371,833

Set-up of legal reserves

20,443

Balance at 31 December 2020

392,276

Set-up of legal reserves

16,129

Balance at 31 December 2021

408,405

(e)
Dividends

Romanian

companies

may

distribute

dividends

from

statutory

profits,

according

to

the

separate

financial

statements
prepared in accordance with Romanian accounting regulations.

The

dividends

declared

by

the

Company

in

2021

and

2020

(from

the

statutory

profits

of

previous

years)

are

as

follows:

Distribution of dividends

2021

2020

To the owners of the Company

247,874

246,108

Total

247,874

246,108

On

28

April

2021

the

General

Shareholders

Meeting

of

the

Company

approved

dividend

distribution

of

RON

247,874
thousand

(2020
:

RON

246,108

thousand).

The

dividend

per

share

distributed

is

RON

0.73

per

share

(2020:

RON
0.7248 per share).

When

calculating

the

dividend

per

share,

the

Company’s

repurchased

own

shares

(6,890,593

shares)

were

not
considered as outstanding shares and are deducted from the total number of issued ordinary shares.

Out

of

the

dividends

declared

by

the

Company

of

RON

247,874

thousand

(2020:

RON

246,108

thousand),

the

dividends
paid

were

of

RON

247,258

thousand

(2020:

RON

245,780

thousand)

the

remaining

difference

represents

dividends
uncollected by the shareholders.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

290

27
Trade payables

31 December

2021

31 December

2020

Electricity suppliers

619,653

373,563

Capital expenditure suppliers

156,546

138,391

Other suppliers

115,136

95,241

Total

891,335

607,195

Electricity

suppliers

are

mainly

state-owned

electricity

producers,

as

detailed

in

Note

33,

but

also

other

participants

to
the electricity market.

Other suppliers include suppliers of services, materials, consumables, etc.

28
Other payables

31 December 2021

31 December 2020

Current

Non-current

Current

Non-current

VAT payable

133,833

-

128,450

-

Liabilities towards the State

7,148

-

6,820

-

Other liabilities

130,282

32,732

105,676

33,873

Total

271,263

32,732

240,946

33,873

Other

liabilities

include

mainly

guarantees,

sundry

creditors,

connection

fees,

habitat

tax

and

cogeneration

contribution.
Other non-current liabilities refer to guarantees from customers related to electricity supply.

29
Provisions

Tax related

Other

Total

Balance at 1 January 2021

1,200

18,038

19,238

Provisions recognized

-

22,933

22,933

Provisions utilised

-

(2,286)

(2,286)

Provisions reversed

(116)

(4,847)

(4,963)

Balance at 31 December 2021

1,084

33,838

34,922

As

at

31

December

2021,

provisions

refer

mainly

to

benefits

upon

the

termination

of

executive

directors'

mandate
contracts

in

the

form

of

a

non-compete

clause

amounting

to

RON

3,971

thousand

(31

December

2020:

RON

6,139

thousand)

and

for

various

claims

and

litigations

involving

the

Group

companies

in

amount

of

RON

30,951

thousand

(31
December 2020: RON 13,099 thousand).

During

2021,

the

Group

set

up

a

provision

in

connection

with

the

supply

subsidiary

obligations

in

amount

of

RON

10,584
thousand

representing

compensations

arising

from

the

application

of

the

Performance

Standard

for

the

electricity

supply
activity

stipulated

in

the

ANRE

Order

6/2017,

and

of

the

Regulation

for

the

supply

of

electricity

to

final

customers,
approved

by

ANRE

Order

no.

235/2019

as

a

result

of

the

total

liberalization

process

of

the

market

which

began

on

1
January 2021.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

291

30
Long-term bank borrowings

Drawings and repayments of borrowings during the year ended 31 December 2021 were as follows:

Currency

Interest rate

Maturity
year

Amount
(RON
thousand)

Balance at 1 January 2021

778,909

Drawings of borrowings
during the period,
out of which:

EBRD

RON

Floating rate (1.15% + interbank
rate + ROBOR spread)

2031

81,685

BCR

RON

ROBOR 3M+1%

2028

82,793

BRD

RON

3.85%

2028

70,212

Total drawings

234,690

Accumulated interest

1,536

Payment of interest

(795)

Reimbursements
, out of which:

BRD

RON

0,02%

2021

(320,000)

BRD

RON

3,99%

2026

(20,800)

BRD

RON

3,85%

2026

(12,857)

Banca Transilvania

RON

4.59%

2027

(17,857)

UniCredit Bank

RON

3.85%

2026

(9,600)

BCR

RON

ROBOR 3M+1%

2026

(4,737)

Balance at 31 December 2021

628,489

As at 31 December 2021, respectively 31 December 2020, the
bank borrowings is as follows:

Lender

Borrower

Balance at
31 December 2021

Balance at
31 December 2020

BRD

Distributie Energie Electrica Romania
(former SDEE Muntenia Nord S.A.)

-

80,000

BRD

Distributie Energie Electrica Romania
(former SDEE Transilvania Nord S.A.)

-

114,000

BRD

Distributie Energie Electrica Romania
(former SDEE Transilvania Sud S.A.)

-

126,000

Banca Transilvania

Distributie Energie Electrica Romania
(former SDEE Transilvania Sud S.A.)

98,227

116,086

UniCredit Bank

Distributie Energie Electrica Romania
(former SDEE Transilvania Nord S.A.)

48,498

58,201

BRD

Distributie Energie Electrica Romania
(former SDEE Muntenia Nord S.A.)

104,000

124,800

BRD

Distributie Energie Electrica Romania
(former SDEE Transilvania Nord S.A.)

92,857

69,584

BRD

Distributie Energie Electrica Romania
(former SDEE Transilvania Sud S.A.)

74,342

40,289

BCR

Distributie Energie Electrica Romania
(former SDEE Muntenia Nord S.A.)

128,243

49,949

EBRD

Distributie Energie Electrica Romania

82,322

-

Total

628,489

778,909

Less: current portion of the long-term bank borrowings

(508,197)

(377,818)

Less: accumulated interest

(1,536)

(795)

Total long-term borrowings, net of current portion

118,756

400,296

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

292

Bank Borrowings description

a)
Investment loans granted by
BRD – Groupe Societe Generale

On

17

October

2016,

the

Company’s

distribution

subsidiaries

(Societatea

de

Distributie

a

Energiei

Electrice

Transilvania
Sud

S.A.,

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.

and

Societatea

de

Distributie

a

Energiei
Electrice

Transilvania

Nord

S.A.,

currently

Distributie

Energie

Electrica

Romania

S.A.)

concluded

long

term

loan

contracts
with

BRD

–

Groupe

Societe

Generale,

for

which

Electrica

SA

is

the

guarantor.

The

loan

was

fully

reimbursed

at

maturity
(16

October

2021).

The

loans

were

subject

to

a

fixed

interest

rate

of

0.02%

per

annum.

As

at

31

December

2021,

the
outstanding balance is Nil (31 December 2020: RON 320,000 thousand) (see also see Note 20).

b)
Investment loan granted by Banca Transilvania

On

18

July

2019,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

currently

Distributie

Energie
Electrica

Romania

S.A.,

as

a

borrower,

concluded

with

Banca

Transilvania

an

investment

credit

agreement

with

the
purpose

of

financing

investments

in

the

electricity

distribution

network,

according

to

the

investment

plan.

Main

provisions
are:

Maximum

loan

amount:

RON

125,000

thousand;

Interest

rate:

fixed,

4.59%

per

annum;

Reimbursements:

quarterly
instalments

until

30.06.2027;

Grace

period:

12

months.

As

at

31

December

2021,

the

outstanding

balance

is

of

RON
98,227

thousand,

of

which

RON

98,214

thousand

principal

and

RON

13

thousand

accrued

interest.

(Outstanding

balance
as at 31 December 2020: RON
116,086
thousand)

c)
Investment loan granted by Unicredit Bank

On

13

November

2019,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.,

currently

Distributie

Energie
Electrica

Romania

S.A.,

as

borrower,

concluded

with

Unicredit

Bank

an

investment

credit

agreement

with

the

purpose
of

financing

investments

in

the

electricity

distribution

network,

according

to

the

investment

plan.

Main

provisions

are:
Maximum

loan

amount:

RON

60,000

thousand;

Interest

rate:

fixed,

3.85%

per

annum;

Reimbursements:

quarterly
instalments

until

13.11.2026;

Grace

period:

12

months.

As

at

31

December

2021,

the

outstanding

balance

is

of

RON
48,498

thousand,

of

which

RON

48,000

thousand

principal

and

RON

498

thousand

accrued

interest.

(Outstanding
balance as at 31 December 2020: RON
58,201
thousand)

d)
Investment loan granted by
BRD – Groupe Societe Generale

On

29

October

2019,

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,

currently

Distributie

Energie
Electrica

Romania

S.A.,

as

borrower,

concluded

with

BRD

–

Groupe

Societe

Generale

an

investment

credit

agreement
with

the

purpose

of

financing

investments

in

the

electricity

distribution

network,

according

to

the

investment

plan.

Main
provisions

are:

Maximum

loan

amount:

RON

130,000

thousand;

Interest

rate:

fixed,

3.99%

per

annum;
Reimbursements:

quarterly

instalments

until

28.10.2026;

Grace

period:

12

months.

As

at

31

December

2021,

the
outstanding

balance

is

of

RON

104,000

thousand.

(Outstanding

balance

as

at

31

December

2020:

RON

124,800
thousand)

e)
Investment loan granted by BRD – Groupe Societe Generale

On

25

June

2020,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.,

currently

Distributie

Energie
Electrica

Romania

S.A.,

as

a

borrower,

concluded

with

BRD

–

Groupe

Societe

Generale

an

investment

credit

agreement
with

the

purpose

of

financing

investments

in

the

electricity

distribution

network,

according

to

the

approved

investment
plan

for

2020.

Main

provisions

are:

Maximum

loan

amount:

RON

100,000

thousand;

Interest

rate:

fixed,

3.85%

per
annum;

Reimbursements:

quarterly

instalments

until

2028;

Grace

period:

12

months.

As

at

31

December

2021,

the
outstanding

balance

is

of

RON

92,857

thousand.

(Outstanding

balance

as

at

31

December

2020:

RON

69,584

thousand)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

293

f)
Investment loan granted by BRD – Groupe Societe Generale

On

25

June

2020,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

currently

Distributie

Energie
Electrica

Romania

S
.
A
.

as

a

borrower,

concluded

with

BRD

–

Groupe

Societe

Generale

an

investment

credit

agreement
with

the

purpose

of

financing

investments

in

the

electricity

distribution

network,

according

to

the

approved

investment
plan

for

2020.

Main

provisions

are:

Maximum

loan

amount:

RON

80,000

thousand;

Interest

rate:

fixed,

3.85%

per
annum;

Reimbursements:

quarterly

instalments

until

2028;

Grace

period:

12

months.

As

at

31

December

2021,

the
outstanding

balance

is

RON

74,342

thousand,

of

which

RON

74,286

thousand

principal

and

RON

56

thousand

accrued
interest. (Outstanding balance as at 31 December 2020: RON 40,289 thousand)

g)
Investment loan granted by Banca Comerciala Romana (“BCR”)

On

17

September

2020,

Societatea

de

Distributie

a

Energiei

Electrica

Muntenia

Nord

S.A.,

currently

Distributie

Energie
Electrica

Romania

S
.
A
.,

as

a

borrower

and

Electrica

SA

as

a

guarantor,

concluded

with

Banca

Comerciala

Romana

S.A.
an

investment

credit

agreement

with

the

purpose

of

financing

investments

in

the

electricity

distribution

network,
according

to

the

approved

investment

plan

for

2020.

Main

provisions

are:

Maximum

loan

amount:

Ron

155,000
thousand;

Interest

rate:

ROBOR

3M+1%

per

annum;

Reimbursements:

quarterly

instalments

until

2028;

Grace

period:
12

months.

As

at

31

December

2021,

the

outstanding

balance

is

RON

128,243

thousand,

of

which

RON

127,911
thousand

principal

and

RON

332

thousand

accrued

interest.

(Outstanding

balance

as

at

31

December

2020:

RON

49,949
thousand)

h)
Investment loan granted by
the European Bank for Reconstruction and Development (“BERD”)

On

2

July

2021,

Societatea

de

Distributie

Energie

Electrica

Romania

SA,

as

a

borrower,

concluded

with

the

European
Bank

for

Reconstruction

and

Development

a

credit

agreement

for

investments

in

order

to

finance

investments

in

the
electricity

distribution

network

according

to

the

2021-2023

investment

plan.

The

main

provisions

are:

The

maximum
value

of

the

loan

RON

195,136

thousand;
 Interest

rate:

agreed

individually

for

each

tranche

drawn;

Repayments:

17
half-yearly

installments

until

31.07.2031;

Grace

period:

24

months.

As

at

31

December

2021,

the

outstanding

balance
is

RON

82,322

thousand,

of

which

RON

81,685

thousand

principal

and

RON

637

thousand

accrued

interest
.

The

loan
agreement is guaranteed by Electrica SA.

i)
Investment loan granted by the European Investment Bank (“BEI”)

On

14

July

2021,

Societatea

de

Distributie

Energie

Electrica

Romania

SA,

as

a

borrower,

concluded

with

the

European
Investment

Bank

an

investment

credit

contract

for

the

purpose

of

financing

investments

in

the

electricity

distribution
network

according

to

the

2021-2023

investment

plan.

The

main

provisions

are:

Maximum

value

of

the

loan:

EUR
120,000

thousand;

Interest

rate

and

Repayments

will

be

agreed

individually

for

each

tranche

drawn.

On

31

December
2021,

the

outstanding

balance

is

Nil

as

no

withdraw

was

made

from

the

loan.

The

loan

agreement

is

guaranteed

by
Electrica SA.

Financial Covenants

The

financial

covenants

specified

in

the

agreements

with

BRD

–

Groupe

Societe

Generale

and

Unicredit

Bank

have

been
fulfilled as at 31 December 2021, respectively as at 31 December 2020.

In

the

agreement

with

Banca

Comerciala

Romana

there

is

stipulated

one

financial

covenant:

leverage

ratio:

Net
Consolidated

Debt

to

Consolidated

EBITDA

for

the

12

months

period

ending

on

the

last

day

of

the

Group's

financial

year
and

each

12

months

period

ending

on

the

last

day

of

the

first

half

of

the

Group's

financial

year,

of

not

more

than

3:1,
which

should

be

fulfilled

by

the

Borrower.

As

at

31

December

2021

due

to

the

breach

in

the

covenant,

the

Group
reclassified

the

amount

of

RON

108.961

thousand

from

“Long

term

bank

borrowings”

to

“Current

portion

of

long-term
bank

borrowings”

on

the

Consolidated

Statement

of

Financial

Position.

The

Group

started

the

procedures

of

obtaining

a
waver for the loan to not be repayable on demand.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

294

In

the

agreement

with

European

Bank

for

Reconstruction

and

Development

there

are

stipulated

two

financial

covenants:
interest

coverage

ratio
:

EBITDA

for

the

12

months

preceding

the

date

of

calculation

to

interest

payments

on

all

Financial
Debt

due

or

accrued

during

such

period,

of

not

less

than

3.00:1.00

which

should

be

fulfilled

by

the

Borrower

and

Net
Debt

to

Consolidated

EBITDA

for

the

12

months

preceding

the

date

of

calculation,

of

not

more

than

3.00:1.00

to

be
fulfilled

by

the

guarantor

Electrica

SA.

Any

breach

in

either

of

the

covenants

would

constitute

non-compliance

leading
to

a

repayment

of

the

loan

on

demand.

As

at

31

December

2021

due

to

the

breach

in

the

covenant

related

to

the
Guarantor,

the

Group

presented

the

amount

of

RON

82,322

thousand

in

Current

portion

of

long-term

bank

borrowings
on

the

Consolidated

Statement

of

Financial

Position.

On

24

February

2022,

the

Group

obtained

a

waver

letter

for

the
loan

to

not

be

repayable

on

demand

but

it

is

subject

to

obtaining

the

waver

letters

for

the

other

loans

for

which

the
Group is in non-compliance BCR and BEI. (Note 36)

In

the

agreement

with

European

Investment

Bank

there

are

stipulated

two

financial

covenants:

interest

coverage

ratio:
means

the

ratio

of

EBITDA

to

Net

Finance

Charges

which

shall

not

be

less

than

3x

and

net

leverage

ratio

-

means

the
ratio

of

total

Net

Debt

to

EBITDA

which

shall

not

be

more

than

3x

which

must

be

fulfilled

by

the

guarantor

Electrica

SA.
As

at

31

December

2021

the

Group

is

in

breach

with

both

covenants,

bearing

the

risk

to

not

be

able

to

make

drawings
from the loan. The Group has started the procedures of obtaining a waver in order to be able to draw from the loan.

In

the

loan

agreement

with

BRD-Groupe

Societe

Generale,

due

to

the

existence

of

the

non-performance

clause

with
cross

effect,

whereby,

the

non-fulfillment

of

financial

obligation

resulting

from

other

loan

agreements

concluded

with
other

credit

institutions,

constitutes

a

breach

of

current

contractual

terms

having

as

possible

repayment

effect.

On
request,

the

Group

reclassified

the

amount

of

RON

224,629

thousand

from

“Long-term

bank

loans”

to

“Current

portion
of

long-term

bank

loans”

in

the

consolidated

statement

of

financial

position.

When

the

Group

obtains

letters

of

exception
for

loans

for

which

it

has

not

complied

with

the

contractual

terms

regarding

the

fulfillment

of

the

financial

indications,
it will reclassify the amount.

31
Financial instruments - fair values and risk management

(a)
Accounting classifications and fair values

According

to

IFRS

9,

financial

assets

are

measured

at

amortised

cost

as

they

are

held

within

a

business

model

to

collect
contractual

cash

flows

and

these

cash

flows

consist

solely

of

payments

of

principal

and

interest

on

the

principal

amount
outstanding.

The

Group

assessed

that

the

carrying

amount

is

a

reasonable

approximation

of

the

fair

value

for

the

financial

assets
and financial liabilities.

(b)
Financial risk management

The Group has exposure to the following risks arising from financial instruments:

•
credit risk;

•
liquidity risk;

•
market risk.

These risks are further explained and detailed.

(i)
Credit risk

Credit

risk

is

the

risk

of

financial

loss

to

the

Group

if

a

customer

or

counterparty

to

a

financial

instrument

fails

to

meet
its

contractual

obligations,

and

arises

principally

from

the

Group’s

receivables

from

customers,

cash

and

cash
equivalents, restricted cash and bank deposits.

The

Group’s

exposure

to

credit

risk

is

influenced

mainly

by

the

individual

characteristics

of

each

customer.

In

the

past,
the Group had a high credit risk mainly from State-owned companies.

Cash and bank deposits are placed in financial institutions which are considered to have low risk of default.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

295

The carrying amount of financial assets represents the maximum credit exposure.

Trade receivables

The

Group’s

credit

risk

in

respect

of

receivables

was

concentrated

in

the

past

around

state-controlled

companies

and

in
the

recent

years

refers

to

clients

that

are

facing

financial

difficulties

in

their

industries

due

to

specific

changes

in
circumstances

in

their

industry

sector.

The

Group

has

implemented

a

policy

on

credit

risk

management

and

is

also
considering

securing

trade

receivables.

Also,

the

electricity

supply

contracts

include

termination

clauses

in

certain
circumstances.

The

Group

establishes

an

allowance

for

impairment

that

represents

the

amount

of

expected

credit

losses,

calculated
based on the expected loss rates.

Impairment

The

following

table

provides

information

about

the

exposure

to

credit

risk

and

expected

credit

losses

for

trade
receivables for customers as at 31 December 2021:

31 December 2021

Expected credit
loss rates (“ECL”)

Gross value

Lifetime ECL

Net trade
receivables

Credit
impaired

Neither past due nor impaired

2%

1,080,179

(16,615)

1,063,564

No

Past due 1-30 days

5%

228,537

(10,598)

217,939

No

Past due 31-60 days

15%

36,646

(5,317)

31,329

No

Past due 61-90 days

38%

15,428

(5,930)

9,498

No

Past due more than 90 days

98%

964,687

(942,398)

22,289

Yes

Total

2,325,477

(980,858)

1,344,619

The

Group

performed

a

sensitivity

analysis

and

a

5%

increase

in

the

expected

credit

loss

rates

would

not

lead

a

material
impact on the results of the Group.

The

following

table

provides

information

about

the

exposure

to

credit

risk

and

expected

credit

losses

for

trade
receivables for customers as at 31 December 2020:

31 December 2020

Expected credit
loss rates (“ECL”)

Gross value

Lifetime ECL

Net trade
receivables

Credit
impaired

Neither past due nor impaired

2%

812,855

(13,053)

799,802

No

Past due 1-30 days

1%

163,436

(2,285)

161,151

No

Past due 31-60 days

12%

48,993

(5,822)

43,171

No

Past due 61-90 days

33%

17,450

(5,679)

11,771

No

Past due more than 90 days

99%

936,614

(922,734)

13,880

Yes

Total

1,979,348

(949,573)

1,029,775

Details of the main movements in the allowances for doubtful debts are disclosed in Note 18.

(ii)
Liquidity risk

Liquidity

risk

is

the

risk

that

the

Group

will

encounter

difficulty

in

meeting

the

obligations

associated

with

its

financial
liabilities

that

are

settled

by

delivering

cash

or

another

financial

asset.

The

Group’s

approach

to

managing

liquidity

is

to
ensure,

as

far

as

possible,

that

it

will

have

sufficient

liquidity

to

meet

its

liabilities

when

they

are

due,

under

both

normal
and stressed conditions, without incurring unacceptable losses.

The

Group

aims

to

maintain

the

level

of

its

cash

and

cash

equivalents

at

an

amount

in

excess

of

expected

cash

outflows
on

financial

liabilities.

The

Group

also

monitors

the

level

of

expected

cash

inflows

on

trade

receivables

together

with
expected cash outflows on trade and other payables. In addition, the Group maintains overdrafts (refer to Note 20).

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

296

Exposure to liquidity risk

The

following

are

the

remaining

contractual

maturities

of

financial

liabilities

at

the

reporting

date.

The

amounts

are

gross
and undiscounted and include estimated interest payments.

Contractual cash flows

Financial liabilities

Carrying
amount

Total

less than 1
year

1-2 years

2-5 years

More than
5 years

31 December 2021

Bank overdrafts

627,402

627,402

627,402

-

-

-

Lease liability

21,544

21,544

9,442

4,874

5,071

2,157

Long term bank borrowings

628,489

628,489

509,733

27,455

82,372

8,929

Trade payables

891,335

891,335

891,335

-

-

-

Total

2,168,770

2,168,770

2,037,912

32,329

87,443

11,086

31 December 2020

Bank overdrafts

164,966

164,966

164,966

-

-

-

Lease liability

27,622

27,622

10,747

6,806

9,961

108

Long-term bank borrowings

778,909

778,909

378,613

70,817

212,453

117,026

Trade payables

607,195

607,195

607,195

-

-

-

Total

1,578,692

1,578,692

1,161,521

77,623

222,414

117,134

(iii)
Market risk

Market

risk

is

the

risk

that

changes

in

market

prices

–

such

as

foreign

exchange

rates

and

interest

rates

–

will

affect

the
Group’s

income

or

the

value

of

its

financial

instruments

held.

The

objective

of

market

risk

management

is

to

manage
and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The

Group

is

exposed

to

currency

risk

to

the

extent

that

there

is

a

mismatch

between

the

currencies

in

which

sales,
purchases

and

borrowings

are

denominated

and

the

functional

currency

of

the

Group.

The

functional

currency

of

all
entities belonging to the Group is the Romanian Leu (RON).

The

currency

in

which

these

transactions

are

primarily

denominated

is

RON.

Certain

liabilities

are

denominated

in

foreign
currency

(EUR).

The

Group

also

has

deposits

and

bank

accounts

denominated

in

foreign

currency

(EUR).

The

Group's
policy

is

to

use

the

local

currency

in

its

transactions

as

far

as

practically

possible.

The

Group

does

not

use

derivative

or
hedging instruments.

Exposure to currency risk

The summary of quantitative data about the Group’s exposure to currency risk is as follows:

31 December 2021

31 December 2020

in thousands of RON

denominated in EUR

denominated in EUR

Cash and cash equivalents

812

3,347

Lease liability

(19,118)

(24,472)

Net statement of financial position exposure

(18,306)

(21,125)

The following significant exchange rates have been applied during the year:

Average rate

Year-end spot rate

RON

2021

2020

2021

2020

EUR 1

4.9204

4.8371

4.9481

4.8694

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

297

Sensitivity analysis

A

reasonably

possible

strengthening

(weakening)

of

the

EUR

against

RON

at

31 December

would

have

affected

the
measurement

of

financial

instruments

denominated

in

a

foreign

currency

and

profit

before

tax

by

the

amounts

shown
below.

The

analysis

assumes

that

all

other

variables,

in

particular

interest

rates,

remain

constant

and

ignores

any

impact
of forecast sales and purchases.

Profit before tax

Effect

Strengthening

Weakening

31 December 2021

EUR (5% movement)

(915)

915

31 December 2020

EUR (5% movement)

(1,056)

1,056

Interest rate risk

For

financing

purposes,

the

Group

uses

both

medium

and

long-term

bank

loans

and

short

term

loans

in

the

form

of
overdraft facilities (please see Notes 20, 30).

The

Group

is

exposed

to

interest

rate

risk

because

entities

in

the

Group

borrow

funds

at

both

fixed

and

floating

interest
rates.

The

risk

is

managed

by

the

Group

by

maintaining

an

appropriate

mix

between

fixed

and

floating

rate

borrowings
(please

see

Notes

20,

30),

as

the

long

term

borrowings

are

contracted

mainly

at

fixed

rates,

while

the

overdraft

facilities
bear variable rates. The Group does not have in place hedging contracts for interest rate.

The

Groups

exposures

to

interest

rates

on

financial

assets

and

financial

liabilities

are

detailed

below.

The

Group

is
exposed to the interest rate benchmark ROBOR, which is the interest rate on the Romanian interbank market.

Exposure to interest rate risk

The interest rate profile of the Group’s interest-bearing financial instruments is as follows:

31 December 2021

31 December 2020

Fixed-rate instruments

Financial assets

Call deposits

53,897

391,514

Financial liabilities

Long-term bank borrowings

(418,893)

(728,960)

Lease liability

(8,276)

(9,070)

(373,272)

(346,516)

Variable-rate instruments

Financial liabilities

Lease liability

(13,268)

(18,552)

Long-term bank borrowings

(209,596)

(49,949)

Bank overdrafts

(627,402)

(164,966)

(850,266)

(233,467)

Fair value sensitivity analysis for fixed-rate instruments

The

Group

does

not

account

for

any

fixed-rate

financial

assets

or

financial

liabilities

at

fair

value

through

profit

or

loss.
Therefore, a change in interest rates at the reporting date would not affect profit or loss.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

298

Cash flow sensitivity analysis for variable-rate instruments

A

reasonably

possible

change

of

50

basis

points

in

interest

rates

at

the

reporting

date

would

have

increased

(decreased)
profit

before

tax

by

the

amounts

shown

below.

This

analysis

assumes

that

all

other

variables,

in

particular

foreign
currency exchange rates, remain constant.

Profit before tax

50 bp increase

50 bp decrease

31 December 2021

Variable-rate instruments

(4,251)

4,251

31 December 2020

Variable-rate instruments

(1,167)

1,167

32
Acquisition of subsidiaries

On

23

June

2020,

Electrica

Furnizare

S.A.

signed

a

share

purchase

agreement

for

the

acquisition

of

100%

of

Electrica
Energie

Verde

1

S.R.L.

