PUBLIC ENTERPRISE ELEKTROPRIVREDA SRBIJE BEOGRAD CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 AND INDEPENDENT AUDITOR'S REPORT CONTENTS Auditor’s report Consolidated Balance sheet Consolidated Income statement Consolidated Statement of other comprehensive income Consolidated Cash flow statement Consolidated Statement of changes in equity Notes to the financial statements Independent auditor’s report To the Management of Javno preduzeće Elektroprivreda Srbije, Beograd Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Javno preduzeće Elektroprivreda Srbije, Beograd (the „Company“) and its subsidiaries (the „Group”), which comprise the consolidated balance sheet as of 31 December 2017 and the consolidated income statement, consolidated statement of other comprehensive income, consolidated statement of changes equity and consolidated cash flow statement for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the requirements of the Law on Accounting and accounting regulation effective in the Republic of Serbia, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Law on Auditing and auditing regulations effective in the Republic of Serbia. These regulations require require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial state ments 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. PricewaterhouseCoopers d.o.o., Omladinskih brigada 88a, 11070 Belgrade, Republic of Serbia T: +381 11 3302 100, F:+381 11 3302 101, www.pwc.rs This version of our report/ the accompanying documents is a translation from the original, which was prepared in Serbian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. Report on the Consolidated Financial Statements (continued) Basis for Qualified Opinion As at 31 December 2017, assets under construction in the amount of RSD 6,675,572 thousand related to projects which are in progress for more than 3 years and for which the Group did not assess the recoverability as required by IAS 36 - Impairment of assets. Out of total amount of RSD 6,675,572 thousand, the amount of RSD 5,716,434 thousand relates to assets under construction in the subsidiary Operator distributivnog sistema EPS distribucija d.o.o., Beograd while the remaining amount relates to projects in Javno preduzeće Elektroprivreda Srbije, Beograd. In the absence of information of the recoverable amount of these assets, we were unable to satisfy ourselves as to the carrying amount of those assets as at 31 December 2017. The audit report for 2016 consolidated financial statements was qualified with this respect. As at 31 December 2017, the Group did not recognize a provision for decommissioning of landfills and dumps for ash and slag in the thermal power plants Kostolac, Kolubara, Morava,Nikola Tesla A and Nikola Tesla B, as required by IAS 37 – “Provisions, contingent liabilities and contingent assets”. In the absence of information to assess the amount of provision for decommissioning, we were unable to satisfy ourselves as to the value of provisions, related assets and expenses in the consolidated financial statements. The audit report for 2016 consolidated financial statements was qualified with this respect. Qualified Opinion In our opinion, except for the possible effects of the matters described in the basis for qualified opinion paragraphs, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2017, and of its financial performance and its cash flows for the year then ended in accordance with the requirements of the Law on Accounting and accounting regulation effective in the Republic of Serbia. Refer to the original signed Refer to the original signed Serbian version Serbian version _________________________ ______________________________ Milivoje Nešović PricewaterhouseCoopers d.o.o., Beograd Licensed Auditor Belgrade, 19 July 2018 2 This version of our report/ the accompanying documents is a translation from the original, which was prepared in Serbian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. To be filled in by the legal entity - entrepreneur TIN – Tax Registration 2 0 0 5 3 6 5 8 Activity code 3 5 1 4 identifica 1 0 3 9 2 0 3 2 7 number tion number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 CONSOLIDATED BALANCE SHEET As at 31 December 2017 - in thousands of Dinars - Amount Accoun Previous year t group, ITEM АОP Note no. account Current year Closing balance as at Opening balance as 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 ASSETS 00 A UNPAID SUBSCRIBED CAPITAL 0001 - - - B FIXED ASSETS (0003 + 0010 + 1,046,339,098 1,047,752,475 958,014,142 0002 0019 + 0024 + 0034) 23 I. INTANGIBLE ASSETS (0004 + 0005 6,914,340 4,563,898 5,105,579 01 0003 + 0006 + 0007 + 0008 + 0009) 010, p.o. - - - 1. Investment in development 0004 019 011, 23 2. Concessions, patents, licenses, 1,329,719 1,339,871 1,020,160 012, p.o. 0005 similar rights, software and other rights 019 013, p.o. - - - 3. Goodwill 0006 019 014, p.o. 23 118,945 28,592 36,859 4. Other intangible assets 0007 019 015, p.o. 23 5,465,676 3,195,435 4,048,560 5. Intangible assets in development 0008 019 016, p.o. 6. Advance payments for acquisition of - - - 0009 019 intangible assets II. PROPERTY, PLANT AND 1,025,501,981 1,032,309,606 949,347,366 02 EQUIPMENT (0011 + 0012 + 0013 + 0010 0014 + 0015 + 0016 + 0017 + 0018) 020, 23 59,051,477 58,653,163 39,415,804 021, p.o. 1. Land 0011 029 022, p.o. 23 342,432,887 348,954,709 322,809,705 2. Buildings 0012 029 023, p.o. 23 513,817,849 522,236,828 495,582,893 3. Machinery and equipment 0013 029 024, p.o. 23 522,451 530,516 556,557 4. Investment property 0014 029 025, p.o. 23 143,535 277,811 161,812 5. Other property, plant and equipment 0015 029 026, p.o. 6. Property, plant and equipment under 23 86,111,084 76,459,405 63,543,171 0016 029 construction 027, p.o. 7. Investment in PPE owned by third 993 1,007 1,064 0017 029 parties 028, p.o. 8. Advance payments for property, plant 23 23,421,705 25,196,167 27,276,360 0018 029 and equipment Amount Accoun Previous year t group, ITEM АОP Note no. account Current year Closing balance as at Opening balance as 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 III. BIOLOGICAL ASSETS (0020 + 0021 438,332 423,147 420,391 03 0019 + 0022 + 0023) 23 030, 438,332 423,147 420,391 031, p.o. 1. Forests and plantations 0020 23 039 032, p.o. - - - 2. Livestock 0021 039 037, p.o. - - - 3. Biological assets under construction 0022 039 038, p.o. 4. Advance payments for biological - - - 0023 039 assets IV. LONG TERM FINANCIAL 04. 12,791,500 8,298,298 2,357,135 INVESTMENTS (0025 + 0026 + 0027 + except 0024 24 0028 + 0029 + 0030 + 0031 + 0032 + 047 0033) 040, p.o. - - - 1. Investments in subsidiaries 0025 049 041, p.o. 2. Investments in associates and joint 24 406,457 406,457 406,457 0026 049 ventures 042, p.o. 3. Investments in other legal entities 5,240,308 381,259 360,088 0027 24 049 and other securities available for sale p.o. 043, p.o. 4. Long-term loans to parent companies - - - 0028 044, p.o. and to subsidiaries 049 p.o. 043, p.o. 5. Long-term loans to other associated 972 3,037 4,923 0029 24 044, p.o. companies 049 p.o. 045, 24 195,388 609,638 948,462 6. Long-term loans to domestic entities 0030 p.o. 049 p.o. 045, - - - 7. Long-term loans to foreign entities 0031 p.o. 049 046, p.o. - - - 8. Securities held to maturity 0032 049 048, p.o. 24 6,948,375 6,897,907 637,205 9. Other long term investment 0033 049 V. LONG TERM RECEIVABLES (0035 692,945 2,157,526 783,671 05 + 0036 + 0037 + 0038 + 0039 + 0040 + 0034 0041) 25 050, p.o. 1. Long term receivables – parent - - - 0035 059 companies and subsidiaries 051, p.o. 2. Long term receivables – other - - - 0036 059 associated entities 052, p.o. - - - 3. Long term trade receivables 0037 059 053, p.o. 4. Trade receivables for financial lease - - - 0038 059 sales 054, p.o. - - - 5. Long term receivables for guarantees 0039 059 055, p.o. - - - 6. Doubtful long term receivables 0040 059 056, p.o. 25 692,945 2,157,526 783,671 7. Other long term receivables 0041 059 288 C. DEFERRED TAX ASSETS 0042 - - - Amount Account Previous year group, ITEM АОP Note no. Current year Closing balance as at Opening balance as account 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 D. CURRENT ASSETS (0044 + 0051 + 133,016,526 143,176,356 127,497,360 0059 + 0060 + 0061 + 0062 + 0068 + 0043 0069 + 0070) I. INVENTORIES (0045 + 0046 + 0047 33,754,647 29,716,762 29,799,281 1 0044 26 + 0048 + 0049 + 0050) 26 26,956,565 24,373,472 24,249,770 10 1. Material 0045 26 344,555 331,898 328,108 11 2. Work in progress 0046 26 2,313,178 2,017,388 2,034,598 12 3. Finished products 0047 4. Merchandise (goods, purchase for 26 2,017 881 942 13 0048 sale) 26 1,825 1,825 1,825 14 5. Non-current assets held for trading 0049 26 4,136,507 2,991,298 3,184,038 15 6. Advance payments 0050 II. TRADE RECEIVABLES (0052 + 43,148,444 46,337,601 40,662,805 20 0053 + 0054 + 0055 + 0056 + 0057 + 0051 27 0058) 1. Trade receivables - domestic parent - - - 200, p.o. companies and 0052 209 subsidiaries 201, p.o. 2. Trade receivables - foreign parent - - - 0053 209 companies and subsidiaries 202, p.o. 3. Trade receivables - domestic other - - - 0054 209 associated entities 203, p.o. 4. Trade receivables - foreign other - - - 0055 209 related parties 204, p.o. 5. Trade receivables - domestic third 42,777,702 45,918,175 39,285,972 0056 27 209 party 205, p.o. 241,384 125,519 1,271,439 6. Trade receivables - foreign third party 0057 27 209 206, p.o. 27 129,358 293,907 105,394 7. Other trade receivables 0058 209 III. RECEIVABLES FROM SPECIFIC 2,826,832 2,086,827 389,750 21 BUSINESS 0059 28 OPERATIONS 9,962,431 7,100,710 9,047,728 22 IV. OTHER RECEIVABLES 0060 29 V. FINANCIAL ASSETS AT FAIR - - - 236 VALUE THROUGH 0061 PROFIT OR LOSS 23 VI. SHORT-TERM FINANCIAL 1,893,483 1,286,297 1,120,801 except INVESTMENTS (0063 + 0064 + 0065 + 0062 30 236 and 0066 + 0067) 237 1. Short-term loans and investments in - - - 230, p.o. parent companies and 0063 239 subsidiaries 231, p.o. 2. Short-term loans and investments in - - - 0064 239 other related parties 232, p.o. 30 1,728 192,512 206,377 3. Short term loans - domestic 0065 239 233, p.o. - - - 4. Short term loans - foreign 0066 239 Amount Account Previous year group, ITEM АОP Note no. Current year Closing balance as at Opening balance as account 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 234, 235, 1,891,755 1,093,785 914,424 5. Other short term investments 0067 30 238, p.o. 239 39,699,986 55,297,089 45,937,129 24 VII. CASH AND CASH EQUIVALENTS 0068 31 - - - 27 VIII. RECEIVABLES FOR VAT 0069 28 1,730,703 1,351,070 539,866 IX. PREPAYMENTS AND ACCRUED 32 except 0070 INCOME 288 1,179,355,624 1,190,928,831 1,085,511,502 E. TOTAL ASSETS = OPERATING 0071 ASSETS (0001 + 0002 + 0042 + 0043) 150,617,359 159,155,546 264,368,258 88 F. OFF BALANCE ASSETS 0072 43 EQUITY AND LIABILITIES А. EQUITY (0402 + 0411 - 0412 + 0413 853,482,204 866,257,905 782,340,222 + 0414 + 0415 - 0416 + 0417 + 0420 - 0401 0421) ≥ 0 = (0071 - 0424 - 0441 - 0442) I. BASIC CAPITAL (0403 + 0404 + 0405 360,141,927 360,141,927 360,141,927 30 0402 33 + 0406 + 0407 + 0408 + 0409 + 0410) - - - 300 1. Share capital 0403 - - - 301 2. Stakes in limited liability companies 0404 - - - 302 3. Participating interests 0405 33 359,939,739 359,939,739 359,939,739 303 4. State owned capital 0406 - - - 304 5. Socially owned capital 0407 - - - 305 6. Stakes in co-operatives 0408 - - - 306 7. Share premiums 0409 33 202,188 202,188 202,188 309 8. Other capital 0410 - - - 31 II. UNPAID SUBSCRIBED CAPITAL 0411 047 and - - - III. OWN SHARES PURCHASED 0412 237 33 12,638 678 668 32 IV. RESERVES 0413 V. REVALUATION RESERVES FOR 611,138,493 613,462,182 536,547,679 330 REVALUATION OF 0414 INTANGIBLES AND PPE 33 VI. NON REALIZED PROFIT FROM 33 33 - - - SECURITIES except 0415 (debit saldo of account group 33 except 330 330) Amount Account Previous year group, ITEM АОP Note no. Current year Closing balance as at Opening balance as account 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 VII. NON REALIZED LOSSES FROM 33 307,246 460,605 451,497 SECURITIES except 0416 (credit saldo of account group 33 except 330 330) 33 VIII. RETAINED EARNINGS 6,387,625 - - 34 0417 (0418+0419) 1. Retained earnings from previous - - - 340 0418 years 33 6,387,625 - - 341 2. Retained earnings from current year 0419 - - - IX. NON-CONTROLLING INTEREST 0420 123,891,233 106,886,277 113,898,555 35 X. ACCUMULATED LOSS (0422+0423) 33 0421 33 123,891,233 106,886,277 113,898,555 350 1. Previous year's losses 0422 - - - 351 2. Current year loss 0423 B. LONG - TERM PROVISIONS AND 130,796,278 140,956,089 130,756,330 LIABILITIES 0424 (0425+0432) I. LONG - TERM PROVISIONS (0426 + 34 15,234,083 15,022,879 17,325,654 40 0425 0427 + 0428 + 0429 + 0430 + 0431) 1. Provisions for costs incurred during - - - 400 0426 the warranty period 2. Provisions for the recovery of natural 2,962,777 2,744,881 2,487,490 401 0427 34 resources - - - 403 3. Provisions for restructuring costs 0428 34 8,196,141 8,128,105 10,203,975 404 4. Provisions for employees benefits 0429 34 4,015,140 4,037,686 4,478,672 405 5. Provisions for litigations 0430 402 and 34 60,025 112,207 155,517 6. Other long-term provisions 0431 409 II. LONG - TERM LIABILITIES (0433 + 115,562,195 125,933,210 113,430,676 41 0434 + 0435 + 0436 + 0437 + 0438 + 0432 35 0439 + 0440) 1. Liabilities that can be converted into 35 80,543 80,543 80,543 410 0433 capital 2. Liabilities to parent companies and - - - 411 0434 subsidiaries 3. Liabilities to other associated - - - 412 0435 companies - - - 413 4. Liabilities for long-term securities 0436 35 27,433,028 27,005,809 44,355,445 414 5. Long-term loans - domestic 0437 35 87,524,019 92,226,279 68,673,270 415 6. Long-term loans - foreign 0438 Amount Account Previous year group, ITEM АОP Note no. Current year Closing balance as at Opening balance as account 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 35 10 - 22,554 416 7. Liabilities for financial lease 0439 35 524,595 6,620,579 298,864 419 8. Other long-term liabilities 0440 95,825,375 98,580,263 87,365,045 498 C. DEFERRED TAX LIABILITIES 0441 22 42 to 49 D. SHORT-TERM LIABILITIES (0443 + 99,251,767 85,134,574 85,049,905 (except 0450 + 0451 + 0459 + 0460 + 0461 + 0442 498) 0462) I. SHORT-TERM FINANCIAL 12,171,010 10,607,727 26,673,610 42 LIABILITIES (0444 + 0445 + 0446 + 0443 36 0447 + 0448 + 0449) 1. Short-term loans from parent - - - 420 0444 companies and subsidiaries 2. Short-term loans from other - - - 421 0445 associated companies - - - 422 3. Short- term loans - domestic 0446 - - - 423 4. Short-term loans - foreign 0447 5. Liabilities for fixed assets and assets - - - 427 of discounting operations 0448 held for sale 424, 12,171,010 10,607,727 26,673,610 425, 426 6. Other short-term financial liabilities 0449 36 and 429 II. RECEIVED ADVANCES 4,982,077 4,628,636 3,428,017 430 PAYMENTS, DEPOSITS AND 0450 37 BAILS 43 III. LIABILITIES FROM BUSINESS 21,972,841 21,030,434 17,238,564 except OPERATIONS (0452 + 0453 + 0454 + 0451 38 430 0455 + 0456 + 0457 + 0458) 1. Trade payables - parent companies - - - 431 0452 and subsidiaries - domestic 2. Trade payables - parent companies - - - 432 0453 and subsidiaries - foreign 3. Trade payables - other associated 48,418 - - 433 0454 38 companies - domestic 4. Trade payables - other associated - - - 434 0455 companies - foreign 38 16,233,007 15,385,350 11,714,540 435 5. Trade payables - domestic 0456 38 4,757,144 4,940,118 4,944,240 436 6. Trade payables - foreign 0457 7. Other liabilities from business 934,272 704,966 579,784 439 0458 38 operations 44, 45 23,834,196 8,077,997 6,088,268 IV. OTHER SHORT-TERM LIABILITIES 0459 39 and 46 V. LIABILITIES FOR VALUE ADDED 4,039,292 4,581,267 5,700,584 47 0460 40 TAX VI. LIABILITIES FOR OTHER TAXES, 7,737,521 13,593,192 5,860,120 48 CONTRIBUTIONS 0461 41 AND OTHER DUTIES 49 24,514,830 22,615,321 20,060,742 VII. ACCRUALS AND DEFERRED 42 except 0462 INCOME 498 Amount Account Previous year group, ITEM АОP Note no. Current year Closing balance as at Opening balance as account 31 December 2016 at 1 January 2016 1 2 3 4 5 6 7 E. LOSS OVER CAPITAL (0412+0416+0421-0420-0417- 0415-0414-0413-0411-0402) ≥ 0 = 0463 - - - (0441+0424+0442-0071) ≥0 F. TOTAL EQUITY AND LIABILITIES 1,179,355,624 1,190,928,831 1,085,511,502 0464 (0424+0442+0441+0401-0463) ≥ 0 150,617,359 159,155,546 264,368,258 89 G. OFF BALANCE LIABILITIES 0465 43 In ____________________________ Legal representative Stamp _____________________________ date ______________20_______ Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/2014 and 144/2014). To be filled in by the legal entity - entrepreneur TIN – Tax Registration 2 0 0 5 3 6 5 8 Activity code 3 5 1 4 identification 1 0 3 9 2 0 3 2 7 number number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 CONSOLIDATED INCOME STATEMENT for the period from 1 January 2017 to 31 December 2017 - in thousands of Dinars - Account Amount group, ITEM АОP Note no. account Current year Previous year 1 2 3 4 5 6 REVENUES FROM REGULAR OPERATIONS 60 to 65, 223,477,570 226,167,924 except 62 А. OPERATING REVENUES (1002+1009+1016+1017) 1001 and 63 I. INCOME FROM THE SALE OF MERCHANDISE 3,804,741 2,967,209 60 1002 5 (1003+1004+1005+1006+1007+1008) 1. Sales of merchandise to parent companies and - - 600 1003 subsidiaries - domestic market 2. Sales of merchandise to parent companies and - - 601 1004 subsidiaries - foreign market 3. Sales of merchandise to other associated companies - - - 602 1005 domestic 4. Sales of merchandise to other associated companies - - - 603 1006 foreign - - 604 5. Sales of merchandise to domestic customers 1007 3,804,741 2,967,209 605 6. Sales of merchandise to foreign customers 1008 II. INCOME FROM SALES OF PRODUCTS AND SERVICE 215,869,645 218,750,441 61 1009 5 RENDERED (1010+1011+1012+1013+1014+1015) 1. Sales of merchandise to parent companies and - - 610 1010 subsidiaries - domestic market 2. Sales of merchandise to parent companies and - - 611 1011 subsidiaries - foreign market 3. Sales of finished goods and services rendered to other 5 923,863 868,925 612 1012 associated entities - domestic 4. Sales of finished goods and services rendered to other - - 613 1013 associated entities - foreign 5 214,387,934 217,104,739 614 5. Sales of merchandise to domestic customers 1014 5 557,848 776,777 615 6. Sales of merchandise to foreign customers 1015 III. INCOME FROM PREMIUMS, SUBVENTIONS, 2,189,667 2,168,525 64 1016 7 DONATIONS, ETC. 1,613,517 2,281,749 65 IV. OTHER OPERATING INCOME 1017 8 COSTS FROM REGULAR OPERATIONS 50 to 55, 62 B. OPERATING EXPENSES (1019-1020-1021+1022+ 210,943,755 191,712,716 1018 and 63 1023+1024+1025+1026+1027+1028+1029) ≥ 0 Account Amount group, ITEM АОP Note no. account Current year Previous year 1 2 3 4 5 6 312,818 98,794 50 I. COST OF GOODS SOLD - COGS 1019 II. INCOME FROM THE OWN USE OF PRODUCTS, 4,977,421 5,022,914 62 1020 6 SERVICES AND MERCHANDISE III. INCREASE OF FINISHED GOODS, WORK IN 962,087 387,152 630 1021 PROGRESS AND SERVICES IN PROGRESS IV. DECREASE OF FINISHED GOODS, WORK IN 653,639 400,573 631 1022 PROGRESS AND SERVICES IN PROGRESS 12,398,559 11,314,013 51 except 513 V. COST OF MATERIAL 1023 9 40,421,675 31,275,991 513 VI. COST OF FUEL AND ENERGY 1024 10 VII. COSTS OF SALARIES, FRINGE BENEFITS AND 67,414,438 64,134,943 52 1025 11 OTHER PERSONAL EXPENSES 21,189,767 20,776,515 53 VIII. COSTS OF PRODUCTION SERVICES 1026 12 46,381,392 44,389,787 540 IX. DEPRECIATION COSTS 1027 13 3,158,911 1,157,330 541 to 549 X. LONG-TERM PROVISIONS COSTS 1028 14 24,952,064 23,574,836 55 XI. NON-PRODUCTION COSTS 1029 15 12,533,815 34,455,208 C. OPERATING PROFIT (1001-1018) ≥ 0 1030 - - D. OPERATING LOSS (1018-1001) ≥ 0 1031 21,012,042 10,927,843 66 E. FINANCIAL INCOME (1033+1038+1039) 1032 66, except I. FINANCIAL INCOME INCURRED WITH ASSOCIATED 716,207 570,290 662, 663 COMPANIES AND OTHER FINANCIAL INCOME 1033 and 664 (1034+1035+1036+1037) 1. Financial income incurred with parent companies and - - 660 1034 subsidiaries 2. Financial income incurred with other associated 650,646 561,135 661 1035 16 companies 3. Income from share in associated entities and joint - - 665 1036 ventures 16 65,561 9,155 669 4. Other financial income 1037 16 9,381,909 8,295,492 662 II. INCOME FROM INTEREST (FROM THIRD PARTIES) 1038 III. FX GAINS AND INCOME FOR THE EFFECTS OF 16 10,913,926 2,062,061 663 and 664 1039 CURRENCY CLAUSE 3,851,527 7,902,949 56 F. FINANCIAL EXPENSES (1041+1046+1047) 1040 56, except I. FINANCIAL EXPENSES INCURRED WITH 334,056 709,322 562, 563 ASSOCIATED COMPANIES AND OTHER FINANCIAL 1041 17 and 564 EXPENSES (1042+1043+1044+1045) 1. Financial expenses incurred with parent companies and - - 560 1042 subsidiaries 2. Financial expenses incurred with other associated - - 561 1043 companies 3. Losses for share in loss of associated companies and - - 565 1044 joint ventures Account Amount group, ITEM АОП Note no. account Current year Previous year 1 2 3 4 5 6 334,056 709,322 566 and 569 4. Other financial expenses 1045 17 17 1,460,177 2,220,609 562 II. COSTS OF INTERESTS (TO THIRD PARTIES) 1046 III. FX LOSSES AND LOSSES FOR CURRENCY CLAUSE 17 2,057,294 4,973,018 563 and 564 1047 EFFECTS 17,160,515 3,024,894 G. FINANCIAL PROFIT (1032-1040) 1048 - - H. FINANCIAL LOSS (1040-1032) 1049 I. INCOME FROM OTHER ASSETS VALUATION 18 2,599,447 8,563,774 683 and 685 1050 ADJUSTMENTS VALUED AT FAIR VALUE J. EXPENSES FROM OTHER ASSETS VALUATION 17,167,041 15,649,018 583 and 585 1051 19 ADJUSTMENTS VALUED AT FAIR VALUE 67 and 68, 1,815,970 23,927,139 except 683 K. OTHER INCOME 1052 20 and 685 57 and 58, 8,749,425 41,836,372 except 583 L. OTHER EXPENSES 1053 21 and 585 M. PROFIT FROM OPERATIONS BEFORE TAXATION 8,193,281 12,485,625 (1030-1031+1048-1049+1050- 1054 22 1051+1052-1053) N. LOSS FROM OPERATIONS BEFORE TAXATION - - 1055 (1031-1030+1049-1048+1051-1050+1053-1052) O. NET OPERATING PROFIT FROM DISCONTINUED - 468 69 minus 59 1056 OPERATIONS P. NET OPERATING LOSS FROM DISCONTINUED - - 59 minus 69 1057 OPERATIONS Q. PROFIT BEFORE TAXATION 8,193,281 12,486,093 1058 (1054-1055+1056-1057) - - R. LOSS BEFORE TAXATION (1055-1054+1057-1056) 1059 S. CORPORATE INCOME TAX 4,529,626 9,677,896 721 I. TAX EXPENSES FOR THE PERIOD 1060 22 - - p.o. 722 II. DEFERRED TAX COSTS FOR THE PERIOD 1061 2,723,970 3,041,705 p.o. 722 III. DEFERRED TAX INCOME FOR THE PERIOD 1062 22 - - 723 T. EMPLOYER`S EARNINGS PAID OUT 1063 6,387,625 5,849,902 U. NET PROFIT (1058-1059-1060-1061+1062-1063) 1064 - - V. NET LOSS (1059-1058+1060+1061-1062+1063) 1065 I. NET PROFIT ATTRIBUTABLE TO MINORITY - - 1066 INVESTORS II. NET PROFIT ATTRIBUTABLE TO MAJORITY 6,387,625 5,849,902 1067 INVESTORS III. NET LOSS ATTRIBUTABLE TO MINORITY - - 1068 INVESTORS IV. NET LOSS ATTRIBUTABLE TO MAJORITY - - 1069 INVESTORS Account Amount group, ITEM АОP Note no. account Current year Previous year 1 2 3 4 5 6 V. EARNINGS PER SHARE 1. Basic earnings per share 1070 - - 2. Diluted earnings per share 1071 - - In ____________________________ Legal representative Stamp _____________________________ Date ______________20_______ Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/2014 and 144/2014). To be filled in by the legal entity - entrepreneur TIN – Tax Registration 2 0 0 5 3 6 5 8 Activity code 3 5 1 4 identification 1 0 3 9 2 0 3 2 7 number number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME for the period from 1 January 2017 to 31 December 2017 - in thousands of Dinars - Account Amount group, account ITEM АОP Note no. Current year Previous year 1 2 3 4 5 6 А, NET RESULT FROM OPERATIONS I, NET PROFIT (AOP 1064) 2001 6,387,625 5,849,902 II, NET LOSS (AOP 1065) 2002 - - Б, OTHER COMPREHENSIVE PROFIT OR LOSS а) Items that will not be reclassified subsequently to profit or loss 1, Revaluation of intangibles and PPE 330 а) increase in revaluation reserves 2003 16,416 91,158,100 b) decrease in revaluation reserves 2004 - - 2, Actuarial gains (losses) on defined benefit plans 331 а) gains 2005 - - b) losses 2006 - - 3, Gains or losses on investments in equity instruments 332 a) gains 2007 - - b) losses 2008 - - 4, Share of other comprehensive income of associates 333 a) gains 2009 - - b) losses 2010 - - b) Items that may be reclassified subsequently to profit or loss 1, Foreign currency translation differences for foreign Operations 334 a) gains 2011 - 506 b) losses 2012 3,397 - Accoun Amount t group, Accoun ITEM АОP t Note no, Current year Previous year 1 2 3 4 5 6 2, Gains and losses on hedge of investment in foreign operations 335 a) gains 2013 - - b) losses 2014 - - 3, Cash flow hedges 336 a) gains 2015 - - b) losses 2016 - - 4, Gains and losses on available for sale financial assets 337 a) gains 2017 150,878 - b) losses 2018 - 9,614 I, OTHER COMPREHENSIVE GROSS PROFIT (2003+2005+2007+2009+2011+2013+2015+2017) - 2019 163,897 91,148,992 (2004+2006+2008+2010+2012+2014+2016+2018) ≥ 0 II, OTHER COMPREHENSIVE GROSS LOSS (2004+2006+2008+2010+2012+2014+2016+2018) - 2020 - - (2003+2005+2007+2009+2011+2013+2015+2017) ≥ 0 III, TAXES ON OTHER COMPREHENSIVE PROFIT OR 2021 22 - 14,245,628 LOSS FOR THE PERIOD IV, OTHER COMPREHENSIVE NET PROFIT 2022 163,897 76,903,364 (2019-2020-2021) ≥ 0 V, OTHER COMPREHENSIVE NET LOSS 2023 - - (2020-2019+2021) ≥ 0 C, TOTAL COMPREHENSIVE NET RESULT FOR THE PERIOD I, TOTAL COMPREHENSIVE NET PROFIT 2024 6,551,522 82,753,266 (2001-2002+2022-2023) ≥ 0 II, TOTAL COMPREHENSIVE NET LOSS 2025 - - (2002-2001+2023-2022) ≥ 0 D, TOTAL COMPREHENSIVE NET PROFIT OR LOSS 2026 6,551,522 82,753,266 (2027+2028) = AOP 2024 ≥ 0 or AOP 2025 > 0 1, Attributable to owners 2027 6,551,522 82,753,266 2, Attributable to non-controlling interest 2028 - - In ____________________________ Legal representative Stamp _____________________________ Date ______________20_______ Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/2014 and 144/2014). To be filled in by legal entity – entrepreneur TIN – Tax Registration 2 0 0 5 3 6 5 8 Activity code 7 3 5 1 4 identification 1 0 3 9 2 0 32 number number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 CONSOLIDATED CASH FLOW STATEMENT for the period from 01 January 2017 to 31 December 2017 - in thousands of Dinars - Amount Item AOP Current year Previous year 1 2 3 4 А. CASH FLOW FROM OPERATING ACTIVITIES 219,501,740 238,196,029 3001 I. Cash inflow from operating activities (1 to 3) 206,848,374 227,694,065 1. Sales and advance payments received 3002 9,193,810 7,988,771 2. Received interests from operating activities 3003 3,459,556 2,513,193 3. Other inflows from operating activities 3004 189,708,763 180,366,421 II. Cash outflows from operating activities (1 to 5) 3005 59,591,091 88,472,047 1. Payments to suppliers and advance prepayments 3006 66,238,597 61,105,527 2. Wages, salaries and other personal costs 3007 2,561,490 354,101 3. Paid interests 3008 16,359,709 1,366,551 4. Corporate income tax 3009 44,957,876 29,068,195 5. Other payments to tax authorities 3010 29,792,977 57,829,608 III. Net cash inflow from operating activities (I-II) 3011 - - IV. Net cash outflow from operating activities (II-I) 3012 B. CASH FLOW FROM INVESTING ACTIVITIES 1,119,334 12,830,901 3013 I. Cash inflow from investing activities (1 till 5) - - 1. Sale of shares and stakes (net inflows) 3014 10,944,316 2. Sale of intangible assets, property, plant, equipment and biological assets 3015 287,394 - 3. Other financial investments (net inflows) 3016 782,830 831,940 1,103,755 4. Interests received from investing activities 3017 - - 5. Dividends received 3018 45,023,247 56,679,635 II. Cash outflow from investing activities (1 till 3) 3019 1. Purchase of shares and stakes (net outflows) 3020 - 2,556 41,857,566 49,900,997 2. Purchase of intangible investments, property, plant, equipment and biological assets 3021 6,776,082 3. Other financial investments (net outflows) 3022 3,165,681 - III. Net cash inflow from investing activities (I-II) 3023 - IV. Net cash outflow from investing activities (II-I) 3024 43,903,913 43,848,734 C. CASH INFLOW FROM FINANCING ACTIVITIES 2,452,461 70,585 3025 I. Cash inflows from financing activities (1 till 5) - 1. Increase of basic capital 3026 40,063 2. Long-term loans (net inflows) 3027 2,412,398 - Amount ITEM AOP Current year Previous year 1 2 3 4 - 3. Short-term loans (net inflows) 3028 - - 4. Other long-term liabilities 3029 - - 70,585 5. Other short-term liabilities 3030 3,293,268 4,969,399 II. Cash outflows from financing activities (1 till 6) 3031 - - 1. Purchase of own shares and stakes 3032 - 3,503,629 2. Long-term loans (net outflows) 3033 176 3. Short-term loans (net outflows) 3034 - 270,196 68,001 4. Other liabilities (net outflows) 3035 22,896 1,337,306 5. Financial lease 3036 3,000,000 60,463 6. Paid dividends 3037 - - III. Net cash inflows from financing activities (I-II) 3038 4,898,814 IV. Net cash outflows from financing activities (II-I) 3039 840,807 223,073,535 251,097,515 D. TOTAL CASH INFLOWS (3001 + 3013 + 3025) 3040 238,025,278 242,015,455 E. TOTAL CASH OUTFLOWS (3005 + 3019 + 3031) 3041 - 9,082,060 F. NET CASH INFLOWS (3040 - 3041) 3042 - G. NET CASH OUTFLOWS (3041 - 3040) 3043 14,951,743 55,297,089 45,937,129 H. CASH AT THE BEGINNING OF THE CALCULATION PERIOD 3044 154,424 373,538 I. POSITIVE EXCHANGE RATE DIFFERENCES DUE TO CALCULATION OF CASH 3045 799,784 95,638 J. NEGATIVE EXCHANGE RATE DIFFERENCES DUE TO CALCULATION OF CASH 3046 K. CASH AT THE END OF REPORTING PERIOD 39,699,986 55,297,089 3047 (3042 - 3043 + 3044 + 3045 - 3046) In ____________________________ Legal representative Stamp _____________________________ Date ______________20_______ Financial statements form prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/2014 and 144/2014) To be filled in by legal entity – entrepreneur TIN – Tax Registration Activity 2 0 0 5 3 6 5 8 3 5 1 4 identification 1 0 3 9 2 0 3 2 7 number code number Company Public Enterprise Elektroprivreda Srbije Beograd Head office Belgrade, Carice Milice 2 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period from 01 January 2017 to 31 December 2017 - In thousands of Dinars – Components of Equity Description No. 30 31 32 AOP AOP Unpaid АОP Core equity Reserves subscribed equity 1 2 3 4 5 Balance as at 01.01. of the previous year - 1. а) debit balance account 4001 4019 - 4037 - 360,141,927 b) credit balance account 4002 4020 - 4038 668 Correction of material errors and changes in accounting policies 2. - а) corrections on the debit side of the account 4003 4021 - 4039 - b) corrections to the credit side of the account 4004 - 4022 - 4040 - Adjusted opening balance as at 01.01. of the previous year а) corrected debit balance account (1a + 2a - 3. 