OSHC “ BARQI T0J1K” Nurek Hydropower Rehabilitation Project, Phase I Advance No. TFOA 4872 Special purpose project financial statements for the year ended December 31, 2018 and independent auditors9 report OPEN STOCK HOLDING COMPANY "BARQI ТОЛК» PROJECT IMPLEMENTATION UNIT NUREK HYDROPOWER REHABILITATION PROJECT, PHASE I ADVANCE NO. TFOA 4872 TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2018 2 INDEPENDENT AUDITORS’ REPORT 3-5 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2018 Statement of cash proceeds and disbursements 6 Statement of uses of funds by project components 7 Notes to the special purpose project financial statements 8-12 STATEMENT OF MANAGEMENTS RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 The following statement, which should be read in conjunction with the independent auditors’ responsibilities stated in the independent auditors5 report set out on pages 3-5, is made with a view to distinguish the respective responsibilities of management and those of the independent auditors in relation to the special purpose project financial statements of £tNurek Hydropower Rehabilitation Project, Phase Г5 , financed under Financing Agreements Advance No. TFOA 4872 (the tTrojecf,). Management is responsible for the preparation of this special purpose project financial statements, the financial position, cash proceeds and disbursements, uses of funds by project components, statement of applications for the year ended December 31, 2018 in accordance with International Public Sector Accounting Standard ‘‘Financial Reporting Under the Cash Basis of Accounting” （the “IPSAS”） issued by the International Public Accounting Standards Board of the International Federation of Accountants and the World Bank’s Financial Management Sector Board’s “Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” （the “WB Guidelines”). In preparing the special purpose project financial statements, management is responsible for: • selecting suitable accounting policies and applying them consistently; • making judgments and estimates that are reasonable and prudent; • stating whether IPSAS and WB Guidelines have been followed, subject to any material departures disclosed and explained in the special purpose project financial statements; and • preparing the special purpose project financial statements on a going concern basis, unless it is inappropriate to presume that the Project will continue its activity for the foreseeable future. Management is also responsible for: • designing, implementing and maintaining effective and sound system of internal control and for revealing risks in system of internal control; • maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Project, and which enable them to ensure that the special purpose project financial statements of the Project comply with IPSAS and WB Guidelines; • compliance with laws and regulations of the Republic of Tajikistan, accounting system of the Project and the requirements of the World Bank; • taking such steps as are reasonably available to them to safeguard the assets of the Project; and • detecting and preventing fraud and other irregularities. The special purpose project financial statements for the year ended December 31, 2018 were approved and authorized for issue on June 13, 2019 by the management of the Project. 2 MOORE STEPHENS MOORE STEPHENS KSC ASSURANCE SRL 175 Calea Floreasca, Floreasca Tower Building, 13th floor, District 1 Bucharest —Romania Г +4 0374 490 074 F+4 0374 094191 E info@moorestephens-ksc.ro www.moorestephens-ksc.ro INDEPENDENT AUDITORS1 REPORT To the Management of the Project tlNurek Hydropower Rehabilitation Project, Phase Г5: Report on the special purpose project financial statements Opinion [1] We have audited the accompanying special puipose project financial statements of uNurek Hydropower Rehabilitation Project, Phase Г5 , financed under Financing Agreements Advance No. TFOA 4872 (the 'Trojecf5 ) which comprise the statement of cash proceeds and disbursements, the statement of uses of funds by project components for the year ended December 31, 2018 and a summary of significant accounting policies and other explanatory information (the ''special purpose project financial statements”). [2] In our opinion, the accompanying special purpose project financial statements are consistent^ in all material respects, cash proceeds and disbursements, and uses of funds by Project components for the year ended December 31, 2018 in accordance with International Public Sector Accounting Standard “Financial Reporting Under the Cash Basis of Accounting” （the “IPSAS”） issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants, and the World Bank’s Financial Management Sector Board’s “Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” （the “WB Guidelines”). Basis for opinion [3] We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are fiirther described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants, Code o f Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Tajikistan, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter [4] Without qualifying our opinion, we draw attention to Note 2 to the special ршрове project financial statements which describe the basis of accounting. These special purpose project financial statements were prepared for complying with the appropriate World Bank Guidelines and Grant agreement requirements, and therefore are not intended to be a complete presentation of the “Nurek Hydropower Rehabilitation Project， Phase Г (the “Project”) operations. Other matter [5] The special purpose project financial statements are prepared to assist the Project to comply with the requirements of the World Bank. As a result the special purpose project financial statements may not be suitable for another purpose MOORE STEPHENS Responsibilities of management and those charged with governance for the special purpose project financial statements 3 [6] Management is responsible for the preparation of these special purpose project financial