(formerly

Long

Bridge

Milenium

S.R.L.)

a

company

that

owns

a

photovoltaic

park

located

in
Stanesti,

Giurgiu

County,

with

an

installed

capacity

of

7.5

MW

(operational

power

limited

at

6.8

MW).

The

photovoltaic
park

was

built

between

October

2012

and

January

2013

and

has

been

delivering

electricity

into

the

national

grid

since
February 2013.

Closing

of

the

transaction

and

the

transfer

of

shares’

ownership

to

Electrica

Furnizare

S.A.

took

place

on

31

August
2020,

the

purchase

price

of

the

shares

being

of

RON

7,830

thousand

(equivalent

of

EUR

1,617,940),

based

on

the

fair
value

report

as

of

acquisition

date.

On

30

October

2020,

the

purchase

price

was

adjusted

in

accordance

with

the
purchase

agreement

based

on

the

financial

results

of

the

acquired

company

as

at

31

August

2020,

the

final

price

being
RON 8,006 thousand (equivalent of EUR 1,637,515 and fees of EUR 17,318).

Amongst

various

elements

of

the

transaction,

Electrica

Furnizare

S.A.

also

took

over

the

loans

granted

by

the

former
shareholders

of

Electrica

Energie

Verde

1

S.R.L.

to

the

acquired

company,

in

amount

of

RON

18,473

thousand
(equivalent of EUR 3,817,749).

The

acquisition

of

Electrica

Energie

Verde

1

S.R.L.

will

allow

the

Group

to

enter

the

renewable

energy

market

having
the

main

purpose

of

increasing

the

Group’s

profitability.

From

the

acquisition

date

until

31

December

2020,

Electrica
Energie

Verde

1

S.R.L.

had

a

contribution

to

the

Group

revenues

in

amount

of

RON

3,736

thousand

and

net

profit

of
RON

(617)

thousand.

If

the

acquisition

date

would

have

been

the

beginning

of

the

period,

the

Group

revenues

would
have been higher by RON 4,500 thousand and net profit of the Group would have been higher by RON 135 thousand.

For

the

acquisition

of

the

share

capital

of

Electrica

Energie

Verde

1

S.R.L.
,

Electrica

Furnizare

S.A.

paid

the

total

amount
of:

(RON thousand)

Purchase price of shares

8,006

Settlement of former shareholders loan

18,473

Total

26,479

For

the

settlement

of

former

shareholders

loans
,

Electrica

Furnizare

S.A.

paid

the

loans

granted

by

the

former
shareholders

Electrica

Energie

Verde

1

S.R.L.

in

amount

of

RON

18,473

thousand,

the

equivalent

of

the

outstanding
balance of EUR 3,817,749 at the transaction date.

The

assets

and

liabilities

of

Electrica

Energie

Verde

1

S.R.L.

taken

over

in

the

consolidation

perimeter

at

the

date

when
the control was obtained by the Group (31 August 2020) were as follows:

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

299

Long Brige Milenium

as at

31 August 2020

Property, plant and equipment

41,404

Other intangible assets

73

Trade and other receivables

253

Cash and cash equivalents

5,577

Other current assets

951

Total assets

48,258

Long-term bank
borrowings

(12,509)

Deferred tax liability

(1,673)

Trade and other payables

(120)

Total liabilities

(14,302)

Net assets acquired

33,956

Consideration paid

(26,479)

Gain from bargain purchase of subsidiaries

7,477

The

bargain

purchase

resulted

is

due

to

the

fact

that

the

Group

would

obtain

specific

synergies

by

integrating

the
production

subsidiary

with

the

existing

supply

company,

which

otherwise

wouldn’t

have

been

seen

in

the

value

of

the
company

acquired

on

a

separate

individual

basis.

This

is

the

main

reason

for

the

lower

consideration

paid

as

compared
to the fair value of the net assets acquired.

The

gain

from

bargain

purchase

was

recognized

in

the

consolidated

statement

of

profit

and

loss

for

the

year

ended

as
at 31 December 2020.

33
Related parties

(a)
Main shareholders

As

at

31

December

2021

and

31

December

2020,

the

major

shareholder

of

Societatea

Energetica

Electrica

S.A.

is

the
Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital.

(b)
Management and administrators’ compensation

2021

2020

Executive Management compensation

34,429

29,072

Executive

management

compensation

refers

to

both

the

managers

with

mandate

contract

and

those

with

labour
contract,

from

both

the

subsidiaries

and

Electrica

SA.

This

also

includes

the

benefits

in

the

event

of

the

termination

of
mandate contracts for executive directors.

Compensations granted to the members of the
Board of Directors were as follows:

2021

2020

Members of Board of Directors

3,992

2,568

Electrica

SA’s

Board

of

Directors

comprises

7

members.

According

to

the

remuneration

policy

approved

by

the

General
Meeting

of

Shareholders

that

took

place

on

28

April

2021,

the

annual

number

of

paid

sessions

is

limited

to

twelve

for
Board

of

Directors

meetings

and

to

six

for

each

of

the

committees.

Additional

committee

meetings

can

be

organized
only

in

exceptional

situations,

upon

the

Chairs’

committee

decision,

who

are

responsible

to

efficiently

organize

the
agenda and activity. However, only one such additional meeting shall be remunerated, for each committee.

No loans were granted to directors or administrators in 2021 and 2020.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

300

(c)
Transactions with companies in which the state has control or significant influence

The

Group

has

transactions

with

companies

in

which

the

State

has

control

or

significant

influence

in

the

ordinary

course
of

business,

related

mainly

to

the

acquisition

of

electricity,

transport

and

system

services

and

sale

of

electricity.
Significant purchases and balances are mainly with energy producers/suppliers, as follows:

Purchases (without VAT)

Balance (including VAT)

Supplier

2021

2020

31 December
2021

31 December
2020

OPCOM

1,700,630

272,246

29,203

4,209

Transelectrica

756,925

680,258

155,931

113,059

Nuclearelectrica

512,915

528,652

43,343

61,848

Complexul Energetic Oltenia

396,072

304,218

31,502

37,350

Hidroelectrica

241,722

476,845

19,711

34,471

Electrocentrale Bucuresti

34,776

116,530

-

-

ANRE

10,320

10,882

132

176

SNGN Romgaz SA

10,727

3,741

3,305

1,245

Transgaz

8,958

1,782

1,226

176

Others

7,889

3,824

1,332

358

Total

3,680,934

2,398,978

285,685

252,892

The

Group

also

makes

sales

to

companies

in

which

the

State

has

control

or

significant

influence

representing

supply

of
electricity, of which the most important transactions are the following:

Sales

(without VAT)

Balance, gross
(including VAT)

Allowance
(including VAT)

Balance,
net

Client

2021

31 December 2021

OPCOM

162,855

28,468

-

28,468

Transelectrica

92,505

27,091

-

27,091

SNGN Romgaz SA

48,099

1,664

-

1,664

Hidroelectrica

19,622

2,638

-

2,638

CN Romarm

14,156

1,093

-

1,093

CFR Electrificare

10,410

507

-

507

C.N.C.F CFR SA

8,281

701

(1)

700

CNAIR

6,928

962

-

962

Municipiul Galati

4,568

12

(12)

-

Transgaz

2,249

1,571

-

1,571

CN Remin SA

700

71,216

(71,216)

-

C.N.C.A.F MINVEST SA

-

26,802

(26,802)

-

Oltchim

-

536,156

(536,156)

-

CET Braila

9

3,361

(3,361)

-

Termoelectrica

-

1,206

(1,206)

-

Agentia Nationala pentru Plati si
Inspectie Sociala

-

59,271

-

59,271

Ministerul Energiei

-

11,420

-

11,420

Altii

32,956

2,204

(536)

1,668

Total

403,338

776,343

(639,290)

137,053

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

301

Sales (without
VAT)

Balance, gross
(including VAT)

Allowance
(including VAT)

Balance,
net

Client

2020

31 December 2020

OPCOM

60,549

3,634

-

3,634

Transelectrica

41,175

7,841

-

7,841

C.N.C.F CFR SA

40,967

5,191

-

5,191

SNGN Romgaz SA

37,501

1,246

-

1,246

CN Romarm

12,457

641

-

641

Hidroelectrica

9,138

598

-

598

Municipiul Galati

8,575

1,731

-

1,731

CFR Electrificare

7,517

420

-

420

Transgaz

3,738

12

-

12

CNAIR

1,569

-

-

-

ANAR - Adm. Nat. Apele Romane

1,436

-

-

-

CN Remin SA

549

71,215

(71,215)

-

CET Braila

7

3,361

(3,361)

-

Termoelectrica

-

1,217

(1,217)

-

Oltchim

-

565,484

(565,484)

-

C.N.C.A.F. MINVEST SA

-

26,802

(26,802)

-

Others

31,008

1,453

(493)

960

Total

256,186

690,846

(668,572)

22,274

34
Contingencies

Contingent assets

Claim against
National Agency of Fiscal Administration (“NAFA”)

In

May

2017,

after

the

revision

of

Electica’s

tax

record,

the

tax

authorities

issued

an

enforcement

order

for

additional
interest and penalties of RON 39,249 thousand as a result of certain tax record allocations for prior periods.

Electrica

filed

a

complaint

with

the

tax

authorities

against

the

enforcement

order

and

also

filed

a

legal

action

to

suspend
the

enforced

payment

by

the

resolution

of

the

above

mentioned

complaint.

These

additional

interest

and

penalties

are
related to the prior enforcement orders received by Electrica SA in the prior years of RON 72,460 thousand.

In

February

2018,

Electrica

SA

has

obtained

a

favourable

Supreme

Court

ruling

in

one

of

the

litigations

with

NAFA,

which
essentially

maintains

into

force

a

prior

Court

of

Appeal

decision,

which

is

favourable

for

the

Group.

Based

on

this

Court
ruling

and

in

conjunction

with

all

other

litigations

with

NAFA

on

the

same

historical

amounts,

for

taxes

including

penalties
and

interest,

as

well

as

based

on

analysis

with

internal

and

external

lawyers,

the

management

best

estimate

is

that
Electrica SA shall be able to obtain favourable Court rulings with the end result of no future cash outflows.

Also,

in

April

2019,

Electrica

SA

obtained

another

favourable

decision

pronounced

by

the

Bucharest

Court

of

Appeal

in
one

of

the

disputes

with

NAFA,

whereby

the

Court

obliges

NAFA

to

correct

the

evidence

of

the

tax

receivables

so

that

it
reflects

the

extinction

by

prescription

of

the

amount

of

RON

16,916

thousand

representing

income

tax

as

well

as

all

the
related

accessories.

This

decision

forms

the

object

of

the

appeal

declared

by

NAFA,

with

the

Court

term

on

17

November
2021, at the High Court of Cassation and Justice.

Morevover,

in

November

2019,

Electrica

SA

obtained

one

more

favourable

decision

pronounced

by

the

Bucharest

Court
of

Appeal

in

one

of

the

disputes

with

NAFA,

whereby

the

Court

obliges

NAFA

to

cancel

the

administrative

documents
issued

regarding

the

accessory

fiscal

obligations

in

the

amount

of

RON

39,249

thousand

and

ordered

the

refund/
compensation

of

the

amount

and

the

correction

of

the

tax

record.

Against

this

decision,

NAFA

filed

an

appeal,

registered
to the High Court of Cassation and Justice, with the Court term on 23 March 2022.

Thus,

as

at

31

December

2019,

the

Group

did

not

recognize

any

provision

in

this

respect,

taking

into

account

that
management’s best estimate is that Electrica SA shall be able to obtain a final favourable Court decision in this case.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

302

During

2020,

the

Group

recognized

revenues

from

indemnities

in

the

amount

of

RON

12,827

thousand

related

to

the
amounts

collected

during

the

year

by

Electrica

SA

from

NAFA

as

a

result

of

the

final

civil

sentences

obtained

in

Court,
which ordered the cancellation of certain enforceable titles as well as fiscal decisions.

Moreover,

as

at

31

December

2020,

the

Group

no

longer

has

a

contingent

liability

of

RON

39,249

thousand

in

respect
to

the

additional

interest

and

penalties

to

be

paid

by

Electrica

SA

to

NAFA,

as

it

applied

for

the

cancellation

of

ancillary
fiscal

obligations

stipulated

by

the

Government

Emergency

Ordinance

no.

69/2020.

Through

NAFA’s

decision

no.
2738/22.12.2020,

the

cancellation

of

the

ancillary

fiscal

obligations

mentioned

above

was

approved,

based

in

articles
IX-XI of the Government Emergency Ordinance no. 69/2020.

In

April

2021,

Electrica

SA

filed

a

new

action

in

contradiction

with

NAFA

-

file

no.

2444/2/2021,

pending

before

the
Bucharest

Court

of

Appeal,

trial

term

16.03.2022,

having

as

object

the

obligation

of

NAFA

to:

correct

Electrica

SA

's

tax
record

in

order

to

reflect

the

right

to

a

refund

for

the

amount

of

RON

5,860

thousand,

amount

paid

by

Electrica

SA

in
2020

for

the

purpose

of

applying

for

the

cancellation

of

ancillary

fiscal

obligations

stipulated

by

the

Government
Emergency

Ordinance

no.

69/2020,

of

an

additional

amount

of

RON

818

thousand

which

was

not

reflected

in

the
payment

made

by

NAFA

in

2020,

and

payment

of

legal

interest

in

amount

of

RON

5,162

thousand

computed

for

the
amount returned by NAFA in 2020.

Contingent liabilities

Fiscal environment

Tax

audits

are

frequent

in

Romania,

consisting

of

detailed

verifications

of

the

accounting

records

of

taxpayers.

Such
audits

sometimes

take

place

after

months,

even

years,

from

the

date

liabilities

are

established.

Consequently,

companies
may

be

found

liable

for

significant

taxes

and

fines.

Moreover,

tax

legislation

is

subject

to

frequent

changes

and

the
authorities demonstrate inconsistency in interpretation of the law.

Income

tax

returns

may

be

subject

to

revision

and

corrections

by

tax

authorities,

generally

for

a

five-year

period

after
they are completed.

The

Group

may

incur

expenses

related

to

previous

years’

tax

adjustments

as

a

result

of

controls

and

litigations

with

tax
authorities.

The

management

of

the

Group

believes

that

adequate

provisions

were

recorded

in

the

consolidated

financial
statements

for

all

significant

tax

obligations;

however

a

risk

persists

that

the

tax

authorities

might

have

different
positions.

Tax inspection report for
SDEE Muntenia Nord S.A.

The

subsidiary

SDEE

Muntenia

Nord

S.A.

was

subject

to

a

tax

audit

performed

by

the

Local

Taxes

Department

of

Galati
City

Hall

that

referred

to

the

building

taxes

paid

for

the

period

2012-2016.

The

tax

audit

was

finalized

in

December
2019,

when

the

fiscal

inspection

report

was

communicated

to

the

subsidiary.

The

fiscal

report

established

additional
payment

obligations

for

the

subsidiary

representing

building

tax

for

the

period

01.01.2012-31.12.2015

in

the

total
amount

of

RON

24,831

thousand,

of

which

principal

in

amount

of

RON

12,051

thousand

and

related

late

penalties
computed

as

of

October

2019,

in

amount

of

RON

12,780

thousand.

Against

Galati

City

Hall,

SDEE

Muntenia

Nord

S.A.
filed a legal request registered at Ploiesti Court of Appeal, with the next term on 17 February 2022.

The

Group

recognised

an

expense

in

amount

of

RON

12,051

thousand

during

the

year

ended

31

December

2019

in
accordance with IFRIC 23
„Uncertainty over Income Tax Treatments”
.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

303

Tax inspection report for Electrica Serv S.A.

In

May

2017

a

tax

inspection

at

Electrica

Serv

S.A.

was

finalized

and

the

tax

authorities

concluded

that

additional

tax
obligations

of

RON

12,281

thousand

should

be

paid

by

the

subsidiary.

This

amount

represents

VAT

(including

related
interest

and

penalties)

that

was

considered

tax

deductible

in

the

period

2012-2013

by

the

subsidiary

in

relation

with
certain

invoices

issued

by

a

lease

supplier

who

was

inactive

at

that

time.

The

company

appealed

in

Court

the

measures
imposed

by

the

tax

authorities.

On

3

July

2019

the

Bucharest

Court

of

Appeal

partially

admitted

the

appeal

through

the
partial

annulment

of

the

fiscal

decision

for

the

amount

of

RON

7,264

thousand

representing

the

VAT

and

the

related
interest

and

penalties,

unlawfully

retained

as

non-deductible.

Against

this

solution,

both

NAFA

and

Electrica

Serv

SA

filed
an appeal, registered at the High Court of Cassation and Justice, with the trial date of 6 October 2022.

As

at

31

December

2021

and

31

December

2020,

the

Group

has

a

receivable

from

the

fiscal

authorities

in

amount

of
RON

12,281

thousand,

without

a

related

bad

debt

allowance,

taking

into

account

that

management’s

best

estimate

is
that Electrica Serv S.A. shall be able to obtain a favourable final Court decision in this case.

Ot
her litigations and claims

The

Group

is

involved

in

a

series

of

litigations

and

claims

(ie.

with

ANRE,

NAFA,

Court

of

Accounts,

claims

for

damages,
claims over land titles, labour related litigations etc.).

As

summarised

in

Note

29,

the

Group

set-up

provisions

for

the

litigations

or

claims

for

which

the

management

assessed
as

probable

the

outflow

of

resources

embodying

economic

benefits

due

to

low

chances

of

favourable

outcomes

of

those
litigations

or

disputes.

The

Group

does

not

present

information

in

the

financial

statements

and

did

not

set-up

provisions
for items for which the management assessed as remote the possibility of outflow of economic benefits.

The

Group

discloses

if

the

case

information

on

the

most

significant

items

of

litigations

or

claims

for

which

the

Group

did
not

set-up

provisions

as

they

relate

to

possible

obligations

that

arise

from

past

events

whose

existence

will

be

confirmed
only

by

the

occurrence

or

non-occurrence

of

uncertain

future

events

not

wholly

within

the

control

of

the

Group

(ie.
litigations

for

which

different

inconsistent

sentences

were

issued

by

the

Courts,

or

litigations

which

are

in

early

stages
and no preliminary ruling was issued so far).

35
Commitments

(a)
 Contractual commitments

Contractual commitments as at 31 December 2021 and 31 December 2020 are as follows:

31 December 2021

31 December 2020

Purchase of electricity

3,200,154

2,067,439

Purchase of green certificates

132,937

402,341

Purchase of property, plant and equipment and intangible assets

212,930

141,033

Purchase of investments

60,485

-

Total

3,606,506

2,610,813

(b)
 Investment program

The investment program at Group level approved for the year 2022 is as follows:

2022

Distribution activity

689,029

Supply activity

54,788

Maintenance activity

10,772

Other/ shared

10,633

Total

765,222

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

304

The capital expenditures actually incurred may differ from the ones planned.

(c)
 Guarantees and pledges

At

31

December

2021

and

31

December

2020,

the

Group

has

guarantees

on

its

bank

accounts

opened

at

ING

Bank
N.V.,

Raiffeisen

Bank,

Banca

Comerciala

Romana,

Banca

Transilvania

and

Intesa

Sanpaolo

Bank

for

the

overdrafts
contracted

(please

see

Note

20),

and

also

on

its

bank

accounts

opened

at
 BRD

–

Group

Societe

Generale,

Unicredit
Bank,

Banca

Transilvania

and

Banca

Comerciala

Romana

for

the

long-term

borrowings

contracted

(please

see

Note

30).

At

31

December

2021,

the

Group

has

outstanding

bank

letters

of

guarantee

of

RON

1,088,629

thousand

(31

December
2020: RON 607,735 thousand) issued in favour of its suppliers.

36 Subsequent events

Change in distribution tariffs starting 1 January 2022

According

to

the

ANRE

Order

no

119/25.11.2021,

the

specific

tariffs

for

the

electricity

distribution

service

for

applicable
starting

with

1

January

2022,

Muntenia

Nord

area,

Transilvania

Nord

area,

Transilvania

Sud

area

and

compared

to
those

applicable

starting

with

1

January

2021

(the

last

time

they

were

modified),

are

the

following

(RON/MWh,
presented cumulatively for medium and low voltage levels):

Order 119/25.11.2021

Order 221,222,220/09.12.2020

Starting with 01 January 2022

Starting with 01 January 2021

High

voltage

Medium
voltage

Low

voltage

High

voltage

Medium
voltage

Low

voltage

Transilvania Nord area

21.79

48.13

122.78

19.23

66.35

173.93

Transilvania Sud area

22.34

45.49

127.04

22.23

67.47

178.78

Muntenia Nord area

21.02

43.54

140.68

18.72

56.87

184.75

ANRE Order no.
119/25.11.2021
 related to the approval of the specific tariffs for electricity distribution service and of
the price for reactive electricity for Societatea Distributie Energie Electrica Romania S.A. was published in the Official
Gazette of Romania, part I, No. 1148/2.12.2021.

Overdrafts facilities

In order to minimize any liquidity risks which might appear due to
 the current unstable economic environment
the
Group secured the following overdrafts facilities:

1)
Overdraft facility granted by Banca Transilvania

On 2 February 2022, Electrica Furnizare SA and Banca Transilvania signed an overdraft facility of up to RON 190,000
thousand for financing the current activity, having the following characteristics: Interest rate: ROBOR 1M+0.4% p.a.,
reimbursements: until 1 August 2022.

2)
Overdraft facility granted by BRD - Groupe Societe Generale

On

4

February

2022,

Electrica

Furnizare

SA

and

BRD

-

Groupe

Societe

Generale

signed

a

revolving

overdraft

facility

of
up

to

RON

220,000

thousand

for

financing

the

current

activity,

having

the

following

characteristics:

Interest

rate:
ROBOR 1M+0.47% p.a., reimbursements: until 03 August 2022.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

305

3)
Overdraft facility granted by Banca Comerciala Romana

On

25

January

2022,

Distributie

Energie

Electrica

Romania

and

Banca

Comerciala

Romana

signed

an

overdraft

facility
of

up

to

RON

180,000

thousand

for

financing

the

current

activity,

having

the

following

characteristics:

Interest

rate:
ROBOR

1M+0.6%

p.a.,

reimbursements:

within

12

months

from

the

withdrawal

date,

not

later

than

25

January

2023.

4)
Overdraft facility granted by ING Bank N.V

On

28

January

2022,

the

credit

facility

contract

signed

between

Electrica

SA

and

ING

Bank

N.V.

for

an

overdraft

facility
of

up

to

RON

210,000

thousand

for

financing

the

current

activity,

in

the

context

of

the

liquidity

concentration

operations
set-up

within

the

Group

and

having

the

following

characteristics:

Interest

rate:

ROBOR

1M+0.8%

p.a.,

was

extended
until 27.01.2023.

On

17

February

2022,

Electrica

Furnizare

SA

and

ING

Bank

N.V.

signed

an

overdraft

facility

of

up

to

RON

170,000
thousand

for

financing

the

current

activity,

in

the

context

of

the

liquidity

concentration

operations

set-up

within

the
Group

and

having

the

following

characteristics:

Interest

rate:

ROBOR

1M+0.5%

p.a.,

reimbursements:

not

later

than
6 months from contract date less 15 calendar days.

Compensation scheme

Electrica

Furnizare

S.A.

submitted

the

requests

no.

1341/17.02.2022

and

no.

1339/17.02.2022

followed

by

request

no.
1363/18.02.2022

along

with

the

supporting

documents

to

the

National

Agency

for

Payments

and

Social

Inspection

in
order

to

receive

the

amounts

compensated

on

the

clients

invoices

for

the

period

1

November

2021

–

31

January

2022
in

amount

of

RON

95.362

thousand

for

energy

invoices

and

RON

247

thousand

for

gas

invoices

out

of

which

the
amount

of

RON

59,271

thousand

refers

to

amount

to

be

received

for

the

period

1

November

2021

–

31

December
2021.

According

to

Order

no.

118/2021

with

subsequent

amendments

approved

by

Law

no.

259/2021

with

subsequent
amendments and Order no. 226/2021 the amounts will be recovered in 30 days after submitting the request.

Waver letter

On 24 February 2022, EBRD issued a waiver letter in respect to the Loan agreement dated 02 July 2021 for:

(a) the Guarantor's Financial Ratio, but in respect of its financial year ending 31 December 2021 only;

(b)

the

Event

of

Default

that

has

occurred

and

is

continuing

pursuant

to

Section

7.01(b)

(Financial

ratio)

of

the

Loan
Agreement,

but

only

in

respect

of

the

Guarantor's

failure

to

comply

with

the

Guarantor's

Financial

Ratio

for

the

financial
year ending 31 December 2021.

The

waiver

issued

by

EBRD

is

conditional

to

the

waivers

which

must

be

received

from

EIB

and

BCR

for

which

the

Group
is

in

default

events.

The

Group

has

submitted

the

requests

for

obtaining

waivers

for

EIB

and

BCR

but

are

still

in

progress
at the authorization for issue of these Consolidated Financial Statements by the Board of Directors.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in THOUSAND RON, if not otherwise stated)

306

Geopolitical tensions

In

February

2022

global

geopolitical

tensions

significantly

escalated

following

military

interventions

in

Ukraine

by

the
Russian

Federation.

As

a

result

of

these

escalations,

economic

uncertainties

in

energy

and

capital

markets

have
increased

with

global

energy

prices

expected

to

be

highly

volatile

for

the

foreseeable

future.

As

at

the

date

of

this
report,

management

is

unable

to

reliably

estimate

the

effects

on

the

Groups

financial

outlook

and

cannot

exclude
adverse

consequence

on

the

business,

operations,

and

financial

condition.

