REG - Soc EnergElectricaSA - Availability of H1 2023 Results - IFRS

Societatea Energetica Electrica SAAnnouncement

20/09/2023 13:30

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RNS Number : 1027N  Societatea Energetica Electrica SA  20 September 2023

Societatea Energetică Electrica S.A.

9, Grigore Alexandrescu str. 010621

District 1, Bucharest, Romania

Phone: 021-208 59 99; Fax: 021-208 59 98

Fiscal Registration Certificate RO 13267221

J40/7425/2000

Share capital: 3.464.435.970  RON

www.electrica.ro

 

 

            PRESS RELEASE

 

Updated information regarding the availability of consolidated financial
statements according to IFRS-EU related to H1 2023

 

The consolidated interim financial statements as of and for the six-month
period ending on 30 June 2023, prepared in accordance with the International
Financial Reporting Standards adopted by the European Union (IFRS-EU) with
subsequent amendments, will be accessible on 28 September 2023, 20:00
(Romanian time).

 

These together with the consolidated board of directors report according to
IFRS-EU for the first semester of 2023 will be able to be accessed, both in
Romanian and in English, in electronic format, on the company's website, at
www.electrica.ro, section "Investors > Results and Reports > Financial
Results":
https://www.electrica.ro/en/investors/results-and-reports/financial-results/financial-statements-for-h1-2023/
(https://www.electrica.ro/en/investors/results-and-reports/financial-results/financial-statements-for-h1-2023/)

 

On 7 March 2023, Electrica announced for the first time, through a press
release published on BVB
(https://bvb.ro/FinancialInstruments/SelectedData/NewsItem/EL-Report-and-financial-Statements-2022-OMFP-2844/35A52)
and LSE
(https://www.londonstockexchange.com/news-article/ELSA/publication-of-the-2022-results-romanian-omfp/15865747)
, that it will publish two sets of annual financial statements - one prepared
according to OMFP 2844/2016 (the primary set) and another one prepared
according to IFRS -EU (secondary set), detailing the main differences between
the two sets of consolidated financial statements of the Electrica Group and
the reasons why, starting with 2022, the Group will report two sets of
consolidated financial statements. Later, on 27 March 2023, Electrica
published, on the BVB
(https://bvb.ro/FinancialInstruments/SelectedData/NewsItem/EL-Announcement-Difference-between-OMFP-2844-vs-IFR-EU/FCC4A)
and the LSE
(https://www.londonstockexchange.com/news-article/ELSA/difference-between-omfp-2844-vs-ifrs-eu/15892840)
, a press release in which it explained and detailed with amounts the
differences that appear between the two sets of financial statements - the one
drawn up according to OMFP 2844/2016 (the primary set ) and the one drawn up
according to IFRS-EU (secondary set).

 

Also, in the Annual Report for 2022, published at the end of April 2023,
details were included regarding the two sets of consolidated financial
statements.

 

A)  The impact of legislative changes in energy on the annual and half-yearly
financial reporting framework of the Electrica Group applicable starting from
31 December 2022

 

 

Until 31 December 2021, the consolidated financial statements prepared in
accordance with OMFP no. 2844/2016 were equivalent to those drawn up according
to IFRS-EU. As a result of the legislative changes introduced by GEO 119/2022
approved by Law no. 357/2022 (in force starting with 1 September 2022) as well
as OMFP 3900/2022 (in force starting with 20 October 2022) following it,
starting from 31 December 2022, OMFP 2844/2016 was amended by introducing a
new clause related to regulatory accounts for the capitalization of
electricity purchase expenses to cover own technological consumption (NL)
compared to the costs included in the distribution tariffs, these being
recognized as intangible assets (see published on the website the financial
accounting treatment in the primary sets of financial statements in accordance
with OMFP No. 2844/2016 on 31 December 2022 and 30 June 2023).

 

In the context of the electricity price crisis of 2022, following the
provisions of GEO 119/2022, the financial regulations of OMFP 3900/2022 were
amended, and ANRE issued Order no. 129/2022, regarding the recognition of
costs in tariffs additional with the purchase of electricity to cover NL
compared to the costs included in the approved distribution tariffs for the
period 1 January 2022 - 31 March 2025.

 

Also, starting with 31 December 2022, the Group issues a set of consolidated
financial statements prepared in accordance with IFRS-EU (see the secondary
set of financial statements in accordance with IFRS-EU on 31 December 2022
published on the website). In the additional set of consolidated financial
statements according to IFRS-EU, these additional expenses with the purchase
of electricity to cover Technological Own Consumption "NL" are accounted for
in the form of financial assets based on the changes to the concession
contracts concluded with the Ministry of Energy (the additional documents
signed from dated 20 January 2023), in which the additional costs of
purchasing electricity to cover the distribution operators' own technological
consumption are recognized as a financial asset as part of the concession
contract, being guaranteed by the concession contract which is enforceable by
law.

 

B) Financial impact of additional NL costs starting with 2022

 

For the year 2022, the distribution subsidiary has capitalized additional
costs with NL in the amount of RON 989 mn., according to the provisions of
ANRE Order no. 129/2022, determined for the amount of NL of 1,850 GWh
recognized for the year 2022, and the price difference of 597 RON/MWh
resulting as the difference between the average purchase price achieved, of
989 RON/MWh, and 392 RON/MWh, recognized price effectively in tariffs by ANRE.

