annual report 2008 · membership of bodies of other companies: chairman of the board of directors...

RWE Distribuční služby

ANNUAL REPORT 2008

Total sales (CZK m) 2,229

EBITDA (CZK m) 114

Operating result (CZK m) 93

Profit before taxation (CZK m) 101

Profit after taxation (CZK m) 73

Investments (CZK m) 18

Number of employees (converted to FTE) 1,593

The term “Company“ used in the text refers to RWE Distribuční služby, s.r.o.

Key Ratios 2008

3TAbLE Of CONTENTs

TAbLE Of CONTENTs

1. ThE ExECuTIvE‘s sTATEmENT 5

2. mANAgEmENT REPORT FOR 2008 9

2.1 general Information 9

2.2 Results 10

2.3 Business Activities 11

2.4 Communication Activities 14

2.5 human Resources 14

2.6 Information Technologies 15

2.7 Environmental Protection 16

2.8 subsequent Events 16

2.9 Outlook 17

3. FINANCIAl PART 19

3.1 Financial statements 19

3.2 Notes to Financial statements 24

4. AuDITOR‘s REPORT 39

4.1 Auditor‘s Report on the Financial statements 39

4.2 Auditor‘s Report on the Annual Report and the Report on Relations between Related Parties 41

5. RWE DIsTRIBučNí služBy, s.R.O. REPORT ON RElATIONs BETWEEN RElATED PARTIEs As

AT 31 DECEmBER 2008 43

ABBREvIATIONs usED 50

5ThE ExECUTivE‘s sTATEmENT

1. ThE ExECUTivE‘s sTATEmENT

ladies and gentlemen,

having launched its operations on 1 January 2008, RWE Distribuční

služby, s.r.o. ("Company") has completed the first year in business that

was marked by the hard work of our employees. The Company was cre-

ated on 26 July 2007 by incorporation in the Commercial Register. Based

on agreements on sale of parts of enterprises, the Company purchased

a stake in severomoravská plynárenská, a.s., východočeská plynáren-

ská, a.s., středočeská plynárenská, a.s., severočeská plynárenská, a.s.,

and Západočeská plynárenská, a.s. effective as of 1 January 2008. RWE

Distribuční služby, s.r.o. is responsible for the operation and mainte-

nance of gas facilities, continuous dispatching and emergency services,

operations management, gas metering, and network construction and

documentation. The Company was established as part of an extensive

project that involved restructuring the RWE group in the Czech Republic

("RWE group"), which necessitated broad coordination with other

RWE group member companies, including the establishment

of the relevant contractual relations and the valuation

of the transferred assets.

The priority of these activities has been and will continue to be ensuring

the secure, reliable, and effective operation of gas processing facilities

and providing high-quality customer service. While our most important

clients are distribution system operators from the ranks of RWE group

members, we also cater to other partners – investors, planners, builders,

municipalities, building authorities, and end customers.

At the beginning of 2008, the Company launched Fenix, one of the most

extensive projects executed by the RWE group in the Czech Republic to

date. The objectives included improving efficiency by reorganizing the

enterprises that had been taken over and unifying processes, regula-

tions, and the standards of provided services. Another purpose of these

measures was to reduce overall costs to allow the Company to be fully

competitive in the future, while preserving the superior quality of all

activities and services.

6 RWE Distribuční služby

The Fenix project focused on optimizing the regional organization, unifying internal guidelines and regula-

tions, fine-tuning network operation and maintenance, harmonizing and improving services secured by inter-

nal and external means, centralizing dispatching management, and, no less importantly, standardizing work

conditions for all employees throughout the Company.

Interim results allowed implementing new measures already in the course of 2008, which helped the Com-

pany surpass the planned financial figures. An important contribution to the positive results was made by

the services Division, particularly the Finance Department that initiated a number of changes and controlled

the Company‘s expenditures. Thus, already the first year of our existence has demonstrated the meaning and

importance of the steps that had led to the Company‘s creation, confirming that we have set out

in the right direction.

The fact that we were able to cope with the exceptional scope of requirements for human resources in con-

nection with the corporate restructuring process has demonstrated our preparedness to provide support to all

employees since the first day of the Company‘s operation. An important event was the successful completion

of the collective bargaining process, which resulted in reaching an accord at the end of 2007 and the subse-

quent signature of a collective agreement for the year 2008.

Considering the predominant nature of the work performed by our staff, we paid close attention to workplace

safety and health protection, which will be an ongoing task in the future.

During the reported year, we had to deal with several disruptions of network operation, which were mostly

caused by third-party damage to gas facilities liable to interrupt gas supplies. These situations were handled

in a professional manner that ensured safety and minimized losses and negative impact on end customers.

In the future, the Company will continue to strive to fulfill its mission – to be an efficient and professional

provider of gas facility services to all our customers.

Ing. Tomáš TichýExecutive, CEO

7ThE ExECUTivE‘s sTATEmENT

Ing. Tomáš Tichý

Executive, CEO

Date of birth: 31 march 1947

Education: Czech Technical university, Prague, Faculty of mechanical Engineering

Membership of bodies of other companies: Chairman of the Board of Directors – Jihomoravská

plynárenská, a.s., Chairman of the supervisory Board – JmP Net, s.r.o., member of the supervisory Board –

gAsFINAl, a.s.

Any other business activities: None

Ing. Karel Mazal

Executive, COO

Date of birth: 21 september 1948

Education: Brno Technical university, Faculty of Electrical Engineering

Membership of bodies of other companies: Chairman of the Board of Directors – gAsFINAl, a.s.,

member of the supervisory Board – českomoravská plynárenská, a.s. – v likvidaci

Any other business activities: None

Changes in the Company‘s governing bodies during 2008 and at the beginning of 2009

At its meeting held on 29 October 2008, the Board of Directors of RWE Transgas, a.s., as the sole member

exercising the powers of the Company‘s general meeting, discussed the resignation of Ing. Patrik Choleva as

the Company‘s Executive effective as of 29 October 2008.

At its meeting held on 17 December 2008, the Board of Directors of RWE Transgas, a.s., as the sole member

exercising the powers of the Company‘s general meeting, appointed Ing. Dušan malý as the Company‘s Execu-

tive effective as of 1 January 2009.

Executives as at 31 December 2008

9mANAgEmENT REPORT fOR 2008

2. mANAgEmENT REPORT fOR 2008

Company name: RWE Distribuční služby, s.r.o.

Registered office: Plynárenská 499/1, 657 02 Brno

Company No.: 27935311

Legal form: limited liability company

The Company’s Establishment and Inception:

The Company was established on 26 July 2007. It is incorporated in the Commercial Register administered by

the Brno Regional Court, section C, File 57165.

The sole member of the Company is RWE Transgas, a.s. with its registered office at limuzská 12/3135,

100 98 Prague 10 – strašnice, Company No. 26460815.

Object of Business:

lease of residential and commercial real estate without providing services other than basic services neces-1.

sary for securing the proper operation of residential and commercial real estate

Installation, repair, inspection, and testing of specialty gas equipment2.

Installation, repair, inspection, and testing of specialty electric equipment3.

Construction, reconstruction, and demolition of structures4.

Wholesale5.

Engineering services in capital construction 6.

lease and rental of movables7.

maintenance of motor vehicles and their accessories8.

Administration, financial, and organizational services9.

Technical consulting services in the field of gas distribution, environmental protection, metering, 10.

and control systems

services relating to work safety and health protection in the workplace11.

Brokerage of trade and services12.

Technical and organizational fire prevention services13.

Testing, measuring, analytical, and inspection services14.

Installation of metering devices15.

Organization of specialized training, instruction courses, and other educational events, including lecturing16.

Waste disposal (excepting hazardous waste)17.

Copy services18.

storage and handling of goods19.

Technical services20.

2.1 general Information

10

Provision of software, hardware and software consulting21.

Advertising and marketing22.

