KORPORATA ELEKTROENERGJITIKE SHQIPTARE SH.A. KESH ...
Transcript of KORPORATA ELEKTROENERGJITIKE SHQIPTARE SH.A. KESH ...
KORPORATA ELEKTROENERGJITIKE
SHQIPTARE SH.A. – KESH
CONSOLIDATED FINANCIAL STATEMENTS
As at 31 December 2015
(with independent auditors’ report thereon)
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Contents
Page
Independent Auditors’ Report i-iv
Consolidated Financial Statements:
Consolidated Statement of Financial Position 1
Consolidated Statement of Profit or Loss and Other Comprehensive Income 2
Consolidated Statement of Changes in Equity 3
Consolidated Statement of Cash Flows 4
Notes to the Consolidated Financial Statements 5-34
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SH.A. -KESH
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31
December
(All Amounts are expressed in ‘000 LEK, unless otherwise stated)
2
The notes on pages 5 to 34 are an integral part of these consolidated financial statements.
Notes 2015
2014
Restated
Revenue 16 19,313,241 10,831,993
Other operating income 17 337,973 4,920,303
Raw materials and consumables used (92,816) (106,162)
Gross profit 19,558,398 15,646,134
Purchased energy 18 (10,546,322) (9,836,700)
Employee benefit expenses 19 (1,048,301) (1,031,550)
Depreciation and amortization 6 (2,363,705) (1,935,724)
Impairment loss 5.2.1 (495,469) (19,642,679)
Impairment losses on property, plant and
equipment 6
(313,040) -
Other expenses 20 (1,291,336) (1,487,247)
Results from operating activities 3,500,225 (18,287,766)
Finance income 21 483,481 339,908
Finance costs 21 (2,537,714) (4,187,575)
Net finance costs (2,054,233) (3,847,667)
Profit/(loss) before tax 1,445,992 (22,135,433)
Income tax expense 22 (648,946) (105,229)
Net profit/ (loss) for the year 797,046 (22,240,662)
Other comprehensive income for the year
Items that are not reclassified to profit or loss
Revaluation of property and equipment 6 12,774,034 -
12,774,034 -
Total comprehensive income/(loss) for the year 13,571,080 (22,240,662)
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SH.A. -KESH
Consolidated Statement of Changes in Equity for the year ended 31 December
(Amounts in Lek thousand, unless otherwise stated)
3
Note
Share
Capital
Unregistered
capital
Legal
reserves
Other
reserves
Accumulated
losses Total
Balance at 1 January 2014, as previously
reported 20,040,097 (4,000) 2,022,217 52,003,121 12,700,040 86,761,475
Impact of change in accounting policy 26 - - - (2,332,582) 2,332,582 -
Impact of correction of errors 26 - - - - (754,374) (754,374)
Restated balance at 1 January 2014 20,040,097 (4,000) 2,022,217 49,670,539 14,278,248 86,007,101
Total comprehensive income for the year
(restated)
Loss for the yearTotal comprehensive income
for the year (restated)
- - - - (22,240,662) (22,240,662)
Transactions with owners
Appropriation of retained earnings - - 635,002 10,795,034 (11,430,036) -
Dividend paid 11.2 - - - - (1,270,004) (1,270,004)
Total transactions with owners - - 635,002 10,795,034 (12,700,040) (1,270,004)
Transfer of revaluation reserve - - - (788,861) 788,861 -
Restated balance at 31 December 2014 20,040,097 (4,000) 2,657,219 59,676,712 (19,873,593) 62,496,435
Total comprehensive income for the year
Profit for the year - - - - 797,046 797,046
Revaluation of property, plant and equipment 6 - - - 12,774,034 - 12,774,034
Total comprehensive income for the year - - - 12,774,034 797,046 13,571,080
Transactions with owners
Increase in share capital 11.1 134,125 - - - - 134,125
Dividend paid 11.2 - - - - - -
Total transactions with owners 134,125 - - - - 134,125
Transfer of revaluation reserve - - - (1,214,172) 1,214,172 -
Balance as at 31 December 2015 20,174,222 (4,000) 2,657,219 71,236,574 (17,862,375) 76,201,640
The notes on pages 5 to 34 are an integral part of these consolidated financial statements.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SH.A. -KESH
Consolidated Statement of Cash Flows for the year ended 31 December
(Amounts in Lek thousand, unless otherwise stated)
4
The notes on pages 5 to 34 are an integral part of these consolidated financial statements.
Notes 2015 2014
Cash flows from operating activities
Profit/(loss) before tax 1,445,992 (22,135,433)
Adjustments for:
- Depreciation and amortization 6 2,363,705 1,935,724
- Impairment loss on trade receivables 9 495,469 19,653,430
- Impairment losses on property, plant and equipment 313,040 -
- Income from subsidies and grants 17 (6,260) (4,488)
- Interest income 21 (286,968) (339,908)
- Interest expense 21 2,222,655 2,579,445
- Change in fair value of borrowings 21 (196,513) 1,025,897
Change in:
- Inventories (61,962) 65,231
- Trade and other receivables (547,687) (9,516,440)
- Trade and other payables (3,104,282) 3,532,997
2,637,189 (3,203,545)
Proceeds from grants, net - 7,624
Interest paid (1,635,756) (2,241,431)
Income tax paid (208,211) (208,773)
Net cash from/(used in) operating activities 793,222 (5,646,125)
Cash flows from investing activities
Purchase of property, plant and equipment (2,247,843) (2,668,373)
Loans granted to third parties, net 1,284,410 490,595
Interest received 357,410 100,491
Net cash used in investing activities (606,023) (2,077,287)
Cash flows from financing activities
Proceeds from borrowings, net 1,277,786 3,479,899
Net cash from financing activities 1,277,786 3,479,899
Net increase/(decrease) in cash and cash equivalents 1,464,985 (4,243,513)
Cash and cash equivalents at 1 January (33,157,194) (28,913,681)
Cash and cash equivalents at 31 December 10 (31,692,209) (33,157,194)
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
5
1. Reporting entity
Korporata Elektroenergjitike Shqiptare – KESH Sha and its subsidiaries (“KESH” or “the Group”) is a
Joint Stock Company established in the Republic of Albania. The Group was registered on 31 December
1994 based on Decision No. 74 of the Ministry of Finance, dated 2 November 1995. The Ministry of
Economic Development, Trade and Entrepreneurship of the Republic of Albania wholly owns the KESH’s
share capital as at 31 December 2015.
As at 31 December 2015, the Group owned the share capital of its subsidiaries, “KESH Security SHRSF”
Sha (“KESH Security”) and “Termocentrali Vlorë” Sha (“TEC Vlorë”). KESH Security was incorporated
on 7 April 2008 based on the Decision No. 14 of the Supervisory Council of the Group and is involved in
providing security services to the Group. Based on the Decision No. 15, dated 28 September 2015 of the
Supervisory Council of the Group and decision No. 2 of the General Assembly of Shareholders’, it was
decided to start the liquidation of KESH Security. The subsidiary is not material to the consolidated
financial statements of the Group.
TEC Vlorë was registered based on Court Decision No. 3862, dated 18 June 2007 as an entity which was
wholly controlled by KESH Sh.a. The main activity of TEC Vlorë is the generation of electricity from a
Thermo power plant (“TPP”). The Group completed the construction of the TPP in 2012 and since then,
the TPP has never been in a production phase due to a defect in the cooling system which requires additional
investment to be repaired.
Additionally, based on the law No. 43/2015, dated 30 April 2015 (the ”Law”), and the Decision No. 244,
dated 30 March 2016, of the Council of Ministers, KESH will exercise the power generation role and is
expected to bear the public service responsibility supplying the Universal Service Provider with the energy
provided from the generating units located on the Drin river cascade, according to a rational regime of
utilisation of generating capacities and the historical average production level, to meet the demand of end
tariff consumers subject to the Universal Service Supply.
As a result of the transitory period until the approval of the bylaws and regulations necessary for the
implementation of the Law, KESH complied for year ended 31 December 2015 and the first half of 2016
with the market model rules which were in force before the issuance of the Law, as required by clauses 4
and 5 of article 109 of the Law.
KESH currently consists of KESH Security, TEC Vlorë, the headquarters unit and three hydroelectric
generation units located on the Drini river cascade. The Group is domiciled in Albania. The address of its
registered office is in Blloku Vasil Shanto, P.O. Box 259/1, Tirana, Albania.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs).
Details of the Group’s accounting policies, including changes during the year, are included in Note 4.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the
property, plant and equipment and borrowings, which are revalued at fair value.