Management

believes

it

is

taking

all

the
necessary

measures

to

support

the

sustainability

and

growth

of

the

Group’s

business

in

the

current

circumstances

and
that the judgements taken in these financial statements remain appropriate.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

307

![Image should be here]()

308

![Image should be here]()

309

![Image should be here]()

![Image should be here]()

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

#### Separate Financial Statements as at and for the year ended

31 December 2021 prepared in accordance with Ministry of Public Finance Order no. 2844/2016 for the approval of the

#### Accounting Regulations in accordance with International Financial Reporting

#### Standards

Free translation from Romanian, which is the official and binding version

![Image should be here]()

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF PUBLIC FINANCE NO. 2844/2016

312

Contents

Separate statement of financial position
1

Separate statement of profit or loss
3

Separate statement of comprehensive income

 4

Separate statement of changes in equity

5

Separate statement of cash flows

7

Notes to the separate financial statements

Basis of preparation

37.
Reporting entity and general information
 9

38.
Basis of accounting
13

39.
Functional and presentation currency
 13

40.
Use of judgments and estimates
13

Accounting policies

41.
Basis of measurement
 14

42.
Significant accounting policies
 14

43.
Adoption of new and revised standards
24

Performance for the year

44.
Revenue
25

45.
Other income and operating expenses
 25

46.
Net finance income
26

47.
Earnings per share
26

Employee benefits

48.
Short-term employee benefits
 26

49.
Post-employment and other long-term employee benefits
 27

50.
Employee benefit expenses
30

Income tax

51.
Income tax
 30

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

PREPARED IN ACCORDANCE WITH THE ORDER OF THE MINISTRY OF PUBLIC FINANCE NO. 2844/2016

313

Assets

52.
Trade receivables
32

53.
Other receivables
33

54.
Cash and cash equivalents
34

55.
Property, plant and equipment
 35

56.
Intangible assets
38

57.
Investments in subsidiaries 39

58.
Investments in associates
41

59.
Loans granted to subsidiaries
43

Equity and liabilities

60.
Capital and reserves
46

61.
Trade payables
48

62.
Other payables
48

63.
Provisions
49

Financial instruments

64.
Financial instruments - fair values and risk management
 49

Other information

65.
Related parties
52

66.
Contingencies
57

67.
Commitments
59

68.
Subsequent events 59

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

314

Note

31 December

2021

31 December

2020

ASSETS

Non-current assets

Property, plant and equipment

19

100,057,480

96,943,295

Intangible assets

20

53,676

272,880

Investments in subsidiaries

21

2,285,224,715

2,284,881,698

Investments in associates

22

25,809,696

-

Loans granted to subsidiaries – long term

23

1,276,325,000

1,030,000,000

Right of use assets

488,370

1,433,070

Total non-current assets

3,687,958,937

3,413,530,943

Current assets

Cash and cash equivalents

18

5,757,972

193,484,820

Restricted cash

18

-

320,000,000

Trade receivables

16

925,873

411,954

Other receivables

17

584,765,644

180,761,447

Prepayments

765,483

427,549

Loans granted to subsidiaries – short term

23

30,000,000

-

Assets held for sale

279,655

-

Total current assets

622,494,627

695,085,770

Total assets

4,310,453,564

4,108,616,713

EQUITY AND LIABILITIES

Equity

Share capital

24

3,464,435,970

3,464,435,970

Share premium

24

103,049,177

103,049,177

Treasury shares reserve

24

(75,372,435)

(75,372,435)

Pre-paid

capital

contributions

in

kind

from
shareholders

24

7,366

7,366

Revaluation reserves

24

12,397,647

12,605,266

Legal reserves

24

228,156,226

212,027,639

Other reserves

24

71,213,362

35,644,469

Retained earnings

319,621,087

296,938,104

Total equity

4,123,508,400

4,049,335,556

(Continued on page 2)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

315

Note

31 December
2021

31 December
2020

Liabilities

Non-current liabilities

Lease liability – long term

118,456

485,741

Employee benefits

13

1,050,299

1,453,187

Total non-current liabilities

1,168,755

1,938,928

Current liabilities

Bank overdrafts

18

120,541,354

-

Lease liability – short term

394,818

968,556

Trade payables

25

4,034,356

7,199,932

Other payables

26

44,022,468

36,034,414

Deferred revenue

384,578

152,559

Employee benefits

12,13

12,160,721

7,168,505

Provisions

27

4,238,114

5,818,263

Total current liabilities

185,776,409

57,342,229

Total liabilities

186,945,164

59,281,157

Total equity and liabilities

4,310,453,564

4,108,616,713

The accompanying notes are an integral part of these separate financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

316

Note

2021

2020

Revenues

8

-

3,250,787

Other income

9

808,081

14,516,325

Employee benefits

14

(39,239,650)

(31,818,555)

Depreciation and amortization

19,20

(2,274,344)

(13,050,255)

Reversal of impairment of trade and other
receivables, net

16,17

70,195

98,583,335

Reversal of impairment/(Impairment) of
property,
plant and equipment, net

19

3,804,893

(9,979,491)

Impairment of assets held for sale

(492,336)

-

Change

in

provisions

for

legal

cases

and

non-compete
clauses, net

27

1,580,149

(2,510,794)

Other operating expenses

9

(19,897,208)

(23,870,825)

(Loss)/Profit before finance result

(55,640,220)

35,120,527

Finance income

10

377,682,973

260,305,358

Finance costs

10

(262,543)

(123,963)

Net finance income

377,420,430

260,181,395

Share of results of associates

22

(3,498)

-

Profit before tax

321,776,712

295,301,922

Income tax benefit

15

43,172

3,076,614

Profit for the year

321,819,884

298,378,536

Earnings per share

Basic and diluted earnings per share (RON)

11

0.95

0.88

The accompanying notes are an integral part of these separate financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

317

Note

2021

2020

Profit for the year

321,819,884

298,378,536

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation of property, plant and equipment

24

-

11,901,253

Tax related to revaluation of property, plant and equipment

15

-

(3,059,897)

Re-measurements of the defined benefit liability

13

269,825

104,482

Tax related to re-measurements of the defined benefit
liability

15

(43,172)

(16,717)

Other comprehensive income, net of tax

226,653

8,929,121

Total comprehensive income

322,046,537

307,307,657

The accompanying notes are an integral part of these separate financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

318

Subscribed and
paid in share
capital

Share
premium

Treasury
shares
reserve

Capital
contributions
in kind from
shareholders

Revaluation
reserves

Legal
reserves

Other
reserves

Retained
earnings

Total equity

Balance at 1 January
2021

3,464,435,970

103,049,177

(75,372,435)

7,366

12,605,266

212,027,639

35,644,469

296,938,104

4,049,335,556

Comprehensive income

Profit for the year

-

-

-

-

-

-

-

321,819,884

321,819,884

Other comprehensive
income

-

-

-

-

-

-

-

226,653

226,653

Total comprehensive
income

-

-

-

-

-

-

-

322,046,537

322,046,537

-

-

-

-

-

-

-

-

-

Transactions with
owners of the Company

-

-

-

-

-

-

-

-

Contributions and
distributions

Dividends to the owners of
the Company

24

-

-

-

-

-

-

-

(247,873,693)

(247,873,693)

Total transactions with
owners of the Company

-

-

-

-

-

-

-

(247,873,693)

(247,873,693)

-

-

-

-

-

-

-

-

-

Other changes in equity

-

-

-

-

-

-

-

-

-

Set up of legal reserves

24

16,128,587

(16,128,587)

Transfer to
other reserves

24

-

-

-

-

-

-

35,568,893

(35,568,893)

-

Transfer of revaluation
reserve to retained earnings
due to depreciation and
disposals of property, plant
and equipment

-

-

-

-

(207,619)

-

-

207,619

-

Balance at 31 December
2021

3,464,435,970

103,049,177

(75,372,435)

7,366

12,397,647

228,156,226

71,213,362

319,621,087

4,123,508,400

Subscribed and
paid in share
capital

Share
premium

Treasury
shares reserve

Capital
contributions

Revaluation
reserves

Legal
reserves

Other
reserves

Retained
earnings

Gains
referring to
share issue

Losses
referring

Total equity

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

319

in kind from
shareholders

to share
issue

Balance at 1 January
2020

3,464,435,970

103,049,177

(75,372,435)

7,366

5,851,829

197,091,689

35,645,456

256,204,946

2,185,519

(963,601)

3,988,135,916

Comprehensive income

Profit for the year

-

-

-

-

-

-

-

298,378,536

-

-

298,378,536

Other comprehensive
income

-

-

-

-

8,841,356

-

-

87,765

-

-

8,929,121

Total comprehensive
income

-

-

-

-

8,841,356

-

298,466,301

-

-

307,307,657

Transactions with
owners of the Company

Contributions and
distributions

Issue of ordinary shares

-

-

-

-

-

-

-

-

(963,601)

963,601

-

Dividends to the owners of
the Company

24

-

-

-

-

-

-

(987)

(244,885,112)

(1,221,918)

-

(246,108,017)

Total transactions with
owners of the Company

-

-

-

-

-

-

(987)

(244,885,112)

(2,185,519)

963,601

(246,108,017)

Other changes in
equity

Set up of legal reserves

24

-

-

-

-

-

14,935,950

-

(14,935,950)

-

-

-

Set up of other reserves

-

-

-

-

(2,087,919)

-

-

2,087,919

-

-

-

Transfer of revaluation
reserve to retained
earnings due to
depreciation and disposals
of property, plant and
equipment

-

-

-

-

-

-

-

-

-

-

-

Balance at 31
December 2020

3,464,435,970

103,049,177

(75,372,435)

7,366

12,605,266

212,027,639

35,644,469

296,938,104

-

-

4,049,335,556

The accompanying notes are an integral part of these separate financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

320

Note

2021

2020

Cash flows from operating activities

Profit for the year

321,819,884

298,378,536

Adjustments for:

Depreciation

19

1,114,306

11,133,444

Amortisation

20

1,160,038

1,916,811

(Reversal of impairment)/Impairment of property, plant
and equipment, net

19

(3,804,893)

9,979,491

Loss from the disposal of tangible assets

19

3,104,047

629,452

Loss from investments in subsidiaries

21

73

-

Reversal of impairment
of trade and other receivables, net

16,17

(70,195)

(98,583,335)

Impairment of assets held for sale

492,336

-

Net finance income

10

(377,420,430)

(260,181,395)

Share of loss of associates

22

3,498

-

Changes in employee benefits obligations

13

5,054,128

(390,301)

Changes in provisions, net

27

(1,580,149)

2,510,794

Income tax benefit

15

(43,172)

(3,076,614)

(50,170,529)

(37,683,117)

Changes in:

Trade receivables

(443,724)

103,223,222

Other receivables

2,972,994

4,329,592

Trade
payables

(2,874,463)

1,755,495

Other
payables

259,359

(419,871)

Employee benefits

(286,961)

1,888,495

Cash flow (used in)/ generated from operating
activities

(50,543,324)

73,093,816

Interest paid

(179,011)

(1,983)

Net cash (used in)/from operating activities

(50,722,335)

73,091,833

(Continued on page 8)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

SEPARATE STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

321

Note

2021

2020

Cash flows from investing activities

Payments for purchases of property, plant and equipment

(4,829,850)

(4,024,333)

Payments for purchase of intangible assets

-

(29,175)

Payments for purchase of interests in subsidiaries, net

(124,990)

-

Proceeds from sales of investments in subsidiaries

20

-

Proceeds from the sale of property, plant and equipment

21,001

191,996

Proceeds from loans granted to subsidiaries

60,000,000

-

Payment for acquisition of investment in associate

(25,813,194)

-

Proceeds from deposits with maturity of 3 months or
longer

-

66,471,188

Loans granted to subsidiaries

(336,325,000)

-

Cash used by subsidiaries under the cash pooling facility

23,29

(393,576,820)

(132,171,404)

Interest received

42,172,401

41,385,917

Dividends received

10

329,543,644

214,969,717

Restricted cash

320,000,000

-

Net cash (used in)/from investing activities

(8,932,788)

186,793,906

Cash flows from financing activities

Dividends paid

24

(247,626,657)

(245,779,724)

Payment of lease liabilities

(986,422)

(900,576)

Net cash used in financing activities

(248,613,079)

(246,680,300)

Net increase in cash and cash equivalents

(308,268,202)

13,205,439

Cash and cash equivalents at 1 January

18

193,484,820

180,279,381

Cash and cash equivalents at 31 December

18

(114,783,382)

193,484,820

The accompanying notes are an integral part of these separate financial statements.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

322

33
Reporting entity and general information

These

financial

statements

are

the

separate

financial

statements

of

Societatea

Energetica

Electrica

S.A.

(“Company”

or
“Electrica SA”) as at and for the year ended 31 December 2021.

Electrica

was

originally

incorporated

as

a

company

in

1998

by

Government

Decision

no.

365/1998,

following

the
restructuring

of

the

former

National

Electricity

Company

(RENEL).

On

1

August

2000,

following

the

restructuring

of

the
former

National

Electricity

Company

(CONEL)

under

the

Government

Decision

no.

627/2000,

the

Company

was
allocated

a

new

tax

registration

number.

The

registered

office

of

the

Company

is

no

9,

Grigore

Alexandrescu

Street,
District

1,

Bucharest,

Romania.

The

Company

has

sole

registration

code

13267221

and

Trade

Register

number
J40/7425/2000.

As

at

31

December

2021

and

31

December

2020,

the

major

shareholder

of

Societatea

Energetica

Electrica

S.A.

is

the
Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital.

The

Company’s

shares

are

listed

on

the

Bucharest

Stock

Exchange

and

the

global

depository

receipts

(“GDRs”)

are

listed
on

the

London

Stock

Exchange.

The

shares

traded

on

the

London

Stock

Exchange

are

the

global

depositary

receipts,
one

global

depositary

receipt

representing

four

shares.

The

Bank

of

New

York

Mellon

is

the

depositary

bank

for

these
securities.

As at 31 December 2021 and 31 December 2020, the Company’s subsidiaries are the following:

Subsidiary

Activity

Sole
registration
code

Head
Office

% shareholding as

at 31 December
2021

% shareholding as
at 31 December
2020

Distributie Energie Electrica
Romania S.A. (
“
DEER”)

Electricity distribution
in geographical areas
Transilvania Nord,
Transilvania Sud and
Muntenia Nord

14476722

Cluj-
Napoca

99.99999929%

100%

Electrica Furnizare S.A.

Electricity and natural
gas supply

28909028

Bucuresti

99.9998415011992%

99.9998409513906%

Electrica Serv S.A.

Services in the energy
sector (maintenance,
repairs, construction)

17329505

Bucuresti

99.99998095%

100%

Electrica Productie Energie
S.A

Electricity generation

44854129

Bucuresti

99.9920%

-

Servicii Energetice Oltenia
S.A. (in bankruptcy)

Services in the energy
sector (maintenance,
repairs, construction)

29389861

Craiova

100%

100%

Servicii Energetice Moldova
S.A. (in bankruptcy)

Services in the energy
sector (maintenance,
repairs, construction)

29386768

Bacau

100%

100%

Servicii Energetice Banat S.A.
(in bankruptcy)

Services in the energy
sector (maintenance,
repairs, construction)

29388211

Timisoara

100%

100%

Servicii Energetice Dobrogea
S.A.
(in bankruptcy)

Services in the energy
sector (maintenance,
repairs, construction)

29388378

Constanta

100%

100%

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

323

As at 31 December 2021, the Company’s associates are the following:

Associate

Activity

Sole
registration
code

Head
Office

% shareholding as
at 31 December
2021

Crucea Power Park SRL

Electricity generation

25242042

Constanta

30%

Sunwind Energy SRL

Electricity generation

42910478

Constanta

30%

New Trend Energy SRL

Electricity generation

42921590

Constanta

30%

Foton Power Energy S.R.L.

Electricity generation

43652555

Constanta

30%

As of 31 December 2020, the Company had no investments in associates.

The Company’s main activities

Currently,

the

core

business

of

the

Company,

according

to

the

Statute

is

"Activities

of

business

and

management
consulting”, also performing
corporate activities at parent company level for its subsidiaries.

Electrica

SA

is

the

parent

company

of

one

electricity

distribution

company

(set

up

from

merger

of

three

electricity
distribution

companies),

one

electricity

and

natural

gas

supplier

and

five

companies

providing

services

in

the

energy
sector

(out

of

which

four

are

currently

in

b
ankruptcy
),

two

energy

production

company

from

renewable

sources
(Electrica

Energie

Verde

1

SRL

in

which

Electrica

SA

has

an

indirect

shareholding

of

100%

being

acquired

on

31

August
2020 by the subsidiary Electrica Furnizare S.A.. and Electrica Productie Energie a new set up Company).

On

6

September

2021,

is

set

up

a

new

legal

entity,

Electrica

Productie

Energie

S.A.,

organized

as

a

joint

stock

company,
in

which

Electrica

SA

holds

a

percentage

of

99.9920%

of

the

share

capital

and

Electrica

Serv

S.A.

holds

a

percentage
of

0.0080%

of

the

share

capital.

The

object

of

activity

is

the

production

of

electricity

from

renewable

sources

through
the

acquisition

and

development

of

projects,

respectively

the

operation

of

electricity

generation

parks

from

renewable
sources,

cumulated

with

the

development

and

operation

of

independent

storage

solutions

that

it

intends

to

develop

in
the near future.

On

28

July

2021,

Electrica

SA

signed,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,

as

sellers,
three

shares

sales

and

purchase

agreements

(“SPAs”)

in

three

project

companies

having

as

main

activity

the

production
of energy from renewable sources, as follows:

iv.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Crucea

Power

Park

SRL

for
an

estimated

total

price

of

EUR

8,470,000.

The

final

price

will

be

determined

by

adjusting

the

total
estimated

price

depending

on

the

production

capacity,

respectively

the

authorized

storage,

based

on

a
contractually

established

calculation

formula.

Crucea

Power

Park

SRL

develops

the

eolian

project

“Crucea
Est”,

with

a

designed

installed

capacity

of

121

MW

and

a

projected

electricity

storage

capacity

of

60

MWh
(15 MW x 4h), located outside the Crucea commune, Constanta county.

v.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

Sunwind

Energy

SRL

for

a
total

estimated

price

of

EUR

1,485,000.

The

final

price

will

be

determined

by

adjusting

the

total

estimated
price

according

to

the

authorized

production

capacity,

based

on

a

contractually

established

calculation
formula.

Sunwind

Energy

SRL

is

developing

the

photovoltaic

project

"Satu

Mare

2"

with

a

designed
installed capacity of 27 MW, located near Satu Mare.

vi.
A

SPA

regarding

the

acquisition

of

100%

of

the

shares

held

by

the

sellers

in

New

Trend

Energy

SRL

for
a

total

estimated

price

of

EUR

3,245,000.

The

final

price

will

be

determined

by

adjusting

the

total
estimated

price

according

to

the

authorized

production

capacity,

based

on

a

contractually

established
calculation formula.

New

Trend

Energy

SRL

develops

the

photovoltaic

project

"Satu

Mare

3",

with

a

designed

capacity

of

59
MW, located near Satu Mare.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

324

The

total

estimated

value

of

the

transaction

is

EUR

13,200

thousand.

The

sale

purchase

agreements

concluded

as

of
28

July

2021

stipulate

that

at

the

initial

stage,

the

Company

acquires

30%

of

the

share

capital

of

the

three

Companies,
and

in

the

subsequent

stages

the

remaining

70%

of

the

share

capital

provided

that

certain

conditions

stipulated

in

the
sale purchase agreements are met.

On

7

December

2021,

Electrica

SA,

signed,

as

buyer,

with

Mr.

Emanuel

Muntmark

and

with

Mr.

Catalin

Mrejeru,

as
sellers,

a

shares

sales

and

purchase

agreement

(“SPAs”)

in

one

project

company

having

as

main

object

of

activity

the
production of energy from renewable sources.

The

SPA

concerns

the

acquisition

of

100%

of

the

shares

of

Foton

Power

Energy

S.R.L,

wholly

owned

by

the

sellers,

for
an

estimated

total

price

of

EUR

4,262,500.

The

final

price

will

be

determined

by

adjusting

the

total

estimated

price
depending

on

the

production

capacity,

respectively

the

authorized

storage,

based

on

a

contractually

established
calculation formula.

Foton

Power

Energy

S.R.L.

develops

the

photovoltaic

project

“Bihor

1”,

with

a

designed

installed

capacity

of

77.5

MW,
located near Oradea city.

The

SPAs

stipulate

the

acquisition

by

Electrica

SA

of

company’s

shares

and

the

payment

of

the

corresponding

price

in
four

stages,

structured

according

to

the

development

stage

of

the

project

and

the

fulfillment

of

certain

conditions
precedent.

As

of

31

December

2021,

with

a

30%

shareholding,

the

Company

has

a

significant

influence

over

the

four

companies,
which

are

presented

as

investments

in

associates.

The

acquisition

value

of

the

30%

shares

is

RON

25,813,194.

(for
further details please refer to Note 22).

The

establishment

of

the

new

subsidiary

together

with

the

investments

in

the

four

entities

are

part

of

the

Electrica
Group's

strategy

which

aims

to

develop

a

portfolio

of

electricity

generation

capacities

from

renewable

sources

(wind
and

photovoltaic)

with

a

cumulative

capacity

of

400

MW,

in

parallel

with

electricity

storage

capacities

with

an

installed
capacity of up to 100 MW.

During

2020,

the

three

distribution

subsidiaries,

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,
Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.

and

Societatea

de

Distributie

a

Energiei

Electrice
Transilvania

Sud

S.A.,

merged

through

absorption,

the

absorbing

entity

being

Societatea

de

Distributie

a

Energiei
Electrice Transilvania Nord S.A..

On

14

October

2020,

the

Cluj

Specialized

Court

admitted

the

requests

of

SDEE

Transilvania

Nord

S.A.,

as

absorbing
company,

and

the

request

of

SDEE

Transilvania

Sud

S.A.

and

SDEE

Muntenia

Nord

S.A.,

as

the

absorbed

companies,
approved the merger and ordered the deregistration of the absorbed companies from the Trade Register.

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

31

December

2020,

when

SDEE

Transilvania
Sud

S.A.

and

SDEE

Muntenia

Nord

S.A.

as

the

absorbed

entities

ceased

to

exist,

being

dissolved

without

going

into
liquidation.

Consequently,

all

of

their

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by
absorption

to

SDEE

Transilvania

Nord

S.A.,

as

the

absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the
share

capital

of

SDEE

Transilvania

Nord

S.A.

in

favour

of

the

shareholder

of

the

absorbed

entities,

namely

Electrica

SA.

Thus,

on

31

December

2020,

Distributie

Energie

Electrica

Romania

S.A.,

formed

by

the

merger

of

the

three

former
electricity distribution companies was recorded on the National Trade Register Office.

During

2020,

the

two

energy

services

subsidiaries,

Electrica

Serv

S.A.

and

Servicii

Energetice

Muntenia

S.A.

merged
through absorption, the
absorbing
 entity being
Electrica Serv S.A..

On

17

September

2020,

the

VI

Civil

Section

of

the

Bucharest

Court

admitted

the

request

of

Electrica

Serv

S.A.,

as
absorbing

company,

and

the

request

of

Servicii

Energetice

Muntenia

S.A.,

as

the

absorbed

company,

and

ascertained
the

legality

of

the

merger

process

and

approved

the

registration

with

the

Trade

Register

of

the

corresponding

merger
mentions.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

325

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

30

November

2020,

when

Servicii

Energetice
Muntenia

S.A.,

as

the

absorbed

entity,

ceased

to

exist,

being

dissolved

without

going

into

liquidation.

Consequently,
all

of

its

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by

absorption

to

Electrica

Serv

S.A.,

as
the

absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the

share

capital

of

Electrica

Serv

S.A.

in

favour

of
the shareholder of the absorbed entity, namely Electrica SA.

Thus,

starting

with

1

December

2020,

the

merger

between

the

aforementioned

companies

was

finalized

and

the

energy
services

will

be

carried

out

only

under

the

umbrella

of

Electrica

Serv.
The

registration

on

the

National

Trade

Register
Office took place on 2 December 2020, with effective date 30 November 2020.

COVID-19 impact

On

11

March

2020

the

World

Health

Organization

(hereinafter

“WHO”)

declared

the

COVID-19

outbreak

a

pandemic
and

on

16

March

2020

Romania

entered

into

a

state

of

emergency.

Measures

taken

by

the

Romanian

Government
included

restrictions

on

the

cross-border

movement

of

people,

entry

restrictions

on

foreign

visitors

and

lock-down

of
certain

industries.

Furthermore,

significant

key

players

on

the

market

decided

to

shut

down

their

operations,

especially
in

the

automotive

and

heavy

industries,

while

some

smaller

businesses

decided

to

curtail

or

temporarily

suspend

their
operations.

Therefore,

on

a

macroeconomic

level,

the

COVID

–

19

pandemic

generated

a

downturn

of

the

economy
leading

to

a

decrease

in

the

demand

for

electricity,

especially

from

non-household

consumers.

The

COVID-19

pandemic
has

persisted

in

2021.

The

resulting

impact

of

the

pandemic

measures

taken

such

as

movement

control

and

safe-
distancing have continued to affect the economy.

In

the

fight

against

the

COVID-19

pandemic,

the

Company

has

adopted

all

the

necessary

measures

for

the

activity

to
continue

to

be

carried

out

under

normal

conditions

and

issued

guidelines

aimed

at

preventing

and/or

mitigating

the
effects

of

contagion

at

the

workplace.

Most

important

measures

included

strict

adherence

to

hygiene

and

social
distancing

rules

as

well

as

working

from

home

where

possible.

A

resilience

plan

was

developed

identifying

essential
activities and critical roles through scenario analysis and ensuring staff backup.

Moreover,

Electrica

SA

promptly

and

transparently

communicates

any

information

that

is

reasonably

expected

to

affect
investor’s

perception

and

as

further

effects

of

the

COVID-19

pandemic

over

the

financial

results

of

the

Electrica

SA

can
be

established,

such

information

will

be

included

in

the

future

financial

statements

and

will

be

made

available

to
investors.

Increase in Energy price impact

Following

the

total

liberalization

of

the

electricity

market

from

1

January

2021

for

all

types

of

consumers,

the
international

context

of

the

energy

markets

characterized

by

an

imbalance

between

supply

and

demand

at

European
level,

corroborated

with

the

energy

policies

developed

both

at

EU

and

national

level,

has

led

to

an

increase

in

electricity
prices.

Moreover,

the

strong

increase

in

energy

prices

is

both

the

result

of

external

factors,

such

as

the

exponential
increase

in

the

price

of

emission

allowances,

and

of

internal

factors,

such

as

the

high

share

of

energy

traded

on

the
spot market (DAM). The entire energy sector was affected by the increased energy price.

The

aforementioned

difficult

conditions

led

to

an

increase

in

operating

expenses,

mainly

for

the

acquisition

of

energy
for

network

losses

and

for

supplying

activity,

affecting

two

of

the

Company’s

subsidiaries.

For

the

two

subsidiaries

the
unstable

economic

environment,

led

to

a

decrease

in

financial

performance

for

2021,

as

compared

with

the

previous
year but with no significant difficulties in receivables collection and consequently payment of debts being noted.

Moreover,

the

state,

through

the

adoption

of

Order

no.

118/2021

with

subsequent

amendments

approved

by

Law

no.
259/2021

with

subsequent

amendments

and

Order

no.

226/2021

implemented

measures

under

the

form

of

capping
and

compensating

scheme

in

order

to

mitigate

the

effect

of

the

price

increase.

The

schemes

aim

in

reducing

the
liquidity

risk

by

reducing

difficulties

in

receivables

collection

and

improve

financial

performance

during

the

unstable
economic environment.

The

Company

actively

implements

strategies

and

takes

measures

in

order

to

reduce

any

liquidity

risk

which

may

appear
within

the

Group

among

which:

securing

new

overdrafts,

prolonging

the

terms

for

reimbursments

of

current

overdrafts,
increaseing the limits for current overdrafts, securing the prolonging of the cash pooling facility.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

326

34
Basis of accounting

These

separate

financial

statements

have

been

prepared

in

accordance

with

the

Ministry

of

Public

Finance

Order

no.
2844/2016

for

the

approval

of

the

Accounting

Regulations

in

accordance

with

International

Financial

Reporting
Standards

("OMFP

no.

2844/2016").

In

acceptance

of

OMFP

no.

2844/2016,

International

Financial

Reporting

Standards
are

standards

adopted

under

the

procedure

provided

by

the

European

Commission

Regulation

no.

1606/2002

of

the
European

Parliament

and

of

the

Council

of

19

July

2002

regarding

the

application

of

the

international

accounting
standards.

These

separate

financial

statements

were

authorized

for

issue

by

the

Board

of

Directors

on

28

February

2022

and

will
be submitted for shareholders’ approval in the general meeting scheduled on 20 April 2022.

Details

of

the

Company’s

accounting

policies

are

included

in

Note

6.

The

Company

has

consistently

applied

the
accounting policies to all periods presented in these separate financial statements.

35
Functional and presentation currency

These

separate

financial

statements

are

presented

in

Romanian

Lei

(RON),

which

is

the

functional

currency

of

the
Company. All amounts are in RON, if not otherwise stated.