4005 4023 - 4041 - 2b) ≥ 0 b) corrected credit balance accounts (1b - 2a 360,141,927 4006 4024 - 4042 668 + 2b) ≥ 0 Changes in the previous year ______ - 4. а) turnover on the debit side of the account 4007 4025 - 4043 - - b) turnover on the credit side of the account 4008 4026 - 4044 10 Balance at the end of the previous year 31.12 .____ 5. а) debit account balance (3a + 4a - 4b) ≥0 4009 - 4027 - 4045 - 360,141,927 b) credit balance accounts (3b - 4a + 4b) ≥0 4010 4028 - 4046 678 Correction of material errors and changes in accounting policies 6. - - - а) corrections on the debit side of the account 4011 4029 4047 - - - b) corrections to the credit side of the account 4012 4030 4048 Corrected opening balance of the current year 01.01. ______ 7. a) corrected debit balance accounts (5a + 6a - - - 4013 4031 4049 - 6b) ≥ 0 b) corrected credit balance accounts (5b - 6a 360,141,927 - 678 4014 4032 4050 + 6b) ≥ 0 Changes in the current year ______ - - - 8. a) turnover on the debit side of the account 4015 4033 4051 - - 11,960 b) turnover on the credit side of the account 4016 4034 4052 Balance at end of the year 31.12 .____ - - - a) debit balance account (7a + 8a - 8b) ≥0 4017 4035 4053 9. 12,638 b) credit balance accounts (7b - 8a + 8b) ≥0 4018 360,141,927 4036 - 4054 Components of Equity DESCRIPTION 35 047 и 237 34 No. АОP Accumulated АОП АОП Retained Treasury shares Loss Earnings 2 6 7 8 Balance as at 01.01. of the previous year 113,898,555 1. a) debit balance account 4055 4073 - 4091 - - b) credit balance account 4056 4074 - 4092 - Correction of material errors and changes in accounting policies - 2. a) corrections on the debit side of the account 4057 4075 - 4093 - - b) corrections to the credit side of the account 4058 4076 - 4094 - Adjusted opening balance as at 01.01. of the previous year a) corrected debit balance account (1a + 2a - 113,898,555 3. 4059 4077 - 4095 - 2b) ≥ 0 b) corrected credit balance accounts (1b - 2a - 4060 4078 - 4096 - + 2b) ≥ 0 Changes in the previous year ______ 4. a) turnover on the debit side of the account 4061 - 4079 - 4097 5,849,902 b) turnover on the credit side of the account 4062 7,012,278 4080 - 4098 5,849,902 Balance at the end of the previous year 31.12 .____ 5. a) debit account balance (3a + 4a - 4b) ≥0 4063 106,886,277 4081 - 4099 - - b) credit balance accounts (3b - 4a + 4b) ≥0 4064 4082 - 4100 - Correction of material errors and changes in accounting policies 6. a) corrections on the debit side of the account 4065 - 4083 - 4101 - b) corrections to the credit side of the account 4066 - 4084 - 4102 - Corrected opening balance of the current year 01.01. ______ 7. a) corrected debit balance accounts (5a + 6a 4067 106,886,277 4085 - 4103 - - 6b) ≥ 0 b) corrected credit balance accounts (5b - 6a - 4068 4086 - 4104 - + 6b) ≥ 0 Changes in the current year ______ 22,854,858 8. a) turnover on the debit side of the account 4069 4087 - 4105 - 5,849,902 b) turnover on the credit side of the account 4070 4088 - 4106 6,387,625 Balance at end of the year 31.12 .____ 9. a) debit balance account (7a + 8a - 8b) ≥0 4071 123,891,233 4089 - 4107 - b) credit balance accounts (7b - 8a + 8b) ≥0 4072 4090 - 4108 6,387,625 - Components of Other Comprehensive Income 330 331 332 DESCRIPTION Gains or losses No. АОP Revaluation АОP Actuarial gains АОП on investment in Reserves or losses equity instruments 1 2 9 10 11 Balance as at 01.01. of the previous year 1. a) debit balance account 4109 4127 - 4145 - - b) credit balance account 4110 536,547,679 4128 - 4146 - Correction of material errors and changes in accounting policies 2. a) corrections on the debit side of the account 4111 - 4129 - 4147 - b) corrections to the credit side of the account 4112 4130 - 4148 - - Adjusted opening balance as at 01.01. of the previous year a) corrected debit balance account (1a + 2a - 3. 4113 4131 - 4149 - 2b) ≥ 0 - b) corrected credit balance accounts (1b - 2a 4114 536,547,679 4132 - 4150 - + 2b) ≥ 0 Changes in the previous year ______ 4. a) turnover on the debit side of the account 4115 17,654,094 4133 - 4151 - b) turnover on the credit side of the account 4116 94,568,597 4134 - 4152 - Balance at the end of the previous year 31.12 .____ - 5. a) debit account balance (3a + 4a - 4b) ≥0 4117 4135 - 4153 - b) credit balance accounts (3b - 4a + 4b) ≥0 4118 613,462,182 4136 - 4154 - Correction of material errors and changes in accounting policies 6. a) corrections on the debit side of the account 4119 - 4137 - 4155 - b) corrections to the credit side of the account 4120 - 4138 - 4156 - Corrected opening balance of the current year 01.01. ______ 7. a) corrected debit balance accounts 4121 4139 - 4157 - (5a + 6a - 6b) ≥ 0 - b) corrected credit balance accounts (5b - 6a 4122 613,462,182 4140 - 4158 - + 6b) ≥ 0 Changes in the current year ______ 8. a) turnover on the debit side of the account 4123 2,340,105 4141 - 4159 - b) turnover on the credit side of the account 4124 16,416 4142 - 4160 - Balance at end of the year 31.12.____ 9. - a) debit balance account (7a + 8a - 8b) ≥0 4125 4143 - 4161 - b) credit balance accounts (7b - 8a + 8b) ≥0 4126 611,138,493 4144 - 4162 - Components of Other Comprehensive Income 333 334 и 335 336 DESCRIPTION Gains or losses No. Gains or losses on foreign Gains or losses АОP on share in OCI АОP operations and АОP on cash flow of associated translation of hedges entities financial statements 1 2 12 13 14 Balance as at 01.01. of the previous year 1. a) debit balance account 4163 4181 - 4199 - - - b) credit balance account 4164 4182 - 4200 - Correction of material errors and changes in accounting policies 2. a) corrections on the debit side of the 4165 4183 - 4201 - account - b) corrections to the credit side of the - 4166 4184 - 4202 - account Adjusted opening balance as at 01.01. of the previous year 3. a) corrected debit balance account (1a + 4167 4185 - 4203 - 2a - 2b) ≥ 0 - b) corrected credit balance accounts (1b - - 4168 4186 - 4204 - 2a + 2b) ≥ 0 Changes in the previous year ______ a) turnover on the debit side of the 4. 4169 4187 4205 account - - - b) turnover on the credit side of the - 4170 4188 - 4206 account - Balance at the end of the previous year 31.12.____ 5. a) debit account balance (3a + 4a - 4b) ≥0 4171 4189 - 4207 - - b) credit balance accounts (3b - 4a + 4b) - 4172 4190 - 4208 ≥0 - Correction of material errors and changes in accounting policies 6. a) corrections on the debit side of the 4173 4191 4209 account - - - b) corrections to the credit side of the - - - 4174 4192 4210 account Corrected opening balance of the current year 01.01. ______ 7. a) corrected debit balance accounts (5a + 4175 4193 - 4211 6a - 6b) ≥ 0 - - b) corrected credit balance accounts (5b - - - 4176 4194 - 4212 6a + 6b) ≥ 0 Changes in the current year ______ a) turnover on the debit side of the 8. 4177 4195 - 4213 account - - b) turnover on the credit side of the - - 4178 4196 - 4214 account Balance at end of the year 31.12.____ 9. a) debit balance account (7a + 8a - 8b) ≥0 4179 4197 - 4215 - - b) credit balance accounts (7b - 8a + 8b) - - 4180 4198 - 4216 ≥0 Components of Other Loss above the Comprehensive Income value of equity Total equity No. DESCRIPTION 337 [Σ(row 1а col 3 to АОP [Σ(row 1б col 3 to col АОP Gains or losses col 15) - Σ(row АОP 15)]≥0 on AFS 1б col 3 to col 15) ]≥ securities 0 1 2 15 16 17 Balance as at 01.01. of the previous year 1. a) debit balance account 4217 451,497 4235 4244 - b) credit balance account 4218 - 782,340,222 Correction of material errors and changes in accounting policies 2. a) corrections on the debit side of the - 4219 - account 4236 4245 - b) corrections to the credit side of the 4220 account - Adjusted opening balance as at 01.01. of the previous year a) corrected debit balance account (1a + 3. 4221 451,497 2a - 2b) ≥ 0 4237 4246 - b) corrected credit balance accounts (1b - 4222 782,340,222 2a + 2b) ≥ 0 - Changes in the previous year ______ a) turnover on the debit side of the 9,614 4. 4223 4238 account 4247 - b) turnover on the credit side of the 506 4224 83,917,683 account Balance at the end of the previous year 31.12.____ 5. a) debit account balance (3a + 4a - 4b) ≥0 4225 460,605 b) credit balance accounts (3b - 4a + 4b) - 4239 4248 - 4226 866,257,905 ≥0 Correction of material errors and changes in accounting policies 6. a) corrections on the debit side of the 4227 account - 4240 4249 - b) corrections to the credit side of the - 4228 - account Corrected opening balance of the current year 01.01. ______ a) corrected debit balance accounts (5a + 7. 4229 460,605 6a - 6b) ≥ 0 4241 4250 - b) corrected credit balance accounts (5b - - 4230 866,257,905 6a + 6b) ≥ 0 Changes in the current year ______ a) turnover on the debit side of the 31,767 8. 4231 account 4242 4251 - b) turnover on the credit side of the 4232 185,126 - account Balance at end of the year 31.12.____ 9. a) debit balance account (7a + 8a - 8b) ≥0 4233 307,246 4243 853,482,204 4252 - b) credit balance accounts (7b - 8a + 8b) - 4234 ≥0 In ____________________________ Legal representative Stamp _____________________________ Date ______________20_______ Financial statements form prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/2014 and 144/2014) Public Enterprise ELEKTROPRIVREDA SRBIJE, BEOGRAD Consolidated Financial Statements 31 December 2017 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONTENTS Page Consolidated financial statements: Consolidated Income statement 1–2 Consolidated Statement of other comprehensive income 3 Consolidated Balance sheet 4–6 Consolidated Statement of changes in equity 7 Consolidated Cash flow statement 8 Notes to the financial statements 9 – 75 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED INCOME STATEMENT For the period 1 January - 31 December 2017 In RSD thousand For the Year For the Year Ended 31 Ended 31 Note December 2017 December 2016 Restated Income from sales of goods and services Income from sales of goods and services to other related parties – on domestic market 5 923,863 868,925 Income from sales of goods and services – on domestic market 5 214,387,934 217,104,739 Income from sales of goods and services – on foreign market 5 4,362,589 3,743,986 219,674,386 221,717,650 Income from premiums, subventions, grants and donations 7 2,189,667 2,168,525 Other operating income 8 1,613,517 2,281,749 Income from operating activities 223,477,570 226,167,924 Expenses from operating activities Operating expenses Cost of goods sold (312,818) (98,794) Work performed by the entity and capitalised 6 4,977,421 5,022,914 Increase/(decrease) in inventories of unfinished goods and services 308,448 (13,421) Cost of material 9 (12,398,559) (11,314,013) Cost of fuel and energy 10 (40,421,675) (31,275,991) Wages and salaries and other personal expenses 11 (67,414,438) (64,134,943) Cost of production services 12 (21,189,767) (20,776,515) Depreciation/Amortisation 13 (46,381,392) (44,389,787) Cost of long-term provisioning 14 (3,158,911) (1,157,330) Other operating expenses 15 (24,952,064) (23,574,836) (210,943,755) (191,712,716) Operating profit/ (loss) 12,533,815 34,455,208 Financial income Financial income from other related parties 16 650,646 561,135 Other financial income 16 65,561 9,155 Interest income (third parties) 16 9,381,909 8,295,492 Foreign exchange gains and gains on currency clause effect (third parties) 16 10,913,926 2,062,061 21,012,042 10,927,843 Financial expenses Other financial expenses 17 (334,056) (709,322) Interest expense (third parties) 17 (1,460,177) (2,220,609) Foreign exchange losses and loss on currency clause effect (third parties) 17 (2,057,294) (4,973,018) (3,851,527) (7,902,949) Gain/(loss) on financing activities 17,160,515 3,024,894 Income from adjustments of other assets carried at fair value through profit and loss 18 2,599,447 8,563,774 Expenses from adjustments of other assets carried at fair value through profit and loss 19 (17,167,041) (15,649,018) Other income 20 1,815,970 23,927,139 Other expenses 21 (8,749,425) (41,836,372) (21,501,049) (24,994,477) Operating profit/(loss) before tax 8,193,281 12,485,625 1 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED INCOME STATEMENT (continued) For the period 1 January - 31 December 2017 In RSD thousand For the Year For the Year Ended 31 Ended 31 Note December 2017 December 2016 Restated Profit/ (loss) before tax 8,193,281 12,485,625 The net gain of the business that is being suspended, the effects of changes in the accounting policy and the correction of errors from previous periods - 468 Profit/ (loss) before tax 22 8,193,281 12,486,093 Income tax Tax expense for the period 22 (4,529,626) (9,677,896) Deferred tax income /(expense) for the period 22 2,723,970 3,041,705 Net profit/ (loss) 6,387,625 5,849,902 The notes on the following pages form an integral part of these consolidated financial statements. On behalf of the JP EPS Мilorad Grčić Acting General Manager 2 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME For the period 1 January - 31 December 2017 In RSD thousand For the Year For the Year Note Ended 31 Ended 31 December 2017 December 2016 Restated Net operating income Net profit 6,387,625 5,849,902 Items that will not be reclassified to profit or loss Increase in revaluation reserves 33 16,416 91,160,131 16,416 91,160,131 Items that will be reclassified to profit or loss Gains/(losses) on translating the results in the consolidated financial statements of foreign operations 33 (3,397) 506 Gains/(losses) on available-for-sale securities 33 150,878 (9,614) 147,481 (9,108) Other Comprehensive gain, gross 163,897 91,151,023 Tax on other comprehensive gain or loss 22 - (14,245,628) Other Comprehensive gain, net 163,897 76,905,395 Total comprehensive gain, net 6,551,522 82,755,297 The notes on the following pages form an integral part of these consolidated financial statements 3 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED BALANCE SHEET As at 31 December 2017 In RSD thousand 31 December 31 December Note 2017 2016 Assets Non-current assets Intangible Assets Concessions, patents, licences, trademarks, software and similar rights 23 1,329,719 1,339,871 Other intangibles 23 118,945 28,592 Intangible Assets under construction 23 5,465,676 3,195,435 6,914,340 4,563,898 Property, plant and equipment Land 23 59,051,477 58,653,163 Buildings 23 342,432,887 348,954,709 Machinery and equipment 23 513,817,849 522,236,828 Investment property 23 522,451 530,516 Other Property, Plant and Equipment 23 143,535 277,811 Construction in progress (CIP) 23 86,111,084 76,459,405 Investments in third party property, plant and equipment 993 1,007 Prepayments for property, plant and equipment 23 23,421,705 25,196,167 1,025,501,981 1,032,309,606 Biological assets Forest farming 23 438,332 423,147 Long-term financial investments Investments in associates and joint ventures 24 406,457 406,457 Investments in other legal entities and other available for sale securities 24 5,240,308 381,259 Long-term financial investments in other related parties 24 972 3,037 Long term investments – domestic 24 195,388 609,638 Other long-term financial investments 24 6,948,375 6,897,907 12,791,500 8,298,298 Long-term receivables Other long term receivables 25 692,945 2,157,526 Current assets Inventory Material, spare parts, tools and inventory 26 26,956,565 24,373,472 Work in progress and ongoing services 26 344,555 331,898 Finished goods 26 2,313,178 2,017,388 Merchandise 26 2,017 881 Non-current assets held for sale 26 1,825 1,825 Prepaid inventory and services 26 4,136,507 2,991,298 33,754,647 29,716,762 Trade receivables Trade receivables – domestic 27 42,777,702 45,918,175 Trade receivables – foreign 27 241,384 125,519 Other trade receivables 27 129,358 293,907 43,148,444 46,337,601 Receivables from specific operations 28 2,826,832 2,086,827 Other receivables 29 9,962,431 7,100,710 (continued) 4 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED BALANCE SHEET (continued) As at 31 December 2017 In RSD thousand 31 December 31 December Note 2017 2016 Short-term financial investments Short-term loans and borrowings - domestic 30 1,728 192,512 Other short term financial investments 30 1,891,755 1,093,785 1,893,483 1,286,297 Cash and cash equivalents 31 39,699,986 55,297,089 Value added tax - - Prepaid expenses and other accruals 32 1,730,703 1,351,070 Total assets 1,179,355,624 1,190,928,831 Off-balance sheet assets 43 150,617,359 159,155,546 Liabilities Equity Basic capital 33 360,141,927 360,141,927 Reserves 33 12,638 678 Revaluation reserves based on revaluation of intangible assets, property, plant and equipment 33 611,138,493 613,462,182 Unrealised gain/(loss) from securities and other comprehensive income items 33 (307,246) (460,605) Current year retained earnings 33 6,387,625 5,849,902 Prior years loss 33 (123,891,233) (112,736,179) 853,482,204 866,257,905 Long-term provisions and liabilities Long-term provisions Provision for environmental restoration 34 2,962,777 2,744,881 Provisions for employee benefits 34 8,196,141 8,128,105 Provisions for litigations 34 4,015,140 4,037,686 Other long term provisions 34 60,025 112,207 15,234,083 15,022,879 Long-term liabilities Liabilities convertible to equity 35 80,543 80,543 Long term loans and borrowings - domestic 35 27,433,028 27,005,809 Long-term loans and borrowings - foreign 35 87,524,019 92,226,279 Finance lease liabilities 35 10 - Other long-term liabilities 35 524,595 6,620,579 115,562,195 125,933,210 Deferred tax liabilities 22 95,825,375 98,580,263 Short-term liabilities Short-term financial liabilities Other short term financial liabilities 36 12,171,010 10,607,727 (continued) 5 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED BALANCE SHEET (continued) As at 31 December 2017 In RSD thousand 31 December 31 December Note 2017 2016 Customer prepayments, deposits and caution money 37 4,982,077 4,628,636 Operating liabilities Trade payables - domestic 38 16,233,007 15,385,350 Trade payables - foreign 38 4,757,144 4,940,118 Other operating liabilities 38 982,690 704,966 21,972,841 21,030,434 Other current liabilities 39 23,834,196 8,077,997 Liabilities for VAT 40 4,039,292 4,581,267 Liabilities for other taxes, contributions and duties 41 7,737,521 13,593,192 Accrued expenses 42 24,514,830 22,615,321 60,125,839 48,867,777 Total liabilities 1,179,355,624 1,190,928,831 Off-balance sheet liabilities 43 150,617,359 159,155,546 The notes on the following pages form an integral part of these consolidated financial statements 6 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY During the period from 1 January - 31 December 2017 In RSD thousand Items of equity Items of other comprehensive income Gains/(losses) on Retained Revaluation available-for-sale Basic capital Loss earnings reserves Reserves securities Total equity Opening balance as at 1 January 2016 a) debit balance - 122,157,853 - - - 451,497 122,609,350 b) credit balance 360,141,927 - 8,259,298 536,547,679 668 - 904,949,572 360,141,927 (122,157,853) 8,259,298 536,547,679 668 (451,497) 782,340,222 Movements in 2016 a) debit turnover - - 8,259,298 17,654,094 - 9,614 25,923,006 b) credit turnover - 9,421,674 5,849,902 94,568,597 10 506 109,840,689 Closing balance as at 31 December 2016 a) debit balance - 112,736,179 - - - 460,605 113,196,784 b) credit balance 360,141,927 - 5,849,902 613,462,182 678 - 979,454,689 360,141,927 (112,736,179) 5,849,902 613,462,182 678 (460,605) 866,257,905 Opening balance as at 1 January 2017 a) debit balance - 112,736,179 - - - 460,605 113,196,784 b) credit balance 360,141,927 - 5,849,902 613,462,182 678 - 979,454,689 360,141,927 (112,736,179) 5,849,902 613,462,182 678 (460,605) 866,257,905 Movements in 2017 a) debit turnover - 18,193,342 5,849,902 2,340,105 - 31,767 26,415,116 b) credit turnover - 7,038,288 6,387,625 16,416 11,960 185,126 13,639,415 Closing balance as at 31 December 2017 a) debit balance - 123,891,233 - - - 307,246 124,198,479 b) credit balance 360,141,927 - 6,387,625 611,138,493 12,638 - 977,680,683 360,141,927 (123,891,233) 6,387,625 611,138,493 12,638 (307,246) 853,482,204 The notes on the following pages form an integral part of these consolidated financial statements 7 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE CONSOLIDATED CASH FLOW STATEMENT During the period from 1 January - 31 December 2017 In RSD thousand 2017. 2016. Cash flows from operating activities Cash inflows from operating activities 219,501,740 238,196,029 Sales and advances received 206,848,374 227,694,065 Interests from operating activities 9,193,810 7,988,771 Other proceeds from operating activities 3,459,556 2,513,193 Cash outflows from operating activities 189,708,763 180,366,421 Payments and prepayments to suppliers 59,591,091 88,472,047 Salaries, fringe benefits and other personal expenses 66,238,597 61,105,527 Interests paid 2,561,490 354,101 Income tax 16,359,709 1,366,551 Charges for services that qualify as public revenues 44,957,876 29,068,195 Cash inflows/(outflow) from operating activities, Net 29,792,977 57,829,608 Cash flows from investing activities Cash inflows from investing activities 1,119,334 12,830,901 Sale of intangible assets, property, plant, equipment and biological assets 287,394 10,944,316 Other financial investments (net inflows) - 782,830 Interests received from investing activities 831,940 1,103,755 Cash outflows from investing activities 45,023,247 56,679,635 Purchase of shares and stakes (outflows, net) - 2,556 Purchase of intangible assets, property, plant, equipment and biological assets 41,857,566 49,900,997 Other financial outflows, Net 3,165,681 6,776,082 Cash inflows/(outflows) from investing activities, Net (43,903,913) (43,848,734) Cash flows from financing activities Cash inflows from financing activities 2,452,461 70,585 Increase in share capital 40,063 - Long-term borrowings (net proceeds) 2,412,398 - Other short-term liabilities - 70,585 Cash outflows from financing activities 3,293,268 4,969,399 Long-term loans (outflows) - 3,503,629 Short-term loans (outflows) 176 - Other liabilities 270,196 68,001 Finance lease 22,896 1,337,306 Dividends paid 3,000,000 60,463 Inflows/(outflows) from financing activities, Net (840,807) (4,898,814) Total cash inflow 223,073,535 251,097,515 Total cash outflow 238,025,278 242,015,455 Net cash inflow/(outflow) (14,951,743) 9,082,060 Cash at the beginning of the accounting period 55,297,089 45,937,129 Foreign exchange gains on translation of cash 154,424 373,538 Foreign exchange losses on translation of cash (799,784) (95,638) Cash at the end of the accounting period 39,699,986 55,297,089 The notes on the following pages form an integral part of these consolidated financial statements 8 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 1. GROUP ORGANISATION AND OPERATIONS The Government of the Republic of Serbia, at its session held on 27 January 2005 (RS Official Gazette, No. 12/2005), passed Decision 05 No.023-396/2005 1 to establish Public Enterprise Elektroprivreda Srbije to be involved in the production, distribution and trade of electricity (the Company). Based on the Decision on Harmonising the Operations of PE Elektroprivreda Srbije with the Law on Public Enterprises (Official Gazette of RS, number 105/16), the Serbian Government harmonized the Articles of Association of PE Enterprise Elektroprivreda Srbije with the Law on Public Enterprises (RS Official Gazette No 15/16). The address of the Company’s registered office is in Belgrade, at 2 Carice Milice Street. The Company’s ID No. is: 20053658. The Company’s tax identification number is 103920327. The Company began operations on 1 July 2015 based on Business Registers Agency Decision No. BD 80380/2005. On 11 May 2018, the Company registered its new address at 13 Balkanska Street, Belgrade. Public Enterprise Elektroprivreda Srbije, Beograd (the Company), as controlling company (i.e. parent company) and its subsidiaries constitute EPS Group (together: the Group). The Company operates under the name: Public Enterprise Elektroprivreda Srbije, Beograd. The Company’s abbreviated name is JP EPS, Beograd. The Group’s principal activity of is energy supply - Code of Activity 3514. In addition to its principal activity, the Group in engaged in other operating activities such as electricity production, coal production, processing and transportation, steam and hot water production in combined processes, as well as in other activities. Furthermore, on the Group level, the Group’s principal activity includes electricity distribution and distribution system management. As of 1 July 2015, the distribution of electricity and the management of distribution systems have been performed by a Distribution System Operator, EPS Distribucija d.o.o., the Company’s subsidiary. The Decision on Harmonising the Operations of PE Elektroprivreda Srbije with the Law on Public Enterprises, specifies that the management of the Public Enterprise is organized on a bicameral basis. The governing bodies of the Company are the Supervisory Board and the General Manager. Their competencies are prescribed by The Law on Public Enterprises, The Company’s Articles of Association, and The Company’s Statute. Assets handled by the Group are public property other than: Land, over which ownership rights have been established in accordance with the 2010 Government Decision to Amend the Decision on establishing the Group („RS Official Gazette'' No. 54/10), Buildings, and Construction Land on which the buildings have been constructed, other than facilities legally designated either as a property of general interest or property that, by virtue of their nature, is intended for the use of all, and has been legally defined as such. The ownership rights of the Republic of Serbia, the autonomous province and the local self-government units over public property, and some other property rights are governed by Law on Public Property (RS Official Gazette Nos. 72/11,…113/17). As at 31 December 2017, the Group had 29.153 employees (31 December 2016: 29,779). The consolidated financial statements of the Group are presented in RSD thousand. RSD is the official reporting currency in the Republic of Serbia. Organisational structure Following the status change of 1 July 2015 involving the merger of the company’s subsidiaries engaged in the production of electricity and coal, the Company continued to operate under the same business name: Public Enterprise Elektroprivreda Srbije, Beograd. The Company’s abbreviated name is: JP EPS, Beograd. 