(c) Changes in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies set out in Note 4
to all periods presented in these consolidated financial statements.
The Group previously transferred the revaluation reserve of property, plant and equipment to retained
earnings on ultimate disposal of corresponding assets. During 2015 the Group changed the accounting
policy by transferring the revaluation reserve to retained earnings as the asset is used.
The Group has applied this change in accounting policy retrospectively and restated the comparative period
as at 1 January 2014 to reflect the transferred surplus amount. The summarized impacts on the Group’s
consolidated financial statements are presented in Note 26.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
6
2 Basis of preparation (continued)
(d) Functional and presentation currency
These consolidated financial statements are presented in Albanian Lek (Lek), which is the Group’s functional
currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
3. Use of estimates and judgments
In preparing these consolidated financial statements, management has made judgements, estimates and
assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognized prospectively.
(a) Judgments
The Group has elected to measure property, plant and equipment and borrowings at fair value. Further
information about judgments made in applying accounting policies that have the most significant effects
on the amounts recognized in the consolidated financial statements is included in accounting policy 4 (e).
(b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a
material adjustment in the following periods is included in the following notes:
Note 4.j and 6.i – impairment test: key assumptions underlying recoverable amounts;
Note 5.1.1: Financial instruments measured at fair value;
Note 6: Fair Value measurement of non-financial assets;
Note 4.k and 5.2.1: Impairment policy and the write-off policy for financial assets; and
Note 22: Tax exposures.
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Group has engaged independent appraisers to determine significant fair value measurements, including
Level 3 fair values of non-financial assets. The Management assesses the evidence obtained from third
parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in
the fair value hierarchy in which such valuations should be classified. The fair value of financial instruments
that are not traded in an active market is determined by using valuation techniques. The Group uses its
judgment to select a variety of methods and make assumptions that are mainly based on market conditions
existing at each reporting date. The Group uses discounted cash flow analysis for financial assets and
liabilities that were not traded in active markets. When measuring the fair value of an asset or a liability,
the Group uses observable market data as far as possible. Fair values are categorized into different levels
in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period
during which the change has occurred. Further information about the assumptions made in measuring fair
values is included in Notes 5.1 and 6.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
7
4. Significant accounting policies
Except for the changes described in Note 2(b) the Group has consistently applied the following accounting
policies to all periods presented in these consolidated financial statements.
Certain comparative amounts in the consolidated statement of financial position have been reclassified or
represented, either as a result of a change in accounting policy (see Note 2 (b)) or the impact of correction
of errors in the prior years (see Note 26).
a. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The consolidated financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control commences until the date on which control
ceases.
(ii) Transaction eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group
transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are
eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of
impairment.
b. Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies at exchange rates at
the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated
to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that
are measured at fair value in a foreign currency are translated to the functional currency at the exchange
rate when the fair value was determined. Foreign currency differences are generally recognized in profit or
loss. Non-monetary items that are measured based on historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
c. Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the
first-in, first-out method, and includes expenditure incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing them to their existing location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses.
d. Intangible assets
Intangible assets acquired by the Group are stated at cost less accumulated amortization and accumulated
impairment losses. Subsequent expenditure on intangible assets is capitalized only when it increases the
future economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of
intangible assets. The estimated useful life is 5 years.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
8
4. Significant accounting policies (continued)
e. Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are stated in the consolidated statement of financial position at their
revalued amounts, being the fair value at the date of revaluation, less accumulated depreciation and any
subsequent accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the carrying amounts do not differ
significantly from those that would be determined using fair values at the end of each reporting period.
Any surplus arising on the revaluation is recognized in Other Comprehensive Income (‘OCI’) except to the
extent that the surplus reverses a previous revaluation deficit on the same asset recognized in profit or loss,
in which case the credit to that extent is recognized in profit or loss. Any deficit on revaluation is recognized
in profit or loss except to the extent that it reverses a previous revaluation surplus on the same asset, in which
case the debit to that extent is recognized in OCI. Therefore, revaluation increases and decreases cannot be
offset, even within a class of assets. The revaluation reserve is included in other reserves (Note 11.4) and is
transferred to retained earnings as the corresponding assets are used.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
Constructions in process are carried at cost, less any recognized impairment loss (if any) and are classified
to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Cost includes all the expenditure directly attributable to the acquisition of the asset. This expenditure
includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the
Group's accounting policy.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated
with the expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the revalued amounts of items of property, plant and equipment less
their estimated residual values using the straight-line method over their estimated useful lives, and is
recognized in profit or loss.
The estimated useful lives of property, plant and equipment for current and comparative periods are as
follows:
Buildings 8 - 100 years
Machinery and equipment 5 - 80 years
Transport vehicles 5 - 15 years
Furniture, fittings and equipment 2 – 4 years
Land and construction in process are not depreciated.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
9
4. Significant accounting policies (continued)
f. Financial instruments
Non-derivative financial assets
The Group initially recognizes financial, trade and other receivables and deposits on the date that they are
originated. All other financial assets are recognized initially on the trade date at which the Group becomes
a party to the contractual provisions of the instrument.
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any
interest in transferred financial assets that is created or retained by the Group is recognized as a separate
asset or liability.
Financial assets and liabilities are offset and the net amount is presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to settle
on a net basis or to realize the asset and settle the liability simultaneously.
Financial, trade and other receivables
Financial, trade and other receivables are financial assets with fixed or determinable payments that are not
quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition trade and other receivables are measured at amortized
cost using the effective interest method, less any impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months
or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash
management are included as a component of cash and cash equivalents for the purpose of the statement of
cash flows.
Non-derivative financial liabilities
The Group initially recognizes financial liabilities on the trade date at which the Group becomes a party to
the contractual provisions of the instrument.
The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled
or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net
basis or to realize the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: borrowings, and trade and other payables.
Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition trade and other payables are measured at amortized cost using the
effective interest method, whereas borrowings are measured at fair value with changes in fair value
recognized in profit or loss.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
10
4. Significant accounting policies (continued)
g. Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance cost.
h. Grants
Grants are recognized initially as deferred income when there is reasonable assurance that they will be
received and that the Group will comply with the conditions associated with the grant. Grants that
compensate the Group for expenses incurred are recognized in profit or loss on a systematic basis in the
same periods in which the expenses are recognized. Grants that compensate the Group for the cost of an
asset are recognized in profit or loss on a systematic basis over the useful life of the asset.
i. Share capital and dividends
Share capital
Ordinary shares are classified as equity. The share capital is recognized at par value.
Dividends
Dividend distribution to the Group’s shareholder is recognized as a liability in the Group’s consolidated
financial statements in the period in which the dividends are approved by the Group’s shareholder.
j. Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets
are reviewed at each reporting date to determine whether there is any indication of impairment. If such
indication exists, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-
generating unit, or ‘CGU’).
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated
recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in
respect of CGUs are allocated to reduce the carrying amounts of the assets in the unit (group of units) on a
pro rata basis.
Impairment losses are assessed at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortization,
if no impairment loss had been recognized.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
11
4. Significant accounting policies (continued)
k. Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy.
The Group considers evidence of impairment for receivables at both a specific asset and collective level.
All individually significant receivables are assessed for specific impairment. All individually significant
receivables found not to be specifically impaired are then collectively assessed for any impairment that has
been incurred but not yet identified. Receivables that are not individually significant are collectively
assessed for impairment by grouping together receivables with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or less than suggested
by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the
asset's original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance
account against receivables. When a subsequent event causes the amount of impairment loss to decrease,
the decrease in impairment loss is reversed through profit or loss.
l. Revenue recognition
The Group is involved in the sale of electricity as well as in performing related services.
Revenue from sales of electricity to the Distribution System Operator (“OSHEE”) is recognized based on
the actual quantity of energy delivered, measured at the delivery point and, deducting transmission losses.
Revenue represents the value of fixed or determinable consideration that has been received or is receivable.
Revenue is stated at amounts invoiced to customers and excludes value added tax, returns, rebates and
discounts.
m. Finance income and expenses
Finance income comprises interest income on funds invested and net foreign exchange gains. Interest
income is recognized as it accrues in profit or loss, using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
Finance costs comprise interest expense on borrowings and are recognized in profit or loss using the
effective interest method.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
12
4. Significant accounting policies (continued)
n. Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in
profit or loss except to the extent that it relates to items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years. Deferred tax is recognized in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for temporary differences on the initial recognition of assets or liabilities in
a transaction that is not a business combination and that affects neither accounting, nor taxable profit or
loss.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the
Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or
on different tax entities, and they intend to settle current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realized simultaneously.