36
Use of judgements and estimates

In

preparing

these

separate

financial

statements,

the

management

has

made

judgements,

estimates

and

assumptions
that

affect

the

application

of

the

Company’s

accounting

policies

and

the

reported

amounts

of

assets,

liabilities,

revenues
and expenses. Actual results may differ from these estimates.

Estimates

and

underlying

assumptions

are

reviewed

on

an

ongoing

basis.

Revisions

to

estimates

are

prospectively
recognised.

Judgements, assumptions and estimation uncertainties

Information

about

judgements

made

in

applying

accounting

policies

and

assumptions

and

estimation

uncertainties

that
have the most significant effects on the amounts recognised in the separate financial statements is included below:

•
Note 6 h) – estimates regarding the useful lives of property, plant and equipment;

•
Note 19 – assumptions regarding the revalued amount of property, plant and equipment;

•
Note 21 – assumptions and estimates regarding the valuation of shareholdings in the subsidiaries;

•
Note 15 - assumptions regarding the recognition of deferred tax asset;

Measurement of fair values

A

number

of

the

Company’s

accounting

policies

and

disclosures

require

the

measurement

of

fair

values

for

both

financial
and non-financial assets and liabilities.

When

measuring

the

fair

value

of

an

asset

or

a

liability,

the

Company

uses

observable

market

data

as

far

as

possible.
Fair

values

are

categorised

into

different

levels

in

the

fair

value

hierarchy

based

on

the

inputs

used

in

the

valuation
techniques as follows:

•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

•
Level

2:

inputs

other

than

quoted

prices

included

in

Level

1

that

are

observable

for

the

asset

or

liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices);

•
Level

3:

inputs

for

the

asset

or

liability

that

are

not

based

on

observable

market

data

(unobservable

inputs).

If

the

inputs

used

to

measure

the

fair

value

of

an

asset

or

a

liability

are

categorised

into

different

levels

of

the

fair
value

hierarchy,

then

the

fair

value

measurement

is

entirely

categorised

on

the

level

of

the

lowest

level

input

that

is
significant to the entire measurement.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

327

The

Company

recognises

transfers

between

levels

of

the

fair

value

hierarchy

at

the

end

of

the

reporting

period

during
which the change has occurred.

Further information about the assumptions used in measuring fair values is included in

•
Note 19: Property, plant and equipment.

•
Note 28: Financial instruments - fair values and risk management.

37
Basis of measurement

The

separate

financial

statements

have

been

prepared

on

the

historical

cost

basis,

except

for

the

land

and

buildings,
which are measured based on revaluation model.

38
Significant accounting policies

The

Company

has

consistently

applied

the

following

accounting

policies

to

all

periods

presented

in

these

separate
financial

statements.

The

new

amendments

to

existing

standards

that

are

effective

starting

with

1

January

2021

do
not have a significant impact over the
Company separate financial statements.

(a)
Going Concern

The

standalone

financial

statements

have

been

prepared

on

the

going

concern

basis.

In

making

this

judgement
management

considers

current

trading

performance

and

access

to

finance

resources.

The

Company

depends

upon

the
trading

and

cash

generation

of

its

subsidiaries,

which

have

been

included

in

the

Groups

consolidated

forecast

which
includes the following assumptions:

•
A

return

to

positive

operating

cash

flow

from

May

2022,

following

with

the

assumption

that

the

effects

of

the
law

118/2021

will

no

longer

continue

past

March

31,

2022.

The

consequence

would

be

that

the

price

for

the
end customers will no longer be capped;

•
The

utilisation

of

confirmed

debt

facilities

up

to

a

limit

of

RON

2,537

million,

including

RON

1,830

million

total
overdraft limits and RON 707 million long term loans;

•
The

utilisation

of

not

yet

confirmed

facilities

amounting

to

RON

840

million

which

would

be

drawn

down

during
the forecast period;

•
The

Group

has

received

the

waiver

letter

from

EBRD

on

24

February

2022,

however

this

is

subject

of

obtaining
the

waiver

letters

also

from

EIB

and

BCR

for

which

the

Group

was

non

compliant

as

at

31

December

2021;
The

management

of

the

Group

is

of

the

opinion

that

based

on

the

discussions

with

EIB

and

BCR

the

waiver
letter will be obtained also from these 2 banks;

At

the

present

time

the

projections

are

based

on

the

latest

assumptions

that

include

the

ending

of

the

Law

no.

118/2021
regarding

the

compensation

and

ceiling

scheme

in

March

2022.

At

the

date

of

issuance

of

these

separate

financial
statements

the

regulatory

position

is

under

review

and

there

may

be

further

laws

enacted

which

could

adversely

impact
the

Groups

operating

cash

flows

beyond

the

1
st

of

April

2022.

Given

the

current

market

uncertainties,

the

Group

has
outlined

a

proposal

to

be

approved

in

the

forthcoming

annual

shareholders

meeting

regarding

the

approval

of

a

total
ceiling

of

short-term

financing

up

to

RON

1,500,000

thousand.

In

light

of

the

importance

of

the

Group

as

the

supplier
and

distributed

of

electricity

on

the

Romanian

market,

having

39.6%

(according

to

the

latest

ANRE

report

2020

for

the
distribution

segment)

as

market

share

on

the

electricity

distribution

and

18.39%

(according

to

the

latest

ANRE

report
November

2021

for

the

supply

segment)

as

market

share

on

the

electricity

supply

market

and

having

as

main
shareholder

of

Electrica

SA

the

Romanian

State,

the

management

believes

sufficient

financing

will

be

made

available
to

cover

any

financing

requirements

arising

from

this

uncertainty

and

Group

will

be

able

to

meet

its

obligations

as

they
fall due.

Based

upon

the

above

projections

and

other

information,

given

the

measures

already

implemented

and

the

strategies
to

reduce

the

risks

which

may

occur

due

to

the

instability

of

the

economic

environment,

the

Board

of

Directors

has,

at
the

time

of

approving

the

separate

financial

statements,

a

reasonable

expectation

that

the

Company

has

adequate
resources

to

continue

in

operational

existence

for

the

foreseeable

future.

Thus

they

continue

to

adopt

the

going

concern
basis of accounting in preparing the separate financial statements.

(b)
Revenue

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

328

The Company recognizes the revenue from contracts with customers in accordance with IFRS 15.

Under

the

standard,

revenue

is

recognized

when

or

as

the

customer

acquires

control

over

the

goods

or

services
rendered,

at

the

amount

which

reflects

the

price

at

which

the

Company

is

expected

to

be

entitled

to

receive

in

exchange
of those goods or services. Revenue is recognized at the fair value of the services rendered or goods delivered, net of
VAT, excises or other taxes related to the sale.

(c)
Commissions

The

Company

assesses

its

revenue

arrangements

based

on

specific

criteria

to

determine

if

it

is

acting

as

principal

or
agent.

If

the

Company

acts

in

the

capacity

of

an

agent

rather

than

as

the

principal

in

a

transaction,

then

the

recognised
revenue is the net amount of commission earned by the Company.

(d)
Finance income and finance costs

The Company’s finance income and finance costs include:

•
interest income;

•
interest expense;

•
dividend income;

•
the foreign currency gain or loss on financial assets and financial liabilities;

•
impairment losses recognised on financial assets (other than trade receivables).

Interest income or expense is recognised using the effective interest method.

(e)
Foreign currency transactions

Transactions

in

foreign

currencies

are

translated

to

the

functional

currency

at

the

exchange

rates

at

the

date

of

the
transactions.

Monetary

assets

and

liabilities

denominated

in

foreign

currencies

are

translated

to

the

functional

currency

at

the
exchange

rate

at

the

reporting

date,

as

communicated

by

the

National

Bank

of

Romania.

Non-monetary

assets

and
liabilities

that

are

measured

at

fair

value

in

a

foreign

currency

are

translated

to

the

functional

currency

at

the

exchange
rate

when

the

fair

value

was

determined.

Foreign

currency

differences

are

recognised

in

profit

or

loss.

Non-monetary
items that are measured based on historical cost in a foreign currency are not translated to the functional currency.

(f)
Employee benefits

(v)
Short-term employee benefits

Short-term

employee

benefits

are

measured

on

an

undiscounted

basis

and

are

expensed

as

the

related

service

is
provided.

A

liability

is

recognised

for

the

amount

expected

to

be

paid

if

the

Company

has

a

present,

legal

or

constructive
obligation

to

pay

this

amount

as

a

result

of

past

services

provided

by

the

employee

and

the

obligation

can

be

reliably
estimated.

(vi)
Defined benefit plans

The

Company’s

net

obligation

in

respect

of

defined

benefit

plans

is

calculated

separately

for

each

plan

by

estimating
the

amount

of

future

benefits

that

employees

have

earned

in

the

current

and

prior

periods,

by

discounting

that

amount.

The

calculation

of

defined

benefit

obligations

is

performed

annually

by

a

qualified

actuary

using

the

projected

unit
credit method.

Re-measurements

of

the

net

defined

benefit

liability,

which

comprise

actuarial

gains

and

losses,

are

recognised
immediately

in

other

comprehensive

income.

The

Company

determines

the

net

interest

expense/(income)

on

the

net
defined

benefit

liability

for

the

period

by

applying

the

discount

rate

used

to

measure

the

defined

benefit

obligation

at
the

beginning

of

the

annual

period

to

the

then-net

defined

benefit

liability,

considering

any

changes

in

the

net

defined
benefit

liability

during

the

period

as

a

result

of

contributions

and

benefit

payments.

Net

interest

expense

and

other
expenses related to defined benefit plans are recognised in profit or loss.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

329

When

the

benefits

of

a

plan

are

changed

or

when

a

plan

is

curtailed,

the

resulting

change

in

benefit

that

relates

to
past

service

or

the

gain

or

loss

on

curtailment

is

recognised

immediately

in

profit

or

loss.

The

Company

recognises
gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(vii)
Other long-term employee benefits

The

Company’s

net

obligation

in

respect

of

long-term

employee

benefits

is

the

amount

of

future

benefit

that

employees
have

earned

in

return

for

their

service

in

the

current

and

prior

periods.

That

benefit

is

discounted

to

determine

its
present value. Re-measurements are recognised in profit or loss in the period in which they arise.

(viii)
Termination benefits

Termination

benefits

are

expensed

at

the

earlier

of

when

the

Company

can

no

longer

withdraw

the

offer

of

those
benefits

and

when

the

Company

recognises

costs

for

a

restructuring.

If

benefits

are

not

expected

to

be

settled

wholly
within 12 months of the end of the reporting period, then they are discounted.

(g)
Income tax

Income

tax

expense

comprises

current

and

deferred

tax.

It

is

recognised

in

profit

or

loss

except

for

the

items

recognised
directly

in

equity

or

in other

comprehensive

income,

in

which

case

it

will

be

recognized

directly

in

equity

or

in other
comprehensive income.

(iii)
Current tax

Current

tax

comprises

the

expected

tax

payable

or

receivable

on

the

taxable

income

or

loss

for

the

year

and

any
adjustment

to

tax

payable

or

receivable

in

respect

of

previous

years.

It

is

measured

using

tax

rates

enacted

or
substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

(iv)
Deferred tax

Deferred

tax

is

recognised

in

respect

of

temporary

differences

between

the

carrying

amounts

of

assets

and

liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

•
temporary

differences

arising

from

the

initial

recognition

of

assets

and

liabilities

resulting

from

transactions

that
are not business combinations and that affect neither accounting nor taxable profit or loss;

•
temporary

differences

resulting

from

investments

in

subsidiaries,

associates

and

jointly

controlled

entities,

to

the
extent

that

the

Company

can

exercise

control

over

the

reversal

period

of

the

temporary

differences

and

it

is
probable that they will not be reversed in the foreseeable future.

Deferred

tax

assets

are

recognised

for

unused

tax

losses,

unused

tax

credits

and

deductible

temporary

differences

only
to

the

extent

that

it

is

probable

that

future

taxable

profits

will

be

available

to

be

used

for

covering

them.

Deferred

tax
assets

are

reviewed

at

each

reporting

date

and

are

reduced

to

the

extent

that

it

is

no

longer

probable

that

the

related
tax benefit will be realised.

Deferred

tax

is

measured

based

on

the

tax

rates

that

are

expected

to

be

applicable

to

temporary

differences

when
they are reversed, using tax rates enacted or substantively enacted at the reporting date.

The

measurement

of

the

deferred

tax

reflects

the

tax

consequences

that

would

follow

from

the

manner

in

which

the
Company expects to recover or settle the carrying amount of its assets and liabilities at the reporting date.

Deferred tax assets and liabilities are offset only if certain criteria are met.

Unrecognized

deferred

tax

assets

are

reassessed

at

each

reporting

date

and

recognized

to

the

extent

that

it

is

probable
that the future taxable profits will be available against which they can be used.

(h)
Property, plant and equipment

(iv)
Recognition and measurement

Property,

plant

and

equipment

are

initially

recognised

at

cost,

which

includes

purchase

price

and

other

costs

directly
attributable to acquisition and bringing the asset to the location and condition necessary for their intended use.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

330

After

initial

recognition,

land

and

buildings

are

measured

at

revalued

amounts

less

any

accumulated

depreciation

and
any accumulated impairment losses since the most recent valuation.

The Company used the fair value as deemed cost for the tangible assets for the opening of the financial position.

Revaluations

are

performed

with

sufficient

regularity

to

ensure

that

the

carrying

amount

does

not

materially

differ

from
the one which would be determined using the fair value at the end of the reporting period.

When

a

building

is

revalued,

the

accumulated

depreciation

is

eliminated

against

the

gross

carrying

amount

of

that

item,
and the net amount is restated to the revalued amount of the asset.

If

significant

parts

of

an

item

of

property,

plant

and

equipment

have

different

useful

lives,

then

they

are

accounted

for
as separate items (major components) of property, plant and equipment.

Spare

parts,

stand-by

and

servicing

equipment

are

classified

as

property,

plant

and

equipment

if

they

are

expected

to
be

used

during

more

than

one

period

or

can

be

used

only

in

connection

with

an

item

of

property,

plant

and

equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

(v)
Subsequent expenditure

Subsequent

expenditure

is

capitalised

only

if

it

is

probable

that

the

future

economic

benefits

associated

with

the
expenditure will flow to the Company.

(vi)
Depreciation

Depreciation

is

calculated

to

write

off

the

cost

of

items

of

property,

plant

and

equipment

less

their

estimated

residual
values

using

the

straight-line

method

over

their

estimated

useful

lives

and

is

recognised

in

profit

or

loss.

Leased

assets
are

depreciated

over

the

shorter

of

the

lease

term

and

their

useful

lives

unless

it

is

reasonably

certain

that

the

Company
will

obtain

ownership

right

by

the

end

of

the

lease

term.

Land

and

other

non-current

assets

in

progress

are
not depreciated.

The estimated useful lives of property, plant and equipment are as follows:

Category

Useful lives (years)

Buildings

40-60

Equipment

4-12

Vehicles, furniture and office equipment

3-10

The

depreciation

methods,

useful

lives

and

residual

values

are

reviewed

at

each

reporting

date

and

adjusted

if
appropriate.

(i)
Intangible assets

(iv)
Recognition and measurement

Intangible

assets

that

are

acquired

by

the

Company

and

have

finite

useful

lives

are

measured

at

cost

less

accumulated
amortisation and any accumulated impairment losses.

(v)
Subsequent expenditure

Subsequent

expenditure

is

capitalised

only

when

it

increases

the

future

economic

benefits

embodied

in

the

specific
asset

to

which

it

relates.

All

other

expenditure,

including

expenditure

on

internally

generated

goodwill

and

brands,

is
recognised in profit or loss as incurred.

(vi)
Amortization

Amortization

is

calculated

to

write

off

the

cost

of

intangible

assets

less

their

estimated

residual

values

using

the

straight-
line method over their estimated useful lives, and is recognised in profit or loss.

The estimated useful lives of software and licenses are 3-5 years.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

331

Amortisation

method,

useful

lives

and

residual

values

are

reviewed

at

each

reporting

date

and

adjusted

if

appropriate.

(j)
Financial instruments

Financial

assets

and

financial

liabilities

are

recognised

in

the

Company’s

statement

of

financial

position

when

the
Company becomes a party to the contractual provisions of the instrument.

Financial

assets

and

financial

liabilities

are

initially

measured

at

fair

value.

Transaction

costs

that

are

directly

attributable
to

the

acquisition

or

issue

of

financial

assets

and

financial

liabilities

(other

than

financial

assets

and

financial

liabilities

at
fair

value

through

profit

or

loss)

are

added

to

or

deducted

from

the

fair

value

of

the

financial

assets

or

financial

liabilities,
as

appropriate,

on

initial

recognition.

Transaction

costs

directly

attributable

to

the

acquisition

of

financial

assets

or
financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i)
Financial assets

All

regular

way

purchases

or

sales

of

financial

assets

are

recognised

and

derecognised

on

a

trade

date

basis.

Regular
way

purchases

or

sales

are

purchases

or

sales

of

financial

assets

that

require

delivery

of

assets

within

the

time

frame
established

by

regulation

or

convention

in

the

marketplace.

All

recognised

financial

assets

are

measured

subsequently
in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Financial

assets

are

initially

measured

at

fair

value

and

subsequently

at

amortized

cost

in

accordance

with

IFRS

9,

as
they

are

held

in

a

business

model

to

collect

contractual

cash

flows

and

these

cash

flows

consist

solely

of

payments

of
principal and interest on the principal amount outstanding.

The

amortized

cost

of

a

financial

asset

is

the

amount

at

which

the

financial

asset

is

measured

at

initial

recognition

less
the

principal

reimbursements,

plus

the

cumulative

amortization

using

the

effective

interest

method,

adjusted

for

any
loss

allowance.

The

gross

carrying

amount

of

a

financial

asset

is

the

amortized

cost

of

a

financial

asset

before

adjusting
for any loss allowance.

Foreign exchange gains and losses

The

carrying

amount

of

financial

assets

that

are

denominated

in

a

foreign

currency

is

determined

in

that

foreign
currency

and translated at the spot rate at the end of each reporting period.

Loans and receivables

These

assets

are

initially

recognized

at

fair

value

plus

any

directly

attributable

transaction

costs.

Subsequent

to

initial
recognition,

they

are

measured

at

amortized

cost

using

the

effective

interest

method.

The

amortised

cost

is

reduced
by impairment losses.

Loans and receivables comprise trade receivables, cash and cash equivalents and bank deposits.

Trade receivables

Trade receivables include mainly invoices issued or to be issued to the subsidiaries for the rendered services.

Cash and cash equivalents

Cash

and

cash

equivalents

comprise

cash

balances

and

call

deposits

and

deposits

with

maturities

of

three

months

or
less

from

the

transaction

date

that

are

subject

to

an

insignificant

risk

of

changes

in

their

fair

value,

that

are

used

by
the Company in the management of its short-term commitments.

(ii)
Financial liabilities

All

financial

liabilities

are

measured

subsequently

at

amortised

cost

using

the

effective

interest

method

or

at

fair

value
through profit or loss.

Financial

liabilities

that

are

not

(i)

contingent

consideration

of

an

acquirer

in

a

business

combination,

(ii)
held‑for‑trading,

or

(iii)

designated

as

at

fair

value,

are

measured

subsequently

at

amortised

cost

using

the

effective

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

332

interest

method.

The

effective

interest

method

is

a

method

of

calculating

the

amortised

cost

of

a

financial

liability

and
of

allocating

interest

expense

over

the

relevant

period.

The

effective

interest

rate

is

the

rate

that

exactly

discounts
estimated

future

cash

payments

(including

all

fees

and

points

paid

or

received

that

form

an

integral

part

of

the

effective
interest

rate,

transaction

costs

and

other

premiums

or

discounts)

through

the

expected

life

of

the

financial

liability,

or
(where appropriate) a shorter period, to the amortised cost of a financial liability.

Other financial liabilities include trade payables.

(iii)
Share capital

Ordinary shares

Ordinary

shares

are

classified

as

equity.

Incremental

costs

directly

attributable

to

the

issue

of

ordinary

shares,

net

of
any tax effects, are recognized as a deduction from equity.

Repurchase and reissue of ordinary shares (treasury shares)

When

shares

recognized

as

equity

are

repurchased,

the

amount

of

the

consideration

paid,

which

includes

directly
attributable

costs,

net

of

any

tax

effects,

is

recognized

as

a

deduction

from

equity.

Repurchased

shares

are

classified
and

presented

in

the

treasury

share

reserve.

When

treasury

shares

are

sold

or

reissued

subsequently,

the

amount
received

is

recognised

as

an

increase

in

equity

and

the

resulting

surplus

or

deficit

on

the

transaction

is

presented

within
share premium.

(k)
Impairment

Impairment of financial assets

The

Company

recognises

a

loss

allowance

for

expected

credit

losses

on

investments

in

debt

instruments

that

are
measured

at

amortised

cost

or

at

fair

value

through

other

comprehensive

income.

The

amount

of

expected

credit

losses
is

updated

at

each

reporting

date

to

reflect

changes

in

credit

risk

since

initial

recognition

of

the

respective

financial
instrument.

The

Company

always

recognises

lifetime

expected

credit

losses

for

trade

receivables.

The

expected

credit

losses

on
these

financial

assets

are

estimated

using

a

provision

matrix

based

on

the

Company’s

historical

credit

loss

experience,
adjusted

for

factors

that

are

specific

to

the

debtors,

general

economic

conditions

and

an

assessment

of

both

the

current
as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

i) Significant increase in credit risk

In

assessing

whether

the

credit

risk

on

a

financial

instrument

has

increased

significantly

since

initial

recognition,

the
Company

compares

the

risk

of

a

default

occurring

on

the

financial

instrument

at

the

reporting

date

with

the

risk

of

a
default occurring on the financial instrument at the date of initial recognition.

Irrespective

of

the

above

analysis,

the

Company

considers

that

default

has

occurred

when

a

financial

asset

is

more
than

90

days

past

due

unless

the

Company

has

reasonable

and

supportable

information

to

demonstrate

that

a

more
lagging default criterion is more appropriate.

(ii) Write‑off policy

The

Company

writes

off

a

financial

asset

when

after

the

finalization

of

the

bankruptcy

proceedings.

Financial

assets
written

off

may

still

be

subject

to

enforcement

activities

under

the

Company’s

recovery

procedures,

taking

into

account
legal advice where appropriate. Any recoveries made are recognised in profit or loss.

(iii) Measurement and recognition of expected credit losses

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

333

The

measurement

of

expected

credit

losses

is

a

function

of

the

probability

of

default,

loss

given

default

(i.e.

the
magnitude

of

the

loss

if

there

is

a

default)

and

the

exposure

at

default.

The

assessment

of

the

probability

of

default
and

loss

given

default

is

based

on

historical

data

adjusted

by

forward‑looking

information

as

described

above.

As

for
the

exposure

at

default,

for

financial

assets,

this

is

represented

by

the

assets’

gross

carrying

amount

at

the

reporting
date.

For

financial

assets,

the

expected

credit

loss

is

estimated

as

the

difference

between

all

contractual

cash

flows

that

are
due

to

the

Company

in

accordance

with

the

contract

and

all

the

cash

flows

that

the

Company

expects

to

receive,
discounted at the original effective interest rate.

Derecognition of financial assets

The

Company

derecognizes

a

financial

asset

only

when

the

contractual

rights

to

the

cash

flows

from

the

asset

expire,
or

when

it

transfers

the

financial

asset

and

substantially

all

the

risks

and

rewards

of

ownership

of

the

asset

to

another
entity.

If

the

Company

neither

transfers

nor

retains

substantially

all

the

risks

and

rewards

of

ownership

and

continues
to

control

the

transferred

asset,

the

Company

recognizes

its

retained

interest

in

the

asset

and

an

associated

liability
for

amounts

it

may

have

to

pay.

If

the

Company

retains

substantially

all

the

risks

and

rewards

of

ownership

of

a
transferred

financial

asset,

the

Company

continues

to

recognize

the

financial

asset

and

also

recognizes

a

collateralized
borrowing for the proceeds received.

(l)
Revaluation reserves

The

difference

between

the

revalued

amount

and

the

net

carrying

amount

of

property,

plant

and

equipment

is
recognized as revaluation reserve included in equity.

If

an

asset’s

carrying

amount

is

increased

as

a

result

of

a

revaluation,

the

increase

is

recognized

and

accumulated

in
equity

under

the

heading

of

revaluation

reserve.

However,

the

increase

is

recognized

in

profit

and

loss

to

the

extent
that it reverses a revaluation decrease of the same amount of the asset previously recognised in profit and loss.

If

an

asset’s

carrying

amount

is

decreased

as

a

result

of

a

revaluation,

the

decrease

is

recognised

in

profit

or

loss,
However,

the

decrease

is

recognized

in

equity

in

revaluation

reserves

if

there

is

any

credit

balance

existing

in

the
revaluation reserve in respect of that asset.

The

revaluation

reserve

is

transferred

to

retained

earnings

in

an

amount

corresponding

to

the

use

of

the

asset

(as

the
asset is depreciated) and upon disposal of the asset.

(m)
 Dividends

Dividends

are

recognized

as

a

deduction

from

equity

in

the

period

in

which

their

distribution

is

approved

and

recognized
as

a

liability

to

the

extent

it

is

unpaid

at

the

reporting

date.

Dividends

are

disclosed

in

the

notes

to

financial

statements
when

their

distribution

is

proposed

after

the

reporting

date

and

before

the

date

of

the

issuance

of

the

financial
statements.

(n)
Capital contributions in kind from shareholders

These

contributions

from

a

shareholder

represent

pre-paid

contributions

of

land

for

which

the

Company

obtained

title
deeds in respect of future issuance of shares. The amounts recorded are based on the fair value of the land.

(o)
Provisions

A

provision

is

recognised

if,

as

a

result

of

a

past

event,

the

Company

has

a

present

legal

or

constructive

obligation

that
can

be

estimated

reliably,

and

it

is

probable

that

an

outflow

of

economic

benefits

will

be

required

to

settle

the

obligation.
Provisions

are

determined

by

discounting

the

expected

future

cash

flows

at

a

pre-tax

rate

that

reflects

current

market
assessments

of

the

time

value

of

money

and

the

risks

specific

to

the

liability.

The

unwinding

of

the

discount

is
recognised as finance cost.

A

provision

for

restructuring

is

recognised

when

the

Company

has

approved

a

detailed

and

formal

restructuring

plan,
and

the

restructuring

either

has

commenced

or

has

been

announced

publicly.

No

provisions

are

provided

for

future
operating losses.

(p)
Contingent assets and liabilities

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

334

A contingent liability is:

(a) a

possible

obligation

that

arises

from

past

events

and

whose

existence

will

be

confirmed

only

by

the

occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(b) a present obligation that arises from past events that is not recognised because:

i. it

is

not

probable

that

an

outflow

of

resources

embodying

economic

benefits

will

be

required

to

settle

the
obligation; or

ii. the amount of the obligation cannot be measured with sufficient reliability.

Contingent

liabilities

are

not

recognized

in

the

financial

statements

of

the

Company.

They

are

presented

in

case

the
output of resources incorporating economic benefits is possible and not probable.

A

contingent

asset

is

a

potential

asset

that

appears

as

a

result

of

previous

events

and

whose

existence

will

be

confirmed
only

by

the

occurrence

or

the

non-occurrence

of

one

or

more

uncertain

future

events,

which

are

not

fully

controlled

by
the Company.

A

contingent

asset

is

not

recognized

in

the

financial

statements

of

the

Company,

but

it

is

shown

when

an

input

of
economic benefits is likely to arise.

(q)
Leases

(ii)
The Company as lessee

The

Company

assesses

whether

a

contract

is

or

contains

a

lease,

at

inception

of

the

contract.