9 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 1. GROUP OGRANISATION AND OPERATIONS (continued) Organisational structure (continued) In 2016, two status changes were registered. Namely, one on 4 January 2016, and the other on 1 June 2016. The status change registered on 4 January 2016, which involved a spin-off of a segment of ODS „EPS Distribucija“ and merger with the Company, resulted in 6.585 employees of ODS „EPS Distribucija“, d.o.o terminating their employment agreements and finding new employment with the Company. The status change registered on 1 June 2016, which involved a merger between „EPS Snabdevanje“ and the Company, resulted in 86 employees of „EPS Snabdevanje“ terminating their employment agreements and finding new employment with the Company. Following the status changes that took place on 1 July 2015 and 1 June 2016, two additional subsidiaries of the Company, in which the Company as sole founder has a 100% share, operate within the Group: - EPS Distribucija“ d.o.o., a distribution system operator engaged in the distribution of electricity and management of distribution systems,. The company was registered with the Business Registers Agency based on Decision BD 57192/2015 dated 1 July 2015. - „EPS Trgovanje'' d.o.o,. engaged in the trade of electricity, headquartered in Ljubljana, the Republic of Slovenia, was established on 1 July 2014. JP EPS is the founder of three public companies in Kosovo and Metohija, namely: - Public company for the production of thermoelectric energy Kosovo, Obilić, - Public company for the production, processing and transportation of coal Kosovo, Obilić, and - Public company for Electricity distribution Elektrokosmet, Priština. The Company has control over all of its subsidiaries, except over those in Kosovo and Metohija because Kosovo has been under the control of the International Community since June 1999, and the Company has lost its administrative and governing control over those companies. In addition to the above, the Company has a significant share in the following companies: - Company for combined production of thermoelectric and thermal energy “Energija Novi Sad“, a.d. Novi Sad (ENS), established together with the City of Novi Sad – a 50% stake in the company’s share capital. - “Ibarske hidorelektrane“ d.o.o. Kraljevo, established together with SECI ENERGIA S.p.A., Italy, Bologna, 6 Via Degli Agresti – a 49% share in the capital amounting to EUR 2,450,000. The Company began operations in order to establish ten cascade type hydro power plants with a total capacity 103 MW, as a facility for the production and sale of electricity from renewable sources. - “Moravske hidroelektrane'' d.o.o., Beograd established together with RW E Innogy GmbH, Germany (RWE AG) – a 49 % share in the capital amounting to EUR 1,960,000. The Company was established with a view to building hydro power plants on the river Morava, comprising no less than five hydro power plants with a total capacity of 150 MW. On 14 December 2017, the Company acquired a 71,90% share in Kolubara - Građevinar d.o.o., Lazarevac, a company engaged in construction projects within the mining infrastructure and exploitation of non-metallic substances. The share was acquired through a conversion of the Company receivables into share capital in accordance with the RS Government Conclusion 05 No: 023-7443/2017 of 17 August 2017, which complied with a previously prepared Plan for the Reorganisation of Kolubara - Građevinar d.o.o., Lazarevac. By the date of these consolidated financial statements, an effective control process over Kolubara-Građevinar d.o.o., Lazarevac has not been implemented. 10 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES 2.1. Basis of preparation and presentation of financial statements The Group’s consolidated financial statements include its Consolidated balance sheet as of 31 December 2017, and the Consolidated income statement, Consolidated statement of other comprehensive income, Consolidated statement of changes in equity and Consolidated cash flow statement for year then ended, and a summary of the significant accounting policies and the notes to the consolidated financial statements. The Group’s consolidated financial statements for the period from 1 January to 31 December 2017 are presented in a form pursuant to the Law on Accounting (Official Gazette of the Republic of Serbia no. 62/2013) and “Guidelines on the Prescribed Form and Content of the Financial Statements of Enterprises, Cooperatives and Entrepreneurial Ventures” (Official Gazette of the Republic of Serbia, no. 95/2014, 144/2014). Recognition and estimate of the line items included in the consolidated financial statements have been performed in accordance with the provisions of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as determined in the Decision enacted by the Ministry of Finance no. 401-00-896/2014-16 on 13 March 2014 (Official Gazette of the Republic of Serbia no.35/2014) officially issued in the Republic of Serbia, Rulebook on the Chart of Accounts and the Contents of Accounts in the Chart of Accounts (Official Gazette of RS number 95/2014), and other applicable Serbian regulation. The consolidated financial statements were prepared based on the historical cost principle, unless otherwise stipulated in the accounting policies presented hereunder. In the preparation of the accompanying consolidated financial statements, the Group adhered to the accounting policies described in Note 3. The Group’s consolidated financial statements are stated in RSD thousand. The dinar is the official reporting currency in the Republic of Serbia. 2.2. Standards and interpretations issued and effective in the past and current periods, which have not yet been officially translated At the date of these financial statements, the standards and their amendments presented in the text below were issued by the International Accounting Standards Board (IASB), and the interpretations presented below were issued by the International Financial Reporting Interpretations Committee, but have not been officially approved in the Republic of Serbian: - Amendments to IFRS 10 “Consolidated Financial Statements“, IFRS 12 “Disclosures of interests in other entities“ and IAS 27 “Separate Financial Statements“ – Investment entities (effective for annual periods beginning on or after 1 January 2016); - IAS-32 (Amended): “Financial Instruments: Presentation” - Offsetting financial assets and financial liabilities (effective for annual periods beginning on or after 1 January 2014); - IAS 36 (Amended) – “Impairment of assets”- Recoverable amount disclosures for non-financial assets (effective for annual periods beginning on or after 1 January 2014); - IAS 39 (Amended) – “Financial instruments: Recognition and measurement” Novation of derivatives and continuation of hedge accounting (effective for annual periods beginning on or after 1 January 2014); - Amendments to IFRS 11 “Joint Arrangements“ – Accounting for acquisitions of interests in joint operations (effective for annual periods beginning on or after 1 January 2016); - Amendments to IAS 16: “Property, Plant and Equipment”, IAS 38: “Intangible Assets” and IFRIC 12: “Service Concession Arrangements“ - amended by Clarification of Acceptable Methods of Depreciation and Amortisation (effective for annual periods beginning on or after 1 January 2016); 11 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES (continued) 2.2. Standards and interpretations issued and effective in the past and current periods, which have not yet been officially translated (continued) - Amendments to IAS 16 “Property, Plant and Equipment“ and IAS 41 “Agriculture – Industrial crop (effective for annual periods beginning on or after 1 January 2016); - IAS 19 “Employee Benefits” (Amended): Defined Benefit Plans: Contribution for employees (effective for annual periods beginning on or after 1 July 2014); - IFRIC 21 “Levies“ (effective for annual periods beginning on or after 1 January 2014) ; - IFRS 14 “Regulatory Deferral Accounts“ (effective for annual periods beginning on or after 1 January 2016); - Amendments to IAS 1 “Presentation of Financial Statements” – Initiative for change of disclosures (effective for annual periods beginning on or after 1 January 2016); - Amendments to IAS 27 “Separate Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” – Application of equity methods in individual financial statements (effective for annual periods beginning on or after 1 January 2016); - Annual improvements to IFRSs (IFRS 5, IFRS 7, IAS 19, IAS 34), arising as a result of the project Cycle of standard improvements for the period from 2012 to 2014, issued in December 2014 (effective for annual periods beginning on or after 1 January 2016); - Annual improvements to IFRSs (IFES 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38, IAS 24) resulting from Annual improvements for the period 2010 - 2012 issued in December 2013 (effective for annual periods beginning on or after 1 July 2014); - Annual improvements for the period 2011 - 2013, resulting from Annual improvements to IFRS (IFRS 1, IFRS 3, IFRS 13, and IAS 40), issued in December 2013 (effective for annual periods beginning on or after 1 July 2014); - Amendments to IAS 7 “Statement of Cash Flows“ – Disclosure Initiative (effective for annual periods beginning on or after 1 January 2017); - Amendments to IAS 12 “ Income Taxes“ – Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods beginning on or after 1 January 2017). 2.3. Standards and interpretations issued but not yet effective At the date of these financial statements, the standards below, their amendments and interpretations have been issued but are not yet effective: - IFRS 9 “Financial instruments” – Revised and issued during 2014 as complete (effective for annual periods beginning on or after 1 January 2018); - IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018); - IFRS 16 “Leases” – Issued during January 2016 (effective for annual periods beginning on or after 1 January 2019); 12 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES (continued) 2.3. Standards and interpretations issued but not yet effective (continued) - IFRIC 22 “Foreign currency transactions and advance consideration” – Issued in December 2016 (effective for annual periods beginning on or after 1 January 2018); - Amendments to IFRS 2 “Share-based payment” – Classification and measurement of share-based payment transactions (effective for annual periods beginning on or after 1 January 2018); - Amendments to IFRS 10 “Consolidated financial statements” and IAS “Investments in Associates and Joint Ventures” – Sale or transfer of funds free of charge between the investor and its associate or joint venture (amendments made in September 2014, the application has been postponed indefinitely); - IFRS 17 "Insurance Contracts" – Revised and issued during 2017 as complete (effective for annual periods beginning on or after 1 January 2018); - Amendments to IFRIC 23 "Uncertainty over Income Tax Treatments" (issued in June 2017 and effective for annual periods beginning on or after 1 January 2019); - Amendments to IAS 40 “Investment Property – Transfers of Investment Property“ (issued in December 2016 and effective for annual periods beginning on or after 1 January 2018); - “Annual Improvements to IFRSs 2014-2016 cycle – Amendments to IFRS 1“ (issued in December 2016 and effective for annual periods beginning on or after 1 January 2018); - “Annual Improvements to IFRSs 2014-2016 cycle – Amendments to IFRS 12“ (issued in December 2016 2.4. Comparative figures As a comparative figures the Group presented restated consolidated income statement for the year ended 31 December 2016. Certain comparative figures in the notes to the financial statements have been reclassified in the current year in order to comply with the current presentation. Detailed explanations of correction of figures from the comparative period are given in note 4. 2.5. Estimation method The preparation of financial statements in accordance with the applicable reporting framework requires management to use the best possible estimates and reasonable assumptions that have an impact on the presented values of assets and liabilities, as well as income and expenses during the reporting period. These estimates and assumptions are based on previous experience, as well as different information available on the day of drawing up financial statements, which act in a realistic and reasonable manner in the circumstances. Based on this information, an assumption is made about the value of assets and liabilities, which cannot be directly confirmed on the basis of other information. The real value of assets and liabilities may deviate from the value estimated in this way. Estimates, as well as the assumptions on the basis of which estimates have been made, are subject to regular checking. Audited accounting estimates are presented for the period in which they are audited, in the event that the assessment affects only a given period, or for the period in which they are audited and for future periods, in the event that the audit affects current and future periods. 13 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 2. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES (continued) 2.5. Estimation method (continued) Information on the areas where the degree of assessment is greatest and which may have the most significant effect on the amounts recognized in the Group's financial statements are given under the following notes: • Note 3.14 – Useful life of intangible assets • Note 3.12 – Useful life of property, plant and equipment • Note 3.15 – Impairment of assets • Note 3.17 – Impairment of financial assets • Note 3.7 – Provisions • Note 3.5 – Employee benefits 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements are prepared in accordance with the generally accepted accounting principles, under the historical convention, with subsequent valuation of all relevant events affecting assets and liabilities a as the date of these consolidated financial statements. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. 3.1. Principles of Consolidation The recognition of line items in the consolidated financial statements was performed in accordance with the generally accepted accounting principles at historical cost principle, with the subsequent estimation of all relevant events influencing the balance of assets and liabilities as of the consolidated financial statements' preparation date. The Consolidated financial statements represent the consolidation of the financial statements of two subsidiaries and the Parent Company, comprising the Group, and are prepared on the full consolidation principle as the Parent Company is the sole owner of its subsidiaries. The financial statements of three entities domiciled on the territory of the Autonomous Province of Kosovo and Metohija are not included in the consolidated financial statements as of 31 December 2017 given that the Company’s management does not have administrative and managing control over the operations of these entities. Financial statements of the entity “Коlubara - Građevinar'' d.о.о., Lazarevac are not included in the consolidated financial statements. On 14 December 2017, the Company acquired 71.90% of ownership interest in “Кolubara - Građevinar'' d.о.о., Lazarevac and up to the date of the accompanying consolidated financial statements preparation, the Company’s management did not establish administrative and managing control over the operations of the mentioned entity. 3.2. Income and expenses Income from sales of goods and services Income and expenses are recognised on accrual basis, meaning that transactions and other events are recognised when incurred, regardless of when the money is actually received or paid. Income from the sale of electricity is recognised when electricity is delivered Income arising from the sale of goods is recognised when all the significant risks and rewards of ownership are transferred, which is as at the date when goods are delivered to the buyer. Revenue is stated at fair value of the goods received or that will be received, net of rebates, excise and VAT. Income from agreed services is recognised under the percentage of completion method. 14 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.2. Income and expenses (continued) Income from connections of new customers Income from connection of new customers to distribution network are recognized in the amount of money received from the customers, when incured – when customer is connected to distribution network or when the customer is provided with the ongoing access to a supply of services. Donations received from customers are initially recognized as deferred income in the amount of fair value of received funds. Deferred income on the basis of received grants is recognized in favour of income in the income statement in proportion to the estimated useful lives of the related assets. Income from usage of finished goods and merchandises Income from usage of finished goods and merchandises includes usage of finished goods, merchandises and services for intangible assets, property plant and equipment, material and for internal transportation services. Expenses are recognized in income statement on accrual basis and are determined for the period when occurred. 3.3. Effects of Foreign Exchange Translation Monetary and non-monetary items of assets and liabilities denominated in foreign currencies are translated at the official exchange rates published by the central bank, at the date of each transaction. As at the date of these financial statements, monetary items were presented at the middle exchange rate of the central bank, while adjustments were recognized in the income statement 3.4. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are measured at fair value and take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to the period in which they are incurred. 3.5. Employee benefits Employee benefits, as well as all types of remuneration that the Group provides to employees pursuant to internal regulations and employment contract, are expensed in the period in which the employee worked and the respective liabilities are also recognized, upon the deduction of each amount that has already been paid. The Group provides jubilee, retirement and other employee benefits in accordance with the Group’ s General Act, and the obligation to pay: - retirement benefits to employees, amounting to three monthly salaries that would be earned in the month preceding the month in which retirement benefits are paid, or three average salaries paid by the company, or in the amount prescribed by the law (if more favourable for the employee), and - jubilee awards for 10, 20, 30 and 40 years of service within the Group amounting to four average salaries in the previous three months preceding the month of payment, respectively. The expected costs of the above benefits are accrued over the period of employment. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually using the projected unit credit method. 15 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.5. Employee benefits (continued) The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds and treasury bills that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. 3.6. Fair value In the Republic of Serbia there is not enough market experience, stability or liquidity in the purchase and sale of loans and other financial assets and liabilities. Official market information is not always available. Therefore, the fair values cannot be determined reliably where there is no active market, as required by IAS and IFRS. In the opinion of the Group’s Management, the amounts disclosed in the consolidated financial statements represent the most valid and useful reporting values, given the existing market conditions. Provision is made when management estimats that the carrying value of assets will not be recovered due to identified risks 3.7. Provisions Litigations Provisions for legal claims and other provisions are recognized when: a) the Group has a present legal or constructive obligation as a result of past events;b) it is probable that an outflow of resources will be required to settle the obligation, and; c) the amount has been reliably estimated. Provisions are not recognised for future operating losses. Management believes that there will not be any significant adjustments to current provisions for litigations. Environmental restoration and environmental protection The Management has established provisions for future costs of dismantling and removing the plant and restoring the site on which it is located, using the best estimate of the production asset’s future cost and useful life. Additionally, the Group established a provision for contingent liabilities on account of toxic effects accumulation protection, as well as for other environmental related costs. The Management has recognized provisions using the best estimate of cash outflow necessary to settle present obligation of future events at the balance sheet date. In accordance with applicable regulations, changes in provisions are subject to an amendments of regulations and their interpretation 3.8. Donations Funds received as grant are initially recorded as deferred income within liabilities. Deferred income is released over the period when expenses linked to grant are recongnised in the income statement. Cash grants covering the Group’s expenses incurred in one period are recognized as income upon their receipt. 3.9. Taxes and contributions Current income tax Current income tax is calculated and paid in accordance with the Law on Income Tax applicable in the Republic of Serbia. Current income tax is paid at the rate of 15% on the tax base defined in the Group’s tax return. The tax base presented in the tax return comprises profit as presented in the Group's income statement and any adjustments as defined by Serbian tax regulations. 16 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.9. Taxes and contributions (continued) Current income tax (continued) The right to reduce the profit tax on the basis of investments in property, plant and equipment was withdrawn as of 1 January 2014, with the exception that a taxpayer who by 31 December 2013 realized the right to a tax incentive under Article 48 of the Corporate Income Tax Law (RS Official Gazette Nos. 25/01, 80/02, 80/02 – other law, 43/03, 84/04, 18/10, 101/11, 119/12 and 47/13) and declared it in its 2013 tax balance and tax return, may carry forward the unused portion of the tax credit to a future tax period, but not to exceed the limit of 33% of the tax liability calculated for that tax period, up to 10 years. Serbian tax regulations do not envisage the possibility of using the current period tax loss as basis for the recovery of taxes paid in prior periods. However, current period losses may be used to reduce the future tax base for up to five years, starting from 2010 or, alternatively, 10 years for losses incurred by 2010. Deferred income tax Deferred tax liabilities are recognized in the amount of future income taxes payable based on the difference between the carrying value of property, plant and equipment and their values recorded in the tax balance sheet. A deferred tax asset is recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Taxes and contributions not related to performance Taxes and contributions not related to performance comprise property tax and other taxes and contributions under national and municipal regulations. 3.10. Property, plant and equipment Property, plant and equipment is initially measured at cost. Cost comprises: Invoice value less any rebates, import duties and other non-refundable taxes, as well as all other directly attributable costs of bringing to asset to working condition for their intended use. Spare parts intended as replacements of a specific part of a limited number of recognized assets, and where costs of replacement of such part are significant compared to the carrying value of such asset, are recognized as separate items of equipment if they meet the definition of property, plant and equipment. After initial recognition, property, plant and equipment used in energy related activities is stated at fair value established by applying the market approach for land, administrative and other buildings used in performing office jobs, hospitality and tourism related activities, or by applying the cost approach (present replacement cost) for other assets. Vehicles, office equipment and equipment used in other premises, other equipment and tools and fixtures the useful life of which is longer than one year are stated at cost. Self-constructed assets are stated at cost if it does not exceed their market value, and such assets are subsequently measured in accordance with the class to which assets belong. 17 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.10. Property, plant and equipment (continued) Subsequent investments in the asset increase the asset’s carrying value, where the investment is made: to upgrade the asset, to replace its part or service other than within the framework of regular maintenance, where it is probable that future economic benefits associated with such investment will flow into the company, and where the cost of the investment can be measured reliably. Gains or losses on disposal of property, plant and equipment are determined as the difference between the expected net proceeds from sale and the carrying amount of an item adjusted for revaluation reserves, if they have been previously created for a particular asset, and are recognized in the income statement. 3.11. Investment property Investment property is property (land or a building or part of a building or both) held by the Group to earn rentals or for capital appreciation or both. Investment property is initially measured at cost, which comprises its purchase price and any directly attributable expenditures. The carrying value of current investment property includes all replacement costs, provided that it is probable that the entity will obtain future economic benefits from the asset and that the cost of an asset can be reliably measured. Subsequent to initial recognition, investment property is measured at cost, less total amortisation and total impairment. Investment property is amortised over its useful life on a straight-line-basis or on an annual quota share basis for every item within investment property. 3.12. Depreciation Property, plant and equipment are amortised over their useful lives on a straight-line-basis or on an annual quota share basis over their estimated useful lives. Exceptionally, land inclusive of costs of dismantling, removal and renewal are depreciated using the functional method, in other words expenses are recognized when costs are based on expected use or performance (over the period in which benefits are acquired through such costs). Depreciation rates for major classes of property, plant and equipment are as presented below: Rate (%) Thermal power plants buildings 1.30% - 4.00% Hydro power plants buildings 1.30% - 4.00% Coal mine buildings 0.68% - 16.67% Electricity distribution buildings 1.25% - 4.00% Commercial buildings 1.18% - 1.43% Other buildings including investment properties 1.30% - 2.50% Thermal power plants equipment 4.00% - 20.00% Hydro power plants equipment 4.00% – 20.00% Coal mine equipment 1.63% - 13.57% Equipment for electricity distribution 4.00% - 20.00% Transportation vehicles 6.67% - 20.00% Equipment for decoration and maintenance of office and other premises 10.00% - 20.00% Other equipment not mentioned 12.50% - 20.00% The depreciation period is reviewed at the end of each accounting period. 18 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13. Leases A lease is classified as finance lease where all the risks and rewards of ownership are transferred substantially to the Group. Any other lease is classified as operating lease. 3.14. Intangible assets Intangible assets are initially measured at cost. After initial recognition, intangible assets are stated at cost less accumulated amortization and any impairment losses. The amortization of intangible assets is computed on a straight-line basis in order to fully write off the cost of the assets over their estimated useful lives. The estimated useful lives and amortization rates in for major classes of intangible assets, unless otherwise indicated in the contract, are as summarized below: Years rate % R&D Investments 4 25% Patents, licenses and similar rights 5 20% Other intangible assets 5 20% Useful life is reviewed at the end of each reporting period. 3.15. Impairment of assets At each balance sheet date, the Group's management assesses whether there are any indications of impairment of its tangible and intangible assets, based on the review and consideration of internal and external sources of information. If there is any indication of impairment, the recoverable amount of the asset is estimated. If the recoverable amount of an asset cannot be estimated, the recoverable amount of the cash generating unit is estimated. 