Additional taxes that arise from the distribution of dividends by the Group are recognized at the same time
as the liability to pay the related dividend is recognized.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences
to the extent that it is probable that future taxable profits will be available against which it can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
o. Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
p. Employee benefits
Social, pension and health funds
The Group is obliged by the current Albanian legislation to make fixed contributions on behalf of the
employees in a social fund operated by the Government. All payments/liabilities are recognized as an
expense in the period to which they relate.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of
those benefits and when the Group recognizes costs for a restructuring. If benefits are not expected to be
settled wholly within 12 months of the reporting date, then they are discounted.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
13
4. Significant accounting policies (continued)
q. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not yet effective for the year
ended 31 December 2015, and have not been early applied in preparing these consolidated financial
statements. Those that may be relevant to the Group are set out below:
IFRS 15 Revenue from Contracts with Customers
IFRS 15, Revenue from Contracts with Customers (effective for the periods beginning on or after 1 January
2017, with early adoption permitted). It replaces existing revenue recognition guidance standard, including
IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The new
standard introduces the core principle that revenue must be recognised when the goods or services are
transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must
be separately recognised, and any discounts or rebates on the contract price must generally be allocated to
the separate elements. When the consideration varies for any reason, minimum amounts must be recognised
if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be
capitalised and amortised over the period when the benefits of the contract are consumed. The Group is
assessing the potential impact on its consolidated financial statements resulting from application of IFRS
15.
IFRS 9 Financial Instruments
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of
financial instruments, including a new expected credit loss model for calculation impairment on financial
assets, and the new general hedge accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting
periods beginning on or after 1 January 2018, with early adoption permitted. The Group has started the
process of evaluating the potential impact on its consolidated financial statements resulting from the
application of IFRS 9.
The following new or amended standards are not expected to have a significant impact on the Group’s
consolidated financial statements:
Effective for annual reporting periods beginning on or after 1 January 2016
IFRS 14 Regulatory Deferral Accounts
Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations
Amendments to IFRS 10, 12 and IAS 28: Investment entities- applying the consolidation exception
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and
Amortisation
Amendments to IAS 1: Disclosure initiative
Amendments to IAS 16 and IAS 41: Bearer Plants
Amendments to IAS 19: Defined Benefit Plans: Employee Contributions
Amendments to IAS 27: Equity method in separate financial statements;
Effective for annual reporting periods beginning on or after 1 January 2017
Amendments to IAS 7: Disclosure Initiative
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
Effective for annual reporting periods beginning on or after 1 January 2019
IFRS 16 Leases
The effective date has not yet been determined, but early adoption is permitted for:
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets between an investor and its associate
or joint venture.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
14
5. Financial instruments - Fair values and risk management
5.1 Accounting, classifications and fair values
The Group has not disclosed the fair values for financial instruments such as short-term trade receivables
and payables, because their carrying amounts are a reasonable approximation of fair values.
5.1.1 Financial instruments measured at fair value
The Group is a party to long-term borrowings measured at fair value through profit or loss and management
has performed analysis to determine their fair values. The following table shows the carrying amounts and
fair values of long-term borrowings as at 31 December 2015 and 2014:
31 December 2015 31 December 2014
Carrying
amount
Fair value
(level 3)
Carrying
amount
Fair value
(level 3)
Non-current borrowings (Note 12) 31,346,020 31,346,020 34,236,324 34,236,324
The fair value is estimated as the present value of future cash flows, discounted at the interest rates for
similar borrowings at the reporting date. The interest rates used to discount future cash flows at 31
December 2015, are in the range of 2.51% to 4.27% (2014: 3.14% and 3.73%).
Management concluded that there is no publicly available market data that can be used without significant
adjustments in determining the appropriate fair values of the long-term borrowings. A number of risks and
circumstances influence the determination of the fair values of these financial instruments, including the
amount of the financial instrument, maturity, credit rating, type of interest, currency, purpose of the loan,
guarantees, the economic environment in which the parties to the financial instruments operate, and own
risk of nonperformance.
Due to the lack of directly observable market data related to the risks and circumstances of these financial
instruments, the fair values above can only be regarded as reasonable approximations to the fair values and
meet the criteria for classification in the third level of the fair value hierarchy. Although the Group considers
that the estimated fair values are correct, the use of different methodologies and assumptions may result in
different fair values.
5.1.2 Financial instruments not measured at fair value
The fair value of cash and cash equivalents, trade and other receivables and payables is deemed to
approximate their carrying amount as they are short-term non-interest bearing instruments.
The fair value of long-term financial receivables is determined using valuation techniques. The fair value
is estimated as the present value of future cash flows, discounted at the market interest rate at the reporting
date. The Group is in the process of calculating the fair value of these financial instruments, however, at
the date of the approval of these consolidated financial statements such calculations were not finalized.
5.2 Financial risk management
The Group has exposure to the following risks arising from financial instruments:
credit risk;
market risk; and
liquidity risk.
The risk management function within the Group is carried out in respect of financial risks (credit, market,
currency, liquidity and interest rate), operational risks (such as environmental risk) and legal risks. The
primary objectives of the financial risk management function are to establish risk limits, and then ensure
that exposure to risks stays within these limits. The operational and legal risk management functions are
intended to ensure proper functioning of internal policies and procedures to minimize operational and legal
risks.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
15
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
Current developments
The Group management performs regular monitoring over all positions of assets and liabilities, income
and expenses, as well as the international markets developments. Based on this, the management analyses
profitability, liquidity and the cost of funds and seeks to implement adequate measures in respect to credit,
market (primarily energy prices and interest rate) and liquidity risk, thus limiting the possible negative
effects from external uncertainties. In this way the Group responds to the challenges of the market
environment, maintaining a stable capital.
5.2.1 Credit risk
The Group is exposed to credit risk, which is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation. The main exposure of the Group to
credit risk arises due to financial, trade and other receivables.
The Group’s maximum exposure to credit risk by category of financial instrument and by counterparty is
as follows:
2015
Cash and cash
equivalents
Trade and
other
receivables
Financial
receivables Total
Cash at banks and in transit (Note 10) 1,260,073 - - 1,260,073
OSHEE (state-controlled) - 51,201,445 11,225,370 62,426,815
OST (state-controlled) - 801,730 10,240,603 11,042,333
Employees - 39,469 15,976 55,445
Other entities - 1,520,129 608,482 2,128,611
Total maximum exposure to credit risk 1,260,073 53,562,773 22,090,431 76,913,277
2014
Cash and cash
equivalents
Trade and
other
receivables
Financial
receivables Total
Cash at banks and in transit (Note 10) 854,077 - - 854,077
OSHEE (state-controlled) - 58,433,053 10,887,537 69,320,590
OST (state-controlled) - 587,072 12,456,639 13,043,711
Employees - 37,913 23,203 61,116
Other entities - 2,292,171 934,144 3,226,315
Total maximum exposure to credit risk 854,077 61,350,209 24,301,523 86,505,809
Credit risk management
The Group is exposed to credit risks in its daily business, because it is possible that its counterparty will
fail to meet their financial obligations. The credit risk arising from financial receivables related to funds
originally borrowed from the Group from various institutions (Note 7) is managed and monitored on the
basis of sub-lending agreements with the beneficiaries of the projects financed with these funds. These
projects include conditions and capital commitments which help the Group in the monitoring and
minimization of the credit risk. These commitments are analyzed and monitored on a regular basis as
required from the original borrowing contract.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
16
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
5.2.1 Credit risk (continued)
Credit risks concentration
The Group is exposed to concentrations of credit risk. The management monitors the concentration of
credit risk but encounters difficulties in applying best practice management policies on the Group’s
exposure to such risk due to lack of diversification of the clients’ portfolio. Under the current market
model, the Group is obliged to supply OSHEE with the energy necessary to meet the demand of end
tariff consumers. Under such circumstances, the diversification measures are difficult to apply and
OSHEE represents the main concentration.
At 31 December 2015 the balances receivable from OSHEE, represent 81% of the total maximum
exposure to credit risk (2014: 80%).