statements in accordance with International Public Sector Accounting Standard ^Financial Reporting Under the Cash Basis of Accounting” （the “IPSAS”） issued by the International Public Accounting Standards Board of the International Federation of Accountants, and the World Bank5 s Financial Management □ Sector Boaid^ "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities” （the “WB Guidelines”)， and for such internal control as management determines is —1 necessary to enable the preparation of the special purpose project financial statements that are free from material misstatement, whether due to fraud or error. ] Auditor^ responsibilities for the audit of the special purpose project financial statements [7] Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole are free from material misstatement， whether due to fraud or error， and to issue an auditor^ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the special purpose project financial statements. □ As part of an audit in accordance with ISAs, we exercise professional judgment and maintain □ professional skepticism throughout the audit. We also: □ • Identify and assess the risks of material misstatement of the special purpose project financial □ statements, whether due to fraud or error, design and perfomi audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our я opinion. The risk of not detecting a material misstatement resulting jfrom fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, □ misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit ] procedures that are appropriate in the circumstances, but not for the piupose of expressing an opinion on the effectiveness of the Project5s internal control. 3 • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the 冲propriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained^ whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Projecfs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the special purpose project financial statements J or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor^ report. However, future events or conditions may cause the Project to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the special purpose project financial statements, including the disclosures, and whether the special pmpose project financial statements represent the underlying transactions and events in a manner that achieves fair J presentation. 4 MOORE STEPHENS [8] We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. [9] We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Moore Stephens KSC Bucharest, Romania June 13, 2019 "1 OPEN STOCK HOLDING COMPANY “BARQI ТОЛК” PROJECT IMPLEMENTATION UNIT NUREK HYDROPOWER REHABILITATION PROJECT, PHASE I ADVANCE NO. TFOA 4872 STATEMENT OF CASH PROCEEDS AND DISBURSEMENTS 1 FOR THE YEAR ENDED DECEMBER 31, 2018 (in US Dollars)_____________________________ ) Notes For the year Cumulative For the year Cumulative 」 ended ended December 31, December 31, ] 2018 2017 Opening balance 1 Funds received 1 Advance: No. TFOA 4872 4 108,520 390,000 281,480 281,480 OSHC "Barki Tojik" 3 contribution 4 - и Total funds received 108,520 390,000 281,480 281,480 Project expenses 3 Part 1. Goods, Works, Non- Consulting Services, J Consultants' Services, Training and Incremental Operating ] Costs 5 108,520 390,000 281,480 281 480 Part 2. Unallocated 5 - п Total project expenses 108,520 390,000 281,480 281,480 :] Closing balance - ) :〕 June 13,2019 Dushanbe, Republic of Tajikistan The notes on pages 8-12 form an integral part of the special purpose project financial statements. The Independent Auditors9 Report is on pages 3-5 J 6 OPEN STOCK HOLDING COMPANY “BARQI TOJIK” PROJECT IMPLEMENTATION UNIT NUREK HYDROPOWER REHABILITATION PROJECT, PHASE I ADVANCE NO. TFOA 4872 STATEMENT OF FUNDS BY PROJECT COMPONENTS FOR THE YEAR ENDED DECEMBER 31, 2018 (in US Dollars)_____________________________________ For the year Cumulative For the year Cumulative ended ended December 31, December 31, 2018 2017 Part 1. Goods, Works, Non-Consulting Services, Consultants' Services, Training and Incremental Operating Costs Consultants' Services 108,520 354,133 245,613 245,613 Training ■ 35,867 35,867 35,867 Part 2. Unallocated Unallocated 108,520 390,000 281,480 281,480 Dus dov A. Chi tant Head of РШ June 13,2019 Dushanbe, Republic of Tajikistan The notes on pages 8-12 form an integral part of the special purpose project financial statements. The Independent Auditors5 Report is on pages 3-5 ОРЕМ STOCK HOLDING COMPANY “BARQI TOJ!K ，， PROJECT IMPLEMENTATION UNIT NUREK HYDROPOWER REHABILITATION PROJECT, PHASE I ADVANCE NO. TFOA 4872 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 ,201 8 (in US Dollars)_______________________________________________________________________________ 1. GENERAL INFORMATION According to the Agreement between the Republic of Tajikistan and International Bank for Reconstruction and Development / International Development Association (the “World Bank”） dated July 31, 2015, the World Bank provided an Advance No. TF0A4872 in the amount of 400,000 US Dollars to the Republic of Tajikistan. c The Advance was provided for the cNurek Hydropower Rehabilitation Project, Phase Iм (the “Project”). The objectives of the First Phase of Nurek Hydropower Rehabilitation Project for Tajikistan are to rehabilitate and restore the generating capacity of three power generating units of Nurek hydropower plant, improve their efficiency, and strengthen the safety of the Nurek dam. Project purpose The Activities for which the Advance is provided consist of the following: The purpose of the project is to assist in the preparation and improving availability First Phase of Nurek HPP Rehabilitation ( "FPNHPPR"); and capacity building of Barki Tojik, Nurek HPP and Ministry of Energy and Water Resources (£ (MEWR5 5) in project management, contract management, security measures and the implementation of complex projects. Project management 4 The project is implemented by the Project Implementation Unit at the OSHC