3.16. Inventory Inventories are stated at the lower of cost and net realizable value. Cost includes purchase value, import duties and other non-refundable taxes, transport, handling and other expenses directly attributable to inventory acquisition, as decreased for trading discounts, rebates and similar items. The net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost is computed using the weighted-average method. Tools and fixtures are fully written off when brought to use. Provisions charged to other expenses are made where appropriate, and when the management estimates that the value of inventories needs to be adjusted to the net realizable value, i.e., based on the documented reduction of the inventories value in use. 3.17. Financial instruments Each contractual right resulting in financial assets, financial liabilities or equity instruments is recognized in the Group's balance sheet as a financial instrument on the settlement date. Financial assets and liabilities not designated at fair value through profit and loss are initially recognised at fair value plus transaction costs, which are directly attributable to the acquisition or issue of a financial asset or financial liability. 19 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.17. Financial instruments (continued) Investments in related parties Investments in related parties are stated at cost. Dividends from available for sale equity investments are recognized in profit or loss when the right to receive payment is established. Other long-term investments Investments in other legal entities and other long-term investments are initially measured at cost; Subsequently, they are measured at: - Fair value, if they are held for trading or available for sale, and have a quoted market price in an active market; - Cost, if they are held for trading or available for sale, and do not have a quoted market price in an active market; - Amortised cost, if they have fixed maturities; - Cost, if they do not have fixed maturities. Any difference (increase or decrease) arising between the carrying value and the value of subsequent measurements is recognized as a separate item within equity – revaluation reserves, for instruments available for sale with quoted prices in an active market, except when there is an objective evidence of impairment, in which case any difference is recognised in the income statement. Any difference between the carrying value of other financial instruments and their subsequent measurements is recognised in profit or loss of the period in which it is incurred. Short-term investments and accounts receivable Short-term investments and accounts receivable comprise trade and other receivables, short-term investments in unconsolidated subsidiaries, short-term deposits held with banks and other short-term investments.. Receivables arising from the sale of electricity and other output are measured at the original invoice amount. The invoiced interest on goods and services is recognized within other receivables as income of the accounting periods to which it relates. Other receivables and assets are measured at amortized cost. Any difference between the carrying value and their subsequent measurements is recognised in profit or loss of the period in which it is incurred. Impairment of financial assets At each balance sheet date, the Group assesses whether there is an objective evidence of impairment by analysing the expected net cash flows in the following manner: - Individually, for financial assets that are individually significant, or - Collectively, for a group of similar financial assets that are not individually significant. Impairment of receivables Except for claims on the basis of turnover of electricity, receivables from households and legal entities for which the payment period has expired for at least 60 days, an allowance adjustment is made. The impairment of receivables is not made for the customers which are at the same time owed. 20 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.17. Financial instruments (continued) Impairment of receivables from the sales of electricity Collection of receivables for electricity is assessed based on the following categories: - Commercial supply - Reserve supply - Guaranteed supply including subcategories: 1. Receivables from third parties (“companies“) 2. Receivables from households (“individuals”) Receivables from all customers with balances above RSD 200 million are assessed individually Collection of receivables is assessed based on turnover (electricity sales), except for the receivables / customers that are assessed individually. Assessment is done for each group and sub-group of customers by applying collection rate on the total amount of receivables (invoiced receivables) in the reporting period: - Collection rate is calculated as a difference between number 1 and collection ratio. Collection ratio is calculated as ratio between unpaid receivables and total receivables for current and previous reporting period, - the Group is assessing all events after balance sheet date up to 31 January of the year after the reporting year. Receivables that are overdue for more than one year are impaired in the full amount. Exceptionally, receivables from customers undergoing reconstruction, bankruptcy or liquidation, irrespective of their amount, may be assessed on an individual basis. A direct write off of receivables is performed upon the conclusion of legal proceedings, or upon the decision adopted by competent authorities, in accordance with the Law and the Company's General Act. Other receivables for interest, debt collection expenses and for other expenses that are related to the amount of main receivables are assessed as the main related receivable. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and deposits with banks.. Financial liabilities Financial liabilities comprise long-term financial liabilities (long-term borrowings, long-term securities and other long-term liabilities), short-term financial liabilities (short-term borrowings and other short-term financial liabilities), short-term operating liabilities, liabilities from specific operations and other liabilities. Financial liabilities are initially recognized at the value of the consideration received. Upon initial recognition, financial liabilities are measured at the initially recognized amount, less repayments of principal, increased for interest capitalized and decreased for any write-off approved by the creditor. Liabilities based on interest on financial liabilities are recorded at the expense of financial expenses in the period in which they relate and are presented within other short-term liabilities and accruals. 21 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 4. ADJUSTMENTS OF COMPARATIVE DATA OF CONSOLIDATED INCOME STATEMENT In 2017, the Group has performed reclassification of figures for 2016 in order to ensure comparative principle. The effects of reclassification performed on the Consolidated Income Statement for the year ended on 31 December 2016 are as follows: In RSD thousand For the Year For the Year ending ending 31 December 2016 31 December 2016 before adjustments Adjustments adjusted OPERATING INCOME Income from the sale of goods and services 221,717,650 - 221,717,650 Other operating income 4,450,274 - 4,450,274 226,167,924 - 226,167,924 OPERATING EXPENSES Cost of goods sold (98,794) - (98,794) Work performed by the entity and capitalized 5,022,914 - 5,022,914 Decrease/(increase) in inventories of unfinished goods and services (13,421) - (13,421) Cost of material (11,314,013) - (11,314,013) Cost of fuel and energy (31,275,991) - (31,275,991) Wages and salaries and other personal expenses (63,837,730) (297,213) (64,134,943) Cost of production services (20,776,515) - (20,776,515) Amortisation/Depreciation (44,389,787) - (44,389,787) Cost of long-term provisioning (1,157,330) - (1,157,330) Other operating expenses (23,871,265) 296,429 (23,574,836) (191,711,932) (784) (191,712,716) OPERATING PROFIT BEFORE TAX 34,455,992 (784) 34,455,208 Financial income 10,927,843 - 10,927,843 Financial expenses (7,902,949) - (7,902,949) Income from adjustments of other assets carried at fair value through profit and loss 8,563,774 - 8,563,774 Expenses from adjustments of other assets carried at fair value through profit and loss (15,649,018) - (15,649,018) Other income 23,926,773 366 23,927,139 Other expenses (41,836,790) 418 (41,836,372) PROFIT BEFORE TAX 12,485,625 - 12,485,625 The net gain of the business that is being suspended, the effects of changes in the accounting policy and the correction of errors from previous periods 468 - 468 Tax expense for the period (9,677,896) - (9,677,896) Deferred tax income /(expense) for the period 3,041,705 - 3,041,705 NET PROFIT 5,849,902 - 5,849,902 Reclassification stated above are related to personal expenses and have no effect on the result for the previous reporting period. 22 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 5. OPERATING INCOME In RSD thousand Year ended 31 December 2017 2016 Income from sales of goods and services PE ''Електрокосмет'', Priština 923,863 868,925 Income from sales of goods and services to other legal entities – on domestic market: - Sale of electricity to households 91,596,072 89,646,133 - Sale of electricity to third parties 17,629,941 20,711,127 - Sale of electricity to licensed customers 1,668,078 7,381,992 - Sale of electricity to qualified customers 82,988,289 80,432,301 - Sale to PE Elektromreža Srbije 11,483,453 10,837,372 - Income from sales of coal 4,362,605 3,703,323 - Sale of technological steam and gas 83,450 72,091 - Sale of electricity on commodity exchange 623,067 1,158,132 - Sale of heat energy 1,646,850 1,103,354 - Income from accessing and using the distribution system 1,299,394 787,536 - Income from sales of services 552,629 813,040 - Income from sales of products 270,472 272,093 - Income from Public Media Service tax 183,634 186,245 214,387,934 217,104,739 Income from sales of goods and services – on foreign market 4,362,589 3,743,986 219,674,386 221,717,650 Revenue from the sale of electricity to PE „Elektrokosmet“, Priština In line with the Conclusion of the Government of the Republic of Serbia No: 021-6624/2009-002 of 30 November 2009, the Group engaged resources to provide electricity to the northern part of Kosovo and Metohija, on the basis of which revenue of RSD 923,863 thousand was recognised in 2017 (2016 – RSD 868,925 thousand). Income from the sale of goods and services on domestic market Income from the sale of electricity in domestic market was recognised based on the sale of electricity to end customers, namely to:  Households and small clients holding the right to a guaranteed supply, at regulated rates,  Other end customers purchasing electricity for own use, at rates generated based on the price mechanism,  Customers holding a license for trade in electricity, at rates generated based on the price mechanism. The Energy Law (RS Official Gazette No 145/14) prescribes that households and small clients have the right to a guaranteed supply, as a public service. A household is an end customer who buys electricity for own household’s consumption, exclusive of consumpti on for commercial or professional operations. Small clients are end customers (legal entities and entrepreneurs) who have no more than 50 employees, whose total annual revenue amounts to EUR 10 million in RSD equivalent, whose facilities are connected to the electricity distribution system with voltage level lower than 1 kV, and whose electricity consumption in the previous calendar year did not exceed 30,000 kWh. Under the Energy Law, a guaranteed supply at regulated rates is regarded as a public service. Energy supply is regarded as a market activity based on which the Group generates income to customers, which is based on the concept of lowest costand principle to maximise income. All end customers have the right of free choice of electricity supplier. 23 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 5. OPERATING INCOME (continued) Income from the sale of goods and services on domestic market (continued) By its Decision to assign an energy supplier to serve end customers with no right to a guaranteed supply, No: 312-11118 / 2016-1, dated 29 November 2016, the Serbian Government appointed the Group to be subsitute suppliers over a two-year period, starting from the Decision’s date, at a rate of 55,84 EUR / MWh, exclusive of excise and VAT. The subsitute supply price is the price that comprises the price of active energy and of balancing amounts to EUR/MWh. The price is exclusive of distribution use-of-system charges (access to the network) and the charge for privileged power producers. Sales includes income from delivering energy to customers receiving subsitute supplies, amounting to RSD 1,837,595 thousand (2016 – RSD 1,082,957 thousand) where an end customer with no right to a guaranteed supply has failed to find a new energy provider following the termination of the supply contract with the previous provider, except where the contract has been terminated due to payment defaults made by the customer, or where the customer, which under the Energy Law falls within the category of customers exempt from energy supply suspension in the event of payment defaults, has failed to find a new supplier, subsequent to the termination of the supply contract with the previous energy provider. Based on the Energy Law and the Rulebook on the Transmission System Operation, the Group entered into Agreements with Elektromreža Srbije, an entity responsible for transmission and the operation of the transmission system. These Agreements govern the manner of providing system services so as to enable the Transmission System Operator to: create conditions required for regular operation of the electricity supply system and mutual electricity deliveries; enable the supply of energy systems that are separated from other interconnections; and recover excessive power loss, i.e. loss of electricity that does not arise from power consumption i.e. the consumption of energy for heating elements in the transmission network due to active resistance present in such elements. Furthermore, for the purpose of balancing actions within the Serbian regulations or securing sufficient tertiary reserves, the Group agreed with PE EMS on the manner of mutual power deliveries in case of a major breakdown on a barter basis or commercial basis, depending on the terms agreed between PE EMS and operators of neighbouring transmission systems. Income from the sale of coal for the year ended 31 December 2017 in the amount of RSD 4,362,605 thousand relate to the delivery of coal to third parties (Branch “RB Kolubara”, Lazarevac in the amount of RSD 3,808,903 thousand and Branch “Termoelektrane i kopovi Kostolac” in the amount of RSD 553.702 thousand). Furthermore, the Group is involved in trading electricity at the commodity exchange, which started operations on 17 February 2016 in Belgrade. In 2017, Income from trading electricity at the commodity exchange amounted to RSD 623,067 thousand (2016 – RSD 1,158,132 thousand) Income from accessing and using the distribution system is measured at regulated rates. Regulated prices are determined based on the methodology adopted by the Energy Agency, which specifies: 1. The terms and conditions for and the manner of establishing the maximum revenue for energy companies; 2. The criteria and the rules for revenue allocation between customer categories and groups; 3. The calculation elements, and the method of calculating the electricity or natural gas received and the services rendered. The cap on income is determined in a manner to secure coverage for reasonable operating costs, adequate return on capital employed, and return on investment during the performance of regulated energy activities. The methodology may be used to set up different tariffs, based on, inter alia, the volume of the energy collected and the terms and conditions for energy collection, the electrical power or capacity, the seasonal and daily delivery dynamics, the points of collection and the ways of measuring energy. Income from the sale of goods and services on foreign market Income from the sale of goods and services to legal entities on foreign market in 2017, disclosed in the amount of RSD 4,362,589 thousand, relate to income from the sale of electricity and income from services in the amount of RSD 4,205,851 thousand and RSD 156,738 thousand, respectively. 24 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 5. OPERATING INCOME (continued) Income from the sale of goods and services on foreign market (continued) Income from the sale of electricity relate to the sale of electricity to “Mješoviti holding Elektroprivreda Republike Srpske” amounting to RSD 399,537 thousand (2016 – RSD 311,961 thousand), to Elektroprivreda Crne Gore amounting to RSD 1,573 thousand (2016 – RSD 2,970 thousand), and to income from the sale of electricity on foreign market through a subsidiary „EPS Trgovanje'' d.o.o. Ljubljana, the Republic of Slovenia, amounting to RSD 3,804,741 thousand (2016 - RSD 2,967,209 thousand). Income from the sale of services abroad primarily relates to income from services such as installations, production of spare parts and other metal structures in Kolubara Metal branch “Rudarski basen Kolubara”, Lazarevac. 6. WORK PERFORMED BY THE ENTITY AND CAPITALISED In RSD thousand Year ended 31 December 2017 2016 Income from activation and consumption of goods for own use 151,465 109,842 Income from activation and consumption of products for own use 3,299,159 3,190,328 Income from activation of services for own use 1,526,797 1,722,744 4,977,421 5,022,914 Income from work performed by the entity and capitalised is recognised based on the goods and services used for the purpose of plant and equipment revitalisation, and spare parts and material development. 7. INCOME FROM PREMIUMS, SUBVENTIONS, GRANTS, DONATIONS AND OTHER OPERATING INCOME In RSD thousand Year ended 31 December 2017 2016 Income from premiums, subventions, grants and donations 904,857 1,194,923 Income from connections of new customers 1,284,810 973,602 2,189,667 2,168,525 Income from donations, premiums subventions and grants include funds received for environmental protection in the amount of RSD 116,069 thousand and for open pit improvements in the amount of RSD 252,680 thousand. Income from connecting new customers to the energy network is recognised based on:  First time customers connection to the distribution system in the amount equivalent to charges to cover the cost of the system and the connection cost,  Income from customers already connected to the distribution system and from an increasing the cost of power compared to the one previously contracted,  Income from customers who have been allowed separation on a facility that has already been connected to the distribution system, as well as other similar income generated on such basis. 25 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 8. OTHER OPERATING INCOME In RSD thousand Year ended 31 December 2017 2016 Income from compensations from insurance for damages 331,889 302,561 Income from rents 240,311 210,569 Other operating income 1,041,317 1,768,619 1,613,517 2,281,749 Other operating income for 2017 in the amount of RSD 1,041,317 thousand (2016 – RSD 1,768,619 thousand) mostly includes: revenues from recharged costs to end customers for engaging private executors in the process of forced collection in the amount of RSD 305,189 thousand (2016 – RSD 50,750 thousand) and; income from sales of secondary raw materials, ashes and waste iron, resulting from the revitalization of the plant and equipment and technological process in the amount of RSD 405,462 thousand (2016 – RSD 811,607 thousand). 9. COST OF MATERIAL In RSD thousand Year ended 31 December 2017 2016 Costs of basic materials 755,980 1,119,016 Cost of material for the maintenance and spare parts 9,709,719 8,236,645 Cost of small inventories and tyres 424,904 333,913 Materials for coal production 313,752 503,959 Cost of oil and lubricants 214,742 215,963 H&S equipment 285,890 267,664 Cost of office and other overheads material 477,266 429,125 Other 216,306 207,728 12,398,559 11,314,013 10. COST OF FUEL AND ENERGY In RSD thousand Year ended 31 December 2017 2016 Cost of electricity: - on domestic market 11,437,767 6,432,303 - on foreign market 280,435 513,451 Cost of transmission of electricity PE EMS, Beograd 21,073,686 18,113,896 Cost of other energy 66,445 81,529 Cost of coal purchased from third parties 1,218,251 1,223,088 Cost of oil and oil derivatives 3,780,371 3,419,069 Cost of gas used in production 2,564,720 1,492,655 40,421,675 31,275,991 26 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 10. COST OF FUEL AND ENERGY (continued) For the purpose of securing conditions for regular and safe supply of energy to tariff customers in the Republic of Serbia, the Group purchased electricity from entities operating in Serbia, and recorded an expense in the amount of RSD 11,437,767 thousand (2016 – RSD 6,432,303 thousand), out of which the amount of RSD 5,902,180 thousand relate to the purchase of electricity from third parties with a licence for electricity trading; amount of RSD 5,017,628 thousand relate to the purchase of electricity from privileged power producers; and the remaining amount of RSD 517,959 thousand relates to purchase of power via the commodity exchange. The purchase of electricity from non-residents in 2017 recognised in the amount of RSD 280,435 thousand (2016 – RSD 513,451 thousand) entirely relate to the purchase o electricity from the company Mješoviti holding Elektroprivreda Republike Srpske. The Group concluded with PE Elektromreža Srbije, Beograd a contract on accessing and using the power transmission system by customers, as well as by power plants and pump-accumulating facilities. On such basis, the cost incurred in the reporting period, relate to the above mentioned transmission and purchase of energy, amounted to RSD 21,073,686 thousand (2016 – RSD 18,113,896 thousand). Prices for accessing the power transmission system are established by Elektromreža Srbije a.d., Beograd, the transmission system operator, with the consent of the Energy Agency of the Republic of Serbia. The cost of oil derivatives amounting to RSD 3,780,371 thousand is predominantly related to oil used in the production and operation of propulsion engines and machinery, largely at production branches TENT, amounting to RSD 1,572,021 thousand; RB Kolubara, amounting to RSD 969.607 thousand; and TEKO Kostolac, amounting to RSD 572,787 thousand. The cost of natural gas in 2017 amounting to RSD 2,564,720 thousand (2016 – RSD 1,492,655 thousand) relates dto purchases made by branch TETO Panonske elektrane of RSD 2,502,748 (2016 – RSD 1,443,524 thousand). A branch of Power Plant Panonske Elektrane(TETO) is, in the event of certain weather conditions, obliged to deliver heating energy to Novi Sad. A cost increased in 2016 due to increase in the production of energy and heating in 2017. In 2017, the branch used over 77 million cubic meters of gas purchased from PE Srbijagas (2016 – 38 million cubic meters of gas). The cost of coal purchased externally in 2017 amounting to RSD 1,218,251 thousand (2016 – RSD 1,223,088 thousand) relates to the coal used by a TENT branch in in the production of energy, and purchased from PE PEU Resavica. 27 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 11. WAGES AND SALARIES AND OTHER PERSONAL EXPENSES In RSD thousand Year ended 31 December 2017 2016 Restated Cost of gross salaries and salary compensation 43,197,533 43,851,542 Taxes and contributions on wages and salaries paid by employer 12,742,919 13,125,502 Cost of special service and temporary service agreements 1,330,388 1,319,349 Fees paid based on other agreements 13,227 9,574 Fees paid to Supervisory and Managing Board members and other managing bodies 7,152 8,559 Cost of transportation of employees 1,427,401 1,511,714 Cost of per diem allowances and compensation of expenses on business trips 167,078 180,139 Cost of scholarship and loans 342,203 330,614 Cost of providing assistance to employees 291,242 301,410 Other personal expenses 7,895,295 3,496,540 67,414,438 64,134,943 Since the Parent Company is a Public Enterprise, pursuant to the request on maximum salaries in public sector, salaries are not allowed to be higher than amount calculated by multiplying the maximum coefficient determined by the law regulating the salaries of employees in public sector and base salary determined by the Budget Law for the current year. Maximum salary for 2017 and 2016 was 153,911.61 RSD. The Law on Temporary Regulation of Bases for Calculation and Payment of Salaries and Wages and Other Permanent Earnings Among Beneficiaries of Public Funds (Official Gazette of RS number 116/14 - in application dated 28 October 2014) specifies a 10% decrease in the base for calculation and payment of salaries of beneficiaries of public funds, defined by law, other regulation or other general and individual act which is in force at the time of adoption of this law. The beneficiary of public funds is required to pay the difference between the total amount of salaries calculated using the base which is not decreased in accordance with this law, with calculated contributions charged to the employer and the total amount of salaries calculated using the decreased base according to this law, with included contributions which are charged to the employer. Other personal expenses include an amount of RSD 3,519,783 thousand (2016 – RSD 3.054.680 thousand) which relate to stimulative redundancy payments for voluntary termination of employment (2017 – 1.428 employees; 2016 – 1.519 employees) for employees who accepted the consensual termination of employment in accordance with the adopted program of optimization of the number of employees in the EPS group adopted by the founders of the Company, while the remaining amount relate to obligations of the Group based on the Collective Agreement (labour disability prevention, cultural and sports activities of employees, expenses for providing assistance to employees for medical treatment, loan, etc.) which are, in accordance with tax regulations, treated as public revenue. 28 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 12. COST OF PRODUCTION SERVICES In RSD thousand Year ended 31 December 2017 2016 Production services 3,327,680 2,800,510 PTT services 1,332,570 1,328,527 Transportation services 129,777 165,268 Cost of maintenance services provided by third parties 10,239,171 11,487,552 Cost of information system maintenance 881,283 463,732 Rental cost 529,366 564,780 Advertising, fairs and marketing costs 89,004 92,363 Cost of research and development 141,442 138,538 Scientific research costs 246,211 458,148 Cost of services for various tests, analysis, preparing technical and project documentation, reports and projects 615,056 456,256 Work safety cost 107,883 100,903 Cost of production services and assistance 290,256 166,768 Labour costs for works on separator and crusher 34,260 10,695 Costs of meter reading services 1,264,076 797,838 Inspection, repair, calibration, inspection and replacement of the meters 105,204 282,335 Costs of transformation of electric energy services 26,273 62,680 Cost of services provided by student and youth organizations 783,101 433,879 Utility costs 596,299 555,738 Costs of other production services 336,813 301,803 Costs of flood damage repair services - 13,409 Costs of environmental protection and site restoration from mining operation 114,042 94,793 21,189,767 20,776,515 PTT services include cost of preparation and sending electricity bills to end customers in the amount of RSD 859,681 thousand (2016 – RSD 516,544 thousand). Rental cost for the year 2017 includes the amount of RSD 380,765 thousand relating to cost of auxiliary mechanization engaged in creating the conditions for coal production in four open-pit mines of “RB Kolubara” branch. Costs of other production services in the amount of RSD 336,813 thousand (2016: RSD 301,803 thousand) mostly relate to costs of project documentation, cost of connection and disconnection of meters, printing costs warnings and similar. 13. DEPRECIATION/AMORTISATION EXPENSE In RSD thousand Year ended 31 December 2017 2016 Depreciation/amortization expense: - Intangible assets (note 23) 509,346 410,394 - Property, plant and equipment (note 23) 45,872,046 43,979,393 46,381,392 44,389,787 29 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 14. COST OF LONG-TERM PROVISIONING In RSD thousand Year ended 31 December 2017 2016 Environmental restoration 404,306 354,952 Retirement benefits and jubilee awards 1,780,594 151,316 Cost of other long-term provisioning: - Litigations 968,557 640,870 - Environmental protection 5,454 10,192 3,158,911 1,157,330 Cost of long-term provisions for retirment benefits and jubilee awards refers to provisions upon termination of employment and jubilee awards which the Group is obliged to pay in accordance with labour Law and General Acts of the Group. Cost of long-term provisions for retirment benefits and jubilee awards in the amount of RSD 1,780,594 thousand relate to provisions upon termination of employment which will be paid upon termination of employment and remuneration for employees that include fees based on jubilee awards in the amount of current obligation based on past events, and which arise from the provisions of the Labour Law and General Acts of each company. (note 3.8 and 34). Cost of provisions for litigations in the amount of RSD 968,557 thousand (2016 – RSD 640,870 thousand) are recognized using the best estimate of cost necessary to settle present obligation for legal claims against the Group. 