The

Company

recognises
a

right-of-use

asset

and

a

corresponding

lease

liability

with

respect

to

all

lease

arrangements

in

which

it

is

the

lessee,
except

for

short-term

leases

(with

a

lease

term

of

12

months

or

less)

and

leases

of

low

value

assets

(
of

less

than

USD
5,000)
.

For

these

leases,

the

Company

recognises

the

lease

payments

as

an

operating

expense

on

a

straight-line

basis
over

the

term

of

the

lease

unless

another

systematic

basis

is

more

representative

of

the

time

pattern

in

which

economic
benefits from the leased assets are consumed.

The

lease

liability

is

initially

measured

at

the

present

value

of

the

lease

payments

that

are

not

paid

at

the

commencement
date,

discounted

by

using

the

default

rate

in

the

lease.

If

this

rate

cannot

be

readily

determined,

the

Company

uses

its
incremental borrowing rate.

The

lease

liability

is

presented

as

a

separate

line

in

the

statement

of

financial

position.

The

lease

liability

is

subsequently
measured

by

increasing

the

carrying

amount

to

reflect

interest

on

the

lease

liability

(using

the

effective

interest

method)
and by reducing the carrying amount to reflect the lease payments made.

The

Company

remeasures

the

lease

liability

(and

makes

a

corresponding

adjustment

to

the

related

right-of-use

asset)
whenever:

•
the

lease

term

has

changed

or

there

is

a

significant

event

or

change

in

circumstances

resulting

in

a

change

in
the

assessment

of

exercise

of

a

purchase

option,

in

which

case

the

lease

liability

is

remeasured

by

discounting
the revised lease payments using a revised discount rate;

•
the

lease

payments

change

due

to

changes

in

an

index

or

rate

or

a

change

in

expected

payment

under

a
guaranteed

residual

value,

in

which

cases

the

lease

liability

is

remeasured

by

discounting

the

revised

lease
payments

using

an

unchanged

discount

rate

(unless

the

lease

payments

change

is

due

to

a

change

in

a
floating interest rate, in which case a revised discount rate is used);

•
a

lease

contract

is

modified

and

the

lease

modification

is

not

accounted

for

as

a

separate

lease,

in

which

case
the

lease

liability

is

remeasured

based

on

the

lease

term

of

the

modified

lease

by

discounting

the

revised

lease
payments using a revised discount rate at the effective date of the modification.

Right-of-use

assets

are

depreciated

over

the

shorter

period

of

lease

term

and

useful

life

of

the

underlying

asset.

If

a
lease

transfers

ownership

of

the

underlying

asset

or

the

cost

of

the

right-of-use

asset

reflects

that

the

Company

expects
to

exercise

a

purchase

option,

the

related

right-of-use

asset

is

depreciated

over

the

useful

life

of

the

underlying

asset.
The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the statement of financial position.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

335

(iii)
Rental income

Rental

income

from

property,

plant

and

equipment

other

than

property

investment

is

recognised

as

Other

income
.
Rental income is recognised on a straight-line basis over the term of the lease.

(r)
Investment in associates

An

associate

is

an

entity

over

which

the

Company

has

significant

influence

and

that

is

neither

a

subsidiary

nor

an

interest
in

a

joint

venture.

Significant

influence

is

the

power

to

participate

in

the

financial

and

operating

policy

decisions

of

the
investee but is not control or joint control over those policies.

The

results

and

assets

and

liabilities

of

associates

are

incorporated

in

these

financial

statements

using

the

equity

method
of

accounting,

except

when

the

investment

is

classified

as

held

for

sale,

in

which

case

it

is

accounted

for

in

accordance
with IFRS 5.

Under

the

equity

method,

an

investment

in

an

associate

is

recognised

initially

in

the

consolidated

statement

of

financial
position

at

cost

and

adjusted

thereafter

to

recognise

the

Company’s

share

of

the

profit

or

loss

and

other

comprehensive
income of the associate.

When

the

Company’s

share

of

losses

of

an

associate

exceeds

the

Company’s

interest

in

that

associate

(which

includes
any

long-term

interests

that,

in

substance,

form

part

of

the

Company’s

net

investment

in

the

associate),

the

Company
discontinues

recognising

its

share

of

further

losses.

Additional

losses

are

recognised

only

to

the

extent

that

the

Company
has incurred legal or constructive obligations or made payments on behalf of the associate.

An

investment

in

an

associate

is

accounted

for

using

the

equity

method

from

the

date

on

which

the

investee

becomes
an

associate.

On

acquisition

of

the

investment

in

an

associate,

any

excess

of

the

cost

of

the

investment

over

the
Company’s

share

of

the

net

fair

value

of

the

identifiable

assets

and

liabilities

of

the

investee

is

recognised

as

goodwill,
which is included within the carrying amount of the investment.

Any

excess

of

the

Company’s

share

of

the

net

fair

value

of

the

identifiable

assets

and

liabilities

over

the

cost

of

the
investment,

after

reassessment,

is

recognised

immediately

in

profit

or

loss

in

the

period

in

which

the

investment

is
acquired.

The

requirements

of

IAS

36

are

applied

to

determine

whether

it

is

necessary

to

recognise

any

impairment

loss

with
respect

to

the

Company’s

investment

in

an

associate.

When

necessary,

the

entire

carrying

amount

of

the

investment
(including

goodwill)

is

tested

for

impairment

in

accordance

with

IAS

36

as

a

single

asset

by

comparing

its

recoverable
amount

(higher

of

value

in

use

and

fair

value

less

costs

of

disposal)

with

its

carrying

amount.

Any

impairment

loss
recognised

is

not

allocated

to

any

asset,

including

goodwill

that

forms

part

of

the

carrying

amount

of

the

investment.
Any

reversal

of

that

impairment

loss

is

recognised

in

accordance

with

IAS

36

to

the

extent

that

the

recoverable

amount
of the investment subsequently increases.

The

Company

discontinues

the

use

of

the

equity

method

from

the

date

when

the

investment

ceases

to

be

an

associate.

(s)
Subsequent events

Events

occurring

after

the

reporting

date

31

December

2021
,

which

provide

additional

information

about

conditions
prevailing

at

the

reporting

date

(adjusting

events)

are

reflected

in

the

separate

financial

statements.

Events

occurring
after

the

reporting

date

that

provide

information

on

events

that

occurred

after

the

reporting

date

(non-adjusting
events),

when

material,

are

disclosed

in

the

notes

to

the

separate

financial

statements.

When

the

going

concern
assumption

is

no

longer

appropriate

at

or

after

the

reporting

period,

the

financial

statements

are

not

prepared

on

a
going concern basis.

39
Adoption of new and revised standards and interpretations

Initial

application

of

new

amendments

to

the

existing

standards

effective

for

the

current

reporting
period

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

336

The

following

amendments

to

the

existing

standards

issued

by

the

International

Accounting

Standards

Board

(IASB)
and adopted by the EU are effective for the current reporting period:

•
Amendments

to

IFRS

9

“Financial

Instruments”,

IAS

39

“Financial

Instruments:

Recognition

and

Measurement”,
IFRS

7

“Financial

Instruments:

Disclosures”,

IFRS

4

“Insurance

Contracts”

and

IFRS

16

“Leases”

-

Interest

Rate
Benchmark

Reform

—

Phase

2

adopted

by

the

EU

on

13

January

2021

(effective

for

annual

periods

beginning

on
or after 1 January 2021),

•
Amendments

to

IFRS

16

“Leases”

-

Covid-19-Related

Rent

Concessions

beyond

30

June

2021

adopted

by

the

EU
on

30

August

2021

(effective

from

1

April

2021

for

financial

years

starting,

at

the

latest,

on

or

after

1

January
2021);

The

adoption

of

amendments

to

the

existing

standards

has

not

led

to

any

material

changes

in

the

Company’s

financial
statements.

Standards

and

amendments

to

the

existing

standards

issued

by

IASB

and

adopted

by

the

EU

but

not

yet
effective

At

the

date

of

authorization

of

these

consolidated

financial

statements,

the

following

amendments

to

the

existing
standards were issued by IASB and adopted by the EU and which are not yet effective:

•
Amendments

to

IAS

16

“Property,

Plant

and

Equipment”

-

Proceeds

before

Intended

Use

adopted

by

the

EU

on
28 June 2021 (effective for annual periods beginning on or after 1 January 2022),

•
Amendments

to

IAS

37

“Provisions,

Contingent

Liabilities

and

Contingent

Assets”

-

Onerous

Contracts

-

Cost

of
Fulfilling

a

Contract

adopted

by

the

EU

on

28

June

2021

(effective

for

annual

periods

beginning

on

or

after

1
January 2022),

•
Amendments

to

various

standards

due

to

“Improvements

to

IFRSs

(cycle

2018

-2020)”

resulting

from

the

annual
improvement

project

of

IFRS

(IFRS

1,

IFRS

9,

IFRS

16

and

IAS

41)

primarily

with

a

view

to

removing
inconsistencies

and

clarifying

wording

-

adopted

by

the

EU

on

28

June

2021

(The

amendments

to

IFRS

1,

IFRS

9
and

IAS

41

are

effective

for

annual

periods

beginning

on

or

after

1

January

2022.

The

amendment

to

IFRS

16

only
regards an illustrative example, so no effective date is stated.).

Electrica

SA

has

elected

not

to

adopt

the

amendments

to

existing

standards

in

advance

of

their

effective

dates.

The
Company

anticipates

that

the

adoption

of

these

amendments

to

existing

standards

will

have

no

material

impact

on

the
financial statements of the Company in the period of initial application.

New standards and amendments to the existing standards issued by IASB but not yet adopted by the
EU

At

present,

IFRS

as

adopted

by

the

EU

do

not

significantly

differ

from

regulations

adopted

by

the

International
Accounting

Standards

Board

(IASB)

except

for

the

following

new

standards

and

amendments

to

the

existing

standards,
which

were

not

endorsed

for

use

in

EU

as

at

the

date

of

publication

of

these

consolidated

financial

statements

(the
effective dates stated below is for IFRS as issued by IASB):

•
Amendments

to

IAS

1

“Presentation

of

Financial

Statements”

-

Classification

of

Liabilities

as

Current

or

Non-
Current (effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

1

“Presentation

of

Financial

Statements”

-

Disclosure

of

Accounting

Policies

(effective

for
annual periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

8

“Accounting

Policies,

Changes

in

Accounting

Estimates

and

Errors”

-

Definition

of
Accounting Estimates (effective for annual periods beginning on or after 1 January 2023),

•
Amendments

to

IAS

12

“Income

Taxes”

-

Deferred

Tax

related

to

Assets

and

Liabilities

arising

from

a

Single
Transaction (effective for annual periods beginning on or after 1 January 2023),

Electrica SA anticipates that the adoption of these new standards and amendments to the existing standards will
have no material impact on the consolidated financial statements of the Company in the period of initial application.

40
Revenue

2021

2020

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

337

Revenues from services contracts related to the Automatic Meter
Reading System

-

3,250,787

In

2020,

the

revenues

earned

by

the

Company

are

represented

by

revenues

from

service

contracts

related

to

the

AMR
system,

concluded

with

the

distribution

subsidiaries

that

include

services

such

as

automatic

meter

reading

services,
communications and monitoring of the quality parameters of electricity.

Starting

with

July

2020,

the

Company

no

longer

provides

services

related

to

the

AMR

system

as

the

system

was
transferred

as

a

contribution

in

kind

to

the

share

capital

of

its

distribution

subsidiaries

(SDEE

Transilvania

Nord

S.A.,
SDEE

Transilvania

Sud

S.A.,

SDEE

Muntenia

Nord

S.A

currently

Distributie

Energie

Electrica

Romania

S.A.),

these

assets
being part of the distribution network (Note 19).

41
Other income and operating expenses

(c)
Other income

2021

2020

Revenues from indemnities

-

12,827,435

Rental income

282,214

332,589

Other

525,867

1,356,301

Total

808,081

14,516,325

In

2020,

revenues

from

indemnities

consist

of

the

amount

of

RON

12,827,435

collected

by

Electrica

SA

from

the
National

Agency

for

Fiscal

Administration

(“NAFA”)

as

a

result

of

final

civil

sentences

obtained

in

Court,

which

ordered
the

cancellation

of

certain

enforceable

titles

as

well

as

fiscal

decisions

(
Note

30
).

As

at

31

December

2020,

the

amount
was entirely collected from the NAFA.

(d)
Other operating expenses

2021

2020

Losses from disposal of assets

3,104,047

629,452

Legal assistance and consulting fees

1,867,407

2,990,741

Insurance premiums

574,058

408,692

Repair and maintenance expenses

487,714

630,721

Other taxes and duties

478,089

885,998

Consumables

399,128

660,017

Travel and transportation expenses

111,330

115,645

Postage and telecommunication

95,976

1,043,024

Donations and sponsorships

50,000

117,305

Other third party services

11,972,370

15,727,097

Other

757,089

662,133

Total

19,897,208

23,870,825

42
Net finance income

2021

2020

Dividends income

329,543,644

214,969,717

Interest income

47,504,909

44,852,139

Other finance income

634,420

483,502

Total finance income

377,682,973

260,305,358

Interest expense

(179,011)

(1,983)

Interest cost for employee benefits (Note 13)

(48,814)

(80,355)

Foreign exchange losses, net

(34,718)

(41,625)

Total finance costs

(262,543)

(123,963)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

338

2021

2020

Net finance income

377,420,430

260,181,395

In 2021, the Company collected the entire amount of the total income of RON
329,543,644
received as dividends
from its subsidiaries (2020: RON 214,969,717).

43
 Earnings per share

The

calculation

of

basic

and

diluted

earnings

per

share

is

based

on

the

following

profit

attributable

to

shareholders

and
weighted-average number of ordinary shares outstanding:

Profit attributable to shareholders

2021

2020

Profit for the year attributable to the shareholders of the Company

321,819,884

298,378,536

Profit attributable to the shareholders of the Company

321,819,884

298,378,536

Number of ordinary shares (in number of shares)

2021

2020

Number of ordinary shares at 31 December

339,553,004

339,553,004

For

the

calculation

of

basic

and

diluted

earnings

per

share,

the

own

shares

repurchased

by

the

Company

(6,890,593
shares) were not treated as outstanding shares and are deducted from the total number of issued ordinary shares.

2021

2020

Basic and diluted earnings per share (RON)

0.95

0.88

44
Short-term employee benefits

31 December

2021

31 December

2020

Personnel payables

5,979,013

6,335,832

Current portion of defined benefit liability and other long-term
employee benefits

5,150,498

48,477

Social security charges

787,241

620,934

Tax on salaries

243,969

163,262

Total

12,160,721

7,168,505

Details related to employee benefit expenses are presented in Note 13.

In

Romania,

all

employers

and

employees,

as

well

as

other

persons,

are

contributors

to

the

state

social

security

system.
The

social

security

system

covers

state

pensions,

child

benefit,

temporary

incapacity

for

work

situations,

risks

of

work
accidents

and

professional

diseases

and

other

social

assistance

services,

redundancy

payments

and

incentives

granted
to employers for creating new jobs.

45
Post-employment and other long-term employee benefits

The

Company

provides

cash

benefits

to

employees

depending

on

seniority

in

the

form

of

jubilee

bonuses

and

depending
on

the

years

of

service

at

retirement

in

the

form

of

retirement

bonuses.

The

post-employment

and

other

long-term
employee benefits are stipulated in the Collective Labour Contract.

On

20

December

2021

the

Board

of

Directors

of

Electrica

SA

approved

the

implementation

of

a

reorganization

process
of

the

Company's

personnel

structure

and

the

initiation

of

the

collective

dismissal

procedure,

formally

communicated

to
all

employees

on

23

December

2021.

On

2

February

2022,

the

Board

of

Directors

approved

the

amendment

of

the

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

339

Company’s

organizational

structure

effective

as

of

1

March

2022

and

the

notification

of

relevant

authorities

and

of

the
Trade

Union

regarding

the

final

decision

of

the

Company

to

implement

the

reorganization

process

and

to

carry

out

the
collective

dismissal

of

the

employees

who

currently

occupy

the

positions

to

be

cancelled,

as

well

as

the

sending

of

all
data

and

information

provided

by

art.

72

of

the

Labour

Code,

including

the

result

of

the

process

of

information

and
consultation

with

the

Trade

Union.

The

organizational

measures

provided

in

the

Reorganization

Plan

have

as

objectives
the

resizing

and

the

redefining

of

the

Company's

personnel

structure,

as

well

as

of

its

organization

and

functioning
mode,

for

the

optimal

correlation

between

the

number

of

employees

and

the

functions

performed,

in

accordance

with
the

current

activity

conditions

on

the

energy

market.

As

a

result

of

this

approach,

the

number

of

organizational

entities
within

the

Company

will

be

significantly

reduced

-

a

decrease

of

19%,

while

the

number

of

management

/

coordination
positions will be reduced even more - a decrease of 25%.

According

to

the

Collective

Labour

Contracts,

based

on

seniority,

the

employees

who

currently

occupy

the

positions

to
be

cancelled

are

entitled

to

receive

a

number

of

gross

average

base

salary

(Note

13

b)).

The

estimated

termination
benefit amounts to RON 5,054 thousand.

Starting

1

April

2020,

from

the

Collective

Labour

Contract

of

the

Company

the

benefit

in

kind

consisting

of

free

of

charge
electricity

granted

to

employees

who

retired

was

excluded.

This

benefit

was

stipulated

in

the

Collective

Labour

Contract
valid

until

31

March

2020.

In

the

same

time,

in

order

to

compensate

for

the

exclusion

of

the

benefit

in

the

form

of

free
of

charge

electricity,

as

per

the

new

Collective

Labour

Contract

in

force

starting

1

April

2020,

the

retirement

bonus
increased by 1 gross monthly base salary on all three levels of seniority.

Thus,

excluding

the

free

of

charge

electricity

benefit

to

the

retired

persons

from

the

Collective

Labour

Contract

generated
in

2020

a

decrease

in

Employee

benefits

costs

amounting

to

RON

574,243.

In

the

same

time,

the

increase

in

the
retirement bonus by 1 gross monthly base salary generated an additional expense in amount of RON 183,942.

In

2021

and

2020,

employee

benefit

obligations

were

computed

by

an

independent

actuary

using

the

projected

unit
credit method with benefits calculated proportionally to the period of service.

31 December

2021

31 December

2020

Defined benefit liability

5,599,583

691,940

Other long-term employee benefits

601,214

809,724

Total

6,200,797

1,501,664

- Current portion\*

5,150,498

48,477

- Non-current portion

1,050,299

1,453,187

\*included in Personnel payables in Note 12

(i)
Movement in the defined benefit liability and other long-term employee benefits

The

following

tables

shows

a

reconciliation

between

the

opening

balances

and

the

closing

balances

of

the

defined
benefit liability and other long-term employee benefits and their components. There are no plan assets.

Defined benefit liability

2021

2020

Balance at 1 January

691,940

1,093,812

Included in profit or loss

Current service cost

107,066

76,681

Past service cost/(gain)

5,054,128

(390,301)

Interest cost

22,832

35,576

5,184,026

(278,044)

Included in other comprehensive income

Re-measurements gain

- Actuarial gain

(269,825)

(104,482)

Other

Benefits paid

(6,558)

(19,346)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

340

Defined benefit liability

2021

2020

Balance at 31 December

5,599,583

691,940

Other long-term employee benefits

2021

2020

Balance at 1 January

809,724

1,078,865

Included in profit or loss

Current service cost

72,968

112,553

Actuarial gain

(268,743)

(226,090)

Interest cost

25,982

44,779

Other

Benefits paid

(38,717)

(200,383)

Balance at 31 December

601,214

809,724

Defined

benefits

refer

to

the

retirement

bonuses

granted

according

to

the

seniority

within

the

Company

and

other

long-
term benefits refer to the jubilee bonuses granted for seniority.

(ii) Actuarial assumptions

The following are the main actuarial assumptions at the respective reporting date:

(c)
Macroeconomic assumptions
:

•
inflation. The actuary used information from the
National Commission for Strategy and Prognosis:

Year

Valuation date

31 December 2021

Valuation date

31 December 2020

2021

7.5%

2.5%

2022

5.9%

2.5%

2023

3.2%

2.5%

2024

3.0%

2.5%

2025

2.8%

2.5%

2026+

2.5%

2.5%

•
the

discount

rate

used

is

based

on

the

yield

of

the

Romanian

Government

bonds

at

the

reporting

date,

therefore
the weighted average discount rate is 5% for the year 2021 (2020: 3.3%);

•
the

mortality

rate

published

by

the

National

Institute

of

Statistics

was

adjusted

to

90%

to

approximate

the

mortality
rates by generations;

•
taxes and social charges are those in force as at the reporting date.

(d)
Company specific assumptions:

•
Starting with 2022 the gross salaries’ growth was forecasted at the inflation level;

•
employees’ turnover: based on historical data;

•
jubilee and retirement bonuses granted based on seniority as per the collective labour contracts, as follows:

Jubilee bonuses based on years of service in the Company

No. of gross monthly base salaries

Seniority

31 December

2021

31 December

2020

20 years

1

1

30 years

2

2

35 years

3

3

40 years

4

4

45 years

5

5

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

341

Retirement bonuses based on years of service in the Company

No. of gross monthly base salaries

Seniority

31 December

2021

31 December

2020

Between 8 and 10 years

2

2

Between 10 and 25 years

3

2

More than 25 years

4

3

Termination benefits

a.
Termination benefits for individual lay-offs at the Company’s initiative

In

accordance

with

the

Collective

Labour

Contract

concluded

between

the

Company

and

the

Union,

when

individual
labour

contract

is

terminated

at

the

Company’s

initiative,

the

Company

will

pay

termination

benefits

to

the

employees
depending on their period of service, as follows:

Seniority

No. of gross monthly average base
salary at Company level

1 - 2 years

2

2 - 5 years

3

5 - 10 years

4

10 - 20 years

5

More than 20 years

8

b.
Termination benefits for collective lay-offs at the Company’s initiative

For

collective

lay-offs,

per

the

Collective

labour

contract,

the

Company

will

pay

termination

benefits

to

the

employees
depending on their period of service, as follows:

Seniority

No. of gross monthly average base
salary at Company level

1 - 3 years

3

3 - 5 years

6

5 - 10 years

7

10 - 20 years

11

More than 20 years

16

The

above-mentioned

stipulations

do

not

apply

to

employees

with

individual

labour

contract

concluded

for

a

determined
period.

The

above

provisions

do

not

apply

to

employees

that

obtained

other

higher

cumulative

salary

compensation
rights,

provided

by

legal

regulations

regarding

the

Company’s

reorganization

and

restructuring.

Employees

who

are

re-
employed within the
Company
 after layoff are not entitled to the above-mentioned benefits.

c.
Termination benefits for voluntary redundancies

In

accordance

with

the

Agreements

signed

between

the

Company

and

the

Union

and

the

Addendums

to

the

Collective
Labour

Contract,

in

case

the

individual

labour

contract

is

terminated

as

voluntary

redundancy

from

the

employee,

the
Company

pays

termination

benefits

depending

on

the

period

to

reach

the

standard

retirement

age,

the

period

of

service
in

the

Company

and

the

seniority.

The

number

of

gross

monthly

base

salaries

paid

in

2020

as

termination

benefits

varied
between 9 and 23. In 2021, there was no longer an agreement in place for the voluntary redundancies.

46
 Employee benefit expenses

2021

2020

Average number of employees

104

107

Number of employees at 31 December

109

120

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

342

2021

2020

Wages and salaries

31,429,153

29,896,689

Social security
contributions

784,372

642,577

Meal tickets

442,500

379,780

Termination benefit for labour/mandate contracts

6,583,625

899,509

Total

39,239,650

31,818,555

The number or employees at 31 December 2021 includes also the 6 employees with mandate agreements.

Termination

benefits

represent

compensation

payments

in

case

of

employees’

voluntary

departure

(see

also

Note

13
c) as well as management compensation in case of mandate contracts termination.

Management remuneration is presented within Note 29 – Related parties.

47

Income tax

In

determining

the

amount

of

current

and

deferred

tax,

the

Company

takes

into

account

the

impact

of

uncertain

tax
positions

and

whether

additional

taxes

and

interest

may

be

due.

This

assessment

relies

on

estimates

and

assumptions
and

may

involve

a

series

of

judgments

about

future

events.

The

Company

considers

that

the

accounting

records

for
taxes

due

are

adequate

for

all

open

fiscal

years,

based

on

assessment

made

by

management

taking

into

account
various

factors,

including

the

interpretation

of

tax

legislation

and

previous

experience.

New

information

may

become
available

that

causes

the

Company

to

change

its

judgment

regarding

the

adequacy

of

existing

tax

liabilities;

such
changes to tax liabilities will impact the income tax expense in the period when such a determination is made.

(i)
Amounts recognised in profit or loss

2021

2020

Deferred tax benefit

(43,172)

(3,076,614)

Total benefit related to income tax

(43,172)

(3,076,614)

(vi)
Amounts recognised in other comprehensive income

2021

2020

Before tax

Tax benefit

Net of tax

Before tax

Tax benefit

Net of tax

Revaluation of
property, plant and
equipment

-

-

-

11,901,253

(3,059,897)

8,841,356

Re-measurement of
defined benefit liability

269,825

(43,172)

226,653

104,482

(16,717)

87,765

Total

269,825

(43,172)

226,653

12,005,735

(3,076,614)

8,929,121

(vii)
Reconciliation of effective tax rate

2021

2020

Profit before tax

321,776,712

295,301,922

Tax using Company’s domestic tax rate

16%

51,484,274

16%

47,248,308

Non-deductible expenses

3%

9,640,583

2%

5,540,066

Non-taxable income

-17%

(54,761,824)

-13%

(38,303,478)

Deductible legal reserve

-1%

(2,574,214)

-1%

(2,362,415)

Recognition of tax effect of previously unrecognised tax
losses

-1%

(3,831,991)

-6%

(18,163,352)

Other tax effects

0%

-

1%

2,964,257

Total benefit related to income tax

0%

(43,172)

-1%

(3,076,614)

Non-taxable income represents dividend income in amount of RON 329,543,644

(2020: RON 214,969,717
).

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

343

(viii)
Movement in deferred tax balances

Balance at 31 December 2021

2021

Net
balance at
1 January
2021

Recognised
in profit or
loss

Recognised in
other
comprehensive
income

Net

Deferred
tax assets

Deferred
tax
liabilities

Property, plant and
equipment

3,681,453

58,089

-

3,739,542

-

3,739,542

Employee benefits

(1,829,942)

(488,804)

43,172

(2,275,574)

(2,275,574)

-

Tax loss carried
forward

(1,851,511)

387,543

-

(1,463,968)

(1,463,968)

-

Tax (assets)/
liabilities

-

(43,172)

43,172

-

(3,739,542)

3,739,542

Balance at 31 December 2020

2020

Net
balance at
1 January
2020

Recognised
in profit or
loss

Recognised in
other
comprehensive
income

Net

Deferred
tax assets

Deferred
tax
liabilities

Property, plant and
equipment

2,188,192

(1,566,636)

3,059,897

3,681,453

-

3,681,453

Employee benefits

(1,356,886)

(489,773)

16,717

(1,829,942)

(1,829,942)

-

Tax loss carried
forward

(831,306)

(1,020,205)

-

(1,851,511)

(1,851,511)

-

Tax (assets)/
liabilities

-

(3,076,614)

3,076,614

-

(3,681,453)

3,681,453

(ix)
Unrecognised deferred tax assets

The

Company

has

not

recognized

deferred

tax

assets

in

respect

of

the

entire

cumulated

tax

losses

as

it

is

not

probable
that future taxable profits will be available against which the Company can use the benefits therefrom.

