Central Asia South Asia Electricity \--t Transmission and Trade Project (CASA-1000) Multi-Donor Trust Fund Grant No. TF0A4614-KG Project Financial Statements For the period from 2 August 2017 to 31 December 2018, together with independent auditor's report l>' EY Building a better working world Project of transmission and commerce of electric energy Central Asia - South Asia (CASA-1000) Grant No. TF0A4614-KG Financial statements TABLE OF CONTENTS f INDEPENDENT AUDITOR'S REPORT Statement of funds received and expenditures paid 1 Statement of expenditures by project components 3 NOTES TO THE FINANCIAL STATEMENTS 1. General information 4 2. Basis of preparation of financial statements 5 3. Summary of significant accounting polices 6 4. Withdrawal applications reports 6 5. Statement of Designated Account 6 6. Statement of financial position 7 7. Cash and cash equivalents 7 8. Funds received 7 9. Expenditures paid " 7 10 Litigation * r. 8 11. Events after the reporting period Г 8 EY «Эрнст энд Янг А у д и т » ЖЧК ООО «Эрнст энд Янг Аудит» Ernst & Young Audit LLC Абдрахманов к., 191 ул. Абдрахманова, 191 Abdrakhmanov Str., 191 Бишкек ш., 720011 г. Бишкек, 720011 Bishkek, 720011 Кыргыз Республикасы., Кыргызская Республика Kyrgyz Republic Building a better working world r Independent auditor's report To the Management of the Central Asia South Asia Electricity Transmission and Trade Project CASA-1000 Opinion We have audited the financial statements of "Central Asia South Asia Electricity Transmission and Trade Project" CASA-1000 (hereinafter - the "Project"), which comprise the statement of funds received and expenditures paid and statement of expenditures by project components for the period from 2 August 2017 to 31 December 2018, and notes to the financial statements, including short description of significant accounting policies and other descriptive notes (hereinafter - "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material matters, cash receipts and payments on the Project and its statement of funds by project components for the period from 2 August 2017 to 31 December 2018 prepared in accordance with the International Public Sector Accounting Standard (hereinafter - the "IPSAS") Financial Reporting under the Cash Basis of Accounting issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants and the relevant reguirements of the Grant Agreement No.TFOA4614-KG between the National Electric Grid of Kyrgyzstan OJSC and the World Bank. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management's responsibility and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the IPSAS and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liguidate the Project or to cease operations, or has no realistic alternative but to do so. A member firm of Ernst & Young Global Limited EY Building a better working world Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; * • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control; • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are reguired to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadeguate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern; • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. A member firm of Ernst & Young Global Limited EY Building a better working world We communicate with the persons, which are responsible for the corporate management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Paul Cohn Audit Partner Elizaveta Tso^ Auditor/ Acting General Director Ernst & Young Audit LLC • Audit Qualification Certificate License to perform audit activities series A No.0003 registration No.00098 dated № 0036 registration No. 0065 dated 28 February 2006 20 February 2010 issued by The State Service for Financial Market Regulation and Supervision under the Government of Kyrgyz Republic Abdrakhmanov Str., 191 Bishkek 720011, Kyrgyz Republic 24 May 2019 A member firm of Ernst & Young Global Limited и ii A ii . ! i' at Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) IBRD and IDA Grant No. TF0A4614-KG Financial statements STATEMENT OF FUNDS RECEIVED AND EXPENDITURES PAID For the period from 2 August 2017 to 31 December 2018 In USD Actual Budget Variance For the period For the period from For the period from from 2 August 2017 2 August 2017 to 2 August 2017 to to 31 December Description Note 31 December 2018 Cumulative 31 December 2018 Cumulative 2018 Cumulative Cash balance as of 2 August 2017 Designated account (IBRD and IDA, grant TF0A4614-KG) - - Total cash balance as of 2 August 2017 7 Funds received Designated account (IBRD and IDA, grant TF0A4614-KG) 196,063 196,063 Direct payment 178,130 178,130 Total funds received 8 374,193 374,193 - - Expenditures paid Non-consulting services Consulting services 254,930 254,930 266,308 266,308 (11,378) (11,378) Incremental operating costs 84,227 84,227 90,930 90,930 (6,703) (6,703) Trainings 1,250 1,250 1,300 1,300 (50) (50) Total expenditures paid 9 340,407 340,407 358,538 358,538 (18,131) (18,131) The accompanying notes on pages 4-8 form an integral part of these financial statements. 