Business, financial, organizational, and economic consulting services23.

Accounting consulting, bookkeeping, and tax administration services24.

Data processing, database services, network administration25.

Facility management26.

Preparation and completion of technical designs27.

Electronic communication services – data transmission services28.

Construction design29.

Real estate brokerage 30.

Purchase, sale, storage, and import of fuels and lubricants, with the exception of the operation of fuel 31.

stations and the exclusive purchase, sale, and storage of fuels and lubricants in consumer packaging up to

50 kg per packaging

Preparatory work for construction32.

specialized construction services33.

Production of electric power34.

Revenues, Expenses, Profit

In 2008, the Company earned CZK 72,749 thousand in net profit. Profit before taxation in 2008 amounted to

CZK 100,701 thousand.

sales of own products and services in 2008 totaled CZK 2,229,140 thousand, including CZK 1,874,021 thou-

sand in revenues from slAs and CZK 355,011 thousand in proceeds from services related to gas facilities.

Assets and Liabilities

The balance of the Company‘s assets as at 31 December 2008 totaled CZK 562,327 thousand, an increase by

CZK 487,697 thousand from 2007. Receivables from other RWE group companies relating to the RWE Transgas, a.s.

cash-pooling arrangement accounted for the most important part of the increase – CZK 304,419 thousand.

Investments

During the reported year, the Company executed investment projects in the framework of the approved invest-

ment plan. We acquired assets, mainly gas processing machinery and equipment, with a total value

of CZK 17,527 thousand.

2.2 Results


11

All the Company‘s investment projects were executed in the Czech Republic and financed using the

Company‘s own resources.

The scope of planned investments has been optimized from the viewpoint of needs and resources until the

year 2011. Projects foreseen in the approved mid-term plan mainly include investments into gas processing

machinery and equipment. All investments will be made in the Czech Republic. The average annual value of

planned increases in assets during 2009 to 2011 totals approximately CZK 20 million.

Risk Management

All risks are recorded in the Risk Catalog. In addition, they are entered into the risk matrix, which allows

identifying the most serious risks from the viewpoint of the probability of their occurrence and the extent of

potential damage. In 2008, the Risk Committee, which consists of management representatives, did not iden-

tify any risks liable to jeopardize the Company‘s existence.

Research and Development

The Company does not carry research and development of new products.

Organizational Units

According to its incorporation data in the Commercial Register, the Company does not have any organizational

units in the Czech Republic or abroad.

The Company mainly provides technical services to distribution system operators and regional gas companies

from the ranks of RWE group members. Our services include securing the operation and maintenance of distri-

bution networks, operations management, metering, and network construction and documentation.

The Company is also responsible for repairing gas equipment, measuring natural gas consumption and quality,

connecting and disconnecting customers, operating the dispatching center, and running the 1239 emergency

telephone line.

The Company secures the operation and maintenance of 44.9 thousand kilometers of gas pipelines

and 2,327 regulation stations. In addition, we oversee 1.7 million gas meters and other metering devices.

For the general public, the Company offers gas pipeline demarcation.

2.3 Business Activities

mANAgEmENT REPORT fOR 2008

12

Network Operation Management Department

As regards network operation management, the Company provides services targeting the administrative and

technical issues related to the distribution network of individual operators, such as issuing positions on gas

and other structures as part of construction approval proceedings, defining conditions for connection to the

distribution system, administering technical documentation, representing distribution network owners in com-

munication with building authorities, and dealing with ownership issues in connection with gas facilities.

In 2008, the Network Operation management Department issued more than 103 thousand positions for

construction approval proceedings, defined over 24 thousand connection requirements, and took over the

operation of close to 6.5 thousand reconstructed or newly built gas facilities.

SČP Net SMP Net STP Net VČP Net ZČP Net Total

Issued positions 17,266 32,511 17,533 21,799 14,465 103,574

Conditions for connection to the distribution system 4,379 6,557 4,942 5,103 3,290 24,271

Taken over gas facilities 694 2,152 1,512 927 1,084 6,369

Network Construction Department

The Company provides engineering services consisting of the preparation and execution of projects involving

reconstruction and construction of new gas facilities. In 2008, we completed the preparation of more than

430 ventures and executed close to 1,200 small- and large-scale construction projects, including nearly 300

new independent household service lines. At the same time, the Company supervised the construction of gas

facilities financed by third-party investors. During the reported year, we prepared an important change in the

Company‘s organizational structure as part of which activities of the Network Construction Department were

transferred into three centers in Pilsen, hradec Králové, and Ostrava. The objective of this change is to reduce

operating costs of the organizational unit and to improve the effectiveness of the process of preparing and

executing network construction projects.

Metering and Technical Services Department

In 2008, we prepared a restructuring of the metering and Technical services Department, which is to take

effect on 1 January 2009. An important change aimed at reducing costs and significantly improving meter

reading processing was a project that centralized metering administration for customers receiving aggregate

service into one department located in Brno. In 2008, we continued the installation of online transmission

and converter systems for large customers in accordance with the approved strategy of distribution

system operators.


13

In 2009, emphasis will mainly be put on further improving the quality and efficiency of all services we

provide. special attention will be paid to the process of disconnecting non-paying customers and detecting

unauthorized offtake.

Network Documentation Department

The tasks of the Network Documentation Department are compiling and managing digital plans, including

technical, financial, and organizational information on gas facilities. Another activity is providing digital docu-

ments pertaining to gas facilities to third parties.

West and North Network Operation and Maintenance Department

The Network Operation and maintenance Department is responsible for the strategic and operational manage-

ment of the Company‘s activities relating to the operation and maintenance of gas facilities for sčP Net,

sTP Net, ZčP Net, včP Net and smP Net. These tasks mainly include conducting inspections, providing emer-

gency services, and rectifying failures in the distribution system. Based on the outcome of network inspec-

tions, the Network Operation and maintenance Department proposes modernization and modification plans

and participates in repair and reconstruction projects.

In 2008, the department inspected 53 transfer stations, 538 odorization stations, and 695 cathodic

protection stations.

The primary mission of the department is to provide high-quality network operation and maintenance services

and to ensure the safe functioning of the gas distribution system.

North Dispatching Department

The North Dispatching Department is responsible for dispatching management in the licensed gas distribu-

tion territories of smP Net and včP Net from regional centers in Ostrava and hradec Králové. The main tasks

of the department comprise monitoring and controlling the high-pressure section of the distribution network,

including transfer and regulation stations, and the continual reception of error reports through the 1239 tele-

phone line. In 2008, we received a total of 44,119 reports, where 12,831 of them were subsequently handled

by the emergency service staff. During the reported year, the dispatching centers carried out long-distance

monitoring of 598 transfer and regulation stations, where detected problems resulted in 1,548 interventions

by operation and maintenance staff, including actions taken in response to station failures caused by extraor-

dinary weather conditions (the Emma windstorm). In 2008, there were 90 cases of unplanned disruption of

distribution, mostly due to third-party pipeline damage, which resulted in 27 extraordinary shutdowns of gas

supplies to end customers.


14

West Dispatching Department

The West Dispatching Department is responsible for dispatching services in the territory of three balancing

zones – sčP Net, ZčP Net and sTP Net. The department itself is located in three centers based in Ústí nad

labem, Pilsen, and Prague. The department‘s tasks correspond to the responsibilities of the North Dispatch-

ing Department. In 2008, the West Dispatching Department‘s 1239 emergency line received 27,749 reports,

where emergency service staff intervention was necessary in 12,775 cases. During the year under review,

the department monitored 997 regulation stations, where 535 problems required action by the operation

and maintenance staff.

In 2008, the most important change in the area of communication was the beginning of a rebranding process.

unifying all activities conducted by companies associated under the RWE group under a new trademark will

help create a uniform image and simplify market orientation for customers who purchase natural gas from

RWE. The new trademark is planned to be introduced in a gradual manner.