2021

2020

Tax losses

356,623,017

371,426,355

48
 Trade receivables

31 December

2021

31 December

2020

Trade receivables, gross

582,938,825

582,495,101

Loss allowance

(582,012,952)

(582,083,147)

Total trade receivables, net

925,873

411,954

Receivables from related parties are presented in Note 29.

Trade receivables, gross, comprise:

31 December

2021

31 December

201920

Electricity receivables from clients in litigation, insolvency or
bankruptcy (mainly Oltchim, Transenergo)

493,474,169

493,018,184

Late payment penalties from clients in litigation, insolvency or
bankruptcy (Oltchim)

88,968,313

88,968,313

Other

496,343

508,604

Total trade receivables, gross

582,938,825

582,495,101

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

344

The

reconciliation

between

the

opening

balances

and

the

closing

balances

of

the

impairment

for

trade

receivables

is
as follows:

Loss allowance

2021

2020

Balance as at 1 January

582,083,147

679,778,904

Loss allowance recognized

2,220

18

Loss allowance used

-

(41,527)

Decrease in loss allowance

(72,415)

(97,654,248)

Balance as at 31 December

582,012,952

582,083,147

The ageing of trade receivables is presented in Note 28.

Oltchim

(a

state-controlled

company)

was

an

important

customer

of

Electrica

S.A.

until

January

2012,

when

the
Company

transferred

the

contract

to

Electrica

Furnizare

S.A..

In

January

2013,

Oltchim

entered

into

insolvency
procedures

and

subsequently

in

May

2019

started

the

bankruptcy

procedures.

Due

to

the

uncertainties

regarding

the
recoverability

of

the

amounts

owed

by

this

customer,

the

Company

recognized

in

prior

years

a

bad

debt

allowance

for
the

entire

amount

receivable.

During

2020,

the

Company

adjusted

the

uncollected

VAT

in

amount

of

RON

95,186,215
related

to

the

doubtful

receivables

from

Oltchim,

based

on

the

sentence

of

starting

the

bankruptcy

procedures

and

the
provisions of art. 287 of the Fiscal Code.

Also

during

2020,

the

Company

adjusted

the

uncollected

VAT

related

to

the

doubtful

receivables

from

two

other

clients
based

on

the

sentences

of

starting

the

bankruptcy

procedures

and

the

provisions

of

art.

287

of

the

Fiscal

Code,

as
follows:

the

amount

of

RON

707,624

related

to

CET

Braila

and

the

amount

of

RON

1,003,559

related

to

Electra
Management & Supply
.

As

the

entire

amount
 of

RON

96,897,398

was

recovered

during

2020,

by

offsetting

the

VAT

positions

to

be

recovered
with

the

payment

position

at

the

level

of

the

VAT

group

to

which

the

companies

in

the

Electrica

Group

belong,

the
adjustment for impairment was reversed with the same amount.

Loss

allowances

are

determined

according

to

IFRS

9

“Financial

instruments”

based

on

“expected

credit

loss”

model.

A
significant

part

of

the

loss

allowances

refers

to

clients

in

litigation,

insolvency

or

bankruptcy

procedures,

many

of

them
being

older

than

five

years.

The

Company

will

derecognize

these

receivables

together

with

the

related

allowances

after
the

finalization

of

the

bankruptcy

process.

These

receivables

were

treated

separately

in

computing

the

allowance
according to IFRS 9.

49
 Other receivables

31 December

2021

31 December

2020

Cash-pooling receivables

567,621,644

166,281,881

Interest receivable

18,319,302

15,380,004

Other receivables

9,870,962

10,145,826

Bad debt allowance

(11,046,264)

(11,046,264)

Total other receivables, net

584,765,644

180,761,447

Cash-pooling

receivables

comprises

the

receivable

of

Electrica

SA

as

at

31

December

2021

as

cash

pool

leader

in

the
two cash-pooling systems set up at Group level (Note 23 and Note 29).

Interest receivable represents mainly interest to be received from related parties for the loans granted (Note 29).

The

reconciliation

between

the

opening

balances

and

the

closing

balances

of

the

impairment

for

other

receivables

is
as follows:

Loss allowance

2021

2020

Balance as at 1 January

11,046,264

11,975,369

Loss allowance recognized

-

-

Loss allowance used

-

-

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

345

Decrease in loss allowance

-

(929,105)

Balance as at 31 December

11,046,264

11,046,264

50
 Cash and cash equivalents

31 December 2021

31 December 2020

Bank current accounts

3,042,170

18,418,340

Call deposits

2,715,802

175,066,480

Total cash and cash equivalents in the separate
statement of financial position

5,757,972

193,484,820

Overdrafts used for cash management purposes

(120,541,354)

-

Total cash and cash equivalents in
the separate
statement of cash flow

(114,783,382)

193,484,820

Restricted cash – short-term

-

320,000,000

On

16

October

2021,

it

was

released

the

collateral

deposits

from

BRD

–

Groupe

Societe

Generale

following

the
repayments

of

the

long

term

borrowings

received

from

BRD

–

Groupe

Societe

Generale

by

the

Company’s

distribution
subsidiaries

(Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

Societatea

de

Distributie

a

Energiei
Electrice

Transilvania

Nord

S.A.

and

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,

currently
Distributie Energie Electrica Romania S.A.) in amount of RON 320,000,000.

As

at

31

December

2021,

the

overdraft

amount

was

drawn

from

ING

Bank

N.V.

overdraft

facility

to

be

used

in

the

cash
pooling

system.

The

outstanding

balance

of

the

overdraft

facility

as

at

31

December

2021

is

of

RON

120,541,354

(31
December 2020: Nil).

51
Property, plant and equipment

The

reconciliation

between

the

initial

balance

and

the

final

balance

of

property,

plant

and

equipment

in

2021

and

2020:
was as follows:

Land and land
improvement

Buildings

Equipment

Vehicles,
furniture
and office
equipment

Construction in
progress

Total

Gross carrying amount

Balance at 1 January 2020

37,164,672

21,118,592

250,959,169

783,366

4,692,392

314,718,191

Additions

32,235,368

1,905,508

285,216

520,751

54,230

35,001,073

Revaluation recognized in other
comprehensive income, net

6,880,612

5,020,641

-

-

-

11,901,253

Revaluation recognized in profit or
loss, net

166,490

-

-

-

-

166,490

Gross book value netted off against
the accumulated depreciation at
revaluation

-

(890,671)

-

-

-

(890,671)

Disposals

(6,764,156)

(147,779)

(224,809,642)

(129,119)

(2,612,179)

(234,462,875)

Balance at 31 December 2020

69,682,986

27,006,291

26,434,743

1,174,998

2,134,443

126,433,461

Additions

-

-

205,413

50,460

4,282,864

4,538,737

Reclassification to assets held to
sale

-

-

(1,913,945)

-

-

(1,913,945)

Disposals

(302,732)

-

(7,407,038)

(6,244)

-

(7,716,014)

Balance at 31 December 2021

69,380,254

27,006,291

17,319,173

1,219,214

6,417,307

121,342,239

Accumulated depreciation

and impairment losses

Balance at

1 January 2020

-

615,437

150,041,093

307,601

2,134,443

153,098,574

Depreciation

-

299,307

10,714,327

119,810

-

11,133,444

Accumulated depreciation of
disposals

-

(24,073)

(143,843,969)

(129,120)

-

(143,997,162)

Impairment of property, plant and
equipment

-

1,905,508

9,435,994

-

-

11,341,502

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

346

Land and land
improvement

Buildings

Equipment

Vehicles,
furniture
and office
equipment

Construction in
progress

Total

Reversal of impairment of property,
plant and equipment, net

-

-

(1,195,521)

(1,195,521)

Accumulated depreciation netted off
against gross book value at
revaluation

-

(890,671)

-

-

-

(890,671)

Balance at

31 December 2020

-

1,905,508

25,151,924

298,291

2,134,443

29,490,166

Depreciation

-

371,863

595,392

147,051

-

1,114,306

Accumulated depreciation of
disposals

-

-

(4,366,733)

(6,133)

-

(4,372,866)

Reversal of impairment of property,
plant and equipment

-

-

(3,804,893)

-

-

(3,804,893)

Reclassification to assets held for
sale

-

-

(1,141,954)

-

-

(1,141,954)

Balance at

31 December 2021

-

2,277,371

16,433,736

439,209

2,134,443

21,284,759

Net carrying amounts

At 1 January 2020

37,164,672

20,503,155

100,918,076

475,765

2,557,949

161,619,617

At 31 December 2020

69,682,986

25,100,783

1,282,819

876,707

-

96,943,295

At 31 December 2021

69,380,254

24,728,920

885,437

780,005

4,282,864

100,057,480

As

at

31

December

2021,

the

buildings

and

land

include

the

administrative

headquarter

of

the

Company

and

the
corresponding

land,

the

plots

of

land

over

which

the

Company

has

obtained

title

deeds

and

the

land

and

buildings
acquired in 2020 from the subsidiary
Servicii Energetice Muntenia S.A.
.

As

at

31

December

2021,

additions

refer

mainly

to

the

refurbishment

and

modernization

of

the

administrative
headquarter of the Company.

In

2021,

following

the

return

from

producers

of

reading

meters,

as

well

as

the

repair

of

reading

meters

that

appeared
as

faulty

at

the

time

when

the

Automatic

Meter

Reading

was

contributed

in

kind

by

Electrica

SA

to

the

share

capital

of
its

distribution

subsidiaries

in

June

2020,

it

resulted

a

number

of

882

reading

meters

at

a

net

book

value

of

RON

771,991
and fair value of RON 279,655 which the management of Electrica SA is committed to sell in the following period.

On

28

May

2020,

the

Company

acquired

a

plot

of

land

and

several

buildings

from

Servicii

Energetice

Muntenia

S.A.

in
the

total

amount

of

RON

33,772,570,

of

which

land

in

amount

of

RON

31,867,062

and

buildings

in

amount

of

RON
1,905,508.

An

additional

amount

of

RON

368,306

representing

taxes

paid

for

the

acquisition

of

the

land

was

capitalized
in the value of the land.

The

plot

of

land

received

according

to

the

payment

agreement

is

in

surface

of

15,844

sqm

and

the

buildings

are
represented

by

22

constructions

in

various

stages

of

degradation,

constructions

for

which

the

Company

has

recognized
an impairment amounting to RON 1,905,508.

In

2021,

disposals

from

property,

plant

and

equipment

in

the

net

amount

of

RON

302,732

refers

to

a

plot

of

land

which
was contributed in kind by Electrica SA to the share capital of its subsidiary Electrica Furnizare S.A.

In

2020,

disposals

from

property,

plant

and

equipment

in

the

net

amount

of

RON

90,465,713

refer

mainly

to

the

AMR
system

(Automatic

Meter

Reading)

equipment

consisting

of

electricity

measuring

equipment

and

7

plots

of

land

that
were

contributed

in

kind

by

Electrica

SA

to

the

share

capital

of

its

subsidiaries

(SDEE

Transilvania

Nord

S.A.,

SDEE
Transilvania Sud S.A., SDEE Muntenia Nord S.A. and Electrica SERV S.A.), as follows:

Month

Subsidiary

Assets transferred

Net book value (RON)

June 20

SDEE Muntenia Nord S.A.

AMR equipment

16,521,690

June 20

SDEE Muntenia Nord S.A.

2 plots of land in surface of 28,696.79 sqm

1,497,132

June 20

SDEE Transilvania Nord S.A.

AMR equipment

37,014,957

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

347

AMR
license intangibles (see Note 21)

2,925,303

AMR construction in progress

763,741

June 20

SDEE Transilvania Sud S.A.

AMR equipment

27,409,181

AMR construction in progress

1,803,638

May 20

Electrica Serv S.A.

5 plots of land in surface of 23,474.07 sqm

5,103,471

Total

93,039,113

As

at

31

December

2021

the

Company

reversed

an

impairment

loss

in

amount

of

RON

3,804,893

(31

December

2020:
1,195,521) for the equipment part of the AMR system which was written off or reclassified to held for sale.

As

at

31

December

2020,

the

Company

performed

the

revaluation

at

fair

value

of

tangible

assets

consisting

of

land
and buildings. The revaluation was performed by an independent authorized valuer Darian DRS S.A..

Following

the

revaluation

performed,

the

gain

from

the

increase

in

value

on

the

land

and

buildings

was

charged

to

Other
Comprehensive Income in amount of RON 11,901,253 and in Profit or Loss in amount of RON 166,490.

Measurement of fair value

The

Company
’
s

land

and

buildings

are

stated

at

their

revalued

amounts,

being

the

fair

value

at

the

date

of

revaluation,
less

any

subsequent

accumulated

depreciation

and

subsequent

accumulated

impairment

losses.

The

fair

value
measurements

of

the

Company
’
s

land

and

buildings

as

at

31

December

2020

were

performed

by

Darian

DRS

S.A.

an
independent

valuer

not

related

to

the

Company.

Darian

DRS

S.A.

is

member

of

the

National

Association

of

Authorised
Romanian

Valuers
,

and

has

appropriate

qualifications

and

recent

experience

in

the

fair

value

measurement

of

properties
in

the

relevant

locations.

The

valuation

conforms

to

International

Valuation

Standards

and

was

based

on

recent

market
transactions
on arm
’
s length terms for similar properties, whenever possible and discounted cash-flows method.

There has been no change to the valuation technique during the period between the present revaluation performed as
at 31 December 2020 and the previous one, performed as at 31 December 2017.

The

following

table

shows

the

valuation

techniques

used

in

measuring

fair

values

(Level

3),

as

well

as

the

significant
unobservable inputs used.

Category

Valuation technique

Significant unobservable
inputs

Inter-relationship
between key
unobservable inputs and
fair value measurement

Land

Market approach

The fair value is estimated based on selling
price per square meter of land of similar
characteristics (i.e. ownership, legal
limitations, financing and selling conditions,
location, physical and economical
properties, and best use). The market price
is mainly based on recent transactions.

•
Adjustment for liquidity,
location, size.

The estimated fair value
would increase/(decrease) if:

•
Adjustment for liquidity,
location or size would be
lower/(higher).

Buildings

Market approach and discounted cash-flows
(DCF) method

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

348

Category

Valuation technique

Significant unobservable
inputs

Inter-relationship
between key
unobservable inputs and
fair value measurement

Buildings were evaluated using the
following methods, depending on the best
use and the availability and credibility of
available market information:

Market approach

The market approach is based on the
selling price per square meter for buildings
with similar characteristics(i.e. ownership,
legal limitations, financing and selling
conditions, location, physical and
economical properties, and best use).,
adjusted
liquidity, location, size etc.

The DCF method

The valuation model based on the DCF
method estimates the present value of net
cash flows to be generated by a building
taking into account occupancy rate and
annual rent. The discount rate estimation
considers, inter alia, the quality of a
building and its location.

•
Adjustment for liquidity,
location, size.

•
Occupancy rates (90%)

•
Yield rates (between
9% and 10%)

•
Annual rent per sqm
(between 2 and 10
EUR/sqm), depending
on location;

•
Adjustment for
liquidity,
location or size would be
lower/(higher).

•
Occupancy rates were
higher/(lower)

•
Yield rates were
lower/(higher)

•
Annual rent per sqm was
higher/(lower)

52
Intangible assets

Intangible

assets

include

mainly

licenses

and

costs

of

implementation

of

the

accounting

system

SAP

and

licenses

for
various software, as follows:

Software and licenses

Total

Gross carrying amount

Balance at 1 January 2020

8,886,791

8,886,791

Additions

29,175

29,175

Disposals

(5,093,287)

(5,093,287)

Balance at 31 December 2020

3,822,679

3,822,679

Disposals

(1,023,055)

(1,023,055)

Balance at 31 December 2021

2,799,624

2,799,624

Accumulated depreciation and impairment losses

Balance at 1 January 2020

4,655,502

4,655,502

Amortisation

1,062,281

1,062,281

Accumulated amortization of disposals

(2,167,984)

(2,167,984)

Balance at 31 December 2020

3,549,799

3,549,799

Amortisation

219,204

219,204

Accumulated amortization of disposals

(1,023,055)

(1,023,055)

Balance at 31 December 2021

2,745,948

2,745,948

Net carrying amounts

At 1 January 2020

4,231,289

4,231,289

At 31 December 2020

272,880

272,880

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

349

Software and licenses

Total

At 31 December 2021

53,676

53,676

53
Investments in subsidiaries

The investments in subsidiaries are presented as follows:

Changes in Company’s subsidiaries structure in 2021

Establishment of a new Subsidiary

On

6

September

2021,

is

set

up

a

new

legal

entity,

Electrica

Productie

Energie

S.A.,

organized

as

a

joint

stock

company,
in

which

Electrica

SA

holds

a

percentage

of

99.9920%

of

the

share

capital

and

Electrica

Serv

S.A.

holds

a

percentage
of

0.0080%

of

the

share

capital.

The

object

of

activity

is

the

production

of

electricity

from

renewable

sources

through
the

acquisition

and

development

of

projects,

respectively

the

operation

of

electricity

generation

parks

from

renewable
sources,

cumulated

with

the

development

and

operation

of

independent

storage

solutions

that

it

intends

to

develop

in
the near future.

Changes in Company’s subsidiaries structure in 2020

Merger of the three distribution companies

On

27

May

2020,

Electrica

SA’s

Board

of

Directors

approved

in

principle

the

merger

through

absorption

between
Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,

Societatea

de

Distributie

a

Energiei

Electrice
Transilvania

Nord

S.A.

and

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

the

absorbing

entity
being Societatea de Distributie a Energiei Electrice Transilvania Nord S.A..

On

14

October

2020,

the

Cluj

Specialized

Court

admitted

the

request

of

SDEE

Transilvania

Nord

S.A.,

as

absorbing
company,

and

the

request

of

SDEE

Transilvania

Sud

S.A.

and

SDEE

Muntenia

Nord

S.A.,

as

the

absorbed

companies,
approved the merger and ordered the deregistration of the absorbed companies from the Trade Register.

31 December 2021

31 December 2020

Gross value

Impairment

Net

Gross value

Impairment

Net

Distributie Energie Electrica
Romania S.A.

1,741,663,327

-

1,741,663,327

1,741,663,339

-

1,741,663,339

Electrica Furnizare S.A.

226,001,553

-

226,001,553

225,783,453

-

225,783,453

Electrica Serv S.A.

481,803,770

(164,368,925)

317,434,845

481,803,862

(164,368,956)

317,434,906

Servicii Energetice Oltenia
S.A.

(in bankruptcy)

82,033,220

(82,033,220)

-

82,033,220

(82,033,220)

-

Servicii Energetice Moldova
S.A.

(in bankruptcy)

106,162,492

(106,162,492)

-

106,162,492

(106,162,492)

-

Servicii Energetice Banat
S.A.

(in bankruptcy )

43,761,094

(43,761,094)

-

43,761,094

(43,761,094)

-

Servicii Energetice
Dobrogea S.A.

(in bankruptcy)

23,822,124

(23,822,124)

-

23,822,124

(23,822,124)

-

Electrica Energie Productie
S.A.

124,990

-

124,990

-

-

-

Total

2,705,372,570

(420,147,855)

2,285,224,715

2,705,029,584

(420,147,886)

2,284,881,698

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

350

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

31

December

2020,

when

SDEE

Transilvania
Sud

S.A.

and

SDEE

Muntenia

Nord

S.A.

as

the

absorbed

entities

ceased

to

exist,

being

dissolved

without

going

into
liquidation.

Consequently,

all

of

their

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by
absorption

to

SDEE

Transilvania

Nord

S.A.,

as

the

absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the
share

capital

of

SDEE

Transilvania

Nord

S.A.

in

favour

of

the

shareholder

of

the

absorbed

entities,

namely

Electrica

SA.

Thus,

on

31

December

2020,

Distributie

Energie

Electrica

Romania

SA,

formed

by

the

merger

of

the

three

former
electricity distribution companies was recorded on the National Trade Register Office.

Also,

based

on

the

Romanian

Energy

Regulatory

Authority

Decision

no.

2461

dated

23

December

2020,

the

electricity
distribution

licenses

granted

by

the

regulator

to

the

absorbed

companies

for

the

areas

Muntenia

Nord

and

Transilvania
Sud were transferred to the absorbing company, Distributie Energie Electrica Romania, starting with 1 January 2021.

Merger of the two energy services companies

On

27

March

2020,

Electrica

SA’s

Board

of

Directors

approved

in

principle

the

merger

through

absorption

between
Electrica

Serv

S.A.

and

Servicii

Energetice

Muntenia

S.A.

and

the

participation

of

the

companies

to

the

merger,

with
Electrica Serv S.A. as absorbing company.

On

17

September

2020,

the

VI

Civil

Section

of

the

Bucharest

Court

admitted

the

request

of

Electrica

Serv

S.A.,

as
absorbing

company,

and

the

request

of

Servicii

Energetice

Muntenia

S.A.,

as

the

absorbed

company,

and

ascertained
the

legality

of

the

merger

process

and

approved

the

registration

with

the

Trade

Register

of

the

corresponding

merger
mentions.

Therefore,

the

merger

produces

its

effects

starting

with

the

effective

date,

30

November

2020,

when

Servicii

Energetice
Muntenia

S.A.,

as

the

absorbed

entity,

ceased

to

exist,

being

dissolved

without

going

into

liquidation.

Consequently,
all

of

its

assets

and

liabilities

were

transferred

through

the

effect

of

the

merger

by

absorption

to

Electrica

Serv

S.A.,

as
the

absorbing

entity,

in

exchange

of

the

issuance

of

new

shares

in

the

share

capital

of

Electrica

Serv

S.A.

in

favour

of
the shareholder of the absorbed entity, namely Electrica SA.

Thus,

starting

with

1

December

2020,

the

merger

between

the

aforementioned

companies

was

finalized

energy

services
will

be

carried

out

only

under

the

umbrella

of

Electrica

Serv.
The

registration

on

the

National

Trade

Register

Office

took
place on 2 December 2020, with effective date 30 November 2020.

Both

mergers

that

took

place

during

2020

consists

only

in

reorganization

of

the

subsidiaries

and

have

no

impact

on

the
Company’s ownership, Electrica SA remaining the parent company with the same % of ownership.

Movements in investments

During

2021,

Electrica

SA

has

increased
,

its

investments

in

Electrica

Furnizare

S.A.

subsidiary
,

by

in

kind

contribution
to

its

share

capital

with

one

plot

of

land

in

surface

of

335.20

mp

for

which

it

held

property

deeds

with

the

amount

of
RON

218,100.

The

value

of

the

assets

contributed

to

the

share

capital

of

the

subsidiary

was

established

according

to
evaluation reports drawn up by the appointed valuation experts.

On

6

September

2021,

is

set

up

a

new

legal

entity,

Electrica

Productie

Energie

S.A.,

organized

as

a

joint

stock

company,
in

which

Electrica

SA,

holds

a

number

of

12,499

shares

in

amount

of

124,990

RON

representing

99.9920%

of

the

share
capital of Electrica Productie Energie S.A..

During

2020,

Electrica

SA

has

increased
,

its

investments

in

its

subsidiaries

(Societatea

de

Distributie

a

Energiei

Electrice
Muntenia

Nord

S.A.,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.,

Societatea

de

Distributie

a
Energiei

Electrice

Transilvania

Sud

S.A.

and

Electrica

SERV

S.A.),

by

in

kind

contribution

to

their

share

capital

with

plots
of

land

for

which

it

held

property

deeds

and

with

the

AMR

system

including

AMR

license,

with

the

amount

of

RON
92,525,620.

The

value

of

the

assets

contributed

to

the

share

capital

of

the

subsidiaries

was

established

according

to
evaluation reports drawn up by the appointed valuation experts
.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

351

On

18

December

2019,

through

decision

no.

11

of

the

General

Extraordinary

Shareholders

Meeting

of

Servicii

Energetice
Muntenia

S.A.,

was

approved

the

share

capital

reduction

of

Servicii

Energetice

Muntenia

S.A.

with

the

amount

of

RON
24,873,550

thorugh

the

reduction

in

the

number

of

shares

from

3,687,355

shares

to

1,200,000

shares

with

a

nominal
value

or

RON/share

10

and

recording

a

receivable

in

the

same

amount

by

the

shareholder,

Electrica

S.A..

The

share
capital

reduction

was

approved

by

the

Bucharest

Trade

Register

Office

on

18

May

2020.

Following

the

approval,

on

28
May

2020,

the

receivable

of

Electrica

S.A.

was

compensated

with

the

debt

from

the

acquisition

of

a

plot

of

land

an
related buildings from Servicii Energetice Muntenia S.A..

As

regard

to

Electrica

Serv

S.A.,

the

Company

has

recognized

an

impairment

in

prior

years,

based

on

a

valuation

report
prepared

by

an

independent

valuator

and

having

as

purpose

the

assessment

of

the

recoverable

value

of

the

investment
in Electrica Serv S.A..

As of 31 December 2021, the management has reassessed the recoverability of the net book value of the investment
in Electrica Serv S.A. and the consistency of the impairment as compared to 31 December 2020, by taking into
account the value of the net assets and the assets owned and concluded that there is no indication that the
investment may be additionally impaired or that the impairment should be reversed.

Due to the current situation of Electica Furnizare SA, management has assessed the recoverability of the net book
value of the investment, by taking into account the cash flow projection and the measures taken to mitigate the risks
of liquidity and concluded that there is no indication that the investment may be impaired.

The main economic and financial indicators achieved by the Company's subsidiaries on 31.12.2020

The

main

economic

and

financial

indicators

achieved

by

the

Company's

subsidiaries

as

at

31

December

2020

(the

last
financial year for which the statutory financial statements were approved) are as follows:

Indicators

Distributie Energie
Electrica Romania
S.A.

Electrica Serv
S.A.

Electrica
Furnizare S.A.

Share capital

1,405,204,790

52,495,780

62,873,860

Total equity

4,917,103,286

382,977,290

363,487,366

Non-current assets

8,979,749,495

324,840,831

97,267,046

Current assets

700,915,480

123,188,247

1,117,019,905

Current liabilities

1,101,696,030

35,367,897

787,966,539

Provisions

148,747,621

11,083,379

28,717,184

Deferred revenue

2,085,457,919

18,827,041

1,967,197

Non-current liabilities

1,430,296,551

-

33,873,216

54
Investments in associates

On

28

July

2021

and

on

7

December

2021,

Electrica

SA

concluded

four

agreements

for

the

sale-purchase

of

shares

in
four

project

companies

having

as

main

object

of

activity

the

production

of

electricity

from

renewable

sources.

The

sale-
purchase

agreements

concluded,

mention

the

fact

that

in

the

first

stage

Electrica

SA

acquires

30%

of

the

share

capital
of

the

four

companies,

remaining

that

in

the

following

stages,

to

acquire

the

remaining

70%

of

the

share

capital

after
the conditions provided in the sale-purchase agreements will be fulfilled.

The four companies are as follows:

-

Crucea

Power

Park

SRL
,

develops

the

wind

project

"Crucea

Est",

with

a

projected

installed

capacity
of

121

MW

and

a

projected

electricity

storage

capacity

of

60

MWh

(15

MW

x

4h),

located

outside

the
Crucea

area,

Constanta

County.

The

estimated

purchase

price

for

the

"Crucea

Est"

wind

project

is

70
thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

8,470

thousand

EUR.

On

28

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

352

July

2021,

Electrica

SA

paid

the

amount

of

EUR

2,541

thousand

representing

30%

of

the

project

value,
respectively 30% of the shares of Crucea Power Park SRL.