1 L уv w JI ii if irw а г ш г т ш г т ш ш г ш т г Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) IBRD and IDA Grant No. TF0A4614-KG Financial statements STATEMENT OF FUNDS RECEIVED AND EXPENDITURES PAID (continued) For the period from 2 August 2017 to 31 December 2018 In USD Actual Budget Variance For the period For the period For the period from 2 August from 2 August from 2 August 2017 to 2017 to 2017 to Description Note 31 December 2018 Cumulative 31 December 2018 Cumulative 31 December 2018 Cumulative Cash balance as of 31 December 2018 Designated account (IBRD and IDA, grant TF0A4614-KG) 33,786 33,786 Total cash balance as of 31 December 2018 7 33,786 33,786 - - rized for issue on 24 May 2019. Diusheeva 1 3)ecFlmplementation Financial Specialist of Grant No. TF0A4614-KG Central jc Grid of Kyrgyzstan" Asia South Asia Electricity Transmission and Trade Project The accompanying notes on pages 4-8 form an integral part of these financial statements. 2 fu г р v w v is ii w u ¥1ЛПППППГЯТВТТ1ПППППТ1ППГ Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) IBRD and IDA Grant No. TF0A4614-KG Financial statements STATEMENT OF EXPENDITURES BY PROJECT COMPONENTS For the period from 2 August 2017 to 31 December 2018 In USD Actual Budget Variance Budget for the Variance for the Actual for the period period from period from from 2 August 2017 2 August 2017 to 2 August 2017 to Project components Note to 31 December 2018 Cumulative 31 December 2018 Cumulative 31 December 2018 Cumulative 1. High Voltage DC and High Voltage AC Transmission Engineers 2. Environment and Social Management Support 186,610 186,610 198,308 198,308 (11,698) (11,698) 3. Audits and Financial and Revenue Management 68,320 68,320 68,000 68,000 320 320 4. Project Management Support 85,477 85,477 92.230 92,230 (6,753) (6,753) 5. Coordination 6. Project Communication 7. Capacity building Total expenditures 340,407 340,407 358,538 358,538 (18,131) (18,131) Signed and authorized for issue on 24 May 2019. Diusheeva G. Financial Specialist of Grant No. TF0A4614- KG Central Asia South Asia Electricity Transmission and Trade Project The accompanying notes on pages 4-8 form an integral part of these financial statements. 3 Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) Financial statements IBRD and IDA Grant No. TF0A4614-KG Notes to financial statements For the period from 2 August 2017 to 31 December 2018 In USD 1. General information t* The Grant No. TF0A4614-KG is provided to National Electric Grid of Kyrgyzstan OJSC (hereinafter - the "Company") in the framework of the "CASA-1000" Central Asia-South Asia Electricity Transmission and Trade Project (hereinafter — the "Grant") carried out on the basis of a grant agreement with the Multi-Donor Trust Fund (hereinafter - "Grant Agreement"), concluded between the International Bank for Reconstruction and Development and the International Development Association (hereinafter - the "IBRD and IDA"), acting as administrators of the CASA-1000 Multi-Donor Trust Fund and the National Electric Grid of Kyrgyzstan OJSC. The purpose of the Grant is to provide technical assistance and support in financing preparations for the implementation of the project on the transmission and trade of electricity in Central Asia - South Asia "CASA-1000" (hereinafter - the "Project"). The total amount of the Grant to prepare for implementation of the Project is not more than 1,000,000 (one million) US dollars. Project Management Project implementation is carried out by the project implementation unit (hereinafter — the "PIU"), which is a structural unit of the Company. The PIU was created on the basis of orders of the Company's General Director dated September 7, 2011 and January 25, 2014, and an order for reorganization for the duration of the CASA-1000 project with construction of 500 kV high voltage AC overhead transmission line to interconnect the electricity network of Kyrgyzstan from "Datka" substation to network of Tajikistan at the Khujand substation. PIU includes a chief, leading