Impairment
At 31 December 2015 and 2014, the ageing of financial, trade and other receivables that were not
impaired was as follows: 2015 2014
Trade and
other
receivables
Financial
receivables Total
Trade and
other
receivables
Financial
receivables Total
Not past due 2,921,184 22,090,431 25,011,615 1,950,563 24,301,523 26,252,086
Past due but not
impaired 50,641,589 - 50,641,589 59,399,646 - 59,399,646
- Up to 6 months 7,466,685 - 7,466,685 4,498,896 - 4,498,896
- 6-12 months 5,847,501 - 5,847,501 3,206,669 - 3,206,669
- More than 12 months 37,327,403 - 37,327,403 51,694,081 - 51,694,081
53,562,773 22,090,431 75,653,204 61,350,209 24,301,523 85,651,732
Past due but not impaired receivables at 31 December 2015 and 2014, relate mainly to amounts
receivable from OSHEE, a state-owned entity, for sales made in 2015 and in previous years. Certain
actions were taken by OSHEE and the Albanian Government to improve the collection rates and reduce
losses in the distribution network. Management expects the improved performance of OSHEE and the
involvement of the Government, in its capacity as owner of both entities to continue in 2016, resulting
in an increased collection of the amounts due. Furthermore, based on a loan agreement signed by the
Albanian Government and IBRD, OSHEE opened a Revenue Escrow Account to deposit monthly
revenues, to pay for purchased energy in accordance with an agreed schedule. While the minimum
monthly payment is defined in such schedule, OSHEE has the obligation to fully repay amounts due to
the Group. The greatest uncertainty in estimating the impairment allowance is the time when the old
receivables that are due from more than one year will be repaid. The Group believes that the data
available continues to indicate that its exposure to OSHEE was not impaired at 31 December 2015.
Receivables for which the Group determines that it is probable that it will be unable to collect all
amounts due according to the contractual terms of the agreement(s) are impaired.
The Group establishes an allowance for impairment losses that represents its estimate of incurred losses
in its portfolio. The main components of this allowance are a specific loss component that relates to
individually significant exposures, and a collective loss allowance established by the Group for
homogeneous assets in respect of losses that have been incurred but have not been identified on
receivables subject to individual assessment for impairment.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
17
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
5.2.1 Credit risk (continued)
Impairment (continued)
The movements in the allowance for impairment in respect of trade and other receivables during the
year was as follows:
2015 2014
Balance at 1 January 42,735,534 23,092,854
Impairment loss recognised:
Households - 17,574,517
Excise tax receivable 495,469 -
Other trade receivables - 24,452
Receivables related to SHKEE - 862,121
Receivables related Jacobsen case - 168,173
Other receivables - 1,013,417
495,469 19,642,680
Balance at 31 December 43,231,003 42,735,534
At 31 December 2015 and 2014, an impairment allowance of Lek 40,667,371 thousand related to
receivable balances from household customers for unpaid electricity bills originating before the spin-
off from KESH of OSHEE, which the Group does not expect to collect. The remainder of impairment
allowance as at 31 December 2015 and 2014 is related to several long-standing receivable balances
with no indication of being collected.
Write-off policy
The Group writes off a receivable balance (and any related allowances for impairment losses) when the
management determines that the receivables are uncollectible. This determination is reached after
considering information such as significant efforts have been taken to recover the amount, and there
are no other possibilities for the collection of the outstanding balances.
5.2.2 Market risk
Market risk is the risk of loss that results from changes in domestic market prices (electricity sale prices),
foreign exchange rates, interest rates and equity prices. The level of market risk to which the Group is
exposed at a point in time varies depending on market conditions, expectations of future price or market
rate movements and the composition of the Group’s physical asset and contract portfolios.
Currency risk
Exchange rate risk derives from the fact that the Group’s revenues and most of its loans and receivables
are denominated in LEK, while a substantial part of the Group’s borrowings and trade payables for
imports of energy are denominated in foreign currencies (including EUR, USD, CHF, YEN, and KRW).
The risk is that the functional currency value of cash flows arising from repayment of borrowings and
related interest and from payments for imports of energy will vary as a result of movements in exchange
rates, which may significantly impact the profit of the Group.
For the purpose of optimizing financing costs, in certain cases, the Group has borrowed funds in foreign
currencies, mainly in USD, EUR and YEN.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
18
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
5.2.2 Market risk (continued)
Currency risk (continued)
The table below includes only monetary assets and liabilities and summarizes the Group’s exposure to
foreign currency exchange rate risk at the reporting date:
2015 2014
Monetary financial
assets
Monetary financial liabilities
Net balance position
Monetary financial
assets
Monetary financial liabilities
Net balance position
Lek 50,497,085 (48,660,224) 1,836,861 53,299,134 (51,314,010) 1,985,124
EUR 16,975,486 (33,118,276) (16,142,790) 23,895,653 (40,021,812) (16,126,159)
USD 1,799,342 (6,178,281) (4,378,939) 1,695,796 (6,290,824) (4,595,028)
KRW 2,714,241 (2,455,618) 258,623 2,815,969 (2,502,575) 313,394
CHF 1,124,312 (3,032,877) (1,908,565) 1,304,559 (2,845,706) (1,541,147)
YEN 2,870,803 (2,817,710) 53,093 2,614,752 (3,362,722) (747,970)
XDR 932,008 - 932,008 879,946 - 879,946
Total 76,913,277 (96,262,986) (19,349,709) 86,505,809 (106,337,649) (19,831,840)
The significant exchange rates used to translate the monetary assets and liabilities denominated in foreign
currencies at 31 December 2015 and 2014 are as follows:
In Lek: 2015 2014
EUR 137.28 140.14
USD 125.79 115.23
CHF 126.74 116.52
100 YEN 104.50 96.49
The management of currency risk is supplemented by monitoring the sensitivity of the Group’s financial
assets and liabilities to various standard and non-standard foreign exchange rate scenarios. Standard
scenarios that are considered on a regular basis include a 100 basis point (bp) parallel fall or rise in all
exchange rates.
An analysis of the Group’s sensitivity to an increase or decrease in the value of Lek against foreign
currencies (assuming no asymmetrical movement and a constant statement of financial position) is as
follows:
2015 2014
100 bp 100 bp 100 bp 100 bp
increase decrease increase Decrease
Estimated Profit (loss) effect (211,866) 211,866 (218,170) 218,170
Interest rate risk
In the normal course of business the Group borrows to finance its operations. The Group is exposed to
interest rate risk because the fair value of fixed rate borrowings and the cash flows associated with floating
rate borrowings will fluctuate with changes in interest rates. Note 12 details the interest rates on the
Group’s borrowings.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
19
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
5.2.2 Market risk (continued)
Interest rate risk (continued)
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the
management of the Group is as follows:
2015 2014
Fixed-rate instruments
Borrowings (31,319,552) (65,954,128)
Total fixed-rate instruments (31,319,552) (65,954,128)
Variable-rate instruments
Financial receivables 22,090,431 24,301,523
Borrowings (44,166,949) (17,668,375)
Total variable-rate instruments (22,076,518) 6,633,148
A reasonable possible change of 100 basis points in interest rates at the reporting date would have
increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all
variables, in particular foreign currency exchange rates, remain constant.
2015 2014
100 bp 100 bp 100 bp 100 bp
increase Decrease increase Decrease
Estimated Profit (loss) effect (220,765) 220,765 66,331 (66,331)
Other market price risk – energy prices
Under the current market model, the Group exercises both functions of Power Generation and Wholesale
Public Supplier (“WPS”). In its role of WPS, the Group is required to supply OSHEE with the quantity
of energy that is necessary to meet the end tariff customers’ demand, at prices regulated by the Albanian
Energy Regulatory Entity (“ERE”), giving rise to price risk. The wholesale price approved by ERE
during 2015 was Lek 3.0 per kWh (2014: Lek 2.20 per kWh).
In addition, in its role of WPS the Group is required to acquire the energy produced by local independent
hydropower producers at regulated prices, which gives rise to additional price risk. The prices of energy
sold by local independent hydropower producers as approved by ERE during 2015 varied between Lek
7.64 per kWh to Lek 8.32 per KWh (2014: Lek 7.77 per kWh to Lek 9.30 per kWh).
As the Group is unable to meet the demand for electricity in Albania with own production from its
hydropower plants, it is dependent on the wholesale local and regional energy markets for electricity
prices, which have been volatile in recent years. The outlook for 2016 continued to be difficult to predict
due in part to the uncertain economic environment and the impact of geopolitical events. The price of
electricity in the local markets is particularly important to the Group given that it sells only electricity.
To manage this risk, the Group optimises its asset and contract portfolio through an approach based on
extensive analysis of supply and demand position and continuous assessment of the local markets in
which it operate. The policy is not to hedge a proportion of the exposure.
The Group is exposed to energy price risk in its energy procurement and downstream activities because
the cost of procuring electricity to serve its downstream customers varies with wholesale commodity
prices. The risk is primarily that market prices for energy will fluctuate between the time that sales prices
are fixed or tariffs are set and the time at which the corresponding procurement cost is fixed, thereby
potentially reducing expected margins or making sales unprofitable.