15. OTHER OPERATING EXPENSES In RSD thousand Year ended 31 December 2017 2016 restated Water use charges 2,097,132 2,242,438 Use of public interest resources fee 115,383 55,582 Environmental fee 6,905,350 5,899,387 Property Tax 1,223,123 1,084,722 Fee for use of riverbanks for business purposes 2,638 48,947 Other indirect taxes and contributions 3,812,323 2,801,479 Utilization of mineral resources 2,068,871 1,749,772 Entertainment expense 33,215 28,790 Cost of payment operations and banking services 321,455 349,583 Subscription cost 26,429 26,941 Legal and advocacy services 950,267 940,526 Other non-material services 1,181,620 1,545,145 Intellectual services 287,947 954,443 Other non-production services 1,676,949 1,590,372 Insurance costs 1,903,342 1,875,835 Student reimbursement cost 42,516 42,294 Health Service costs 233,582 168,866 VAT calculated on electricity losses 215,106 128,836 Membership fees 254,301 517,419 Costs of undertaken commitments 1,194 1,194 Costs of safeguarding property and archival materials 676 2,454 Security services, protection of buildings and work health and safety 1,598,645 1,519,811 24,952,064 23,574,836 30 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 15. OTHER OPERATING EXPENSES (continued) Cost of water use charges, environmental fee expense and cost of utilization of mineral resources are recorded in accordance with the Law on Waters, Law on Environment Protection and Law on Mining and Geological Explorations. 16. FINANCIAL INCOME In RSD thousand Year ended 31 December 2017 2016 Financial income arising from related parties 650,646 561,135 Other financial income 65,561 9,155 Interest income: - Trade receivables for electricity sold 6,998,230 7,035,575 - Short-term financial investments 1,083,162 1,052,249 - Public Media Service tax 163,735 64,239 - Other interest income 1,136,782 143,429 9,381,909 8,295,492 Foreign exchange gains and gains on currency clause effect - Foreign exchange gains 10,791,360 1,954,577 - Gains on currency clause effects 122,566 107,484 10,913,926 2,062,061 21,012,042 10,927,843 Interest income is recognized in the amount of statutory default interest calculated on unpaid debt obligations of the debtor. Interest income from short-term financial investments in the amount of RSD 1,083,162 relates to the interest earned by placement of free cash in the reporting period deposited with commercial banks in the country (2016 – RSD 1,052,249 thousand). Other interest income in the amount of RSD 1,136,782 thousand mostly relates to interest calculated on unpaid obligations of “RB Kolubara” branch’s customers for sold coal, electricity, heat energy, products and services. Also, the mentioned income includes interest calculated on Government Bonds of the Republic of Serbia in the amount of RSD 101,836 thousand. 31 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 17. FINANCIAL EXPENSES In RSD thousand Year ended 31 December 2017 2016 Other financial expenses 334,056 709,322 Interest expense - on liabilities toward PE EMS 10,144 13,646 - Paris and London clubs of creditors 535,429 613,807 - on renegotiated liability for loan from National Republic of China – Deposit Insurance Agency 33,947 40,203 - other interest expenses (on all other items) 640,247 1,486,035 - Interest expense related to late payment of public duties 240,410 66,918 1,460,177 2,220,609 Foreign exchange losses and losses on currency clause effect: - Costs of effects of foreign currency clause 41,741 58,507 - Losses on currency clause effect 2,015,553 4,914,511 2,057,294 4,973,018 3,851,527 7,902,949 Financial expenses are recognized in the amount of interest agreed with creditors – financial institutions. Other financial expenses in the amount of RSD 334,056 thousand (2016 – RSD 709,322 thousand) mostly in the amount of RSD 332,264 thousand, refer to Commitment fee and Management fee based on a loan arrangement with the foreign creditors. Main reason for decrease of other financial expenses compared to previous year is Management fee in the amount of RSD 246,361 thousand, paid in 2016, which relate to new drawdown portion from financial agreement with EBRD. 18. INCOME FROM ADJUSTMENTS OF OTHER ASSETS CARRIED AT FAIR VALUE THROUGH PROFIT AND LOSS In RSD thousand Year ended 31 December 2017 2016 Income from adjustment in value of long-term investments 2,592 2,176 Collection and reduction in allowances for impairment - advances given for fixed assets - 2,797 - advances given for inventories 1,044 2,039 - accounts receivable 2,595,811 8,556,762 2,599,447 8,563,774 Revenue from the adjustment of the value of trade receivables in the amount of RSD 2,595,811 thousand (2016 – RSD 8,556,762 thousand) mostly relate to collection of previously impaired receivables from sale of electricity, receivables from sale of coal and heat energy and receivables for services in the amount of RSD 2,135,326 thousand, RSD 100,128 thousand and RSD 110,733 thousand, respectively. Revenue from the adjustment of the value of trade receivables in the amount of RSD 8,556,762 thousand for 2016 includes the termination of previously recognized impairment of receivables from the joint stock company "Railways of Serbia" ad, Belgrade, in the amount of RSD 5,113,301 thousand, pursuant to a contract on mutual regulation of claims and obligations concluded between the Government of the Republic of Serbia and the Group, in connection with the implementation of the agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on the regulation of the obligations of the former USSR from goods trade with the former SFRY (Note 20 and 35). Namely, the Government of the Republic of Serbia has released a part of the entity’s debt related to obligations arising from the revitalization of HPP "Djerdap 1", in the amount of RSD 5,113,301 thousand, provided the Group release the same amount of receivables from the Railways of Serbia, Belgrade, on the basis of which the previously recognized receivables provision. 32 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 19. EXPENSES FROM ADJUSTMENTS OF OTHER ASSETS CARRIED AT FAIR VALUE THROUGH PROFIT AND LOSS In RSD thousand Year ended 31 December 2017 2016 Expenses from value adjustments of: - Investments in equity 11,679 - - Advances given for inventories and services 44,743 1,508 - Trade receivables for electricity 15,641,510 14,255,487 - Other receivables 1,469,109 1,391,731 - Short-term financial assets - 292 17,167,041 15,649,018 Short-term receivables that are overdue for a longer period of time are impaired and expensed the amount of RSD 15,641,510 thousand (2016 – RSD 14,255,487 thousand), as disclosed in note 3.17. 20. OTHER INCOME In RSD thousand Year ended 31 December 2017 2016 Restated Gains on disposal of materials, investment in equity, intangible assets, properties and equipment 89,518 62,553 Income from reversal of provision for employee benefits (Note 34) 198,968 477,585 Income from collected written-off receivables and reversal of impairment of receivables and short-term financial placements 243,942 844,387 Incomes from the diminution of liabilities (Note 18) 12,738 5,332,345 Incomes from reversal of long-term provisions for the protection of the environment (Note 34) 40,554 41,236 Subsequently approved discounts 7,734 85,900 Income from reversal of long-term provisions of litigations (Note34) 340,216 434,845 Incomes from the contracted risk protection 19,764 1,383 Incomes from the diminution of liabilities for the protection of the environment 354,827 218,207 Surpluses 118,866 170,869 Incomes from the value adjustment of assets: - Property, plant and equipment 72,507 16,141,329 - Other effects from the asset value adjustments - - Other incomes 316,336 116,500 1,815,970 23,927,139 The revenues from the decrease in liabilities for the environmental protection in the amount of RSD 354,827 thousand mostly relate to diminution of liability to Environmental Protection Fund of the Republic of Serbia for environmental fee, resulting from a difference between advance payments in 2016 and final calculation. Incomes from the value adjustment of property, plant and equipment in the amount of RSD 16,141,329 thousand for 2016 relate to valuation effects of fair value assessment of property, plant an equipment, performed by independent appraiser as of 31 January 2016 (note 23). 33 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 20. OTHER INCOME (continued) The stated amount of revenues from the decrease in liabilities of RSD 5,151,723 thousand for 2016 mostly refers the realisation of the Conclusion of the Government of the Republic of Serbia 05 No. 312-11997 / 2016 from 15 December 2016. Accordint to the document, part of the debt in the amount of RSD 5,113,300 thousand is settled. It relates to Agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on settling the obligations of the former USSR for calculations related to goods trading between the former USSR and the former SFRY, and on the basis of agreement on mutual settlement of liabilities and receivables arising from the agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on regulating the obligations of the former USSR and the former SFRY dated 27 April 2007, No. 12.01.141486 / 7-17 from 16 May 2017. 21. OTHER EXPENSES In RSD thousand Year ended 31 December 2017 2016 Restated Losses on disposal of materials, intangible assets, property, plant and equipment and investments 1,152,363 443,484 Losses on disposal of inventory 129,864 60,026 Impairment losses - property, plant and equipment - 24,311,690 - construction in progress - 2,647,659 - intangible assets - 1,505,655 Impairment losses from inventory 798,233 948,738 Shortages 376,400 95,812 Losses on write off: - short-term receivables and rescheduled accounts receivable 42,477 5,316,997 - other assets 1,281 807 Expenses for contributions paid to employees from public enterprises from Kosovo and Metohija 5,337,095 5,319,407 Sponsorships and donations 149,201 170,634 Other expenses 762,511 1,015,463 8,749,425 41,836,372 Expense in the amount of RSD 5,337,095 thousand (2016 – RSD 5,319,407 thousand) is recognized for salaries and salaries contribution for employees in public enterprises from Kosovo and Metohija. Impairment losses in the amount RSD 28,465,004 thousand for 2016 relate to valuation effects of fair value assessment of property, plant an equipment, performed by independent appraiser as of 31 January 2016 (note 23).. 22. INCOME TAX EXPENSE а) Current tax In RSD thousand Year ended 31 December 2017 2016 Tax expense for the period 4,529,626 9,677,896 Deferred tax income for the period (2,723,970) (3,041,705) 1,805,656 6,636,191 34 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 22. INCOME TAX EXPENSE (continued) b) Harmonization of taxes and products of business results before taxation and prescribed tax rates In RSD thousand 2017 2016 Profit before tax 8,193,281 12,486,093 Tax on profit calculated at statutory tax rate - 15% 1,228,992 1,872,914 Tax effect on unrecognized expenses 1,975,993 6,355,696 Tax effect on expenses recognized on cash basis (822,388) - Effect on capital gains (50) 3,883 Tax effect on unrecognized revenues (102,445) (121,508) Used tax credits - (727,826) Effect of transfer prices 126,993 366,032 Effect of the estimate recorded in the income statement - (1,402,814) Effects of different tax rate for non-residents 643 1,326 Tax effects of adjustments made in process of consolidation (85,973) - Оther (516,109) 288,488 1,805,656 6,636,191 c) Components of deferred tax liability Deferred tax liabilities presented as at 31 December 2017 in the amount of RSD 95,825,375 thousand (2016 – RSD 98,580,263 thousand) relates to temporary differences between the carrying amount of property, pland and equipment and their tax base. Movements on the deferred tax liabilities were as follows: 2017 2016 Balance as at 1 January 98,580,263 87,365,045 Effects on income statement (2,723,970) (3,041,705) Adjustments in respect to valuation of property, plant and equipment - 14,245,628 Оther (30,918) 11,295 Balance as at 31 December 95,825,375 98,580,263 35 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 23. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT Intangible assets In RSD thousand Cost Cost amount at 1 January 2016 7,414,710 Additions 1,456,105 Impairment of the intangible assets (1,977,653) Disposals (5,359) Other changes 3,971 Closing cost amount as at 31 December 2016 6,891,774 Additions 2,804,460 Transfers within other group of accounts 111,991 Disposals (137,433) Other changes (2,820) Closing cost amount as at 31 December 2017 9,667,972 Accumulated amortisation Accumulated amortisation amount at 1 January 2016 2,309,131 Amortisation charge (note 13) 410,394 Impairment of the intangible assets (438,073) Disposals (4,075) Other changes 50,499 Accumulated amortisation amount at 31 December 2016 2,327,876 Amortisation charge (note 13) 509,346 Disposals (84,382) Other changes 792 Accumulated amortisation amount at 31 December 2017 2,753,632 Net book value Balance as at 31 December 2016 4,563,898 Balance as at 31 December 2017 6,914,340 36 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 23. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT (continued) In RSD thousands Other property, Machinery plant and Constructio Prepayme Investment and Investment Biological equipmen n in nts for s in third Land Buildings equipment property assets t progress PP&E party PP&E Total Cost Balance at 31 December 2015 51,621,766 573,541,246 1,228,522,700 778,619 420,391 343,492 64,011,222 27,726,436 1,396 1,946,967,268 Increase/additions 2,717,199 144,548 2,832,473 - - 146,039 38,052,426 3,980,051 - 47,872,736 Transfer from other accounts within the group 02 or from other group accounts 22,941 20,455 217,682 - 3,283 2,891 (515,576) - - (248,324) Transfer from construction in progress (activation) 526,509 1,667,144 22,687,639 - - 9,111 (24,890,403) - - - Investments conducted in own held (group account 62) 3,012 23,809 258,391 - - - 3,025,750 - - 3,310,962 Transfer of funds with third parties (assignments without compensation) - 23,242 895,139 - - - - - - 918,381 Effects of the revaluation of the assets (revalorization) 19,063,203 91,063,394 158,443,053 - - 96,279 (2,285,833) - - 266,380,096 Stockcount surpluses - 107,511 42,695 - 9,808 - - - - 160,014 Stockcount shortages - (82,190) (436,843) - (10,335) (251) - - - (529,619) Sales - (5,328) (196,191) (18,721) - - - - - (220,240) Disposals (68,678) (372,164) (9,814,118) - - (2,868) (7,638) - - (10,265,466) Other (24,381) (49,385) 14,114 - - (83) 29,848 (5,647,806) - (5,677,693) Balance at 31 December 2016 73,861,571 666,082,282 1,403,466,734 759,898 423,147 594,610 77,419,796 26,058,681 1,396 2,248,668,115 Increase/additions 3,928,267 164,450 4,567,505 - 9,822 268 32,947,244 5,885,753 - 47,503,309 Transfer from other accounts within the group 02 or from other group accounts - (810,290) 1,494,980 - 8,788 (218,403) (472,530) (2,545) - Transfer from construction in progress (activation) 41,929 3,519,250 21,667,110 - - 8,380 (25,236,669) - - - Investments conducted in own held (group account 62) - 7,399 627,660 - - - 2,412,152 - - 3,047,211 Transfer of funds with third parties (assignments without compensation) - - (470,349) - - - - - - (470,349) Stockcount surpluses - 250 55,686 - 9,934 - - - - 65,870 Stockcount shortages - - (596,167) - (3,248) - - - - (599,415) Sales - (3,520) (537,659) - - - - - - (541,179) Disposals (25,656) (2,866,109) (3,074,627) - (10,111) (129) (1,087) (2,040) - (5,979,759) Other (14,926) 44,680 280,990 - - - 169,477 (7,657,672) - (7,177,451) Balance at 31 December 2017 77,791,185 666,138,392 1,427,481,863 759,898 438,332 384,726 87,238,383 24,282,177 1,396 2,284,516,352 37 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 23. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT (continued) In RSD thousands Other property, Investments Machinery and Investment Biological plant and Construction Prepayment in third party Land Buildings equipment property assets equipment in progress s for PP&E PP&E Total Depreciation - Balance at 31 December 2015 12,205,962 250,731,542 732,939,807 222,062 181,679 468,051 450,076 332 997,199,511 Depreciation charge (note 13) 2,991,851 7,743,095 33,155,773 8,568 - - 80,049 - 57 43,979,393 Impairment of advances given - - - - - - - 412,056 - 412,056 Transfers within the 02 group of accounts or from other group of - 400,011 (412,606) - - 14,841 - - - 2,246 accounts Effects of the revaluation of the 107,027 58,501,575 123,930,620 - - (27,656) 361,827 - - 182,873,393 assets (revalorization) Stockcount surplus - (5,562) (7,553) - - - - - - (13,115) Stockcount shortage - (562) (303,400) - - - - - - (303,962) Sales - (973) (146,704) (1,249) - - - - - (148,926) Disposals - (207,833) (8,004,854) - - (2,868) - - - (8,215,555) Other (96,432) (33,720) 78,823 1 - 150,803 50,464 382 - 150,321 - Balance at 31 December 2016 15,208,408 317,127,573 881,229,906 229,382 316,799 960,391 862,514 389 1,215,935,362 Depreciation Balance at 31 December 2016 15,208,408 317,127,573 881,229,906 229,382 - 316,799 960,391 862,514 389 1,215,935,362 Depreciation charge (note 13) 3,387,309 7,867,547 34,606,919 8,200 - 2,057 - - 14 45,872,046 Transfers within the 02 group of accounts or from other group of - (478,993) 566,475 - - (87,482) - - - - accounts Stockcount surplus - - 115 - - - - - - 115 Stockcount shortage - - (205,444) - - - - - - (205,444) Sales - (1,210) (270,219) - - - - - - (271,429) Disposals - (865,622) (2,252,076) - - (122) (721) (2,040) - (3,120,581) Other 143,991 56,210 (11,662) (135) - 9,939 167,629 (2) - 365,970 Balance at 31 December 2017 18,739,708 323,705,505 913,664,014 237,447 - 241,191 1,127,299 860,472 403 1,258,576,039 Net book value Balance at 31 December 2016 58,653,163 348,954,709 522,236,828 530,516 423,147 277,811 76,459,405 25,196,167 1,007 1,032,732,753 Balance at 31 December 2017 59,051,477 342,432,887 513,817,849 522,451 438,332 143,535 86,111,084 23,421,705 993 1,025,940,313 38 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 23. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT (continued) Advances given for property, plant and equipment, as at 31 December 2017 in the amount of RSD 23,421,705 thousand (2016 – RSD 25,196,167 thousand) mostly relate to the implementation of the second phase of the project "Kostolac B "implemented under an agreement concluded between the Enterprise and the China Machinery Engineering Corporation (" CMEC ") on 20 November 2013. The project is financed from loan agreement concluded, on 17 December 2014, between the Government of the Republic of Serbia, as a borrower, and Chinese Export-Import Bank, as the lender (note 35). As at 31 December 2017, the total amount of advances given on this basis amounts to RSD 17,436,226 thousand (2016 – RSD 20,689,797 thousand). Additionally, part of the advances given, in the amount of RSD 2,960,275 thousand, relates to construction of desulphurisation of the exhaust gases facility for the Power Plant Nikola Tesla A, under an agreement concluded between the Group and Mitsubishi Hitachi Power Systems Ltd. and „Јеdinstvo“ a.d. Sevojno consortium on 8 September 2017. During 2016, the Group engaged an independent appraiser for determining fair value of the assets, and testing for the impairment of the value of the assets as of January 31, 2016, and made a booking for the effects of revaluation of property, plant and equipment used to perform energy activities. 24. LONG-TERM FINANCIAL INVESTMENTS In RSD thousand 31 December 31 December 2017 2016 Investments in equity: - Investments in associates and joint ventures 406,457 406,457 - Investments in other legal entities 10,564,021 2,389,257 Less: allowance for impairment of investments in other legal entities (5,323,713) (2,007,998) 5,240,308 381,259 Long-term financial investments in other related parties: 972 3,037 Long term loans given 195,388 819,804 Less: current portion of long-term financial investments in other related parties: - (210,166) 195,388 609,638 Other long-term financial investments 7,077,433 7,026,965 Less: allowance for impairment (129,058) (129,058) 6,948,375 6,897,907 12,791,500 8,298,298 Share in capital of joined legal entities and joint ventures Share in capital of joined legal entities and joint ventures disclosed at 31 December 2017 and 31 December 2016 in the amount of RSD 406,457 thousand relate to investment in equity of the following entities: In RSD thousand % 31 December 31 December ownership 2017 2016 „Ibarske hidroelektrane'' d.о.o., Кraljevo 49% 379,630 379,630 „Мoravske hidroelektrane'' d.о.о., Beograd 49% 26,267 26,267 „Еnergija Novi Sad“ а.d., Novi Sad 50% 560 560 406,457 406,457 39 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 24. LONG-TERM FINANCIAL INVESTMENTS (continued) Share in capital of joined legal entities and joint ventures (continued) Based on the closed international agreements, the Company and "SECI" from Italy entered into contractual arrangements on the establishment of the entity "Ibarske hidroelektrane" d.o.o., Kraljevo with the following equity interests: - "SECI", Italy invested EUR 2,550,000.00 which gives it 51% equity share, - JP EPS invested EUR 2,450,000.00 which gives it 49% equity share. The founders undertook the obligation to pay in additional equity contributions totalling 25% of the investment value, in accordance with the investment and technical documentation for the construction of hydro power plants within the deadline set in the Company’s management decisions. The work of the entity from the commencement of its registered activity will be financed from the equity and if it proves insufficient, the funds will be used from the borrowing that is to be approved by the Company and by “SECI”. This does not apply to the construction of hydro power plants. 75% of investments into the hydro power plant construction will be funded from borrowings from a bank or another financial institution. The objective of establishing this company is the construction of hydro power plants on the Ibar river, which will comprise ten hydro power plants with a total power of around 102 MW. The business entity ''Ibarske hidroelektrane'' d.o.o. was registered in the register with the competent authority on 3 December 2010. In accordance with the Decision on additional capital dated 22 April 2014, the share capital has been increased in the amount of RSD 242,500 thousand, as follows: - “SECI” Italy’s share increased in the amount of RSD 123,675 thousand - Company’s share increased in the amount of RSD 118,825 thousand . In addition, according to the Memorandum of Understanding concluded with RWE Innogy GmbH, Germany, (RWE AG), upon the RS Government approval (Conclusion 05 no. 018-7493/2009 dated 13 November 2009), JP EPS and RWE AG entered into an agreement on establishment of the company ''Moravske hidroelektrane'' d.o.o. with the following equity interests: - RWE AG, Germany invested EUR 2,040,000 which gives it 51% equity share, - JP EPS invested EUR 1,960,000 that gives it 49% equity share. Once the arrangement was signed, the founders paid in their contributions as follows: RWE AG paid a RSD counter value of EUR 102,000 and JP EPS paid the RSD counter value of EUR 98,000. During the 2014 monetary capital was paid in as follows: JP EPS paid the RSD counter value of EUR 142,100, and RWE AG paid a RSD counter value of EUR 147,900. The balance of subscribed capital not paid in the amount of EUR 3,510,000 will be paid in the respective amounts determined by the Board of Directors’ Decision thereon and within terms set in accordance with the prevailing legislation. The goal of company establishment is the construction of the hydro power plant system on the Velika Morava River comprised of at least five hydro power plants with the total power of about 150 MW. The Public Company ''Moravske hidroelektrane'' d.o.o. was entered into the registry maintained by the competent body as 23 August 2011. Pursuant to Article 15 of the Agreement on Company Establishment of the Entity for Combined Thermal and Heat Energy “Energija Novi Sad” a.d. Novi Sad closed between JP EPS and the City of Novi Sad, in 2009 the Company paid in EUR 6,000 which at the payment date totalled RSD 560 thousand and was recognized as an equity investment into a newly-founded entity. Share in capial in other legal entities Share in capial in other legal entities as at 31 December 2017 in the amount of RSD 10,564,021 thousand (2016 – RSD 2,389,257 thousand) mostly relate to investment in Government Bonds of the Republic of Serbia in the amount of RSD 3,090,882 thousand. The Group acquired 300,000 bonds with nominal value of RSD 10,000 per bond and maturity date at 12 January 2019. Interest rate on acquired bonds at balance sheet date was 3,50%. Fair value changes of these securities are recognized directly in equity as revaluation reserves, through the consolidated statement of changes in equity and in consolidates statement of other comprehensive income. In addition, share in equity of other legal entities relates to the share in equity of legal entities "HIP Azotara" d.o.o., Pancevo and "HIP - Petrohemija" a.d. Pancevo in the amount of RSD 982,401 thousand and RSD 2,716,906 thousand, respectively, related to the conversion of the receivables for electricity into capital. For these two parties, the Group formed a value impairment in its entirety 40 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 24. LONG-TERM FINANCIAL INVESTMENTS (continued) Share in capial of other legal entities (continued) On 14 December 2017, the Company acquired a 71,90% ownership interest in “Kolubara – Građevinar” d.o.o., Lazarevac, a company engaged in construction projects within the mining infrastructure and exploitation of non-metallic substances in the amount of RSD 1,756,993 thousand. The share was acquired through a conversion of the Company receivables as at 30 september 2016 into basic capital in accordance with the RS Government Conclusion 05 No: 023-7443/2017 of 17 August 2017, which complied with a previously prepared Plan for the Reorganisation of Kolubara - Građevinar d.o.o., Lazarevac. In line with the Conclusion of the Government of the Republic of Serbia , the structure of “RB Kolubara” branch receivables converted into basic capital was as follows: In RSD thousand Long-term financial investments 600,464 Long-term receivables 218,955 Advances given 189,078 Trade receivables 209,183 Other receivables 6,225 Short-term financial investments 533,088 1,756,993 The change in ownership interest was registered with the Business Registers Agency on 14 December 2017. By the date of the accompanying consolidated financial statements, an effective control process over “Kolubara-Građevinar” d.o.o., Lazarevac has not been implemented. Other long-term financial investments Other long-term financial investments disclosed as of 31 December 2017 in the amount of RSD 6,948,375 thousand mostly relate to a guarantee deposit in the name of securing settlement of the obligation under the access service to the distribution system with the authorized bank in accordance with the signed agreement on access and use of the electricity distribution system. The guarantee deposit on this basis as at 31 December 2017 amounts to RSD 6,187,849 thousand. Those funds were deposited for period of 24 months with the annual interest rate of 3.9% 25. LONG-TERM RECEIVABLES In RSD thousand 31 December 31 December 2017 2016 Rescheduled trade receivables for electricity and services: - households 1,071,992 1,127,244 - legal entities 18,547,413 17,098,408 Loans to employees: - sold apartments 451,455 514,202 - housing loans 64,079 71,350 Receivables from the Privatization Agency of RS 57,489 62,347 Less: Allowance for impairment - rescheduled trade receivables for electricity and services from households (1,071,992) (1,127,244) - rescheduled trade receivables for electricity and services from legal entities (18,367,750) (15,524,438) - receivables from the Privatization Agency of RS (57,489) (62,347) - sold apartments and housing loans (2,252) (1,996) 692,945 2,157,526 41 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 25. LONG-TERM RECEIVABLES (continued) Rescheduled trade receivables for electricity relate to receivables from households and legal entities for which an agreement on rescheduled receivables was concluded in line with the decisions by the Supervisory Board (number 860/4-13 dated 22 February 2013, number 1151/3-30 dated 2 April 2013 and number 2233/9-13 dated 25 July 2013). Namely, according to the aforementioned decisions, electricity customers with overdue liabilities as at 31 May 2013, and qualified customers who lost the right to public supply of electricity as at 31 December 2012, are allowed to repay the total debt in 120 instalments depending on the amount of the receivabable and conditional write-off depending on the number of rescheduled instalments (up to 40% if one-off settlement of outstanding debt is paid, with no decrease if payment is in 60-120 instalments). In addition, no interest is charged on the outstanding amount owed during the duration of agreement, and in the event of two consecutive unpaid instalments, in spite of notice sent, the agreement shall be considered terminated. Loans to employees that relate to the sale of apartments in the amount of RSD 451,455 thousand as at 31 December 2017 (2016 – RSD 514,202 thousand) refer to the solidarity apartments purchased by the employees of the Group. The Group has sold the solidarity apartments to employees for a period of 40 years and repayment is done through monthly instalments that are adjusted with the corresponding indices of retail prices, up to a rate of growth of average earnings in the Republic of Serbia. Loans to employees for housing loans at 31 December 2017 in the amount of RSD 64,079 thousand (2016 – RSD 71,350 thousand) relate to loans for the housing needs of employees which are approved for a period of 20 or 40 years. Repayment of housing loans is linked to the EUR exchange rate and they were approved without interest or at a fixed interest rate of 1% per annum. 