engineers and an economist. The general management of the PIU is carried out by an executive director for projects implementation, appointed by the General Director of the Company. The main responsibilities of PIU are the following: • Organization and coordination of work on the implementation of projects, ensuring compliance with conditions of obligations under international agreements concluded with the participation of financial organizations; • Control over the effective and targeted expenditures of funds in accordance with loan agreements and effective and targeted use of machinery and equipment purchased for the project and transferred to the Company's ownership. Address of the Company: Kyrgyz Republic, Bishkek, 326 Jibek Jolu Avenue, 720040. Project Objective The objective of the Project constitutes creating conditions for sustainable electricity trade between Central Asian countries of Republic of Tajikistan and Kyrgyz Republic and South Asian countries of Islamic Republic of Afghanistan and Islamic Republic of Pakistan. The Project consists of 3 components: 1. Component A "Construction of High Voltage Transmission Infrastructure"; 2. Component В "Technical Assistance and Project Implementation Support"; 3. Component С "Community Support Program". The implementation of the components of the project is carried out by one or several countries mentioned above. As part of the grant TF0A4614-KG, the Kyrgyz Republic implements component В "Technical Assistance and Project Implementation Support", which consists of the following subcomponents: 1. High Voltage DC and High Voltage AC Transmission Engineers; 2. Environment and Social Management Support; 3. Audits and Financial and Revenue Management; 4. Project Management Support; 5. Coordination; 6. Project Communication; 7. Capacity building. According to the Grant Agreement, the duration of the Grant is set from August 2, 2017 to June 30, 2020. 4 Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) Financial statements IBRD and IDA Grant No. TF0A4614-KG Notes to financial statements (continued) For the period from 2 August 2017 to 31 December 2018 In USD 2. Basis of preparation of financial statements The financial statements are prepared in accordance with the International Public Sector Accounting Standard (hereafter — "IPSAS") Financial Reporting under Cash Basis of Accounting issued by the Public Sector Committee of the International Federation of Accountants and corresponding points of the Grant Agreement No. TFOA4614-KG. The format of the financial statements complies with the one used for the projects financed by the World Bank, that discloses the sources and uses of funds in the framework of the Project CASA-1000. The financial statements consist of the following: • Statement of funds received and expenditures paid; • Statement of expenditures by project components; • Notes to the financial statements, including short description of the main statements of accounting policies and other descriptive notes. The reporting currency of the financial statements is US dollars (USD). 3. Summary of significant accounting policies Cash basis of accounting The financial statements are prepared on the cash basis of accounting. The cash basis of accounting recognizes transactions and events when cash (including cash equivalents) is received or paid by the Project. The financial statements, which are prepared on the cash basis of accounting, provide users with information about the sources of cash received during the period, the purposes of which cash was used and the cash balances at the reporting date. Measurement of the financial statements is executed through flow of fund and their ending balances. Foreign currency Cash receipts and payments in foreign currency are converted at USD spot rate of exchange as at the date of cash receipts and payments. Cash balance held in foreign currency is reported using the spot rate of exchange at the reporting date. In preparing financial statements the following exchange rates of the National Bank of the Kyrgyz Republic (hereafter — "NBKR") as at the date of operation in regard to KGS were used: 1 US dollar as of 31 December 2018 69.8500 1 US dollar as of 31 December 2017 68.8395 1 US dollar as of 2 August 2017 68.6875 Cash and cash equivalents Cash and cash equivalents include cash in foreign and national currency in a bank account. Taxes Calculation and payment of income tax and contributions to Social Fund from income of local staff and consultants are made in accordance with the requirements of the Tax Code of the Kyrgyz Republic and the Law of the Kyrgyz Republic on Tariffs of Insurance Contributions for State Social Insurance. Grant income Grant income is recognized fully in the amount of actual cash receipts within the reporting period, in which they are actually received. 