The climate instability as well as the hydrological risk inherent with KESH operations, particularly with
the uncertainties of future generation regimes and the possibility to trade any surplus energy, hampers
the calculation of reliable forecasts to support investment decisions leading to potentially lower than
expected returns.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
20
5. Financial Instruments - Fair values and risk management (continued)
5.2 Financial risk management (continued)
5.2.3 Liquidity risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities. The Group is exposed to daily calls on its available cash resources,
mainly in order to settle its operating expenses incurred on its ordinary activity as well as to repay its
debt. On the other hand, the Group faces substantial delays in settlement of credit sales made to OSHEE.
Management monitors monthly rolling forecasts of the Group’s cash flows. Additionally, during 2015
the Group has prepared a schedule for the restructuring of its bank overdrafts for the purpose of
optimizing liquidity risk management.
The process of liquidity management adopted by the management includes setting limits to units for
expenditures related to daily activities such as services, supplies, investments, deferring suppliers’
payments, rescheduling agreements between parties, scheduling debt payments and ensuring they are
covered.
The table below shows the remaining contractual maturities of financial liabilities at the reporting date
by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual
discounted cash flows. When the amount payable is not fixed, the amount disclosed is determined by
reference to the conditions existing at the reporting date. Foreign currency payments are translated
using the spot exchange rate at the reporting date.
Up to one year One to five
years Over five
years Total
2015
Trade and other payables 19,966,341 - 810,146 20,776,487
Borrowings 44,140,481 15,722,384 15,623,636 75,486,501
Total 64,106,822 15,722,384 16,433,782 96,262,988
Up to one year
One to five
years
Over five
years Total
2014
Trade and other payables 21,905,000 - 810,146 22,715,146
Borrowings 49,386,179 17,794,581 16,441,743 83,622,503
Total 71,291,179 17,794,581 17,251,889 106,337,649
5.3 Management of capital
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for the shareholder and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholder, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This
ratio is calculated as total liabilities divided by total capital under management. The Group considers
total capital under management to be equal to the equity as shown in the consolidated statement of
financial position.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
21
6. Property, Plant and Equipment
Land Buildings
Machinery
and
equipment
Transport
vehicles
Furniture,
fittings and
equipment
Construction
in progress Total
Cost or evaluation
As at 1 January 2014 1,165,632 87,403,309 22,916,361 268,803 88,075 1,569,481 113,411,661
Additions - 29,778 518,402 - 57,695 2,105,694 2,711,569
Disposal - - (69,509) (2,584) (1,483) - (73,576)
As at 31 December 2014 1,165,632 87,433,087 23,365,254 266,219 144,287 3,675,175 116,049,654
Revaluation 01 January 2015 115,509 (346,310) 24,709,471 (167,891) (70,527) - 24,240,252
Additions 57,044 77,081 236,211 134,100 35,825 1,792,534 2,332,795
Disposal - - (881) - (73) - (954)
Transfers - 507,876 (73,598) (1,152) 22,367 (727,660) (272,167)
As at 31 December 2015 1,338,185 87,671,734 48,236,457 231,276 131,879 4,740,049 142,349,580
Accumulated depreciation
As at 1 January 2014 - (27,788,767) (4,708,117) (127,925) (59,077) - (32,683,886)
Charge for the year - (1,013,919) (851,314) (47,725) (22,766) - (1,935,724)
Disposal - - 26,617 1,545 2,231 - 30,393
As at 31 December 2014 - (28,802,686) (5,532,814) (174,105) (79,612) - (34,589,217)
Revaluation 01 January 2015 - (589,713) (11,433,301) 167,393 76,363 - (11,779,258)
Charge for the period - (1,003,579) (1,308,576) (28,520) (23,030) - (2,363,705)
Disposal - - 604 - 20 - 624
Transfer - - 273,455 320 (1,608) - 272,167
As at 31 December 2015 - (30,395,978) (18,000,632) (34,912) (27,867) - (48,459,389)
Carrying amount
As at 1 January 2014 1,165,632 59,614,542 18,208,244 140,878 28,998 1,569,481 80,727,775
As at 31 December 2014 1,165,632 58,630,401 17,832,440 92,114 64,675 3,675,175 81,460,437
As at 31 December 2015 1,338,185 57,275,756 30,235,825 196,364 104,012 4,740,049 93,890,191
If the cost model had been used, the carrying amounts representing the deemed cost upon IFRS transition of property, plant and equipment as at 31 December 2015
would be Lek 38,959 million (2014: Lek 38,089 million). The revalued amounts include a revaluation surplus which is not available for distribution to the shareholder.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
22
6. Property, plant and equipment (continued)
(i) Measurement of fair value - Fair value hierarchy
In 2015, the Group revalued its property, plant and equipment at fair value, which resulted in a net
increase of Lek 12,460,994 thousand composed of a revaluation surplus of Lek 12,774,034 thousand
recognized as an increase in revaluation reserves and a revaluation decrease of Lek 313,040 recognized
as an impairment loss in profit or loss.
Property, plant and equipment related to TEC Vlorë, with a carrying amount of Lek 10,692,163 thousand
as at 31 December 2015 (2014: Lek 11,273,429 thousand), were not part of the revaluation process and
were not revalued during 2015.
The fair value of property, plant and equipment was determined by a group of six external experts
appointed by the Ministry of Economic Development, Tourism, Commerce and Entrepreneurship. The
group of experts comprised three certified real estate property valuers and three certified public
accountants. Their report is dated 25 February 2016, whilst the effective date of revaluation of property,
plant and equipment of the Group was 1 January 2015. The revaluation was performed in accordance
with International Valuation Standards.
Level 3 fair value
The fair values of the Group’s property, plant and equipment are categorized into Level 3 of the fair
value hierarchy. The significant inputs and assumptions are developed in close consultation with
management.
The following table shows the valuation technique used in measuring the fair value of property, plant
and equipment as well as the significant unobservable inputs used.
Assets Valuation technique Significant unobservable inputs
Buildings Depreciated Replacement
Cost:
There is no market or
comparable evidence for these
properties.
Market prices were modified to reflect the
following:
• The level of market transactions when
the market activity is low or the price for
an identical property is difficult to
obtain.
• Specific condition of each property
(construction, position, electrical
installations).
Machinery and
equipment
Depreciated Replacement
Cost:
There is no market or
comparable evidence for these
assets.
The determination of the fair value is
highly subjective, due to the following:
• The price for an identical asset is
difficult to obtain due to lack of market
activity, and the specialized nature of the
assets.
• Specific condition of each asset,
including projected life cycles, which
can change as a result of changes in the
market.
Changes in the assumptions made for these
unobservable inputs, if any, may lead to
significant adjustments in the next
financial year.
Land, transport
vehicles, furniture
fittings and
equipment
Direct Comparison Market prices were modified to reflect the
following:
• The level of market transactions when
the market activity is low or the price for
an identical asset is difficult to obtain.
Specific condition of each asset.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
23
6. Property, plant and equipment (continued)
(ii) Impairment test
As described above, the fair value of the majority of the property, plant and equipment of the Group, due
to their specialized nature, was determined based on the depreciated replacement costs. For this purpose,
the Group carried out an impairment test for its property and equipment which were subject to revaluation
and estimated their recoverable amount as at 1 January 2015. Property, plant and equipment of TEC Vlorë
were not tested for impairment in 2015.
For the purposes of the impairment test management allocated all of the assets being tested to one cash
generating unit (“CGU”) comprised of the three hydropower plants located on the Drini river cascade, as
they use the same water resource and are managed together to optimise total power production.
The recoverable amount was based on value in use, determined by discounting the future cash flows to be
generated from the continuing use of the CGU.
The key assumptions used in the estimation of value in use are set out below:
In percent 2015
Discount rate 7.6
Terminal growth rate 1.0
Budgeted EBITDA annual growth rate (average of next five years) 38.0
The discount rate was a post-tax measure based on the estimated weighted average cost of capital.
The cash flow projections included specific estimates for five years and a terminal growth rate thereafter.
The terminal growth rate was determined based on management’s estimate of the long-term compound
annual EBITDA growth rate within the normal production capacities of the Group.