Throughout the reported year, the Company‘s communication activities mainly focused on providing informa-

tion and advice to end customers. The objective was to improve the safety of the operation of gas appliances

and offtake equipment.

Employees

The average employee headcount (full-time equivalent) in the Company in 2008 was 1,593 workers.

Wages

Wages developed in accordance with the Company‘s business strategy and the remuneration and salary

growth principles agreed under the Collective Agreement. In 2008, the average monthly wage was

CZK 27,554.

Employee Training and Career Development

In 2008, close attention was paid to employee training, obligatory legislative and gas-sector training in par-

ticular. In addition, we focused on improving language proficiency, management skills, technical abilities,

and IT knowledge, including the use of development centers and modern experience-based learning methods.

2.5 human Resources


2.4 Communication Activities

15

The Company supported possibilities of increasing and deepening qualifications under part-time

study programs.

Employee Structure by Education (%) (31 December 2008)

Employees with a high potential to grow had the opportunity to participate in Perspectives, a two-year pro-

gram that flexibly responds to new trends in training for young managers. We have executed a pilot program

aimed at identifying and training external instructors and established close partnerships with selected schools

and universities.

Social Policy

The Company developed and supported its social program for employees. using the social Fund‘s personal

accounts, we disbursed contributions for individual recreation, cultural and sporting events, healthcare, and

education. The Company offered employees and their family members the possibility to use our own recrea-

tional facilities. We paid contributions for the employee retirement savings program. At the end of the year,

the Company provided employees with free vitamin packages and flu vaccination as part of the healthcare

Prevention Program.

IT services are outsourced to RWE Interní služby, a.s. The main IT activity in 2008 was a sAP ECC 6.0 upgrade

(sAP Classic, hR, Is-u, Is-u-BW). This project has been successfully completed.

The IT security policy has been fully implemented throughout the Company.


Primary 3 %

Secondary 46 % 43 % Complete Secondary

8 % University

2.6 Information Technologies

16

Based on the outcome of the 2007 services project, mobile and IP telephony services were centralized under

the TElCO service in cooperation with RWE Interní služby, a.s.

As part of the Fenix project, central systems for organizational changes and workflow processes were defined

for the Company. We reviewed locally operated sW, where emphasis was put on its future optimization and

standardization. hW and sW requirements for the conduct of work tasks at individual workstations were

defined throughout the Company.

under the applicable contractual agreements (slA), the Company provides environmental protection services

to 13 RWE group member companies. The year under review was marked by defining basic processes, particu-

larly in the area of waste disposal and air protection.

In 2008, the Company began implementing the IsO 14 001 environmental management system and became

an active member of the Argus commission, which manages environmental management system implementa-

tion in all RWE group companies on a countrywide scale. The Company approved its environmental protection

policy in January 2008, subscribing to a proactive approach to the continuing alleviation of the impact of the

operation and maintenance of the natural gas distribution system on the environment. since environmental

protection is one of our main priorities, we have declared our determination not only to comply with legisla-

tive requirements, but also to improve the diffusion of information to our employees and to promote the use

of environment-friendly technologies. One of our objectives is passing the Company‘s positive attitude to

ecology on to our suppliers and creating conditions that enable them to protect the environment

to the maximum extent.

There were no extraordinary events relating to the operation and maintenance of the natural gas distribution

system, which would result in environmental damage. As part of three inspections conducted by state govern-

ment authorities, the companies for which the Company secures methodological environmental protection

management did not receive any fines.

On 27 January 2009, an extraordinary event occurred in the ZčP Net gas system. The DN 500, PN 40

sviňomazy – vřesová pipeline near the municipality of Křepkovice ruptured, causing a massive leak of natural


2.7 Environmental Protection

2.8 subsequent Events

17

gas and a complete interruption of natural gas supplies in six municipalities with a total of 1,795 customers,

including 21 Key Account (Industrial) clients. The accident did not cause any injuries. In view of the serious-

ness and extent of the event, the distribution system operator, ZčP Net, declared a state of emergency in the

Karlovy vary Region on 28 January 2009.

Thanks to the professional and dedicated action of the Company‘s employees and excellent cooperation be-

tween the Karlovy vary Region Crisis staff, the individual components of the Integrated Rescue system,

and contractors, the consequences of the accident were rectified on 29 January 2009. On the same day, gas

supplies to all affected customers were restored, and the state of emergency was called off.

The Company‘s principal objective in 2009 will be completing the Fenix project and ensuring a gradual transi-

tion to the new organizational structure of the Network Operation and maintenance Department. Positive

effects of the restructuring process are expected already this year, namely improved quality of provided serv-

ices and cost savings. Emphasis will be put on completing the harmonization of all processes and activities

using comparison techniques and the implementation of best solutions.

As to relations with our most important partners – RWE group distribution system operators, attention will

mainly be paid to further improving processes and service level agreements (slA) with the aim to ensure full

conformity to all relevant standards in accordance with generally binding legal regulations, technical stand-

ards, and internal guidelines.

securing the reliable and secure operation of gas facilities and ensuring the safety and health protection of

our employees will remain our ongoing and most important task.


2.9 Outlook

19fiNANCiAL PART

3. fiNANCiAL PART

BALANCE SHEET (in thousand Czech crowns)

31.12.2008 31.12.2007

Gross Provision Net Net

TOTAL ASSETS 592,481 (30,154) 562,327 74,630

B. Fixed assets 112,295 (21,569) 90,726 -

B. I. Intangible fixed assets 865 (197) 668 -

B. I. 3. software 450 (137) 313 -

6. Other intangible fixed assets 392 (60) 332 -

7. Intangible fixed assets in the course of construction 23 - 23 -

B. II. Tangible fixed assets 110,319 (21,372) 88,947 -

B. II. 2. Constructions 32 (1) 31 -

3. Equipment 79,697 (19,337) 60,360 -

7. Tangible fixed assets in the course of construction 84 - 84 -

9. Adjustment to acquired fixed assets 30,506 (2,034) 28,472 -

B. III. Long-term investments 1,111 - 1,111 -

B. III. 3. Other long-term investments in securities 1,111 - 1,111 -

C. Current assets 477,729 (8,585) 469,144 74,595

C. I. Inventories 11,502 (5,805) 5,697 -

C. I. 1. Raw materials 11,502 (5,805) 5,697 -

C. II. Long-term receivables 11,411 - 11,411 -

C. II. 1. Trade receivables 90 - 90 -

7. Other receivables 563 - 563 -

8. Deferred tax asset 10,758 - 10,758 -

C. III. Short-term receivables 454,634 (2,780) 451,854 78

C. III. 1. Trade receivables 112,485 (2,780) 109,705 -

2. Receivables - controlling entities / subsidiaries 304,111 - 304,111 -

6. Taxes and state subsidies receivable 0 - 0 78

7. short-term advances paid 1,765 - 1,765 -

8. Anticipated assets 36,023 - 36,023 -

9. Other receivables 250 - 250 -

C. IV. Financial assets 182 - 182 74,517

C. Iv. 1. Cash in hand 182 - 182 -

2. Cash at bank 0 - 0 74,517

D. I. Accruals and deferrals 2,457 - 2,457 35

D. I. 1. Prepaid expenses 2,294 - 2,294 35

3. Accrued revenue 163 - 163 -

3.1 Financial statements


BALANCE SHEET – continued (in thousand Czech crowns)