26. INVENTORY In RSD thousand 31 December 31 December 2017 2016 Materials 14,515,299 13,635,583 Less: Allowance for impairment (2,806,746) (2,210,419) 11,708,553 11,425,164 Spare parts 15,767,392 13,691,453 Less: Allowance for impairment (1,744,370) (1,605,101) 14,023,022 12,086,352 Tools and inventory 1,311,694 948,699 Less: Allowance for impairment (86,704) (86,743) 1,224,990 861,956 Total materials, spare parts, tools and inventory 26,956,565 24,373,472 Work in progress and ongoing services 344,555 331,898 Coal 2,313,178 2,017,388 Merchandise 2,017 881 2,659,750 2,350,167 Fixed assets available for sale 1,825 1,825 Advances given for inventories and services 4,453,023 3,287,406 Less: Allowance for impairment (316,516) (296,108) 4,136,507 2,991,298 33,754,647 29,716,762 42 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 26. INVENTORY (continued) Advances given for inventories and services to third parties as at 31 December 2017 in the amount of RSD 4,453,023 thousand mostly relate to “TEKO Kostolac” branch in the amount of RSD 1,982,868 thousand. Namely, in 2017, the mentioned branch concluded two construction agreements. One for completion of VI BTO system and one for the construction of industrial railway from the railway station to thermal power plant “Kostolac B” which had the most significant effect on increase of advances compared to previous year. 27. TRADE RECEIVABLES In RSD thousand 31 December 31 December 2017 2016 Customers – other related parties (PE "Elektrokosmet") 10,108,022 8,533,875 Less: allowance for impairment (10,108,022) (8,533,875) - - Customers on domestic market: - sale of electricity – households 75,281,640 72,263,018 - sale of electricity – legal entities 50,736,863 55,667,093 sale of electricity - companies in restructuring 11,543,090 10,539,803 - other – companies under restructuring and in bankruptcy 1,291,829 1,256,779 sale of electricity – licenced customers 19,438 17,468 sale of electricity – qualified customers 27,120,635 27,378,336 - PE “Elektromreža Srbije“ 1,460,134 1,832,577 - sale of coal 2,676,084 2,447,284 - sale of heat and process steam 497,159 343,492 - sale of heat energy 776,113 642,704 - trade receivables for services 1,286,793 940,727 172,689,778 173,329,281 Less: allowances for impairment - sale of electricity – households (56,323,004) (52,531,743) - sale of electricity – legal entities (44,876,258) (48,343,439) sale of electricity - companies in restructuring (11,543,090) (10,539,803) - other – companies under restructuring and in bankruptcy (1,291,829) (1,256,779) sale of electricity – licenced customers (7,072) (7,072) sale of electricity – qualified customers (12,477,072) (11,811,376) - sale of coal (2,258,531) (1,926,822) - sale of heat and process steam (2,012) (2,012) - sale of heat energy (564,902) (439,610) - trade receivables for services (568,306) (552,450) (129,912,076) (127,411,106) Customers on domestic market, net 42,777,702 45,918,175 Customers – foreign 4,978,282 5,559,364 Less: allowances for impairment (4,736,898) (5,433,845) 241,384 125,519 Other trade receivables 568,958 842,412 Less: Allowances for impairment (439,600) (548,505) 129,358 293,907 43,148,444 46,337,601 43 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 27. TRADE RECEIVABLES (continued) In accordance with the Conclusion of the Government of the Republic of Serbia, number 021-6624 / 2009- 002, adopted at the Government session on 30 November 2009, the Company uses its available production capacity in order to provide with electricity to the majority Serb area in the north of AP of Kosovo and Metohija. On the above basis, the receivables from the delivered electricity to the Public Company “Elektrokosmet” Priština were recognized, in the amount of RSD 10,108,022 thousand (2016 – RSD 8,533,875 thousand). At the same time, the unpaid amount is recognized as an expense by indirect write-off. Receivables from companies in restructuring include receivables from business entities that are bankrupt, and whose settlement of creditors, in many cases, is carried out according to the adopted reorganization plan in accordance with the Bankruptcy Law and the Law on Privatization. 28. RECEIVABLES FROM SPECIFIC OPERATIONS In RSD thousand 31 December 31 December 2017 2016 Other receivables from specific operations 366,698 358,629 Receivables for Public Media Service charge 2,497,220 1,754,937 Less: Allowances for impairment (37,086) (26,739) 2,826,832 2,086,827 Receivables for Public Media Service charge as of 31 December 2017 in the amount of RSD 2,497,220 thousand (2016 – RSD 1,754,937 thousand) relate to receivables from end customers for the purpose of financing the public media service in accordance with the Law on the Temporary Regulation of the Method of Tax Collection for the Public Media Service. 44 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 29. OTHER RECEIVABLES In RSD thousand 31 December 31 December 2017 2016 Receivables for interest: - PE ''Elektrokosmet'', Pristina 683 315 - for electricity – households 1,690,430 1,311,767 - for electricity – legal entities 3,984,320 4,637,188 - for electricity - companies in restructuring 2,864,063 2,864,063 - other legal entities (banks and sale of heat and process steam) 647,492 587,205 - for Public Service Media 170,071 52,475 Receivables from insurance companies 15,683 11,855 Receivables from billing 208,615 223,198 Receivables from employees 185,259 2,078,076 Receivables from customers financed from the budget and overpaid taxes and contributions 5,452,285 497,956 Other receivables 506,116 554,611 15,725,017 12,818,709 Less: allowance for impairment - Receivables from interest for electricity – households (374,498) (399,874) - Receivables from interest for electricity – legal entities (1,759,437) (1,749,113) - Receivables from interest for electricity - companies in restructuring (2,864,063) (2,864,063) - Receivables from interest for other receivables (709,799) (656,065) Receivables from employees (23,411) (21,238) Receivables for overpaid taxes and contributions (31,378) (27,646) (5,762,586) (5,717,999) 9,962,431 7,100,710 Receivables for overpaid taxes and contributions includes the amount of RSD 4,670,755 thousand relating to prepaid income tax as a difference between calculated tax for 2017 and advance payments made in accordance with tax regulations. 30. SHORT-TERM FINANCIAL INVESTMENTS In RSD thousand 31 December 31 December 2017 2016 Short-term loans and borrowings – domestic 1,728 192,512 Short-term rescheduled receivables for electricity 1,319,853 819,090 Current portion of long-term financial investments 1,044,693 1,055,551 Short-term deposits in domestic banks 1,212,429 12,682 Other short-term financial investments 33,864 48,929 Less: allowance for impairment (1,719,084) (842,467) 1,893,483 1,286,297 45 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 30. SHORT-TERM FINANCIAL INVESTMENTS (continued) Short-term financial investments as at 31 December 2017 in the amount of RSD 1,212,429 thousand mostly relates short-term bank deposits in the amount of RSD 1,200,000 thousand, broke down to: - Non-specific purpose deposit in domestic currency in the amount of RSD 1,000,000 thousand placed in OTP banka Srbija a.d., Novi Sad, for the period of 12 months with interest rate of 4.2% annually, and - Non-specific purpose deposit in domestic currency in the amount of RSD 200,000 thousand placed in Direktna banka a.d., Kragujevac for the period of 6 months with interest rate of 3.7% annually. 31. CASH AND CASH EQUIVALENTS In RSD thousand 31 December 31 December 2017 2016 Current accounts: - in RSD 34,025,210 44,737,161 - in foreign currency 5,591,639 10,323,830 39,616,849 55,060,991 Deposits for securing letters of credit - in foreign currency - 149,304 - 149,304 Cash desk: 46,213 36,305 Special purpose cash funds 18,999 33,612 Securities – cash equivalents 17,925 16,877 Cash funds with limited use 677,900 674,648 Less: allowance for impairment (677,900) (674,648) 39,699,986 55,297,089 An impairment of the value of cash assets refers to cash assets deposited with banks that have been subject to bankruptcy proceedings. Most of these funds relate to assets deposited with bankrupt banks such as: Univerzal banka a.d., Beograd, Beobanka a.d., Beograd and Borska banka a.d., Bor. 32. PREPAID EXPENSES AND OTHER ACCRUALS In RSD thousand 31 December 31 December 2017 2016 Prepaid expenses 146,922 49,652 Deferred expenses 77,817 1,618 Other accruals 1,505,964 1,299,800 1,730,703 1,351,070 46 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 33. EQUITY Other capital Other capital stated in the Group’s consolidated balance sheet as of 31 December 2017 in the amount of RSD 202,188 thousand (2016 – RSD 202,188 thousand) relates to the consolidated public enterprises’ sources of non-operating assets that were transferred upon the transition to the new accounting regulations applicable in the Republic of Serbia as of 1 January 2004. Profit distribution The Supervisory Board made decisions on the allocation of part of the profit according to the financial statements of the Public Enterprise Elektroprivreda Srbije (JP EPS) and its subsidiary „EPS Distribucija“ d.о.о., Belgrade as follows:  for the year ending on 31 December 2016, in the amount of RSD 4,382,928 thousand (50% of profit) for JP EPS to the founder on behalf of the participation in profit, in accordance with the Law on the Budget of the Republic of Serbia,  for the year ending on 31 December 2015, in the amount of RSD 7,694,733 thousand (70% of profit) for JP EPS and 4,006,865 thousand (70% profit) for EPS Distribution Ltd., to the founder on behalf of the participation in profit, in accordance with the Law on the Budget of the Republic of Serbia,  for the year ending on 31 December 2014, in the amount of RSD 2,090,978 thousand (50% of profit) for EPS Distribucija Ltd, to the founder on behalf of the participation in profit, in accordance with the Law on the budget of the Republic of Serbia,  the remaining amount of the result for the reporting years is retained as an undistributed profit. As at 31 December 2017, part of the profit allocated to the founder on behalf of the participation in profit amount to RSD 18,175,504 thousand. In 2017, the Group has settled obligation towards the Founder, in the amount of RSD 3,000,000 thousand pursuant to the decision on the allocation of part of the profit (note 39). 47 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 33. EQUITY (continued) Changes in equity in 2017 and 2016 are disclosed below: In RSD thousand Retained Legal Revaluation Unrealized earnings/(accu Share capital reserves reserves gains/losses mulated loss) Total Balance at 1 January 2016 360,141,927 668 536,547,679 (451,497) (113,898,555) 782,340,222 Net income - - - - 5,849,902 5,849,902 Effects of revaluation of fixed assets - - 94,568,599 - - 94,568,599 Effects of deferred tax - - (14,245,628) - - (14,245,628) Disposal of fixed assets - - (3,402,823) - 1,162,376 (2,240,447) Deferred gains and losses on investments in debt and equity securities - - - (9,476) - (9,476) Share based payments - - - (138) - (138) Foreign currency translation - - - 506 - 506 Other - 10 (5,645) - - (5,635) Balance at 31 December 2016 360,141,927 678 613,462,182 (460,605) (106,886,277) 866,257,905 Net income - - - - 6,387,625 6,387,625 Allocation of profit to the founder - - - - (18,175,504) (18,175,504) Disposal of fixed assets - - (2,340,105) - 1,051,614 (1,288,491) Effects of fair value change in financial instruments - - - 150,878 - 150,878 Share based payments - - - 5,878 (5,878) - Foreign currency translation - - - (3,397) - (3,397) Other - 11,960 16,416 - 124,812 153,188 Balance at 31 December 2017 360,141,927 12,638 611,138,493 (307,246) (117,503,608) 853,482,204 34. LONG-TERM PROVISIONS In RSD thousand 31 December 31 December 2017 2016 Long-term provision for environmental restoration 2,962,777 2,744,881 Long-term provision for retirement benefits and jubilee rewards 8,196,141 8,128,105 Long-term provision for litigations 4,015,140 4,037,686 Long-term provision for protection of natural environment 60,001 112,092 Other long-term provisions 24 115 15,234,083 15,022,879 Long-term provision for retirement benefits and jubilee rewards as at 31 December 2017 in the amount of RSD 8,196,141 thousand (2016 – RSD 8,128,105 thousand) relates to provisions upon termination of employment and to provisions for jubilee awards for the continuous service rendered by employees for the period of 10, 20, 30 and 40 years. These provisions are recognized as present value of future payments using actuarial valuation method which comprises the following actuarial assumptions: discount rate of 5%, employee fluctuation rate of 1.5% and salary growth rate of 0%. 48 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 34. LONG-TERM PROVISIONS (continued) Long-term provision for retirement benefits and jubilee awards are recorded as disclosed in notes 3.5. Long-term provision for environmental restoration in 2017 in the amount of RSD 2,962,777 thousand includes provision in the amount of RSD 2,766,796 thousand which relates to “Rudarski basen Kolubara” and provision in the amount of RSD 195,981 thousand, which relates to “Termoelektrane i kopovi Kostolac”. These provisions were formed for the recultivation of the land or the bringing of the property in their original condition after the end of the exploitation. Long-term provision for protection of natural environment disclosed at 31 December 2017 in the amount of RSD 60.001 thousand (2016 – RSD 112,092 thousand) entirely relate to provisions formed in “Drinsko- Limske hidrolektrane” branch. Changes on the long-term provisions in 2017 and 2016 are disclosed in the table below: In RSD thousand Provision for Provision for retirement Provision for protection of benefits and Provision for environmental natural Other jubilee awards litigations restoration environment provision Total Balance at 1 January 2016 8,117,382 4,467,811 2,487,490 154,919 598 15,228,200 Transfer related to status change 972,387 - - - - 972,387 Provisions charged to current expenses (Note 14) 149,203 640,831 354,952 10,192 - 1,155,178 Used long-term provision (659,792) (636,111) (97,561) (11,783) (483) (1,405,730) Reversal of provision (Note 20) (477,585) (434,845) - (41,236) - (953,666) Оther 26,510 - - - - 26,510 Balance at 31 December 2016 8,128,105 4,037,686 2,744,881 112,092 115 15,022,879 Provisions charged to current expenses (Note 14) 1,780,595 968,557 404,306 5,454 - 3,158,912 Used long-term provision (1,513,591) (650,887) (186,410) (16,991) (91) (2,367,970) Reversal of provision (Note 20) (198,968) (340,216) - (40,554) - (579,738) Balance at 31 December 2017 8,196,141 4,015,140 2,962,777 60,001 24 15,234,083 49 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES In RSD thousand 31 December 31 December 2017 2016 Liabilities convertible to equity 80,543 80,543 Long-term borrowings: domestic 30,111,357 30,996,343 Less: Current portion of long-term borrowings: domestic (2,678,329) (3,990,534) 27,433,028 27,005,809 Long-term borrowings - foreign 96,831,717 98,666,967 Less: Current portion of long-term borrowings: foreign (9,307,698) (6,440,688) 87,524,019 92,226,279 Financial leasing liabilities 10 - Rescheduled public revenues liabilities: 39 40 Less: Current portion (39) (40) - - Other long-term liabilities - Rescheduled liabilities toward suppliers 162,863 230,530 - Other 429,433 6,480,704 Less: Current portion of other long-term liabilities (Note 36) (67,701) (90,655) 524,595 6,620,579 115,562,195 125,933,210 Long-term liabilities arising from domestic long-term borrowings, with maturity over 1 year, in amount of RSD 27,433,028 thousand comprise: loans granted by Paris club creditors in the amount of RSD 20,014,115 thousand; liabilities regarding other refinancing loans in the amount of RSD 7,416,073 thousand, and RSD 2,840 thousand regarding other liabilities. Part of the borrowed funds from commercial banks, residents of the Republic of Serbia, in the total amount of RSD 24,392,749 thousand, is prematurely repaid from the EBRD loan in 2016. Long-term liabilities arising from foreign long-term borrowings, with maturity over 1 year, in amount of RSD 87,524,019 thousand comprise: loans from international financial organisations in amount of RSD 50,656,109 thousand; loans granted by State Governments in amount of RSD 36,867,910 thousand. I Refinanced borrowings realised prior to 1990 from the funds of 1. Paris Club of Creditors The repayment of liabilities arising from the refinanced long-term borrowings from the Paris Club of Creditors realised through domestic banks was frozen upon the introduction of the United Nations’ Sanctions in May 1992. The liabilities arising from the debt to the Paris Creditor Club members were recognized, in accordance with the Reconciled Minutes of the FRY Debt Consolidation and the Law Governing the Relations between the Federal Republic of Yugoslavia and Legal Entities and Banks within the Territory of the Federal Republic of Yugoslavia (FRY Official Gazette No. 36/2002), who are the Original Debtors or Guarantors toward the Paris Club and London Club Creditors and the balance reconciled with the National bank of Serbia, in the amount of 49% of the relevant principal, based on the concluded bilateral agreements. The Law provided for the possibility of the additional write-off of liabilities in three years to the maximum amount of 66.67%. In the course of 2006, with the Deposit Insurance Agency acting on behalf and for the account of the Republic of Serbia, and with Panonska banka a.d., Novi Sad, whose legal successor is Banca Intesa a.d. Beograd, the Company closed annexes to the original contracts approving an additional discount in the amount of 15% of the relevant principal. 50 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) I Refinanced borrowings realised prior to 1990 from the funds of: (continued) 2. London Club of Creditors In 2005 The Company wrote off 62% of new principal of the debt to the London Club of Creditors on 30 September 2004 and reconciled the amount of new principal based on the communication and annuity plans provided by the National Bank of Serbia. During 2006, an agreement regulating the liabilities to the Republic of Serbia was signed with the Deposit Insurance Agency. The newly determined principal is to be repaid in semi-annual annuities where the first and the last one are due on 1 May 2010 and 1 November 2024, respectively. The interest of 3.75% has been calculated to the newly determined principal as of 1 November 2005 until 1 November 2009, and as of 1 November 2009 until 1 November 2024 the interest charged to this principal will total 6.75% annually, and will be settled in semi-annual annuities. 3. International Banks for Reconstruction and Development In accordance with the Agreement entered into between the Government of the Federal Republic of Yugoslavia and the IBRD dated 17 December 2001, the total amount of liabilities for principal, interest and other expenses accrued up to the end of 2001, represents the principal of a new loan which is to be repaid to the Government of the Republic of Serbia in semi-annual instalments in the period from 15 June 2005 to 15 December 2031 and carries a variable interest rate. On 17 May 2006, the Company entered into an agreement on rescheduled liabilities with the Deposit Insurance Agency governing the Company’s liabilities to the Republic of Serbia arising from the rescheduled loans from the aforementioned creditor. Borrowings realised in the period 1990 – 2001 II Borrowings from the People’s Republic of China through domestic banks JP EPS recognized the liability arising from the borrowing facility used by JP EPS and PE EMS pursuant to the sub agreements no. 99012D, 99012E, 99012F and 99012G, as enacted with Beogradska banka a.d. Beograd and in accordance with the General Agreement dated 23 December 1999 signed between the borrower – Beogradska banka a.d., Beograd, and the lender, EXIM Bank of China, and endorsed by the state guarantee issued by SRY. The Government of the Republic of Serbia, in its capacity of a guarantor, assumed the debt towards EXIM Bank of China from the People’s Republic of China on 20 Februa ry 2009, by signing a Debt Restructuring Agreement. It has been agreed therein that 40% of debt be written off, so the new debt shall be determined as 60% of the total value of the sum of unpaid principal, accrued but unpaid interest and accrued penalty interest aggregated in the period ended 25 March 2009. Interest rate is contractually agreed as a six- month LIBOR further increased by 1.3%, shall be accrued as an actual number of days/360, and it shall be discharged semi-annually on 21 January and 21 July In case of delay in settling liabilities matured, a penalty interest rate of 1% above the regular interest has been agreed. Pursuant to Article 6 of the Law Governing Relations between the Republic of Serbia and Banks in Bankruptcy regarding foreign loans and borrowings (Official Gazette of RS number 45 as of 31 May 2005) on 28 June 2010, JP EPS closed with the Deposit Insurance Agency an Agreement regulating the liabilities thereof towards the Republic of Serbia under same terms as those applied to the agreement signed between the Republic of Serbia and Chinese party relevant to the portion used by the Company and its subsidiaries. 51 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) Republic of Serbia – Ministry of Finance III Liabilities and receivables based on Agreement between Republic of Serbia Government and Russian Federation Government Based on the Conclusion of the Government of the Republic of Serbia 05 No. 312-11997 / 2016 from 15 December 2016 part of the debt in the amount of RSD 5,113,300 thousand, was released, on the basis of the Agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on settling the obligations of the former USSR for calculations related to goods trading between the former USSR and the former SFRY, and on the basis of agreement on mutual settlement of liabilities and receivables arising from the agreement between the Government of the Republic of Serbia and the Government of the Russian Federation on regulating the obligations of the former USSR and the former SFRY dated 27 April 2007, No. 12.01.141486 / 7-17 from 16 May 2017. Remainig part of the debt, in the amount of RSD 5,406,534 thousand, was reclassified into domestic long-term borrowings. The company is obligated to repay the remaining part of debt in amount of USD 54,547,812.55 to Republic of Serbia in dinar payments, using own funds, according to Annuity plan contained in Appendix 1 of the Agreement. The debt must be settled within 10 years including 2 years grace period. Interest will be calculated during the grace period and payments will be made on maturity date of first installment, precisely on 30 March 2019. Principal is to be repaid in 16 equal semi-annual instalments and nominal annual interest rate represents a sum of 6M LIBOR for American dollar and fixed mark-up of 1%. IV Borrowings from foreign governments 1. Borrowings from the government of the Republic of Poland The borrowing from the government of the Republic of Poland was approved during 2003 in the amount of USD 49,996,616.78 and was used in full by 31 December 2005. The agent is Vojvođanska banka a.d. Novi Sad. The borrowing is repaid in semi-annual instalments starting from 2005 and is to be completed in 2024. Interest is accrued semi-annually by applying the annual rate of 0.75 %. 2. Borrowing from the Japanese Government through Japanese International Cooperation Agency (JICA) The Government of Japan, is financing the project of flue gas desulphurization plant construction at ''Nikola Tesla'' Thermal Power Plant. Financing is done through the Japan International Cooperation Agency (JICA). The borrowing of JPY 28,252 billion was agree on 24 November 2011. Agreement is concluded for the period of 15 years and repayment period is 10 years following the five-year grace period. Utilization period of loan funds is 10 years after the Borrowing Agreement efectiveness, with possibility of extension. The interest rate is 0.6% annually, except for the borrowing portion used for payment of consultant services, where the interest is accrued at the rate of 0.01% annually. Maturity dates are 20 May and 20 November, whereby the repayment of the principal, according to the amortization plan in Appendix 3 and Annex 1 of the Loan Agreement, commences on 20 November, 2016 and completes on 20 November 2026. In November 2016 due principal I amounted to JPY 5,572,856 and principal II due amounted to JPY 50,340,000. From 20 May 2017 to 20 May 2022 due principal I and II will amount to JPY 5,562,000 and JPY 50,333,000 respectively. On 20 November 2022 due principal I and II will amount to JPY 3,014,253,144 and JPY 50,333,000 respectively. From May 2023 to the end of repayment period, 20 November 2026, due principal I and II will amount to JPY 3,014,249,000 and JPY 50,333,000 respectively. 3. Borrowings from the People’s Republic of China through Export-Import Bank (EXIM Bank of China) In accordance with the Agreement on Economic and Technical Cooperation in Infrastructure, signed on 20 August 2009 by and between the Government of the Republic of Serbia and the People’s Republic of China, following Agreements have been concluded: 52 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) IV Borrowings from foreign governments (continued) 3. Borrowings from the People’s Republic of China through Export-Import Bank (EXIM Bank of China) (continued)  Borrowing Agreement for subsidized buyer for stage I of the Kostolac-B Power Plant Projects Package, concluded on 26 December 2011 between the Government of the Republic of Serbia, as the Borrower, and Chinese Export-Import Bank, as the Creditor, in accordance with the Contractual Agreement as of 8 December 2010 for implementation of stage I of the Kostolac-B Power Plant Projects Package. The borrowing was agreed in the amount of USD 293 million, for a period of 180 months, including grace period of 60 months, after coming into effect of Borrowing Agreement for subsidized buyer. Usage period of borrowing funds is 60 months after coming into effect of Borrowing Agreement for subsidized buyer, with possibility of extending. The instalments mature for repayment semi-annually, on 21 January and 21 July each calendar year. The principal is repaid in 20 equal semi-annual instalments over 120 months following the grace period. The agreed interest rate equals 3% annually, with the one-off loan origination fee of 1% of the agreed loan amount and the cost of financing of 0.75% annually.  