5 Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) Financial statements IBRD and IDA Grant No. TF0A4614-KG Notes to financial statements (continued) For the period from 2 August 2017 to 31 December 2018 In USD 3. Summary of significant accounting policies (continued) Grant expenditures Grant expenditures include non-consulting services, consulting services, training and incremental operating costs. Expenditures are recognized in the period, in which they are actually incurred. Budget Budget of the Grant is developed on a basis of the procurement plan, approved by the World Bank. Financing and applications of cash within the Grant are executed according to the budget. Execution of the procurement plan is controlled in real time through secured website of the World Bank "Client Connection". 4. Withdrawal applications reports Cash and cash equivalents' withdrawal reports for the period from 2 August 2017 to 31 December 2018 are as follows: Direct Designated Source Withdra wal No. Amount Grant No. TF0A4614-KG No. 1 DA-D 100,000 100,000 Grant No. TF0A4614-KG No. 2 47,061 — 47,061 Giant No. TF0A4614-KG No. 3 68,320 — 68,320 Grant No. TF0A4614-KG No. 4 DA-D - 96,063 96,063 Grant No. TF0A4614-KG No. 5 62,749 - 62,749 Total 178,130 196,063 374,193 5. Statement of Designated Accounts Movements of the IBRD and IDA Designated Account for the period from 2 August 2017 to 31 December 2018 in USD are as follows: Designated account IBRD and IDA, grant No. TF0A4614-KG Bank account number #1091820100040808 Bank Optima Bank OJSC Bishkek Central branch Bank address 104/1 Kiev St., Kyrgyz Republic, 720040 Balance as of 2 August 2017 Advance/ replenishment during the reporting period (IBRD and IDA) 196,063 Less: amount disbursed (excluding direct payments) during the reporting period (162,277) Balance as of 31 December 2018 33,786 Central Asia — South Asia Electricity Transmission and Trade Project (CASA-1000) Financial statements IBRD and IDA Grant No. TF0A4614-KG Notes to financial statements (continued) For the period from 2 August 2017 to 31 December 2018 In USD 6. S t a t e m e n t of f i n a n c i a l p o s i t i o n Statement of the financial position provides information on the accumulated funds and cash balances on a bank account as of 31 December 2018: 31 December In USD 2018 Assets Cash and cash equivalents 33,786 Accumulated expenditures 340,407 Total assets and expenditures 374,193 Financing Grant IBRD and IDA 374,193 Total financing 374,193 7. Cash a n d cash e q u i v a l e n t s Balance of cash and cash equivalents of the Grant as of 31 December 2018 is as follows: 31 December 2 August In USD 2018 2017 • Designated Account in foreign currency (IBRD and IDA, grant No. TF0A4614-KG) 33,786 Total 33,786 8. Funds received Received financing for the period of the Grant from 2 August 2017 to 31 December 2018 is as follows: Paymen t methods Amount in USD Advance payments to Designated account 100,000 Account replenishment 96,063 Direct payments* 178,130 Total 374,193 * Direct payments constitutes a payment, executed by the World Bank directly to the supplier. 9. Expenditures paid Expenditures paid within the Grant are presented by category for the period from 2 August 2017 to 31 December 2018 as follows: Expenditures category Amount in USD Consultant's services 186,610 Audit services 68,320 Travel expenses 50,727 Salaries of local consultants 28,164 Training expenses 1,250 Bank commission expenses 128 Other operating projects expenses 5,208 Total 340,407 Central Asia - South Asia Electricity Transmission and Trade Project (CASA-1000) Financial statements IBRD and IDA Grant No. TF0A4614-KG Notes to financial statements (continued) For the period from 2 August 2017 to 31 December 2018 In USD V--J * I 10. Litigation According to management's opinion, there are no current legal proceedings or other outstanding claims, which could have a material negative effect on results of operations or financial position of the Project, and which have not been disclosed in the financial statements. 11. Events after the reporting period There are no events after the reporting period. EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernsf & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © Ernst & Young Audit LLC. All Rights Reserved. ey.com