31.12.2008 31.12.2007

TOTAL LIABILITIES AND EQUITY 562,327 74,630

A. Equity 146,648 73,899

A. I. Share capital 75,000 75,000

A. I. 1. share capital 75,000 75,000

A. I. Retained earnings (1,101) -

A. I. 2. Accumulated losses (1,101) -

A. V. Profit (loss) for the current period (+/-) 72,749 (1,101)

B. Liabilities 415,626 730

B. I. Provisions 95,090 -

B. I. 3. Income tax provision 38,710 -

4. Other provisions 56,380 -

Short-term liabilities 320,536 730

1. Trade payables 117,488 84

2. liabilities - controlling entities / subsidiaries - 308

5. liabilities to employees 43,926 192

6. liabilities for social security and health insurance 20,309 119

7. Taxes and state subsidies payable 40,355 26

8. short-term advances received 51,614 -

10. Anticipated liabilities 44,763 1

11. Other payables 2,081 -

C. I. Accruals and deferrals 53 1

C. I. 1. Accruals 53 1

21fiNANCiAL PART

INCOME STATEMENT (in thousand Czech crowns)

Accounting period

Year ended 31 December 2008

Period from 26 July to

31 December 2007

II. sales of production 2,229,140 -

II. 1. sales of own products and services 2,229,140 -

B. Cost of sales 1,287,932 428

B. 1. Raw materials and consumables 119,042 173

2. services 1,168,890 255

+ Added value 941,208 (428)

C. staff costs 755,212 658

C. 1. Wages and salaries 539,899 272

2. Emoluments of board members - 215

3. social security costs and health insurance costs 195,917 170

4. Other social costs 19,396 1

D. Taxes and charges 753 27

E. Depreciation of long-term assets 21,576 -

III. sale of long-term assets and raw materials 101 -

2. sale of raw materials 101 -

F. Net book value of long-term assets and raw materials sold 2,775 -

2. Net book value of raw materials sold 2,775 -

g. Increase / (decrease) in operating provisions 64,964 -

Iv. Other operating income 2,519 -

h. Other operating charges 5,769 -

* Operating result 92,779 (1,113)

x. Interest income 8,194 20

N. Interest expense 34 1

xI. Other financial income 19 -

O. Other financial expense 257 7

* Financial result 7,922 12

Q. Tax on profit or loss on ordinary activities 27,952 -

Q. 1. - current 38,710 -

2. - deferred (10,758) -

** Profit or loss on ordinary activities after taxation 72,749 (1,101)

*** Net profit (loss) for the financial period 72,749 (1,101)

*** Net profit (loss) before taxation 100,701 (1,101)


STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY


Share capital CZK’000

Retained Earnings/(Accumulated losses)

CZK’000Total

CZK’000

As at 26 July 2007 500 - 500

Increase of share capital 74,500 - 74,500

Net loss for 2007 - (1,101) (1,101)

As at 31 December 2007 75,000 (1,101) 73,899

Net profit for 2008 - 72,749 72,749

As at 31 December 2008 75,000 71,684 146,648

23fiNANCiAL PART

CASH FLOw STATEMENT



CZK’000

Period from 26 July to 31 December 2007

CZK’000

Cash flows from operating activities

Net profit/(loss) on ordinary activities before tax 100,701 (1,101)

A.1 Adjustments for non-cash movements: 78,381 (19)

A.1.1 Depreciation and amortisation of fixed assets 21,576 -

A.1.2 Change in provisions 64,965 -

A.1.5 Net interest expense/(income) (8,160) (19)

A * Net cash flow from operating activities before tax, changes in working capital

179,082 (1,120)

A.2 Working capital changes: 287,182 310

A.2.1 Change in receivables and prepayments 46,348 (113)

A.2.2 Change in short-term payables and accruals 236,899 423

A.2.3 Change in inventories 3,935 -

A ** Net cash flow from operating activities before tax 466,264 (810)

A.3 Interest paid (34) (1)

A.4 Interest received 8,031 20

A *** Net cash flow from operating activities 474,261 (791)

Cash flows from investment activities

B.1 Acquisition of fixed assets (17,419) -

B *** Net cash flow from investment activities (17,419) -

Cash flows from financing activities

C.2 Changes in equity: - 75,000

C.2.1 Cash inflow from the increase of share capital - 75,000

C *** Net cash flow from financing activities - 75,000

Cash flows from purchase of part of a business (226,758) -

Net increase in cash and cash equivalents 230,084 74,209

Cash and cash equivalents as at the beginning of the year 74,209 -

Cash and cash equivalents as at the end of the year 304,293 74,209



1 gENERAl INFORmATION

RWE Distribuční služby, s.r.o. (“the Company”) was incorporated on 26 July 2007 and has its registered office

at Brno, Plynárenská 499/1, ZIP 657 02, Czech Republic. The Company’s business activities are specialized

construction activities, preparation works for constructions and assembling, repairs, revisions and tests

of designated gas equipment, real estate administration and maintenance.

The Company’s ID number is 279 35 311.

The sole shareholder of the Company is RWE Transgas, a.s.

The Directors as at 31 December 2008 and 31 December 2007 were:

Appointed on

Tomáš Tichý 6 september 2007

Karel mazal 6 september 2007

Patrik Choleva resigned from his position of Director on 29 October 2008.

Dušan malý was appointed to the position of Director on 1 January 2009.

The Company is organised as follows:

Directors represent the statutory body that controls the Company’s activities and acts on behalf of the Company.

Administration of the Company is divided into three divisions: The Network services Division, Operations

and maintenance Division and services Division. These divisions are directly managed by Directors.

The Company is located in four competency centres in Brno, Ostrava, hradec Králové and Pilsen.

The Company ensures operation and maintenance of 44.9 thousand km of gas network, 2,327 regulatory sta-

tions and ensures administration of 1.7 million gas meters and other metering equipment.

3.2 Notes to Financial statements

25fiNANCiAL PART

The reason for incorporation of the Company was unification of rules, procedures and activities connected

with administration of gas property within the whole RWE group in the Czech Republic which is considered to

further improve the quality of services provided to customers and to achieve savings which could not be

accomplished by individual regional gas companies.

The main objective of the Company is to provide mainly technical services to gas distributors and regional gas

companies within RWE group in the Czech Republic. This concerns ensuring the operation and maintenance

of distribution networks, administration, construction and documentation of networks and metering.

2 PURCHASE OF PART OF A BUSINESS

As at 1 January 2008 the Company purchased part of the business – divisions of distribution - from individual

regional gas companies - severočeská plynárenská, a.s.; severomoravská plynárenská, a.s.; středočeská plyná-

renská, a.s.; východočeská plynárenská, a.s.; Západočeská plynárenská, a.s – in total amount


Assets and liabilities purchased by the Company as a part of a business were as at the purchase day recog-

nized in the accounting values that were taken from audited financial statement of the selling companies as at

31 December 2007.

Adjustment to acquired fixed assets is represented by the difference between the valuation of purchased part

of the business by using the discounted cash flow method and the aggregate carrying amount of assets and

liabilities acquired as recorded in the accounts of the selling companies.


Assets and liabilities acquired as a part of a business:

Purchase of part of a business CZK’000

software 450

Other intangible fixed assets 392

Intangible assets in the course of construction 23

Intangible fixed assets 865

Constructions 32

Equipment 62,261

Tangible fixed assets 62,293

long-term investments in securities 1,111

Long-term investments 1,111

Fixed assets 64,269

Raw materials 15,437

Inventories 15,437

long-term advances paid 5

Other receivables 895

Long-terms receivables 900

Trade receivables 192,716

short-term advances paid 317

Anticipated assets 273

Other receivables 137

Short-term receivables 193,443

Current assets 209,780

Prepaid expenses 5,300

TOTAL ASSETS 279,349

Trade payables 27,976

liabilities to employees 34,232

short-term advances received 45

Anticipated liabilities 18,522

Short-term liabilities 80,775

Accruals 2,322

TOTAL LIABILITIES 83,097

ACCOUNTING VALUE OF PURCHASED PART OF A BUSINESS 196,252

Adjustment to acquired fixed assets 30,506

TOTAL VALUE OF PURCHASED PART OF A BUSINESS 226,758

27fiNANCiAL PART

3 ACCOUNTING POLICIES

3.1 Basis of preparation

The financial statements have been prepared in accordance with generally Accepted Accounting Principles

in the Czech Republic and have been prepared under the historical cost convention.

