REG - Soc EnergElectricaSA - Difference between OMFP 2844 vs IFRS-EU

Societatea Energetica Electrica SAAnnouncement

27/03/2023 18:00

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RNS Number : 3735U  Societatea Energetica Electrica SA  27 March 2023

Announcement

Difference between Consolidated Financial Statements OMFP 2844/2016 vs IFRS-EU

 

Explanations of the differences between:

-       The Annual Consolidated Financial Statements of Electrica as of
and for the financial year ended on December 31, 2022, prepared in accordance
with OMFP no. 2844/2016, for the approval of the Accounting Regulations in
accordance with the International Financial Reporting Standards adopted by the
European Union with subsequent changes and

-       The Annual Consolidated Financial Statements of Electrica as of
and for the financial year ended on 31 December 2022, prepared in accordance
with the International Financial Reporting Standards adopted by the European
Union with subsequent amendments (IFRS-EU)

 

Societatea Energetica Electrica SA announces the publication of the
consolidated annual financial statements for the year 2022, prepared in
accordance with the International Financial Reporting Standards adopted by the
European Union with subsequent amendments (IFRS-EU) after on 7 March 2023 it
published the consolidated annual financial statements drawn up in accordance
with the Order of the Minister of Public Finance no. 2844/2016 for the
approval of the Accounting Regulations compliant with the International
Financial Reporting Standards.

 

Until 31 December 2021, the consolidated financial statements prepared in
accordance with OMFP no. 2844/2016 were equivalent to IFRS-EU.

 

Starting from December 31, 2022, according to the Order of the Ministry of
Public Finances (OMFP) no. 3900/2022, a new clause was provided regarding the
regulatory accounts to cover the additional expenses of the network losses
("NL") for the actual energy costs compared to the ANRE ex-ante prices
recognized in the distribution tariffs, by constituting intangible assets for
these additional expenses. This amendment to the financial regulations of OMFP
2900/2022, was decided as a result of the context of electricity prices from
2022, which determined that ANRE issue for the Distribution Operators a new
methodology regarding additional costs with NL during the period 1 January
2022 - 31 August 2023. The calculation of the capitalized amounts is carried
out in compliance with the legislation specific to the entities that are the
subject of GEO 119/2022, with subsequent additions and changes. According to
ANRE regulations, the capitalized costs as intangible assets are recorded in
the accounting record and therefore in the annual financial statements
according to the instructions issued by the Ministry of Finance. ANRE will
determine the recognized annual amounts of capitalized costs based on the
recognized quantities and prices for NL.

 

Thus, within the consolidated annual financial statements for the year 2022,
prepared in accordance with OMFP no. 2844/2016, for the approval of the
Accounting Regulations in accordance with the International Financial
Reporting Standards adopted by the European Union with subsequent amendments,
the Group recorded intangible assets in the amount of 951.6 million RON, in
correspondence with income from the production of intangible assets in the
amount of 989 .3 million RON and amortization related to intangible assets
constituted until 31Dec2022 in the amount of 37.3 million RON. The revenues
from the production of intangible assets represent the additional network
losses (own technological consumption) calculated as the difference between
the net cost with the purchase and the cost of NL included in the regulatory
tariff, for the period 1 January 1 -31  December 2022.

 

In the set of consolidated financial statements according to IFRS-EU, these
expenses have another applicable financial treatment, based on the amendment
of the concession contracts regarding the recognition of additional costs
(actual costs vs recognized ex-ante in the tariffs) with the purchase of
electricity to cover NL for the distribution segment. On 20 January 2023, the
Ministry of Energy, as the concedent, amended the concession contract with the
Electrica Group for the distribution segment to reflect that, in the event of
early termination of the concession contract, for any reason, the new
concessionaire would reimburse the Group the amount the current cost of
purchasing electricity for own technological consumption compared to the costs
included in the regulated tariffs. Based on the changes in the concession
contracts, the additional cost of purchasing electricity to cover the
distribution operators' own technological consumption  is recognized as a
financial asset (guaranteed asset) as part of the concession contract. These
amounts are guaranteed by the concession contract that was fined based on the
legal provisions. The resulting financial assets are presented in the
consolidated financial statements at the fair value determined as the net
present value of the additional costs with the purchase of electricity borne
by the distribution subsidiary for NL.

 

Thus, within the consolidated annual financial statements for the year 2022,
drawn up in accordance with the International Financial Reporting Standards
adopted by the European Union with subsequent amendments (IFRS-EU), the Group
recorded both a financial asset and corresponding income from the initial
recognition of fixed assets financial related to the concession agreements in
the amount of 951.6 million RON, representing the value that has to be
recovered regarding the additional NL calculated as the difference between the
net cost with the purchase of the energy for NL and the NL cost included in
the regulatory tariff by ANRE, for the period 1 January - 31 December 2022, as
specified in the additional act to the concession contract concluded between
the distribution subsidiary of the Group (Distributie Energie Electrica
Romania SA "DEER") with the Ministry of Energy.. Because all the facts and
circumstances were available on 31 December 2022, the Group accounted for
these changes as an event the subsequent adjustment for the year ended 31
December 2022 and recognized a financial asset for the value of the additional
NL to be recovered.

 

In conclusion, both on IFRS-EU and on OMFP 2844/2016 the Group recognizes
related assets/revenues as a result of the additional difference of NL for the
distribution subsidiary, the net impact in the profit of the period being the
same in both sets of consolidated annual financial statements, while in the
financial position of the Group, according to OMFP 2844/2016 is recognized as
an intangible asset and according to IFRS-EU is regognized as a financial
asset (divided into long-term/short-term according to the recovery of
additional costs with NL in tariffs), both assets having the same net value
reflected in the statements consolidated annual financial statements, thus the
values are comparable on both sets for the main financial indicators of the
Electrica Group.

 

For more information, please contact Electrica at ir@electrica.ro
(mailto:ir@electrica.ro) .

 

Chief Executive Officer
 
CFO

Alexandru - Aurelian Chirita
                                    Stefan Frangulea

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