Projected EBITDA was based on the following key assumptions, which represent management best
estimates and are in accordance with the provisions of the Law No. 43/2015, dated 30 April 2015, “On the
Power Sector” and the Decision No. 244, dated 30 March 2016 of the Council of Ministers on the
establishment of the public service obligation:
Starting from 1 January 2018, the energy generated by KESH will be traded in the free market using
future prices based on current management expectations of the future trend of local and regional energy
market prices ;
Starting from 1 July 2016 the Wholesale Public Supplier function will be transferred to OSHEE and
KESH will not have the obligation to acquire the energy produced by local independent hydropower
producers; and
The production level will be constant and is estimated based on the average long-term historical
production level of the CGU being tested;
The values assigned to the key assumptions represent management’s assessment of the future trend in the
power sector and have been based on historical data and future developments from both external and
internal sources.
The estimated recoverable amount of the CGU exceeded its carrying amount by approximately Lek 76
billion and, as a result no impairment was identified.
(iii) Security
There were no assets pledged as collateral as at 31 December 2015 and 31 December 2014.
(iv) Construction in progress
Construction in progress represents the construction of assets not yet completed for the safeguard of the
hydroelectric plants.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
24
7. Financial receivables
2015 2014
Non-current receivables
Loans to third parties 16,619,549 18,967,445
Loans to employees 8,749 14,999
16,628,298 18,982,444
Current receivables
Loans to third parties 5,454,907 5,310,875
Loans to employees 7,226 8,204
5,462,133 5,319,079
22,090,431 24,301,523
Loans to third parties represent funds originally borrowed by the Group from various institutions and
sub-lent to the following entities:
- Operatori i Sistemit të Transmetimit (“OST”) Sh.a. in the amount of Lek 10,240,603 thousand (2014:
Lek 12,449,050 thousand);
- OSHEE in the amount of Lek 11,225,370 thousand (2014: Lek 10,887,536 thousand);
Loans to OST and OSHEE were sub-lent as a result of their spin-off from KESH and have maturities
and average nominal interest rates which are determined based on the agreements with original
lenders (Note 12); and
- Elektroprivreda Crne Gore AD Nikšić (“EPCG”) in the amount of Lek 608,483 thousand (2014: Lek
941,734 thousand), under the terms of the “Transmission line Tirana-Podgorica” project. The loan
is interest-bearing and yields interest rate of 0.75% per annum for Portion I, EURIBOR+0.65% per
annum for Portion II and a fixed interest rate to be equal to aggregate of KfW effective funding costs
in the Euro capital market for maturities plus a margin of 0.65% per annum. Upon disbursement in
full of the Portion II, KESH has the option to request for the remaining term a change-over from the
variable interest rate to a fixed interest rate.
8. Inventories
2015 2014
Combustibles 1,143,073 1,119,068
Raw and other materials 1,288,478 1,250,521
Total 2,431,551 2,369,589
9. Trade and other receivables
2015 2014
Trade receivables 92,778,563 100,027,717
Other receivables 4,015,213 4,058,026
96,793,776 104,085,743
Allowance for impairment (43,231,003) (42,735,534)
53,562,773 61,350,209
Information about the Group’s exposure to credit and market risks, and impairment losses for trade and
other receivables is included in Note 5.2.1.
During the year ended 31 December 2015 the Group recognized impairment losses of Lek 495,469
thousand (2014: Lek 19,642,680 thousand) in respect of non-recoverable receivable balances (Note
5.2.1).
All of the Group’s receivables are pledged as collateral for borrowings received from banks.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
25
9. Trade receivables and other receivables (continued)
Trade receivables are further detailed as follows:
2015 2014
Trade receivables
Households 40,667,371 40,667,371
OSHEE 51,201,445 58,433,053
OST 801,730 587,072
Other trade receivables 108,017 340,221
92,778,563 100,027,717
Allowance for impairment (40,691,823) (40,691,823)
52,086,740 59,335,894
Other receivables
Receivables related to Shërbimi i Kontrollit të Energjisë
Elektrike (“SHKEE”) 862,121 862,121
Tax Authorities – Excise tax 825,782 825,782
Tax Authorities – Other 330,445 330,445
Receivables related “Jacobsen” case 168,173 168,173
Receivables from employees 39,469 37,913
Other receivables 1,789,223 1,833,592
4,015,213 4,058,026
Allowance for impairment (2,539,180) (2,043,711)
1,476,033 2,014,315
Total 53,562,773 61,350,209
As at 31 December 2014 trade receivables from OSHEE included an amount disputed by the latter of
Lek 19,595,834 thousand representing receivables for certain sales of energy and late payment penalties
which were subsequently reconciled between the parties in 2015 and are considered to be settled in the
near future.
10. Cash and cash equivalents
2015 2014
Cash at banks 1,204,596 832,428
Cash on hand 442 628
Cash in transit 55,035 21,021
Cash and cash equivalents in the statement of financial
position 1,260,073 854,077
Bank overdrafts (32,952,282) (34,011,271)
Cash and cash equivalents in the statement of cash flows (31,692,209) (33,157,194)
Cash in transit consist of certain borrowing disbursements net of repayments made in December 2015
and reflected in the bank accounts of the Group in January 2016.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
26
11. Equity
11.1 Share capital
The total number of ordinary shares at 31 December 2015 was 20,174,222 shares (2014: 20,040,097
shares) with a par value of Lek 1,000 per share. All issued shares are fully paid.
Registrations of unregistered capital based on the decisions of the Shareholder are detailed as follows:
Decision
Number
Decision Date Registration
Date
Share
capital
Unregistered
capital
As at 1 January 2014 20,040,097 (4,000)
Capital increase - -
As at 31 December 2014 20,040,097 (4,000)
Capital increase 544/1
11 February
2015
23 March
2015 117,012 -
Capital increase 2549/1
16 April
2015
8 May
2015 17,113
As at 31 December 2014 20,174,222 (4,000)
Capital increases during 2015 consist of in kind contributions in property, plant and equipment.
11.2 Dividends
In accordance with Law No. 9901, dated 14 April 2008, based on decision 5870/1, dated 30 July 2015
the Ministry approved the consolidated financial statements for the year ended 31 December 2014. No
dividend was distributed in 2015 (2014: Lek 1,270,004 thousand) as the Group resulted with a net loss
for the year in 2014.
11.3 Legal reserves
Legal reserves of Lek 2,657,219 thousand (2014: Lek 2,657,219 thousand) represent the appropriation
of a portion of retained earnings in accordance with Law No. 9901, dated 14 April 2008, “On
entrepreneurs and commercial companies” which requires that at least 5% of the profit, but not more
than 10% of the subscribed capital is kept as legal reserves. As at 31 December 2015, legal reserves
represented 13% of the subscribed capital of the Group (2014:13%).
11.4 Other reserves
Other reserves comprise revaluation reserves and other reserves as follows:
Revaluation
reserves
Other
reserves Total
Balance at 1 January 2014, as previously reported 46,492,562 5,510,559 52,003,121
Transfer of revaluation reserve (2,332,582) - (2,332,582)
Restated balance at 1 January 2014 44,159,980 5,510,559 49,670,539
Transfer of revaluation reserve (788,861) - (788,861)
Allocation of retained earnings - 10,795,034 10,795,034
Restated balance at 31 December 2014 43,371,119 16,305,593 59,676,712
Transfer of revaluation reserve 12,774,034 - 12,774,034
Revaluation of property, plant and equipment (1,214,172) - (1,214,172)
Balance at 31 December 2015 54,930,981 16,305,593 71,236,574
Revaluation reserves represent the revaluation surplus derived from the independent valuation of
property, plant, and equipment carried out as at 1 January 2015 (see Note 6) less any amounts
subsequently transferred to retained earnings.
Other reserves are created from the appropriation of prior years’ retained earnings based on, and can
only be utilized upon the decision of the Shareholder.
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
27
12. Borrowings
2015 2014
Non-current
Borrowings from banks 15,849,705 18,649,845
Government loans 15,496,315 15,586,479
31,346,020 34,236,324
Current
Borrowings from banks 39,501,706 45,745,353
Government loans 4,638,775 3,640,826
44,140,481 49,386,179
Total 75,486,501 83,622,503
As at 31 December 2015, borrowings amounting to Lek 42,534,219 thousand (2014: Lek 49,611,232
thousand) bear interest rates below market rates and have maturities ranging from 2016 to 2044. The
Group has recognized the borrowings at fair value at initial recognition and has subsequently measured
them at fair value. During 2015, changes in fair value of borrowings of Lek 196,513 thousand (2014:
Lek (1,025,897) thousand) were recognized as finance income/(costs) in profit or loss.
Bank borrowings are secured by the guarantees from the Government of Albania and by the Group’s
receivables (see Note 9).