3.2 Intangible and tangible fixed assets

All intangible and tangible assets with a useful life longer than one year and a unit cost of more than

CZK 60 thousand (CZK 10 thousand) are treated as intangible and tangible fixed assets.

Purchased intangible and tangible fixed assets are recorded at cost, which includes all costs incurred in bring-

ing the assets to their present location and condition.

Intangible and tangible fixed assets are depreciated applying the straight-line method over their estimated

useful lives as follows:

software 4 years

Other intangible fixed assets 6–7 years

Constructions 30 years

machinery and equipment 3–15 years

The depreciation rates used differ from those allowable for taxation purposes.

A provision for impairment is established when the carrying value of an asset is greater than its estimated

recoverable amount.

Repairs and maintenance expenditures of tangible fixed assets are charged to expenses as incurred. Enhance-

ments of intangible and tangible fixed assets are capitalised.

Adjustment to acquired fixed assets represents the difference between the valuation of purchased part of

a business and the aggregate carrying amount of assets and liabilities acquired as recorded in the accounts of

the original owner. such differences are amortised on a straight-line basis over a period of 15 years.

3.3 Other securities and investments

The Company classifies securities and investments, other than investments in subsidiaries and associates as

trading, held-to-maturity or available-for-sale. Currently the Company holds only available for sale investments.


securities and investments intended to be held for an indefinite period of time, which may be sold in response

to liquidity requirements, are classified as available-for-sale. These investments are included in non-current

assets unless management has the express intention of holding the investment for less than 12 months from

the balance sheet date, in which case they are included in current assets. management determines the appro-

priate classification of investments as at the time of purchase and the classification is reviewed on

a regular basis.

All securities and investments are initially recorded at cost, including transaction costs. held-to-maturity

investments are subsequently accounted for at amortised cost. Other investments are subsequently accounted

for at fair value. The fair value is determined as the market value of the securities as at the balance sheet date.

measurement of non-traded securities is based on management estimates based on recognised models or

valuation techniques.

3.4 Inventories

Inventories are stated at the lower of cost and net realisable amount. Cost includes the appropriate overheads

incurred to bring inventory to its present state and location (mainly transport costs etc.). The weighted aver-

age cost method is applied for all disposals.

A provision is created for slow-moving and obsolete inventory based on an analysis of turnover and individual

evaluation of inventories.

3.5 Receivables

Receivables are stated at nominal value less a provision for doubtful amounts. A provision for bad debts is

created on the basis of an ageing analysis and individual evaluation of the recoverability of the receivables.

Receivables from related parties have not been provided for.

3.6 Foreign currency translation

Transactions denominated in a foreign currency are translated and recorded at the rate of exchange ruling

as at the transaction date.

Cash, receivables and liabilities balances denominated in foreign currencies have been translated at the ex-

change rate published by the Czech National Bank as at the balance sheet date. All exchange gains and losses

on cash, receivables and liabilities balances are recorded in the income statement.

3.7 Revenue recognition

sales are recognised as at the date the services are rendered and are stated net of discounts and value Added Tax.

29fiNANCiAL PART

3.8 Provisions

Provisions are recognised when the Company has a present obligation, it is probable that an outflow of

resources will be required to settle the obligation, and a reliable estimate of the amount can be made. When

recognising provisions, the Company considers all predictable risks and potential losses.

3.9 Interest costs

All interest expenses are expensed.

3.10 Deferred taxation

Deferred tax is recognised on all temporary differences between the carrying amount of an asset or liability

in the balance sheet and its tax base. Deferred tax assets are recognised if it is probable that sufficient future

taxable profit will be available against which the assets can be utilised.

3.11 Related parties

The Company’s related parties are considered to be the following:

– shareholders, of which the Company is a subsidiary or an associate, directly or indirectly, and other subsidiar-

ies and associates of these shareholders; and/or

– members of the Company’s or parent company’s statutory and supervisory bodies and management

and parties close to such members, including entities in which they have a controlling or significant influence;

and/or

– subsidiaries and associates.

material transactions and outstanding balances with related parties are disclosed in Note 15.

3.12 Cash flow statement

The Company has prepared a cash flow statement following the indirect method. Cash equivalents represent

short-term liquid investments, which are readily convertible for a known amount of cash.

The Company uses so-called cash-pooling within the group. A receivable/ (liability) that arises from cash-pool-

ing is presented in the Cash Flow statement as a part of the item Cash and Cash equivalents.

3.13 Subsequent events

The effects of events, which occurred between the balance sheet date and the date of preparation of the

financial statements, are recognised in the financial statements in the case that these events provide further

evidence of conditions that existed as at the balance sheet date.


Where significant events occur subsequent to the balance sheet date but prior to the preparation of the finan-

cial statements, which are indicative of conditions that arose subsequent to the balance sheet date, the effects

of these events are disclosed, but are not themselves recognised in the financial statements.

4 INTANGIBLE FIXED ASSETS

Cost

31 December 2007

CZK’000

Purchase of part of a business

1 January 2008CZK’000

Additions/transfersCZK’000

DisposalsCZK’000

31 December 2008

CZK’000

software - 450 - - 450

Other intangible fixed assets - 392 - - 392

Intangible fixed assets in the course of construction

- 23 - - 23

Total - 865 - - 865

Accumulated amortisation

31 December 2007

CZK’000



AdditionsCZK’000

DisposalsCZK’000

31 December 2008

CZK’000

software - - 137 - 137

Other intangible fixed assets - - 60 - 60

Total - - 197 - 197

Net book value - 865 668

5 TANGIBLE FIXED ASSETS

Cost

31 December 2007

CZK’000



Additions/transfersCZK’000

DisposalsCZK’000

31 December 2008

CZK’000

Buildings, halls and other constructions - 32 - - 32

Equipment - 62,261 17,443 (7) 79,697

Tangible fixed assets in the course of construction

- - 84 - 84

Adjustment to acquired fixed assets - 30,506 - - 30,506

Total - 92,799 17,527 (7) 110,319

31fiNANCiAL PART

Accumulated depreciation

31 December 2007

CZK’000



AdditionsCZK’000

DisposalsCZK’000

31 December 2008

CZK’000

Buildings, halls and other constructions - - 1 - 1

Equipment - - 19,344 (7) 19,337

Adjustment to acquired fixed assets - - 2,034 - 2,034

Total - - 21,379 (7) 21,372

Net book value - 92,799 88,947

The Company does not have any assets acquired via finance or operating lease.

6 OTHER SECURITIES AND INVESTMENTS

Other securities and investments are represented by 12 % share in Association for creation and use of a digital

technical map of the city of Pardubice.

7 INVENTORIES

Inventories as at 31 December 2008 consist in particular of spare parts for repairs of gas distribution system.

The Company created provision for inventories as at 31 December 2008 in the amount CZK 5,805 thousand.

The Company did not own any inventories as at 31 December 2007.

8 RECEIVABLES

Receivables outstanding have not been secured as at 31 December 2008 and none of them are due after 5

or more years.

Receivables – controlling entities/ subsidiaries as at 31 December 2008 represent cash equivalents from cash-

-pooling, see Note 18 Cash flow statement.

Anticipated assets as at 31 December 2008 are represented mainly by receivables from unbilled project prepa-

ration and realization of constructions in the amount of CZK 34,023 thousand.


The overdue receivables as at 31 December 2008 amounted to CZK 11,759 thousand.

As at 31 December 2007 the Company did not have any overdue receivables.

The provision related to doubtful receivables as at 31 December 2008 was CZK 2,780 thousand

(2007: CZK 0 thousand).