Borrowing Agreement for subsidized buyer for stage II of the Kostolac-B Power Plant Projects Package, concluded on 17 December 2014 between the Government of the Republic of Serbia, as the Borrower, and Chinese Export-Import Bank, as the Creditor, in accordance with the Contractual Agreement as of 20 November 2013 for implementation of stage II of the Kostolac- B Power Plant Projects Package. The borrowing was agreed in amount of USD 608.26 million, for a period of 240 months, including grace period of 84 months. Usage period of loan funds is 25 May 2022, with possibility of extending. The instalments mature for repayment semi-annually, on 21 January and 21 July each calendar year. Repayment of the principals starts 21 July 2022, in 26 equal semi-annual instalments, ending 21 January 2035. The agreed interest rate equals 2.5% annually, with the one-off loan origination fee of 0.25% of the agreed borrowing amount and commission for the unused part of borrowing of 0.25% annually. V Borrowings from International Financial Organizations 1. KfW With the German financial organization KfW financial agreements were executed in the period from 2001 through 2017as follows:  EUR 30 million was borrowed on 9 September 2005. The final date for the availability of funds borrowed was extended to 31 March 2014, up to when all funds have been used in full. Pursuant to the provisions contained in the Agreement, the principal repayment has commenced on 30 December 2010 in 20 equal instalments of EUR 1,500,000. The final maturity date is 30 June 2020. The borrowing was agreed interest-free. Guarantee costs, which are calculated on the unpaid portion of the principal, amount to 0.75% annualy, while commision for unused funds of borrowing amount to 0.25% annualy.  EUR 36 million (with the additional amount of EUR 10 million not to be repaid) was borrowed on 2 January 2008. Deadline for usage of borrowing funds is extended until 30 June 2017. According to the Agreement, repayment of principal commences on 30 June 2013, to be completed on 30 December 2019. The interest rate is determined two days prior to usage of each individual tranche and is fixed at that level until KfW informs the Company on the consolidated interest rate for the entire borrowing which will be determined upon the execution of the last disbursement of the subject borrowing and will remain constant throughout the entire repayment period. Interest rate of each tranche is defined as the rate determined by KfW two days prior to date of repayment of appropriate portion of the borrowing based on effective financing costs of KfW on EURO capital market in moment of payment for maturities which, as close as possible, match maturities of borrowing portions on which payments should be made plus mark-up of 1.75% annually. Commision on unused portion of borrowing amounts to 0.25% annually. Management fee amounts to 1% of total borrowing amount, and is paid once out of Borrowers own funds. 53 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) V Borrowings from International Financial Organizations (continued) 1. KfW (continued)  EUR 70 million was agreed on 29 October 2010. As the final deadline for the use of borrowed funds has been set 31 December 2015 with the option of deadline extension. This deadline has been extended to 31 December 2018. According to the provisions of the Borrowing Agreement, the principal repayment should have commenced on 30 December 2015 in 20 equal semi-annual instalments. According to Amendment I to the Borrowing Agreement loan principal repayment terms have been changed such that principal is to be repaid in 14 equal semi-annual instalments starting on 31 December 2018. A fixed interest rate has been agreed and is to be determined by KfW annually two days before the disbursement for each portion of the borrowing received based on the expenses incurred by KfW on the EUR capital market under terms that best correspond to the fixed interest rate period decreased by 0.5% mark-up annually, given that the rate calculated in this manner cannot be below 1% annually. After each payment, KfW consolidates these rates into a uniform rate for the total borrowing. Commision for unused portion of the borrowing amounts to 0.25% annually, with the Company being freed from this expense in 2014. Management fee amounts to 1% of total loan amount and is paid once out of Borrowers own funds.  EUR 65 million (with additional EUR 9 million of non-repayable funds) was agreed on 12 October 2012. As the final date for utilization of borrowing funds was set 30 December 2015, which has been extended to 20 December 2017. According to the provisions of the Borrowing Agreement, the principal repayment commenced on 30 December 2015 in 19 equal semi-annual instalments, where in the event of extension of date for utilization of borrowing funds, repayment would commence 2 years later, on 30 December 2016, in 15 equal semi-annual instalments. A fixed interest rate has been agreed and is to be determined by KfW annually two days before the disbursement for each portion of the borrowing received based on the expenses incurred by KfW on the EUR capital market under terms that best correspond to the fixed interest rate period increased by 0.4% for the portion of the loan of EUR 25 million, and by 1.15% for the portion of the borrowing of EUR 40 million. After each payment, KfW consolidates these rates into a uniform rate for the total borrowing amount, which is fixed to the end of the repayment period. Management fee amounts to 1% of total loan amount and is paid once out of Borrowers own funds.  EUR 45 million was agreed on 28 February 2017. As the final deadline for the use of borrowed funds is set 30 June 2022 with the option of deadline extension. According to the Borrowing Agreement loan principal repayment is to be repaid in 14 equal semi-annual instalments starting on 30 June 2022, ending to 30 December 2028. A Fixed interest rate has been agreed and amounts to 0.80% annually. Commission for unused portion of the borrowing amounts to 0.25% annually. Management fee amounts to 0.75% of total borrowing amount, and is paid once out of Borrowers own funds.  — EUR 80 million (with additional EUR 1 million of non-repayable funds) was agreed on 29 November 2017. As the final deadline for the use of borrowed funds is set 30 December 2021 with the option of deadline extension. According to the Borrowing Agreement loan principal repayment is to be repaid in 23 equal semi-annual instalments starting on 30 December 2021, ending to 30 December 2032. A Fixed interest rate has been agreed and amounts to 0.85% annually. Commission for unused portion of the borrowing amounts to 0.25% annually. Management fee amounts to 0.75% of total borrowing amount, and is paid once out of Borrowers own funds 54 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) V Borrowings from International Financial Organizations (continued) 2. Borrowings from the European Bank for Reconstruction and Development (EBRD) Financial agreements were concluded with the European Bank for Reconstruction and Development (EBRD) in period from 2001 to 2017 for the following amounts:  EUR 39,6 million, was agreed on 25 October 2001, and was fully used until 25 February 2011, with a portion of borrowing canceled, totalling EUR 1,179. The initially agreed borrowing of EUR 100 million was divided between the Company (EUR 39.6 million) and the Public Enterprise “Elektromreža Srbije” (EUR 60.4 million). The redistribution of rights and liabilities between Th e Company and the Public Enterprise “Elektromreža Srbije” with the consent of the EBRD, as the concerned creditor, and the Republic of Serbia, as the guarantor, was executed on 27 May 2008 by closing the following: the Amended Borrowing Agreement between JP EPS and JP EMS Beograd and EBRD, the Amended Borrowing Agreement between the Public Enterprise “Elektromreža Srbije” and the EBRD and the Agreement on the Recognition, Consent and Reaffirmation signed between the Republic of Serbia, JP EPS, the Public Enterprise “Elektromreža Srbije” and the EBRD. The rights and liabilities for the portion of this borrowing amounting to EUR 60.4 million were transferred to the Public Enterprise “Elektromreža Srbije.” The principal repayment commenced on 7 September 2005 and it has been completely repaid in 2016. The interest rate agreed is variable and corresponds the sum of EURIBOR and 1% annually mark-up.  EUR 59,9 million, was agreed on 21 October 2003, and was fully used until 30 April 2010. EUR 60 million had been agreed, but a portion of borrowing of EUR 135,857.49 was cancelled. The repayment of the principal commenced from 7 March 2008 and will continue until 7 September 2018. The interest rate agreed is variable and consists of EURIBOR and 1% annually mark-up.  EUR 40 million was agreed on 2 September 2010. On 22 December 2016 The Bank extended the ultimate date until which funds are available up to 2 September 2018. According to the provisions of the relevant Agreement, the principal repayment commenced on 2 September 2013 and is to be executed in 18 semi-annual instalments by 2 March 2022. The borrowing accrues variable interest rate, which consists of EURIBOR and mark-up of 1% annually, with the option to choose a fixed interest rate. Commision on unused portion of the loan amounts to 0.5% annually. Management fee amounts to 1% of total loan amount and is paid once out of borrowed funds.  UR 80 million was agreed on 28 July 2011. The ultimate date until which funds are available is set at 28 January 2015, where the bank extended the drawdown period up to 31 January 2017. According to the provisions of the relevant Agreement, the principal repayment commences as of 31 January 2015 and is to be executed in 17 equal semi-annual instalments by 31 January 2023. The borrowing accrues variable interest rate, which consists of EURBOR and mark-up of 1% annully, with the option to choose a fixed interest rate. Commision on unused portion of borrowing amounts to 0.5% annually. Management fee amounts to 1% of total borrowing amount, and is paid once out of borrowed funds.  EUR 45 million was agreed on 7 December 2011. The ultimate date until which funds are available is set on 7 December 2014, where the drawdown period has been extended to 31 December 2018. The amount of EUR 12.3 million has been cancelled. According to the provisions of the relevant Agreement, the principal repayment commenced on 30 April 2015 and is to be executed in 18 equal semi-annual instalments until 31 October 2023. The borrowing accrues variable interest rate, which consists of EURBOR and mark-up in amount of 1% annually, with the option to choose a fixed interest rate. Commision on unused portion of borrowing amounts to 0.5% annually. Management fee amounts to 1% of total borrowing amount, and is paid once out of borrowing funds. 55 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) V Borrowings from International Financial Organizations (continued) 2. Borrowings from the European Bank for Reconstruction and Development (EBRD)  EUR 200 million was agreed on 30 October 2015, for a period of 15 years, including grace period of 18 months. The ultimate date for usage of borrowing funds is to be determined as a date upon expiry of one year from date of effectiveness of borrowing funds, with the option of extension. Defined date of effectiveness of borrowing funds is 29 September 2016. The procedure of providing conditions for achieving of effectiveness of the borrowing funds is in progress. According to the terms of the Agreement, repayment of the principal will commence on 15 June 2017, in 27 equal semi-annual instalments, until 15 June 2030. The borrowing accrues variable interest rate, which consists of EURIBOR and mark-up in amount of 1% annually, with the option to choose a fixed interest rate. Commision on unused portion of borrowing amounts to 0.5% annually. Management fee amounts to 1% of total borrowing amount, and is paid once out of borrowing funds.The Company used granted funds for early repayment of loans with following banks: Abstract of Early repayment plan for loans granted by the banks (NBS average exchange rate as at 31.10.2016 has been used in The Plan) Amount (ЕUR) Cumulative (NBS average Early Bank Contract number Funds amount exchange rate as at repayment (EUR) 31.10.2016) 2392/106-14; 2806/42-13; Unicredit Bank a.d. Beograd 44,828,439 44,828,439 2-01-1-3251; 2-01-1-3252 25.10. Banka Poštanska štedionica 2392/110-14 4,833,333 49,661,773 a.d. Beograd Alpha Bank Srbija a.d. 2392/98-14 4,333,333 53,995,106 Beograd Vojvođanska banka a.d. Novi 2392/108-14 13,500,000 67,495,106 Sad 26.10. Erste Bank a.d. Novi Sad 2392/100-14 9,000,000 EBRD loan 76,495,106 Societe Generale Banka Srbija 2392/97-14; 2392/102-14; No 47318 17,500,000 93,995,106 a.d. Beograd 2392/95-14; 2392/93-14 ALPHA BANK LONDON 1714/2-15 50,000,000 143,995,106 Banca Intesa a.d., Beograd 2392/116-14; 2806/35-13 15,275,067 159,270,173 27.10. OTP BANKA SRBIJA A.D., 2392/91-14 8,666,667 167,936,839 Novi Sad AIK Banka a.d. Niš 1734/22-12; 2392/114-14 12,854,970 28.10. 180,791,809 Komercijalna Banka a.d. 2392/94-14; 2392/96-14; 17,208,191 198,000,000 Beograd - part I 2392/104-14 31.10. Komercijalna Banka a.d. Company’s 2392/104-14; 2806/47-13 460,963 460,963 Beograd - part II own funds 3. Borrowings from the European Investment Bank (EIB) Financial agreements concluded with the European Investment Bank (EIB) are as follows:  Based on the borrowing on financing the project of managing the electric power system of Serbia and Montenegro entered by and between Serbia and Montenegro on one side and European Investment Bank on 30 October 2003, a loan of EUR 22 million was extended to the Company. The borrowing was fully drawn in 10 tranches in the period until 31 December 2008. The borrowing is repaid in semi-annual instalments, partly maturing on 25 May and 25 November, and in part these instalments fall due on 9 June and 9 December in the period from 2010 through 2027. The first instalment is due on 25 November 2010 and the last instalment is due on 9 December 2027. The applicable interest rate is set for each tranche individually and is fixed until the end of repayment period. 56 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) V Borrowings from International Financial Organizations (continued) 3. Borrowings from the European Investment Bank (EIB) (continued)  Based on the Financial Agreement on financing the EPS Project – electricity meters, closed on 29 November 2010 between the Company and the European Investment Bank, the Company was approved a loan of EUR 40 million. The borrowing will be drawn in 10 tranches in the period ending 30 June 2015, with a commenced procedure to extend the borrowing usage deadline until 30 December 2018. The interest rate is defined as fixed or variable rate, of which the EIB will inform the Company within 10 days after the commencement of any referent period for variable interest rate. There is a possibility to convert variable into fixed interest rate. The tranches will be repaid in equal annual, semi-annual and quarterly instalments or one-off. The date of maturity for the first instalment will be set at the date which immediately follows the expiry of three years from drawing the first tranche and the last date of tranche repayment will be set at the date that falls no earlier than four years and no later than twelve years from the tranche drawing date. If the tranche is repaid one-off and in full, the maturity date will be the date falling no earlier than three and no later than seven years from the tranche drawing date. The interest rate and terms of tranche repayment are determined for each tranche separately at the tranche disbursement date. 4. Borrowings from the World Bank (WB) International Development Association (IDA) Pursuant to the Agreement on a development borrowing (Serbia and Montenegro Component of the Program of Energy Community of South East Europe – Serbia Project - ECSEE) contracted on 8 September 2005 between the State Union of Serbia and Montenegro on one side and the International Development Association on the other, in the amount of SDR 13.9 million and a Borrowing Sub agreement signed between the Republic of Serbia and the Sate Union of Serbia and Montenegro and the Borrowing Sub agreement concluded between the Republic of Serbia and the Company, the Company can use the loan funds of SDR 12.24 million. Funds were drawn down up to 30 June 2012, with the exception that the amount of SDR 441,151.20 was cancelled. The borrowing is to be repaid in instalments maturing on 15 March and 15 September in the period from 2015 to 2025, free of interest. Service charge amounts to 0.75% annually, and is calculated on the unpaid portion of the principal. Fee for the commitment of funds on the principal amount of the principal amount which is not withdrawn amounts to no more than 0.5% annually. International Bank for Reconstruction and Development (IBRD) Based on Borrowing Agreement (Project of urgent recovery from floods) concluded on 9 October 2014, between the Republic of Serbia, as the Borrower, and the IBRD, as the Creditor, in amount of EUR 227.48 million, the Republic of Serbia has via Loan Subagreement, agreed on 19 February 2015, transferred to the Company rights to use a portion of the loan funds, in amount of EUR 157.11 million. Loan duration is 30 years, including grace period of 9 years. The borrowing is repaid in 42 sequential semi-annual instalments, on 1 May and 1 November, starting as of 1 November 2023 and 1 May 2044. Interest rate is the sum of 6M EURIBOR and variable mark-up which currently amounts to 0.8% annually. Commision for unused borrowing funds amounts to 0.25% annually, and is calculated on the amount of unused borrowing funds. 57 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) An overview of all borrowings as at 31 December 2017 is presented in the table below: Equivalent value in ORIGINAL CURRENCY Means of thousands of RSD No. BORROWING Currency Maturity Repayment security Principal Interest rate 31.12.2017. 01.01.2017. date schedule TOTAL LONG-TERM BORROWINGS (A+B) 126,943,073 129,663,310 А FOREIGN CURRENCY BORROWINGS (I+II+III+IV) 126,943,073 129,663,310 Borrowings realised prior to 1990 I REFINANCED BORROWINGS REALIZED FROM THE FUNDS OF: (1+2+3+4+5+6) 30,108,689 29,660,121 1 PARIS CLUB OF CREDITORS 21,955,688 25,999,267 30.09.2008.- 30.03. and Amarketrate/EUR+0, Promissory 1.1 AUSTRIA EUR 2,410,863 285,621 324,433 31.03.2024. 30.09. 6% pа, notes 22.09.2008.- 22.03. and Promissory 1.2 FRANCE EUR 27,801,623 5,90% p.a. 3,293,733 3,741,302 22.03.2024. 22.09. notes 22.09.2008.- 22.03. and Promissory 1.3 GERMANY EUR 18,441,970 5,50% p.a. 2,184,870 2,481,761 22.03.2024. 22.09. notes 22.09.2008.- 22.03. and EURIBOR/EUR Promissory 1.4 CANADA EUR 40,365,851 4,782,251 5,432,087 22.03.2024. 22.09. +0,5% p.a. notes 22.09.2008.- 22.03. and 6M LIBOR/ Promissory 1.5 SWITZERLAND CHF 55,806,280 5,652,322 6,985,330 22.03.2024. 22.09. CHF+0,5% p.a. notes 22.09.2008.- 22.03. and Promissory 1.6 USA USD 4,522,273 5,375% p.a. 448,227 577,335 22.03.2024. 22.09. notes 22.03.2006.- 22.03. and Promissory 1.7 RUSSIA USD 39,879,192 0,5517% p.a. 3,952,646 4,768,389 22.03.2034. 22.09. notes 22.09.2008.- 22.03. and Promissory 1.8 JAPAN JPY 1,542,552,706 2,8390% p.a. 1,356,016 1,688,630 22.03.2024. 22.09. notes LONDON CLUB OF 01.05.2010.- 01.05. and 3,75% p.a.till 11/09 Promissory 2 USD 7,617,540 755,016 1,019,752 CREDITORS 01.11.2024. 01.11. 6,75% p.a. till 11/24 notes 15.03. and Promissory 15.03.2005.- 1/3-5,44 % и 2/3 3 IBRD EUR 6,816,051 15.09.15.06. notes 807,516 866,275 15.12.2031. EURIBOR p.a. and 15.12. 17.10.2012.- 17.04.and 4 EZ EUR 426,596 6М EURIBOR p.a. 50,540 52,673 17.10.2016. 17.10. Borrowings realised in the period 1990 – 2001 1,133,395 1,722,154 21.07.2010.- 21.01. and 6M LIBOR+1,3% Promissory II Chinese borrowing USD 11,435,094 1,133,395 1,722,154 21.01.2021. 21.07. p.а. notes Republic of Serbia – Мinistry of Finance 5,406,534 - 18.05.2017. 01.01. 30.03. 6M LIBOR+1,3% Promissory III Russian borrowing USD 54,547,813 5,406,534 - 30.09.2026. and 30.09 p.а. notes 58 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) Equivalent value in ORIGINAL CURRENCY Means of thousands of RSD No. BORROWING Currency Repayment security Principal Maturity date Interest rate 31.12.2017. 01.01.2017. schedule IV LOANS GRANTED BY STATE GOVERNMENTS 39,810,941 40,216,253 15.06. and Guarantee RS 1 Polish borrowing USD 11,128,406 2005.-2024. 0.75% p.a. 1,102,998 1,698,274 15.12. 20.11.2016.- 20.05 and 0.6% p.a. Guarantee RS 2 Japanese – JICA JPY 3,870,602,483 3,402,542 522,254 20.11.2026 20.11 0.01% p.a. Export-Import Bank of 21.07.2017- 21.01. and Promissory 3 USD 253,984,354 3% p.a. 25,173,786 29,672,091 China 21.01.2027 21.07. notes Export-Import Bank of 21.07.2022. 21.01. and Promissory 4 USD 102,220,286 2.5% p.a. 10,131,615 8,323,634 China 21.01.2035. 21.07. notes V LOANS FROM INTERNATIONAL FINANCIAL ORGANIZATIONS 56,951,685 59,702,309 30.12.2010.- 30.06. and Guarantee RS 1 KfW III (30 mil. EUR) EUR 7,500,000 - 888,545 1,296,459 30.06.2020 30.12. 30.06.2013.- 30.06. and variable rate + mark- Guarantee RS 2 KfW IV (36 mil. EUR) EUR 8,671,525 1,027,339 1,690,852 30.12.2019 30.12. up of 1.75% p.a. 31.12.2018.- 30.06. and variable rate + 0.5% Guarantee RS 3 KfW V (70 mil. EUR) EUR 33,001,317 3,909,755 2,472,747 30.06.2025 30.12. p.a. variable rate + 0.4% Guarantee RS p.a. for EUR 25 30.12.2017. 30.06. and 4 KfW VI (65 mil. EUR) EUR 31,292,326 million and variable 3,707,286 1,491,483 30.12.2024. 30.12. + 1.15% p.a. for EUR 40 million. 30.06.2022. 30.06. and 5 KfW VI (45 mil. EUR) EUR - 0,80% p.a. - - 30.12.2028. 30.12. 30.12.2021. 30.06. and 6 KfW VI (80 mil. EUR) EUR - 0,85% p.a. - - 30.12.2032. 30.12. 07.09.2005.- 07.03. and Guarantee RS 7 EBRD I (39,6 mil. EUR) EUR - EURIBOR + 1% p.а. - - 07.03.2016. 07.09 07.03.2008.- 07.03. and 6М EURIBOR + 1% Guarantee RS 8 EBRD II (60 mil. EUR) EUR 6,061,900 718,170 1,496,953 07.09.2018. 07.09 p.a. 02.09.2013.- 02.03. and 6М EURIBOR + 1% Guarantee RS 9 EBRD III (40 mil. EUR) EUR 3,055,390 361,980 461,091 02.03.2022. 02.09 p.a. 31.01.2015.- 31.01. and 6М EURIBOR + 1% Guarantee RS 10 EBRD IV(80 mil. EUR) EUR 56,974,121 6,749,878 8.002.568 31.01.2023. 31.07 p.a. 30.04.2015.- 30.04. and 6М EURIBOR + 1% Guarantee RS 11 EBRD V (45 mil. EUR) EUR 4,633,609 548,956 141.207 31.10.2023. 31.10 p.a. 15.06.2017.- 15.06. and Guarantee RS 12 EBRD VI (200 mil. EUR) ЕUR 185,185,185 EURIBOR + 1% p.а. 21,939,389 24.694.460 15.06.2030. 15.12. 09.06. and fixed for each Guarantee RS 09.12.2010.- 13 EIB II (22 mil.EUR) EUR 12,493,333 09.12; 25.05. tranche from 3.879% 1,480,119 1.723.673 09.06.2027. and 25.11. p.a. to 5.248% p.a. Wb IDA (12,24 mil. 15.09.2015.- 15.03. and Guarantee RS 14 XDR 8,849,137 - 1,246,077 1.574.274 SDR) 15.03.2025. 15.09 6М EURIBOR + 01.11.2023. 01.05. and variable mark-up Promissory 15 WB IBRD (157 mil.EUR) EUR 121,329,133 14,374,190 14.656.542 01.05.2044. 01.11. which is currently notes 0.91% VI OTHER 71,758 84,628 15.03. and 15.03.2005.- Promissory 1 EMS а.д. - IBRD EUR 22,503 15.09.15.06. 1/3-5,44i 2/3-euribor 2,666 2.975 15.12.2031. notes and 15.12. 2 Tehnoexport USD 697,086 - 69,092 81.653 CURRENT PORTION OF LONG TERM LOANS 11,986,027 10,431,222 А Foreign currency loans 11,986,027 10,431,222 B Loans in RSD - - TOTAL LONG TERM PORTION 114,957,047 119,232,089 А Foreign currency loans 114,957,047 119,232,089 B Loans in RSD - - 59 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 35. LONG-TERM LIABILITIES (continued) Analysis of approved loans withdrawals In order to finance the specific projects to increase production capacities in thermo and hydro power plants, in the period from 2003 to 2017 the Group executed various loan agreements with international financial institutions, to which the Federal Republic of Yugoslavia and the State Union of Serbia and Montenegro or Republic of Serbia served as guarantors: Creditor Currency Contracted Draw Down Amount EBRD II EUR 59,864,143 59,864,143 EBRD III EUR 40,000,000 4,824,498 EBRD IV EUR 78,527,683 78,527,683 EBRD V EUR 32,700,000 5,298,452 EBRD VI EUR 200,000,000 200,000,000 EIB II EUR 22,000,000 22,000,000 EIB III EUR 40,000,000 - KfW III EUR 30,000,000 30,000,000 KfW IV EUR 36,000,000 34,385,815 KfW V EUR 70,000,000 33,001,317 KfW VI EUR 65,000,000 31,292,326 KfW VII EUR 45,000,000 - KfW VIII EUR 80,000,000 - IDA SDR 11,798,849 11,798,849 JICA JPY 28,252,000,000 4,038,305,339 EXIM Bank of China I USD 293,000,000 266,650,088 EXIM Bank of China II USD 608,260,000 102,220,286 Borrowing from the Republic of Poland USD 49,996,617 49,996,617 WB IBRD EUR 139,743,296 121,329,133 Analysis of long term loans maturities In RSD thousand As at 31 December As at 1January 2017 2017 Index From one to five years 51,328,965 46,058,158 111.44 Over five years 63,628,082 73,173,931 86.95 Total 114,957,047 119,232,089 96.41 Analysis of borrowings per requested discharging currency as at 31 December 2017 31 December Currency Amount in Currency 2017 EUR 503,020,941 59,594,648 USD 450,888,031 44,689,993 CHF 50,071,948 5,071,522 ЈPY 5,142,861,362 4,520,951 XDR 7,669,252 1,079,933 Total 114,957,047 60 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 36. SHORT-TERM FINANCIAL LIABILITIES In RSD thousand 31 December 31 December 2017 2016 Liabilities in foreign currency Current portion of long-term loans – foreign (Note 35) 9,307,698 6,440,688 Current portion of long term-loans – domestic (Note 35) 2,678,329 3,990,534 Other short-term financial liabilities 3,016 3,016 11,989,043 10,434,238 Liabilities in RSD Current portion of long-term liabilities - - Current portion of rescheduled liabilities 39 40 Current portion of other long-term liabilities 67,701 90,655 Other short-term financial liabilities in RSD 114,227 82,794 181,967 173,489 12,171,010 10,607,727 Short-term liabilities arising from current portion of foreign long-term loans in amount of RSD 9,307,698 thousand comprise: loans from international financial organisations in amount of RSD 6,295,575 thousand; loans granted by State Governments in amount of RSD 2,943,034 thousand and RSD 69,089 thousand regarding other liabilities Short-term liabilities arising from current portion of domestic long-term loans in foreign currency in amount of RSD 2,678,329 thousand comprise: loans granted by Paris club creditors in amount of RSD 1,941,573 thousand and liabilities regarding other refinancing loans in amount of RSD 736,756 thousand. 37. CUSTOMER PREPAYMENTS, DEPOSITS AND CAUTION MONEY In RSD thousand 31 December 31 December 2017 2016 Customer prepayments: - In RSD 3,041,503 2,846,414 - In foreign currency 1,115,547 1,327,703 Received deposits and down payments 176,680 286,249 Received prepayments from individuals in RSD 648,347 168,270 4,982,077 4,628,636 Out of RSD 1,115,547 thousand relating to customer prepayments in foreign currency as of 31 December 2017 (2016 – RSD 1,327,703 thousand), the amount of RSD 1,115,219 thousand (2016 – RSD 1,317,972 thousand) relates to the advance received from China Machinery Engineering Corporation (CMEC) based on the First Phase of "Kostolac B" Power plant projects (rehabilitation of block B1 and B2, desulphurization of blocks B1 and B2 with supporting infrastructure consisting of railway construction and modernization of the river port and road). 61 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 38. OPERATING LIABILITIES In RSD thousand 31 December 31 December 2017 2016 Trade payables: - Other related parties 14,102,374 13,318,947 - PE "Elektromreža Srbije" 2,130,633 2,066,403 16,233,007 15,385,350 Trade payables - foreign 4,757,144 4,940,118 Other trade payables: - expropriation liabilities 123,985 79,485 - liabilities for compensation for damages from operations 9,365 11,105 - other 849,340 614,376 982,690 704,966 21,972,841 21,030,434 39. OTHER CURRENT LIABILITIES In RSD thousand 31 December 31 December 2017 2016 Liabilities for fees for Public Media Service 1,303,570 1,336,628 Liabilities for unpaid wages and salaries, net 1,487,668 1,359,232 Liabilities for taxes and contributions: - charged to employee 600,376 551,719 - charged to employer 453,361 393,707 Other liabilities for wages and salaries 41,048 31,481 Liabilities for interests and financing costs 372,046 280,610 Liabilities for dividends and profit share 15,195,440 19,819 Other liabilities towards employees 3,378,862 3,166,186 Liabilities towards members of Executive and Supervisory board 371 436 Liabilities towards individuals 108,325 62,521 Liabilities for matured loans from Ministry of Finance of the Republic of Serbia 397,223 397,223 Other liabilities 495,906 478,435 23,834,196 8,077,997 Other liabilities towards employees as at 31 December 2017 in the amount of RSD 3,378,862 thousand relate to liabilities towards employees based on the voluntarily termination programme (note 3.5 and 11) in the amount of RSD 3,042,321 thousand, liabilities for retirement benefits and jubilee awards in the amount of RSD 293,576 thousand and other liabilities in the amount of RSD 42,965 thousand. Liabilities for dividends and profit share relate to the declared allocation of part of the profit made by Supervisory Board (note 33). 