-

Sunwind

Energy

SRL
,

develops

the

photovoltaic

project

"Satu

Mare

2"

with

a

designed

installed
capacity

of

27

MW,

located

near

Satu

Mare

city.

The

estimated

purchase

price

for

the

photovoltaic

project
"Satu

Mare

2"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

1,485
thousand

EUR.

On

28

July

2021,

Electrica

SA

paid

the

amount

of

EUR

445.5

thousand

representing

30%
of the project value, respectively 30% of the shares of Sunwind Energy SRL.

-

New

Trend

Energy

SRL
,

develops

the

photovoltaic

project

"Satu

Mare

3",

with

a

projected

capacity

of
59

MW,

located

near

Satu

Mare

city.

The

estimated

purchase

price

for

the

photovoltaic

project

"Satu

Mare
3"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

3,245

thousand

EUR.
On

28

July

2021,

Electrica

SA

paid

the

amount

of

EUR

973.5

thousand

representing

30%

of

the

project
value, respectively 30% of the shares of New Trend Energy SRL.

-

Foton

Power

Energy

SRL
,

develops

the

photovoltaic

project

"Bihor

1",

with

a

projected

capacity

of
77.5

MW,

located

near

Inand

city,

Bihor

County.

The

estimated

purchase

price

for

the

photovoltaic

project
"Bihor

1"

is

55

thousand

EUR/MW

for

the

aforementioned

capacity,

totalling

the

amount

of

4,262.5
thousand

EUR.

On

7

December

2021,

Electrica

SA

paid

the

amount

of

EUR

1,279

thousand

representing
30% of the project value, respectively 30% of the shares of Foton Power Energy SRL.

Considering

the

holding

percentage

of

30%,

as

at

31

December

2021,

the

four

entities

are

accounted

for

using

the
equity method in these separate financial statements as provided in the Company's accounting policies in note 6.

The cost of the investments at acquisition date, totalling the amount of
RON
25,813,194
 is detailed as follows:

Crucea Power
Park S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

Acquisition date

31.07.2021

31.07.2021

31.07.2021

31.12.2021

Percentage ownership and
voting rights at acquisition date

30%

30%

30%

30%

Net assets at acquisition date

(241,682)

(5,023)

(5,055)

(7,016)

Company’s share of net assets

(72,505)

(1,507)

(1,516)

(2,105)

Goodwill

12,572,700

4,790,543

2,193,109

6,334,475

Cost of investment at acquisition
date

12,500,195

4,789,036

2,191,593

6,332,370

Summarised financial information in respect of each of the Company’s associates is set out below:

Crucea
Power Park
S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

31.12.2021

31.12.2021

31.12.2021

31.12.2021

Non-current assets

7,077,834

248,925

160,968

141,436

Current assets

944,520

47,490

20,987

22,890

Non-current liabilities

(6,904,114)

(302,773)

(190,152)

(167,773)

Current liabilities

(1,364,020)

(2,433)

(650)

(3,569)

Net assets

(245,780)

(8,791)

(8,847)

(7,016)

Reconciliation to carrying amounts:

Opening net assets at acquisition date

(241,682)

(5,023)

(5,055)

-

Loss for the period

(4,098)

(3,768)

(3,792)

-

Closing net assets 31.12.2021

(245,780)

(8,791)

(8,847)

(7,016)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

353

Reconciliation of the above summarised financial information to the carrying amount of the interest in associates recognised
in the separate financial statements:

Crucea
Power Park
S.R.L.

New Trend
Energy S.R.L.

Sunwind Energy

S.R.L.

Foton Power
Energy

S.R.L.

Closing net assets of associates
31.12.2021

(245,780)

(8,791)

(8,847)

(7,016)

Share in associates %

30%

30%

30%

30%

Company’s share of net assets as at
31.12.2021

(73,734)

(2,638)

(2,654)

(2,105)

Goodwill

12,572,700

4,790,543

2,193,109

6,334,475

Carrying amount of interest in associate
31.12.2021

12,498,966

4,787,905

2,190,455

6,332,370

The

share

loss

in

amount

of

RON

3,498

for

the

period

was

recognized

in

the

separate

statement

of

profit

and

loss

for
the year ended as at 31 December 2021.

55
Loans granted to subsidiaries

i.
Loans granted to subsidiaries – long term

Loans granted to subsidiaries

31 December

2021

31 December

2020

Distributie Energie Electrica Romania S.A.

1,276,325,000

1,030,000,000

Total loans granted to subsidiaries – long term

1,276,325,000

1,030,000,000

The Company has entered into loan agreements as lender, as follows:

•
Loans granted in 2017:

-
Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)

concluded

in

November

2017.

Main

provisions

are:

maximum

loan

amount:
RON

150,000,000;

Purpose

of

the

loan:

to

finance

the

investment

program

of

2017;

Interest

rate:

2.79%

per

annum;
Maturity:

84

months;

Period

allowed

for

disbursements:

12

months;

Repayment

in

full

at

maturity;

Reimbursement
allowed

in

advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding
balance is of RON
150,000,000 (31 December 2020:
RON
150,000,000)
;

-
Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)

concluded

in

November

2017.

Main

provisions

are:

maximum

loan

amount:
RON

200,000,000;

Purpose

of

the

loan:

to

finance

the

investment

program

of

2017;

Interest

rate:

2.79%

per

annum;
Maturity:

84

months;

Period

allowed

for

disbursements:

12

months;

Repayment

in

full

at

maturity;

Reimbursement
allowed

in

advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding
balance is of RON 200,000,000 (31 December 2020: 200,000,000);

-
Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)


concluded

in

November

2017.

Main

provisions

are:

maximum

loan

amount:
RON

160,000,000;

Purpose

of

the

loan:

to

finance

the

investment

program

of

2017;

Interest

rate:

2.79%

per

annum;
Maturity:

84

months;

Period

allowed

for

disbursements:

12

months;

Repayment

in

full

at

maturity;

Reimbursement
allowed

in

advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding
balance is of RON 160,000,000 (31 December 2020: RON 160,000,000).

•
Loans granted in 2018:

-



Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)

concluded

in

April

2018.

Main

provisions

are:

maximum

loan

amount:

RON
230,000,000;

Purpose

of

the

loan:

to

finance

the

investment

program

of

2018;

Interest

rate:

4.7%

per

annum;
Maturity:

84

months;

Period

allowed

for

disbursements:

12

months;

Repayment

in

full

at

maturity;

Reimbursement
allowed

in

advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding
balance is of RON 230,000,000 (31 December 2020: RON 230,000,000);

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

354

-
Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)

concluded

in

April

2018.

Main

provisions

are:

maximum

loan

amount:

RON
160,000,000;

Purpose

of

the

loan:

to

finance

the

investment

program

of

2018;

Interest

rate:

4.7%

per

annum;
Maturity:

84

months;

Period

allowed

for

disbursements:

12

months;

Repayment

in

full

at

maturity;

Reimbursement
allowed

in

advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding
balance is of RON 160,000,000 (31 December 2020: RON 160,000,000);

-
Intragroup

loan

agreement

with

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.

(currently
Distributie

Energie

Electrica

Romania

S.A.)

concluded

in

April

2018.

Main

provisions

are:

maximum

loan

amount:

RON
130,000,000,

Purpose

of

the

loan:

to

finance

the

investment

program

of

2018,

Interest

rate:

4.7%

per

annum,

Maturity:
84

months,

Period

allowed

for

disbursements:

12

months,

Repayment

in

full

at

maturity;

Reimbursement

allowed

in
advance,

but

not

earlier

than

the

12

months

of

the

period

of

use.

As

at

31

December

2021,

the

outstanding

balance

is
of RON 130,000,000 (31 December 2020: RON 130,000,000).

•
Loans granted in 2021:

-

Intragroup

loan

agreement

with

Distributie

Energie

Electrica

Romania

S.A.

concluded

in

October

2021.

Main

provisions
are:

maximum

loan

amount:

RON

246,325,000,

The

purpose

of

granting

this

loan

is

the

partial

repayment

of

loans
contracted

from

BRD

in

2016

to

finance

the

investment

plan

for

the

year

2016

which

reached

the

maturity

in

October
2021,

Interest

rate:

3.51%

per

annum,

Maturity:

96

months

until

12.10.2029,

Period

allowed

for

disbursements:

12
months,

Repayment

in

full

at

maturity;

Reimbursement

allowed

in

advance,

but

not

earlier

than

the

12

months

of

the
period of use. As at 31 December 2021, the outstanding balance is of RON 246,325,000.

ii.
Loans granted to subsidiaries – short term

Loans granted to subsidiaries

31 December

2021

31 December

2020

ELectrica Furnizare S.A.

30,000,000

-

Total loans granted to subsidiaries – short term

30,000,000

-

On

23.12.2021

was

concluded

an

intragroup

loan

agreement

with

Electrica

Furnizare

S.A..

Main

provisions

are:
maximum

loan

amount:

RON

130,000,000,

The

purpose

of

granting

this

loan

represents

the

financing

of

the

short

term
working

capital

needs,

Interest

rate:

ROBOR

1M

+

0.23

%

per

annum,

Maturity:

30

days

until

23.01.2022

with
possibility

of

extension.

The

total

amount

drawn

was

of

RON

90,000,000

out

of

which

on

28.12.2021

it

was

repaid

the
amount of RON 60,000,000. As at 31 December 2021, the outstanding balance is of RON 30,000,000.

iii.
Multi-borrower credit agreements

On

1

April

2019,

between

Banca

Comerciala

Romana,

as

lender

and

Societatea

Energetica

Electrica

SA,

as

guarantor
and

borrower,

together

with

its

distribution

subsidiaries

(SDEE

Muntenia

Nord

S.A.,

SDEE

Transilvania

Nord

S.A.

and
SDEE

Transilvania

Sud

S.A.,

currently

Distributie

Energie

Electrica

Romania

S.A.)

as

borrowers,

was

concluded

a
contract

for

a

multi-product

revolving

facility,

as

follows:

Maximum

loan

amount:

RON

125,000,000;

Purpose

of

the
loan:

financing

the

current

activity;

Interest

rate:

0.77%

+

ROBOR

1M

p.a.;

Initial

maturity:

16

March

2020

and

was
extended

with

1

year,

until

16

March

2021

under

the

same

terms

and

conditions.

Repayment:

in

full,

at

maturity.

At
the maturity date the revolving facility has not been extended.

On

16

April

2019,

between

BNP

PARIBAS,

as

lender

and

Societatea

Energetica

Electrica

SA,

as

guarantor

and

borrower,
together

with

its

subsidiaries,

Electrica

Furnizare

S.A.

and

Electrica

Serv

S.A.

as

borrowers,

was

concluded

a

contract
for

a

credit

facility

in

the

form

of

a

credit

line

from

the

current

accounts

opened

by

borrowers

to

the

lender,

as

follows:
Maximum

loan

amount:

RON

160,000,000

(maximum

amount

for

Electrica

SA

is

RON

10.000.000);

Purpose

of

the

loan:
financing

the

current

activity;

Interest

rate:

0.60%

+

ROBOR

1M

p.a.;

Initial

maturity:

16

March

2020

and

was
extended,

until

16

March

2022

under

the

same

terms

and

conditions.

Repayment:

in

full,

at

maturity.

As

at

31

December
2021, the outstanding balance of the facility for the Company is nill.

iv.
Cash pooling system at Group level

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

355

On

20

December

2019,

between

ING

Bank

N.V.,

Electrica

SA

and

its

subsidiaries

were

concluded

two

agreements

for
the implementation of two cash pooling schemes, as follows:

•
a

first

system

involving

Electrica

SA,

as

cash

pool

leader

and

its

distribution

subsidiaries

(
Societatea

de
Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.,

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania
Nord

S.A.

and

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.,

currently

Distributie

Energie
Electrica Romania S.A.
), as participants;

The

credit

facility

offered

by

the

pool

leader

to

each

participant

is

up

to

the

amount

of

RON

180,000,000

RON;
The

credit

facility

offered

by

each

participant

to

the

pool

leader

is

up

to

the

amount

of

RON

50,000,000;
Interest

rate:

ROBOR

1M

+

0.07%

p.a.

However,

if

the

amounts

drawn

by

the

participants

are

covered

both
by

the

internal

liquidity

of

Electrica

SA,

and

by

drawing

from

the

credit

line

granted

to

Electrica

SA,

the

amount
of

interest

due

by

the

participants

to

Electrica

SA

will

be

calculated

using

a

weighted

interest

rate,

calculated
on

the

basis

of

the

ROBOR

Internal

Rate

1M

+0.07%

p.a.

and

the

ROBOR

Bank

Rate

1M

+

0.8%

p.a.

The
initial

due

date

was

20.12.2020,

the

convention

being

automatically

extended

at

the

maturity

of

the

bank
facility agreement 28.01.2022;

•
a

second

system

involving

Electrica

SA,

as

cash

pool

leader

and

its

subsidiaries,

Electrica

Furnizare

S.A.,
Electrica

Serv

S.A.
,

Servicii

Energetice

Muntenia

S.A

(currently

absorbed

by

Electrica

Serv

S.A.),
 Electrica
Energie Verde 1 SRL (starting with 30 December 2020) as participants;

The

credit

facility

offered

by

the

participants

to

the

pool

leader

is

up

to

the

amount

of

RON

180,000,000

for
Electrica

Furnizare

S.A.
;
 RON

10,000,000

for

Electrica

Energie

Verde

1

SRL;

RON

50,000,000

for

Electrica

Serv
S.A..

As

at

30

November

2020

was

in

place

the

convention

in

amount

to

RON

2,000,000

with

Servicii
Energetice

Muntenia

S.A.

which

was

absorbed

by

Electrica

Serv

S.A.

being

integrated

in

the

conventions

limits
applicable for Electrica SERV S.A..

The

credit

facility

offered

by

the

pool

leader

to

the

participants

is

up

to

the

amount

of

RON

245.000.000

(31
December

2020:

30,000,000

RON)

for

Electrica

Furnizare

S.A.;
 RON

15,000,000

(31

December

2020:

RON
15,000,000)

for

Electrica

Energie

Verde

1

SRL;

RON

12,000,000

(31

December

2020:

RON

10,000,000)

in

the
case

of

Electrica

Serv

S.A..

As

at

30

November

2020

was

in

place

the

convention

in

amount

to

RON

2,000,000
with

Servicii

Energetice

Muntenia

S.A.

which

was

absorbed

by

Electrica

Serv

S.A.

being

integrated

in

the
conventions limits applicable for Electrica SERV S.A.

Interest

rate:

ROBOR

1M

+

0.07%

p.a.

However,

if

the

amounts

drawn

by

the

participants

are

covered

both
by

the

internal

liquidity

of

Electrica

SA,

and

by

drawing

from

the

credit

line

granted

to

Electrica

SA,

the

amount
of

interest

due

by

the

participants

to

Electrica

SA

will

be

calculated

using

a

weighted

interest

rate,

calculated
on

the

basis

of

the

ROBOR

Internal

Rate

1M

+0.07%

p.a.

and

the

ROBOR

Bank

Rate

1M

+

0.8%

p.a.

The
initial

due

date

was

20.12.2020,

the

convention

being

automatically

extended

at

the

maturity

of

the

bank
facility agreement 28.01.2022;

through

which

the

bank

will

automatically

transfer

all

available

amounts

existing

at

the

end

of

each

day

in

the

current
bank

accounts

of

the

participants

to

the

master

bank

account

of

Electrica

SA.

In

case

the

current

bank

accounts

of

the
participants

have

a

negative

balance

at

the

end

of

the

day,

the

bank

will

transfer

the

necessary

amounts

from

the
master

bank

account

of

Electrica

SA

to

the

current

bank

accounts

of

the

participants,

so

as

at

the

end

of

each

day

the
balance

of

the

current

bank

accounts

of

the

participants

is

nil.

In

case

the

balance

of

the

master

bank

account

of
Electrica

SA

is

not

sufficient

to

cover

the

negative

balance

of

the

current

bank

accounts

of

the

participants,

the

bank
will

make

available

the

necessary

funds

from

the

overdraft

facility

that

will

be

signed

between

the

bank

and

Electrica
SA.

As

of

31

December

2021,

the

credit

facility

has

an

outstanding

balance

of

RON
 120,541,354

(31

December

2020:0
RON)
.

For

the

amounts

drawn/transferred

to

the

cash

pooling

systems

between

Electrica

SA

and

the

other

participants,
please refer to Note 29.

56
 Capital and reserves

(f)
Share capital, share premium, gains and losses referring to share issue

The

issued

share

capital

in

nominal

terms

consists

of

346,443,597

ordinary

shares

as

at

31

December

2021

(31
December

2020:

346,443,597)

with

a

nominal

value

of

RON

10

per

share.

As

of

4

July

2014,

after

the

Initial

Public
Offering

(“IPO”),

the

Company’s

shares

are

listed

on

the

Bucharest

Stock

Exchange

and

the

Global

Depositary

Receipts
are listed on the London Stock Exchange.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

356

The

shares

owned

by

the

Company’s

shareholders

that

are

traded

on

the

London

Stock

Exchange

are

the

global
depositary

receipts

(GDRs).

A

global

depositary

receipt

represents

four

shares.

The

Bank

of

New

York

Mellon

is

the
depositary

bank

for

these

securities.

The

GDRs’

weight

in

Electrica’s

total

share

capital

diminished

following

the

Initial
Public Offering, reaching a level of 0.7842% at the end of 2021 as compared to 10.17% at 4 July 2014.

The

holders

of

ordinary

shares

are

entitled

to

receive

dividends

as

declared,

and

are

entitled

to

one

vote

per

share

in
the

shareholders’

meetings

of

the

Company,

except

for

the

6,890,593

shares

purchased

by

the

Company

in

July

2014
in

order

to

stabilize

the

price.

All

shares

rank

equal

and

confer

equal

rights

to

the

net

assets

of

the

Company,

except
for treasury shares.

The

Company

recognizes

changes

in

share

capital

only

after

their

approval

in

the

General

Shareholders

Meeting

and
their

registration

by

the

Trade

Register.

The

contributions

made

by

the

shareholders

which

are

not

yet

registered

with
the Trade Register at year end are recognized as pre-paid capital contributions from shareholders.

After

IPO

privatization,

the

Company

recognized

an

increase

of

share

capital

of

RON

1,771,887,440

and

a

share
premium of RON 171,128,062. The transaction costs of RON 68,078,885 were deducted from the share premium.

Following

the

SPO

that

took

place

in

November

2019,

the

share

capital

of

Electrica

SA

was

increased

by

in

kind

and
cash

contribution,

with

the

amount

of

RON

5,036,680
,

from

the

amount

of

RON

3,459,399,290

to

the

amount

of

RON
3,464,435,970,

by

issuing

a

number

of

503,668

new

nominative

and

dematerialized

shares

with

a

nominal

value

of

10
RON/share.

The

costs

generated

by

the

secondary

public

offering

are

in

amount

of

RON

963,601
.

Also,

the

Company

recorded
gains

referring

to

share

issue

of

RON

2,185,519
,

resulting

from

the

difference

between

the

contribution

value

of

the
plots of land and their value recorded as pre-paid capital contributions in kind from shareholders.

(g)
Treasury shares reserve

In

July

2014,

the

Company

purchased

5,206,593

ordinary

shares

and

421,000

Global

Depositary

Receipts,

equivalent

to
1,684,000

shares

(totaling

6,890,593

shares).

The

total

amount

paid

for

acquiring

the

shares

and

Global

Depositary
Receipts was RON 75,372,435.

(h)
Revaluation reserves

The reconciliation between opening and closing balance of the revaluation reserve is as follows:

2021

2020

Balance at 1 January

12,605,266

5,851,829

Revaluation of property, plant and equipment

-

11,901,253

Deferred tax liability arising on revaluation of property, plant and equipment

-

(3,059,897)

Release of revaluation reserve to retained earnings corresponding to
depreciation and disposals of property, plant and equipment

(207,619)

(2,087,919)

Balance at 31 December

12,397,647

12,605,266

(i)
Legal reserves

The

Legal

reserves

are

set

up

as

5%

of

the

gross

profit

for

the

year,

until

the

total

legal

reserves

reach

20%

of

the
paid-up

nominal

share

capital

of

the

Company,

according

to

the

legislation.

These

reserves

are

deductible

for

income
tax purposes and are not distributable.

As

at

31

December

2021,

the

legal

reserves

were

in

amount

of

RON

228,156,226

(31

December

2020:

RON
212,027,639).

(j)
Dividends

The

dividends

distributed

by

the

Company

in

2021

and

2020

(from

the

statutory

profits

of

preceding

years)

were

as
follows:

2021

2020

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

357

Distributed dividends

247,873,693

246,108,017

On

28

April

2021,

the

General

Shareholders

Meeting

of

the

Company

approved

the

net

distributable

profit

of

2020

as
follows:

•
Dividends to be distributed to shareholders: RON 247,873,693;

•
Legal reserve (5% from 2020 pre-tax profit): RON 14,935,950;

•
Other reserves: RON 35,568,893.

On

29

April

2020,

the

General

Shareholders

Meeting

of

the

Company

approved

the

distribution

of

dividends

as

follows:

•
Dividends

to

be

distributed

to

shareholders

from

the

net

distributable

profit

for

the

financial

year

ended

as

of
31 December 2019 (100%): RON 244,885,112;

•
Dividends

to

be

distributed

to

shareholders

from

the

net

gain

obtained

from

the

Secondary

Public

Offering,
after covering the loss associated with the Secondary Public Offering costs: RON 1,221,918;

•
Dividends to be distributed from “Other reserves”: RON 987.

The

total

amount

of

dividends

to

be

distributed

to

shareholders

in

2021

was

of
 RON

247,873,693

(2020:

RON
246,108,017)
.

The

value

of

dividends

per

share

distributed

to

the

shareholders

of

the

Company

were:

RON

0.73

per
share

(2020:

RON

0.7248

per

share).

When

calculating

the

dividend

per

share,

the

Company’s

repurchased

own

shares
(6,890,593

shares)

were

not

considered

as

outstanding

shares

and

are

deducted

from

the

total

number

of

issued
ordinary shares.

Out

of

the

dividends

declared

by

the

Company

of

RON

247,873,693

(2020:

RON

246,108,017),

the

dividends

paid

were
RON
 247,258,353

(2020:

RON

245,779,724),

the

remaining

difference

represents

dividends

uncollected

by

the
shareholders.

57
Trade payables

31 December 2021

31 December 2020

Suppliers of goods and services

3,402,954

7,028,982

Capital expenditure suppliers

464,293

103,421

Suppliers – related parties (Note 29)

167,109

67,529

Total

4,034,356

7,199,932

Payables to related parties are detailed in Note 29.

58
 Other payables

31 December 2021

31 December 2020

Current

Non-current

Current

Non-current

Cash-pooling
payables

41,885,081

-

34,110,477

-

Dividends payable

1,715,724

-

1,705,199

-

VAT under settlement

18,302

-

14,391

-

Other payables to the state budget

6,659

-

6,782

-

Other liabilities

396,702

-

197,565

-

Total

44,022,468

-

36,034,414

-

Cash-pooling

payables

comprises

the

payable

of

Electrica

as

at

31

December

2021

as

cash

pool

leader

in

the

two

cash-

pooling systems set up at Group level (Note 23 and Note 29).

Other

liabilities

include

mainly

guarantees

and

sundry

creditors.

Dividends

payable

represent

the

dividends

uncollected
by the shareholders.

In

August

2020,

the

VAT

group

was

established

at

the

Electrica

level

in

accordance

with

the

provisions

of

Article

269
(9)

of

the

Tax

Code

and

the

rules

for

its

application,

National

Agency

for

Fiscal

Administration

(“NAFA”)

Order

No.
3006/2016

on

the

approval

of

the

Procedure

for

the

implementation

and

administration

of

the

single

tax

group.

The
members

of

the

VAT

group

are

Electrica

SA

and

its

subsidiaries.

The

representative

of

the

group

is

Electrica

Furnizare
S.A.,

having

all

the

reporting

and

VAT

record

obligations

stipulated

by

the

legal

regulations

in

force

for

the

whole

group.

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

358

59
 Provisions

Litigations and other risks

Balance at 1 January 2021

5,818,263

Provisions recognized

81,627

Provisions utilized

(1,126,255)

Provisions reversed

(535,521)

Balance at 31 December 2021

4,238,114

The

provisions

in

amount

of

RON

2,568,765

as

at

31

December

2020

(31

December

2020:

RON

4,140,732)

refer

to
the

benefits

granted

upon

the

termination

of

executive

directors'

and

management

key

personnel

contracts

in

the

form
of a non-compete clause.

60
Financial instruments - fair values and risk management

(c)
Accounting classifications and fair values

According

to

IFRS

9,

financial

assets

are

measured

at

amortized

cost

as

they

are

held

within

a

business

model

to

collect
contractual

cash

flows

and

these

cash

flows

consist

solely

of

payments

of

principal

and

interest

on

the

principal

amount
outstanding.

The

Company

assessed

that

the

carrying

amount

is

a

reasonable

approximation

of

the

fair

value

for

the

financial

assets
and financial liabilities.

(d)
Financial risk management

The Company has exposure to the following risks arising from financial instruments:

•
credit risk;

•
liquidity risk;

•
market risk.

These risks are further explained and detailed.

(iv)
Credit risk

Credit

risk

is

the

risk

of

financial

loss

to

the

Company

if

a

customer

or

counterparty

to

a

financial

instrument

fails

to
meet

its

contractual

obligations,

and

arises

mainly

from

the

Company’s

receivables

from

customers,
 cash-pooling
debtors, cash and cash equivalents, restricted cash and bank deposits.

The

Company’s

exposure

to

credit

risk

is

influenced

mainly

by

the

individual

characteristics

of

each

customer.

In

the
past,

the

Company

had

a

high

credit

risk

mainly

from

State-owned

companies.

Until

2012,

the

Company

had

a
concentration of credit risk with Oltchim, company that went into bankruptcy procedures during 2019 (see Note 16).

Cash

and

bank

deposits

are

placed

in

financial

institutions,

which

are

considered

to

have

good

creditworthiness.

The
carrying amount of financial assets represents the maximum credit exposure.

Trade receivables

The

Company

establishes

an

allowance

for

impairment

that

represents

the

amount

of

expected

credit

losses,

calculated
based on the expected loss rates.

Impairment

The

following

table

provides

information

about

the

exposure

to

credit

risk

and

expected

credit

losses

for

trade
receivables for customers as at 31 December 2021:

31 December 2021

Expected
loss

Gross value

Lifetime ECL

Net trade
receivables

Credit
impaired

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

359

rates
(“ECL”)

Neither past due nor
impaired

0%

843,715

-

843,715

No

Past due 1-30 days

0%

78,107

-

78,107

No

Past due 31-60 days

0%

-

-

-

No

Past due 61-90 days

0%

-

-

-

No

Past due more than 90 days

100%

582,017,003

(582,012,952)

4,051

Yes

Total

582,938,825

(582,012,952)

925,873

Allowances

for

impairment

are

referring

mainly

to

Oltchim

in

amount

of

RON

518,938,151

(31

December

2020:

RON
518,938,151),

Transenergo

Com

in

amount

of

RON

37,088,264

(
31

December

2020
:

RON

37,088,830)

and

to

Fidelis
Energy in amount of RON 11,220,386 (31 December 2020: RON 11,220,386). Please see Note 16.