9 EQUITY

The Company is fully owned by RWE Transgas, a.s., based in Praha 10, strašnice, limuzská 12/3135, 100 98,

identification number 264 60 815, registered in the Commercial Register kept with the Regional Court in

Praha, section B, insert 7240. The ultimate holding company is RWE Ag, with the seat in Opernplatz 1,

45128 Essen, incorporated in germany.

The loss of CZK 1,101 thousand for 2007 was approved and transferred by the decision of the sole shareholder

on 7 may 2008 to accumulated losses.

The statutory reserve fund is created from the profit of the Company according to law and may not be distrib-

uted to shareholders, but may be used to offset losses.

10 PROVISIONS

31 December 2008CZK’000

Income tax provision 38,710

Other provisions 56,380

Total provisions 95,090

Other provisions are represented by provision for restructuring in the amount of CZK 44,849 thousand, provi-

sion for untaken holiday of employees in the amount of CZK 10,050 thousand and provision for management’s

option share plan in the amount of CZK 1,481 thousand.

As at 31 December 2007 the Company did not have any provisions.

33fiNANCiAL PART

11 PAYABLES AND COMMITMENTS

Trade and other payables have not been secured over any assets of the Company and none of them are due

after 5 or more years.

Taxes and state subsidies payable as at 31 December 2008 are represented in particular by value added tax in

the amount of CZK 33,875 thousand (as at 31 December 2007: CZK 0 thousand).

short term advances received as at 31 December 2008 in the amount of CZK 51,614 thousand are represented

by items related to project preparation and realization of constructions (as at 31 December 2007:

CZK 0 thousand).

liabilities overdue were as at 31 December 2008 CZK 45,772 thousand (as at 31 December 2007:

CZK 0 thousand). The Company does not have any overdue payables related to social or health insurance or

any other overdue payables to tax authorities or other state institutions.

For liabilities with related parties see Note 15 Related party transactions and balances.

12 TAXATION

Income tax expense consists of the following:

2008CZK’000

Current tax expense (2008: 21%, 2007: 24%) 38,710

Deferred tax expense (10,758)

Total income tax expense 27,952

The Company did not have any tax obligation for the period from 26 July till 31 December 2007.

The deferred tax as at 31 December 2008 is calculated at 20% (the rate enacted for 2009) and 19% (the rate

enacted for 2010 and following) depending on the period of temporary differences expected reversal.

The Company did not have any deferred tax asset/liability at 31 December 2007.


Deferred tax asset can be analysed as follows:


Deferred tax from:

– Accelerated tax depreciation of fixed assets (1,068)

– Provision for inventories and receivables 1,590

– Other provisions 10,236

Net deferred tax asset 10,758

13 REVENUE ANALYSIS

Revenue from operating activities (all domestic) has been generated as follows:

2008CZK’000

Revenues from sale of electricity 108

Revenues from services 2,229,032

Other operating revenues 2,519

Total 2,231,659

The major part of the Company’s revenues from services consists of revenues from inspection of regulatory

stations, repairs, maintenance of gas pipelines and gas fixtures.

Other operating revenues are represented mainly by write off of anticipated assets in the amount


The Company had no revenues for the period from 26 July to 31 December 2007.

14 EMPLOYEE ANALYSIS

Employee costs Average number of employees during the year


CZK’000


CZK’000

2008 2007

members of management 8,924 290 2 3

Other staff 746,288 368 1,591 10

Total 755,212 658 1,593 13

35fiNANCiAL PART

members of management are represented by Directors.

With the purchase of part of a business as at 31 January 2008 1,569 employees were transferred to the Com-

pany together with their rights and obligations resulting from their employment contract and further

77 employees were newly hired.

Other transactions with employees are described in Note 15 Related party transactions and balances.

15 RELATED PARTY TRANSACTIONS AND BALANCES


CZK’000


CZK’000

Costs:

RWE Transgas, a.s. 15,861 -

Regional gas companies 83,436 -

Other gas distribution companies 1,592 -

Other related companies within RWE group 505,390 -

Interest expense:

RWE Transgas, a.s. 34 -

Total 606,313 -

Revenues:

Regional gas companies 1,288 -

Other gas distribution companies 2,169,464 -


Interest income:

RWE Transgas, a.s. 8,187 1

Total 2,184,991 1


The following related party balances were outstanding as at:



Receivables

RWE Transgas, a.s. 304,111 -

Regional gas companies 373 -

Other gas distribution companies 98,486 -

Other related companies within RWE group 609 -

Accrued income

RWE Transgas, a.s. 163 -

Total receivables and accrued income 403,742 -

Payables

RWE Transgas, a.s. 4,614 337

Regional gas companies 8,377 7

Other gas distribution companies 496 -


Total payables 70,863 344

Receivables and payables arose under standard market conditions.

Company cars are made available for use by Directors and other management. Total remuneration for Direc-

tors was CZK 654 thousand for the year ended 31 December 2008 (period from 26 July to 31 December 2007:

CZK 215 thousand). This remuneration is part of the staff costs.

16 FEES PAID AND PAYABLE TO THE AUDIT COMPANY

The information relating to the fees paid and payable for services performed by the audit company

PricewaterhouseCoopers Audit, s.r.o. is included in the annual report of the parent company RWE Ag

of the consolidation unit.

17 CONTINGENT LIABILITIES

The management of the Company is not aware of any significant unrecorded contingent liabilities

as at 31 December 2008.

37fiNANCiAL PART

18 CASH FLOW STATEMENT

Cash and cash equivalents disclosed in the cash flow statement can be analysed as follows:



Cash on hand and in transit 123 -

Cash in bank - 74,517

Cash equivalents included in short-term investments 59 -

Receivable/(liability) arising from cash-pooling 304,111 (308)

Cash and cash equivalents 304,293 74,209

19 RECENT VOLATILITY IN GLOBAL FINANCIAL MARKETS

The ongoing global economic recession which commenced in the middle of 2008 has resulted in, among other

things, a lower level of capital market funding, lower liquidity levels across the banking sector, and, at times,

higher interbank lending rates and very high volatility in stock markets.

management of the Company evaluated all information available and currently does not assume significant

impact of the economic recession on the Company`s business, specifically on liquidity and funding of the

Company. management of the Company believes it is taking all the necessary measures to support the sustain-

ability and growth of the Company’s business under the current circumstances.

20 SUBSEQUENT EVENTS

No events have occurred subsequent to year-end that would have a material impact on the financial state-

ments as at 31 December 2008.

2 march 2009

Tomáš Tichý Dušan Malý Executive, CEO Executive, CFO

39AUDiTOR‘s REPORT

4. AUDiTOR‘s REPORT

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDER OF RWE DISTRIBUčNí SLUžBY, S.R.O.

We have audited the accompanying financial statements of RWE Distribuční služby, s.r.o. (“the Company”), which

comprise the balance sheet as at 31 December 2008, the income statement, statement of changes in equity

and cash flow statement for the year then ended and notes, including a summary of significant accounting poli-

cies (“the financial statements”). Details of the Company are disclosed in note 1 to these financial statements.

Statutory Directors’ Responsibility for the Financial Statements

The statutory Directors are responsible for the preparation and fair presentation of the financial statements

in accordance with Czech accounting legislation. This responsibility includes: designing, implementing and

maintaining internal control relevant to the preparation and fair presentation of financial statements that are

free from material misstatement, whether due to fraud or error; selecting and applying appropriate account-

ing policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted

our audit in accordance with the Act on Auditors of the Czech Republic, International standards on Audit-

ing and the related application guidance of the Chamber of Auditors of the Czech Republic. Those standards

require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assur-

ance whether the financial statements are free from material misstatement.

PricewaterhouseCoopers Audit, s.r.o. registered seat Kateřinská 40/466, 120 00 Prague 2, Czech Republic, Identification Number: 40765521, regis-tered with the Commercial Register kept by the municipal Court in Prague, section C, Insert 3637, and in the Register of Audit Companies with the Chamber of Auditors of the Czech Republic under licence No 021.