 

For the first 6 months of 2023, the distribution subsidiary capitalized
additional costs with NL in the amount of RON 56.3 mn., according to the
provisions of ANRE Order no. 129/2022, determined for the amount of NL
performed in the first semester of 2023.

 

In the six-month period ending on June 30, 2023, the cost of electricity
purchased to cover NL (net of revenues) decreased compared to the first half
of 2022 by RON 491 mn., or 46%, to RON 582 mn., from RON 1,073 mn..

 

C) Publication requirements

 

Regarding the publication requirements and the legal obligations of the
Electrica Group regarding the financial statements, we make the following
clarifications:

a.   Starting with 2022, Electrica publishes both consolidated financial
statements according to IFRS-EU (secondary set) and according to OMFP
2844/2016 (primary set) for the year end and the half-year, due to the
different treatment of the additional capitalized NL;

b.   According to BVB code and ASF regulations, the Group reports according
to IAS 34 for half year, and according to Law 24/2017 - art. 68, the Group
prepares half year consolidated financial statements in accordance with the
international accounting standards applicable to interim financial reports
adopted according to the procedure provided for in art. 6 of Regulation (EC)
no. 1.606/2002 (IFRS-EU). Also, according to law 24/2017, the Group publishes
a half-year financial report for the first 6 months of each financial year, as
soon as possible after the end of the relevant period, but no later than 3
months after its end. For the first 6 months of 2023, Electrica published the
set of primary financial statements according to OMFP 2844/2016 on 25 August
2023. The Group is not obliged to publish financial statements audited or
reviewed by the financial auditors every six months, this being the option of
the Group in order to increase transparency of financial reports;

c.   For the statutory and legal obligations (other than those above), the
Group prepares the primary set according to OMFP 2844/2016 which is submitted
to the Ministry of Finance;

d.   According to Law 24/2017 art 65 paragraph (3), the company has the
obligation to draw up annual consolidated financial statements according to
IFRS-EU (secondary set).

 

Thus, the Group publishes two sets of half-yearl and annual financial
statements (IFRS "local" cf. OMFP 2844/2016 with NL capitalized as an
intangible asset and IFRS-EU with NL capitalized as a financial asset) to
fulfill all legal listing requirements and related to the capital market
(taking into account the listing of the shares at the BVB as well as the GDRs
at the LSE), the primary set also agreed with the Romanian authorities being
OMFP no. 2844/2016 (the reference).

 

D) IFRS-EU Analysis

 

Regarding the accounting treatment according to the IFRS-EU standard related
to the recognition in the form of a financial asset of the capitalized NL
related to the energy cost difference for the NL for the distribution
subsidiary, based on the amendment of the concession contracts with the
Ministry of Energy (guaranteed receivables), at the moment, the validation of
the technical arguments prepared by the Group with the financial auditors at
the level of Deloitte Global IFRS is under discussion regarding the way to
treat the additional costs with NL according to the IFRS-EU, the Group
accounting them in the form of financial assets.

 

We mention that this financial asset is currently registered by the management
according to the accounting policies of the Electrica Group presented in the
financial statements in chapter 6 "Significant accounting policies" for the
registration of financial assets according to IFRS 9, starting with the year
2018 when the respective standard was adopted by the EU and applied by the
Group. The Group has defined the categories for which IFRS 9 applies
(contractual assets, financial guarantee contracts, trade receivables, etc.).
At the same time, comparability with other companies with similar provisions
of the energy concession contract was analyzed (to be comparable and
transparent at the EU level for energy companies).

 

In consolidated financial statements prepared according to IFRS-EU, both on 31
December 2022 and on 30 June 2023, the financial asset is at the level of the
net value of the intangible asset (the fair value determined as the net
present value of the additional costs with the purchase of electricity
incurred), until the establishment of a final calculation for the subsequent
measurement of these financial assets.

 

Considering the complexity of the ongoing technical analysis with the
financial auditors at Deloitte Global IFRS level, the IFRS-EU consolidated
financial statements (secondary set) as of and for 30 June 2023 will be
published on 28 September 2023 (unaudited and unrevised), at a later date than
the one previously mentioned in the current report from 9 August 2023, namely
20 September 2023.

 

Currently, the consultation with the financial auditors on the accounting
treatment related to IFRS-EU is in progress, the Company considers that the
arguments presented are sufficient for recognition as a financial asset,
presentation comparable otherwise with other energy companies with similar
provisions of the contract of concession, but considering the complexity of
the case, the financial auditor will be able to evaluate the impact on the
audit report, only after the completion of all procedures. Thus, then it will
be possible to determine if from the point of view of the financial auditors,
the assets and the carried forward result are over-valued by including in the
consolidated financial statements the financial asset recognized as a result
of the amendment of the concession contracts with the Ministry of Energy in
order to be able to reflect the NL additionally on the distribution segment.
The result of the currently ongoing consultation will be reflected in the set
of consolidated financial statements according to IFRS-EU as of and for 31
December 2023, which will be audited by the financial auditors of the
Electrica Group.

 

The Simplified Individual Interim Financial Statements as at and for the
six-month period ending on 30 June 2023, together with the Board of Directors'
individual report for the first half of 2023, will be published on 20
September 2023, 20.00 (Romanian time).

 

Contact details:

Electrica Investors relations, E-mail: ir@electrica.ro
(mailto:ir@electrica.ro)

 

Chief Financial Officer,

Stefan Frangulea

 

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