An

analysis

of

trade

receivables

from

the

point

of

view

of

the

credit

risk

and

expected

credit

losses

for

trade

receivables
for customers as at 31 December 2020, is as follows:

31 December 2020

Expected loss
rates (“ECL”)

Gross value

Lifetime ECL

Net trade
receivables

Credit
impaired

Neither past due nor impaired

0%

411,954

-

411,954

No

Past due 1-30 days

0%

-

-

-

No

Past due 31-60 days

0%

-

-

-

No

Past due 61-90 days

0%

-

-

-

No

Past due more than 90 days

100%

582,083,147

(582,083,147)

-

Yes

Total

582,495,101

(582,083,147)

411,954

(v)
Liquidity risk

Liquidity

risk

is

the

risk

that

the

Company

might

encounter

difficulty

in

meeting

the

obligations

associated

with

its
financial

liabilities

that

are

settled

by

delivering

cash

or

another

financial

asset.

The

Company

has

significant

cash

and
cash equivalents so that no liquidity risk is experienced.

The

Company

aims

to

maintain

the

level

of

its

cash

and

cash

equivalents

at

an

amount

in

excess

of

expected

cash
outflows

on

financial

liabilities.

The

Company

also

monitors

the

level

of

expected

cash

inflows

on

trade

receivables
together with expected cash outflows on trade and other payables.

Exposure to liquidity risk

The

following

table

presents

the

contractual

maturities

of

financial

liabilities

at

the

reporting

date.

The

amounts

are
gross and undiscounted, and include estimated interest accrued.

Contractual cash flows

Financial liabilities

Carrying
amount

Total

less than 1
year

1-2 years

2-5 years

31 December 2021

Bank overdrafts

120,541,354

120,541,354

120,541,354

-

-

Trade payables

4,034,356

4,034,356

4,034,356

-

-

Lease liability

513,274

513,274

394,818

62,647

55,809

Total

125,088,984

125,088,984

124,970,528

62,647

55,809

31 December 2020

Trade payables

7,199,932

7,199,932

7,199,932

-

-

Lease liability

1,454,297

1,454,297

968,556

365,389

120,352

Total

8,654,229

8,654,229

8,168,488

365,389

120,352

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

360

(vi)
Market risk

Market

risk

is

the

risk

that

changes

in

market

prices

–

such

as

foreign

exchange

rates,

interest

rates

–

will

affect

the
Company’s

income

or

the

value

of

its

holdings

of

financial

instruments.

The

objective

of

market

risk

management

is

to
manage and control market risk exposures within acceptable parameters, while optimizing the return.

Currency risk

The

Company

is

exposed

to

currency

risk

to

the

extent

that

there

is

a

mismatch

between

the

currencies

in

which

sales,
purchases

and

borrowings

are

denominated

and

the

functional

currency

of

the

Company.

The

functional

currency

of
the Company is the Romanian Leu (RON).

The

currencies

in

which

these

transactions

are

primarily

denominated

are

RON

and

EUR.

The

Company

also

has
deposits

and

bank

accounts

denominated

in

foreign

currency

(EUR).

The

Company's

policy

is

to

use

the

local

currency
in its transactions as far as practically possible. The Company does not use derivative or hedging instruments.

Exposure to currency risk

The summary of the quantitative data about the Company’s exposure to currency risk is as follows:

31 December 2021

31 December 2020

In RON

denominated in EUR

denominated in EUR

Cash and cash equivalents

262,918

898,585

Lease liability

(509,598)

(1,454,297)

Net statement of financial position exposure

(246,680)

(555,712)

The following significant exchange rates have been applied during the year:

Average rate

Year-end spot rate

RON

2021

2020

2021

2020

EUR 1

4,9204

4,8371

4,9481

4,8694

Sensitivity analysis

A

reasonable

possible

appreciation

(depreciation)

of

the

EUR

against

RON

at

31 December

would

have

affected

the
measurement

of

financial

instruments

denominated

in

a

foreign

currency,

the

profit

before

tax

and

the

equity,
respectively,

by

the

amounts

shown

below.

The

analysis

assumes

that

all

other

variables,

in

especially

the

interest
rates, remain constant and ignores the impact of forecasted sales and purchases.

Profit before tax

Effect

Appreciation

Depreciation

31 December 2021

EUR (5% movement)

(12,334)

12,334

31 December 2020

EUR (5% movement)

(27,786)

27,786

Interest rate risk

The

Company

exposures

to

interest

rates

on

financial

assets

and

financial

liabilities

are

detailed

below.

The

Company
is

exposed

to

the

interest

rate

benchmark

ROBOR,

which

is

the

interest

rate

on

the

Romanian

interbank

market.

The
Company does not have in place hedging contracts for interest rate.

Exposure to interest rate risk

The interest rate profile of the Company’s interest-bearing financial instruments is as follows:

31 December

2021

31 December

2020

Fixed-rate instruments

Financial assets

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

361

31 December

2021

31 December

2020

Call deposits

2,715,802

175,066,480

Restricted cash

-

320,000,000

2,715,802

495,066,480

Variable-rate instruments

Financial assets

Cash pooling receivables (Note 23, Note 29)

567,621,644

166,281,881

Financial liabilities

Cash pooling payables (Note 23, Note 29)

(41,885,081)

(34,110,477)

Bank overdrafts (Note 18)

(120,541,354)

-

Lease liability

(513,274)

(1,454,297)

Total

404,681,935

130,717,107

Fair value sensitivity analysis for fixed-rate instruments

The

Company

does

not

account

for

any

fixed-rate

financial

assets

or

financial

liabilities

at

fair

value

through

profit

or
loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

A

reasonably

possible

change

of

50

basis

points

in

interest

rates

at

the

reporting

date

would

have

increased

(decreased)
profit

before

tax

by

the

amounts

shown

below.

This

analysis

assumes

that

all

other

variables,

in

particular

foreign
currency exchange rates, remain constant.

Profit before tax

50 bp increase

50 bp decrease

31 December 2021

Variable-rate instruments

2,023,410

(2,023,410)

31 December 2020

Variable-rate instruments

653,586

(653,586)

61
Related parties

(a) Main shareholders

As

at

31

December

2021

and

31

December

2020,

the

major

shareholder

of

Societatea

Energetica

Electrica

S.A.

is

the
Romanian State, represented by the Ministry of Energy with a share of ownership of 48.79% from the share capital.

(b) Management and administrators’ compensation

2021

2020

Management compensation

6,833,228

6,042,695

Executive

management

compensation

refers

to

both

the

managers

with

mandate

contract

and

those

with

labour
contract,

concluded

with

Electrica

SA.

This

also

includes

the

benefits

in

the

event

of

the

termination

of

mandate

contracts
for

executive

directors.

The

benefits

paid

for

the

termination

of

mandate

contracts

in

2021

was

in

amount

of

RON
3,136,800 (2020: Nil).

Compensations granted to the members of the Board of Directors were as follows:

2021

2020

Members of Board of Directors

3,887,254

2,468,177

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

362

Electrica

SA’s

Board

of

Directors

comprises

7

members.

According

to

the

remuneration

policy

approved

by

the

General
Meeting

of

Shareholders

that

took

place

28

April

2021,

the

annual

number

of

paid

sessions

is

limited

to

twelve

for
Board

of

Directors

meetings

and

to

six

for

each

of

the

committees.

Additional

committee

meetings

can

be

organized
only

in

exceptional

situations,

upon

the

Chairs’

decision,

who

are

responsible

to

efficiently

organize

the

agenda

and
activity. However, only one such additional meeting shall be remunerated, for each committee.

No loans were granted to managers and administrators in 2021 and 2020.

(e)
Transactions with the Group companies

(i)
Balance of receivables and payables from/ to Group companies:

Trade Receivables/Trade Payables

Receivables from

Payables to

31 December

2021

31 December

2020

31 December
2021

31 December
2020

Distributie Energie Electrica Romania
S.A.

474,458

449,299

62,709

-

Electrica Serv S.A.

7,828

29,515

-

-

Electrica Furnizare S.A.

1,767

29,790

104,400

67,529

Total

484,053

508,604

167,109

67,529

As

at

31

December

2021

and

31

December

2020,

receivables

from

electricity

distribution

subsidiaries

include

mainly
other services reinvoiced.

Loans granted/interest receivable:

Loans granted to

Interest receivable from

31 December

2021

31 December

2020

31 December

2021

31 December

2020

Distributie Energie Electrica Romania
S.A.

1,276,325,000

1,030,000,000

15,439,712

13,518,378

Electrica Furnizare S.A.

30,000,000

-

30,400

-

Total

1,306,325,000

1,030,000,000

15,470,112

13,518,378

Cash-pooling system 31 December 2021:

Amount drawn

by participants

Amount
contributed to
by participants

Net position

Interest
receivable

31 December

2021

31 December

2021

31 December

2021

31 December

2021

Distributie Energie Electrica Romania
S.A.

311,620,794

-

311,620,794

602,305

Electrica Furnizare S.A.

245,000,000

-

245,000,000

540,414

Electrica Energie Verde 1 S.R.L.

11,000,850

-

11,000,850

24,345

Electrica Serv S.A.

-

(41,873,420)

(41,873,420)

(105,541)

Total

567,621,644

(41,873,420)

525,748,224

1,061,523

Cash-pooling system 31 December 2020:

Amount drawn

by participants

Amount
contributed to
by participants

Net position

Interest
receivable/

(payable)

31 December

2020

31 December

2020

31 December

2020

31 December

2020

Distributie Energie Electrica Romania
S.A.

151,282,223

-

151,282,223

304,831

Electrica Furnizare S.A.

-

(200,121)

(200,121)

(171,143)

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

363

Electrica Energie Verde 1 S.R.L.

14,999,506

-

14,999,506

862

Electrica Serv S.A.

152

(33,910,356)

(33,910,204)

(60,591)

Total

166,281,881

(34,110,477)

132,171,404

73,959

(ii)
Transactions with subsidiaries

Sales/Purchases

Sales

in 2021

Sales

in 2020

Purchases

in 2021

Purchases

in 2020

Distributie Energie Electrica Romania S.A.

740,664

-

131,742

-

Societatea de Distributie a Energiei Electrice
Transilvania Nord S.A. (\*\*)

-

3,457,185

-

27,736

Societatea de Distributie a Energiei Electrice
Transilvania Sud S.A. (\*\*)

-

670,475

-

26,494

Societatea de Distributie a Energiei Electrice
Muntenia Nord S.A. (\*\*)

-

273,181

-

-

Electrica

Furnizare S.A.

14,471

448,821

434,915

407,020

Electrica Serv S.A.

16,909

264,591

-

-

Total

772,044

5,114,253

566,657

461,250

Starting

with

July

2020,

the

Company

no

longer

provides

services

related

to

the

AMR

system

as

the

system

was
transferred

as

a

contribution

in

kind

to

the

share

capital

of

its

distribution

subsidiaries

(SDEE

Transilvania

Nord

S.A.,
SDEE Transilvania Sud S.A., SDEE Muntenia Nord S.A.).

(\*\*)

On

31

December

2020,

Distributie

Energie

Electrica

Romania

SA

was

formed

by

the

merger

of

the

three

former
electricity

distribution

companies

(
Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.;

Societatea

de
Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.;

Societatea

de

Distributie

a

Energiei

Electrice

Muntenia

Nord

S.A.
).
(Note 21)

Reimbursements / Borrowings

Borrowings
granted in 2021

Borrowings
granted in 2020

Reimbursements
in 2021

Reimbursements

in 2020

Distributie Energie Electrica Romania
S.A.

246,325,000

-

-

-

Electrica Furnizare S.A.

90,000,000

-

60,000,000

Servicii Energetice Muntenia S.A. (\*)

-

-

-

5,500,000

Total

336,325,000

-

60,000,000

5,500,000

\*

Transactions

presented

are

carried

out

with

Servicii

Energetice

Muntenia

S.A.

for

the

period

01.01.2020-30.11.2020,

until

the

effective

date

of

merger
by absorption with Electrica Serv S.A..

On

28

May

2020,

the

Company

signed

an

agreement

with

Servicii

Energetice

Muntenia

S.A.

in

which

the

Company
acquired

a

plot

of

land

in

amount

of

RON

31,867,062

and

buildings

in

amount

of

RON

1,905,508,

the

amounts

being
compensated, among others, with the settlement of the loan granted to subsidiary in amount of RON 5,500,000.

Interest income for loans

Interest income

2021

Interest income

2020

Distributie Energie Electrica Romania S.A.

41,127,404

-

Societatea de Distributie a Energiei Electrice Muntenia Nord S.A.
 (\*\*)

-

15,244,917

Societatea de Distributie a Energiei Electrice Transilvania Nord S.A.
 (\*\*)

-

13,318,333

Societatea de Distributie a Energiei Electrice Transilvania Sud S.A.
 (\*\*)

-

10,750,233

Electrica Furnizare S.A.

30,400

-

Servicii Energetice Muntenia S.A.(\*)

-

101,750

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

364

Total

41,157,804

39,41
5
,233

(\*)

Transactions

presented

are

carried

out

with

Servicii

Energetice

Muntenia

S.A.

for

the

period

01.01.2020-30.11.2020,

until

the

effective

date

of

merger
by absorption with Electrica Serv S.A..

(\*\*)

On

31

December

2020,

Distributie

Energie

Electrica

Romania

SA

was

formed

by

the

merger

of

the

three

former

electricity

distribution

companies
(Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.;

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.;

Societatea

de
Distributie a Energiei Electrice Muntenia Nord S.A.). (Note 21)

Dividends income

Dividends income

2021

Dividends income

2020

Electrica Furnizare S.A.

233,293,563

124,015,481

Distributie Energie Electrica Romania S.A.

96,250,081

-

Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. (\*\*)

-

54,065,512

Societatea de Distributie a Energiei Electrice Transilvania Sud S.A. (\*\*)

-

6,935,492

Societatea de Distributie a Energiei Electrice Muntenia Nord S.A. (\*\*)

-

2,705,803

Electrica Serv S.A.

-

27,247,429

Total

329,543,644

214,969,717

(\*\*)

On

31

December

2020,

Distributie

Energie

Electrica

Romania

SA

was

formed

by

the

merger

of

the

three

former

electricity

distribution

companies
(Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.;

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.;

Societatea

de
Distributie a Energiei Electrice Muntenia Nord S.A.). (Note 21)

Cash pooling system – interest income/(expense)

Interest
income/(expense)

Interest
income/(expense)

2021

2020

Distributie Energie Electrica Romania S.A.

3,344,942

-

Societatea de Distributie a Energiei Electrice Transilvania Sud S.A.(\*\*)

-

2,132,479

Societatea de Distributie a Energiei Electrice Transilvania Nord S.A. (\*\*)

-

1,256,996

Societatea de Distributie a Energiei Electrice Muntenia Nord S.A.(\*\*)

-

568,730

Electrica Energie Verde 1 S.R.L.

223,675

862

Electrica Serv S.A.

(808,125)

(673,516)

Servicii Energetice Muntenia S.A.(\*)

-

14

Electrica Furnizare S.A.

1,193,403

(1,282,859)

Total

3,953,895

2,002,706

\*

Transactions

presented

are

carried

out

with

Servicii

Energetice

Muntenia

S.A.

for

the

period

01.01.2020-30.11.2020,

until

the

effective

date

of

merger
by absorption with Electrica Serv S.A..

\*\*

On

31

December

2020,

Distributie

Energie

Electrica

Romania

SA

was

formed

by

the

merger

of

the

three

former

electricity

distribution

companies
(Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Nord

S.A.;

Societatea

de

Distributie

a

Energiei

Electrice

Transilvania

Sud

S.A.;

Societatea

de
Distributie a Energiei Electrice Muntenia Nord S.A.). (Note 21)

(f)
Transactions with companies in which the state has control or significant influence

The Company had sale and purchase transactions mainly with the following companies:

Purchases (without VAT)

Balance (including VAT)

Supplier

2021

2020

31 December
2021

31 December
2020

ANCOM

605,644

542,560

139,758

90,871

Others

42,062

30,877

910

860

Total

647,706

573,437

140,668

91,731

Sales

(without VAT)

Balance, gross
(including VAT)

Allowance
(including VAT)

Balance, net

Client

2021

31 December 2021

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

365

Oltchim

-

518,938,151

(518,938,151)

-

CET Braila

-

3,118,411

(3,118,411)

-

Total

-

522,056,562

(522,056,562)

-

Sales

(without VAT)

Balance, gross
(including VAT)

Allowance
(including VAT)

Balance,
net

Client

2020

31 December 2020

Oltchim

-

518,938,151

(518,938,151)

-

CET Braila

-

3,118,411

(3,118,411)

-

Total

-

522,056,562

(522,056,562)

-

62
Contingencies

b)
Contingent Assets

Litigation with National Agency of Fiscal Administration (“NAFA”)

In

May

2017,

after

the

revision

of

Electica’s

tax

record,

the

tax

authorities

issued

an

enforcement

order

for

additional
interest

and

penalties

of

RON

39,248,818

as

a

result

of

certain

tax

record

allocations

for

prior

periods.

Electrica

SA

filed
a

complaint

with

the

tax

authorities

against

the

enforcement

order

and

also

filed

a

legal

action

to

suspend

the

enforced
payment

by

the

resolution

of

the

above

mentioned

complaint.

These

additional

interest

and

penalties

are

related

to
the prior enforcement orders received by Electrica SA in the prior years of RON 72,460,387.

In

February

2018,

Electrica

SA

has

obtained

a

favourable

Supreme

Court

ruling

in

one

of

the

litigations

with

NAFA,
which

essentially

maintains

into

force

a

prior

Court

of

Appeal

decision,

which

is

favourable

for

the

Company.

Based

on
this

Court

ruling

and

in

conjunction

with

all

other

litigations

with

NAFA

on

the

same

historical

amounts,

for

taxes
including

penalties

and

interest,

as

well

as

based

on

analysis

with

internal

and

external

lawyers,

the

management

best
estimate

is

that

Electrica

SA

shall

be

able

to

obtain

favourable

Court

rulings

with

the

end

result

of

no

future

cash
outflows.

Also,

in

April

2019,

Electrica

SA

obtained

another

favourable

decision

pronounced

by

the

Bucharest

Court

of

Appeal

in
one

of

the

disputes

with

NAFA,

whereby

the

court

obliges

NAFA

to

correct

the

evidence

of

the

tax

receivables

so

that
it

reflects

the

extinction

by

prescription

of

the

amount

of

RON

16,915,950

representing

income

tax

as

well

as

all

the
related

accessories.

This

decision

forms

the

object

of

the

appeal

declared

by

NAFA,

with

the

Court

term

on

17

November
2021, at the
High Court of Cassation and Justice
.

Morevover,

in

November

2019,

Electrica

SA

obtained

one

more

favourable

decision

pronounced

by

the

Bucharest

Court
of

Appeal

in

one

of

the

disputes

with

NAFA,

whereby

the

court

obliges

NAFA

to

cancel

the

administrative

documents
issued

regarding

the

accessory

fiscal

obligations

in

the

amount

of

RON

39,248,818

and

ordered

the

refund/
compensation

of

the

amount

and

the

correction

of

the

tax

record.

Against

this

decision,

NAFA

filed

an

appeal,

registered
to the High Court of Cassation and Justice, with the Court term on 23 March 2022.

Thus,

as

at

31

December

2019

Company

did

not

recognize

a

provision

in

this

respect,

taking

into

account

that
management’s

best

estimate

is

that

the

Company

shall

be

able

to

obtain

a

favourable

final

Court

decision

in

this

case.

During

2020,

the

Company

recognized

revenues

from

indemnities

in

the

amount

of

RON

12,827,435

(Note

9)

related

to
the

amounts

collected

during

the

year

by

Electrica

SA

from

NAFA

as

a

result

of

the

final

civil

sentences

obtained

in
Court, which ordered the cancellation of certain enforceable titles as well as fiscal decisions.

Moreover,

as

at

31

December

2020,

the

Company

no

longer

has

a

contingent

liability

of

RON

39,248,818

in

respect

to
the

additional

interest

and

penalties

to

be

paid

by

Electrica

SA

to

NAFA,

as

it

applied

for

the

cancellation

of

ancillary
fiscal

obligations

stipulated

by

the

Government

Emergency

Ordinance

no.
 69/2020.

Through

NAFA’s

decision

no.
2738/22.12.2020,

the

cancellation

of

the

ancillary

fiscal

obligations

mentioned

above

was

approved,

based

in
 articles

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

366

IX-XI of the Government Emergency Ordinance no. 69/2020.

In

April

2021,

Electrica

SA

filed

a

new

action

in

contradiction

with

NAFA

-

file

no.

2444/2/2021,

pending

before

the
Bucharest

Court

of

Appeal,

trail

term

16.03.2022
,

having

as

object

the

obligation

of

NAFA

to:

correct

Electrica

SA

's

tax
record

in

order

to

reflect

the

right

to

a

refund

for

the

amount

of

RON

5,860,080,

amount

paid

by

Electrica

SA

in

2020
for

the

purpose

of

applying

for

the

cancellation

of

ancillary

fiscal

obligations

stipulated

by

the

Government

Emergency
Ordinance

no.

69/2020,

of

an

additional

amount

of

RON

817,521

which

was

not

reflected

in

the

payment

made

by

NAFA
in

2020,

and

payment

of

legal

interest

in

amount

of

RON

5,161,492

computed

for

the

amount

returned

by

NAFA

in
2020.

c)
Contingent Liabilities

Other litigations and claims

The

Company

is

involved

in

a

series

of

litigations

and

claims

(ie.

with

SAPE,

ANRE,

NAFA,

Court

of

Accounts,

claims

for
damages, claims over land titles, labour related litigations etc.).

As

summarised

in

Note

27,

the

Company

set-up

provisions

for

the

litigations

or

claims

for

which

the

management
assessed

as

probable

the

outflow

of

resources

embodying

economic

benefits

due

to

low

chances

of

favourable

outcomes
of

those

litigations

or

disputes.

The

Company

does

not

present

information

in

the

financial

statements

and

did

not

set-
up provisions for items for which the management assessed as remote the possibility of outflow of economic benefits.

The

Company

discloses,

if

the

case,

information

on

the

most

significant

items

of

litigations

or

claims

for

which

the
Company

did

not

set-up

provisions

as

they

relate

to

possible

obligations

that

arise

from

past

events

whose

existence
will

be

confirmed

only

by

the

occurrence

or

non-occurrence

of

uncertain

future

events

not

wholly

within

the

control

of
the

Company

(ie.

litigations

for

which

different

inconsistent

sentences

were

issued

by

the

Courts,

or

litigations

which
are in early stages and no preliminary ruling was issued so far).

(
b) Fiscal environment

Tax

audits

are

frequent

in

Romania,

consisting

of

detailed

verifications

of

the

accounting

records

of

taxpayers.

Such
audits

sometimes

take

place

after

months,

even

years,

from

the

date

liabilities

are

established.

Consequently,
companies

may

be

found

liable

for

significant

taxes

and

fines.

Moreover,

tax

legislation

is

subject

to

frequent

changes
and

the

authorities

sometimes

demonstrate

inconsistency

in

interpretation

of

the

law.

Income

tax

statements

may

be
subject

to

revision

and

corrections

made

by

tax

authorities,

generally

for

a

five-year

period

after

they

are

filled

in.

The
company was the subject of fiscal inspections until 31 March 2013.

The

Company

may

incur

expenses

related

to

tax

adjustments

related

to

previous

years

as

a

result

of

tax

authorities
inspections

and

disputes.

The

Company's

management

considers

that

adequate

reserves

were

established

in

the
separate

financial

statements

for

all

the

significant

fiscal

obligations,

however

a

risk

that

the

tax

authorities

could

take
different positions still persists.

(e)
Transfer prices

According

to

the

fiscal

legislation,

the

fiscal

assessment

for

a

transaction

with

affiliates

is

based

on

the

market

price
concept

for

that

transaction.

Based

on

this

concept,

the

transfer

prices

must

be

adjusted

in

order

to

reflect

the

market
prices

that

would

have

been

established

between

the

entities

having

no

affiliation

relation

and

are

acting

independently,
based on “normal market conditions”.

Likely,

verifications

of

the

transfer

prices

may

be

done

in

the

future

by

the

fiscal

authorities,

in

order

to

establish

if
these

prices

are

respecting

the

principle

of

the

“normal

market

conditions”

and

that

the

tax

base

for

Romanian

taxpayer
is not distorted.

63
 Commitments

a)
Contractual commitments

Contractual commitments as at 31 December 2021 and 31 December 2020 are as follows:

#### SOCIETATEA ENERGETICA ELECTRICA S.A.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2021

(All amounts are in RON, if not otherwise stated)

367

31 December 2021

31 December 2020

Purchase of property, plant and equipment, intangible assets
and other maintenance and repairs services

22,568

4,859,511

Purchase of investments

60,484,337

-

Total

60,506,905

4,859,511

b)
Investment program

The investment program approved for the year 2022 is as follows:

2022

Investment program

10,633,000

The capital expenditures actually incurred may differ from the ones planned.

c)
Guarantees and pledges

The

Company

has

a

facility

for

issuing

bank

guarantee

letters

in

the

amount

of

RON

200,000,000

contracted

from
Unicredit

Bank

and

which

is

used

at

Group

level,

out

of

which

the

used

amount

as

of

31

December

2021

is

RON
161,394,730

(31

December

2020:

RON

171,870,774).

The

maturity

of

the

facility

is

on

31

December

2029.

Also,

the
Company issued parenting guarantees for Electrica Furnizare S.A. in total amount of 203,464,672.

64
Subsequent events

Overdraft facility granted by ING Bank N.V

On

28

January

2022,

the

credit

facility

contract

signed

between

Electrica

SA

and

ING

Bank

N.V.

for

an

overdraft

facility
of

up

to

RON

210,000,000

thousand

for

financing

the

current

activity,

in

the

context

of

the

liquidity

concentration
operations

set-up

within

the

Group

and

having

the

following

characteristics:

Interest

rate:

ROBOR

1M+0.8%

p.a.,

was
extended until 27.01.2023.

Geopolitical tensions

In

February

2022

global

geopolitical

tensions

significantly

escalated

following

military

interventions

in

Ukraine

by

the
Russian

Federation. As

a

result

of

these

escalations,

economic

uncertainties

in

energy

and

capital

markets

have
increased

with

global

energy

prices

expected

to

be

highly

volatile

for

the

foreseeable

future.

As

at

the

date

of

this
report,

management

is

unable

to

reliably

estimate

the

effects

on

the

Groups

financial

outlook

and

cannot

exclude
adverse

consequence

on

the

business,

operations,

and

financial

condition.

Management

believes

it

is

taking

all

the
necessary

measures

to

support

the

sustainability

and

growth

of

the

Group’s

business

in

the

current

circumstances

and
that the judgements taken in these financial statements remain appropriate.

Chief Executive Officer

Chief Financial Officer

Georgeta Corina Popescu

Stefan Alexandru Frangulea

28 February 2022

368

#### DECLARATION OF THE MANAGEMENT

We

confirm

to

the

best

of

our

knowledge

that

the

consolidated

financial

statements,

prepared

in

accordance

with
the

applicable

accounting

standards,

give

a

true

and

fair

view

of

the

financial

position

of

the

Group,

its

financial
performance

and

cash

flows

for

the

year

ended

31

December

2021,

and

that

the

Directors‘

report

gives

a

true
and

fair

view

of

the

development

and

performance

of

the

business

of

the

Group,

together

with

a

description

of
the main risks and uncertainties associated with the expected development of the Group.

Iulian Cristian Bosoanca

non-executive director, Chairman of the Board of Directors

George Cristodorescu

non-executive director

Radu Mircea Florescu

non-executive director

Gicu Iorga

non
-executive director

Adrian-Florin Lotrean

non-executive director

Dragos-Valentin Neacsu

non-executive director

Cosmin Ion Petrescu

non-executive director

Georgeta Corina Popescu

General Manager