© 2009 PricewaterhouseCoopers Audit, s.r.o. All rights reserved. “PricewaterhouseCoopers“ refers to the Czech firm of PricewaterhouseCoopers Audit, s.r.o. or, as the context requires, the network of member firms of PricewaterhouseCoopers International limited, each of which is a separate and independent legal entity.

4.1 Auditor‘s Report on the Financial statements

PricewaterhouseCoopers Audit, s.r.o.Kateřinská 40/466120 00 Praha 2česká republikaTelefon +420 251 151 111Fax +420 251 156 111


Shareholder of RwE Distribuční služby, s.r.o.

Independent auditor’s report

Auditor’s Responsibility (continued)

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor’s judgment, including assessment of the

risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the Company’s preparation and fair presenta-

tion of the financial statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit

also includes evaluating the appropriateness of the accounting policies used and the reasonableness of account-

ing estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company

as at 31 December 2008, its financial performance and its cash flows for the year then ended in accordance

with Czech accounting legislation.

2 march 2009

PricewaterhouseCoopers Audit, s.r.o.represented by

Václav Prýmek Petr ŠobotníkDirector Auditor, licence No. 113

Note: Our report has been prepared in Czech and in English. In all matters of interpretation of information, views or opinions, the Czech version of our report takes precedence over the English version.

41AUDiTOR‘s REPORT

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDER OF RWE DISTRIBUčNí SLUžBY, S.R.O.

We have audited financial statements of RWE Distribuční služby, s.r.o. (“the Company”) for the year ended 31 December 2008 disclosed in the annual report in chapter 3 and issued the opinion dated 2 march 2009 and disclosed in chapter 4.

Report on the Annual ReportWe have verified that the other information included in the annual report of the Company for the year ended 31 December 2008 is consistent with the financial statements referred to above. The statutory directors are re-sponsible for the accuracy of the annual report. Our responsibility is to express an opinion on the consistency of the annual report with the financial statements based on our verification procedures.

Auditor’s ResponsibilityWe conducted our verification procedures in accordance with the International standards on Auditing and the related application guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the verification procedures to obtain reasonable assurance about whether the other information included in the annual report which describes matters that are also presented in the financial statements is, in all material respects, consistent with the relevant financial statements. We believe that the verification procedures performed provide a reasonable basis for our opinion.

OpinionIn our opinion, the other information included in the annual report of the Company for the year ended 31 December 2008 is consistent, in all material respects, with the abovementioned financial statements.

PricewaterhouseCoopers Audit, s.r.o., registered seat Kateřinská 40/466, 120 00 Prague 2, Czech Republic, Identification Number: 40765521, registered with the Commercial Register kept by the municipal Court in Prague, section C, Insert 3637, and in the Register of Audit Companies with the Chamber of Auditors of the Czech Republic under licence No 021.

© 2009 PricewaterhouseCoopers Audit, s.r.o. All rights reserved. "PricewaterhouseCoopers" refers to the Czech firm of PricewaterhouseCoopers Audit, s.r.o. or, as the context requires, the network of member firms of PricewaterhouseCoopers International limited, each of which is a separate and independent legal entity.

4.2 Auditor‘s Report on the Annual Report and the Report on Relations between Related Parties

PricewaterhouseCoopers Audit, s.r.o.Kateřinská 40/466120 00 Praha 2česká republikaTelefon +420 251 151 111Fax +420 251 156 111


Shareholder of RwE Distribuční služby, s.r.o.Independent auditor’s report

Report on review of the Report on RelationsIn addition we have also reviewed the accompanying report on relations between the Company and its con-trolling party and between the Company and the other persons controlled by the same controlling party for the year ended 31 December 2008 (the “Report”). The completeness and accuracy of the Report is the respon-sibility of the statutory Directors of the Company. Our responsibility is to review the accuracy of information included in the Report.

Scope of ReviewWe conducted our review in accordance with the International standard on Review Engagements 2410 and related application guidance of the Chamber of Auditors of the Czech Republic for review of the report on relations. These standards require that we plan and perform the review to obtain moderate assurance as to whether the Report is free of material misstatement. A review is limited primarily to inquiries of Company per-sonnel, analytical procedures and examination, on a test basis, of factual accuracy of data. A review therefore provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the accompanying Report has not been properly prepared, in all material respects, in accordance with the requirements of Article 66a of the Commercial Code.

16 march 2009

PricewaterhouseCoopers Audit, s.r.o.represented by

Václav Prýmek Petr ŠobotníkDirector Auditor, licence No. 113

Translation note: This version of our report is a translation from the original, which was prepared in Czech. All possible care has been taken to ensure that the translation is an accurate representation of the original. however, in all matters of interpretation of information, views or opinions, the Czech version of our report takes precedence over this translation.

43RWE DisTRibUčNí sLUžby, s.R.O. REPORT ON RELATiONs bETWEEN

RELATED PARTiEs As AT 31 DECEmbER 2008

5. RWE DisTRibUčNí sLUžby, s.R.O. REPORT ON RELATiONs bETWEEN RELATED PARTiEs As AT 31 DECEmbER 2008

Whereas RWE Distribuční služby, s.r.o. (“Company“) has not entered into a controlling contract as a controlled

entity that would be in effect during 2008, the Company has compiled this report on relations between the

Company and controlling parties and between the Company and other parties controlled by the same control-

ling parties (“related parties“) for 2008, insofar as such persons are known to the Company. The report was

compiled in accordance with section 66a(9) of Act No. 513/1991 Coll., the Commercial Code, as amended. The

report constitutes an integral part of the Company‘s Annual Report for 2008, and the Company‘s members will

have the report available at the same time and under the same conditions as the annual financial statements.

1. Controlling Parties

Throughout the last fiscal reporting period, the Company was controlled by the following parties:

a) Directly

– RWE Transgas, a.s., with its registered office at limuzská 12/3135, 100 98 Prague 10, Company

No. 26460815, was the sole member of the Company, and it was directly controlled by its shareholder –

RWE gas International B.v.

b) Indirectly

– RWE gas International B.v. with its registered office at Diamantlaan 15, 2132 Wv hoofddorp,

Kingdom of the Netherlands was the sole shareholder of RWE Transgas, a.s.,

– RWE Energy Aktiengesellschaft (“RWE Energy Ag“) with its registered office at Rheinlanddamm 24,

44139 Dortmund, Federal Republic of germany which was the sole member of RWE gas International B.v.,

and

– RWE Aktiengesellschaft (“RWE Ag“) with its registered office at Opernplatz 1, 45128 Essen,

Federal Republic of germany, was the sole shareholder of RWE Energy Ag.

2. Other Related Parties

The Company has requested the above listed controlling parties to provide a list of other parties that were

controlled by the same controlling parties in the last fiscal reporting period. The present report was compiled

by the Company based on information provided by the controlling parties and other available information.

The ties and the controlling structure between companies within the RWE group as at 31 December 2008 are

shown on the third page of the cover of this Annual Report.

3. Contracts Signed by the Company and Related Parties, Services Rendered, and Payments Received

In the last fiscal reporting period, the Company and related parties signed the contracts listed in Annex No. 1.

The Company has not incurred any damage by performing these contracts, including contracts signed in

preceding accounting periods. For this reason, there was no need to secure compensation for damage or enter

into any agreements to this effect. The value of services rendered and payments made between related parties

in the last fiscal reporting period is specified in Note 15 of the Notes to the Financial statements as

at 31 December 2008.

44

4. Other Legal Acts Completed in the Interest of Related Parties

On 1 January 2008, Agreements on sale of Part of Enterprise came into effect, under which the Company

acquired a part of the enterprise (Asset services) of individual regional gas companies: severočeská plynáren-

ská, a.s., severomoravská plynárenská, a.s., středočeská plynárenská, a.s., východočeská plynárenská, a.s.,

and Západočeská plynárenská, a.s.