The average nominal interest rates at the reporting date were as follows:
2015 EUR USD CHF YEN KRW Lek
Bank borrowings 1.75% 1.92% 0.00% 2.40% 2.50% 4.72%
Government loans 0.56% 1.51% 0.46% - - -
2014 EUR USD CHF YEN KRW Lek
Bank borrowings 1.57% 1.38% 0.00% 2.40% 2.50% 4.64%
Government loans 0.58% 1.20% 0.49% - - -
Breach of loan covenant
Loans from the European Bank for Reconstruction and Development (“EBRD”) amounting to Lek
4,017,865 thousand (2014: 6,557,276 thousand) and repayable between 2016 and 2027 contain financial
covenants stating that during the loan repayment period, the Group is required to maintain adequate
financial ratios, as follows:
Debt service coverage ratio as an indicator for coverage of debt (net income plus depreciation in
respect of interest and principal due on credits), and
Debt over EBITDA ratio as an indicator for a Group’s ability to pay off its incurred debt.
During 2015 and 2014 the Group did not comply with the following covenants from EBRD loans:
2015 2014
Required Actual Required Actual
Loan agreement between KESH and EBRD
Operation no. 33833, July 2004
- Debt service coverage ratio min.1.25 0.23 min.1.25 (0.12)
Loan agreement between KESH and EBRD
Operation no. 36112, October 2006
- Debt service coverage ratio min.1.25 0.23 min.1.25 (0.12)
- Debt over EBITDA max.5.50 9.63 max.5.50 (2.73)
Loan agreement between KESH and EBRD
Operation no. 23830, September 2002
- Debt service coverage ratio min.1.25 0.23 min.1.25 (0.12)
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
28
13. Grants
2015 2014
Balance at 1 January 141,816 138,680
Received during the year - 9,183
Adjustments and reclassifications (222) (1,559)
Released during the year (6,260) (4,488)
Balance at 31 December 135,334 141,816
Grants relate to costs and assets and can be direct grants from the government or grants from donors to
the Albanian government related to the Group’s activities.
14. Trade and other payables
2015 2014
Non-current
Other payables 810,146 810,146
810,146 810,146
Current
Trade payables 4,582,167 7,668,080
Tax Authorities – payables from tax audits 3,152,720 3,450,243
Tax Authorities – VAT Payable 2,635,174 2,484,252
Balances with OSHEE 1,879,720 1,879,720
Dividend payable 1,834,700 1,834,700
Income tax payable 2,162,951 1,785,466
Payables for compensation of flood cases 754,374 754,374
Payables related to SHKEE 236,928 236,928
Payables to personnel 58,790 59,363
Tax Authorities – other payables 236,629 237,057
Other payables 2,432,197 2,269,191
19,966,350 22,659,374
Total 20,776,496 23,469,520
Payables from tax audits amounting Lek 3,152,720 thousand (2014: Lek 3,450,243 thousand) consist of
tax liabilities, penalties and late payment interest resulting from tax audits.
Balances with OSHEE relate to certain disputed amounts arising from the spin-off of OSHEE from
KESH and which the parties are in the process of seeking clarification on the accounting implications
and ownership related to these balances.
15. Deferred tax liabilities
Deferred tax is calculated based on the enacted tax rate of 15% (2014: 15%).
Movement in deferred tax liabilities balances during the year are as follows:
2015 At 1 January Recognized in
profit or loss
At 31 December
Borrowings 605,633 29,477 635,110
Total 605,633 29,477 635,110
2014 At 1 January Recognized in
profit or loss
At 31 December
Borrowings 506,345 99,288 605,633
Total 506,345 99,288 605,633
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
29
16. Revenue
2015 2014
Electricity 19,311,870 10,813,134
Service rendered 179 714
Other 1,192 18,145
Total 19,313,241 10,831,993
The increase in revenue from electricity sales is due to higher quantity of energy sold following the
increase in quantity of internally generated energy by the Group during 2015. As showed in Note 18,
own production of KESH in 2015 was 4,451,975 MWh resulting 31% higher than in 2014.
17. Other operating income
2015 2014
Trade payables written off 230,470 -
Income from changes in prices from regulator 63,234 -
Late payment penalties 8,889 4,874,190
Grants 6,260 4,488
Other 29,120 41,625
Total 337,973 4,920,303
Late payment penalties of Lek 4,874,190 thousand in 2014 represent penalties charged to OSHEE for
non-payment of electricity invoices ranging from 2010 to 2014, calculated at the monthly average rate
of one-year Treasury Bills + 3%. Such penalties are disputed by OSHEE and the parties at the date of
release of these consolidated financial statements are in process of reconciling the amounts. In 2015, late
payment penalties relate mainly to penalties applied for contractual delays of suppliers.
Income from trade payables written off is related to certain payables to CEZ Trade Albania Shpk, an
entity part of CEZ Group, for contractual obligations under court dispute. Subsequently, following the
agreement between the Albanian Government and CEZ Group for the amicable settlement of all of the
disagreements with CEZ Group, CEZ Trade Albania Shpk withdrew its claims towards KESH and the
court case was closed.
18. Purchased energy
2015 2014
Locally generated energy 7,790,209 8,138,026
Imported energy 1,672,172 976,232
Energy purchased from licensed traders 829,137 506,479
Energy purchased from separated HPP 238,564 204,540
Compensation for imbalances 16,240 11,423
10,546,322 9,836,700
The quantity of energy supplied by source of generation was as follows:
2015 2014
(in MWh) (in MWh)
(unaudited) (unaudited)
Internally generated and supplied 4,451,975 3,408,555
Locally generated energy 1,001,192 919,010
Imported energy 246,116 136,560
Energy purchased from licensed traders 129,184 69,360
Energy purchased from separated HEC 31,242 32,726
Compensation for imbalances 11,392 11,423
5,871,101 4,577,634
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
30
19. Employee benefit expenses
2015 2014
Salaries 709,792 693,532
Other 205,015 201,918
Social & health contribution 133,494 136,100
Total 1,048,301 1,031,550
The number of employees at 31 December 2015 was 975 (31 December 2014: 997).
20. Other operating expenses
Expenses by category are composed as follows:
2015 2014
Bailiff services 507,467 182,045
Insurance premiums 260,043 265,406
Fines and penalties 98,646 653,101
Experts services 73,709 77,528
Bank charges 63,485 122,673
Maintenance expenses 61,080 43,802
Business trip per diem expenses 20,308 17,252
Hired services 5,954 6,357
Telephone and postage 5,777 6,113
Taxes, fees and similar 4,623 4,863
Provision for legal cases 4,009 10,751
Other 186,235 97,356
Total 1,291,336 1,487,247
21. Net finance costs
2015 2014
Finance income
Interest income 286,968 339,908
Change in fair value of borrowings 196,513 -
483,481 339,908
Finance costs
Interest expense on bank borrowings (2,222,655) (2,579,445)
Change in fair value of borrowings - (1,025,897)
Foreign exchange loss, net (315,059) (582,233)
(2,537,714) (4,187,575)
Net finance cost (2,054,233) (3,847,667)
22. Income tax expense
The Group determines taxation at the end of the year in accordance with the Albanian tax legislation. In
2015, the corporate tax rate on profit was equal to 15% (2014: 15%) of taxable income.
2015 2014
Current tax 619,469 5,941
Deferred income tax (Note 15) 29,477 99,288
Total 648,946 105,229
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
31
22 Income tax expenses (continued)
The following is a reconciliation of income taxes calculated at the applicable tax rate to income tax
expense:
Tax rate 2015 Tax rate 2014
Profit/ (loss) before income tax 1,445,992 (22,135,433)
Tax calculated at the tax rate of 15% 15.0% 216,899 15.0% (3,320,315)
Tax effect of non-deductible expenses 22.6% 326,831 (14.8%) 3,279,371
Tax effect of non-taxable income (2.1%) (29,758) - -
Change in recognized deductible
temporary differences 8.4% 29,477 (0.4%) 99,288
Current year losses for which no
deferred tax asset is recognized 2.0% - (0.2%) 46,885
Recognition of tax effect of previously
unrecognised tax losses 7.3% 105,497 - -
Tax charge 44.9% 648,946 (0.5%) 105,229
Tax exposures
In determining the amount of current and deferred tax the Group takes into account the impact of
uncertain tax positions and whether additional taxes and interest may be due. The Group believes that
its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgments about future events. New information may become
available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities;
such changes to tax liabilities will impact tax expense in the period that such a determination is made.
23. Related Parties
As at 31 December 2015 and 2014 the Group was controlled by the Ministry of Development, Economy,
Tourism, Trade and Entrepreneurship (‘MZHETTS’), of the Republic of Albania, which owned 100%
of the Group’s shares.