62 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 40. LIABILITIES FOR VAT In RSD thousand 31 December 31 December 2017 2016 Deferred VAT 2,092,793 2,355,709 Liabilities for calculated VAT 1,946,499 2,225,558 4,039,292 4,581,267 Deferred VAT relate to Group liability for VAT owed that is postponed to next tax period. The mentioned liability was paid after balance sheet date. 41. LIABILITIES FOR TAXES, CONTRIBUTIONS AND OTHER DUTIES In RSD thousand 31 December 31 December 2017 2016 Liabilities for Income tax - 7,158,819 Liabilities for taxes, customs and other duties charged to expenses 3,116,755 3,251,774 Water use charges (land) 676,658 543,688 Special charge for protection and improvement of environment 2,825,203 2,081,620 Other liabilities for taxes, customs and other duties charged to expenses 1,118,905 557,291 7,737,521 13,593,192 Liabilities for taxes, customs and other duties charged to expenses as at 31 December 2017 in the amount of RSD 3,116,755 thousand, includes excise duty liabilities in the amount of RSD 3,020,926 thousand, which are paid after balance sheet date. Amendments to the Law on Excise Tax from 1 August 2015, introduced the obligation to calculate and pay excise tax on delivered and billed electricity intended for final consumption. Final consumption of electricity, in terms of this Act, is defined as delivered electricity to end customers in the Republic of Serbia, including the consumption of electricity by the supplier for its own purposes, calculated based on the reading of the consumption via the control devices on electricity delivery points, in accordance with the law. Only the supplier of electricity is obligated to pay the excise tax. Other liabilities for taxes, customs and other duties include liabilities for taxes and contributions related to the voluntarily termination programme initiated by the management of the Group in order to optimize the number of employee on a Group level (note 3.5 and 11). These liabilities disclosed at 31 December 2017 in the amount of RSD 474,911 thousand have been settled in accordance with tax regulations. Obligations for environmental protection fees are calculated on the basis of the Law on Environmental Protection (Note 15). As at 31 December 2017, the Group has no liability for income tax (2016 – RSD 7,158,819 thousand) but receivable for prepaid income tax in the amount of RSD 4,670,755 thousand (note 29)based on a difference between calculated tax for 2017 and advance payments made in accordance with tax regulations. 63 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 42. ACCRUED EXPENSES In RSD thousand 31 December 31 December 2017 2016 Received donations: - from the Government of RS and other state authority 1,644,968 2,245,630 - foreign 7,994,595 6,951,452 - domestic 13,147,289 11,293,793 22,786,852 20,490,875 Other accruals 410,822 792,650 Accrued expenses 1,300,797 1,314,874 Deferred purchase costs 16,359 16,922 24,514,830 22,615,321 The Group received funds for financial and technical support from agencies and similar authorities on an international level which were initially recognized as deferred revenue. All contracts and agreements are ratified by the National Assembly of the Republic of Serbia. Accrued expenses disclosed at 31 December 2017 in the amount of RSD 1,300,797 thousand, mostly relate to accrued interest for loans received in the amount of RSD 730,988 thousand. Changes in deferred revenue which pertain to received donations during 2017 and 2016 are the following: In RSD thousand 31 December 31 December 2017 2016 Opening balance 20,490,875 19,856,102 Current year donations 3,554,511 2,218,104 Transfer to revenues (1,557,499) (1,089,920) FX rate differences (11,597) 1,763 Other 310,562 (495,174) Closing balance 22,786,852 20,490,875 43. OFF BALANCE SHEET ASSETS AND LIABILITIES In RSD thousand 31 December 31 December 2017 2016 Liabilities for issued guarantees and other types of collateral for liabilities of the Group 93,455,334 108,759,120 Material for processing 38,414 49,788 Receivables for received guarantees and other types of collateral for receivables 56,738,274 50,235,369 Written off equity investments 385,337 111,269 150,617,359 159,155,546 64 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Capital risk management Debt indicators of the Group for the year then ended are the following: In RSD thousand 31 December 31 December 2017 2016 Indebtedness а) 127,652,662 136,460,394 Cash and cash equivalents 39,699,986 55,297,089 Net indebtedness 87,952,676 81,163,305 Capital b) 853,482,203 866,257,905 Total debt to equity ratio 0.10 0.09 Indebtedness pertains to long term and short-term liabilities from borrowings and other long term and short term financial liabilities. b) Capital includes share capital, revaluation reserves, unrealized gains and losses from securities for sale, retained earnings and accumulated loss. Significant accounting policies that pertain to financial instruments Details on significant accounting policies, as well as criteria and basis for recognition of revenue and expenses for all financial assets and liabilities are disclosed in note 3. Financial instruments categories In RSD thousand 31 December 31 December 2017 2016 Financial assets Equity investments 5,646,765 787,716 Long-term financial investments 7,144,735 7,510,582 Long-term receivables 692,945 2,157,526 Trade receivables 43,148,444 46,337,601 Short-term financial assets 1,893,483 1,286,297 Other receivables 7,206,507 6,660,389 Cash and cash equivalents 39,699,986 55,297,089 105,432,865 120,037,200 Financial liabilities Long-term borrowings 114,957,047 119,232,088 Other long-term liabilities 524,605 6,620,579 Trade payables 21,972,841 21,030,434 Current portion of long-term borrowings 11,986,027 10,431,222 Short-term financial liabilities 184,983 176,505 Other liabilities 17,872,881 2,575,672 167,498,384 160,066,500 Primary financial instruments of the Group are cash and cash equivalents, trade receivables, interest receivables and trade payables, whose primary purpose is financing current operations of the Group. In regular business conditions, the Group is exposed to risks stated below. 65 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Financial risk management Financial risks include market risk (foreign exchange risk and interest risk) and liquidity risk. Financial risks are reviewed on a timely basis and are primarily avoided by lowering the exposure of the Group to these risks. The Group does not use any financial instruments to avoid effects of financial risks on operations as such instruments are not widely used, nor are there organized markets for such instruments in the Republic of Serbia. Market risk In its regular business operations, the Group is exposed to financial risks from changes in exchange rates and changes in interest rates. Exposure to market risk is reviewed with sensitivity analysis. There were no significant changes to Group’s exposure to market risk, nor in the Group’s approach to measure and manage aforementioned risk. Currency risk The Group is exposed to currency risk primarily through cash and cash equivalents and trade payables which are denominated in foreign currency. The Group does not use special financial instruments as a protection from risk, as such instruments are not common in the Republic of Serbia. Stability of the Group’s economic environment largely depends on government commerce measures, including establishing appropriate legal and regulatory framework. Net book amount of Group’s monetary assets and liabilities disclosed in foreign currency on reporting date were the following:: Assets Liabilities 31 December 31 December 31 December 31 December 2017 2016 2017 2016 EUR 56,492,907 83,843,355 598,268,680 622,426,600 JPY - - 5,451,913,209 2,214,262,553 SEK 564 567 - - CHF 82,784 90,118 55,806,280 61,001,007 GBP 416 2,065 - - USD 20,307,939 70,862,685 498,360,887 494,960,177 XDR - - 8,849,137 10,051,169 DKK - 53 - - The Group is sensitive to changes in foreign exchange rates of currencies Euro and American dollar. The table below represents details of sensitivity analysis of the Group to increase and decrease of 10% in exchange rates of Serbian dinar to foreign currencies. The sensitivity rate of 10% is used for internal review of currency risk and represents an estimate of the Management of reasonably expected changes in foreign exchange rates. Sensitivity analysis includes only unsettled receivables and liabilities disclosed in foreign currency and harmonizes their translation at period end for change of 10% in foreign exchange rates. Positive number in the table below suggest a decrease in current year profit, when the Serbian dinar depreciates compared to foreign currency. In case of appreciation of Serbian dinar of 10% compared to foreign currency, the effect on the current year profit would be opposite of the result stated above, in the previous case. 66 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Market risk (continued) Currency risk (continued) In RSD thousand 31 Dеcember 31 December 2017 2016 EUR 6,418,564 6,650,011 JPY 479,263 222,403 SEK (1) (1) CHF 564,394 699,545 GBP (6) (30) USD 4,738,246 4,967,679 XDR 138,906 157,775 Current year profit 12,339,366 12,697,382 Sensitivity of the Group to changes in foreign exchange increased in the current period, mostly due to effects of nominal increase of liabilities presented in Euro currency which mostly pertain to liabilities towards suppliers. Interest rate risk The Group is exposed to risk from changes in interest rates in assets and liabilities with variable interest rates. This risk depends on the financial market and the Group has no available instruments to lessen the effects of the risk. Net book amount of financial assets at reporting date is grouped according to level of interest rate risk, and is presented in the following table: In RSD thousand 31 December 31 December 2017 2016 Financial assets Interest-free - Equity-investments 5,646,765 787,716 - Long-term financial assets 5,602,983 5,502,668 - Trade receivables 30,562,574 34,408,876 - Other receivables 676,335 - - Cash and cash equivalents 192,835 287,127 42,681,492 40,986,387 Fixed interest-rate - Long-term receivables 411,374 2,157,526 - Long-term financial investments 123,321 6,174 - Short-term financial investments 1,062,482 652,676 - Cash and cash equivalents 37,889,090 55,009,962 39,486,267 57,826,338 Variable interest-rate: - Long-term financial investments 1,418,431 2,001,740 - Long-term receivables 281,571 - - Trade receivables 12,585,870 11,928,725 - Short-term financial investments 831,001 633,621 - Other receivables 6,530,172 6,660,389 - Cash and cash equivalents 1,618,061 - 23,265,106 21,224,475 105,432,865 120,037,200 67 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Market risk (continued) Interest rate risk (continued) Net book amount of financial liabilities at reporting date is grouped according to level of interest rate risk, and is presented in the following table: In RSD thousand 31 December 31 December 2017 2016 Financial liabilities Interest-free - Trade payables 21,972,841 21,030,434 - Other liabilities 17,576,167 2,278,958 39,549,008 23,309,392 Fixed interest rate - Long-term borrowings 20,942,104 11,109,496 - Current portion of long-term borrowings 1,893,887 897.937 - Short-term financial liabilities 358 23,313 22,836,349 12,030,746 Variable interest rate - Long-term borrowings 94,014,943 108,122,592 - Other long-term liabilities 524,605 6,620,578 - Other liabilities 296,714 296,714 - Current portion of long-term borrowings 10,092,140 9,533,285 - Short-term financial liabilities 184,625 153,192 105,113,027 124,726,361 167,498,384 160,066,499 Sensitivity analysis presented is established based on exposure to changes in interest rates for non- derivative instruments at the balance sheet date. For liabilities with variable interest rate, analysis has been compiled under the assumption that the remaining amount of assets and liabilities on the balance sheet date remained the same during the business year. Increase or decrease of 1% represents, according to the Management, is an estimation of a realistically plausible change in interest rates. If the interest rates are 1% higher/lower, with all other variables unchanged, the Group would have sustained operating loss/realized profit for the year then ended 31 December 2017 in amount of RSD 1,442,333 thousand (31 December 2016: RSD 1,388,420 thousand). This situation is attributed to Group’s exposure to interest rate risk, which is based on variable interest rates that are calculated on short-term borrowings. Exposure of the Group to changes in interest rates is increased in the current period primarily due to nominal increase of liabilities from short-term borrowings. Credit risk Trade receivables management The Group is exposed to credit risk which represents risk that debtors will not be able to settle their debts to the Group completely and timely, which would in turn result in financial losses for the Group. Group’s exposure to this risk is limited to the amount of trade receivables at balance sheet date. 68 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Credit risk (continued) Trade receivables management (continued) Structure of trade receivables as at 31 December 2016 is presented in the following table: In RSD thousand Gross Provided Net exposure exposure amount Not due trade receivables 25,284,212 (450,486) 24,833,726 Overdue, provided trade receivables 141,476,845 (141,476,845) - Overdue, not provided trade receivables 21,503,875 - 21,503,875 188,264,932 (141,927,331) 46,337,601 Structure of trade receivables as at 31 December 2017 is presented in the following table: In RSD thousand Gross Provided Net exposure exposure amount Not due trade receivables 23,598,990 (521,162) 23,077,828 Overdue, provided trade receivables 144,675,434 (144,675,434) - Overdue, not provided trade receivables 20,070,616 - 20,070,616 188,345,040 (145,196,596) 43,148,444 Not due trade receivables Not due trade receivables disclosed as at 31 December 2017 in amount of RSD 23,077,828 thousand (31 December 2016: RSD 24,833,726 thousand). Overdue, provided trade receivables In previous periods, the Group has provided for receivables impairment for overdue receivables in amount of RSD 144,675,434 thousand (2016 – RSD 141,476,845 thousand), for which the Group has determined that there was a change in creditworthiness of the customers and that receivables will not be collected in original amounts. Overdue, not provided trade receivables Ageing structure of overdue, not provided receivables is presented in the table below: In RSD thousand 31 December 31 December 2017 2016 Less than 30 days 5,083,563 5,446,584 31 - 60 days 9,571,181 10,254,667 Over 60 days 5,415,872 5,802,624 20,070,616 21,503,875 69 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Credit risk (continued) Trade receivables management (continued) In RSD thousand Receivables from Short-term Long-term Trade Lon-term specific Other financial investments receivables receivables operations receivables investments Total Balance at 1 January 2016 2,349,128 4,313,291 139,554,415 26,739 13,921,413 1,667,936 161,832,922 Allowances through Statement of profit and loss 1 (10,421) 15,473,647 - 168,852 15,430 15,647,509 Foreign exchange differencies - - 119,838 - 6,937 - 126,775 Income regarding to adjustment of allowance balance (3,334) (129,063) (7,147,834) - (678,576) (645,434) (8,604,241) Collection of previously impaired receivables - (54,943) (647,215) - - (97,547) (799,705) Writte-off of receivables and investments (1,219) (133,730) (137,183) - (304,342) (3,130) (579,604) Transfers within receivables - 12,730,841 (5,248,576) - (7,389,672) (92,593) - Оther 2,646 51 (39,761) - (6,613) (2,194) (45,871) Balance at 31 December 2016 2,347,222 16,716,026 141,927,331 26,739 5,717,999 842,468 167,577,785 Allowances through Statement of profit and loss 424,961 3,571,333 11,666,043 1,248 445,178 969,765 17,078,528 Writte-off of receivables and investments - - (1,431,759) - (8,159) - (1,439,918) Income regarding to adjustment of allowance balance (210,175) (636,209) (479,799) - (2,036) (169,533) (1,497,752) Foreign exchange differencies - - (841,978) - (13,409) - (855,387) Collection of previously impaired receivables (9,297) - (880,218) - (746) (451,740) (1,342,001) Transfers 2,915,369 (149,961) (2,922,671) 9,099 (376,317) 524,481 - Writte-off of receivables - „HIP-Petrohemija” а.d., Pančevo - - (1,826,722) - - - (1,826,722) Оther (15,308) (1,706) (13,631) - 76 3,644 (26,925) Balance at 31 December 2017 5,452,772 19,499,483 145,196,596 37,086 5,762,586 1,719,085 177,667,608 70 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)) Credit risk (continued) Trade payables management Trade payables as at 31 December 2017 are disclosed in amount of RSD 21,972,841 thousand (2016 – RSD 21,030,434 thousand). Suppliers calculate penalty interest on overdue, unsettled liabilities, whereby the Group due trade payables, according to financial risks management policy, settles in agreed period. Liquidity risk Ultimate responsibility for liquidity risk management is on the Group’s Management, which has established an appropriate managing system for utilization of short term, medium term and long term financing of the Group, as well as liquidity management. The Group manages liquidity risk maintaining appropriate monetary reserves continuously monitoring planned and actual cash flow, as well as maintaining appropriate ratio of maturity of financial assets and liabilities Liquidity risk and credit risk tables Presented in the following tables are details on remaining agreed maturities of Group’s financia l assets. Presented amounts are based on non-discounted cash flows which occurred from financial assets based on the earliest date on which the Group could collect funds. Financial assets maturity In RSD thousand 31 December 2017 Less than one 1 to 3 3 months 1 to 5 More than month months to 1 year years 5 years Total Interest-free 31,179,668 - 252,076 - 11,249,748 42,681,492 Fixed interest rate 37,735,375 1,216,197 123,321 - 411,374 39,486,267 Variable interest rate 20,893,370 32,666 815,792 19,636 1,503,642 23,265,106 89,808,413 1,248,863 1,191,189 19,636 13,164,764 105,432,865 In RSD thousand 31 December 2016 Less than one 1 to 3 3 months 1 to 5 More than month months to 1 year years 5 years Total Interest-free 30,214,680 - 4,481,323 - 6,290,384 40,986,387 Fixed interest rate 52,730,989 639,994 85,785 6,174 4,363,396 57,826,338 Variable interest rate 19,461,241 228,244 922,314 612,675 - 21,224,474 102,406,910 868,238 5,489,422 618,849 10,653,780 120,037,200 Presented in the following tables are details on remaining agreed maturities of Group’s financial liabilities. Presented amounts are based on non-discounted cash flows that occurred from financial liabilities based on the earliest date on which the Group should settle liabilities. 71 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Liquidity risk (continued) Liquidity risk and credit risk tables (continued) Financial liabilities maturity In RSD thousand 31 December 2017 Less than one 1 to 3 3 months 1 to 5 More than month months to 1 year years 5 years Total Interest-free 20,449,973 5,896,023 13,203,012 - - 39,549,008 Fixed interest rate - - 1,894,245 - 20,942,104 22,836,349 Variable interest rate - 296,714 10,134,628 87,885,785 6,795,900 105,113,027 20,449,973 6,192,737 25,231,885 87,885,785 27,738,004 167,498,384 In RSD thousand 31 December 2016 Less than one 1 to 3 3 months 1 to 5 More than month months to 1 year years 5 years Total Interest-free 8,561,949 13,285,601 1,461,843 - - 23,309,393 Fixed interest rate - - 921,250 - 11,109,496 12,030,746 Variable interest rate 3,615,647 1,242,392 5,126,009 98,615,779 16,126,534 124,726,361 12,177,596 14,527,993 7,509,102 98,615,779 27,236,030 160,066,500 72 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Fair value of financial instruments Presented in the following table are present values of financial assets and financial liabilities and their fair value as at 31 December 2017 and 31 December 2016 In RSD thousand 31 December 2017 31 December 2016 Net book value Fair value Net book value Fair value Financial assets Equity investments 5,646,765 5,646,765 787,716 787,716 Long-term financial assets 7,144,735 7,144,735 7,510,582 7,510,582 Long-term receivables 692,945 692,945 2,157,526 2,157,526 Trade receivables 43,148,444 43,148,444 46,337,601 46,337,601 Short-term financial assets 1,893,483 1,893,483 1,286,297 1,286,297 Other receivables 7,206,507 7,206,507 6,660,389 6,660,389 Cash and cash equivalents 39,699,986 39,699,986 55,297,089 55,297,089 105,432,865 105,432,865 120,037,200 120,037,200 Financial liabilities Long-term borrowings 114,957,047 114,957,047 119,232,088 119,232,088 Other long-term liabilities 524,605 524,605 6,620,579 6,620,579 Trade payables 21,972,841 21,972,841 21,030,434 21,030,434 Current portion of long-term loans 11,986,027 11,986,027 10,431,222 10,431,222 Short-term financial liabilities 184,983 184,983 176,505 176,505 Other liabilities 17,872,881 17,872,881 2,575,672 2,575,672 167,498,384 167,498,384 160,066,500 160,066,500 Assumptions for estimation of fair value of financial instruments Given the fact that there is insufficient market experience, stability and liquidity in purchase and sales of financial assets and liabilities, as well as the fact that there are no available market information which could be used for purposes of disclosure of fair value of financial assets and liabilities, method of discounting cash flows was utilized. Utilizing this value method, interest rates of similar financial instruments are applied, with the objective to acquire a relevant estimate of market value of financial instruments at reporting date. 45. CONTINGENCIES AND COMMITMENTS Litigations As at 31 December 2017, total estimated value of litigations against the Group amounted to RSD 5,182,005 thousand (2016 – RSD 5,604,936 thousand). The final outcome of these litigations is uncertain. As disclosed in Note 34, as at 31 December 2017, the Group made provision for potential losses that may arise out of those litigations in the total amount of RSD 4,015,140 thousand (2016 – RSD 4,037,686 thousand), based on the management's assessment. As for the remaining amount of legal disputes that are being conducted against the Group and for which no provision for potential losses has been made, the Group's management considers that there is no risk of material losses. 73 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 45. CONTINGENCIES AND COMMITMENTS (continued) Commitments For the purpose of acquiring property, plant and equipment for its own needs and for the account of its subsidiaries, the Group has commitments towards the following suppliers: Contractual Realised as of Supplier amount 31.12.2017. Branch China national machinery & equipment import & export corporation (CMEC) 34,158,175 30,419,636 ТЕ КО Kostolac Voith Hydro GmbH & CoKG 7,481,475 4,013,934 Drinsko-Limske HE China Machinery Engineering Corporation (CMEC) 70,927,052 5,147,446 ТЕ КО Kostolac ABB Automation GmbH 578,147 70,877 RB Kolubara Joint Venture of Companies ATOS WORLDGRID SAS and SAGEMCOM ENERGY & TELECOM SAS 3,158,122 - JP EPS Konzorcijum Elnos BL Koessler GmbH & Co KG 930,177 17,896 JP EPS FAM Magdeburger Forderanlagen und Baumaschinen GmbH 3,457,596 1,463,347 RB Kolubara Joint Venture Energoprojekt Oprema ad and GP Planum ad 1,837,059 671,254 RB Kolubara Konzorcijum Mitsubishi Hitachi Power Systems Ltd., Itochu Corporation, Mitsubishi Hitachi Power Systems Europe GmbH i Jedinstvo a.d. Sevojno 22,480,892 - ТЕ Nikola Tesla 145,008,695 41,804,390 As of 31 December 2017, the Group’s commitments based on contracts for the purchase and reconstruction of property, plant and equipment in the estimated amount of RSD 11,477,099 thousand. The above mentioned amount refers to the contractual unrealized amount for purchases as of 31 December 2017, based on the contracts that have not yet been completed on that day. 46. TAX RISKS The Serbian tax regulations are often subject to interpretations and various changes. Interpretations of tax regulations made by Tax Authorities regarding the Group’s operations and transactions may differ from those made by Group management. The tax collection time-period is five years. This practically means that the Tax Authorities may asses unpaid liabilities within five years from the date such liabilities have been incurred. 47. EVENTS AFTER THE BALANCE SHEET DATE The Sustainable Development Strategy The Energy Law (RS Official Gazette No 145/14) prescribes that the Serbian energy policy objectives are, inter alia, to provide conditions that will improve energy efficiency while carrying out energy activities and reduce energy consumption; create economic and commercial conditions for a more efficient management of electro power systems, especially having in mind distributed power-generation systems, distributed power storage capacity improvements, implementation of an energy consumption management system, and the implementation of a “smart” network concept. In order to successfully enter the world of global, regional, national and local competition, the Government of the Republic of Serbia has passed a National Strategy for Sustainable Development, a Third Energy Efficiency Action Plan for a time period up to 2018 („RS Official Gazette No 1/17), and the Energy Strategy of the Republic of Serbia for the period until 2025, with projections by 2030 („RS Official Gazette No. 101/15) 74 PUBLIC ENTERPRISE, ELEKTROPRIVREDA SRBIJE, BELGRADE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 December 2017 47. EVENTS AFTER THE BALANCE SHEET DATE (continued) The Sustainable Development Strategy (continued) In view of the need to build new infrastructure systems and to revitalise and modernise the existing ones, and the fact that both energy production and energy consumption generate environmental pressure in the Republic of Serbia, significant investments are expected in the Energy Sector. At the same time, the aforementioned stands as the requirement for the National Energy Sector to integrate with both the Regional and the European energy markets. Therefore, for Serbia to achieve a balanced economic and environmental development, sustainable management, preserved natural equilibrium, integrity, diversity and quality of natural values, prevention, control, reduction and recovery from any form of environmental pollution, the Serbian Electricity Sector is obliged to efficiently use relatively ‘clean’ energy available from different sources, rely as much as possible on renewable sources of energy and as little as possible on exhaustible resources, and to leave as few as possible negative effects on the environment, water, air and land. Amendments to the Collective Labour Agreement On 7 February 2018, the Government of Serbia and the Union of Workers PE Elektroprivreda Srbije concluded a Collective Agreement on Amendments to be made to PE Elektroprivreda Srbije special Collective Labour Agreement, which was applicable as of January 2015. Amendments to the Collective Labour Agreement introduced a new item, namely a jubilee award for 35 years of continued service with the Group in the amount of 3.5 employee salaries earned. Furthermore, the salary calculation method for jubilee award payment was amended. Namely, instead of the average of three employee salaries earned with the Group during the months preceding the month in which a jubilee award is paid, the average of 12 salaries earned with the Group has been introduced. Procedures before the Commission for Protection of Competition On 23 February 2018, the Administrative Court rendered a Judgement by which it has been annulled the Decision of the Commission for Protection of Competition (the „Commission“) to determine a breach of competition rules by „ODS EPS Distribucija“ d.o.o., Beograd through abuse of dominant position, which was issued in December 2016. Previously, as prescribed in the above Decision of the Commission, ODS EPS Distribucija d.o.o. acted on all findings and imposed measures within the prescribed deadlines to be met in 2017. The Administrative Court proceeded with ODS EPS Distribucija d.o.o. appeal lodged in January 2017 and, based on the Administrative Court’s Judgement, the case was returned to the Committee for re- determination, on the grounds of a violation of the rules of procedure. In its Judgement, the Administrative Court did not assess whether ODS EPS Distribucija d.o.o., Beograd performed an abuse of dominance however, the Administrative Court ordered the Commission to eliminate the deficiencies and based on factual findings to re-issue a Decision regarding this case. 48. FOREIGN EXCHANGE RATES Foreign exchange rates determined in the interbank foreign exchange market, which have been used to translate FX items presented in the Consolidated Balance sheet into RSD, were as follows: In RSD 31 December 31 December 2017 2016 EUR 118.4727 123.4723 USD 99.1155 117.1353 75