5. Measures Adopted or Implemented in the Interest or at the Request of Related Parties

During the last fiscal reporting period, the Company did not adopt or implement any measures in the interest

or at the request of related parties.

6. Non-Existence of Damage

In the last fiscal reporting period, the Company incurred no damage under contracts with related parties,

other legal acts completed in the interest of related parties, or measures carried out in the interest or at the

request of such parties, which were executed or adopted prior to the past fiscal period.

7. Confidentiality

This report does not contain any information that would constitute the Company‘s trade secret.

8. Summary

This report was compiled and approved by the Company‘s executives on 16 march 2009, and it has been

presented for examination to the Company‘s auditor who reviews the financial statements in accordance with

the law.

Brno, 16 march 2009

Ing. Tomáš Tichý Ing. Dušan Malý Ing. Karel MazalExecutive, CEO Executive, CFO Executive, COO


45

ANNEX NO. 1

Contracts Signed between the Company and Related Parties in the Last Accounting Period

Contracting party Contract type/subject matter Quantity

RWE Transgas, a.s. marketing services Agreement 1

Annexes No. 1 and 2 to marketing services Agreement 2

Public Relations services Agreement 2

Insurance Premium Payment Agreement 1

slA Access Agreement 1

slA Consulting – P & O services Agreement 1

Annex No. 1 to slA Consulting - P & O services Agreement 1

Non-Disclosure Agreement 1

RWE Transgas Net, s.r.o. Argus Consulting services Agreement 1

RWE Interní služby, a.s. Transport services Agreement 1

Annex No. 1 to Transport services Agreement 1

Facility management services Agreement 1

Annex No. 1 to Facility management services Agreement 1

Purchasing and logistics services Agreement 1

Annex No. 1 to Purchasing and logistics services Agreement 1

security management services Agreement 1

Annex No. 1 to security management services Agreement 1

Information Technology services Agreement 1

Annexes No. 1 and 2 to Information Technology services Agreement 2

Central Payroll Processing services Agreement 1

Annex No. 1 to Central Payroll Processing services Agreement 1

mobile Telephone and IP Telephone lease, logistics, and Billing services Agreement 1

Annexes No. 1 and 2 to mobile Telephone and IP Telephone lease, logistics, and Billing services Agreement

2

vehicle Fleet maintenance services Agreement 1

Annex No. 1 to vehicle Fleet maintenance services Agreement 1

RWE Zákaznické služby, s.r.o. security management services Agreement 1

Annex No. 1 to security management services Agreement 1

RWE Plynoprojekt, a.s. master Work Agreement – Regular Annual servicing and Error Rectification at Děhylov, Štramberk, Třanovice, and lobodice Central Odorization stations

1

Jihomoravská plynárenská, a.s. Commercial lease Agreement 1

Annex No. 1 to Commercial lease Agreement 1

RWE DisTRibUčNí sLUžby, s.R.O. REPORT ON RELATiONs bETWEEN


46


JmP Net, s.r.o. security management services Agreement 1

Annexes No. 1 and 2 to security management services Agreement 2

severočeská plynárenská, a.s. security management services Agreement 1

Commercial lease Agreement 1


sčP Net, s.r.o. human Resources services Agreement 1

Annex No. 1 to human Resources services Agreement 1

Technical Dispatching services Agreement 1

Annexes No. 1, 2, and 3 to Technical Dispatching services Agreement 3

gas Facility Construction services Agreement 1

Annexes No. 1, 2, and 3 to gas Facility Construction services Agreement 3

gas Facility Construction Planning services Agreement 1

Annexes No. 1, 2, and 3 to gas Facility Construction Planning services Agreement 3

Agreement on gas Facility Construction supervision services for Third-Party Investors 1

Annexes No. 1, 2, and 3 to Agreement on gas Facility Construction supervision services for Third-Party Investors

3

Network Operation and maintenance services Agreement 1

Annexes No. 1, 2, and 3 to Network Operation and maintenance services Agreement 3

gas Asset Operations management services Agreement 1

Annexes No. 1, 2, and 3 to gas Asset Operations management services Agreement 3

Network Documentation services Agreement 1

Annexes No. 1, 2, and 3 to Network Documentation services Agreement 3

metering services Agreement 1

Annexes No. 1, 2, 3, and 4 to metering services Agreement 4



severomoravská plynárenská, a.s. Annex No. 1 to Agreement on sale of Part of Enterprise 1


Purchase Agreement – Office Equipment 1




47


smP Net, s.r.o. Annexes No. 1, 2, and 3 to Technical Dispatching services Agreement 3




3







středočeská plynárenská, a.s. security management services Agreement 1



Commercial sublease and services Agreement 1

Annex No. 1 to Commercial sublease and services Agreement 1

sTP Net, s.r.o. Technical Dispatching services Agreement 1








3













48


východočeská plynárenská, a.s. security management services Agreement 1



Commercial sublease Agreement 1

Annex No. 1 to Commercial sublease Agreement 1

včP Net, s.r.o. Annexes No. 1, 2, and 3 to Technical Dispatching services Agreement 3




3







Západočeská plynárenská, a.s. security management services Agreement 1




49


ZčP Net, s.r.o. Technical Dispatching services Agreement 1








3











Agreement on Assignment of Rights and Obligations 1




Ag Aktiengesellschaft (public limited company)

a.s. Public limited company

hR human Resources

hW hardware

Ič Company No.

IP Internet protocol

Is-u Customer Information system

IT Information technology

slA service level Agreement

s.r.o. limited liability company

sW software

vTl high pressure (pressures up to 4 mPa)

sčP Net sčP Net, s.r.o.

smP Net smP Net, s.r.o.

sTP Net sTP Net, s.r.o.

včP Net včP Net, s.r.o.

ZčP Net ZčP Net, s.r.o.

AbbREviATiONs UsED

Scheme of the relations between and control of companies along the relevant line within the RWE Group

as at 31 December 2008

RWE Aktiengesellschaft 100.00% RWE Energy Aktiengesellschaft 1.00% RWE Energy hungária Tanácsadó Kft. 100.00% RWE gas International B.v. 100.00% RWE Transgas, a.s. 100.00% RWE Transgas Net, s.r.o. 100.00% RWE gas storage, s.r.o. 100.00% RWE Interní služby, a.s.* 100.00% RWE Distribuční služby, s.r.o. 100.00% RWE Zákaznické služby, s.r.o. 100.00% RWE Plynoprojekt, a.s.* 100.00% RWE Key Account CZ, s.r.o. 100.00% RWE gas slovensko, s.r.o. 100.00% gasnet, s.r.o. v likvidaci 18.09% severomoravská plynárenská, a.s. 2.95% východočeská plynárenská, a.s. 2.46% Jihomoravská plynárenská, a.s. 100.00% severočeská plynárenská, a.s. 100.00% sčP Net, s.r.o. 100.00% Západočeská plynárenská, a.s. 100.00% ZčP Net, s.r.o. 100.00% středočeská plynárenská, a.s. 100.00% sTP Net, s.r.o. 63.62% východočeská plynárenská, a.s. 100.00% včP Net, s.r.o. 49.64% severomoravská plynárenská, a.s. 100.00% smP Net, s.r.o. 52.25% gAsFINAl, a.s. 47.66% Jihomoravská plynárenská, a.s. 100.00% JmP Net, s.r.o. 47.75% gAsFINAl, a.s. 100.00% českomoravská plynárenská, a.s. - v likvidaci 100.00% RWE Energy Nederland N.v. 99.00% RWE Energy hungária Tanácsadó Kft.

* As from 1 January 2009 the legal form of this company was changed from a public limited company to a limited liability company

RWE Distribuční služby, s.r.o.

Plynárenská 499/1657 02 Brno

T +420 532 221 111F +420 545 578 571E [email protected] www.rwe.cz

annual report 2008 · membership of bodies of other companies: chairman of the board of directors...

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