The following transactions were carried out with related parties:
2015 2014
(a) Sales of services
OSHEE 15,704,045 10,129,994
OST 346,854 241,826
16,050,899 10,371,820
(b) Purchases of goods and services
Lanabregas Sha 238,564 204,540
OST 16,241 11,423
Other state-controlled entities 4,178 4,929
258,983 220,892
(c) Key management compensation
Salaries and other short-term employee benefits 42,845 45,984
Supervisory board 2,059 2,036
44,904 48,020
(d) Arising from activity
Receivables from related parties:
OSSHE (Note 9) 51,201,445 58,433,053
OST (Note 9) 801,730 587,072
Tax authorities - Excise tax (Note 9), net of
impairment (Note 5.2.1) 330,313 825,782
Tax authorities - Other (Note 9) 330,445 330,445
52,663,933 60,176,352
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
32
23. Related Parties (continued)
Payables to related parties:
Balances with OSHEE (Note 14) 1,879,720 1,879,720
OST 32,620 76,487
Tax Authorities - payables from tax audits (Note 14) 3,152,720 3,450,243
Tax authorities - VAT payables (Note 14) 2,635,174 2,484,252
Tax authorities - Income taxes (Note 14) 2,162,951 1,785,466
Tax authorities - other taxes payable (Note 14) 236,629 237,057
10,099,814 9,913,225
(e) Loans to related parties
OSHEE (Note 7) 11,225,370 10,887,536
OST (Note 7) 10,240,603 12,449,050
21,465,973 23,336,586
(f) Loans from related parties
Ministry of Finance (Note 12) 20,135,090 19,227,305
20,135,090 19,227,305
(g) Dividends payable
Ministry of Finance (Note 14) 1,834,700 1,834,700
1,834,700 1,834,700
Following the transfer of control in CEZ Shpërndarje (former name of OSHEE) from ČEZ, a.s., to the
Albanian Regulator of Energy in January 2013, CEZ Shpërndarje is classified as a state-controlled entity.
Subsequently, based on the Law No. 114/2014, dated 31 July 2014 “On the approval of the amicable
settlement agreement between the Republic of Albania and ČEZ, a. s.”, the ownership of 76% of the
shares in CEZ Shpërndarje was transferred from ČEZ, a. s. to the sole shareholder of KESH.
As described in note 24, based on decision no. 317, dated 27 April 2016 of the Council of Ministers, the
Group ownership was transferred from MZHETTS to the Ministry of Energy and Industry (“MEI”) and
registered at the National Registration Center as at 24 May 2016.
24. Commitment and Contingencies
Commitments
As at 31 December 2015, the Group has entered into capital commitments of Lek 2,084,207 thousand
(2014: Lek 2,838,343 thousand), relating to projects for the safeguard the hydroelectric dams on the Drin
river cascades. These commitments are expected to be paid over a period of two years.
Contingencies
In the normal course of business the Group is presented with legal claims and litigation; the Group’s
management is of the opinion that no material losses will be incurred in relation to other legal claims
outstanding as at 31 December 2015.
In addition, the Group’s tax books and records for the financial year ended 31 December 2015 have not
been inspected by the local tax authorities. Consequentially, the Group’s tax liabilities may not be
considered finalized. Additional taxes that may arise in the event of tax audit cannot be determined with
any reasonable accuracy.
Operating Leases
The Group leases various offices and warehouses under non-cancellable operating lease agreements.
The leases have varying terms, escalation clauses and renewal rights. The Group mainly enters into one-
year leasing contracts, renewable annually. As at 31 December 2015, minimum lease payments of less
than one year amount to Lek 5,954 thousand (2014: Lek 6,357 thousand).
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA - KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
33
25. Events after the reporting date
Laws and regulations
A new law introducing the energy market model in Albania was approved by the Parliament, law No.
43/2015, dated 30 April 2015 “On the power sector”. The main impact of the new law on the activities
of the Group is that the Wholesale Public Supplier function, which is a current sub-division of the Group
is expected to be transferred to OSHEE. However, the time framework of changes brought about the
new law are still to be determined as further implementation rules and bylaws are expected to be issued.
Based on Council of Ministers decision no. 244, dated 30 March 2016, “On the conditions for approval
of the public service obligation, applicable for licenced entities in the energy sector and which operate
in the generation, transmission, and distribution and supply of energy” will act as a Temporary Energy
Market Model, based on which the Group will bear the public service responsibility supplying the
Universal Service Provider with the energy provided from the generating units located in Drin Cascade,
based on a rational regime of utilisation of generating capacities and historical average production level
which shall be used for the coverage of final consumers demand.
Based on this Temporary Market Model OSHEE will continue to purchase the energy from renewable
resources as per current law in force and contract agreement approved by ERE. While, starting from 1
July 2016 KESH Sha is not expected to bear the obligation to import energy for the compensation in
demand from the tariff customers and purchase the energy from small HPP’s as per requirements of law
no. 138/ 2013, dated 17 December 2013 “On renewable energy resources”. Furthermore, actual energy
purchase agreements from small and private HPP’s are going to be transferred to OSHEE as per new
law requirements.
Based on decision no. 317, dated 27 April 2016 “On appointing the Public Authority representing the
Government as a Shareholder of entities in the energy sector”, the Group sole Shareholder is the Ministry
of Energy and Industry, which will not act as a Shareholder for the other entities in the sector.
Additionally, the members of the Supervisory Council of the Group will act as the governing body only
for the KESH Sha.
Restructuring
Based on the decision no. 4, “For restructuring of short term borrowings of KESH Sha”, dated 14 June
2016 the Supervisory Council approved a draft borrowing agreement with the European Bank for
Reconstruction and Development (“EBRD”). The Ministry of Finance and the Ministry of Economy and
Industry have negotiated with EBRD to secure a long term borrowing contract with preferential terms
and conditions implying a longer maturity of 15 years and interest rate 6 months EURIBOR + 1%. The
purpose of the borrowing will be to settle the current short-term borrowings with second tier local banks
obtained from the Group during 2015 in order to meet its liquidity needs and improve its profitability
and debt ratios.
26. Restatement
(a) Correction of errors
During 2015 the Group discovered that certain amounts payable arising as a result of decisions of the
Council of Ministers issued during 2010 and 2011 related natural flood cases in Shkodra had erroneously
not been recognized as a consequence of which, trade and other payables had been understated. The
error has been corrected by restating each of the affected financial statement line items for the prior
period.
(b) Changes in accounting policies
Changes in accounting policies are described in Note 2(c).
KORPORATA ELEKTROENERGJITIKE SHQIPTARE SHA -KESH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2015
(Amounts in Lek thousand, unless otherwise stated)
34
26. Restatement (continued)
The following tables summarise the impacts on the Group’s consolidated financial statements:
(i) Statement of financial position
31 December 2014
As previously
reported
Correction
of error
(a)
Changes in
accounting
policies
(b)
As restated
Total assets 170,335,907 - - 170,335,907
Equity
Other reserves 62,786,821 - (3,110,109) 59,676,712
Accumulated (losses) (22,229,328) (754,374) 3,110,109 (19,873,593)
Others 22,693,316 - - 22,693,316
Total equity attributable to the
owners 63,250,809 (754,374) - 62,496,435
Trade and other payables 23,469,520 754,374 - 24,223,894
Others 74,738,151 - - 74,738,151
Total liabilities 107,085,098 754,374 - 107,839,472
1 January 2014
As previously
reported
Correction
of error
(a)
Changes in
accounting
policies
(b)
As restated
Total assets 184,969,146 - - 184,969,146
Equity
Other reserves 52,003,121 - (2,332,582) 49,670,539
Accumulated (losses) 12,700,040 (754,374) 2,332,582 14,278,248
Others 22,058,314 - - 22,058,314
Total equity attributable to the
owners 86,761,475 (754,374) - 86,007,101
Trade and other payables 18,996,350 754,374 - 19,750,724
Others 79,211,321 - - 88,088,748
Total liabilities 98,207,671 754,374 - 98,962,045
(ii) Statement of profit or loss and OCI
31 December 2014
As previously
reported
Correction
of error
(a)
Changes in
accounting
policies
(b) As restated
(Loss)/profit before tax (22,135,433) - - (22,135,433)
Income tax expense (105,229) - - (105,229)
Net (loss)/ profit for the year (22,240,662) - - (22,240,662)
Other comprehensive income for
the year - - - -
Total comprehensive
(loss)/income for the year (22,240,662) - - (22,240,662)